In re Frontier Commc'ns Corp.

641 B.R. 64

IN RE: FRONTIER COMMUNICATIONS CORPORATION, et al., Reorganized Debtors.

Case No. 20-22476 (MG) Jointly Administered

United States Bankruptcy Court, S.D. New York.

Signed June 13, 2022

LUSKIN, STERN & EISLER LLP, Counsel for the Copyright Claimants, 50 Main Street, White Plains, NY 10606, By: Michael Luskin, Esq., Stephen E. Hornung, Esq. and

OPPENHEIM + ZEBRAK, LLP, Counsel for the Copyright Claimants, 4350 Wisconsin Avenue, NW, Fifth Floor, Washington, DC 20016, By: Matthew J. Oppenheim, Esq., Alex Kaplan, Esq., Carly A. Kessler, Esq.

KIRKLAND & ELLIS LLP, KIRKLAND & ELLIS INTERNATIONAL LLP, Co-Counsel for the Reorganized Debtors, 601 Lexington Avenue, New York, New York 10022, By: Stephen E. Hessler, Esq., Mark McKane, Esq., Patrick Venter, Esq. and 300 North LaSalle Street, Chicago, Ill. 60654, By: Chad Husnick, Esq. and

ACKERMAN LLP, Co-Counsel for the Reorganized Debtors, 71 South Wacker Drive, Chicago, Ill. 60606, By: Ruben Castillo, Esq., Massimo D'Angelo, Esq., Ildefonso Mas, Esq. and

Wiley Rein LLP, Co-Counsel for the Reorganized Debtors, 1176 K Street NW, Washington, DC 20006, By: David Weslow, Esq., Ari Meltzer, Esq., David Weslow, Esq.

MEMORANDUM OPINION AND ORDER DETERMINING THAT AMENDED CLAIMS RELATE BACK

MARTIN GLENN, CHIEF UNITED STATES BANKRUPTCY JUDGE

On November 8, 2021, Judge Drain entered the Order Authorizing Copyright Claimants to File Amended Proofs of Claim ("November 8 Order," ECF Doc. # 2026), which granted the Copyright Claimants’¹ motion ("Motion," ECF Doc. # 1977) and authorized them to amend Exhibit A (the "Amendments") to each of the Proofs of Claim (as defined below). The November 8 Order stated that the Court made no decision whether the Amendments related back pursuant to Rule 15(c) of the Federal Rules of Civil Procedure ("FRCP") and Rule 7015 of the Federal Rules of Bankruptcy Procedure ("Bankruptcy Rules") or whether any administrative claims, as amended, were timely filed on or before the Administrative Claims Bar Date (as defined below). (November 8 Order ¶ 4.) Following entry of the November 8 Order, the Copyright Claimants filed (i) a supplemental brief ("Supplemental Brief," ECF Doc. # 2038) requesting that the Court find that the Amendments relate back under FRCP 15(c) and Bankruptcy Rule 7015 to the timely filed Proofs of Claim, and (ii) a declaration of Matthew J. Oppenheim ("Oppenheim Decl.," ECF Doc. # 2039). The reorganized debtors (collectively, "Frontier," or, prior to the effective date of their Chapter 11 plan of reorganization, the "Debtors," and after the effective date of their Chapter 11 plan of reorganization, the "Reorganized Debtors") filed a response in opposition to the Supplemental Brief ("Opposition," ECF Doc. # 2047), and the Copyright Claimants then filed a reply brief in response to the Opposition ("Reply," ECF Doc. # 2053). On May 3, 2022, the Clerk of the Court reassigned the Reorganized Debtors’ cases to me. (ECF Doc. # 2079.)

For the reasons discussed below, the Court GRANTS the Motion and FINDS that the Amendments relate back under FRCP 15(c) and Bankruptcy Rule 7015 to the timely filed Proofs of Claim. Alternatively, the Court FINDS that excusable neglect exists permitting the filing of the Amendments to the Proofs of Claim.

I. BACKGROUND

A. The Proofs of Claim

On April 14, 2020, the Debtors each filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in this Court. (Motion ¶ 7.) On August 27, 2020, the Court confirmed the Debtors’ Chapter 11 plan of reorganization ("Plan," ECF Doc. # 1005-1) and entered an order confirming the Plan (the "Confirmation Order," ECF Doc. # 1005). (Motion ¶ 8.) The Plan provides that all unsecured claims will be paid in full, and claimants may litigate their claims in courts other than this Court. (Id. (citing Plan, Art. VII.A, at 74–75 and Confirmation Order ¶¶ 99, 104).) With respect to amendments to proofs of claim, the Plan provides as follows:

On or after the Effective Date, except as provided in the Plan or the Confirmation Order, a Proof of Claim or Proof of Interest may not be Filed or amended without the prior authorization of the Bankruptcy Court or the Reorganized Debtors, and any such new or amended Proof of Claim or Proof of Interest Filed shall be deemed disallowed in full and expunged without any further action, order, or approval of the Bankruptcy Court.

(Plan, Art. VII.I, at 77.)

On April 30, 2021, the Debtors filed the Notice of (I) Entry of Confirmation Order, (II) Occurrence of Effective Date, and (III) Related Bar Dates , which provided notice that the effective date of the Plan had occurred on April 30, 2021 (the "Effective Date") and that the bar date for filing administrative proofs of claim, other than for a proof of claim for professional fees, was June 1, 2021 (the "Administrative Claims Bar Date"). (ECF Doc. # 1793 at 1–2).

