Pacific Drilling S.A.

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UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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In the Matter of: 	:
: 	Case No. 17-13193 (MEW)
PACIFIC DRILLING S.A., et al., 	:
: 	Jointly Administered
Reorganized Debtors. 	:
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BENCH DECISION REGARDING OBJECTION TO PROOF OF
CLAIM NO. 200 FILED BY SAMSUNG HEAVY INDUSTRIES CO., LTD.
A P P E A R A N C E S:
TOGUT, SEGAL & SEGAL LLP
New York, NY 10119
Attorneys for Debtors
By: 	Kyle J. Ortiz
Albert Togut
Frank A. Oswald
Patrick Marecki
Amanda C. Glaubach
DLA PIPER LLP (US)
New York, NY 10020 and San Francisco, CA 94105
Attorneys for Samsung Heavy Industries Co. Ltd.
By: 	R. Craig Martin
Joshua D. Morse
HONORABLE MICHAEL E. WILES
UNITED STATES BANKRUPTCY JUDGE
This is the final version of a bench decision that I announced during a telephonic hearing
on March 26, 2020.
The proceeding before me today has arisen in the Chapter 11 cases of Pacific Drilling
S.A. and certain of its affiliates, which are being jointly administered under case number 17-
13193. The parties have referred to Pacific Drilling S.A. as “PDSA” in their papers, but since
that name is similar to the name of another entity I will instead refer to it as “Pacific Drilling” in
this decision.
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Before the Court is the objection by the reorganized Pacific Drilling and certain other
affiliated debtors to Proof of Claim Number 200, which was filed on December 20, 2018 on
behalf of Samsung Heavy Industries Co., Ltd. I will refer to Samsung Heavy Industries Co., Ltd.
as “Samsung” in this decision.
The objecting parties contend that Claim Number 200 is barred because it was filed long
after the deadline that I set for the filing of such claims. I will refer to that deadline as the “bar
date.” Samsung argues that the late filing should be permitted on grounds of excusable neglect.
Samsung also contends that other claims that it filed prior to the bar date effectively asserted
claims against all of the debtors in these cases; Samsung refers to these as “informal” claims
against Pacific Drilling. Samsung therefore argues, in effect, that Claim 200 should just be
treated as an amendment or a clarification of a timely informal claim that was previously filed.
I have carefully reviewed the parties’ submissions. I have also carefully reviewed the
relevant papers that were filed in these cases in order to confirm, or in some cases to refresh, my
recollections about prior events. I believe that much of what Samsung has contended in
connection with the matters presently before me is at odds with what the record reflects. It is
therefore important to make a detailed review of the chronology before discussing the merits of
the objection to claim number 200.
The chronology is as follows.
Samsung commenced an arbitration against Pacific Drilling VIII Limited on November
18, 2015. The arbitration arose out of the purported rescission of a contract to construct a
drillship that was to be known as the Pacific Zonda. The rescission was based on an alleged
failure by Samsung to make a timely delivery of the drillship. I will refer to the arbitration as the
“Zonda Arbitration”.
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Pacific Drilling VIII Limited was the entity that entered into a contract with Samsung for
the construction of the drillship. For convenience, I will refer to that entity as “PDVIII”. Pacific
Drilling Services, Inc. guaranteed the obligations of PDVIII. I will refer to Pacific Drilling
Services, Inc. as “PDSI.” For reasons that will become clear as I review the chronology, I will
also from time to time refer to PDVIII and PDSI collectively as the “Zonda Debtors,” and I will
refer to Pacific Drilling and the other affiliated debtors in these cases (other than the Zonda
Debtors) as the “Non-Zonda Debtors.”
It is not clear from the materials before me whether PDSI was named as a respondent
from the inception of the Zonda Arbitration, but it is clear from the papers that at least at some
point it became a respondent. In any event, it is admitted and undisputed that PDVIII and PDSI
were the only entities named as respondents in the Zonda Arbitration.
Each side sought a large damage award in the Zonda Arbitration. The arbitration had not
been concluded when the bankruptcy cases of Pacific Drilling and its affiliates were filed in
2017. On November 15, 2017, with the agreement of the parties, I entered an order that
permitted the Zonda Arbitration to proceed. The evidentiary hearing in the Zonda Arbitration
was later completed on March 2, 2018. Closing submissions were made in April 2018, and
replies were filed in mid-May 2018.
In the meantime, I issued a bar date order applicable to all of the relevant cases on March
12, 2018. That order can be found on the docket at ECF Number 253. The bar date order
established a deadline of May 1, 2018 for the filing of proofs of claim. I issued the order
pursuant to Rule 3003(c)(3) of the Federal Rules of Bankruptcy Procedure, which states that the
Court “shall” set a deadline for the filing of claims in chapter 11 cases. Subparagraph (c)(2) of
this rule further provides that any creditor who fails to file a claim before the deadline set by the
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Court “shall not be treated as a creditor with respect to such claim for the purposes of voting and
distribution.” Fed. R. Bankr. P. 3003.
