FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

In re: ZILOG, INC.; In re: ZILOG 

MOD III, INC.,

Debtors,

No. 04-15787

D.C. Nos. ZILOG, INC.,  CV-03-02704-JF Plaintiff-Appellee, 02-51144-MM

v.

ROSE MARIE CORNING; SELENA

ROBERT; MARGIE CLEVERDON,

Defendants-Appellants. 

In re: ZILOG, INC.; In re: ZILOG 

MOD III, INC.,

Debtors,

No. 04-15794

D.C. Nos. ZILOG, INC.,  CV-03-02705-JF Plaintiff-Appellee, 02-5286

v. OPINION

ROSE MARIE CORNING; SELENA

ROBERT; MARGIE CLEVERDON,

Defendants-Appellants. 

Appeal from the United States District Court

for the Northern District of California

Jeremy Fogel, District Judge, Presiding

Argued and Submitted

December 7, 2005—San Francisco, California

6593
Filed June 15, 2006

Before: Alex Kozinski and Barry G. Silverman,

Circuit Judges, and Roger T. Benitez,* District Judge.

Opinion by Judge Kozinski

*The Honorable Roger T. Benitez, United States District Judge for the

Southern District of California, sitting by designation. 

6594 In re ZILOG, INC.
COUNSEL

Eric S. Rossman, Rossman Law Group, PLLC, Boise, Idaho,

and Ruth Elin Auerbach, Glassberg, Pollak & Associates, San

Francisco, California, for the defendants-appellants. 

Richard Levin and Kurt Ramlo, Skadden, Arps, Slate,

Meagher & Flom LLP, Los Angeles, California, for the

debtors/plaintiff-appellee. 

In re ZILOG, INC. 6597
OPINION

KOZINSKI, Circuit Judge: 

This case shows once again why it’s important for lawyers

representing a bankruptcy debtor to turn square corners. 

Facts

In June 2001, ZiLOG, Inc. announced that it would close

one of its Idaho plants, effective December 31, 2001. To

retain employees through the plant closure, ZiLOG offered

certain employees one-time retention bonuses. Rose Marie

Corning, Selena Robert and Margie Cleverdon (collectively,

“the women”) were among the employees who accepted the

offer. 

In December 2001, ZiLOG notified the women that it had

rescinded the retention bonus agreements because the women

would not, after all, lose their jobs at the end of the year. In

January 2002, Corning and Robert learned that three male

engineers would receive retention bonuses. Corning and Robert claim, however, that not until “late April or early May,

2002,” did they learn that those same three male employees

had been paid bonuses even though they were not laid off.

Cleverdon claims that she did not learn this until mid-June

2002. 

Prior to this time, on February 28, 2002, ZiLOG and a

related entity had filed for bankruptcy in the Northern District

of California. ZiLOG employees received an email soon afterward from the company’s general counsel explaining that they

would receive proof of claim forms from the bankruptcy

court. The employees were instructed that “[y]ou need to fill

out and return the Proof of Claim form only if you believe

that, on February 28, 2002, ZiLOG owed you money other

than the wages, benefits and expense reimbursements that you

are entitled to as an employee. Otherwise, you do not need to

6598 In re ZILOG, INC.
take any action in connection with the notice that you have

received.” 

Around this same time, the women received a notice from

the bankruptcy court explaining that the deadline for filing

proofs of claims that had accrued prior to the bankruptcy filing was April 19, 2002. The women did not file proofs of

claim prior to the deadline. 

The bankruptcy court confirmed ZiLOG’s plan of reorganization on April 30 of that year, and the reorganization became

effective on May 13. The bankruptcy court’s April 30 confirmation order—mirroring ZiLOG’s reorganization plan—

provided that “[o]n the Effective Date, the Debtors shall be

discharged of all liability for payment of any Claims incurred

before the Effective Date, to the fullest extent provided by

Bankruptcy Code § 1141, except that any liability imposed by

or assumed under the Plan shall not be discharged.” The confirmation order also provided that “July 1, 2002, is the deadline for filing a request for payment of an administrative

expense arising from February 28, 2002 through April 30,

2002.” The women received written notice of the plan’s confirmation. 

Pursuant to 11 U.S.C. § 524(a)(2), confirmation of a plan

“operates as an injunction against the commencement or continuation of an action, the employment of process, or an act,

to collect, recover or offset any such debt as a personal liability of the debtor.” Id.; see also id. § 1141(d)(1). Notwithstanding the discharge injunction, the women subsequently filed an

action in Idaho state court (the “Idaho action”) alleging contract, tort and statutory claims based on ZiLOG’s failure to

pay the promised retention bonuses. The complaint did not

allege sex discrimination. 

In response to this filing, ZiLOG initiated an adversary proceeding in the Northern District of California Bankruptcy

Court, and sought to enjoin the Idaho action, arguing that

In re ZILOG, INC. 6599
those claims had been discharged in bankruptcy. Shortly after

commencement of this adversary proceeding, the women and

ZiLOG stipulated that the women would stay the Idaho action

until the bankruptcy court entered a judgment in the adversary. The bankruptcy court approved this stipulation and it

was entered into the record. 

Subsequently, the women filed complaints with the Idaho

Human Rights Commission and the United States Equal

Employment Opportunity Commission. Each of the verified

complaints contained identical statements of fact, alleging that

[s]ometime after December 31, 2001, I learned that

I would not be paid the promised retention bonus.