On June 1, 2021, the Copyright Claimants filed the following administrative proofs of claim: Claim No. 3821 (Universal Claimants), Claim No. 3822 (Sony Claimants), and Claim No. 3823 (Warner Claimants) (each, a "Proof of Claim," and collectively, the "Proofs of Claim" or "Administrative Claims") in the Reorganized Debtors’ bankruptcy cases.² (Supp. Brief ¶ 9.) Each Administrative Claim asserts that Frontier is contributorily and vicariously liable for direct infringements by Frontier's subscribers of at least 6,025 copyrighted sound recordings (the "Existing Works," Proofs of Claim, Ex. A) between the Petition Date and the Effective Date. (Motion ¶ 12 (citing Proofs of Claim ¶¶ 3–9).) The Proofs of Claim state that the Copyright Claimants sent Frontier more than 20,000 copyright infringement notices ("DMCA Notices") under the Digital Millennium Copyright Act ("DMCA") that provided Frontier with detailed information regarding specific subscribers’ infringing behavior. (Supp. Brief ¶ 10 (citing Proofs of Claim ¶¶ 41–44).) The Existing Works were those copyrighted sound recordings that the Copyright Claimants were able to identify prior to the Administrative Claims Bar Date. (Oppenheim Decl. ¶ 7.) Therefore, each Proof of Claim provided specifically that Exhibit A was "illustrative and nonexhaustive." (Supp. Brief ¶ 13 (citing Proofs of Claim ¶¶ 37, 54, 63).)

On July 30, 2021, the Reorganized Debtors filed an objection (ECF Doc. # 1951) to the Administrative Claims that incorporated by reference their objection to the Pre-Petition Claim and added that the Proofs of Claim do not constitute actual, necessary costs, and expenses of preserving the estate. (Motion ¶ 13.)

B. The District Court Action and the Motion to Withdraw

On June 8, 2021, fifteen of the Copyright Claimants commenced an action against Frontier in the United States District Court for the Southern District of New York (the "District Court") seeking (i) damages for Frontier's infringement of at least 2,856 of the Copyright Claimants’ copyrighted sound recordings since the Effective Date, and (ii) a preliminary and permanent injunction against Frontier and the other Reorganized Debtors. (Motion ¶ 18.) This action is pending as UMG Recordings, Inc. v. Frontier Communications Corporation , Case No. 1:21-cv-05050-AT (the "District Court Action"), before Judge Analisa Torres. (Id. )

On June 9, 2021, the Copyright Claimants filed a motion to withdraw the reference ("Motion to Withdraw") with respect to their claims against Frontier that accrued before the Effective Date. (Id. ¶ 14.) The Motion to Withdraw is pending before Judge Torres as UMG Recordings, Inc. v. Frontier Communications Corporation , Case No. 1:21-cv-05253-AT. (Id. ¶ 19.)

On August 12, 2021, Frontier filed a motion to stay the District Court Action pending resolution of the Motion to Withdraw and resolution of the Pre-Petition Claim and Administrative Claims by this Court. ("Motion to Stay," District Court Action ECF Doc. # 31; see also District Court Action ECF Doc. # 33.) On February 25, 2022, the District Court entered an order granting the Motion to Stay, ruling that the District Court Action is stayed pending the District Court's decision on the Motion to Withdraw. (District Court Action ECF Doc. # 39.) Neither the filing of the Motion to Withdraw nor the stay of the District Court proceedings stays the administration of the Reorganized Debtors’ bankruptcy cases in this Court. See FED. R. BANKR. P. 5011(C). At a case management conference on May 11, 2022, the parties urged this Court to decide the relation-back Motion rather than await a decision by the District Court on the pending Motion to Withdraw with respect to the Copyright Claims. (See ECF Doc. # 2096 at 15:21–16:11.)

C. The Additional Works, the Motion, and the November 8 Order

1. The Additional Works

The Copyright Claimants state that the process for identifying the Existing Works "took significant time, effort, and resources to complete" as they had to: (i) evaluate more than 20,000 DMCA Notices sent to Frontier to determine whether the Frontier subscriber could be deemed a repeat infringer; (ii) identify the sound recordings that the Frontier subscriber infringed; (iii) determine which of the Copyright Claimants owned each of the thousands of such sound recordings that were infringed at the time of distribution; and (iv) confirm that each sound recording had been registered with the Copyright Office prior to the date of the detected infringement. (Supp. Brief ¶ 14 (citing Oppenheim Decl. ¶¶ 24–25).) Additionally, the Copyright Claimants represent that the foregoing process took more time than normal because (a) the Copyright Claimants’ offices and the U.S. Copyright Office were closed during the COVID- 19 pandemic (id. ¶ 16 (citing Oppenheim Decl. ¶ 27)), and (b) between March and May 2021, the Copyright Claimants spent time and resources engaging with Frontier to exchange information and attempt to resolve the Pre-Petition Claim (id . ¶ 17 (citing Oppenheim Decl. ¶ 28)).

The Copyright Claimants were able to identify the 6,025 Existing Works included in...