Paragraph 7(d) of the March 12, 2018 bar date order stated that if
. . . the holder [of a claim] asserts a claim against more than one Debtor or has
multiple claims against different Debtors, a separate proof of claim form must be
filed with respect to each Debtor. In addition, any entity filing a proof of claim
must identify on its proof of claim form the specific Debtor against which its
claim is asserted.
I also approved a form of notice, which was attached as an exhibit to the bar date order. On Page
4, that notice referenced the need to file separate claims as to each Debtor against which a
claimant wished to make a claim.
Note that by the time the bar date occurred on May 1, 2018 the evidentiary hearing in the
Zonda Arbitration had been completed and the parties had filed their initial closing statements.
Samsung’s counsel acknowledged during oral argument on March 25, 2020 that he and his client
knew about the bar date, knew about the terms of the bar date order, and received the official
notice thereof.
There is no contention in any of the papers before me that Samsung was unaware of the
requirement to file separate proofs of claim for each separate Debtor against which it wished to
make a claim. The official claim forms that were prepared for these cases also emphasized the
need to file separate claims as to each separate Debtor. Each claim form listed all of the Debtors
at the top of the first page, with checkboxes to enable creditors to identify the particular Debtor
against which a particular claim was being asserted. The official proof of claim forms also
included an instruction, repeating what I had said in the bar date order, to the effect that only one
Debtor could be named in each separate claim form.
It was therefore clear that separate claim forms were needed if a creditor sought to make
claims against more than one Debtor. This is a frequent feature of bar date orders, and similar
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requirements have been enforced and approved by the Second Circuit Court of Appeals in prior
cases. See In Re Enron Corp., 419 F.3d 115, 119, 127 (2d Cir. 2005).
In fact, Samsung did file more than one proof of claim in these cases. The official
records of the claims agent identify five proofs of claim as having been filed by Samsung on or
before the bar date. Those are claims numbered 164, 168, 169, 170 and 176. Two of those
claims were filed against PDVIII (claims 169 and 176); they appear to be duplicates of each
other. Three claims were filed against PDSI (claims 164, 168 and 170); they, too, appear to be
duplicates of each other. Anyone who has practiced in bankruptcy cases knows very well that
claims agents often receive multiple copies of claims and then, as a precaution, often designate
them as separate claims, which results in the official docketing of large numbers of duplicates.
Putting the duplicates aside, however, it is undisputed that Samsung actually filed separate
claims, as required by the bar date order, only against PDVIII and PDSI, and did not file any
proofs of claim asserting a claim against any other Debtor or any of the Non-Zonda Debtors.
The proofs of claim that Samsung filed all had the same attachments. Paragraph 1 of
each attachment stated that PDVIII had contracted for the construction and delivery of the new
drillship, and that PDSI had guaranteed the obligations of PDVIII. Each attachment further
stated, in paragraph 5, that “[i]n connection with the pending Zonda Arbitration, Samsung asserts
a contingent claim against the debtors in the above captioned cases (“the Debtors”) in the
aggregate amount of $387,442,227.00” I will discuss this statement more after I finish with the
chronology, but for now I will note that this statement referred specifically to the claims asserted
in the Zonda Arbitration itself, and that the only Debtors who were parties to that arbitration
were PDVIII and PDSI.
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No plan of reorganization had been filed as of the bar date. The first filing of a proposed
plan of reorganization occurred on July 31, 2018. It can be found at ECF Number 450. A
proposed disclosure statement was filed that same day at ECF Number 451. On July 31, 2018,
when those documents were filed, the Zonda Arbitration remained undecided.
The initial proposed plan of reorganization referred to Samsung’s timely proofs of claim
as the “Zonda Claims.” The Zonda Claims were classified as Class 7E claims. The proposed
plan would have applied to all of the Debtors, including the Zonda Debtors and the Non-Zonda
Debtors, and the proposed plan stated that all unsecured claims, including Class 7E claims,
would be paid in full. The proposed disclosure statement that accompanied the plan also referred
to the claims that Samsung had filed. It stated that Samsung had filed claims “against PDVIII
and PDSI” for approximately $387.44 million.
A First Amended Plan and Amended Disclosure Statement were filed on August 31, 2018
at ECF Numbers 551 and 552. They made no changes that are material to the matters before me
today, but I note that the amended disclosure statement continued to state that Samsung’s claims
had been filed against PDVIII and PDSI. See Amended Disclosure Statement (ECF No. 552) at
p. 38.
