In re Draw Another Circle, LLC
In re Draw Another Circle, LLC
Opinion of the Court
On June 13, 2016, the Debtors filed *176chapter 11 bankruptcy petitions.
Presently before the Court is the motion for leave to file a late claim filed by Ms. Shelly Adele Peterson on October 11, 2018 (the "Late Claim Motion").
On November 5, 2018, the Liquidating Trustee filed an objection to the Late Claim Motion. In addition to arguing that Ms. Peterson has not proved excusable neglect for filing a late claim, the objection includes a request that any order denying the Late Claim Motion also prohibit further correspondence and filings by Ms. Peterson regarding her claims. Ms. Peterson filed a Response on November 14, 2018, and a hearing was held on November 19, 2018. At the hearing, the Court admitted the Liquidating Trustee's exhibits into evidence, after overruling Ms. Peterson's objections.
For the reasons set forth below, the Late Claim Motion will be denied and the further relief requested by the Liquidating Trustee will be granted.
BACKGROUND
Bankruptcy case filings related to Ms. Peterson
On July 6-7, 2016, each of the Debtors filed its respective Schedule of Assets and Liabilities and Statement of Financial Affairs (the "Schedules" and the "SOFA"), which were amended on August 29, 2016.
In Hastings Entertainment's Schedules E/F, Ms. Peterson is identified as a potential creditor holding a contingent, unliquidated, disputed claim based on the Customer Discrimination Action (the "Peterson Scheduled Claim").
On September 6, 2016, the Court entered an Order establishing bar dates for filing proofs of claim (the "Bar Date Order"), setting October 28, 2016 as the deadline for certain creditors to file proofs of claim against the Debtors.
On June 29, 2017, the Liquidating Trustee filed an objection to the Peterson Scheduled Claim on the grounds that it was contingent, unliquidated, and/or disputed, and because no additional information had been provided by the claimant.
Communications from Ms. Peterson to the Liquidating Trustee's counsel
On October 24, 2017, Ms. Peterson contacted counsel to the Liquidating Trustee by email asserting that a certified letter she sent to him in July had been returned to her.
*178On October 29, 2017, Ms. Peterson sent another email claiming that she had "found the saved email ... on them accepting my claim," which she wanted to send to the Liquidating Trustee, along with the July mail that had been returned to her.
On December 6, 2017, in response to a voicemail from Ms. Peterson, the Liquidating Trustee's counsel sent an email stating:
In response to your voice mail message you left me on Wednesday, December 6, please be advised that there is no record of your having timely filed a proof of claim in the Hastings bankruptcy cases. Thus, neither the Debtors nor the Liquidating Trustee have objected to any claim you filed. In addition, we have not adjourned any matter involving your claim because no such claim exists on the claim register.27
Ms. Peterson sent an email response the next day stating that her "claim was filed in Dan Crow's office,"
Ms. Peterson's court filings
On November 1, 2017, Ms. Peterson sent a letter to the Court, which was docketed at D.I. 1563, stating that she has been a creditor of Hastings Entertainment since 2013 and attempting to explain the basis of her claim.
On July 9, 2018, Ms. Peterson filed a Petition with the Court seeking recovery of damages, including treble damages, against "John Marmaduke and Hastings Entertainment" for, among other things, "violation of due process," "ruinous injustice," "racketeering, laundering billions, terrorism acts," "depravation [sic] of federal statuatory[sic] rights," "punitive damages, personal injury damages, unlawful imprisonment damages," and "financial and emotional suffering."
On August 17, 2018, the Liquidating Trustee filed a motion seeking to dismiss and/or deny Ms. Peterson's Petition with prejudice.
On October 11, 2018, Ms. Peterson filed the Late Claim Motion.
Discussion
Under Bankruptcy Rule 3003(c)(3), a bankruptcy court fixes a deadline *180for filing proofs of claim in a chapter 11 case.
(i) the danger of prejudice to the debtor;
(ii) the length of the delay and its potential impact on judicial proceedings;
(iii) the reason for the delay, including whether it was within the reasonable control of the movant; and
(iv) whether the movant acted in good faith.50
"All factors must be considered and balanced; no one factor trumps the others."
