Court Opinion

ID: 3003348
Source: CourtListenerOpinion
Date Created: 2015-09-24 20:42:39.465342+00
Date Added: 2024-06-11T13:24:06.511699
License: Public Domain

In the

United States Court of Appeals
                  For the Seventh Circuit

No. 06-2738

IN RE:

    MARCH FIRST, INCORPORATED ,
                                                                      Debtor,
A PPEAL OF:

    A VNET, INCORPORATED

                Appeal from the United States District Court
           for the Northern District of Illinois, Eastern Division.
                No. 05 C 6866—Matthew F. Kennelly, Judge.

         A RGUED O CTOBER 21, 2008—D ECIDED JULY 17, 2009

  Before R IPPLE, E VANS, and SYKES, Circuit Judges.
  S YKES, Circuit Judge. MarchFIRST, Inc., an Internet
consulting company, entered Chapter 7 bankruptcy
proceedings in April 2001. Soon thereafter, marchFIRST
sent a notice of bankruptcy to its creditors requiring them
to file any claims against its estate by 4 p.m. on October 11,
2001. Avnet, Inc., an unsecured creditor of marchFIRST,
faxed its proof of claim to the claims agent at 4:43 p.m. on
October 11. Andrew Maxwell, the trustee of marchFIRST’s
estate, objected to Avnet’s claim because it was not timely
2                                               No. 06-2738

filed. The bankruptcy court agreed and entered an order
sustaining the objection, which the district court upheld.
Because Avnet’s claim was filed after the deadline,
we affirm.

                      I. Background
   After marchFIRST entered Chapter 7 bankruptcy pro-
ceedings, the company mailed a notice of bankruptcy to
its creditors. The notice stated that proof of any claims
against its estate must be received by the bankruptcy
clerk’s office by October 11, 2001. The notice listed two
addresses where creditors could send their proofs of
claim—one address for claims submitted by mail and
another for claims submitted by hand or overnight courier.
Attached to each notice was a personalized proof-of-claim
form that stated in capital letters: “THE ORIGINAL OF
THIS PROOF OF CLAIM MUST BE SENT SO THAT IT IS
RECEIVED ON OR BEFORE 4:00 P.M., EASTERN TIME,
ON OCTOBER 11, 2001.”
  Avnet received marchFIRST’s bankruptcy notice and
personalized proof-of-claim form. On October 11, 2001, at
4:43 p.m., Avnet faxed the proof-of-claim form to
marchFIRST’s claims agent with a cover sheet stating:
“Following is our proof of claim in this case. Original will
arrive by courier tomorrow morning.” As promised, a
courier delivered the original the following morning.
Nevertheless, Maxwell objected to Avnet’s claim because
the original proof-of-claim form did not arrive until
October 12, one day after the deadline. The bankruptcy
court sustained the objection and subordinated Avnet’s
claim, and the district court affirmed.
No. 06-2738                                                    3

                        II. Discussion
   We review the bankruptcy court’s findings of fact for
clear error and its conclusions of law de novo. Monarch Air
Serv., Inc. v. Solow (In re Midway Airlines, Inc.), 383 F.3d 663,
668 (7th Cir. 2004). Avnet argues that its transmission
by facsimile was proper because the notice did not ex-
pressly forbid submission by fax. Next, Avnet claims
that the bankruptcy court should have exercised its
discretion under Rule 5005(c) of the Federal Rules of Bank-
ruptcy Procedure to deem the claim timely. Finally, Avnet
argues that the bankruptcy court should have considered
its initial fax as an informal proof of claim and its sub-
sequent delivery of the original form as an amendment
to the informal claim. None of Avnet’s arguments are
persuasive.
   Avnet first argues that the bankruptcy court should
have accepted its faxed submission because marchFIRST’s
notice did not expressly forbid claimants from faxing
their proof-of-claim forms. The bankruptcy court
correctly rejected this argument. MarchFIRST’s notice
listed two ways—and only two ways—for claimants to
submit their claims: by mail or by hand. The notice
did not list a fax number as an alternate method of sub-
mitting one’s claim. In a case with almost identical facts,
we held that transmission of proof of claim by fax was
inappropriate. In re Outboard Marine Corp., 386 F.3d 824
(7th Cir. 2004). The bankruptcy notice at issue in Outboard
Marine stated that creditors could file claims by mailing
them to the listed address. The claimant instead faxed
his proof-of-claim form to the claims agent. We held that
4                                                    No. 06-2738

