In re U-Haul Co. of W. Va.

1

IN RE: U-HAUL CO. OF WEST VIRGINIA, Debtor.

No. 2:21-bk-20140

United States Bankruptcy Court, S.D. West Virginia, Charleston

December 10, 2021

CHAPTER 11

MEMORANDUM OPINION AND ORDER

B McKAY MIGNAULT, CHIEF BANKRUPTCY JUDGE

Pending are several threshold matters that must be adjudicated prior to the Court's ruling on confirmation of the Debtor's proposed Second Amended Plan [dckt. 135]. On October 20, 2021, the Court heard argument on the Debtor's Preliminary Objection to Proof of Claim No. 13 Filed by Ferrell Class [dckt. 160] (the "Objection") and ordered supplemental briefing regarding (1) the merits of the Debtor's Objection and (2) whether the Ferrell Class Claimants have standing to assert (a) their Class 6 Ballot to reject the Second Amended Plan [dckt. 135], (b) their Objection to Confirmation of the Debtor's Plan [dckt. 174], and (c) their Objection to Non-Debtor UHI's Claim #9 [dckt. 175]. The Ferrell Class filed its Response to Debtor's Objection and Cross-Motion for Enlargement of Time for Filing Proof of Claim No. 13 Less Than 12 Hours Late [dckt. 213] ("Response") on November 10, 2021 (the "Response"); Debtor filed its Reply [dckt 223] (the "Debtor's Reply") on November 24, 2021; U-Haul International, Inc. ("UHI") also filed its Reply [dckt. 222] ("UHI's Reply") on November 24, 2021 and, finally, the Ferrell Class filed its Surreply [dckt. 225] (the "Surreply") on December 1, 2021.

This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(B). The Court is vested with subject matter jurisdiction pursuant to 28 U.S.C. § 157 and 28 U.S.C. § 1334.

I.

Approximately ten years prior to the commencement of this Chapter 11 case on June 16, 2021, the Ferrell Class filed a class action lawsuit against the Debtor, styled Ferrell, et al. v. U-Haul Co. of West Virginia, Civil Action No. 11-C-1426, in the Circuit Court of Kanawha County (the "Ferrell Class Litigation"). In that lawsuit, the Ferrell Class asserted claims alleging that the Debtor improperly charged environmental fees of $1, $3, or $5 in truck rental transactions from March 2008 to May 2017. The total environmental fees collected by Debtor from the 323, 746 Ferrell Class claimants over this period is alleged to be $644, 566, but the Ferrell Class seeks over $53 million in compensation under the West Virginia Consumer Credit Protection Act. See Objection at 4-6; Proof of Claim 13.

When this bankruptcy case was commenced on June 16, 2021 (the "Petition Date"), the Debtor scheduled the Ferrell Class's claim as disputed, contingent, and unliquidated in an unknown amount. See Schedule E/F, Part 2, No. 3.17 [dckt. 1].

On June 21, 2021, the Clerk of this Court issued a bar date notice to all creditors (including the Ferrell Class representatives) setting various deadlines in this Chapter 11 case, including establishing the claims bar date for non-governmental claims as August 25, 2021. See Notice of Chapter 11 Bankruptcy Case [dckt. 35].

Additionally, the Debtor filed a motion [dckt. 3] (the "Motion") on the Petition Date seeking an order authorizing and directing the Class Representatives for the Ferrell Class Litigation to file a class proof of claim on behalf of the Ferrell Class. The Ferrell Class did not object to that motion, and, following multiple hearings on that motion, the Ferrell Class agreed to and assisted with the preparation of the Order Authorizing Class Proof of Claim [dckt. 104] (the "Bar Date Order"), which provides:

1. The Ferrell Class representatives are hereby authorized and directed to file two Class Claims on account of the two classes certified in the Ferrell Litigation pre-petition. The deadline for the Class Claims is August 25, 2021 at 11:59 p.m. The Class Claims must be actually received by the Clerk of the Court on or before that date and time, or such claims shall be forever barred. For any claim to be validly and properly filed, a signed original of a completed proof of claim, together with any accompanying documentation required hereunder or by Bankruptcy Rules 3001(c) and 3001(d), must be (a) filed through the CM/ECF system on the Court's website at https://ecf/wvsb/uscourts.gov/; (b) filed electronically using the Electronic Proof of Claim (ePOC) Program on the Court's website at https://ecf.wvsb.usourts.gov/cgi-bin/autoFilingClaims.pl; or, (c) sent by first-class mail or overnight courier or hand delivery to the Clerk of the Bankruptcy Court, Southern District of West Virginia, Robert C. Byrd U.S. Courthouse, 300 Virginia Street East, Room 3200, Charleston, West Virginia 25301.

