AMR Corporation

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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In re: 	Chapter 11
AMR CORPORATION, et al., 	Case No. 11-15463 (SHL)
Reorganized Debtors. 	(Confirmed)
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MEMORANDUM OF DECISION
A P P E A R A N C E S :
WEIL, GOTSHAL & MANGES LLP
Attorneys for Reorganized Debtors
767 Fifth Avenue
New York, New York 10153
By: 	Stephen Karotkin, Esq.
Alfredo R. Pérez, Esq.
Stephen A. Youngman, Esq.
GLAD R. HAYES
Pro Se
295 Harbour Way
Lakehills, Texas 78063
SEAN H. LANE
UNITED STATES BANKRUPTCY JUDGE
Before the Court is the Motion by pro se claimant Glad Hayes (“Ms. Hayes”) for an
Extension to File Proof of Claim Pursuant to Rule 9006(b)(1) of the Federal Rules of Bankruptcy
Procedure (the “Motion”) (ECF No. 12606) and the Objection of Debtors Pursuant to 11 U.S.C.
§ 502(b) and Federal Rule of Bankruptcy 3007 to Glad Hayes' Request for Extension to File
Proof of Claim (the “Objection”) (ECF No. 12638). 1
1 	At a status conference held on September 23, 2015, Ms. Hayes and the Debtors agreed that this matter
would be decided without a hearing unless one was requested by the parties. See Transcript of Hearing Held on
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Ms. Hayes asserts that she did not receive actual notice of the deadline for filing claims
in the above-captioned Chapter 11 case, and therefore, the Court should consider her proof of
claim filed after the bar date as if it was timely. In the alternative, Ms. Hayes argues that she
meets the excusable neglect standard to permit a late filed claim. Conversely, the Debtors seek
an order granting the Debtors’ objection to her claim as untimely. For the reasons stated below,
Ms. Hayes’ Motion is denied and the Debtors’ Objection is granted.
BACKGROUND
On November 29, 2011, American Airlines, AMR Corporation, American Group, Inc.
and American, Inc. (collectively, the “Debtors”) filed a voluntary petition for relief under
Chapter 11 of the Bankruptcy Code in this Court. As of the petition date, all judicial proceedings
against the Debtors were stayed pursuant to section 362(a) of the Bankruptcy Code. When the
Debtors filed their Schedules of Assets and Liabilities (the “Schedules”), Ms. Hayes was listed as
a holder of a contingent, unliquidated, and disputed claim in an undetermined amount. See
Schedule F-2 (ECF No. 1430-1).
In May 2012, this Court entered an order (the “Bar Date Order”) setting a bar date of July
16, 2012 (the “Bar Date”). See ECF No. 2609. Pursuant to the Bar Date Order, holders of
scheduled claims listed as either “disputed,” “contingent,” or “unliquidated” were required to file
a proof of claim by the Bar Date. Likewise, the Bar Date Order provided that a proof of claim
“shall be deemed timely filed only if it is actually received by the Debtors’ Court-approved
claims agent, GCG, Inc. (“GCG”) or by the Court, on or before the applicable Bar Date.” Bar
Date Order at 3.
September 23, 2015 at 12:7–13:21 (ECF No. 12636). Neither party requested a hearing. In fact, Ms. Hayes
contacted chambers to express her preference that this Court make its decision solely based on the submitted
documents.
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GCG served by first class mail a copy of, among other things, actual notice of the Bar
Date (the “Bar Date Notice”) on thousands of parties including Ms. Hayes. Ms. Hayes was
served at 295 Harbour Way, Lakehills, Texas 78063. Debtors also served her last known legal
representative, Tom Hayes, at 560 Mountain Drive Lot 20, Lakehills, Texas 78063. See
Affidavit of Service of Isabel Baumgarten, dated May 23, 2012, at 1665 (ECF No. 2888). In
addition to the personalized first class mail delivery, GCG published the Bar Date Notice in ten
publications, including, The Wall Street Journal, The New York Times, USA Today, Dallas
Morning News, and Forth Worth Star- Telegram. See Notice of Certification of Publication of
Katina Brountzas – Notice of Deadline for Filling Proofs of Claim, dated June 13, 2012 (ECF
No. 3215).