A few weeks later, on September 14, 2018, the Debtors filed a proposed Second
Amended Plan of Reorganization that significantly altered their approach to the Zonda Debtors
and to the Samsung claims. See ECF No. 590. The Second Amended Plan dropped PDVIII and
PDSI from the list of Debtors who were to be subject to the proposed plan. The definition of
“Debtor” made clear that the two Zonda Debtors would be subject to a separate Chapter 11 plan.
Id. at 6. Accordingly, all references to Samsung, and to the Zonda Claims generally, were
dropped from the proposed plan.
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The Second Amended Disclosure Statement (ECF No. 591) referred to the proofs of
claim that had been filed against PDVIII and PDSI and stated that “[t]he Chapter 11 debtors
against which SHI has asserted claims, PDVIII and PDSI (the ‘Zonda Plan Debtors’) are not
Debtors under the Plan, and thus are not part of Class 7 (General Unsecured Claims) or any other
Class under the Plan. The Zonda Plan Debtors intend to file a separate Chapter 11 plan (the
‘Zonda Plan’).” Id. at 37. The Second Amended Disclosure Statement further noted that if the
Zonda Debtors were unsuccessful in the Zonda Arbitration, they would liquidate what few assets
they had, and also noted that “[t]he proposed treatment of claims against the Zonda Plan Debtors
in the event of an unsuccessful Zonda Arbitration will be set forth in the Zonda Plan.” Id. at 38.
I held a hearing to consider the proposed Second Amended Disclosure Statement on
September 18, 2018. The transcript can be found at ECF No. 622. The transcript reflects the
fact that Samsung’s counsel, the DLA Piper firm, was present and entered an appearance at this
hearing. I noted during the hearing that PDVIII and PDSI had been removed as debtors who
would be subject to the plan. See Hr’g Tr., 11:13. Mr. Ortiz, on behalf of the Debtors, explained
that
[i]n the event that the Zonda Arbitration does go against PDVIII, other than PDSI,
no other Debtor entity and none of the Debtors that are still in this plan are a
guarantor or otherwise potentially liable on that claim. Thus, the Debtors will file
a separate plan to address those two entities, which is basically just to set aside
and wait for that decision from the arbitration, because it’s really pretty binary.
It’s either going to be a lot of cash into the estate or it’s going to be a claim where
that claim is isolated to those two entities.
Id. at 12:4. Samsung’s counsel noted at the same hearing that the revised plan had “carved out
two debtors against two of my client, Samsung Heavy Industries have claims.” I think that is
supposed to be “against whom my client” has claims, but the transcript reads “against two of my
client.” Id. at 111:24 – 112:2. He noted that there might be avoidance actions or other rights
belonging to those two carved out estates “that are now more meaningful to me than before when
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I was in Class 7E and told in the old disclosure statement that I was going to be getting paid in
full if I had a claim.” He therefore asked that such avoidance action claims not be pledged to
others. Id. at 112:2-10.
At the hearing, Samsung’s counsel did not dispute the contention that Samsung had filed
no claim against the Non-Zonda Debtors. Instead, he acknowledged it when he acknowledged
that the two Debtors against which his client had made claims were being removed from the
proposed plan, and when he acknowledged that the effect of this removal would be that Samsung
would no longer be a general unsecured creditor under the main Debtors’ plan, and would no
longer be entitled to payment under that plan.
Samsung’s counsel later sent a letter dated September 24, 2018 to the Debtors’ counsel.
A copy of the letter was submitted to the Court as Exhibit P to the declaration of R. Craig
Martin, filed on March 20, 2020 (ECF No. 940). Footnote 3 of the September 24, 2018 letter
stated the following: “SHI filed proofs of claim against PDVIII and PDSI, which have been
identified as Claim Nos. 164, 168, 169, 170 and 176 on the official register of claims in these
cases, in which SHI asserted claims in the aggregate amount of approximately $327 million.” At
no point in the letter did Samsung’s counsel allege that Samsung had actually filed any proofs of
claim against other entities. Samsung’s counsel argued in the letter, however, that the Debtors
acted as a single integrated enterprise, and he urged the Debtors’ counsel to abandon the separate
plans and instead to return to a single plan for all of the Debtors under which all unsecured
creditors would be paid in full. Samsung’s counsel also asked for various other things,
including: (1) that the Zonda Plan Debtors’ cases be converted to Chapter 7, or that a Chapter 11
trustee be appointed; (2) that Samsung be given the right to file objections on behalf of the
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Zonda Debtors to the separate plan of reorganization filed by other Debtors; and (3) that the
Zonda Debtors investigate transfers that may have been made to other Debtors.
The Non-Zonda Debtors filed a Third Amended Plan and a Third Amended Disclosure
Statement on September 25, 2018. Those documents can be found at ECF Nos. 608 and 610.
