Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_06-cv-02027/USCOURTS-azd-2_06-cv-02027-0/pdf.json

Nature of Suit Code: 445
Nature of Suit: Americans with Disabilities Act - Employment
Cause of Action: 28:1331 Fed. Question: Employment Discrimination

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WO

NOT FOR PUBLICATION

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

GREGORY C. WISE, )

)

Plaintiff, )

)

v. ) CIV 06-02027 PHX MEA

) 

NCD INCORPORATED, ) MEMORANDUM AND ORDER 

)

 Defendant. )

_______________________________ )

All of the parties have consented to the exercise of

magistrate judge jurisdiction over this case, including the

entry of final judgment. Before the Court is Defendant’s Motion

to Dismiss (Docket No. 8).

Background

After January 28, 2003, and before June 24, 2004,

Plaintiff filed a claim with the EEOC asserting Defendant

terminated his employment in violation of the Americans with

Disabilities Act (“ADA”). On June 24, 2004, after conducting an

investigation, the EEOC found reasonable cause to believe

Defendant violated the ADA by terminating Plaintiff’s employment

based on his disability. The EEOC’s finding was provided to

Defendant on or about June 24, 2004.

Case 2:06-cv-02027-MEA Document 16 Filed 10/26/06 Page 1 of 9
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Defendant filed for bankruptcy pursuant to Chapter 11

of the Bankruptcy Code on July 13, 2005. On July 22, 2005, the

bankruptcy court entered an order setting a bar date for proofs

of claim, requiring any and all claims against the bankruptcy

estate of Defendant be filed by September 16, 2005. Plaintiff

did not file a proof of claim in the bankruptcy proceeding.

Plaintiff was not listed as a creditor, nor was his ADA claim

scheduled as a liability, in the bankruptcy proceeding. On

March 23, 2006, the Trustee filed a Plan of Reorganization for

Defendant, which plan was confirmed on June 22, 2006. 

The only fact asserted regarding Plaintiff’s actual or

constructive knowledge of Defendant’s bankruptcy proceeding is

alleged by Defendant. Defendant attaches to the reply an email

from Defendant’s counsel to an EEOC investigator dated May 25,

2006. Counsel asks for an “update and explanation of where this

issue is so that [they could] evaluate its status in the

bankruptcy.” Docket No. 15, Exh. A. The EEOC investigator

replied to Defendant’s counsel that the EEOC was aware of the

pending bankruptcy proceedings. 

On May 23, 2006, two days before the email exchange

between the EEOC and Defendant’s counsel, the EEOC issued

Plaintiff a “right to sue” letter regarding his ADA claim

against Defendant. Complaint at para. 16. 

On August 21, 2006, Plaintiff filed his complaint

alleging Defendant is liable to Plaintiff because his employment

was terminated in violation of the Americans with Disabilities

Act. On September 18, 2006, in lieu of an answer, Defendant

Case 2:06-cv-02027-MEA Document 16 Filed 10/26/06 Page 2 of 9
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filed a motion to dismiss Plaintiff’s complaint pursuant to Rule

12(b)(6), Federal Rules of Civil Procedure. Defendant asserts

Plaintiff’s ADA claim was discharged pursuant to Chapter 11 of

the Bankruptcy Code. 

Analysis

Defendant asserts that dismissal of Plaintiff’s ADA

claim is warranted pursuant to Rule 12(b)(6), Federal Rules of

Civil Procedure, for failure to state a claim on which relief

may be granted. 

When deciding a motion to dismiss pursuant to Federal

Rule of Civil Procedure 12(b)(6), the Court must take the

factual allegations of the complaint as true and construe them

in the light most favorable to the plaintiff. See Galbraith v.

County of Santa Clara, 307 F.3d 1119, 1121 (9th Cir. 2002);

Epstein v. Washington Energy Co., 83 F.3d 1136, 1140 (9th Cir.

1996). Although the face of the pleadings may indicate the

plaintiff’s chance of recovery is remote or unlikely, that is

not the test for whether dismissal for failure to state a claim

is warranted. See McGary v. City of Portland, 386 F.3d 1259,

1261 (9th Cir. 2004); Jackson v. Carey, 353 F.3d 750, 755 (9th

Cir. 2003). The complaint should not be dismissed unless the

plaintiff is not entitled to relief under any set of provable

facts. See, e.g., Livid Holdings Ltd. v. Salomon Smith Barney,

Inc., 416 F.3d 940, 951 (9th Cir. 2005); McGary, 386 F.3d at

1270; Broam v. Bogan, 320 F.3d 1023, 1033 (9th Cir. 2003).

Defendant asserts the complaint must be dismissed

because Plaintiff’s claim is barred by the discharge of the

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1

 Defendant initially contends Plaintiff’s “claim” arose on

or about January 28, 2003, when Plaintiff’s employment was terminated.

