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Full title: Response to 324 Motion for relief from judgment or order filed by Debtor 1 Tea Olive I, LLC. An affidavit or verification. (Andre, Samuel) (Entered: 06/02/2021)
Document posted on Jun 1, 2021 in the bankruptcy, 11 pages and 0 tables.
Bankrupt11 Summary (Automatically Generated)
Within its Motion, DCC Propane, LLC (“DCC”) seeks relief from the Court’s January 14, 2021 order setting the deadline for the filing of reclamation and twenty day claims in its bankruptcy case. Contrary to the assertions made in the Motion, DCC’s failure to timely file its claim was not the result of excusable neglect; instead, DCC’s late-filed Claim, as well as its Motion filed fifty-five days after the claims deadline, are inexcusable and the granting of the Motion would significantly prejudice the Debtor by impacting its bankruptcy case in the late stages of the Debtor’s winddown efforts. Contrary to the assertions of DCC, the Debtor will suffer significant prejudice if DCC’s Claim is allowed as timely. Additionally, while DCC alleges that the delay in the submittal of the Claim was minimal, courts have previously failed to find excusable neglect where claims were filed with similar lengths of delays.On top of its failure to timely file its Claim, DCC failed to file its Motion seeking relief from the Court’s Order until fifty-five days after the Claims Deadline, during which time the Debtor continued and is now near the end of its liquidation and winddown efforts including the departure of a significant portion of the Debtor’s workforce (some of which hold knowledge as to DCC’s claims).
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Document ContentsUNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF MINNESOTA In re: Case No.: 21-30037 Tea Olive I, LLC d/b/a Stock+Field, Chapter 11 Case Debtor. DEBTOR’S RESPONSE IN OPPOSITION TO MOTION OF DCC PROPANE, LLC FOR RELIEF FROM ORDER UNDER FED. R. CIV. P. 60(B) AND FED. R. BANKR. P. 9006(B) Tea Olive I, LLC d/b/a Stock+Field (the “Debtor”) submits this response in opposition to the Motion of DCC Propane, LLC for Relief from Order Under Fed. R. Civ. P. 60(b) and Fed. R. Bankr. P. 9006(B) [Dkt. No. 324] (the “Motion”). Within its Motion, DCC Propane, LLC (“DCC”) seeks relief from the Court’s January 14, 2021 order setting the deadline for the filing of reclamation and twenty day claims in its bankruptcy case. Contrary to the assertions made in the Motion, DCC’s failure to timely file its claim was not the result of excusable neglect; instead, DCC’s late-filed Claim, as well as its Motion filed fifty-five days after the claims deadline, are inexcusable and the granting of the Motion would significantly prejudice the Debtor by impacting its bankruptcy case in the late stages of the Debtor’s winddown efforts. The Court should accordingly deny the Motion. BACKGROUND On January 10, 2021 (the “Filing Date”), the Debtor filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. The Debtor has continued in possession of its respective assets and the management of its business as a debtor in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code.
1Further general background information about the Debtor and this case is set forth in the Declaration of Matthew Whebbe in Support of Chapter 11 Petition and Initial Motions [Docket. No. 22] and the Declaration of James H. Cullen [Docket. No. 20]. On the Filing Date, the Debtor filed its Motion for Order (I) Granting Expedited Relief and (II) Establishing Procedures for the Resolution of Reclamation Claims and Administrative Claims Asserted Pursuant to Section 503(b)(9) of the Bankruptcy Code (Dkt. No. 14) (the “Motion”). In the Motion, the Debtor sought approval of its proposed procedures for the administration of reclamation and twenty day claims asserted against the Debtor. On January 14, 2021, the Court entered its Order (I) Granting Expedited Relief and (II) Establishing Procedures for the Resolution of Reclamation Claims and Administrative Claims Asserted Pursuant to Section 503(b)(9) of the Bankruptcy Code [Dkt. No. 54] (the “Order”) approving the Debtor’s proposed reclamation and twenty day claim procedures. Pursuant to the clear language of the Order, any claimant asserting a reclamation and/or a twenty day claim against the Debtor under 11 U.S.C. §§ 546(c) or 503(b)(9), respectively, was required to deliver a copy of its claim form, by mail or e-mail, to counsel for the Debtor, the Debtor itself, Second Avenue Capital Partners LLC, and Riemer & Braunstein LLP, no later than 60 calendar days after entry of the Order. (Dkt. No. 54 at 2.) All reclamation and twenty day claims were therefore required to be submitted no later than March 15, 2021 (the “Claims Deadline”). Within sixty days thereafter, the Order required the Debtor to submit a notice (the “Notice”) listing the reclamation and twenty day claims received, the amount it determined to be valid for each claim, and the amount that the Debtor disputed for each claim. (Id. at 2.) On January 22, 2021, the Debtor served, via U.S. First Class Mail, DCC and other potential reclamation and twenty day claimants with the Reclamation Claims and/or Twenty Day Claims