The Third Amended Disclosure Statement disclosed that the Debtors’ counsel had received the
September 24, 2018 letter from Samsung’s counsel, and that the Non-Zonda Debtors denied any
responsibility for the Zonda Claims. See Third Amended Disclosure Statement at 38.
I held a continuation of the disclosure statement hearing on September 25, 2018. The
transcript of that hearing can be found at ECF number 634. Samsung’s counsel stated at that
time that Samsung was reserving its rights with respect to the proposed plan of the Non-Zonda
Debtors, but without providing further details. Id. at 36.
A Third Modified Plan and Modified Third Disclosure Statement were filed on
September 27, 2018 (ECF 620 and 621), but they made no changes that are material to the
present matter. A Fourth Amended Plan was filed on October 29, 2018 (ECF No. 713). It still
made no reference to Zonda or to Samsung. It still made clear that PDVIII and PDSI would
submit their own separate plan and were not part of the plan for which confirmation was being
sought on behalf of the Non-Zonda Debtors.
Samsung did not object to the confirmation of the Non-Zonda Debtors’ plan. A
confirmation hearing was held on October 31, 2018; the transcript is at ECF No. 803. Mr. Ortiz
noted again at that hearing that the Zonda Debtors would file a separate plan under which, if
Samsung prevailed, those two Debtors would be liquidated. Id. at 38:10.
After the confirmation hearing I entered findings of fact and a confirmation order that
appear on the docket at ECF No. 746. Paragraph 112 made clear that nothing in the plan or in
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the confirmation order waived, settled or compromised any claims against the Non-Zonda
Debtors that were owned by the Zonda Debtors or by creditors of the Zonda Debtors, and that
claims and causes of action were reserved “subject to the Bar Date Order and any argument
regarding the applicability thereof.” Id. ¶ 112.
At this point Samsung still had filed no claim against Pacific Drilling or any of the other
Non-Zonda Debtors. It was entirely clear to me, and I believe to all of the parties involved
(including Samsung), that the whole premise of the separate plan confirmation for the Non-
Zonda Debtors in October 2018 was that the Samsung claims would be isolated to the Zonda
Debtors.
After confirmation the parties proceeded to close a number of new financings and equity
purchases representing infusions of hundreds of millions of dollars of capital into the Non-Zonda
Debtors. It was only after those financings had closed, and only after the other parties were
locked into the terms of the confirmed plan of reorganization for the Non-Zonda Debtors, that
Samsung filed a proof of claim against Pacific Drilling in December 2018.
The new Samsung claim was filed as Claim number 200. It was filed using the official
proof of claim form, and the box was checked showing that the claim was filed against Pacific
Drilling. The claim is marked as having been received by the official claims agent on December
20, 2018. Item four on the claim form asked whether the claim amended another claim that had
previously been filed. Samsung checked the “no” box. The claim also included an attachment
that explained the bases for the claim. Paragraph 5 of the attachment asserted that Samsung had
a contingent claim against Pacific Drilling for $387,442,227. It then stated that “Samsung filed
proofs of claim previously against the Zonda Debtors, asserting contingent claims for the amount
listed immediately above.” A footnote listed and made reference to claims 169 and 170.
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I will discuss the merits in a moment, but I want to pause to note that, in contrast to what
Samsung has argued in its papers and at the hearing on March 25, Samsung’s December 2018
proof of claim did not take the position that its prior claims had been filed against all of the
Debtors, and it did not take the position that claim 200 was merely an amendment or a
clarification as to those prior claims. Rather, the plain wording of Samsung’s own claim said the
exact opposite. Samsung acknowledged that its prior claims were only against the two Zonda
Debtors, and it also acknowledged that this new claim was not an amendment to those prior
claims.
Furthermore, Samsung noted at paragraph 7 of the attachment to claim 200 that Samsung
expected the Non-Zonda Debtors to object to the timeliness of the claim. Samsung did not argue
in that paragraph that in fact the claim had previously been filed, either on a formal or an
informal basis. Instead, Samsung argued that it should be allowed to file a late claim and should
be excused from the normal consequences of missing the bar date on grounds of “excusable
neglect.” See the attachment to proof of claim number 200 ¶ 8. The purported grounds for the
excusable neglect claim were that the plan of reorganization had been changed on the eve of
confirmation to carve out the Zonda Debtors, which meant that Samsung’s potential recovery
would be limited to those debtors and thereby jeopardized. Id. ¶ 9.
I will now turn to the merits of the objection that is before me. I will start with a
procedural comment. At least part of Samsung’s argument is that I should excuse Samsung from
the requirements of the bar date on grounds of “excusable neglect.” Procedurally, Samsung has
not raised this issue in the proper way. If a party wishes to file a late claim it is incumbent on the
party to seek the Court’s permission to do so by filing a motion under Rule 9006 of the Federal
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Rules of Bankruptcy Procedure. Samsung never did so. Instead it just filed a belated claim and
argued in the claim itself that the late filing should be excused on grounds of excusable neglect.