Ms. Hayes’ claim arises out of her pending legal dispute against American Airlines in an
action styled as Glad Rustyn Hayes v. American Airlines, Inc., Case No. 2011-CI-10057 (the
“Texas Action”), before the District Court of Bexar County, Texas, 225th Judicial District. The
Texas Action alleges wrongful termination of employment by American Airlines in June 2009,
along with other allegedly improper workplace actions. See Ex. C, attached to Objection.
Although Ms. Hayes is appearing pro se before this Court, attorney Tom Hayes is listed as her
counsel in the Texas Action. Id. at 38.
On July 19, 2012, three days after the Bar Date, GCG received Ms. Hayes’ proof of claim
(the “Proof of Claim”). According to Ms. Hayes, on July 13, 2012, she had “discovered a
version of the notice” on the internet and mailed her proof of claim to GCG on the same day.
See Response To Objection Of Debtors To Glad Hayes' Request For Extension To File Proof Of
Claim (“Hayes’ Response”) at ¶ 11 (ECF No. 12649). Ms. Hayes argues she was under the
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impression that her filing would be timely “using the international legal rule of thumb that
documents must be post marked by that day.” Motion at 2.
In her pleadings before this Court, Ms. Hayes maintains that she never received the Bar
Date Notice because of “unreliable” mail service and possibly even mail theft in her “rural
county.” Motion at 1; Hayes’ Response at ¶¶ 10, 16. In support of her assertion, Ms. Hayes
provided the following: (1) a copy of a November 12, 2015 police report filed with the Bandera
County Sherriff’s Department (the “Police Report”) (ECF No. 12650); (2) her affidavit, dated
July 29, 2015 (the “Hayes Aff.”), attached to the Motion at 3; and (3) a June 11, 2015 Bandera
Bulletin online article that discusses mail theft in Bandera County between May 26, 2015 and
June 6, 2015 (the “Bulletin Article”) (ECF No. 12649). Ms. Hayes also asserts that she never
saw the Bar Date Notice in any of the ten publications as none of them targeted former
employees of the Debtors. See Hayes’ Response at ¶¶ 9, 10.
DISCUSSION
“A bar date order is ‘an integral step in the reorganization process.’” In re AMR Corp.,
492 B.R. 660, 663 (Bankr. S.D.N.Y. 2013) (quoting In re Best Prods. Co., 140 B.R. 353, 357
(Bankr. S.D.N.Y. 1992)). It enables “the parties in interest to ascertain with reasonable
promptness the identity of those making claims against the estate and the general amount of the
claims, a necessary step in achieving the goal of successful reorganization.” Id. “If individual
creditors were permitted to postpone indefinitely the effect of a bar order . . . the institutional
means of ensuring the sound administration of the bankruptcy estate would be undermined.”
Fidelity Bank, N.A. v. Hooker Invs., Inc. (In re Hooker Invs., Inc.), 937 F.2d 833, 840 (2d Cir.
1991).
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A. Alleged Lack of Notice of the Bar Date
The constitutional standard for due process requires that known creditors in a bankruptcy
case, such as Ms. Hayes, receive actual notice of the bar date. City of New York v. N.Y., N.H. &
H.R. Co., 344 U.S. 293, 296–97 (1953). “Known creditors . . . must be afforded notice
‘reasonably calculated, under all the circumstances, to apprise’ them of the pendency of the bar
date.” In re R.H. Macy & Co., 161 B.R. 355, 359 (Bankr. S.D.N.Y. 1993) (citing Mullane v.
Central Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950)). “[I]f a creditor is not given
reasonable notice of the bankruptcy proceeding and the relevant bar dates, its claim cannot be
constitutionally discharged.” In re U.S.H. Corp., 223 B.R. 654, 658 (Bankr. S.D.N.Y. 1998). In
Chapter 11, therefore, a known creditor must receive proper, adequate notice before its claim is
barred forever. See In re Best Prods. Co., 140 B.R. at 357. Furthermore, the bar date is strictly
enforced except when a known creditor is not listed on the schedules and fails to receive notice
of the bar date. Id. at 358.
It is well-settled that proof that a letter was properly addressed and placed in the mail
system “creates a presumption that the letter was received in the usual time by the addressee.” In
re AMR Corp., 492 B.R. at 663 (citing Hagner v. United States, 285 U.S. 427, 430 (1932). Thus,
upon proof of mailing a properly addressed letter, a rebuttable presumption of receipt arises. See
R.H. Macy, 161 B.R. at 359–60; In re Worldcom, Inc., 2005 WL 3875192, at *3 (Bankr.
