In Re: Westinghouse Electric Company LLC

Background

Timothy Ellis appealed an order of the United States Bankruptcy Court for the Southern District of New York. That order denied Ellis permission to file a late administrative expense claim in the Chapter 11 bankruptcy proceedings involving Westinghouse Electric Company LLC. W Wind Down Co. LLC was the appellee in the district-court appeal.

Ellis was a former employee of Original Westinghouse. He was terminated on or about May 31, 2018, and alleged that the termination resulted from age discrimination. The bankruptcy court had confirmed a bankruptcy plan before his termination. The plan became effective on August 1, 2018, and required administrative expense claims to be filed by August 31, 2018.

Ellis received notices about the bankruptcy proceedings and the claim deadline. He said that a human-resources director had told him earlier notices did not apply to him. He also said he did not remember receiving the August 2018 notice and, if he received it, disregarded it. The record contained proof that the notice was sent to him, and another court had found that he received it. Ellis was represented by counsel by that time.

Instead of filing a bankruptcy claim, Ellis filed an employment-discrimination case against New Westinghouse in the Western District of Pennsylvania. In that case, New Westinghouse later argued that Ellis had to seek recovery through the bankruptcy process before the administrative bar date. New Westinghouse and others also told Ellis that he could ask the bankruptcy court to accept a late claim. Ellis nevertheless did not seek permission to file late until November 2, 2021.

The bankruptcy court denied that request. It applied the factors from Pioneer Investment Services v. Brunswick Associates Limited Partnership to determine whether Ellis’s delay resulted from “excusable neglect.” Those factors include the reason for the delay and whether the delay was within the claimant’s control, the length of the delay, possible prejudice to the opposing party, and whether the claimant acted in good faith.

Issues and standard of review

The district court reviewed the bankruptcy court’s decision for abuse of discretion. Under that deferential standard, reversal was appropriate only if the bankruptcy court applied the wrong legal standard, relied on clearly erroneous factual findings, or proceeded from an erroneous view of the law.

Ellis agreed that the excusable-neglect standard applied. He argued that the bankruptcy court misapplied that standard and relied on clearly erroneous factual findings, including findings about his control over the delay, his reasons for not filing earlier, and prejudice to W Wind Down Co.

Court’s analysis

The district court held that the bankruptcy court correctly applied the legal standard. The court explained that the excusable-neglect inquiry is flexible and considers the relevant circumstances, but that flexibility does not favor every late claimant. The most important factor in this case was the reason for the delay, including whether the delay was within Ellis’s reasonable control.

The district court rejected Ellis’s argument that the novelty or uncertainty of the underlying legal issue required a finding of excusable neglect. The court stated that a legal mistake can exist even when the governing legal rule is unclear. A lack of a clear rule does not automatically justify a late filing.

The district court also found no clear error in the bankruptcy court’s factual findings. The record supported the conclusion that, beginning no later than November 2019, Ellis had been told that filing a protective or late claim in the bankruptcy court was a prudent option. Ellis did not file for several years and had identified tactical reasons for avoiding the bankruptcy forum, including concerns about a jury trial and litigating an employment-discrimination claim there.

The court rejected Ellis’s argument that New Westinghouse had chosen the Pennsylvania forum for him. Ellis had initially filed the Pennsylvania case, and New Westinghouse and W Wind Down Co. were separate legal entities. The district court also concluded that statements by the Pennsylvania judge did not prevent Ellis from filing a bankruptcy claim.

Finally, the district court upheld the finding of prejudice to W Wind Down Co. The bankruptcy court had found that W Wind Down Co. was nearly finished resolving claims and making final distributions, and that allowing Ellis’s late claim would cause additional delays and prejudice W Wind Down Co. and other creditors.

Disposition

The district court affirmed the Bankruptcy Court’s February 15, 2022 decision and order. It directed the Clerk of Court to enter judgment for W Wind Down Co. and close the case. The opinion addressed only Ellis’s request to file a late bankruptcy claim; it did not decide whether Ellis’s age-discrimination allegation was valid.