Artificial Intelligence Corp. v. Casey (In Re Casey)

198 B.R. 918, 1996 Bankr. LEXIS 919, 1996 WL 442587
United States Bankruptcy Court, S.D. California·Decided July 10, 1996·No. 19-00556·Published·Cited by 6 cases

Opinion

MEMORANDUM DECISION

PETER W. BOWIE, Bankruptcy Judge.

Artificial Intelligence Corporation, Steven Sanford, Steven Greenberg and Catherine Casey (“plaintiffs”) bring this motion to enlarge the time to serve complaints to determine the nondischargeability of certain debts pursuant to Federal Rule of Bankruptcy Procedure (“Rule”) 9006(b)(1). The complaints were filed on July 18, 1995, but service was not made until December 15, 1995. The period between filing and service exceeded the time limit for service under the former Federal Rule of Civil Procedure (“FRCP”) 4(j), made applicable to all adversary proceedings by Rule 7004, which requires that a complaint be served within 120 days of its filing. 1 By separate order, this Court denied plaintiffs’ request to excuse their late service under former FRCP 4(j)’s good cause exception because they did not present facts meeting the good cause standard of that rule. As an alternative method of excusing their late service, plaintiffs now request an enlargement of the time pursuant to Rule 9006(b) to serve their complaints, and assert in support that their failure to serve was the product of excusable neglect.

This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1334 and General Order No. 312-D of the United States District Court for the Southern District of California. This is a core proceeding under 28 U.S.C. § 157(b)(2)(I).

Mr. Casey filed his chapter 11 petition on April 14, 1995. July 18, 1995, was subsequently set as the deadline to object to the *920 dischargeability of certain debts. On July 18, Í995, plaintiffs timely filed the subject complaints, but did not serve them on the debtor. On October 2, 1995, plaintiffs filed a motion to dismiss, convert or appoint a chapter 11 trustee in the debtor’s underlying bankruptcy proceeding. On October 30, 1995, a hearing was held on the motion to dismiss. Neither in their papers in support of the motion to dismiss, nor at the hearing did plaintiffs reference the complaints or request an extension of the time to serve the complaints pending a determination of the motion to dismiss. At the conclusion of the hearing, the Court took the matter under submission.

On November 16, 1995, the Court held a hearing on the motions to dismiss the related Audre bankruptcies. 2 The Court denied the motions to dismiss those cases, but did not rule at that time on the motion to dismiss Mr. Casey’s individual bankruptcy, which was still under submission. Although plaintiffs point out that this hearing took place on the 120th day after the complaints were filed, none of the parties inquired about an extension of the deadline for service of the subject complaints. It was not until one hundred and fifty (150) days after the filing of the complaints, on December 15, 1995, that an alias summons was issued and the complaints were served on the debtor.

The plaintiffs admit that they intentionally did not immediately serve these complaints. Plaintiffs contend that this decision was justified based on their belief that substantial grounds existed for success on the motion to dismiss the underlying bankruptcy. Dismissal would have rendered these complaints moot. Also, a decision on the motion to dismiss would avoid unnecessary expenditures by both parties.

Although service was initially delayed, plaintiffs maintain that they never intended to allow the entire service period to run without effectuating service, and that they were unaware of the 120 day service requirement. Plaintiffs argue that the hearing on the motion to dismiss occurred well within the 120 day service period. When no ruling was made on the motion to dismiss Mr. Casey’s bankruptcy after the motions to dismiss the Audre and ARSI bankruptcies were denied, the plaintiffs claim that they became concerned that further delay of service of the complaints might not be reasonable. Plaintiffs assert that they believed service within a reasonable time of filing was the only requirement regarding service of the complaints. While investigating the reasonableness of further delaying service, plaintiffs assert that they discovered that Rule 7004 incorporates the 1990 version of FRCP 4(j), requiring service of a complaint within 120 days of its filing, and that this period had already run. Upon discovery of this service requirement and its expiration, plaintiffs submit that they immediately served the complaints on the debtor. Plaintiffs believe that their failure to keep track of these complaints and calendar their service or a hearing on their extension is grounds for excusable neglect.

DISCUSSION

This ease presents two issues. First, may the plaintiffs properly rely on the excusable neglect standard of Rule 9006(b)(1) for enlargement of time to serve when FRCP 4(j) contains its own good cause standard which this Court has already ruled that plaintiffs failed to meet? Second, if plaintiffs may seek enlargement pursuant to Rule 9006, have they presented grounds that warrant enlarging the time for service due to excusable neglect?

The debtor claims that the motion to enlarge time is moot because this Court has granted debtor’s motions to dismiss. This claim is an attempt to elevate form over substance. Plaintiffs raised the excusable neglect question in the opposition to the motion to dismiss, before the adversary proceedings were dismissed. However, because a request to enlarge time for excusable neglect is procedurally a separate motion, this Court specifically left the excusable neglect determination out of its prior decision. *921 Therefore, debtor’s claim of mootness is rejected.

Plaintiffs seek to enlarge the time to serve their complaints under Rule 9006(b)(1), which provides:

In General. 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. 3

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Artificial Intelligence Corp. v. Casey (In Re Casey), 198 B.R. 918, 1996 Bankr. LEXIS 919, 1996 WL 442587 (Cal. 1996).

198 B.R. 918 (Artificial Intelligence Corp. v. Casey (In Re Casey)) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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