That in late April or early May, 2002, I learned that

male employees who had signed retention bonus

agreements had been paid the retention bonuses and/

or rehired within a period of time that Zilog represented such individuals would not be rehired. 

Several months later, the women filed affidavits in the

bankruptcy court further detailing their allegations of discrimination. Corning and Robert claimed (consistent with their

verified complaints) that they did not learn until “late April or

early May, 2002,” that the three male engineers who had

received retention bonuses would not be laid off. During this

same period, Corning and Robert allegedly learned that three

male maintenance workers who had been laid off in January

2002 might be returning to ZiLOG but would not have to

repay their retention bonuses. 

Corning and Robert also claimed to have learned by late

April or early May 2002 that a seventh male employee who

had been paid a retention bonus was neither terminated nor

was asked for a refund. (This was in contrast to a female

employee who had apparently been retained, but was forced

to return her bonus.) Finally, in “mid-June 2002,” Corning

and Robert allegedly learned that an eighth male employee

6600 In re ZILOG, INC.
had been rehired without being required to repay his retention

bonus. 

While Corning and Robert’s affidavits to the bankruptcy

court were consistent with their verified complaints to the

Idaho Human Rights Commission and the EEOC, Cleverdon’s was not. In her complaint to the Idaho Human Rights

Commission, Cleverdon had alleged that she became aware of

disparate treatment in late April or early May 2002. In her

later affidavit to the bankruptcy court, however, Cleverdon

claimed that she did not become aware of the disparate treatment until “approximately mid-June 2002,” when she was

informed of such by Corning and Robert. 

Subsequently, the women moved to enter their untimely

contract, tort and statutory claims into the bankruptcy proceedings under the equitable doctrine of excusable neglect.

See Fed. R. Bankr. 9006(b)(1). They also requested payment

of their sex discrimination claims as post-petition administrative expenses.1

The bankruptcy court granted summary judgment to

ZiLOG, and held all of the women’s claims barred by the

bankruptcy confirmation order. Applying California Department of Health Services v. Jensen (In re Jensen), 995 F.2d

1Although not disputed by the parties, we note in passing that a literal

reading of 11 U.S.C. § 503(b), governing administrative expenses, might

suggest that “[t]o be deemed an administrative expense, the claim must

have arisen from a transaction with the debtor in possession, and directly

and substantially benefitted the estate.” Boeing N. Am., Inc. v. Ybarra (In

re Ybarra), 424 F.3d 1018, 1025 (9th Cir. 2005) (emphasis added) (footnote omitted). But the Supreme Court has “carved out an exception” by

holding that “[i]n the interests of ‘fairness to all persons having claims

against the insolvent’ . . . tort claims arising post-petition [are] ‘actual and

necessary expenses’ of preserving the estate.” Id. at 1025 n.10 (emphasis

added) (quoting Reading Co. v. Brown, 391 U.S. 471, 477, 482 (1968)).

Thus, under Reading and its progeny, discrimination claims that arise

post-petition but pre-confirmation can be filed as administrative expenses

against the debtor’s estate. 

In re ZILOG, INC. 6601
925 (9th Cir. 1993) (per curiam), which held that a claim

arises under the bankruptcy code once it is within the claimant’s “fair contemplation,” id. at 930, the bankruptcy court

held that the women’s sex discrimination claims “should have

been within their fair contemplation as of the effective date of

confirmation on May 13, 2002. As preconfirmation claims

they are subject to the bankruptcy proceedings.”

2

 The bankruptcy court also found all of the women’s other claims to be

within their fair contemplation pre-petition, and thus barred

because no proofs of claim were filed by the April 19 deadline. The bankruptcy court found no excusable neglect for the

late filing of these claims, and held the women in contempt

for willfully violating the discharge injunction. ZiLOG was

awarded $20,000 in attorneys’ fees. 

The district court affirmed, holding that the bankruptcy

court had made “explicit [factual] findings” that, by late April

or early May 2002, Corning and Robert were aware that a

number of male employees had received retention bonuses

while remaining employed at ZiLOG. The district court held

that the bankruptcy court’s findings were not clearly erroneous, and that “the bankruptcy court did not err in finding that

Corning’s and Robert’s gender discrimination claims were

classified appropriately as pre-petition and thus barred by the

May 13, 2003 bankruptcy discharge.”

3

 (Emphasis added.) 

2

It’s unclear why the bankruptcy court looked to May 13 rather than

April 30 as the relevant date. See pp. 6604-6606 infra. 

3Setting aside the fact that the discharge became effective on May 13,

2002, not 2003, we do not understand why the district court described the

claims as “pre-petition.” The bankruptcy court had determined that the

claims arose pre-discharge, not pre-petition. As we explain on pages

6604-6606, the bankruptcy court’s use of the May 13 effective date, rather

than the April 30 confirmation date, as the deadline for the discharge of

administrative claims was inconsistent with other portions of its confirmation order. In any event, the district court’s description as “pre-petition”

of claims that the bankruptcy court had “found” to have arisen in late

April or early May 2002 (i.e., at least one-and-a-half months after the filing of the bankruptcy petition) is contradicted by the record. 

6602 In re ZILOG, INC.
The district court described the issue of when Cleverdon’s

sex discrimination claim arose as “closer.” Citing the conflict

between Cleverdon’s complaint to the Idaho Human Rights

Commission and her subsequent affidavit to the bankruptcy

court, the district court affirmed the bankruptcy court’s grant

of summary judgment against Cleverdon: “In light of Cleverdon’s conflicting statements, this Court cannot conclude that

the bankruptcy court’s factual determination that Cleverdon’s

claims were pre-petition [sic] and barred by the confirmation

plan on May 13, 2003 [sic] constituted clear error.” (Emphasis added.) 

