Mr. Wellington objected to several claims filed in his Chapter 11 case as those were filed five days after the bar date. The creditors filed motions to allow their late filed claims, arguing excusable neglect, but in previous orders the bankruptcy court found that the creditors has failed to show why the tardiness of the claims was not entirely within the creditor's control. The creditors appealed, but with that still pending Mr. Wellington sought an interim distribution in his case of $2.1 million to other unsecured creditors, which would exclude the disallowed creditors. Those creditors sought to stay of that distribution pending the appeal.
The bankruptcy court found that the standard for determining stays pending appeal is a four-factor test requiring consideration of:
(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits;
(2) whether the applicant will be irreparably injured absent a stay;
(3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and
(4) where the public interest lies. Nken v. Holder , 556 U.S. at 434
Applying these factors, the bankruptcy court found that the creditors were unlikely to prevail on appeal, as a showing or excusable neglect lies with the late-claimants who continued to provide any clear answer for why the claims were not filed before the bar date. As the Fourth Circuit has held in Symbionics Inc. v. Ortlieb, 432 F. App'x 216, 219 (4th Cir. 2011) the reason for the delay is the most important factor in an excusable neglect inquiry. Regarding whether the creditors would suffer an irreparable injury, the bankruptcy court relied on Long v. Robinson, 432 F.2d 977, 979 (4th Cir. 1970), holding that a mere monetary injury was insufficient, particularly as the creditors could, if successful on appeal, seek disgorgement from other creditors of funds received. The late creditors further failed to show that a stay of distribution would cause substantial harm to the other creditors, contrasting the "irreparable harm" in the second factor standard with the lower "substantial harm" here. Lastly, the bankruptcy court found that there was at best minimal public interest in this matter, making the last factor of small consequence.
This decision was affirmed by the district court-
For a copy of the opinion, see: