In an appeal from the bankruptcy court's disallowance of late filed claims in In re Wellington, the two issues were first whether the Bankruptcy Court erred in considering only prejudice to the claims of allowed creditors and not considering prejudice to late creditors and also whether the Bankruptcy Court erred in finding the late creditors had failed provide a reason for the delay.
The district court, following Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380, 395 (1993), considered whether the neglect by the late creditors was excusable under the following factors:
(1) the danger of prejudice to the debtor and also to non-movants or the opposing party (See Thompson v. E.I. DuPont de Nemours & Co., 76 F.3d 530, 534 (4th Cir. 1996));
(2) the length of the delay and its potential impact on judicial proceedings;
(3) the reason for the delay, including whether it was within the reasonable control of the
(4) whether the movant acted in good faith.
Although the district court found that the bankruptcy court had, in its evaluation of he second factor, failed to explicitly consider the prejudice to the late creditors, Pioneer does not require consideration of all four factors, with as excusable neglect can be rejected due to even a single factor. As the bankruptcy court had found that the prejudice to allowed claims was be significant, that was sufficient.
As to the reason for the delay, the district court agreed with the bankruptcy decision that the excuse, namely that the late creditors thought their state court attorney was still representing them in the bankruptcy proceeding, was insufficient. Again, in Pioneer the Supreme Court cited examples of failures by attorneys to attend hearing or to file timely tax returns as insufficient. Here too, even though the district court was not convinced that the attorneys were to blame, but arguably the late creditors themselves, parties “must be held accountable for the acts and omissions of their attorney.” Pioneer, 507 U.S. at 396.
There is often an an attempt by attorneys to "fall on their sword" and exaggerate their failures in order to remedy those of their clients. (Or of a subsequent attorney blame the previous lawyers and "throw them under the bus.") Here that was insufficient, particularly as there is no mention that the late creditors had commenced any malpractice action against the attorneys they claimed were at fault for missing the claims deadline.
For a copy of the opinion, please see: