IN RE KMART CORPORATION (Bankr.N.D.Ill. 2004)

Case No. 02 B 02474.United States Bankruptcy Court, N.D. Illinois, Eastern Division.
July 16, 2004

MEMORANDUM OPINION
SUSAN SONDERBY, Chief Judge, Bankruptcy

This matter is before the court on the Motion of Donna Hill (“Hill”) for Leave to File a Late Filed Administrative Expense Claim Instanter (the “Motion”). Hill, a personal injury claimant, failed to file an administrative proof of claim by the June 20, 2003 bar date. She now seeks entry of an order granting her leave to file the claim and deeming it timely.

BACKGROUND
On January 22, 2002, Kmart Corporation and thirty-seven of its subsidiaries and affiliates filed voluntary Chapter 11 petitions in this court. Kmart continued to operate as debtor in possession thereafter.

On December 21, 2002, after the filing of the petitions, Hill allegedly sustained personal injuries at a Kmart store in Virginia. Hill thereafter retained Charles S. Wakefield, Jr. to represent her in connection with her claim for injuries. On March 17, 2003, Wakefield sent a letter of representation to LaShanda Renwrick, a claims examiner at Sedgwick Claims

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Management Services, Inc., Kmart’s third-party administrator for public liability claims. Renwrick acknowledged the representation the same day by letter which also requested copies of medical bills and other information. On April 3, 2003, Wakefield sent Renwrick a letter forwarding certain of the information requested and stating that he was in the process of assembling a settlement demand package. However, there was no further correspondence between Wakefield and Kmart until September, 2003, when Wakefield received a letter, dated September 19, from Jon Benner, another claims examiner for Kmart, advising that Hill’s claim was time-barred for failure to file a claim form by the bar date.

Prior thereto, on or about April 23, 2003, this Court had entered an order confirming the First Amended Joint Plan of Reorganization of Kmart Corporation and its Affiliate Debtors and Debtors-in-Possession, as modified (the “Plan”). The Plan became effective on May 6, 2003 (the “Effective Date”). Shortly after the Effective Date, Trumbull Services, LLC, the court-approved noticing agent in this case, caused to be served a “Notice Regarding (A) Entry of Order Confirming the First Amended Joint Plan of Reorganization of Kmart Corporation and its Affiliated Debtors and Debtors-in-Possession, (B) Occurrence of Effective Date, and (C) Notice of the Administrative Bar Date” (the “Notice”). Paragraph 7 on the fourth page of the Notice contained a section entitled “Administrative Claims Bar Date.” That section stated that “Administrative Claims” (other than certain types of claims dealt with elsewhere in paragraph 7) had to be filed by June 20, 2003 (the “Administrative Bar Date”).

According to a Trumbull affidavit submitted on Kmart’s behalf, the Notice was mailed to Hill, in care of Wakefield, on May 9, 2003, at an address that is substantially identical to the address shown in Wakefield’s letterhead. The Notice was mailed to Wakefield again, at the same

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address, on May 19, 2003, — this time with an Administrative Expense Claim Request Form. According to the Trumbull affidavit, neither mailing was returned as undeliverable.

Kmart further alleges that on April 29, 2003, Wakefield was told by claims examiner Renwrick that he would be receiving a proof of claim. Kmart submitted the affidavit of Michael Collins to that effect.[1]

Wakefield avers, however, in an affidavit attached to the Motion, that he never received the bar date notice, or indeed any other paper concerning the Kmart bankruptcy case. He states that upon receipt of Benner’s September 19 letter advising that the claim was barred, he immediately telephoned Benner, who referred him to Michael Collins, a claims supervisor in Kmart’s Risk Management Department.[2] Wakefield spoke with Collins on September 23, 2003. Wakefield avers that Collins said he was writing a letter to another attorney who had a client with a similar situation and that Collins asked Wakefield to wait until he finished the letter. Wakefield spoke with Collins again on September 25, October 2, and October 6, 2003, and Collins told Wakefield that he was unable to write the letter because he could not explain why a postpetition personal injury claim constituted an administrative expense. Collins then referred Wakefield to Gwen Ponder, an associate at Wilmer Cutler Pickering LLP, the firm retained as Kmart’s bankruptcy counsel in this case.

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Wakefield avers that he began calling Ponder on October 8, 2003 but was unable to reach her until October 14. He states that Ponder asked him to send her an e-mail explaining the situation and requesting that Kmart agree to the late filing of the administrative claim. Wakefield sent her the e-mail the next day. According to Wakefield, he left voicemail messages for Ponder during the next several weeks, but she did not return his calls. He ultimately received an e-mail from her on November 10, 2003, stating that he should file a motion with this Court.

Finally, Wakefield avers that “[s]ince September 19, 2003,” he “began researching whether a postpetition personal injury claim was an administrative expense claim.” He did not believe that it was an administrative claim until November, when he spoke with bankruptcy counsel in Chicago. Bankruptcy counsel was then retained and filed the instant Motion on December 19, 2003. Wakefield’s practice is concentrated in personal injury law, collection law, and general civil litigation. He does not practice bankruptcy law.

