Restructuring

Contributed by Conray C. Tseng
“Due and proper notice” is a term frequently used in pleadings, but few decisions discuss what constitutes due and proper notice.  Absent due and proper notice, a debtor may not be able to enforce, among other things, the automatic stay, the bar date, or the discharge under the Bankruptcy Code.  In CFP Liquidating Estates, Adv. Proc. No. 09-50478 (Bankr. D. Del. 2010), Judge Walsh of the United States Bankruptcy Court for the District of Delaware provided some recent guidance on the seemingly routine topic of notice, holding that notice to a remittance address (i.e., where a debtor sends payments on bills) is insufficient when serving a summons and complaint. 
While Judge Walsh relied specifically on Bankruptcy Rule 7004(b)(3) (which provides that notice of a summons or complaint must be on the defendant’s officer or agent), an overarching issue is whether a remittance address is sufficient for other bankruptcy notices (e.g., notice of commencement, notice of bar date, etc.). 
Often, debtors may only have a remittance address in their records.  In CFP, however, the remittance address was simply a lockbox to which checks were sent.  As a result, Judge Walsh concluded that the remittance address could not provide adequate notice of the summons and complaint.  CFP suggests that a debtor may want to take a closer look at its notice lists and conduct a little bit of diligence in finding an alternative address, especially when the only notice address suggests that the mailing is going to a lockbox and not an office.  While debtors may rely on notice by publication, judges in the Southern District of New York have recently questioned whether publishing a notice once in the legal notice sections of the Wall Street Journal or New York Times is sufficient.  See In re BearingPoint, Inc., 09-10691 (REG) (Bankr. S.D.N.Y. 2009) (Judge Gerber’s comments during the first-day hearing regarding publication notice of a motion to limit claims trading).  Because lack of due and proper notice may affect enforcement the automatic stay, bar date, or discharge, a little diligence can go a long way.