Borders Group, Inc.

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UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
In re:
BORDERS GROUP, INC., et al.,
Debtors.1
FOR PUBLICATION
Chapter 11
Case No. 11-10614 (MG)
(Jointly Administered)
MEMORANDUM OPINION SUSTAINING TENTH OMNIBUS OBJECTION
A P P E A R A N C E S:
KASOWITZ, BENSON, TORRES & FRIEDMAN LLP
Attorneys for Borders Group, Inc.
1633 Broadway
New York, New York 10019
By: 	Jeffery R. Gleit, Esq.
Michele L. Angell, Esq.
LOWENSTEIN SANDLER PC
Attorneys for the Official Committee of Unsecured Creditors
65 Livingston Avenue
Roseland, New Jersey 07068
By: 	Bruce Buechler, Esq.
Timothy R. Wheeler, Esq.
MARTIN GLENN
UNITED STATES BANKRUPTCY JUDGE
Original claims by two Texas counties were not received by the Debtors’ claims agent
before the governmental bar date expired. Well after the bar date, the counties submitted
supposedly amended claims, which the counties argued related back to the dates of the original
claims. The Debtors objected to the later amended claims, seeking to expunge them on the
grounds that they were not timely filed. The Texas counties argued that the original claims were
1 The Debtors are: Borders Group, Inc.; Borders International Services, Inc.; Borders, Inc.; Borders Direct,
LLC; Borders Properties, Inc.; Borders Online, Inc.; Borders Online, LLC; and BGP (UK) Limited.
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mailed, but they offered no proof to support that assertion. Because the counties did not provide
any evidence of mailing the original proofs of claim, the Court sustains the Debtors’ Objection
and expunges the late-filed claims.
BACKGROUND
Pending before the Court is the Debtors’ Tenth Omnibus Objection to the Allowance of
Certain Claims: (I) Late Filed Claims, (II) Claims that Contradict the Debtors’ Books and
Records, (III) Reclassified Claims, (IV) Reclassified Claims that Also Contradict the Debtors’
Books and Records, (V) No Liability Claims, and (VI) Insufficient Documentation Claims (the
“Objection”).2 (ECF Doc. # 2025.) According to the Debtors, the proofs of claim subject to the
Objection should be disallowed because they were filed after the Governmental Bar Date.3 In
support of the Objection, the Debtors filed the declaration of David F. Head, managing director
of AlixPartners, LLP (the “Head Declaration”). (ECF Doc. # 2026.) Mr. Head coordinates and
supervises the Debtors’ claims reconciliation process and supports the Debtors’ Objection.
The County of Denton, Texas (“Denton”) and Tax Appraisal District of Bell County,
Texas (“Bell” and together with Denton, the “Claimants”) filed a response (the “Response”) to
the Objection asserting that Claim Numbers 3765 and 3766 (the “Claims”), which the Debtors
seek to expunge because they were late-filed, actually amend timely-filed claims. (ECF Doc. #
2170.) However, the Claimants failed to file any declaration or affidavit in support of the
2 	In addition to the two proofs of claim subject to this opinion, through the Objection, the Debtors also seek
to disallow other claims that were: (1) filed after the after the General Bar Date, Rejection Bar Date and/or
Governmental Bar Date; (2) assert amounts in excess of the amounts reflected in the Debtors’ books and records; (3)
improperly assert administrative or priority status; (4) assert amounts in excess of the amounts reflected in the
Debtors’ books and records and improperly assert administrative or priority status; (5) relate to alleged liabilities
that are not enforceable; and (6) did not include sufficient documentation to ascertain their validity. At the
December 14 hearing, the Court sustained the Objection to the other claims. This opinion relates only to the two
claims filed by the two Texas counties discussed below.
3 	The Court established June 1, 2011 at 5:00 p.m. as the general bar date for filing proofs of claim against the
Debtors’ estates (the “General Bar Date”). (ECF Doc. # 580.) The Court established August 15, 2011 as the bar
date by which Governmental Units must file proofs of claim against the Debtors’ estates (the “Governmental Bar
Date”). (Id.)
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Response. The Court initially held a hearing on the Objection on November 29, 2011, but, at the
Debtors’ request, the hearing was adjourned to provide the Claimants an opportunity to support
their Response with a factual record. On December 12, 2011, the Debtors filed a reply to the
Claimants’ Response (the “Reply”) as well as the Declaration of Craig E. Johnson (the “Johnson
Declaration”) in support of the Reply. Specifically, Mr. Johnson, a Senior Director with the
Garden City Group (“GCG”), the Debtors’ claims agent, stated that GCG “never received any
proofs of claim from . . . Bell . . . besides Proof of Claim No. 3765.” (Johnson Decl. ¶ 4.)