The district court also affirmed the sanctions award, holding that “[a]bsent any affirmative act by Defendants to stay or

dismiss the Idaho litigation, the bankruptcy court’s finding

that the continuing Idaho state proceedings were a willful violation of the discharge order was reasonable.”

4

Summary Judgment on the Discrimination Claims

[1] We look to federal law to determine when a claim arises

under the bankruptcy code. Cool Fuel, Inc. v. Bd. of Equalization (In re Cool Fuel, Inc.), 210 F.3d 999, 1006 (9th Cir.

2000). In Jensen, we held that an environmental claim arises

under the bankruptcy code once it is within the claimant’s

“fair contemplation.” 995 F.2d at 930. Jensen has been

applied to a range of non-environmental claims. See, e.g., In

re Cool Fuel, Inc., 210 F.3d at 1000 (tax claim); Hassanally

v. Republic Bank (In re Hassanally), 208 B.R. 46, 53 (B.A.P.

9th Cir. 1997) (negligent construction claim); Corman v.

Morgan (In re Morgan), 197 B.R. 892, 898 (N.D. Cal. 1996)

(fraud claim). 

4This statement is puzzling, given that the bankruptcy court approved

a stipulation by the parties staying the Idaho action pending resolution of

the adversary bankruptcy proceeding. See p. 6600 supra and pp.

6619-6620 infra. 

In re ZILOG, INC. 6603
[2] Although we have not had occasion to consider whether

Jensen’s “fair contemplation” test extends to claims of discrimination, we see no reason why these claims should not be

analyzed under Jensen’s framework. We therefore agree with

the courts below that the women’s claims of sex discrimination accrued under the bankruptcy code once they were within

the women’s “fair contemplation.” 

The bankruptcy court granted summary judgment to

ZiLOG and held that the sex discrimination claims arose predischarge. The plan was confirmed on April 30, 2002, and

became effective on May 13. The bankruptcy court held that

claims arising prior to May 13 were discharged under the

plan, even though the April 30 confirmation order only permitted claims arising “from February 28, 2002 through April

30, 2002” to be filed as administrative expenses. Under the

bankruptcy court’s confirmation order, claims arising from

May 1 to May 12 were discharged, even though no provision

was made for their presentation and payment. 

The issue of which date should be used to bar claims for

administrative expenses was raised before the bankruptcy

court at the hearing on motions for summary judgment. Counsel for the women objected that, because the July 1 bar date

only related to administrative claims that had arisen on or

before April 30, the discharge injunction should likewise only

bar claims that had accrued through April 30, rather than May

13. As counsel for the women explained: “The problem with

using the effective date is that the debtor is trying to vacate

any right to payment for claims that it didn’t even know

existed at the time that one would vote on confirmation of the

plan.” For reasons not apparent from the record, the bankruptcy court overruled the objection. 

[3] Assuming that the bankruptcy court even has the

authority to discharge post-confirmation debts,5 we cannot see

5Both the reorganization plan and the bankruptcy court’s confirmation

order—in identical language—discharged ZiLOG “of all liability for pay6604 In re ZILOG, INC.
how, in this case, the bankruptcy court could have discharged

claims arising between the plan’s confirmation and effective

dates without first allowing for the presentation of such

claims. Given the manifest injustice of discharging claims that

could not have been filed under the bankruptcy court’s April

30 confirmation order, we hold that only claims against

ZiLOG arising on or before April 30 were discharged. 

[4] Even if the bankruptcy court meant to say that the

women’s discrimination claims arose prior to the April 30

confirmation order, summary judgment was still unwarranted.

Corning and Robert claimed that they became aware by late

ment of any Claims incurred before the Effective Date, to the fullest extent

provided by [11 U.S.C. § 1141].” Section 1141 of the bankruptcy code

provides that “[e]xcept as otherwise provided in this subsection, in the

plan, or in the order confirming the plan, the confirmation of a plan . . .

discharges the debtor from any debt that arose before the date of such confirmation.” 11 U.S.C. § 1141(d)(1)(A) (emphasis added). 

We are uncertain whether post-confirmation debts can in fact be discharged in bankruptcy. The “[e]xcept as otherwise provided” clause in

section 1141 can be read in either of two ways. One way would be to read

the clause as modifying the words “any debt.” Under that reading, all preconfirmation debts are dischargeable, except as limited by the plan or the

code. Alternatively, one could read the “[e]xcept as otherwise provided”

clause as modifying the phrase “before the date of such confirmation.”

Under that reading, even post-confirmation debts could be discharged if

that were provided for in the reorganization plan. 

We have not located a case addressing which reading is correct. Nor

have we found an answer in the statute’s legislative history. See H. Rept.

No. 95-595 to accompany H.R. 8200, 95th Cong., 1st Sess. (1977), at 418.

Although we find the first alternative more plausible, we need not decide

the matter here. Under either reading, the bankruptcy court’s confirmation

order failed to provide for the presentation and adjudication of claims arising between April 30 and May 13. Because it would be manifestly unjust

to discharge claims that could not have been filed as either pre-petition

claims or administrative expenses, we hold that even if the bankruptcy

court had the power to discharge post-confirmation claims, the court

abused its discretion in discharging the women’s discrimination claims

here. 

