In re Freedom Communications Holdings, Inc.
In re Freedom Communications Holdings, Inc.
Opinion of the Court
OPINION
Before the Court is the FCH Litigation Trust’s
I. BACKGROUND
From 2009 to 2010, Freedom was a debtor in this Court under chapter 11 of the Bankruptcy Code. 11 U.S.C. §§ 101, et seq. At the time, Freedom owned an Arizona-based newspaper called the East Valley Tribune. Gibson worked at the Tribune for nearly thirty years, until February 2008. Toward the end of her tenure, Gibson started alleging that certain managers and supervisors were mistreating her, which led her to file a discrimination action with the Equal Employment Opportunity Commission (“EEOC”).
Several months after confirmation, Gibson, having received a “right to sue” letter from the EEOC, filed a complaint against Freedom in federal court in Arizona. In response, Freedom filed a motion
At that hearing, the Court denied the Motion to Enjoin. Much of the discussion centered around whether Gibson received adequate notice of the bankruptcy case and of the bar date. The Court became concerned when Freedom’s counsel pointed out that the address for Gibson on
In so doing, the Court intended “to permit the late filing of a proof of claim” but leave “the treatment of that [claim]” as “an open question”: “I want to be clear that I’m not ruling that this is a class (a)(4) claim or ... a subordinated claim.” (Id. 16:22-17:3.) Those issues were left for later. Indeed, the order entered after the hearing reflected that, if Gibson filed a claim, it would be subject to “all of [Freedom’s] and the Trust[’s] defenses to it.” (Id. 17:5-6.) Specifically, the order provides:
All rights held by [Freedom] and the [Trust,] respectively, to object on any grounds to any proof of claim filed by [Gibson] in the above-captioned cases are fully reserved, including, but not limited to (i) the [Trust’s] right to seek a determination that any proof of claim filed by [Gibson] may not be treated or discharged under [the Plan] and (ii) the rights of [Freedom] and the [Trust,] respectively, to argue that any proof of claim filed by [Gibson] may be subordinated under the Plan.
(Order Denying Mot. to Enjoin at 2.)
For her part, Gibson filed a proof of claim
Freedom joined in the Motion to Classify and Gibson opposed it.
II. LEGAL ANALYSIS
Parties are entitled to get adequate notice of proceedings that may result in the “judicial denial of [the] party’s claimed rights.” City of New York v. New York, N.H. & H.R. R.R. Co., 344 U.S. 293, 297, 73 S.Ct. 299, 97 L.Ed. 333 (1953). Section 342(a) of the Bankruptcy Code, for in
In Mullane v. Cent. Hanover Bank & Trust Co., the Supreme Court held that for notice to satisfy due process it must be “reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” 339 U.S. 306, 314, 70 S.Ct. 652, 94 L.Ed. 865 (1950) (calling notice “[a]n elementary and fundamental requirement of due process in any proceeding which is to be accorded finality.”). Mullane has been interpreted “to set the standard for notice required under the Due Process Clause in Chapter 11 bar date cases.” Chemetron Corp. v. Jones (“Chemetron I”), 72 F.3d 341, 346 n. 1 (3d Cir. 1995). Failure to meet that standard “is a serious procedural irregularity,” Constr. Drilling, Inc. v. Chusid, No. 03-3786, 2005 WL 1111760, at *4 (3d Cir. May 5, 2005)—so much so that a claimant without appropriate notice is “not subject to the bankruptcy court’s bar date order, and [its claim is] not discharged by [the] confirmation order.” Jones v. Chemetron Corp. (“Chemetron II”), 212 F.3d 199, 210 (3d Cir. 2000).
Bankruptcy law divides creditors into two groups for purposes of notice: known and unknown creditors. Gibson was the former. From the outset of Freedom’s bankruptcy case, Gibson was listed on Freedom’s schedules as holding a disputed claim.