Johnson also stated that GCG “never received any proofs of claim from . . . Denton besides Proof
of Claim No. 3766.” (Id.) The Reply states that the Claimants were unable to locate proof of
mailing, communication evidencing mailing, or any other proof that original proofs of claim
were timely sent to GCG. (ECF Doc. # 2304.) According to the Reply, the Claimants provided
the Debtors’ counsel with:
statements 	of 	‘Proof 	of 	Claim’ 	with 	attached 	exhibit 	tax
assessments that do not appear to have been filed and that Garden
City 	Group 	never 	received; 	a 	copy 	of 	an 	undated 	envelope
addressed to Garden City Group with counsel’s return address,
which envelope was otherwise unmarked; and 1 and ¼ pages of
what appeared to be internal law firm documentation of the
Debtors’ bankruptcy ‘Status Report.’
(Reply ¶ 4.)
On December 14, 2011, the Court held another hearing on the Objection. No one
appeared at the hearing for Claimants. Debtors’ counsel again requested that the Court expunge
the Claims and informed the Court that the Claimants had not provided any mail receipts
showing that original proofs of claim were sent to GCG prior to the Governmental Bar Date.
Debtors’ counsel argued that the “mailbox rule,” or a presumption of receipt upon proof of
mailing, does not apply here because the Claimants have failed to provide any evidence of
mailing.
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The Claims apparently arise from property taxes on the Debtors’ property in Denton and
Bell counties for the 2011tax year. The Claimants contend that on February 16, 2011, original
proofs of claim were “generated” in the amount of $3,426.24 for Denton and $13,213.85 for
Bell. (Response at 2.) According to the Response, these original proofs of claim were sent to
GCG by regular first class U.S. mail, but file-stamped copies were not returned to the Claimants.
(Id.)
On October 22, 2011, the Claimants filed claim number 3766 on behalf of Denton in the
amount of $3,148.40 and claim number 3765 on behalf of Bell in the amount of $7,393.13. The
Debtors seek to expunge the Claims because they were filed after the August 15, 2011
Governmental Bar Date. The Debtors provided the Claimants a further opportunity to prove that
they filed original proofs of claim on February 16, 2011. However, the Claimants did not
provide any proof of mailing; they have not filed any declaration or affidavit describing their
mailing procedures or stating that they mailed the original proofs of claim on February 16, 2011.
DISCUSSION
A. The Governmental Bar Date
Rule 3003(c)(3) of the Federal Rules of Bankruptcy Procedure provides that “[t]he court
shall fix and for cause shown may extend the time within which proofs of claim or interest may
be filed.” FED. R. BANKR. P. 3003(c)(3). Section 502(b)(9) of the Bankruptcy Code also
provides that “if [an] objection to a claim is made, the court, after notice and a hearing, shall
determine the amount of such claim . . . and shall allow such claim in such amount, except to the
extent that . . . proof of such claim is not timely filed . . . .” 11 U.S.C. § 502(b)(9). Bar dates
serve the important purposes of “finality and debtor rehabilitation.” In re PT-1 Communs., Inc.,
386 B.R. 402, 409 (Bankr. E.D.N.Y. 2007). Permitting creditors and claimants to file proofs of
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claim at any time would make it “impossible to determine with any finality the obligations of the
debtor.” Id.
Here, the Governmental Bar Date applicable to the Claimants provided a clear and
unambiguous deadline for filing proofs of claim against the Debtors. The notices of the Bar
Date, served by GCG on all known creditors, provided that:
CONSEQUENCES OF FAILURE TO FILE A PROOF OF
CLAIM BY THE APPLICABLE BAR DATE
. . . ANY CREDITOR WHO FAILS TO FILE A PROOF OF
CLAIM ON OR BEFORE THE APPLICABLE BAR DATE IN
THE APPROPRIATE FORM IN ACCORDANCE WITH THE
PROCEDURES DESCRIBED IN THIS NOTICE FOR ANY
CLAIM SUCH CREDITOR HOLDS OR WISHES TO ASSERT
AGAINST EACH OF THE DEBTORS, WILL BE FOREVER
BARRED, ESTOPPED AND ENJOINED FROM ASSERTING
THE CLAIM AGAINST EACH OF THE DEBTORS AND
THEIR RESPECTIVE CHAPTER 11 ESTATES, SUCCESSORS,
AND PROPERTY WILL BE FOREVER DISCHARGED FROM
ANY AND ALL INDEBTEDNESS OR LIABILITY WITH
RESPECT TO THE CLAIM, AND THE HOLDER WILL NOT
BE PERMITTED TO . . . PARTICIPATE IN ANY
DISTRIBUTION IN ANY OF THE DEBTORS’ CHAPTER 11
CASES ON ACCOUNT OF THE CLAIM . . . .
(Objection ¶ 16.)
Moreover, notice of the Governmental Bar Date was published in the national edition of
the New York Times on April 25, 2011, and prominently stated:
Any creditor who is required, but fails, to file a Proof of Claim
in accordance with the Bar Date Order on or before the applicable
Bar Date shall be forever barred, estopped, and enjoined from
asserting such claim against the Debtors (or filing a Proof of Claim
with respect thereto), the Debtors and their property shall be
forever discharged from any and all indebtedness or liability with
respect to such claim, and such holder shall not be permitted to . . .
participate in any distribution in the Debtors’ chapter 11 cases on
account of such claim . . . .
(Objection ¶ 17.)