While the procedure was wrong, I will nevertheless consider the excusable neglect
argument on its merits and I will consider Samsung’s other contentions on their merits.
As to the excusable neglect contention: Rule 9006 of the Federal Rules of Bankruptcy
Procedure states that if an order of the court requires an action to be taken on or before a
particular date, and if the action is not taken by the specified deadline, the court nevertheless may
extend the deadline after the fact, and may permit the act to be done belatedly, “where the failure
to act was the result of excusable neglect.” See Fed. R. Bankr. P. 9006(b)(1).
The leading decision on the application of the “excusable neglect” standard is the
decision of the United States Supreme Court in Pioneer Inv. Servs. v. Brunswick Assocs, Ltd.
P’ship, 507 U.S. 380 (1993). In Pioneer, an attorney filed a claim 20 days after the bar date. He
claimed that he had been experiencing “a major and significant disruption” in his life due to his
withdrawal from his former law firm and that he was unaware of the bar date until after the date
had passed. The Supreme Court held that the wording of the rule shows that relief may be
available even if a deadline is missed due to neglect. It also held that neglect includes instances
in which deadlines are missed due to carelessness or inattentiveness. In the words of the
Supreme Court, the term “neglect” encompasses “both simple, faultless omissions to act and,
more commonly, omissions caused by carelessness.” Id. at 388. The Supreme Court also held
that the determination of whether neglect is excusable is “at bottom an equitable one, taking
account of all relevant circumstances surrounding the party’s omission.” Id. at 395. The
relevant factors include: (1) the danger of prejudice; (2) the length of the delay and its potential
impact on proceedings; (3) the reason for the delay, including whether it was in the reasonable
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control of the movant; and (4) whether the movant acted in good faith. Id. However, the
Supreme Court rejected the Sixth Circuit’s holding that a party should not be held responsible for
the excusable neglect of its counsel. Id. at 396.
Applying these principles, the Supreme Court held in Pioneer that excusable neglect had
been demonstrated. Id. at 397-99. The Supreme Court gave “little weight” to the fact that
counsel was allegedly experiencing upheaval in his law practice. Id. at 398. However, since the
bar date notice had been set forth in a notice of a creditor meeting, without any indication in the
title of the notice that it also included information about a bar date, the Supreme Court held that
counsel’s admitted lack of actual knowledge of the bar date, coupled with a lack of prejudice and
a demonstration of good faith, constituted excusable neglect. Id. at 398-99.
The Second Circuit has taken “a hard line” in applying the Pioneer factors. See Silivanch
v. Celebrity Cruises, Inc., 333 F.3d 355, 368 (2d Cir. 2003). In Silivanch, the Second Circuit
applied the Pioneer factors in determining whether an untimely filing of an appeal was due to
excusable neglect. The Court held that the third of the Pioneer factors (the reason for a delay
and whether it was in the reasonable control of the movant) is to be given the most weight in
determining whether excusable neglect has been shown. Id. at 366. It further instructed that if a
deadline is clear and understood, but is missed anyway, “we continue to expect that a party
claiming excusable neglect will, in the ordinary course, lose under the Pioneer test.” Id. at 366-
67.
In a later decision, the Second Circuit emphasized again that “it is the third factor – the
reason for delay – that predominates, and the other three are significant only in close cases.”
Williams v. KFC Nat’l Mgmt. Co., 391 F.3d 411, 415-16 (2d Cir. 2004). The Silivanch decision
was reaffirmed in Midland Cogeneration Venture Ltd. P’ship v. Enron Corp. (In re Enron
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Corp.), 419 F.3d 115, 122-24 (2d Cir. 2005), where the court rejected a request for relief from a
bar date based on allegations of “excusable neglect.”
Consistent with these authorities I will first consider the reason for the alleged delay by
Samsung.
Samsung contends the delayed filing constituted excusable neglect because the proposed
plan was changed at the last minute in September 2018 and the change caught Samsung
unawares. However, the relevant question is whether there was excusable neglect for Samsung’s
failure to file by the bar date on May 1, 2018. No plan had even been proposed at the time of the
bar date, so later plan terms and changes in plan terms could not possibly have anything to do
with Samsung’s failure to assert claims by the bar date against anyone other than the Zonda
Debtors.
Samsung’s counsel argued at the hearing on March 25 that the arbitration claims had not
yet been decided when the Bar Date arrived and therefore that it was not known whether
Samsung would have excess claims against the Non-Zonda Debtors. But the definition of
“claims” under section 101 of the Bankruptcy Code includes claims that are contingent,
unliquidated, unmatured or disputed, and my bar date order plainly applied to all such claims. I
note that the explanation offered by Samsung’s counsel would have similarly suggested that
there was not yet reason to file claims against PDSI as the guarantor of the obligations of
PDVIII, but that hardly stopped Samsung from doing so in May 2018. If Samsung really thought
that it had a contingent claim against other debtors then Samsung should have filed a claim
against those debtors, and that is true regardless of whether the claim was contingent on the
outcome of the Zonda Arbitration, or whether it was contingent, unliquidated, unmatured or
disputed in any other way.