Yet here, because the mailing address Freedom used for Gibson was incorrect, the Court ruled (at the July 19 hearing) that the presumption had been overcome. But that is not the end of the analysis. By allowing the Trust and Freedom to argue that Gibson’s claim could be subordinated, the Court recognized that the issue of whether Gibson received adequate notice remained unresolved. Courts “assess the sufficiency of notice against the backdrop of the factual circumstances in each case.” Christopher v. Kendavis Holding Co. (In re Kendavis Holding Co.), 249 F.3d 383, 386-87 (5th Cir. 2001) (citing Mullane, 339 U.S. at 314, 70 S.Ct. 652). On the present record, the Court holds that the notice Freedom provided to Gibson satisfied the Mullane standard.
Recall that Freedom mailed both the commencement and bar date notices to Gibson at 8027 Del Cristel, Scottsdale, AZ 85258, rather than her true address, 8027
Most compelling, however, was evidence—introduced in connection with the Motion to Classify, and not before the Court at the July 19 hearing—that Gibson had failed to fix the erroneous address when given the chance, well before Freedom’s bankruptcy. In the summer of 2006, Freedom changed payroll systems. (Mitchell Decl. ¶ 5.) As part of that process, Freedom required all of its employees to complete an information verification form, which asked the employees to verify, among other things, their then-current mailing address. (Id.) The address listed on the form sent to Gibson was 8027 Del Cristel, Scottsdale, AZ 85258. (Id.) Although Gibson updated her home phone number and emergency contact information, she did not correct the erroneous address. (Id.) Instead, she simply signed the form and sent it back to the company, as instructed. (Freedom Joinder Ex. C)
Throughout this dispute Gibson has found Freedom to be “preoccupied with the fact that there was a misspelling on [her] address label.” (Mot. to Enjoin Hr’g Tr. 10:7-11.) Gibson acknowledged she “wasn’t even aware of’ the error, “and so that was not the issue with [her] not getting the [notice].”
III. CONCLUSION
For the reasons stated above, the Court GRANTS the Motion to Classify. Gibson’s claim is a Subordinated Claim under Freedom’s Plan.
ORDER
Upon consideration of the FCH Litigation Trust’s Motion to Classify [Docket No. 1963], and the responses filed to it; and having held a hearing on the Motion; for the reasons set forth in the accompanying Opinion, it is hereby
ORDERED, that the Motion is GRANTED. The claim at issue [Nos. 4471 & 4472], that of Katherine Gibson, is a Subordinated Claim under the confirmed plan of reorganization in this case.
. The Court’s jurisdiction over this matter is not in dispute. It exists under 28 U.S.C. §§ 157 and 1334. Venue is also proper here under 28 U.S.C. §§ 1408 and 1409. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A) and (0). Moreover, the Court expressly retained jurisdiction over matters like this in § 10.1(h) of the Plan (defined below).
. The Trust was created and empowered by the Plan (defined below) to act on behalf of certain of the debtor's unsecured creditors on a post-confirmation basis.
. Docket No. 1963.
. Docket No. 1150.
. The debtors in the Freedom family of bankruptcy cases consisted of fifty related corporate entities, but the Court refers to them collectively as Freedom, for simplicity’s sake.
. See EEOC Charge No. 540-2007-01828C.
. Docket No. 1147.
. Docket No. 1821.
. Docket No. 1828.
. Docket No. 1934.
. Neither Freedom nor the Trust asked the Court to reconsider its ruling, nor did they appeal it.
. Docket No. 1933.
. Claim Nos. 4471 & 4472.
. Technically, Freedom’s joinder extended only to the subordination issue. Freedom disagrees with the Trust over how the Court should handle Gibson's claim if it were not subordinated. But because the Court finds that subordination is appropriate, the alternative arguments need not be addressed.
. Docket No. 1998.
. As the holder of a claim “scheduled as disputed, contingent, or unliquidated,” Gibson had to file a proof of claim in the case in order to "be treated as a creditor with respect to such claim for the purposes of voting and distribution.” Fed. R. Bankr.P. 3003(c)(2).
.The envelope in which the commencement and bar date notices were served included a return address for Logan & Company, Inc., the court-approved claims noticing and balloting agent in the Freedom case.
. Docket No. 1969.
. Gibson used the word “claim" instead of "notice” but it is clear that she meant the latter.
Reference
- Full Case Name
- In re FREEDOM COMMUNICATIONS HOLDINGS, INC., Debtors
- Cited By
- 5 cases
- Status
- Published