In re ZILOG, INC. 6605
April or early May 2002 that female ZiLOG employees were

subjected to disparate and allegedly discriminatory treatment.

As this was a motion for summary judgment, the court was

required to resolve disputed issues of fact in favor of the

women, as the non-moving parties. See Matsushita Elec.

Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986);

see also Fed. R. Bankr. P. 7056; Fed. R. Civ. P. 56. 

[5] Accepting that Corning and Robert’s sex discrimination

claims arose in late April or early May 2002, there is a substantial possibility that those claims were not within the

women’s fair contemplation until after the April 30 confirmation order, and thus were outside the bankruptcy process. The

bankruptcy court therefore erred in granting summary judgment and finding those claims discharged. 

The bankruptcy court’s grant of summary judgment to

ZiLOG on Cleverdon’s sex discrimination claim is even more

problematic. Cleverdon claimed in her complaint to the Idaho

Human Rights Commission and the EEOC that she learned of

the allegedly disparate treatment by late April or early May

2002. Even if this were true, the bankruptcy court’s grant of

summary judgment must be reversed for the reasons discussed

above. 

[6] Cleverdon, however, claimed in her subsequent affidavit to the bankruptcy court that she did not learn of the allegedly disparate treatment until mid-June 2002. The date by

which Cleverdon’s allegedly disparate treatment was within

her fair contemplation was therefore in dispute. Taking the

facts in the light most favorable to Cleverdon, her discrimination claim did not come within her fair contemplation until

one-and-a-half months after confirmation of the plan.6 The

6The district court appeared to believe that, because Cleverdon had indicated in her administrative complaint that she learned the facts underlying

the discrimination complaint in late April or early May, it was entitled to

ignore her declaration in the bankruptcy court that she only learned of

6606 In re ZILOG, INC.
bankruptcy court therefore erred in granting summary judgment to ZiLOG on Cleverdon’s sex discrimination claim. 

[7] The district court then compounded these mistakes by

deferring under the clearly erroneous standard of review to

the bankruptcy court’s “explicit [factual] findings”—

“findings” that the bankruptcy court had no authority to make

on a motion for summary judgment. The district court’s affirmance of the bankruptcy court’s grant of summary judgment

was therefore erroneous. 

[8] Taking the facts in the light most favorable to the

women, there is a substantial possibility with respect to Corning and Robert, and a certainty with respect to Cleverdon,

that their discrimination claims arose post-confirmation. We

reverse the bankruptcy court’s grant of summary judgment on

the women’s discrimination claims and remand to the bankruptcy court to determine when those claims came within the

women’s fair contemplation. See Renwick v. Bennett (In re

Bennett), 298 F.3d 1059, 1072 (9th Cir. 2002). 

Excusable Neglect

[9] We next consider whether the bankruptcy court abused

its discretion in declining to excuse the women’s failure to file

timely proofs of claim regarding their retention bonuses. The

determination of whether neglect is “excusable” is “an equitable one, taking account of all relevant circumstances surrounding the party’s omission.” Pioneer Inv. Servs. Co. v.

these facts in mid-June. But the fact that Cleverdon presented a sworn

statement in another proceeding that appears to contradict her sworn statement in this proceeding does not vitiate her sworn statement here. At most,

the conflicting statement may be used to impeach her testimony at trial.

Confronted with that inconsistency, Cleverdon may be able to reconcile

the two statements or otherwise explain away the inconsistency. Or, the

trier of fact may resolve the inconsistency in favor of the later statement.

These are matters to be resolved at trial, not on summary judgment. 

In re ZILOG, INC. 6607
Brunswick Assocs. Ltd. P’ship, 507 U.S. 380, 395 (1993).

Such circumstances include “the danger of prejudice to the

debtor, the length of the delay and its potential impact on judicial proceedings, the reason for the delay . . . and whether the

movant acted in good faith.” Id. This list is not exhaustive.

See id.

On March 11, 2002, the women received the following

email from ZiLOG’s general counsel: 

Sent: Monday, March 11, 2002 7:40 PM 

To: Austin Users; Field Sales Americas;

Fort Worth Users; Tampa Users; San

Jose Users 

Cc: ‘rlevin@skadden.com’;

‘pclapp@skadden.com’;

‘tivey@skadden.com’; 

‘slubben@skadden.com’ 

Subject: Proof of Claim 

Importance: High 

As you know, we commenced our chapter 11 case on

February 28, 2002. The case will affect only the

holders of the company’s public debt securities and

the current holders of our common and preferred

shares. We expect to conclude the case and emerge

from chapter 11 by early May. In the interim, the

bankruptcy court has granted the company’s motion

for permission to pay all amounts owed to employees for salary, wages, expense reimbursements, and

vacation, medical, and other benefits as they become

due. We expect that the chapter 11 case will have no

effect on you or on our business operations.

6608 In re ZILOG, INC.
The Federal bankruptcy rules requires [sic] that we

provide the broadest possible notice of the case’s

commencement. For that reason, you will likely all

receive in the mail a written notice, together with a

Proof of Claim form, from . . . the company’s noticing agent. You may receive additional notices about

the progress of the case. 

This is nothing to be concerned about. You need to

fill out and return the Proof of Claim form only if

you believe that, on February 28, 2002, ZiLOG owed

you money other than the wages, benefits and

expense reimbursements that you are entitled to as

an employee. Otherwise, you do not need to take any

action in connection with the notice that you have

received. 