See Bar Date Order at 2 (emphasis added). The Bar Date Order was entered on July 23, 2021 and bears the electronic signature of Anthony J. Majestro as "Counsel for the Certified Class of Claimants (the 'Ferrell Class')." Id. at 4.

Despite having over a month from the date of the Bar Date Order to file its claim, the Ferrell Class's Proof of Claim 13-1 (the "Ferrell Class Claim") in the amount of $53, 353, 400 was filed a day late, on August 26, 2021.

Debtor's Objection seeks a Court order disallowing the Ferrell Class Claim in full because it was filed after the deadline established by the Bar Date Order and, therefore, is "forever barred." In addition to the terms of the Bar Date Order, Debtor relies upon Rule 3003(c)(2) of the Federal Rule of Bankruptcy Procedure, which provides that "any creditors… whose claim… is… scheduled as disputed, contingent, or unliquidated shall file a proof of claim… within the time prescribed by [the court]; any creditor who fails to do so shall not be treated as a creditor with respect ot such claim for the purposes of voting and distribution." See F. R. Bankr. P. 3003(c)(2).

The Ferrell Class initially filed no response to the Objection. At the October 20, 2021 hearing on the Objection, however, counsel for the Ferrell Class explained that he attempted to file the Ferrell Class Claim after business hours on August 25, 2021, but he was unsuccessful because he did not realize that he did not have the proper PACER login information for this Court. Counsel emailed the Ferrell Class Claim to all counsel in the case one hour and twenty-six minutes late and filed the claim nine hours and 45 minutes late upon obtaining the correct filing credentials. When questioned by the Court how this could be when counsel had successfully filed documents on the docket for this case in the past, counsel for the Ferrell Class explained that those prior filings were completed by staff members with access to the right login information.

Because of the significance of the allowance or disallowance of the Ferrell Class Claim to the Court's consideration of the Second Amended Plan, the Court continued the confirmation hearing to December 17, 2021 and required the parties to submit additional briefing regarding whether the Ferrell Class Claim should be disallowed and whether the Ferrell Class retains standing to vote against the Second Amended Plan, object to the Second Amended Plan, and object to the claim of UHI.

The Ferrell Class's Response^[1] asserts that "[c]ounsel wrongly believed that he had the proper credentials to log onto the Southern District of West Virginia Bankruptcy Court's CM/ECF filing system" and "[b]ecause this Court's clerk's office was closed, Counsel was unable to obtain the correct log-in information." Response at 1-2. After attempting to file for one and a half hours, ^[2] counsel emailed all counsel of record at 1:29 a.m. on August 26, 2021 to provide a copy of the un-filed claim and advise that "technical difficulties made it impossible for the Ferrell Class to log-in to the CM/ECF filing system." Id. at 5-6, Exh. A. The claim was filed successfully at 9:49 a.m. on August, 2021. The Ferrell Class argues that the Proof of Claim is timely under the "excusable neglect" standard established by Ruel 9006(b)(1) of the Federal Rules of Bankruptcy Procedure because "the Court must find" under the standard of review established by the U.S. Supreme Court in Pioneer Investment Services Company v. Brunswick Associates Limited Partnership, 507 U.S.380 (1993) "that the Ferrell Class's late filing of its Proof of Claim was caused by 'excusable neglect' which includes 'inadvertence, mistake, or carelessness, as well as by intervening circumstances beyond the party's control." Id. at 3. Further, the Ferrell Class asserts that the standard for finding excusable neglect under Pioneer "militate in favor of the Ferrell Class" because (1) counsel's attempt to log-in prior to expiration of the deadline is evidence of good faith, (2) the Debtor is not prejudiced by a nine hour and fifty minute delay, (3) "the inability of the Ferrell Class's counsel to log-in to the Court's CM/ECF system… was an intervening circumstance that was not under the control of the Ferrell Class's counsel," and (4) disallowance would be unfair to the Ferrell Class. Id. at 3-6. Accordingly, the Ferrell Class argues that it has standing to object to, vote on, and receive distributions from the Plan because it is a party-in-interest having a pecuniary interest directly affected by this case pursuant to Sections 1109(b) and 1128(b) of the Bankruptcy Code and Fourth Circuit precedent in Yadkin Valley Bank & Trust Co. v. Dairymen, inc. (In re Hutchinson), 5 F.3d 750, 756 (4th Cir. 1993). Id. at 6-10. The Ferrell Class also asserts standing to object to the claim of UHI because any such "party in interest may object to a claim" pursuant to 11 U.S.C. § 502(a). Id. at 10.

The Debtor's Reply requests that the Court deny the Ferrell Class's motion to enlarge time to file its Proof of Claim because the Ferrell Class has not met their burden to demonstrate "excusable neglect" under Rule 9006(b)(1). Debtor's Reply at 2-3. The Debtor argues that...