2Form and a copy of the Order. (Dkt. No. 86.) DCC received service of the Order no later than January 29, 2021. (Dkt. No. 324 at 5.) On March 23, 2021, more than 60 days after entry of the Order, DCC submitted its twenty day claim form (the “Claim”) to the Debtor. Within the Claim, DCC asserts a twenty day claim totaling $24,903.70 on the basis of “Propane and propane cylinders.” At no time prior to the Claims Deadline did DCC request an extension of time to submit its Claim. After receiving the Claim, the Debtor reviewed the Claim and its books and records. Based on this review, the Debtor determined that it held no record of any product received from DCC within the twenty days prior to the Filing Date. Additionally, the Debtor’s records show that at least some invoices to DCC owed as of December 31, 2020, were paid, including three payments not listed by DCC within its Claim.1 The Debtor accordingly filed the Notice on April 16, 2021 (Dkt. No. 290), in which it deemed DCC’s claim valid in the amount of $0.00 based on its lack of records related to the claim as well as its untimeliness. Since the Claims Deadline, the Debtor has continued its winddown efforts, including, but not limited to, the liquidation of a significant portion of its assets and the reduction of its workforce to a bare-bones group of personnel to see the Debtor through the final stages of its bankruptcy case. On May 6, 2021, DCC filed an objection to the Notice (Dkt. No. 314). Within its objection, DCC stated that it would seek retroactive relief from the Claims Deadline. (Dkt. No. 314 at 2.) Thereafter, on May 17, 2021, DCC filed the Motion. Within the Motion, DCC requests that the 1 After DCC filed its objection to the Notice (Dkt. No. 314), on May 27, 2021, the Debtor requested confirmation from DCC on how its December 31 payments had been applied to outstanding amounts on its accounts and why the three payments were not recognized as received by DCC. On June 2, 2021, DCC agreed to reduce its twenty day claim to $21,903.70 in recognition of these three unrecognized payments.
3Court allow its late-filed Claim as the result of “excusable neglect” pursuant to Federal Rule of Bankruptcy Procedure 9006(b)(1). The Debtor submits this response in opposition to DCC’s Motion. ARGUMENT I. LEGAL STANDARD. Under Federal Rule of Bankruptcy Procedure 9006(b)(1), when an act is required or allowed to be done at or within a specified period by these rules or by a notice given thereunder or by order of court, the court for cause shown may at any time in its discretion (1) with or without motion or notice order the period enlarged if the request therefor is made before the expiration of the period originally prescribed or as extended by a previous order or (2) on motion made after the expiration of the specified period permit the act to be done where the failure to act was the result of excusable neglect. Fed. R. Bankr. P. 9006(b)(1). In determining whether a party established excusable neglect, “courts consider (1) the length of the delay and its potential impact on judicial proceedings, (2) the reason for the delay, including whether it was within the reasonable control of the appellant, (3) whether the appellant acted in good faith, and (4) the danger of prejudice to the appellee.” Nora v. Internal Revenue Serv., No. 18-CV-0682 (WMW), 2018 WL 4520881, at *1 (D. Minn. Aug. 29, 2018), aff’d, 782 F. App’x 512 (8th Cir. 2019) (citing Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380, 395 (1993)); see also In re Ceresota Mill Ltd. P’ship, 211 B.R. 315, 318 (B.A.P. 8th Cir. 1997). The reason for the delay is considered the key factor in the analysis. In re Guidant Corp. Implantable Defibrillators Prod. Liab. Litig., 496 F.3d 863, 867 (8th Cir. 2007). Even if excusable neglect is established, the Court may grant or deny a requested extension within its discretion. Nora, 2018 WL 4520881, at *1.