S.D.N.Y. Oct. 27, 2005) (noting that 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.”). Nevertheless, if the mail comes back undeliverable then
the sender will not be entitled to the presumption. See In re Residential Capital, LLC, 2015 WL
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2256683, at *8 (Bankr. S.D.N.Y. May 11, 2015) (holding that the Court cannot presume that
notice was received when the notice documents were returned as undeliverable).
Federal courts in New York have held “quite uniformly” that an affidavit of non-receipt
is insufficient to rebut the presumption of receipt created by proof of mailing. See In re
Malandra, 206 B.R. 667, 673 (Bankr. E.D.N.Y. 1997); R.H. Macy, 161 B.R. at 360 (“Movants'
respective self-serving submissions asserting non-receipt . . . [are] insufficient to rebut the . . .
presumption of receipt.”); In re Horton, 149 B.R. 49, 58 (Bankr. S.D.N.Y. 1992) (noting that
“affidavits of [creditor's] employees stand merely as general denials that [creditor] received the
[n]otice and are therefore insufficient to rebut the presumption of receipt.”).
However, testimony denying receipt that is accompanied by objective evidence such as
tracking procedures can rebut the presumption of mailing. See Hogarth v. N.Y.C. Health &
Hosps. Corp., 2000 WL 375242, at *4–5 (S.D.N.Y. Apr. 12, 2000) (holding that the claimant
successfully rebutted the mailbox presumption by presenting into evidence detailed logs of
incoming and outgoing mail that contained no record of the letter in question); see also In re
Robinson, 228 B.R. 75, 82 (Bankr. E.D.N.Y. 1998) (ruling that "[a]lthough the mere denial of
receipt does not rebut the presumption, testimony denying receipt in combination with evidence
of a standardized procedure for processing mail can be sufficient to rebut the presumption.").
Likewise, the presumption may be rebutted by denial of receipt supported by evidence “that the
regular office practice was not followed or was carelessly executed so the presumption that
notice was mailed becomes unreasonable.” Meckel v. Cont'l Res. Co., 758 F.2d 811, 817 (2d Cir.
1985).
Because the bar date is such a significant tool of order and efficiency for all parties
involved in a reorganization, “[c]ourts in the Second Circuit do not take this issue lightly.” In re
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AMR Corp., 2014 Bankr. LEXIS 4314, at *6 (Bankr. S.D.N.Y. Oct. 9, 2014). Accordingly, the
heightened burden in this Circuit “recognizes that if a party was permitted to defeat the
presumption of receipt of notice resulting from the certificate of mailing simply by giving an
affidavit to the contrary, the scheme of deadlines and bar dates under the Bankruptcy Code
would come unraveled.” Id. “‘Evidence of an objective nature going beyond the claimant’s
statement of non-receipt is necessary.’” In re Greenberg, 526 B.R. 101, 105 (Bankr. E.D.N.Y.
2015) (quoting In re Barquet Grp., Inc., 477 B.R. 454, 462 n.7 (S.D.N.Y. 2012)).
Applying these principles here, the Debtors have submitted evidence establishing that
actual notice was provided to Ms. Hayes. The Debtors presented two documents. The first is the
declaration of Karina Brountza, the Assistant Director of GCG, dated September 21, 2015 (the
“Brountza Declaration”), attached as Exh. D to the Objection. The second is Isabel I.
Baumgarten’s affidavit of service, dated May 23, 2012 (the “Baumgarten Aff.”), attached as Ex.
B to Ex. D of the Objection. Ms. Baumgarten is the Senior Director of GCG and supervised the
mailing of the Bar Date Notice to Ms. Hayes and other creditors listed on the Debtors’ petition.
Both sworn statements allege that the Bar Date Notice was mailed via first class mail to Ms.
Hayes and others on May 18, 2012 and none of the mailings were ever returned as undeliverable.
See Brountza Declaration ¶ 3; Baumgarten Aff. ¶¶ 2–4. This is sufficient evidence to trigger the
presumption that Ms. Hayes received the Bar Date Notice. See, e.g., In re Adler, Coleman
Clearing Corp., 204 B.R. 99, 104–05 (Bankr. S.D.N.Y. 1997) (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).