The Bar Date for filing claims in the Debtors' bankruptcy cases was October 28, 2016. Ms. Peterson did not file a claim in the bankruptcy case by the Bar Date. She also did not respond timely to the Liquidating Trustee's objection to her scheduled claim, which was disallowed by Order dated July 20, 2017.
In October 2017 -- about one year after the Bar Date and three months after the Order was entered granting the objection to the scheduled claim -- Ms. Peterson contacted the Liquidating Trustee about asserting a claim in the case. In November 2017 and in July 2018, she sent a letter and a petition to the Bankruptcy Court in an effort to assert a late claim. Her Late Claim Motion describes the basis of her claim and asserts that notices sent by the Claims Agent were not addressed properly. In response, the Liquidating Trustee argues that an analysis of the Pioneer factors weighs against allowing Ms. Peterson to file a late claim.
(1) Prejudice to the Debtors
The first Pioneer factor -- prejudice to the Debtor -- "does not refer to an imagined or hypothetical harm; a finding of prejudice should be a conclusion based on the facts in evidence."
*181the size of the claim with respect to the rest of the estate; whether allowing the late claim would have an adverse impact on the judicial administration of the case; whether the plan was filed or confirmed with knowledge of the existence of the claim; the disruptive effect that the late filing would have on the plan or upon the economic model upon which the plan was based; and whether allowing the claim would open the floodgates to other similar claims.53
Damage to other creditors in the form of a reduced recovery is not a consideration.
The Liquidating Trustee argues that allowing Ms. Peterson to file a late claim would result in prejudice to the Trust, as successor to the Debtors' estates. Ms. Peterson asserted her claim after confirmation of the liquidating Plan. The Trust has already made an initial distribution to holders of general unsecured claims under the Plan.
I was falseley [sic ] arrested for a felony inside of Hastings Entertainment, Moses Lake, WA. It held over my head 543 days. I have several different damages. Personal, Injury Punitave [sic ] from loss of livestock. Unlawful imprisonment damages. Victim of victimization damages. The Defendants Violate Due process as well as not adhering to requests made for debtor exams and disclosure of the concealed letter to prove my innocence.57
[T]his claim is a[n] Injury claim as well as punitave [sic ] damages, personal injury damages, rule 7055
1) Rule 7055a. A defendant shall not dismiss crime victims claims.
2) Failure of consideration, Fault and fraud of non moving party.
3) Injuries by Defendants to plaintiff constitutes avoidance
4) NATURE OF SANCTIONS
A) RCW1.16.050 RULE AGAINST THE DEFENDANTS, They have had in these proceedings for 5 years sufficient deffence [sic ] or any rebundant [sic ] Material pertinetint [sic ] in this case. They have been caught raceteering [sic ] massive amounts of money out of this country, which I do believe is considered terrorism acts. Scandalous malicious behavior, Rule 56 Defendants havnt [sic ] cooperated or communicated in any legal way.58
Ms. Peterson provides no plausible facts in her filings, except those describing her allegedly false arrest on April 17, 2013 in a Hastings Entertainment store.
The Debtors scheduled a contingent, unliquidated and disputed claim by Ms. Peterson based on a lawsuit that she filed in Washington State Court against John Marmaduke and Hastings Entertainment. The state court lawsuit was dismissed.
*182Ms. Peterson did not file a proof of claim by the Bar Date and, later (post-confirmation), Ms. Peterson did not provide information to support her claim in response to the Liquidating Trustee's objection. The Late Claim Motion contains a mixture of legal conclusions and unknown theories of damages, with little or no credible support. To grant leave to file her claim at this juncture would disrupt the Trust's administration of the estate and cause the Trust to incur significant time and money to determine the validity and amount of the claim. The Debtors' liquidation may further complicate the Trust's ability to find witnesses and evidence to verify the claim. Reviewing this matter in light of the considerations for prejudice recognized by the Third Circuit in O'Brien Environmental , I conclude that this factor weighs in favor of the Trust.