4II. DCC FAILS TO ASSERT A REASONABLE EXCUSE FOR ITS LATE-FILED CLAIM. DCC asserts in the Motion that the tardiness of its Claim should be excused for various reasons, including business challenges associated with its acquisition of another entity and the COVID-19 pandemic, the health of its employee in charge of receiving and administering the Notice, and DCC’s lack of sophistication or experience in relation to bankruptcy proceedings. These excuses, however, are inadequate and unpersuasive. As described above, DCC received service of the Order—which explicitly included the Claims Deadline and overall procedure for administration of reclamation and twenty day claims—no later than January 29, 2021. DCC accordingly had at least 45 days to prepare and submit its Claim by the Claims Deadline. However, DCC still failed to timely submit its Claim and did not even retain bankruptcy counsel until March 17, 2021—two days after the Claims Deadline. (Dkt. No. 324 at 5.) Courts under similar circumstances have outright rejected such untimely claims based on the clear notice of the applicable bar date received by the claimant. See, e.g., In re Interco, Inc., 186 F.3d 1032, 1034 (8th Cir. 1999) (denying relief against certain time bars where claimant had more than four weeks’ notice of bar date); see also In re Nutri*Bevco, Inc., 117 B.R. 771, 783 (Bankr. S.D.N.Y. 1990) (“Where a creditor has notice of the pendency of a bankruptcy case and is aware that it holds a disputed claim, notwithstanding the fact that it at no time received notice that its claim has been scheduled as such, the creditor is barred for its failure to file a claim.”). Even if DCC’s clear notice of the Claims Deadline does not in itself bar DCC’s Claim from retroactive relief, its proposed excuses fail to support its request for such relief. In fact, courts have repeatedly determined that excuses such as a claimant’s current situation as of the time of the applicable claims deadline and the status of persons related to the claimant (i.e. a client or
5employee) are within the claimant’s reasonable control and thus inadequate excuses for purposes of granting relief under Rule 9006(b)(1). See In re Harlow Fay, Inc., 993 F.2d 1351, 1352 (8th Cir. 1993) (finding that counsel’s financial pressures, relocation, and reduction in staff were not adequate basis for excusable neglect); Hanson v. First Bank of S. Dakota, N.A., 828 F.2d 1310, 1315 (8th Cir. 1987) (finding employee turnover was within employee’s reasonable control and thus an inadequate excuse under Rule 9006); Nora, 2018 WL 4520881, at *2; see also In re Enron Corp., 419 F.3d 115, 126 (2d Cir. 2005) (“[P]reoccupation or an excessive workload does not typically render a mistake excusable.”). Additionally, a claimant’s ignorance of bankruptcy rules or processes typically fails to qualify as “excusable neglect” for purposes of Rule 9006(b)(1). In re Enron Corp., 419 F.3d at 126 (2d Cir. 2005); Clark v. Am.’s Favorite Chicken Co., 190 B.R. 260, 268 (E.D. La. 1995). Because DCC’s proffered excuses for its late-filed Claim prove inadequate, this key factor in the determination of whether the Court should allow DCC’s late-filed Claim weighs heavily against granting such relief. Accordingly, the Court should deny the Motion for failure to provide an adequate excuse for the late filing of the Claim. III. THE DEBTOR WILL SUFFER SIGNIFICANT PREJUDICE IF THE ADMINISTRATIVE EXPENSE CLAIM IS ALLOWED. Contrary to the assertions of DCC, the Debtor will suffer significant prejudice if DCC’s Claim is allowed as timely. The Debtor prepared its reclamation claims procedures, which were approved by the Court within its Order, for the purpose of creating a clear timeline for its bankruptcy case. One beneficial effect of this timeline was to allow the Debtor to evaluate timely-filed claims and appropriately budget the necessary funds based on the claims received. Because the Debtor is no longer operating and holds limited funds with which to administer its estate and pay claimants, DCC threatens to throw the Debtor’s budgeting and administration efforts into
6imbalance by circumventing the court-approved timeline. For example, this potential imbalance may affect present and future negotiations with other creditors who filed timely claims by reducing available funds and, in turn, threatening the success of the Debtor’s bankruptcy case. Additionally, while DCC alleges that the delay in the submittal of the Claim was minimal, courts have previously failed to find excusable neglect where claims were filed with similar lengths of delays. See, e.g., IN RE: Donald F. Wellington Debtor., No. 20-10080, 2021 WL 2020643, at *1 (Bankr. M.D.N.C. May 20, 2021) (denying motion for stay pending appeal of ruling that claimants failed to show excusable neglect for claims filed five days after bar date); In re Hardin, No. 18-70395-LRC, 2019 WL 2612752, at *2 (Bankr. N.D. Ga. June 24, 2019) (“Contrary to Plaintiff’s argument, counsel's mistake as to the deadline is not sufficient to justify an equitable exception simply because Plaintiff perceives no prejudice to Defendant from the fact that the Complaint was filed four days late.”). On top of its failure to timely file its Claim, DCC failed to file its Motion seeking relief from the Court’s Order until fifty-five days after the Claims Deadline, during which time the Debtor continued and is now near the end of its liquidation and winddown efforts including the departure of a significant portion of the Debtor’s workforce (some of which hold knowledge as to DCC’s claims). While any prejudice to the Debtor may have been minimal initially, this extra delay significantly increases the prejudice. Because the Debtor will suffer significant prejudice from any allowance of DCC’s untimely claim, the Court should therefore deny the Motion regardless of the actual length of the claim’s untimeliness. IV. THE LENGTH OF THE DELAY FAVORS DENIAL OF THE MOTION. DCC’s delay in filing its Claim, as well as its further delay in seeking relief from the Order, heavily favors denying the Motion in order to prevent any impact on the Debtor’s bankruptcy case.
