In Re: The Roman Catholic Diocese of Rockville Centre, New York

Background

This appeal arose from the bankruptcy case of the Roman Catholic Diocese of Rockville Centre. Claimant 20101 challenged the bankruptcy court’s order sustaining the Diocese’s objection to the claimant’s proof of claim as untimely and disallowing it.

The bankruptcy court set August 14, 2021, as the deadline for claims based on allegations of sexual abuse. Claimant 20101 filed the proof of claim on November 22, 2021, approximately three months after the deadline. The bankruptcy court later sustained the Diocese’s timeliness objection and disallowed the claim.

The bankruptcy court evaluated whether the late filing resulted from “excusable neglect” under Bankruptcy Rule 9006. It considered four factors identified by the Supreme Court: prejudice to the debtor, the length and effect of the delay, the reason for the delay and whether it was within the claimant’s reasonable control, and whether the claimant acted in good faith. The bankruptcy court found that three factors favored the late claimants, but concluded that the reason-for-delay factor did not. It found that the claimants had constructive notice of the deadline through an extensive publication and outreach program and had not explained the delay after learning of the deadline.

Arguments on Appeal

Claimant 20101 raised three arguments. First, the claimant argued that the bankruptcy court had provided no rationale for disallowing the claim. The district court rejected that argument, explaining that the bankruptcy court had issued a detailed opinion addressing materially identical objections to other claims and later entered a specific order addressing Claimant 20101’s claim after its consideration had been briefly postponed.

Second, Claimant 20101 argued that the bankruptcy court misapplied the excusable-neglect factors. The claimant’s counsel argued that it took time for the claimant to come to terms with childhood abuse and seek legal relief. The district court stated that it was sympathetic but explained that the Second Circuit treats the reason for delay, including whether it was within the claimant’s reasonable control, as the most important factor. The court also distinguished a decision that excused a late claim because the claimant had been confused about which deadline applied. Here, the bankruptcy deadline and the state-law deadline were the same, and Claimant 20101 did not assert confusion about the bankruptcy deadline.

Third, Claimant 20101 argued that the bankruptcy court should have considered a request to participate in any late-claims fund that might be created in the future. The district court rejected this argument because the request appeared only in one sentence in the response to the objection rather than in a formal motion. It also stated that ruling on participation in a fund that did not yet exist would likely have been an improper advisory opinion.

Ruling and Reasoning

The district court reviewed the bankruptcy court’s factual findings for clear error, its legal conclusions independently, and its decision about whether to permit a late claim for abuse of discretion. Under that standard, the district court could not reverse merely because it might have exercised discretion differently. Reversal required a legal error, a clearly erroneous factual finding, or a decision outside the range of permissible choices.

The district court held that the bankruptcy court had not abused its discretion. The bankruptcy court had considered the relevant factors, and its conclusion that the reason for the delay did not qualify as excusable neglect was permissible under the Second Circuit’s approach. The district court therefore affirmed the bankruptcy court’s judgment sustaining the Diocese’s objection and disallowing Claimant 20101’s claim.