Ms. Hayes has not provided sufficient evidence to overcome the presumption. In her
Motion, Ms. Hayes claims that she did not receive the Bar Date Notice. But such an assertion of
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non-receipt is not sufficient to rebut the presumption. See In re Ms. Interpret, 222 B.R. 409, 413
(Bankr. S.D.N.Y. 1998) (noting that “a party must do more than merely assert that it did not
receive the mailing; its testimony or affidavit of non-receipt is insufficient, standing alone, to
rebut the presumption.”); In re Barquet Grp., 477 B.R. at 462 n.7 (noting that the mailbox
presumption must be rebutted by objective evidence and not by invoking another presumption
and not by a mere affidavit to the contrary); see also In re O.W. Hubbell & Sons, Inc., 180 B.R.
31, 35 (N.D.N.Y. 1995) (finding that the bankruptcy court “gave the proper weight, i.e. none” to
affidavit denying receipt of notice).
Subsequent to her original Motion, Ms. Hayes submitted additional evidence, including a
news article and a police report. Both are intended to demonstrate a mail theft problem in the
county where she lives in Texas. But neither is enough to overcome the presumption. Both
exhibits relate to mail issues in May, June, or November of 2015, approximately three years after
the Bar Date Notice was mailed to Ms. Hayes’s address. Putting aside whether the news article
is proper evidence, the article provides no evidence that a mail theft issue existed at the time the
Bar Date Notice in this case was mailed in 2012. See, e.g., Bulletin Article (noting that area
mailboxes were “hit between May 26 and June 6” of 2015) (ECF No 12649). Similarly, the
Police Report consists of Ms. Hayes’ own complaint to the police in 2015 about mail service and
does not relate to 2012. See Police Report at 3 (“Glad stated that after learning of reports of mail
theft occurring in the area of her residence of 295 Harbour Way, she believes her mail has been
stolen. She stated that this missing mail if [sic] from approximately 1 year ago.”) (ECF No.
12650). As the Police Report merely recounts what Ms. Hayes told officers, it is essentially the
same as her Motion’s assertion of non-receipt, rather than the kind of objective contemporaneous
evidence required to rebut the presumption. In re Greenberg, 526 B.R. at 106 (finding that
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creditors who “failed to provide any evidence of non-receipt other than conclusory, unsupported
denials . . . have failed to overcome the presumption of receipt.”).
B. Excusable Neglect
As an alternative argument, Ms. Hayes contends that her failure to timely file was due to
excusable neglect under Bankruptcy Rule 9006(b)(1). Bankruptcy Rule 9006(b)(1) provides that
“the court for cause shown may at any time in its discretion . . . 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).
The Supreme Court has held that the term “neglect” in its ordinary sense means “to give
little attention or respect to a matter, or . . . to leave undone or unattended to esp[ecially] through
carelessness.” Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd., 507 U.S. 380, 388 (1993)
(citation and internal quotations omitted). Neglect “encompasses both simple, faultless
omissions to act and, more commonly, omissions caused by carelessness.” Id. Whether a
claimant's neglect of a deadline is excusable, however, is an equitable determination. Id. at 395.
A court should consider all relevant circumstances surrounding the claimant's omission,
including “the danger of prejudice to the debtor, the length of delay and its potential impact on
judicial proceedings, the reason for the delay, including whether it is within the reasonable
control of the movant, and whether the movant acted in good faith.” Id. However, the Pioneer
factors are “not given equal weight.” In re Lyondell Chem. Co., 543 B.R. 400, 409 (Bankr.
S.D.N.Y. 2016).
The Second Circuit has adopted a strict standard on excusable neglect. See In re Johns–
Manville Corp., 476 F.3d 118, 124 (2d Cir. 2007); In re Enron Corp., 419 F.3d 115, 122 (2d Cir.
2005) (“[This Circuit has] ‘taken a hard line’ in applying the Pioneer test.”). “[T]he equities will
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rarely if ever favor a party who fail[s] to follow the clear dictates of a court rule, and . . . where
the rule is entirely clear, we continue to expect that a party claiming excusable neglect will, in
the ordinary course, lose under the Pioneer test.” Enron Corp., 419 F.3d at 123 (internal
quotations omitted). The hard line approach concentrates predominantly on the reason for the
claimant's delay, including whether it was within the reasonable control of the claimant because
the other three Pioneer factors usually weigh in favor of the party seeking the extension. Id. at
122.