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The Claimants do not argue that they were unaware of the Governmental Bar Date. The
Court finds that sufficient notice of the Governmental Bar Date was provided to the Claimants.
Additionally, the Order Establishing Deadline for Filing Proofs of Claim and Approving the
Form and Manner of Notice Thereof (the “Bar Date Order”) (ECF Doc. # 580) specifically
provides “Proofs of Claim will be deemed filed only when received by . . . The Garden City
Group . . . or the Clerk of the United States Bankruptcy Court for the Southern District of New
York on or before the applicable Bar Date.” (Bar Date Order at 3.) The Claimants argue they
mailed original proofs of claim to GCG on February 16, 2011; they do not argue that the claims
were actually received by GCG prior to the Governmental Bar Date. Moreover, the Johnson
Declaration provides competent evidence that GCG did not receive the original proofs of claim.
B. Presumption of Receipt from Proof of Mailing
Courts in this circuit follow the so-called “mailbox rule” with respect to the timely filing
of proofs of claim.4 See, e.g., In re Adler, Coleman Clearing Corp., 204 B.R. 99, 110 (Bankr.
S.D.N.Y. 1997) (Garrity, J.) (applying the “mailbox” rule to claimants who provided evidence
that normal procedures were followed in mailing a proof of claim). “A rebuttable presumption
that an addressee received a mailed notice arises when the mailing party submits sufficient
evidence to demonstrate the notice was properly addressed and mailed.” In re WorldCom, Inc.,
Case No. 02-13533, 2005 WL 3875192, at *3 (Bankr. S.D.N.Y. Oct. 27, 2005) (Gonzalez, J.)
(finding that a claimant received notice of a bar date based on evidence demonstrating that notice
was properly addressed and mailed); see also Hagner v. U.S., 285 U.S. 427, 430 (1932) (“The
rule is well settled that proof that a letter properly directed was placed in a post office creates a
4 	The Third Circuit has declined to adopt the mailbox rule. See Chrysler Motors Corp. v. Schneiderman, 940
F.2d 911, 913 (3d Cir. 1991) (stating that “courts in this circuit have not permitted a rebuttable presumption of
receipt to arise by the mere act of mailing a proof of claim”). Because the Claimants failed to offer proof of mailing,
the result in this case would be the same whichever rule applied.
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presumption that it reached its destination in usual time and was actually received by the person
to whom it was addressed.”). The sender must provide evidence of actual mailing in the form of
an affidavit submitted by an individual who supervised the mailing to allow the presumption to
arise. See In re WorldCom, Inc., 2005 WL 3875192, at *3 (citing In re Adler, Coleman Clearing
Corp., 204 B.R. 99, 104-05 (finding that an affidavit submitted by the president of the company
stating that he oversaw the mailing of claims packages was sufficient to trigger the presumption
that the claimants received the packages)). “[U]nder New York law personal knowledge is
required only to establish regular office procedure, not the particular mailing.” Meckel v.
Continental Resources Co., 758 F.2d 811, 816 (2d Cir. 1985). Such evidence creates a
rebuttable presumption as to the addressee’s receipt.
In this case, the Debtors supported the Objection with competent evidence that GCG did
not receive the original proofs of claim. To overcome the Debtors’ Objection, the Claimants
must prove that they mailed the original proofs of claim before the Governmental Bar Date.
Proof of mailing properly addressed would be sufficient to presume receipt of the original proofs
of claim by GCG, thereby shifting the burden to the Debtors to rebut the presumption.
Although given ample opportunity to do so, the Claimants have not provided any
evidence of mailing. They did not submit an affidavit or declaration explaining their mailing
procedures or describing the particular circumstances of the preparation and alleged mailing of
the original proofs of claim. The Response simply states:
[o]n February 16, 2011, original proofs of claim were generated . .
. . These original claims were sent by regular first class U.S. mail
to the debtor’s claims agent, Garden City Group, but file stamped
copies were not returned from the Garden City Group for the
original proofs of claim.
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(Response at 3.) The rebuttable presumption of receipt does not arise from the conclusory
statements in the Response, unsupported by any competent evidence.5
CONCLUSION
The Debtors established that GCG did not receive the original proofs of claim. The
Claimants failed to provide any evidence that original proofs of claim were mailed prior to the
Governmental Bar Date. Therefore, for these reasons discussed above, the Debtors’ Objection is
sustained and the Claims are expunged. Debtors’ counsel shall submit a separate order
sustaining the Objection and expunging the claims.
Dated: December 22, 2011
New York, New York
_____/s/Martin Glenn____________
MARTIN GLENN
United States Bankruptcy Judge
5 	In this case the presumption of receipt from proof of mailing did not arise. When evidence of mailing is
provided, “[t]he mere denial of receipt does not rebut that presumption. There must be—in addition to denial of
receipt—some proof that the regular office practice was not followed or was carelessly executed so the presumption
that notice was mailed becomes unreasonable.” In re Alder, Coleman Clearing Corp., 204 B.R. at 110 (citing
Meckel v. Continental Resources Co., 758 F.2d 811, 816).
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