DISCUSSION
A fundamental requirement of due process is “notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” Mullane v. Central Hanover Bank Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 94 L.Ed. 865 (1950) (citations omitted). Accordingly, unless a creditor is given reasonable notice of the bankruptcy case and the relevant bar dates, his claim cannot be constitutionally discharged. In re O’Shaughnessy, 252 B.R. 722, 729 (Bankr. N.D. Ill.

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2000) (citations omitted); see also Chemetron Corp. v. Jones, 72 F.3d 341, 346 (3rd Cir. 1995), cert. denied, 517 U.S. 1137, 116 S.Ct. 1424, 134 L.Ed.2d 548 (1996).

The court reviews the totality of circumstances to determine whether reasonable notice was given. O’Shaugnessy, 252 B.R., at 730. The court should consider, among other things, whether any inadequacies in the notice prejudiced the creditor and whether notice is given in enough time to afford a creditor sufficient opportunity to respond to “the impending deprivation of its rights.” O’Shaugnessy, 252 B.R., at 730 (citing In re Walker, 149 B.R. 511, 514 (Bankr. N.D. Ill. 1992)).

The Supreme Court has “repeatedly recognized that mail service is an inexpensive and efficient mechanism that is reasonably calculated to provide actual notice.” Tulsa Professional Collection Services, Inc. v. Pope, 485 U.S. 478, 490, 108 S.Ct. 1340, 99 L.Ed.2d 565 (1988). Mail properly addressed, stamped, and deposited in the mail system is presumed to have reached its destination in the usual time and to have actually been received by the party to whom it was addressed. See, e.g., Hagner v. U.S., 285 U.S. 427, 430, 52 S.Ct. 417, 76 L.Ed. 861 (1932); In re Bucknum, 951 F.2d 204, 207 (9th Cir. 1991).

Kmart claims the benefit of this presumption based on the Trumbull affidavit, and Hill seeks to rebut it on the basis of Wakefield’s affidavit. Wakefield avers, in this regard: “I have not received a notice concerning a bar date for filing Administrative Expense Claim Requests or any other paper concerning the Kmart bankruptcy case. I have been assured by Hill that she has never received any such notice or paper.”

While a simple denial of receipt may create a question of fact, it does not rebut the

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presumption.[3] See In re Longardner Assoc., Inc., 855 F.2d 455, 459 (7th Cir. 1988), cert. denied, 489 U.S. 1015, 109 S.Ct. 1130, 103 L.Ed.2d 191 (1989); In re Pettibone Corp., 123 B.R. 304, 310 (Bankr. N.D.Ill. 1990); see also In re Ms. Interpret, 222 B.R. 409, 413 (Bankr. S.D.N.Y. 1998) (“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”). Inasmuch as the Notice was mailed twice and neither copy was returned as undeliverable, and since Hill has offered nothing but a simple denial of receipt, the Court resolves this question of fact against Hill.[4]

Hill’s “alternative” argument based on the excusable neglect standard of Bankruptcy Rule 9006 must also fail. She contends that because the Notice was lengthy and failed to mention personal injury claims, it would be difficult for a personal injury lawyer to ascertain that such claims were subject to the Administrative Bar Date. Hill attempts by this argument to come within the purview of certain decisions rendered by this Court on prior late claim motions.[5]

However, in each of the prior decisions, counsel read the Notice and mistakenly concluded that the term “Administrative Claim” did not encompass claims for postpetition personal injuries. That mistake was established, as a factual matter in each case, as the reason for the delay in filing the claim. The Court then found that while counsel’s mistake constituted

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neglect, it was (under all the circumstances, including counsel’s lack of bankruptcy experience) excusable.

Here, however, it has not been established that Wakefield read the Notice, much less that he was confused by it. Indeed, Wakefield cannot, as a factual matter, establish that he misapprehended the scope of the Notice, since he insists that he never received it at all. He simply cannot assert that he never received the Notice and at the same time contend that he was confused by it.[6]

Finally, Hill contends that any neglect here was excusable because Wakefield acted diligently after he received Benner’s September 19, 2003 letter advising that the claim was barred. However, even if the Court were to find that Wakefield acted diligently after September 19, 2003, there is no explanation for his delay from May to September, other than the alleged non-receipt of the Notice. Inasmuch as the Court finds that the Notice was received, that explanation is plainly inadequate.

Accordingly, even assuming that Hill has otherwise acted in good faith and that Kmart would not be prejudiced, under all the circumstances presented here, the relief requested must be denied. Setting a precedent of excusable neglect on these facts would undermine the goal of “deter[ring] creditors . . . from freely ignoring court-ordered deadlines.” Pioneer Investment Services Co. v. Brunswick Associates Ltd. Partnership, 507 U.S. 380, 395, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993).

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CONCLUSION
For all the foregoing reasons, the Court denies the Motion of Donna Hill for Leave to File a Late Filed Administrative Expense Claim Instanter. This opinion constitutes the Court’s findings of fact and conclusions of law in accordance with Bankruptcy Rule 7052. A separate order will be entered pursuant to Bankruptcy Rule 9021.