I am out of the office until Monday. In my absence,

if you have any particular questions, please call Stephen Lubben of Skadden, Arps (213-687-5000). 

Cheers, 

dmj 

Daniel M. Jochnowitz 

Vice President and General Counsel 

532 Race Street 

San Jose, CA 95126 

(t) 408-558-8485 (Emphasis added.) 

The email was not calculated to inform the women that they

needed to file their wage claims with the bankruptcy court.

More likely, it would have led them to believe exactly the

opposite. 

The second sentence of the email states: “The [bankruptcy]

case will affect only the holders of the company’s public debt

In re ZILOG, INC. 6609
securities and the current holders of our common and preferred shares.”

7

 The clear import of this language, especially

when read by employees who were not lawyers and had no

expertise in bankruptcy law, is that the bankruptcy would not

affect their rights. The author of the email reinforced this

view by concluding the first paragraph with a sentence

expressing the company’s expectation that “the chapter 11

case will have no effect on you or on our business operations.”

(Emphasis added.) 

The third paragraph reinforces the idea that the employees

need not file claims with the bankruptcy court. Having

explained in the second paragraph that the notice was sent

only because “[t]he Federal bankruptcy rules requires [sic]

that we provide the broadest possible notice of the case’s

commencement,” the third paragraph begins by assuring

employees that “[t]his is nothing to be concerned about.” Cf.

The Wizard of Oz (Metro Goldwyn-Mayer 1939) (“Pay no

attention to that man behind the curtain.”). Then follows—

buried in the middle of the third paragraph—the only sentence

that gives any hint that some employees may need to file

proofs of claim after all: “You need to fill out and return the

Proof of Claim form only if you believe that, on February 28,

2002, ZiLOG owed you money other than the wages, benefits

and expense reimbursements that you are entitled to as an

employee.” 

Assuming diligent employees made their way past the

assurances that they needn’t worry about all the legal mumbojumbo, it is far from clear that they would have understood

they were required to file proofs of claim for monies they

7This statement was plainly incorrect. The bankruptcy affected virtually

all pre-petition creditors, in that they were required to file proofs of claim

in order to preserve their rights to payment. Presumably, what the company meant to say was that, under the terms of the reorganization plan, all

valid general unsecured pre-petition claims would receive 100% on the

dollar, assuming proofs of claim were filed with the bankruptcy court. It

was only public debt and equity holders whose claims would be impaired.

6610 In re ZILOG, INC.
believed they were owed as retention bonuses. The bonuses

ZiLOG had promised the women were supposed to compensate them for services they had rendered or would be rendering to the company. As such, the bonuses could easily be

understood to be “wages, benefits and expense reimbursements that you are entitled to as an employee”—the type of

claims for which no proof of claim needed to be filed. We

also note that the “you need to do X only if Y” construction

of the sentence—giving information by way of negative inference rather than affirmative assertion—appears designed to

deflect attention from, rather than underscore the necessity of,

filing proofs of claim.8

[10] Read in its entirety, the email from the general counsel

hardly gives fair notice to the women, or to others in their

8The bankruptcy judge, in her oral ruling, concluded that the March 11

email gave the women fair notice because the email “referred to employees’ wages, expense reimbursements, vacation, medical, and other benefits

as they become due.” (Emphasis added.) In the bankruptcy court’s view,

“[t]hat language clearly projects into the future,” whereas “[t]he retention

bonuses, if payable to the claimants, were due January 4th, 2002 more

than a month before the petition date.” 

The problem with the bankruptcy court’s analysis is twofold. First, it

ignores the other parts of the email that speak directly to the necessity of

filing a proof of claim. Specifically, the email told employees they need

not file claims for wages or other benefits owed to them on February 28,

2002. Contrary to what the bankruptcy court believed, this refers to claims

for past services, rather than “project[ing] into the future.” Second, the

language on which the bankruptcy court relied says nothing about the filing of proofs of claim; rather, it advises employees that “the bankruptcy

court has granted the company’s motion for permission to pay all amounts

owed to employees for salary, wages, expense reimbursements, and vacation, medical, and other benefits as they become due.” To someone versed

in bankruptcy law, saying that the debtor is authorized by the court to pay

certain claims suggests that no proofs need be filed for those claims. But

the employees to whom the email was addressed can’t be presumed to

have understood that connection. A fair reading of the email, using the

eyes of an ordinary non-lawyer employee, does not convey the idea that

proofs of claim had to be filed for all pre-petition claims for employee

compensation. 

In re ZILOG, INC. 6611
position, that they were required to file proofs of claim to preserve their rights. Rather, the email seems designed to lull the

employees into a false sense of security about the need to file

claims, and to dissuade them from paying very close attention

to any notices sent out by the bankruptcy court.9

The written notice from the bankruptcy court muddied the

waters further. That notice stated: 

The Bankruptcy Court has set April 19, 2002, as the

deadline for filing proofs of claim (the “Bar Date”).

. . . If you have a prebankruptcy claim against either

Debtor that is not based on the delivery of goods or

services to the Debtors in the ordinary course of

business, you must file a proof of claim . . . so that

it is received no later than the Bar Date. If you fail

to do so, your claim will be discharged.

. . . . 

