United States District Court, E.D. Virginia, Richmond Division
A. Gibney, Jr. United States District Judge
Sports appeals an order from the United States Bankruptcy
Court for the Eastern District of Virginia. The Bankruptcy
Court denied Bravo's motion to file a late chapter 11
administrative expense claim, finding that Bravo failed to
show excusable neglect for missing the claim deadline.
Because the Bankruptcy Court adequately weighed the relevant
factors and did not commit a clear error of judgment, the
Court will affirm the decision of the Bankruptcy Court.
"R" Us, Inc. ("TRU"), declared bankruptcy
in September, 2017. On November 29, 2017, Bravo filed timely
claims against TRU in the Bankruptcy Court for recreational
and sporting goods it sold to TRU before TRU declared
bankruptcy. Bravo shipped $574, 960.52 worth of goods after
TRU declared bankruptcy. Payment for the post-bankruptcy
goods became due on June 5, 2018.
25, 2018, the Bankruptcy Court set a filing deadline of July
16, 2018, for all claims entitled to administrative priority
under 11 U.S.C. § 503. TRU's claim and notice agent
mailed the order with the deadline to Bravo on June 4, 2018.
Bravo's controller, Daneene Elston, received all
communications regarding Bravo's claims against TRU.
Elston was scheduled to begin maternity leave on July 6,
2018, so on May 21, 2018, Bravo hired Steven Finney to take
Elston's place in the interim. Elston unexpectedly began
her maternity leave due to a medical emergency several weeks
after Bravo hired Finney.
Finney assumed his role as interim controller at Bravo, he
did not know of the Bankruptcy Court's July 16 claim
deadline. Finney first learned of the deadline when he found
the Bankruptcy Court's order during the week of July 23.
Although Bravo's legal affairs manager told Finney that
Elston had already filed all the claims in the case, Elston
never filed a claim for the post-bankruptcy shipments of
$574, 960.52. When Finney discovered that Elston had not
filed the claim, Bravo began searching for local counsel.
Bravo retained local counsel on September 6, 2018. After
Finney's family emergency further delayed the process,
Bravo moved for permission to file a late administrative
claim on September 18, 2018-sixty-four days after the
deadline. The Bankruptcy Court denied the motion, holding
that Bravo failed to show excusable neglect for missing the
deadline. This appeal followed.
STANDARD OF REVIEW
courts review a bankruptcy court's finding on excusable
neglect for abuse of discretion. Colony Apartments v.
Abacus Project Mgmt., Inc., 197 Fed.Appx. 217, 223 (4th
Cir. 2006). When reviewing a bankruptcy court's decision
for abuse of discretion, "the district court will not
reverse the bankruptcy court unless its conclusion was
'guided by erroneous legal principles,' or 'rests
upon a clearly erroneous factual finding.'" In
re Yankah, 514 B.R. 159, 163 (E.D. Va. 2014) (quoting
Westberry v. Gislaved Gummi AB, 178 F.3d 257, 261
(4th Cir. 1999)). "[E]ven if the bankruptcy court
applies the proper legal principles to supported facts, the
district court may reverse if it holds 'a definite and
firm conviction that the [bankruptcy court] committed a clear
error of judgment in the conclusion it reached upon a
weighing of the relevant factors."' Id.
(alteration in original) (quoting Westberry, 178
F.3d at 261).
9006(b)(1) empowers a bankruptcy court to permit a late
filing if the movant's failure to comply with an earlier
deadline 'was the result of excusable neglect.'"
Pioneer Inv. Servs. Co. v. Brunswick Assocs., L.P.,
507 U.S. 380, 382 (1993) (quoting Fed.R.Bankr.P. 9006(b)(1)).
Courts "should find excusable neglect only in the
extraordinary cases where injustice would otherwise
result." Symbionics Inc. v. Ortlieb, 432
Fed.Appx. 216, 220 (4th Cir. 2011) (emphasis in original).
consider four factors when determining whether excusable
neglect justifies a late-filed bankruptcy claim. See In
re U.S. Airways, Inc., No. 04-13819-SSM, 2005 WL
3676186, at *6-7 (Bankr. E.D. Va. Nov. 21, 2005). These
factors include "(1) the danger of prejudice to the
debtor; (2) the length of the delay and its potential impact
on judicial proceedings; (3) the reason for the delay,
including whether it was within the reasonable control of the
movant; and (4) whether the movant acted in good faith."
Id. at *7 (citing Pioneer, 507 U.S. at
389). The Fourth Circuit has characterized the third factor,
"the untimely party's reason for the delay," as
"the most important [factor in] the excusable neglect
inquiry." Symbionics Inc., 432 Fed.Appx. at
219; see also United States v. Jones, 658 Fed.Appx.
188, 191 (4th Cir. 2016) ("The Pioneer factors
... do not carry equal weight; the excuse given for the late
filing must have the greatest import.").
case, the Bankruptcy Court adequately weighed the relevant
factors in its finding that Bravo failed to show excusable
neglect. In considering the danger of prejudice to the debtor
(the first factor), the court concluded that prejudice did
not exist. Hr'g Tr. 53:25-54:5 (Dk. No. 5) ("I'm
not real sure I've heard really what the prejudice
is."). The court also contemplated the sixty-four-day
length of delay (the second factor), and similarly afforded
it little weight. Cf. Agnew v. United Leasing Corp.,
No. 2:14-cv-525, 2015 WL 13022508, at *4-5 (E.D. Va. Aug. 10,
2015) (finding a delay of twelve days did not constitute
excusable neglect). The parties agreed that Bravo had acted
in good faith (the fourth factor).
Bankruptcy Court emphasized the third factor: the reason for
delay and "whether the ability to file the claim timely
was within the reasonable control of the claimant."
Hr'g Tr. 57:24-58:1. While acknowledging Elston's
unexpected medical emergency, the court noted that Bravo
received timely notice of the claim deadline and that Finney
began working at Bravo before Elston left. Id. at
58:2-4. Even after the medical emergency, "there was an
opportunity for [Finney] to comply with the
deadline." Id. at 58:4-6. The Bankruptcy
Court thus found that Bravo's ability to file a timely
claim was "clearly" within its reasonable control,
"[i]n light of the timing" and Finney's lack of
"haste" in complying with the deadline.
Id. at 58:1-2, 58:12-16. The Bankruptcy Court's
conclusion did not "rest upon [any] clearly erroneous
factual finding[s]." Yankah, 514 B.R. at 163.
the Bankruptcy Court commit a "clear error of
judgment" by emphasizing Bravo's reason for the
delay. Id. Indeed, the Fourth Circuit has instructed
courts to place the most importance on "this critical
third factor." Symbionics, Inc., 432 Fed.Appx.
at 219 (explaining that "the first two Pioneer
factors will favor the moving party" and that "the
fourth Pioneer factor is rarely material"). The
Bankruptcy Court acknowledged that the other factors weighed
in Bravo's favor, but nonetheless concluded that the
third factor outweighed the others. Moreover, the Bankruptcy
Court adequately supported its conclusion as to Bravo's
reason for the delay with the underlying facts. See
Yankah, 514 B.R. at 163. Upon "review [of] the
record and reasons offered by the [Bankruptcy] [C]ourt,"