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Samsung has also argued, based on various alleged prior statements and conduct by
Pacific Drilling both before the bankruptcy cases and in alleged meetings of creditors, that
Samsung allegedly believed at the time of the bar date that all of the Pacific Drilling entities
would stand behind the payment of a potential Samsung claim. But if any of that were true, it
hardly excused Samsung’s failure to file claims against Pacific Drilling and other Non-Zonda
Debtors. To the contrary: if Samsung believed for any reason that any of the Non-Zonda
Debtors were going to be obligated to stand behind the payment of any Samsung claim, that is
just an explanation of why Samsung could and should have filed claims against those entities on
or before the bar date. It is not an excuse for Samsung’s failure to do so.
As I said a moment ago, the bar date order applies to claims of any and all kinds. By its
terms it explicitly covered claims even if they were contingent, unmatured, unliquidated or
disputed. The whole point of that broad definition is to allow the relevant debtors to identify all
claims against them so that they know what they need to address in a plan of reorganization. See
In re Manhattan Jeep Chrysler Dodge, Inc., 18-10657-MEW, 2019 WL 1054928, at *2 (Bankr.
S.D.N.Y. March 4, 2019) (noting that the definition of claim encompasses all claims, whether
contingent or disputed or otherwise, and that “[a] company cannot reorganize, and cannot
structure potential distributions to its claimants, without having an ability to identify the universe
of those potential claimants. That is the purpose that a bar date order serves.”) In that context,
any and all of the matters to which Samsung has cited in its papers or that Samsung referenced
during the hearing yesterday that occurred on or prior to May 1, 2018 are just reasons why
Samsung should have filed claims before the bar date, and are not good excuses for its failure to
do so.
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Samsung also alleges in its papers that Pacific Drilling allegedly acted as the contracting
party and allegedly gave reassurances to Samsung that it would cover Samsung’s claim, but
again that does not show excusable neglect. To the extent any of those alleged reassurances
happened prior to the bar date (as appears to be the case as to most of the matters to which
Samsung has cited), those are just good reasons, once again, why Samsung ought to have filed a
claim against Pacific Drilling, which Samsung did not do. If on the other hand, alleged
reassurances were given after the bar date and then subsequently revoked, then they obviously
had nothing to do with Samsung’s prior decision, at the time of the bar date, to file claims only
against the Zonda Debtors and not against others.
The third Pioneer factor also calls upon me to consider whether the delay was based on
something that was within the reasonable control of Samsung. This is not like the Pioneer case,
where it was undisputed that an attorney did not actually know about a bar date and where the
court excused that lack of knowledge because notice of the bar date had not been prominently
given. In this case, experienced bankruptcy counsel knew of the bar date and knew of the
requirements of the bar date order. If Samsung did not file claims against the Non-Zonda
Debtors, it was because Samsung elected not to do so at that time. Samsung may regret its
decision, but the failure to file the claim was entirely in Samsung’s control and is entirely the
result of Samsung’s own decisions.
Samsung may want to change its mind now, but that does not mean that its prior
decisions were the result of excusable neglect, or even that they were the result of “neglect” at
all. I must emphasize again that there is no allegation here that Samsung did not know of the bar
date and the requirements of my bar date order. There is similarly no allegation that Samsung
did not understand that the bar date applied to claims that Samsung might want to pursue against
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the Non-Zonda Debtors. What Samsung’s counsel argued yesterday was that I should find that it
was nevertheless reasonable for Samsung to wait before filing a claim. But the gist of that
argument is not that I should excuse Samsung for a careless oversight, but that I instead should
excuse Samsung from the consequence of a deliberate and knowing decision. That is not a basis
for relief under Rule 9006. A decision not to file a claim, even if that decision turns out to be
unwise, is not “neglect” of a kind that Rule 9006 excuses. See United States v. Darling, 706 F.
App’x 34, 36 (2d Cir. 2017) (holding that the fact that a party has changed its mind is neither
good cause to reopen a deadline nor excusable neglect for having missed one).