(2) Length of the delay and impact of the delay on judicial proceedings
The second Pioneer factor to consider is the length of the delay in asserting a claim and the impact of the delay on the judicial proceedings. Here, Ms. Peterson first contacted counsel for the Liquidating Trustee one year after the Bar Date and about three months after the Court granted the Trust's objection to her scheduled claim. She followed up by filing a letter with the Court in November 2017 and the Petition in July 2018. Even if I determined that the actual length of this delay was not excessively long, still, the delay will impact estate administration. As discussed above, the state court action was dismissed, and the Trust needs witnesses and evidence to determine the validity and amount of Ms. Peterson's claim, most likely through litigation. This factor weighs in favor of Trust.
(3) Reason for the delay
The concept of excusable neglect anticipates that the movant's lack of care may have caused the delay, i.e., neglect on the part of the one seeking to be excused.
The gist of Ms. Peterson's argument is that she did not receive proper notice of the Bar Date or of the objection to her scheduled claim. She argues that the mailing address used by the Claims Agent was incomplete because it did not include her apartment or unit number: "n.e. # 10. To support this claim, she attached to her Motion copies of the envelopes received from the Debtors' Claims Agent with the incomplete address.
(4) Good Faith of the movant
The final Pioneer factor is the movant's good faith in seeking to file a late proof of claim. The Liquidating Trustee questions Ms. Peterson's good faith because she claimed that she was not properly served with notices, even though she had envelopes from the Debtors' Claims Agent in her possession. However, even assuming, without deciding, that Ms. Peterson acted in good faith, that finding would not materially alter the foregoing analysis determining that the other three Pioneer factors weigh against a determination of excusable neglect.
Additional Relief Requested by the Liquidating Trustee
The Liquidating Trustee's objection includes a request that any order denying the Late Claim Motion also prohibit further correspondence and filings by Ms. Peterson regarding her claims. The Liquidating Trustee seeks this relief "to ensure the orderly and efficient administration of the Trust," because Ms. Peterson has sent numerous emails to the Liquidating Trustee's counsel, in addition to filing the petition and motions.
Anybody that goes against Legislature Law and protecting Cival [sic ] Liberty Rights is obviously hiding more criminal acts. You treated me like dirt like my suffering held prisoner was no big deal. How about you be held 543 days inside your home held with no freedom. I didn't do anything wrong in any realm defending my federal rights. Why would you hate me for standing for Truth and Justice? Why wouldn't you want Justice and Trust out on facts if you sincerely represent this case in an honest manner? The file you have needs to be given to someone who takes my claim serious and dosnt conceiling [sic ] my paperwork for months. Very glad I kept sealed all the proof I need I am telling the 100% truth. Are you [counsel] being honest where my large file is I sent you. You have very personal information of mine your [sic ] holding on to and would appreciate you giving my file up so Judge Carey gets his letters you have and you have all my papers for entry I typed for the courts back in July. Can you at least try 1 time finding who took it? Don't see you going or moving anything when it comes to my files. Why did you ask me to send them to you if your [sic ] not the one shedding light on the fraud? I am not Attorney and I pray God has mercy on the souls of entities ignoring victims of terrorist acts like you have done so well [counsel]. Thanks for standing with me on fighting for Truth, Justice and protecting our homeland. If your [sic ] against me you are the enemy in every realm. Power abusers in the Judicial process of these cases needs to end. The creditors are suffering not you, not Marmaduke, not Crow or Billy Mays. The company needs held responsible for unlawful imprisonment, I have punitive damages and kinda think it's priority over a gas bill. I am a nobody in this case and you would like it to remain that way. I get it.67
*184Moreover, Trustee Exhibit # 16 is an email from Ms. Peterson to the Liquidating Trustee's counsel dated November 7, 2018, with a Subject that refers to counsel as a "LIAR" and states:
Just wanted your firm to know your abuse ended against Shelly Peterson. [Counsel] May God have mercy on your soul on the 19th. II Corinthians 10:4 THEY ARE THE WORD OF GOD, and the BLOOD, They overcame Satan by the blood of the Lamb and by the word of there [sic ] testimony. WE NEED THE WORD AND THE BLOOD.68
Upon review of the Trustee's exhibits, I agree that cause exists to grant this relief.
Conclusion
Based upon the foregoing analysis of the Pioneer factors, I conclude that Ms. Peterson has not established excusable neglect and the Late Claim Motion will be denied. Moreover, the further relief requested by the Liquidating Trustee will be granted.
An appropriate Order follows.
