In an 8 page decision signed February 21, 2013, Judge Gross of the Delaware Bankruptcy Court denied a Motion for Enlargement of Administrative Claim, holding that the movant failed to prove excusable neglect. Judge Gross’s opinion is available here (the “Opinion”).
The Opinion analyzes the motion pursuant to the excusable neglect factors provided in Pioneer Investment Services Co. v. Brunswick Assocs. Ltd. Partnership, 507 U.S. 380, 395 (1993) (“These include, as the Court of Appeals found, the danger of prejudice to the debtor, the length of the delay and its potential impact on judicial proceedings, the reason for the delay, including whether it was within the reasonable control of the movant, and whether the movant acted in good faith.”).
The debtors in this case include Barden Mississippi Gaming, LLC (“Barden”), a casino operator located in Mississippi. Entergy Mississippi, Inc. (“Entergy”) provided electricity to a casino operated by Barden in Robinsville, Mississippi (the “Casino”). After discovering that the meter that measured the Casino’s power consumption was faulty, Entergy filed its Motion for Enlargement of Time and Payment of an Administrative Expense (the “Motion”) which led to the issuance of the Opinion.
The following chronology provided by the Court on pages 3-4 of the Opinion is the clearest history of a contested matter I have ever seen in an opinion (Barden Mississippi Gaming, LLC, or “Barden” is a Debtor subsidiary and Entergy is the movant):
- April 7, 2003 – Entergy installed a meter at Barden’s Casino
- November 23, 2009 – Debtors’ Petition Date
- November 23, 2009 – Debtors’ Motion for Entry of Interim and Final Orders Determining Adequate Assurance of Payment for Future Utility Services
- December 17, 2009 – Stipulation between Entergy and Debtors re: Adequate Assurance of Payment for Future Utility Services
- January 4, 2011 – Bar Date for Pre-Petition Claims
- February 25, 2011 – Cure Notice
- March 11, 2011 – Plan’s Confirmation Date
- December 1, 2011 – Effective Date of the Plan
- January 18, 2012 – Bar Date for Administrative Claims
- April 17, 2012 – Entergy discovers the meter’s error
- September 6, 2012 – Entergy files its motions
- September 27, 2012 – Order and Final Decree Closing Certain Chapter 11 Cases
Judge Gross’s Opinion
Judge Gross begins his discussion with a reference to Federal Rule of Bankruptcy Procedure 9006(b), which provides the court the authority to grant an enlargement of time after the expiration of the specified period where the failure to act was the result of excusable neglect. Opinion at *4. He then discusses the four factor test approved by the Supreme Court in the Pioneer Investment case. The factors are: (1) the danger of prejudice to the Debtor; (2) the length of the delay and its effect on court proceedings; (3) the reason for the delay, including whether the delay was within the movant’s reasonable control; and (4) whether the movant acted in good faith. Opinion at *5.
Judge Gross walked through each of the four factors, holding that (1) the length of time that had passed and the near completion of the bankruptcy case would prejudice the Debtors; (2) While the length of the delay did not necessarily weigh against Entergy, the fact that it waited five months after discovering the problem, while the bar date notices only provided 45 to 60 days of notice; (3) Because Entergy had sole control over the faulty meter, this factor weighs heavily against Entergy; (4) Lastly, no one disputes that Entergy is acting in good faith. Opinion at *6-8.
After this weighing of factors, Judge Gross determined that Entergy “did not prove, by a preponderance of the evidence, that is late filing was the result of excusable neglect.” He thus denied the Motion. Opinion at *8.
As predictable as the Delaware Bankruptcy Court is, litigants can be sure that relevant U.S. Supreme Court precedent will be followed. Thus it falls to the attorneys to make sure they are aware of, and couch their arguments in terms of, the precedent that applies to their case.