The Plan alters the rights of the holders of ZiLOG’s

Senior Notes and its equity securities but does not

alter the rights of holders of any other class of

claims. If the Court confirms the Plan, it will be

9

It’s not as if fair and accurate notice would have been impossible to

give. Rather than minimizing the notice from the bankruptcy court as an

irrelevant technicality, the general counsel could have encouraged

employees to examine it closely and make sure that they had no need to

file timely proofs of claim. He could also have encouraged employees who

did not understand the notice to seek independent legal advice. The email

could also have laid out in plain terms who was required to file proofs of

claim using language such as this: “You must file a proof of claim to preserve your rights, unless you are seeking payment only of ordinary salaries, wages, employee benefits and expense reimbursements. If you have

any doubt as to whether your claim falls into this excepted category, you

should file a proof of claim to preserve your rights or contact a lawyer for

guidance.” The plainly defective notice was cc’d to four of ZiLOG’s outside counsel, none of whom sent a corrected notice. 

6612 In re ZILOG, INC.
binding on all holders of claims against and interests

in the Debtors. 

. . . . 

Confirmation of the Plan will result in a discharge of

claims against the Debtors, which may include all or

part of your claim. A discharge means that you may

never try to collect the claim from the Debtors,

except as provided in the Plan. (First emphasis in

original.) 

Part of the problem, of course, is that—having been assured

by the general counsel’s email that “[t]his is nothing to be

concerned about”—many employees may not have read the

bankruptcy court’s notice very carefully, or at all. Assuming,

however, that employees did read the notice, they would have

learned that no proof of claim had to be filed for any “prebankruptcy claim . . . based on the delivery of . . . services to

the Debtors in the ordinary course of business.” The phrase

“in the ordinary course of business” is most readily understood as modifying “delivery of . . . services to the Debtors,”

which immediately precedes it. The women’s one-time retention bonuses were based on their performing services for

ZiLOG, and the services were rendered in the ordinary course

of ZiLOG’s business. ZiLOG does not claim that the women

were required to perform extraordinary services to earn the

bonuses; as best the record reveals, the bonuses were to be

paid if the women kept their jobs through the end of the year.

Given that the services they rendered to earn the bonuses were

exactly the same ones they had been rendering to ZiLOG all

along, we can easily see how the women, even had they read

the notice from the bankruptcy court closely, would have

believed there was no need to file proofs of claim to preserve

their right to recover the promised bonuses.10 Moreover, given

10Once again, careful drafting could have avoided the problem. Rather

than speaking of compensation for services in the ordinary course of busiIn re ZILOG, INC. 6613
the misleading statements in the March 11 email that “the

chapter 11 case will have no effect on you” and “[t]his is

nothing to be concerned about,” we can readily understand

why the women may not have parsed the notice from the

bankruptcy court more closely or consulted an attorney at that

time. 

In Pioneer—which, as it happens, was also a bankruptcy

case involving a late proof of claim—a creditor represented

by “an experienced bankruptcy attorney” missed the deadline

for filing pre-petition claims because his lawyer overlooked

the filing date in the bankruptcy court’s notice. 507 U.S. at

384. The bankruptcy court refused to find excusable neglect

for the creditor’s late filing, and the district court affirmed.

See id. at 384-86. 

The Sixth Circuit reversed the bankruptcy court’s refusal to

accept the late-filed proofs of claim, and the Supreme Court

affirmed. Id. at 386-87. In holding that the bankruptcy court

abused its discretion, the Supreme Court explained that the

standard for excusable neglect 

is at bottom an equitable one, taking account of all

relevant circumstances surrounding the party’s omission[, including] . . . 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. 

Id. at 395. 

ness, the notice might have said something like this: “If you are an

employee, you need not file proofs of claim if you believe ZiLOG owes

you money only for ordinary wages, salaries and expense reimbursements.

If you are in doubt as to whether the monies you claim are owed to you

fall into this narrow category, you must file a proof of claim to preserve

your rights.” 

6614 In re ZILOG, INC.
In Pincay v. Andrews, 389 F.3d 853 (9th Cir. 2004) (en

banc), we applied Pioneer to hold that the district court did

not abuse its discretion by finding excusable neglect when a

sophisticated law firm missed a filing deadline because of a

paralegal’s error. See id. at 860. Although we did not hold that

the district court was required to find excusable neglect under

those circumstances, we upheld a finding of excusable neglect

because we found the evidence sufficient to support it. See id.

In Pioneer and Pincay, sophisticated attorneys were let off

the hook after missing filing deadlines. In fact, the Supreme

Court in Pioneer went so far as to hold that it was an abuse

of discretion not to find excusable neglect where a versed

bankruptcy practitioner missed the bankruptcy court’s notice

and failed to file a timely proof of claim. By contrast, Corning, Robert and Cleverdon were unrepresented by counsel,

and the notices sent out by debtor’s counsel and the bankruptcy court were, at the very least, ambiguous, and more

likely affirmatively misleading. It would be very strange

indeed to find the neglect in our case inexcusable, when the

neglect in Pioneer and Pincay was found excusable. 

ZiLOG argues that permitting the late-filing of the

women’s claims could create a “Material Adverse Change,”

which could interfere with the effectiveness of the reorganization. Even if this were a “theoretical possibility,” as ZiLOG

puts it, the bankruptcy court made no finding that ZiLOG

would suffer any prejudice if the claims were filed late. Based

on the record before us, we cannot say that ZiLOG would be

prejudiced by the late-filing of the women’s claims. See Pioneer, 507 U.S. at 389. In any event, to the extent that ZiLOG

is prejudiced as a result of its own deficient lawyering, the

burden of such errors or malfeasance must be borne by those

who caused it, rather than by innocent creditors who were

misled thereby. 