Docket No. 8 at 3. The Court notes Defendant argues in the Reply that

“Since Plaintiff failed to have a claim against the Debtor until the

EEOC issued the Plaintiff’s Right-To-Sue Letter, NCD actions were

reasonably calculated to inform interested creditors.” Docket No. 15

at 2. This last statement is incorrect; Plaintiff’s ADA claim arose

on the date he was terminated and not on the date the jurisdictional

prerequisite to suit was satisfied by the issuance of the right to sue

letter. See O’Loghlin v. County of Orange, 229 F.3d 871, 874 (9th

Cir. 2000); McSherry v. Trans World Airlines, Inc., 81 F.3d 739, 740

(8th Cir. 1996).

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claim in Defendant’s Chapter 11 bankruptcy proceeding. Because

Plaintiff failed to assert his extant ADA claim in the

bankruptcy proceedings, Defendant argues, the claim was

discharged in the bankruptcy.1 Defendant also asserts Plaintiff

had at least constructive knowledge of the bankruptcy

proceeding. 

Plaintiff contends the bankruptcy did not discharge

Plaintiff’s claim because Defendant did not list or schedule

Plaintiff’s claim in the bankruptcy proceeding, despite

Defendant’s knowledge of the potential claim. Plaintiff

contends his claim was not discharged in the bankruptcy because,

prior to filing for bankruptcy, Defendant “had actual and ample

notice as to Plaintiff’s discrimination claims as alleged in the

Complaint.” Docket No. 10 at 2. Plaintiff contends Defendant

was required to list Plaintiff as a creditor in the bankruptcy

proceedings because Defendant was aware of Plaintiff’s claim

against Defendant. Plaintiff contends that, because “Defendant

intentionally avoided naming Plaintiff [] as a creditor in its

list of creditors...,” Plaintiff’s claim was not subject to

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discharge in bankruptcy. Id. at 4.

Defendant replies that the “exclusion of Plaintiff on

the Debtor’s list of creditors is not dispositive of whether the

Plaintiff’s claim was discharged pursuant to the Confirmation

Order. The key issue is that the Plaintiff has been unable to

demonstrate that he did not have notice of NCD’s pending Chapter

11.” Docket No. 15 at 2. Defendant argues that, because

plaintiff failed to have a claim against the

Debtor until the EEOC issued the Plaintiff’s

Right to Sue Letter, NCD actions were

reasonably calculated to inform interested

creditors. The EEOC issue[d] its Right-ToSue prior to the entry of the Confirmation

Order. Therefore, arguably the Plaintiff

had, at a minimum, constructive notice of the

pending Chapter 11.

Id. Defendant contends that, because Plaintiff had at least

constructive notice of the bankruptcy, Plaintiff’s claim was

discharged and is precluded.

The initial burden is on the pre-petition creditor,

i.e., Plaintiff, to show his claim was not duly scheduled in the

bankruptcy proceeding; this showing establishes the claim is not

per se precluded by its discharge in the bankruptcy. See Hill

v. Smith, 260 U.S. 592, 595, 43 S. Ct. 219, 220 (1923). Cf. In

re Casini, 307 B.R. 800, 809 (Bankr. D.N.J. 2004) (placing the

burden on the plaintiff to establish the claim fit an exception

to discharge); In re Paul, 194 B.R. 381, 384 (Bankr. D.S.C.

1995) (reaching this conclusion in a case brought by the debtor

to “reopen” bankruptcy proceedings to schedule and discharge the

plaintiff’s claim). But see In re Enciso, 300 B.R. 235, 241

(Bankr. W.D. Pa. 2003) (collecting and discussing cases

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involving the assignment of the burden of proof regarding the

dischargeability of liabilities). If Plaintiff establishes his

claim was not scheduled, the burden shifts to Defendant to

produce evidence that Plaintiff had notice of the bankruptcy

proceeding and failed to file a claim, resulting in the

conclusion the claim was discharged. See Hill, 260 U.S. at 595,

43 S. Ct. at 220 (debtor must prove that creditor omitted from

schedule had actual knowledge of bankruptcy proceedings); In re

Myrvang, 232 F.3d 1116, 1121 (9th Cir. 2000).

A debtor may not constitutionally discharge a potential

plaintiff’s claim in Chapter 11 proceedings unless the potential

plaintiff is given “reasonable” notice of the proceedings. In

re Maya Constr. Co., 78 F.3d 1395, 1398 (9th Cir. 1996). When

determining if notice was reasonable, the Court must consider

whether the debtor’s efforts in selecting a means likely to

inform the affected individual were adequate, not whether the

potential plaintiff actually received notice of the bankruptcy

proceedings. See id. at 1399. The determination of whether the

debtor’s efforts at notice were reasonable is a fact-specific

inquiry. See In re Eagle Bus. Mfg., Inc., 62 F.3d 730, 735 (5th

Cir. 1995).

The Ninth Circuit Court of Appeals has stated:

it is the debtor’s knowledge of a creditor,

not the creditor’s knowledge of his claim,

which controls whether the debtor has a duty

to list that creditor.