submission by fax was improper because the notice
clearly permitted only one method of transmittal. We
stated that “it was unnecessary to explicitly state that
mailing the proof of claim to the designated post office
box was the exclusive method of transmittal.” Id. at 828.
The facts here are indistinguishable from Outboard Marine:
MarchFIRST’s notice was sufficiently clear that submission
by mail or by hand were the only permissible methods
of transmittal. The company was not required to also list
all impermissible methods of transmittal. Furthermore,
the form clearly emphasized that the original proof-of-
claim form must be submitted, implicitly ruling out
faxed submissions. Transmission by facsimile was im-
proper, and the bankruptcy court correctly rejected Avnet’s
argument.1
  Avnet next argues that the bankruptcy court erred by
not exercising its discretion under Rule 5005(c) of the
Federal Rules of Bankruptcy Procedure to deem its claim
timely. Rule 5005(c) states: “In the interest of justice, the

1
  Even if we accepted Avnet’s argument that a faxed copy was
proper, we would still affirm the bankruptcy court’s decision
because Avnet did not fax its proof of claim until 43 minutes
after the deadline. Avnet argues that its small delay constitutes
“excusable neglect,” as the Supreme Court has formulated that
defense in Pioneer Investment Services Co. v. Brunswick Associates,
507 U.S. 380 (1993). As the district court correctly noted, how-
ever, the defense of excusable neglect is only available in
Chapter 11 bankruptcy cases, not Chapter 7 bankruptcy cases.
See In re De Vries Grain & Fertilizer, Inc., 12 F.3d 101, 105 (7th
Cir. 1993).
No. 06-2738                                                  5

court may order that a paper erroneously delivered shall be
deemed filed with the clerk or transmitted to the
United States trustee as of the date of its original delivery.”
Avnet argues that its faxed claim constitutes an “erroneous
delivery” under Rule 5005(c), and the bankruptcy court
abused its discretion by not accepting the claim. We
disagree. Rule 5005(c) only applies where a claimant
delivers a document to the wrong recipient—for example,
to the trustee instead of the bankruptcy clerk or vice
versa. See id. (discussing the various ways in which a
paper could be erroneously delivered to the bankruptcy
clerk, the trustee, the attorney for the trustee, or the
bankruptcy judge, among others); Outboard Marine, 386
F.3d at 828 (“Rule 5005(c) . . . grants the bankruptcy
court equitable discretion to backdate papers like a
proof of claim that are ‘erroneously delivered’ to the
wrong official in a bankruptcy proceeding.” (emphasis
added)). The rule does not address situations where the
claimant makes a delivery using the wrong method, and
we are unaware of a single case in which a court relied
upon this rule to excuse a claimant who delivered his
claim to the correct recipient using the wrong method.
Further, Rule 5005(c) is an equitable rule. Avnet, a sophisti-
cated claimant with benefit of counsel, did not give the
bankruptcy court any reason to believe that the equities
weighed in its favor; it did not explain why it waited
until 43 minutes after the deadline to fax a copy of its
proof of claim. A claimant who wants the benefit of
Rule 5005(c) must “offer[] [a] convincing justification or
explanation for its untimely filing.” Id. The bankruptcy
court did not abuse its discretion in declining to deem
Avnet’s claim timely.
6                                                 No. 06-2738

  Finally, Avnet argues that the bankruptcy court should
have considered its faxed submission as an informal
proof of claim and its subsequent mailing of the original
as an amendment to that informal claim. The informal
proof-of-claim doctrine is an equitable doctrine that
permits bankruptcy courts to treat a creditor’s late formal
claim as an amendment to a timely informal claim. See
Barlow v. M.J. Waterman & Assocs., Inc. (In re M.J. Waterman
& Assocs., Inc.), 227 F.3d 604, 608 (6th Cir. 2000); Wilkens v.
Simon Bros., Inc., 731 F.2d 462, 465 (7th Cir. 1984). Even if
we were inclined to consider Avnet’s initial fax as an
informal claim, the fax was not timely; Avnet’s fax
arrived 43 minutes late.
  For the foregoing reasons, we A FFIRM the decision of
the district court.

                            7-17-09