[11] After Pioneer and Pincay, we have little difficulty in

concluding that the bankruptcy court here abused its discreIn re ZILOG, INC. 6615
tion in failing to find excusable neglect. See Fed. R. Bankr.

9006(b)(1) (“[W]hen an act is required or allowed to be done

at or within a specified period by these rules . . . 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.”). We remand to the bankruptcy court to permit the

women to file their pre-petition claims in the bankruptcy proceedings as timely. Similarly, in the event that the bankruptcy

court determines that the women’s discrimination claims

came within their fair contemplation after the filing of the

bankruptcy petition but before its April 30 confirmation order,

the bankruptcy court shall permit those claims to be filed as

timely administrative expenses. (Of course, if the discrimination claims are found to have accrued after April 30, 2002, the

women may pursue those claims outside of the bankruptcy

proceedings.) 

Sanctions Award

[12] Section 524 of the bankruptcy code provides that discharge “operates as an injunction against the commencement

or continuation of an action . . . to collect, recover or offset

any [discharged] debt as a personal liability of the debtor.” 11

U.S.C. § 524(a)(2). A party who knowingly violates the discharge injunction can be held in contempt under section

105(a) of the bankruptcy code. See In re Bennett, 298 F.3d at

1069; Walls v. Wells Fargo Bank, N.A., 276 F.3d 502, 507

(9th Cir. 2002) (holding that civil contempt is an appropriate

remedy for a willful violation of section 524’s discharge

injunction). In Bennett, we noted that the party seeking contempt sanctions has the burden of proving, by clear and convincing evidence, that the sanctions are justified. We cited

with approval the standard adopted by the Eleventh Circuit

for violation of the discharge injunction: “[T]he movant must

prove that the creditor (1) knew the discharge injunction was

applicable and (2) intended the actions which violated the

6616 In re ZILOG, INC.
injunction.” Bennett, 298 F.3d at 1069 (citing Hardy v. United

States (In re Hardy), 97 F.3d 1384, 1390 (11th Cir. 1996)). 

It is clear from our cases, and should have been clear to the

bankruptcy court, that knowledge of the injunction is a question of fact that can normally be resolved only after an evidentiary hearing.11 The bankruptcy court, however, decided

the contempt motion on a paper record. The court did so after

expressing its views about the applicable law in its oral ruling,

such as “contempt need not be willful to justify an award of

damages,” and “[c]ontempt may be established even if the

failure to comply with the Court order was unintentional.”

The bankruptcy court also seemed to be under the misimpression that knowledge, for purposes of contempt, could be presumed: “While a party can’t be held in contempt absent

knowledge of the injunction, knowledge may be presumed in

a case where the defendants received notice of bankruptcy

and of confirmation of the debtor’s plan of reorganization.”

The court went on to conclude that “[b]ased on the evidence,

it appears that the defendants knew about the bankruptcy case,

knew that the plan had been confirmed. That is sufficient for

a presumed knowledge of the discharge injunction.” 

[13] It is certainly true that a trier of fact could infer knowledge of an automatic stay or discharge injunction from the

fact that a creditor knew of the bankruptcy. Such an inference,

however, would be a matter of fact, not a presumption implied

in law. Knowledge of the injunction, which is a prerequisite

to its willful violation, cannot be imputed; it must be found.

If, as here, the creditors dispute that they had such knowledge,

a finding that they knew of the injunction, and thus willfully

violated it, can only be made after an evidentiary hearing. 

11Of course, where the facts are not in dispute, no hearing need be held.

See, e.g., Knupfer v. Lindblade (In re Dyer), 322 F.3d 1178, 1191-92 (9th

Cir. 2003) (contempt sanctions upheld where creditor admitted having

notice of the automatic bankruptcy stay, yet took no steps to remedy his

violation of the stay). 

In re ZILOG, INC. 6617
We made this point clear, if it was not before, in a case

decided after the bankruptcy court entered its contempt order

(but before it denied the women’s motion to reconsider its

finding of contempt). In Knupfer v. Lindblade (In re Dyer),

322 F.3d 1178 (9th Cir. 2003), we dealt with contempt sanctions for violation of the automatic bankruptcy stay by a creditor, represented by counsel, who filed a lien on property of

the estate after commencement of the bankruptcy proceedings. See id. at 1183-84. In considering whether to uphold the

sanctions, we noted that the creditor and his lawyer both knew

of the bankruptcy but “may not have been familiar with that

particular Code provision [section 362(a) of the bankruptcy

code, which imposes an automatic stay].” Id. at 1191. While

acknowledging that “a party with knowledge of bankruptcy

proceedings is charged with knowledge of the automatic stay”

for purposes of awarding damages under section 362(h) of the

bankruptcy code, “we hesitate[d] to extend that principle to

the contempt context. Generally, a party cannot be held in

contempt for violating an injunction absent knowledge of that

injunction.” Id. at 1191-92 (citing Bennett, 298 F.3d at 1069,

and Jove Eng’g, Inc. v. IRS, 92 F.3d 1539, 1555 (11th Cir.

1996)). 

