Restructuring

In chapter 11 reorganizations, Federal Rule of Bankruptcy Procedure 3003(c)(3) provides that “[t]he court shall fix and for cause shown may extend the time within which proofs of claim or interest may be filed” (commonly known as the bar date).  For a creditor or interest holder to be subject to this bar date, they must have received notice to satisfy due process.  A known creditor, one that is reasonably ascertainable, must receive “actual notice.”  Simply receiving a court-approved bar date notice from the debtor is enough to satisfy this requirement for due process.  However, Plum Creek is a creditor that attempted to make actual notice more than it appears to be.
Background
For decades, W.R. Grace & Co. (“Grace”) owned and operated a vermiculite mine in Libby, Montana (the “Libby Zone”).  After the Environmental Protection Agency (the “EPA”) initiated an asbestos investigation into the Libby Zone in 1999, Grace filed for chapter 11 protection on April 2, 2001 in the District of Delaware.  The Bankruptcy Court set the bar date for March 31, 2003 and approved Grace’s bar date notice.  Grace mailed this notice to Plum Creek, an entity that owned timberland within the Libby Zone, on June 27, 2002, nine months before the deadline.
Plum Creek had deemed 30,000 acres of its timberland in the Libby Zone as a precautionary zone, or an area where it should currently not harvest timber, and the EPA and Plum Creek independently began testing the Libby Zone in late 2002.  In early 2003, the EPA emailed Plum Creek and indicated that Plum Creek should assume the worst, and that contamination could be present in all aspects of the Libby Zone, including the timber.
The EPA filed a timely proof of claim for clean-up costs related to the Libby Zone on March 28, 2003.  Plum Creek did not file a proof of claim until June 7, 2010, seven years after the bar date.  This proof of claim was later refiled on October 7, 2015, pursuant to a tolling agreement which specifically indicated that the passage of time after June 7, 2010 until Plum Creek’s claims were resolved would not be held against it.  Grace then moved to enforce its plan against Plum Creek.
The Bar Date Notice
Importantly, Grace’s bar date notice was broad and detailed.  It stated that “any creditor having a claim against the Debtors, no matter how remote or contingent, must file a proof of claim before the Bar Date.”  The notice further defined asbestos property damage claims (“Asbestos Claims”) very broadly, so as to include all “[c]laims as of the time immediately preceding the Bar Date that relate, for example to the cost of removal, diminution of property value or economic loss caused by asbestos in products manufactured by the Debtors or from vermiculite mined, milled, or processed by the Debtors. . . .”
In fact, the notice expressly warned that any holder of an Asbestos Claim who “fails to file a proof of claim on or before the Bar Date for any claims such claimant holds against any of the Debtors . . . SHALL BE FOREVER BARRED, ESTOPPED AND ENJOINED from asserting any such claims . . . .”
Bankruptcy Court’s Analysis
Plum Creek asserted a creative argument that it did not have actual notice of its Asbestos Claims for the Libby zone.  Plum Creek claimed that because it was not known to a scientific certainty that asbestos-contaminated vermiculite could be absorbed into the tree bark in its timberlands, it did not and could not have actual notice.  The Bankruptcy Court disagreed with this argument and found that Plum Creek had received actual notice for two reasons.
First, Plum Creek knew to a high degree of certainty that there was asbestos contamination on its timberland as a result of the EPA’s ongoing investigations and communications regarding the Libby Zone prior to the bar date.  On February 18, 2003, the EPA clearly stated that there was a serious risk that asbestos contaminated Plum Creek’s timberland.  While bark sampling for asbestos contamination had not yet taken place, the EPA warned that there was a real possibility that “[t]he worst scenario would be detection of large amounts of [vermiculite], which would likely preclude any logging.”  Plum Creek’s scientific certainty argument fell flat on this point.
Second, the Bankruptcy Court found that Grace had sent clear notice of a potential claim to Plum Creek “to satisfy due process concerns as well as the requirements in the Bankruptcy Rules.”  The notice expressly indicated that a creditor should file a proof of claim no matter how “remote or contingent” prior to the bar date.  Importantly, the notice warned that any holder of an Asbestos Claim that failed to file a timely proof of claim would be “forever barred, estopped and enjoined from asserting any such claims.”  Asbestos Claims were broadly defined to include potentially remote or contingent claims such as Plum Creek’s.
The Bankruptcy Court implied that the notice alone would have been sufficient to warrant that Plum Creek had actual notice.  When combined with the EPA’s actions, the Bankruptcy Court determined that Plum Creek had absolutely no excuse not to file a timely proof of claim.  Scientific certainty of the bark sampling was not necessary, as at a minimum, Plum Creek knew that it had to file a proof of claim for “contingent and remote” claims. Plum Creek was well aware from the EPA that its potential Asbestos Claims for the Libby Zone were unlikely to be contingent nor remote.  Therefore, Plum Creek knew enough to constitute actual notice, and it should have filed a timely proof of claim, even if the extent of the claim was, at the time, completely unknown.
Plum Creek further attempted to argue excusable neglect as the reason for its untimely proof of claim.  The Bankruptcy Court would have none of it.  Plum Creek was aware of the possibility of an Asbestos Claim for a variety of reasons, all well before the bar date.  Moreover, even if Plum Creek did have a cogent excuse, nothing could excuse a delay of over seven years beyond the bar date.
Conclusion
The moral of the case is that even if a creditor is not 100% certain that it has a claim, it should file a timely proof of claim if a claim is at all possible:  better to be safe than sorry.  Otherwise, as was the case here, the Bankruptcy Court may show no mercy and consider no excuse.