In re Chicago Pacific Corp.

773 F.2d 909, 1985 U.S. App. LEXIS 31474
CourtCourt of Appeals for the Seventh Circuit
DecidedSeptember 24, 1985
DocketNo. 84-2033
StatusPublished
Cited by49 cases

This text of 773 F.2d 909 (In re Chicago Pacific Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Chicago Pacific Corp., 773 F.2d 909, 1985 U.S. App. LEXIS 31474 (7th Cir. 1985).

Opinion

HARLINGTON WOOD, Jr., Circuit Judge.

Appellants, the Organization of Minority Vendors, Inc., et al. (“OMVI”), appeal from an order of the reorganization court, Chief Judge McGarr presiding, denying their requests for leave to file a proof of claim against the debtor, the Chicago, Rock Island and Pacific Railroad Company (the “Rock Island”)1 or for modification of an injunction barring them from pursuing their claims against the Rock Island in an action pending before Judge Moran. Judge McGarr concluded that the OMVI claim was barred as untimely under both Rule 8 — 401(b)(1) of the Bankruptcy Rules and Order No. 669 of the Reorganization Court.

[911]*911I.

The procedural histories of two separate judicial proceedings are crucial to resolution of the major issue whether the reorganization court erred in denying OMVI leave to file its claim: the Rock Island reorganization proceedings and proceedings in a class action lawsuit filed by OMVI against a number of railroad companies charging them with discriminating against Black and Hispanic businesses by refusing to allow them to provide goods and services to defendant railroads and seeking injunctive and monetary relief. The details necessary to an understanding of this appeal follow.

In March, 1975, the Rock Island, in serious financial difficulty, sought reorganization under section 77 of the Bankruptcy Act of 1898, 11 U.S.C. § 205 (1976). Although the Trustee, at the direction of the reorganization court, continued rail operations for the next four and one-half years, the losses also continued. On April 16, 1979, OMVI filed a complaint in the district court initiating the above-mentioned proceeding. The Rock Island and its Trustee were listed as defendants in the caption and the Rock Island was described in the body of the complaint. Both were served with process. On June 18, 1979, defendants filed a motion to dismiss the complaint against them, arguing that the reorganization court had exclusive jurisdiction over claims against the Rock Island.

On September 26, 1979, the Rock Island, declared cashless by the Interstate Commerce Commission, ceased operation as a rail carrier. On December 28, 1979, the Trustee filed a plan calling for a reorganization built around an operating core railroad. On January 25, 1980, the plan was rejected by Judge McGarr, who ordered the Trustee to cease his efforts to reorganize the Rock Island and to begin liquidation of the Rock Island’s assets. On June 2, 1980, Judge McGarr ordered the system-wide abandonment of the Rock Island.2

On June 17, 1980, OMVI filed an amended complaint in the class action. The district court had never ruled upon the motion to dismiss the original complaint filed by the Rock Island and the Trustee. Although the amended complaint retained the same caption as the original complaint, the Rock Island was not named as a defendant.3 The Rock Island did not file a responsive pleading to the amended complaint or otherwise participate in the proceedings, though it remained on the service list. No default judgment was sought by OMVI. On January 9, 1981, OMVI filed a memorandum in response to motions to dismiss and for summary judgment filed by the defendant railroads; in that memorandum, OMVI indicated its intention to voluntarily dismiss the Rock Island from the action.

In the two-year interim between briefing on these motions and Judge Moran’s opinion of December 9, 1983 disposing of these motions, public hearings were held on the first and second amended reorganization plans. Notice of the hearings to begin on September 27, 1983 was published in all editions of the Wall Street Journal on August 11, 1983. Copies of the plan and the notice of hearing on approval of the plan 4 were mailed to all known or potential [912]*912creditors.5 Section 3.4 of the plan provided that “all obligations incurred by the Trustee and all obligations of and claims against the Debtor that are outstanding as of the Consummation Date and not otherwise provided for in the Plan will be discharged.”

The hearing was continued to December 22, 1983, on which date the plan was approved. The plan was then submitted to the creditors and stockholders entitled under Bankruptcy Rule 8-305 to vote on it. The voting report filed by the Trustee with the reorganization court on March 23,1984, indicated that the plan had been accepted by the requisite number of creditors, and stockholders.

Judge Moran’s opinion disposing of the motions filed by the defendant railroads in the class action, issued on December 9, 1983, several weeks before the plan was approved, had stated that the Rock Island had been dismissed from the action. On April 11, 1984, OMVI filed a motion to amend its complaint to include the Rock Island as' a defendant railroad, claiming that the Rock Island had been inadvertently omitted from paragraph 6 of the first amended complaint.

On April 19, 1984, a hearing on the confirmation of the plan was held. Notice of the hearing had been served by mail upon all creditors who had made themselves known by previously filing claims or objections. Notice was also published in all domestic editions of the Wall Street Journal on March 29, 1984. This notice stated that those asserting claims against the Trustee in his personal rather than official capacity were required to file those claims no later than April 12, 1984. The plan was confirmed on April 19, 1984. On that same date, a consummation order and final decree were entered. June 1, 1984 was set as the consummation date.

On April 26, 1984, the Trustee and the Crown Intervenors filed with the reorganization court a petition to enjoin OMVI from proceeding with its civil suit against the Rock Island and its Trustee. The petition was granted on May 1, 1984.

On May 21, 1984, OMVI filed for the first time a proof of claim against the Rock Island in the amount of $60 million. OMVI also sought modification of Judge McGarr’s injunction, requesting that its claim against the Rock Island be heard by Judge Moran. The motion to modify was denied and the Trustee was ordered to file his objections to the claim in writing by the following day, May 30, 1984. The Trustee objected on the ground that the OMVI claim was untimely and further contended that OMVI had induced him to believe that it had abandoned its claim.

[913]*913In a minute order dated May 31, 1984, one day before the June 1 consummation date, Judge McGarr denied OMVI’s motion to file a proof of claim. The court’s reasoning was articulated in a memorandum opinion and order of June . 7, 1984. The court concluded that the OMVI claim was untimely under both Bankruptcy Rule 8-401(b)(1) and Order No. 669 of the Reorganization Court. The court found that OMVI had made no showing of “excusable neglect” under Bankruptcy Rule 8-401(b)(3)(c); that the Trustee would be substantially prejudiced if OMVI were allowed to file the claim at the eleventh hour; that the Trustee reasonably believed that OMVI had abandoned its claim against the Rock Island; and that OMVI’s failure to include the Rock Island in the body of its amended complaint was not inadvertent. OMVI appeals.

II.

OMVI contends that because the Trustee failed to notify it of the bar dates, its claim was not time-barred.

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Cite This Page — Counsel Stack

Bluebook (online)
773 F.2d 909, 1985 U.S. App. LEXIS 31474, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-chicago-pacific-corp-ca7-1985.