Therefore, under the Pioneer analysis, the Court must consider Ms. Hayes’ reason for
delay in filing her proof of claim and whether that reason was reasonably within her control.
Here, Ms. Hayes’ excuse for delay is that she did not receive notice due to alleged mail theft and
or unreliable mail service in her rural county in Texas. See Motion at 2. As discussed above,
however, Ms. Hayes has failed to rebut the presumption in favor of receipt.
Next, the Court considers the length of Ms. Hayes’ delay and its potential impact on the
judicial proceedings. There is no specific threshold governing when the lateness of a claim is
“substantial.” Enron, 419 F.3d at 128. Instead, courts consider the degree to which the delay
might disrupt the judicial administration of that particular case. Id. Thus, the length of the
delay, the complexity of the case, and the progress made in a case are all relevant considerations,
but none is dispositive on its own. Id. at 128–29 (citing Linder v. Trump's Castle Assocs., 155
B.R. 102, 108 n.10 (D.N.J. 1993)).
Ms. Hayes missed the Bar Date by only a few days, but she did not take prompt action to
address the lateness of her claim. Ms. Hayes asserts the she was unaware of any issues with her
Proof of Claim until July 2014 when the opposing attorney in the Texas Action informed her that
he was considering moving for summary judgment due to the fact that she missed the Bar Date.
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Hayes Response at ¶ 28. But Ms. Hayes then waited more than a year to file her motion in this
Court seeking to allow her late filed claim. See In re AMR Corp., 492 B.R at 667 (noting that a
“Motion [filed] more than five months after the Court entered the Bar Date Order and more than
three months after the Bar Date had passed” was a significant delay); cf. In re Dana Corp., 2007
WL 1577763, at *5–6 (Bankr. S.D.N.Y. May 30, 2007) (finding that a “six-month delay is not
excusable” especially when creditor was well aware of its claim and followed the bankruptcy
case).
When considering the last factor of prejudice to the debtor, courts are concerned about
opening the floodgates to potential claimants. In re Dana Corp., 2007 WL 1577763, at *6; see
also In re Enron, 419 F.3d at 132 n.2 (“[C]ourts in this and other Circuits regularly cite the
potential ‘flood’ of similar claims as a basis for rejecting late-filed claims.”). Ms. Hayes argues
that the “opening the floodgates” consideration has “no bearing” on her individual case. Hayes’
Response at ¶ 30. The Court disagrees. Concern over permitting late filed claims is particularly
strong in a very large bankruptcy case such as this one. See In re AMR, 492 B.R. at 667 (noting
that the floodgate concern is “not merely hypothetical in large [bankruptcy] cases”); see also In
re Glob. Aviation Holdings Inc., 495 B.R. 60, 67 (Bankr. E.D.N.Y. 2013) (noting that to permit
potential creditor to “file a late claim based upon inadvertence, lack of familiarity with the
bankruptcy process, or a mistaken assumption that the Debtor would voluntarily pay the claim”
would encourage similarly situated creditors to do the same). This concern is heightened where,
as here, the request for relief from a bar date is made when a case is well advanced. In these
bankruptcy cases, there have been already been multiple and significant distributions to creditors.
Thus, there would be real prejudice to the estate if this claim—and others like it—were allowed
at this late date.
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In sum, Ms. Hayes has not satisfied the high hurdle for excusable neglect set forth in
Pioneer.
CONCLUSION
Based on the foregoing, the Court finds that Ms. Hayes has received actual notice of the
Bar Date, and denies her Motion seeking to allow her late filed claim. The Court rejects all other
arguments raised by Ms. Hayes. 2 For these same reasons, the Court grants the Debtors’
Objection to her claim. The Debtors are directed to submit an order on five days’ notice.
Date: March 17, 2016
New York, New York
/s/ Sean H. Lane
UNITED STATES BANKRUPTCY JUDGE
2 	Ms. Hayes questioned this Court’s ability to hear her motion due to jurisdictional concerns. See Hayes’
Response at ¶ 4. This argument is rejected as this Court has jurisdiction over this core proceeding pursuant to 28
U.S.C. §§ 157(b)(2)(A), (B), (I), and 28 U.S.C. § 1334.
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