Court Opinion

ID: 3156627
Source: CourtListenerOpinion
Date Created: 2015-11-20 22:00:54.686044+00
Date Added: 2024-06-11T11:56:54.858779
License: Public Domain

FILED
                            NOT FOR PUBLICATION
                                                                           NOV 20 2015
                    UNITED STATES COURT OF APPEALS                      MOLLY C. DWYER, CLERK
                                                                         U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

IRIS BIOTECHNOLOGIES, INC.,                      No. 13-16827

              Appellant,                         D.C. No. 3:12-cv-06232-JSW

 v.
                                                 MEMORANDUM*
HELLER EHRMAN LLP,

              Appellee.

                    Appeal from the United States District Court
                       for the Northern District of California
                     Jeffrey S. White, District Judge, Presiding

                           Submitted November 17, 2015**
                              San Francisco, California

Before: FERNANDEZ and M. SMITH, Circuit Judges, and MORRIS,*** District
Judge.

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
        **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
        ***
             The Honorable Brian M. Morris, District Judge for the U.S. District
Court for the District of Montana, sitting by designation.
      Heller Ehrman LLP (Heller) filed for bankruptcy on December 28, 2008.

The bankruptcy court set April 27, 2009, as the claims bar date—the deadline to

file a proof of claim against the bankruptcy estate. More than three years after that

date, Iris Biotechnologies, Inc., (Iris) moved the bankruptcy court to permit it to

file a late proof of claim against Heller. The bankruptcy court denied Iris’s motion,

holding that its delay did not constitute “excusable neglect” under Federal Rule of

Bankruptcy Procedure 9006(b)(1). On appeal, Iris argues that the bankruptcy court

abused its discretion. Because the bankruptcy court applied the correct legal

standard to well-supported findings of fact, we affirm.

      1. Iris argues that under Zilog, Inc. v. Corning (In re Zilog, Inc.), 450 F.3d
996 (9th Cir. 2006), before a bankruptcy court may analyze whether a late-filing

claimant’s neglect is “excusable,” it must first determine whether the claim was

within the claimant’s “fair contemplation” as of the claims bar date. Iris is

mistaken. The fair-contemplation test applies when determining whether a debt

was discharged. See Zilog, 450 F.3d at 1000. The bankruptcy code provides that a

debt may be discharged if it “arose” before the date a reorganization plan was

confirmed. 11 U.S.C. § 1141(d)(1)(A). Zilog merely reaffirmed and elaborated

upon the long-recognized doctrine that a claim arises in this context “once it is

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within the claimant’s ‘fair contemplation.’” 450 F.3d at 1000-01 (quoting Cal.

Dep’t of Health Servs. v. Jensen (In re Jensen), 995 F.2d 925, 930 (9th Cir. 1993)).

      Here, the bankruptcy court did not hold that Iris’s claim was discharged, and

Iris does not argue that its claim was not discharged. Rather, Iris argues that its

delay in filing its proof of claim should be excused under Rule 9006(b)(1).

Whether a delay is excusable under Rule 9006(b)(1) is analyzed using four factors

enunciated in Pioneer Investment Services Co. v. Brunswick Associates Ltd.

Partnership: “[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.” 507 U.S. 380, 395 (1993); see

also Pincay v. Andrews, 389 F.3d 853, 855 (9th Cir. 2004). (We note that the third

of these factors encompasses many of the same concerns as the fair-contemplation

test.) The bankruptcy court rightly applied this test to determine whether Iris’s

neglect was excusable.

      2. Iris argues that the bankruptcy court’s application of the excusable-neglect

test to the facts was an abuse of discretion. Iris is mistaken. The court gave the

heaviest weight to the third factor—the reason for the delay—and determined that

Iris had more than enough notice that it might have a claim and sat on its rights for

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no good reason. The purported malpractice took place in March and October 2008.

The latest date at which Iris discovered it was August 2011. Iris had several

previous opportunities at which discovery ought to have occurred, such as the July

2009 letter informing Iris that Heller had elected to dissolve and wind up its

operations and disengage from all patent and trademark matters. Even crediting the

August 2011 date, however, Iris waited an entire year to file its proof of claim. The

bankruptcy court observed that had Iris attended to its own interests sooner, even

after the claims bar date, it might have granted Iris’s motion. But on these facts, the

bankruptcy court held that Iris’s neglect was not excusable.

      The bankruptcy court analyzed all four factors of the excusable-neglect test

and based its decision on factual findings that are amply supported by the record.

The bankruptcy court did not abuse its discretion. The district court’s judgment is

therefore

AFFIRMED.

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