***

... if a known contingent creditor is not

given formal notice, he is not bound by an

order discharging the bankruptcy’s

obligations. The fact that a creditor has

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actual knowledge that a Chapter 11 bankruptcy

proceeding is going forward involving a

debtor does not obviate the need for notice.

Id. at 1398-99.

This inquiry as to whether notice was reasonable may

depend on whether the plaintiff was a “known” or “unknown”

creditor. See DePippo v. Kmart Corp., 335 B.R. 290, 295-96

(S.D.N.Y. 2005). Known creditors of the debtor must receive

actual notice, as opposed to constructive notice, of the

proceeding. In re Maya Constr., 78 F.3d at 1399 (“The burden is

on the debtor to cause formal notice to be given; the creditor

who is not given notice, even if he has actual knowledge of

reorganization proceedings, does not have a duty to investigate

and inject himself into the proceedings”). 

The United States Supreme Court has characterized a

“known creditor” as “one whose identity is either known or

‘reasonably ascertainable by the debtor.’” Tulsa Prof’l

Collection Serv., Inc. v. Pope, 485 U.S. 478, 490, 108 S. Ct.

1340, 1347 (1988), quoted in Chemetron Corp. v. Jones, 72 F.3d

341, 346 (3d Cir. 1995). A creditor’s identity is “reasonably

ascertainable” if it can be discovered through reasonably

diligent efforts. See Mennonite Bd. of Missions v. Adams, 462

U.S. 791, 798 n.4, 103 S. Ct. 2706, 2711 n.4 (1983). “A debtor

need not be onmipotent or clairvoyant. A debtor is obligated,

however, to undertake more than a cursory review of its records

and files to ascertain its known creditors.” In re Texaco Inc.,

182 B.R. 937, 955 (Bankr. S.D.N.Y. 1995). A claim is reasonably

ascertainable if the debtor has “in his possession, at the very

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least, some specific information that reasonably suggests both

the claim for which the debtor may be liable and the entity to

whom he would be liable.” In re Crystal Oil Co., 158 F.3d 291,

297 (5th Cir. 1998). See also Solow Bldg. Co., LLC v. ATC

Assoc., Inc., 175 F. Supp. 2d 465, 471-72 (E.D.N.Y. 2001); In re

U.S.H. Corp., 223 B.R. 654, 660 (Bankr. S.D.N.Y. 1998).

 Defendant could not be said to “lack knowledge” of

Plaintiff’s ADA claim, as Defendant had specific knowledge of

the EEOC proceedings in June of 2004, a year before entering

bankruptcy proceedings. Reasonably diligent efforts by

Defendant would have, and evidently did, result in the

ascertainment of the identity of Plaintiff and his potential

claim. Because there is no dispute Defendant knew about the

EEOC proceedings in June of 2004 and enquired as to the status

of those proceedings during the bankruptcy in May of 2006, the

Court concludes Plaintiff was a “known” creditor. Compare In

re Crystal Oil Co., 158 F.3d at 297-298; DePippo, 335 B.R. at

296 (concluding an individual with a potential civil rights

claim against a debtor business had an “unknown” claim and due

process did not bar the discharge of the claim by notice via

publication in a newspaper where the debtor business did not

know the customer intended to assert a claim). 

There is no factual allegation that Defendant provided

Plaintiff, a known creditor, with actual notice of the

bankruptcy proceeding. The parties do not dispute that

Plaintiff was not listed as a creditor or that his claim was not

scheduled as a potential liability. Therefore, Plaintiff’s

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2

 Additionally, Plaintiff may be able to establish his

claim falls within an exception to the general rule of

dischargeability, stated within 11 U.S.C. § 523. See Kresmery v.

Service Amer. Corp., 227 B.R. 10, 14-15(D. Conn. 1998).

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claim was not discharged in the bankruptcy. Cf. Solow Bldg.

Co., LLC, 175 F. Supp. 2d at 473 (concluding the plaintiff’s

claim not discharged in bankruptcy because the debtor should

have known identity of creditor and the debtor did not disclose

creditor on schedule); In re Kewanee Boiler Corp., 297 B.R. 720,

730 (Bankr. N.D. Ill. 2003) (“It is well-established that the

debtor’s failure to schedule or notify a creditor of a Chapter

11 proceeding and the confirmation hearing precludes the

creditor’s claim from being discharged in the bankruptcy

proceeding.”).2 

Conclusion

Because the discharge of an unscheduled ADA claim in a

Chapter 11 proceeding is a fact-based inquiry, the Court

concludes Plaintiff could plead facts sufficient to establish

the claim was not discharged because Plaintiff was a known

creditor who did not receive actual notice of the Chapter 11

proceeding and, therefore, the motion to dismiss must be denied.

THEREFORE, IT IS ORDERED THAT Defendant’s motion to dismiss,

Docket No. 8, is DENIED. 

DATED this 25th day of October, 2006.

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