The second Pioneer factor calls upon me to consider the length of a party’s delay and its
impact on proceedings. Many cases have noted, in applying Pioneer, that a party who misses a
deadline must act with reasonable promptness after its neglect becomes clear to it, and must act
promptly to take the action that should have been taken earlier. See, e.g., In re AMR Corp., 492
B.R. 660, 667 (Bankr. S.D.N.Y. 2013) (holding that a three-month delay was an unreasonable
delay in applying the Pioneer factors). Here, my original bar date order gave creditors about
seven weeks to file claims. Samsung knew in early September 2018 that the Zonda Debtors
were being separated from other debtors, and that Samsung’s claims would only result in
recoveries from the Zonda Debtors. However, Samsung filed no proof of claim against any of
the Non-Zonda Debtors at that time. It was not until 15 weeks later – after the secured creditors
had committed hundreds of millions of dollars of new financing to the Non-Zonda Debtor plan,
after I entered an order confirming that plan, and after that plan became effective – that Samsung
filed its new claim, seeking full payment by the Non-Zonda Debtors of more than $300 million.
That is not acting with reasonable promptness; it is exactly the opposite of reasonable
promptness.
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I am also directed under the second Pioneer factor to consider the effect of a party’s
delay on the proceedings before me. To some extent this overlaps with the first Pioneer factor in
this particular case, which requires me to consider the prejudicial impact on other parties.
As I explained above, the whole purpose of having a bar date in a Chapter 11 case is to
identify the universe of claims that must be addressed in a Chapter 11 plan. In this case, the
Non-Zonda Debtors had several classes of secured creditors. It was quite evident that the values
of the companies were not sufficient to cover the amounts of all of the secured claims.
Unsecured creditors (including, if its claim were allowed, Samsung) were junior to the secured
creditors, and technically they had no right to be paid at all if the secured creditors pursued their
rights as senior creditors to receive whatever value was available. The secured creditors, in the
case of the Non-Zonda Debtors, nevertheless agreed in the confirmed plan to allow unsecured
claims against those Debtors to be paid in full. That was explained to me early in these cases as
a gesture of good will and a desire to maintain good relations with trade creditors and employees.
But the actual reason does not matter. The unsecured claims that had been filed against the Non-
Zonda Debtors were relatively small at the time the plan was confirmed.
If Samsung wanted to assert a potential eye-popping claim against the Non-Zonda
Debtors, then as a matter of equity and fairness it should have done so at an earlier time. If it had
done so in September, after the Zonda Debtors had been separated from the other debtors, then
the parties could have litigated at that earlier time the question of whether the late claim should
be permitted. If the late claim had been permitted at that time, the Non-Zonda Debtors would
have been able to decide whether they still wished to agree to pay unsecured creditors in full.
More importantly, the senior secured creditors could have decided whether they wished to
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support a plan under which potentially hundreds of millions of dollars of their investments and
recoveries might be diverted to a creditor who legally was junior to them.
The fact that Samsung waited until after these transactions were in place and until after
the plan was confirmed was improper, inequitable and prejudicial. The senior secured creditors
committed hundreds of millions of dollars of financing under the plan. Samsung’s belated claim
would completely alter the landscape. It would effectively divert the value that the secured
creditors contributed, potentially devoting that value to Samsung itself rather than to the conduct
of the business of which the secured creditors took ownership. The effect would be that the
secured creditors would have contributed vast sums of their own money for the benefit of a
creditor who was junior to them.
Samsung argued at the hearing on March 25 that it should be entitled to take discovery
and to try to prove that somehow the secured creditors would have done the same thing anyway,
and that the terms of the Non-Zonda Debtors’ plan would have been the same, even if Samsung
had filed its claim earlier. But I see no reason for such discovery. The relevant point is that in
fairness to the other parties, the question of whether Samsung would be able to pursue a claim
could and should have been decided earlier. Samsung did not act reasonably, promptly or
equitably in delaying the filing of its claim. Instead, it tried to game the timing of its claim,
filing it only after the other parties were committed to the confirmed plan and only after it was
too late for them to change the provisions of that plan insofar as they related to payments of
unsecured claims.
In this regard, the delay had a huge impact on the proceedings. An entire plan was
confirmed and hundreds of millions of dollars were committed to new financing arrangements.
Trying to sneak in a $337 million claim after all this was done is just not right. It is prejudicial.
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The secured creditors and other parties were entitled to make informed decisions about the
treatment of junior creditors at the time of plan confirmation. Samsung’s delay in filing the
claim was just an effort to take away that opportunity and to wait until other parties were “locked
in” to the payment of unsecured claims, even though it had to be obvious to everyone that the
payment of unsecured claims would have an entirely different impact on the secured creditors if
Samsung’s own claims potentially were included. In that regard, Samsung’s delay was
inequitable, manipulative and inexcusable.
I am also directed under Pioneer to consider whether Samsung has acted in good faith. I
certainly believe that Samsung has not acted equitably, for the reasons that I have just explained,
but I do not need to go so far as to decide as a factual matter whether its conduct also amounted
to a lack of subjective good faith. My decision would be the same even if I were to find that
Samsung acted with good faith.