The Debtors operate multimedia entertainment retail companies. See Declaration of Duane A. Huesers in Support of Debtors' First Day Pleadings (D.I. 18).
The Debtors' and the Creditors' Committee's First Amended Joint Combined Disclosure Statement and Plan of Liquidation Under Chapter 11 of the Bankruptcy Code, D.I. 1076.
D.I. 1195.
Plan, IX.B. All capitalized terms not defined herein shall have the meaning provided in the Plan and the Liquidating Trust Agreement.
D.I. 1706.
Late Claim Motion at 5.
The Liquidating Trustee's exhibits are referred to herein as "Tr. Ex. #____."
The initial Schedules and SOFA filed on July 6-7, 2016 are docketed at D.I. 266-275, and the Amended Scheduled and SOFA filed on August 29, 2016 are docketed at D.I. 622-631.
Tr. Ex. # 15 (D.I. 625).
Tr. Ex. # 14 (D.I. 624, p. 343 of 514).
D.I. 670.
Tr. Ex. # 12 (D.I. 769).
The Liquidating Trustee's Fourth Omnibus Objection to Certain (I) Duplicate Claims (II) Amended and Superseded Claims, and (III) Insufficient Documentation Claims (Non-Substantive) (the "Fourth Omnibus Objection") (D.I. 1441).
The Liquidating Trustee's noticing agent is Reliable, Inc. Tr. Ex. # 13. (D.I. 1668, p. 27 of 38).
Tr. Ex. # 6 (D.I. 1462).
Tr. Ex. # 4 at 3.
Tr. Ex. # 4 at 2.
Tr. Ex # 5 at 5.
The record does not contain any information about the identity or relevance of Dan Crow.
Tr. Ex. # 7 (D.I. 1563) (the "November 1 Letter").
Tr. Ex. # 7 at 31-50. At a hearing on October 2, 2018, Ms. Peterson stated that the Washington state court action was dismissed. Tr. Ex. # 10, Hr'g Tr. Oct. 2, 2018 at 7:4-23.
Tr. Ex. # 8 (D.I. 1662) (the "Petition"). The Liquidating Trustee notes that John Marmaduke was a prior owner and the CEO of Hastings Entertainment, who sold his equity interests and retired from Hastings Entertainment in 2014. (Tr. Objection, D.I. 1706, at 6 n. 5).
Tr. Ex. # 8 at 1.
Tr. Ex. # 9 (D.I. 1669).
Tr. Ex. # 10.
Tr. Ex.# 11 (D.I. 1692).
D.I 1697.
D.I. 1706.
D.I. 1709.
Fed. R. Bankr. P. 3003(c) 3) provides in pertinent part that "[t]he court shall fix and for cause shown may extend the time within which proofs of claim or interest may be filed."
Fed. R. Bankr. P. 9006(b)(1) provides:
Except as provided in paragraphs (2) and (3) of this subdivision, when an act is required or allowed to be done at or within a specified period by these rules or by a notice given thereunder or by order of court, the court for cause shown may at any time in its discretion (1) with or without motion or notice order the period enlarged if the request therefor is made before the expiration of the period originally prescribed or as extended by a previous order or (2) 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.
Pioneer Inv. Serv. Co. v. Brunswick Assoc. Ltd. P'ship ,
Pioneer ,
Hefta v. Off'l Comm. Of Unsecured Creditors (In re Am. Classic Voyages Co. ),
Toscano v. RSH Liquidating Trust (In re RS Legacy Corp.) ,
O'Brien Envtl. Energy ,
O'Brien Envtl. Energy ,
Tr. Ex. # 3, ¶ 4.
Late Claim Motion, p. 4.
Tr. Ex. # 7, pp. 11-22.
Tr. Ex. # 10, Tr. 10/2/2018 at 6:18 - 7:17.
O'Brien Envtl. Energy ,
Late Claim Motion, pp. 21-26.
Tr. Ex. # 12.
Tr. Ex. # 13.
Tr. Ex. # 5, Tr. Ex. # 16.
Tr. Ex. # 5 at 3 (Dec. 19, 2017 email).
Tr. Ex. # 16.
Reference
- Full Case Name
- IN RE: DRAW ANOTHER CIRCLE, LLC Debtors.
- Cited By
- 1 case
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- Published