As noted, the women here dispute knowing of the discharge

injunction. That a competent lawyer should have known about

the injunction after diligent inquiry is not dispositive. The

creditor’s lawyer in Dyer no doubt should have known about

the existence of the automatic stay, which he could easily

have discovered by doing elementary legal research. Nevertheless, we declined to affirm the contempt sanctions on this

basis because the lawyer “may not have been familiar with

that particular Code provision.” There is nothing remarkable

or surprising about this aspect of Dyer; it simply reiterates the

well-established proposition that only actual knowledge of the

discharge injunction suffices for a finding of contempt.12

12Although Dyer involved the automatic stay, rather than the discharge

injunction, it relied on discharge injunction cases such as Bennett and

6618 In re ZILOG, INC.
By the time ZiLOG was appealed to the district court, Dyer

had been decided and the district court, in fact, relied on it.

Perhaps aware that Dyer undercut the bankruptcy court’s

rationale for imposition of contempt sanctions, the district

court relied on an alternative theory for affirming the contempt order. In Dyer, we ultimately upheld the contempt sanctions on the ground that, though the creditor may not have

known about the automatic stay initially, he became aware of

it when he was notified by the trustee, and this created “an

affirmative duty to remedy [the] automatic stay violation” by

“undo[ing] the recordation process.” Dyer, 322 F.3d at 1192.

Because the failure to cure the violation after notice was

undisputed in Dyer, we agreed that the violation was willful

and upheld the contempt sanctions. 

The district court relied on this aspect of Dyer in upholding

the bankruptcy court: 

Defendants were charged with knowledge of the stay

[sic13] no later than August 21, 2002, when ZiLOG

served a complaint on Defendants seeking injunctive

relief to stop the Idaho state actions. See In re Dyer,

322 F.3d at 1191. Defendants’ failure to take affirmative action to undo an arguably innocent violation

of the automatic stay [sic13] constituted a willful

violation. Absent any affirmative act by Defendants

to stay or dismiss the Idaho litigation, the bankruptcy

Hardy, and, indeed, we see no material difference between the discharge

injunction and the automatic stay for these purposes. A contempt order

entered for violation of either is governed by the same standards, namely

those applicable to all civil contempt proceedings. See Dyer, 322 F.3d at

1191-92 (citing Fed. R. Civ. P. 65(d) for the proposition that an “injunction [is] not binding unless [a] party has actual knowledge of it”). 

13We don’t understand why the district court discussed the automatic

stay. By August 21, 2002, the automatic stay had long since disappeared;

it was only the discharge injunction that was relevant. See 11 U.S.C.

§ 362(c)(2)(C) (“[The automatic stay] continues until . . . the time a discharge is granted or denied.”). 

In re ZILOG, INC. 6619
court’s finding that the continuing Idaho state proceedings were a willful violation of the discharge

order was reasonable. . . . There is nothing in the

record to suggest that the bankruptcy court abused its

discretion. (Emphasis added.) (Internal citation omitted.) 

But the record, in fact, clearly undercuts the district court’s

conclusion. Specifically, the record contains a stipulation,

approved by the bankruptcy court, staying the Idaho state

court proceedings. 

There remains the question of whether the women and their

counsel were, in fact, unaware of the discharge injunction and

its potential applicability to their claims. Dyer relied on the

fact that the automatic stay is imposed by statute, rather than

court order, and counsel may not have been aware of the statute. See 322 F.3d at 1191-92. The same is true here; the discharge injunction is imposed by section 524(a) of the

bankruptcy code, and we have found no place where it is also

embedded in the bankruptcy court’s confirmation order. This

raises the possibility, as in Dyer, that counsel for the women

“may not have been familiar with that particular Code provision.” Id. at 1191. 

To say that counsel may not have known of section 524 is

not the same as saying that he did not know. Dyer had no reason to resolve this uncertainty because it affirmed on another

ground. Here, the uncertainty is crucial because there is no

evidentiary basis on which to dispose of the contempt claim.

On remand, the bankruptcy court shall determine whether the

women were aware of the discharge injunction and its applicability to their claims. See Bennett, 298 F.3d at 1069 (in

order to justify sanctions, “the movant must prove that the

creditor (1) knew the discharge injunction was applicable and

(2) intended the actions which violated the injunction”).14 We

14The willfulness question is clouded to some extent by the deficiencies

in the March 11 email and the notice sent out by the bankruptcy court,

6620 In re ZILOG, INC.
vacate the bankruptcy court’s contempt finding and remand

for a determination of willfulness. 

[14] We REVERSE (1) the bankruptcy court’s grant of

summary judgment to ZiLOG on the women’s sex discrimination claims; (2) the bankruptcy court’s discharge of the

women’s statutory, contract and tort claims; (3) the bankruptcy court’s permanent injunction against the women’s pursuit of those claims; (4) the bankruptcy court’s determination

that the women failed to show excusable neglect for not filing

those claims on time; and (5) the bankruptcy court’s award of

sanctions. 

We REMAND to the bankruptcy court to conduct proceedings in close conformity with the views expressed in this

opinion. On remand, the bankruptcy court should consider

whether any fees it may have approved for debtor’s counsel

should be adjusted in light of our observations. The bankruptcy court should also consider whether costs and attorneys’

fees incurred by the women in defending this adversary proceeding, and the appeal therefrom, should in equity and good

conscience, be shifted to ZiLOG and its lawyers.

REVERSED and REMANDED.

discussed at length above. See pp. 6608-6614 supra. To be held in contempt, the women must not only have been aware of the discharge injunction, but must also have been aware that the injunction applied to their

claims. To the extent that the deficient notices led the women to believe,

even unreasonably, that the discharge injunction did not apply to their

claims because they were not affected by the bankruptcy, this would preclude a finding of willfulness. 

In re ZILOG, INC. 6621