I have discretion to balance the Pioneer factors, so long as I give primary weight to the
third factor in accordance with the Second Circuit authorities. In my judgment the lack of a good
reason for delay, the fact that what happened was entirely under Samsung’s control, the absence
of a proper identification of actual “neglect” that should be excused (as opposed to a request to
be excused from the consequences of a conscious decision), the fact that Samsung did not
proceed with reasonable promptness when it learned of the nature of its alleged mistake in
September, the fact that the claim was delayed until after confirmation of the plan of
reorganization and after other parties had committed huge resources, and the fact that Samsung’s
unexcused delay deprived other parties of opportunities to make their own informed choices as to
how to treat a potential Samsung claim, all show that Samsung did not act with “excusable
neglect” under the circumstances.
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I note again that under the applicable case law, Samsung’s failure to identify a good and
sufficient excuse for its conduct would itself be grounds for the denial of relief under Rule 9006,
even if all of the other factors weighed in Samsung’s favor. See Williams, 391 F.3d at 417
(holding that even if the other factors favored relief, a failure to satisfy the third Pioneer factor
justified the denial of a motion for relief from the consequences of a missed deadline based on
alleged “excusable neglect”). That is all the more reason why the request for relief should be
denied in this particular case, where Samsung has failed to pass any of the Pioneer tests (with the
possible exception of good faith, which I have found it unnecessary to consider). Under these
particular circumstances the objection should be sustained.
Samsung has also argued that the claims that it filed against PDVIII and PDSI actually
were claims against all of the Debtors. This allegation is based on the statement in the
attachment that I cited above to the effect that Samsung was asserting a contingent claim against
the “debtors.” As I noted above, the full sentence in the attachment actually stated that “[i]n
connection with the pending Zonda Arbitration” Samsung had made claims against the “debtors
in the above captioned cases.” The only debtors named in the arbitration were the Zonda
Debtors, and the Debtors’ cases that were identified in the proof of claim forms (to which these
attachments were attached) were the Chapter 11 cases of PDVIII and PDSI.
Contrary to what Samsung now alleges, it was not making claims against all of the
debtors. In fact, even now Samsung is not seeking to do so. It wants only to assert a belated
claim against Pacific Drilling, not against all of the debtors.
Samsung’s contention, more importantly, is belied by the plain terms of the documents
and by Samsung’s own prior statements. As I have noted, the captions to the proofs of claim that
Samsung actually filed referred only to the Zonda Debtors. Samsung did in fact file separate
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claims as to PDVIII and PDSI. If Samsung had really thought that one claim was good enough
to constitute a claim against all of the Debtors, then there would have been no reason for
Samsung to file claims against both PDVIII and PDSI. That plainly is not how Samsung itself
regarded the situation. It named the two Zonda Debtors as respondents in the arbitration, and it
realized that it needed to file separate claims against each of those two Debtors in order to pursue
claims against both of them.
As I noted above, Samsung did not object to the statements on the record by the Debtors’
counsel to the effect that Samsung’s claims had only been filed against PDVIII and PDSI. Nor
did Samsung object to similar statements that were made in the Disclosure Statements that the
Debtors filed. In addition, Samsung’s counsel himself stated in the September 24, 2018 letter to
the Debtors’ counsel that Samsung had filed claims against PDVIII and PDSI. There was no
assertion that Samsung had filed claims against others.
Similarly, the December 2018 proof of claim did not allege that it was a clarification of
prior claims or an amendment to prior claims. Instead it said in part I-4 that it was not such an
amendment. The attachment even referred to the prior claims that had been filed and described
those as claims that had been made against PDVIII and PDSI. The attachment did not argue that
the December 20 claim should be treated as an amendment or a clarification of a prior formal or
informal claim. Instead it argued solely that the new claim should be permitted based solely on
excusable neglect.
As to Pacific Drilling, this is an entirely new claim, not an amendment or a clarification
of an existing claim. See In re PT-1 Communications, Inc., 292 B.R. 482, 487 (Bankr. E.D.N.Y.
2003).
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Samsung has also suggested that the reservation of rights paragraph in the confirmation
order allegedly permits the late claim to be filed. The relevant provision merely said that the
plan and the confirmation order themselves were not prejudicial to claims that various entities
might have. It said nothing about the fact that the bar date order might bar such claims. In fact,
it made clear that any claims remained subject to the bar date and to arguments about the
application of the bar date. At most, the reservation of rights reserved Samsung’s right to ask for
permission to file a late claim. It did not mean that Samsung would automatically have
permission to do so, and it did not insulate Samsung from contentions that its claims were barred
by the bar date order.
For the foregoing reasons, I will sustain the objection to proof of claim number 200 and I
will expunge that claim.
Dated: New York, New York
April 2, 2020
s/Michael E. Wiles
Honorable Michael E. Wiles
United States Bankruptcy Judge
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