7Within the Motion, DCC claims that because it submitted its claim “six days” after the Claims Deadline and that the Debtor’s bankruptcy case is in its “early stages,” there is little to no impact on the Debtor’s bankruptcy case. (Dkt. No. 324 at 5.) This claim, however, is false. Not only did DCC file its Claim eight days after the Claims Deadline, DCC thereafter failed to file its Motion seeking relief from the Court’s Order until fifty-five days after the Claims Deadline. The applicable length of its delay is therefore fifty-five days, not six as asserted by DCC. In that timeframe, the Debtor has continued its efforts to liquidate its assets and winddown, including but not limited to significantly decreasing its workforce (including those with information related to DCC, its account, and its claim). By allowing the Claim now in the Debtor’s later stages of its winddown efforts, DCC risks overturning the Debtor’s prior and planned final acts of winding down and related negotiations. In turn, such an upheaval could prolong the Debtor’s bankruptcy case, costing further money to the state that, in turn, affects other creditors’ timely claims. The length of the overall delay of DCC to file and now support its Claim, and the consequent effects on the Debtor’s bankruptcy case, therefore strongly favor denial of the Motion. V. GOOD FAITH. The Court should finally deny DCC’s motion because DCC’s untimely Claim and its delayed Motion seeking relief from the Court’s Order suffer from a lack of good faith on the part of DCC. DCC claims within the Motion that its untimely Claim was not intentional or done with disregard for deadlines and procedural rules but instead was due to its lack of expertise in bankruptcy cases. (Dkt. No. 324 at 7-8.) DCC additionally alleges that it immediately took steps to remedy its error upon discovery. (Dkt. No. 324 at 8.) The facts of this matter show otherwise. As discussed above, DCC’s ignorance of the bankruptcy process does not qualify as “excusable neglect.” Even if it did, DCC still failed to promptly remedy its error. See In re
8Wooten, 620 B.R. 351, 357 (Bankr. D.N.M. 2020) (finding creditor acted in good faith where it promptly hired bankruptcy counsel and filed a motion after notice of bankruptcy case). At or before the time of the filing of its Claim, DCC failed to attempt to negotiate any form of extension of the Claims Deadline due to its alleged excuses. Thereafter, DCC failed to move for any relief from the Court’s Order until May 17, 2021, fifty-five days after the Claims Deadline and thirty-one days after the Debtor filed its Notice in which it deemed DCC’s claim valid in the amount of $0.00 based on its lack of records related to the claim as well as its untimeliness. Even if DCC’s late filing of its Claim may in and of itself have been in good faith, its failure to promptly seek relief from the Court illustrates a lack of good faith on DCC’s part. Under similar circumstances, courts have found that parties have failed to act in good faith in failing to meet case deadlines. See Lennartson v. Cristofono, No. 21-CV-0013 (PJS), 2021 WL 1749916, at *2 (D. Minn. Mar. 30, 2021). Because DCC failed to timely file its claim and seek relief from the Court’s Order, DCC failed to act in good faith and its Motion should accordingly be denied. CONCLUSION For the reasons set forth above, the Debtor respectfully requests that the Court deny DCC’s Motion.
9Dated: June 2, 2021 /e/ Samuel M. Andre Clinton E. Cutler (#0158094) James C. Brand (#387362) Steven R. Kinsella (#0392289) Samuel M. Andre (#0399669) Emily M. McAdam (#0400898) FREDRIKSON & BYRON, P.A. 200 South Sixth Street Suite 4000 Minneapolis, MN 55402-1425 Minneapolis, MN 55402-1425 (612) 492-7000 (612) 492-7077 email@example.com firstname.lastname@example.org email@example.com firstname.lastname@example.org email@example.com ATTORNEYS FOR THE DEBTOR
10VERIFICATION I, Michael Wesley, a Partner at Clear Thinking Group, the Chief Restructuring Officer and Financial Advisor to the Debtor, declare under penalty of perjury that the facts set forth in the preceding response are true and correct according to the best of my knowledge, information, and belief. Dated: June 2, 2021 _____________________________ Michael Wesley 73049618 v3