In re Westinghouse Elec. Co.

1

In re WESTINGHOUSE ELECTRIC COMPANY, LLC, et al., Debtors.

No. 17-10751 (MEW)

United States Bankruptcy Court, S.D. New York

February 15, 2022

APPEARANCES:

LAW OFFICES OF JOEL SANSONE Pittsburgh, Pennsylvania Attorney for Timothy Ellis BY: Joel Sansone, Esq. (Telephonically).

PAUL WEISS, RIFKIND, WHARTON & GARRISON LLP Attorney for W Wind Down Co LLC New York, New York BY: Kyke Kimpler, Esq. (Telephonically).

DECISION DENYING MOTION OF TIMOTHY ELLIS TO ALLOW LATE FILING OF ADMINISTRATIVE CLAIM

HONORABLE MICHAEL E. WILES, UNITED STATES BANKRUPTCY JUDGE.

Before the Court is the motion by Timothy Ellis seeking entry of an order granting him permission to file a tardy administrative expense claim. As set forth below, the motion was filed on November 2, 2021, which was more than three years after the August 31, 2018 deadline that this Court set for the filing of administrative claims. More importantly, the motion was filed almost two years after Mr. Ellis was clearly notified (in connection with court proceedings in Pennsylvania) that he had missed the administrative claims deadline and that if he wished to pursue a late claim he needed permission from this Court.

The record shows that Mr. Ellis and his Pennsylvania counsel made a deliberate tactical decision not to proceed in this Court and instead to argue, in Pennsylvania, that Mr. Ellis's claim had not been discharged and that Mr. Ellis was entitled to pursue that claim against the reorganized company that had emerged from the Westinghouse bankruptcy. His decision though erroneous, was knowing and deliberate, and there is no just cause to grant the relief he now seeks.

Chronology

On March 29, 2017, Westinghouse Electric Company LLC and certain of its affiliates filed voluntary chapter 11 bankruptcy petitions before this Court. Mr. Ellis had begun working for Westinghouse in 2010 and he was still employed when the bankruptcy began. Mr. Ellis acknowledges that he knew of the bankruptcy filing and that he received certain notices from the court. Mr. Ellis contends that he spoke to a Human Resources Director at Westinghouse in March 2018 and that he was told that the bankruptcy notices he had previously received did not apply to him. Apparently that advice was correct at the time: Mr. Ellis was still employed, and there is no indication that he had a pre-bankruptcy claim to be asserted against Westinghouse or that the bankruptcy had affected his rights as of March 2018.

On March 28, 2018, this Court entered an order (ECF No. 2988) (the "Confirmation Order") confirming the Modified Second Amended Joint Chapter 11 Plan of Reorganization (ECF No. 2986) (the "Plan") in Westinghouse's chapter 11 case. As often happens in chapter 11, certain other events (particularly regulatory approvals) needed to occur before the Plan could take effect. As a result, the actual effective date of the Plan did not occur until August 1, 2018 (the "Effective Date"). It was known, at the time of the confirmation hearing, that there would be a delay before the Plan would be effective. As a result, the provisions of the Plan and the Confirmation Order made clear that the transactions that were contemplated by the Plan, and the discharges of the Debtors' liabilities, would occur as of the Effective Date of the Plan and not as of the date on which the Confirmation Order was entered.

More particularly, the Plan provided that on the Effective Date an investor would purchase the equity of one of the parent companies of Westinghouse and the equity of a foreign affiliate. See Plan §§ 1.97, 5.2. The proceeds would be used to pay the creditors of Westinghouse and its affiliated Debtors. On the Effective Date, Westinghouse and other Debtors would emerge from bankruptcy as newly reorganized entities and with discharges from all obligations that had arisen prior to the Effective Date. See Plan, §§ 11.1, 11.3; Confirmation Order ¶¶ KK, 12, 14, 15, 54. The Plan also established W Wind Down Co LLC ("Wind Down Co.") as a separate entity to hold the proceeds of the sale and certain other assets that were to be distributed to creditors, including to holders of "Administrative Expense Claims." See Plan, §§ 1.16, 2.1, 5.4.

Administrative Expense Claims were defined in the Plan as claims of a kind specified in section 503(b) of the Bankruptcy Code, including costs and expenses incurred after the filing of the bankruptcy case up to and including the "Effective Date" of the Plan. See Plan § 1.2. The Plan also established a deadline for the filing of administrative expense claims:

Holders of Administrative Expense Claims that are required to file and serve a request for payment of such Administrative Expense Claims and that do not file and serve such a request by the Administrative Expense Claims Bar Date shall be forever barred, estopped, and enjoined from asserting such Administrative Expense Claims against the Debtors, Wind Down Co, and the Reorganized Debtors, or their property, and such Administrative Expense Claims shall be deemed compromised, settled, and released as of the Effective Date.

See Plan, § 2.5. Since the Effective Date occurred on August 1, 2018, the deadline for the filing of such claims (the "Administrative Bar Date") was August 31, 2018.

As noted above, Mr. Ellis was an employee of Westinghouse in early 2018, at which time he held the position of Vice President, Global Projects Management Operations. However, on May 16, 2018 - after the confirmation of the Plan, but before its Effective Date -Westinghouse informed Mr. Ellis that his employment would be terminated. That termination became effective on May 31, 2018.

On July 3, 2018, Mr. Ellis filed a charge with the Equal Employment Opportunity Commission ("EEOC"), alleging age discrimination in his termination. Approximately one month later, on or about August 2, 2018, a notice was sent to creditors, informing them that the Effective Date of the Plan had occurred on August 1 and that the reorganization of the Debtors, and the various transactions approved by the Court in the Confirmation Order, had taken effect as of the Effective Date. The notice also advised creditors of the August 31, 2018 Administrative Claims Bar Date. It stated:

PLEASE TAKE FURTHER NOTICE that, unless otherwise provided by the Plan, the Confirmation Order, any other applicable order of the Court, or agreed to by the holder of an Allowed Administrative Expense Claim and the Debtors, all requests for payment of Administrative Expense Claims must be filed and served on the Debtors no later than August 31, 2018 (the "Administrative Expense Claims Bar Date"). Holders of Administrative Expense Claims that are required to file and serve a request for payment of such Administrative Expense Claims that do not file and serve such a request by the Administrative Expense Claims Bar Date shall be forever barred, estopped, and enjoined from asserting such Administrative Expense Claims against the Debtors, or their property and such Administrative Expense Claims shall be deemed discharged as of the Effective Date.

See Notice [ECF No. 3705] (emphasis in original). The affidavit of service indicates that the notice was served by first class mail on Timothy Ellis. [ECF # 3724, Ex. D, PDF p. 292 of 1009]. Although Mr. Ellis has claimed uncertainty as to whether he received this particular notice, the Pennsylvania District Court has ruled that he did receive it. See Ellis v. Westinghouse Elec. Co., No. 2:18-cv-01442, 2020 WL 4499931, at *8-9 (W.D. Pa. Aug. 5, 2020).

Mr. Ellis filed no administrative expense claim in this Court. On October 26, 2018, however, Mr. Ellis filed an action against the post-Effective Date company that emerged from the bankruptcy of Westinghouse ("WEC") in the District Court for the Western District of Pennsylvania, alleging discrimination in connection with his termination (the "Pennsylvania Action"). Wind Down Co. was not named as a party to the Pennsylvania Action. The Pennsylvania Action was stayed in January 2019 for reasons that are not completely clear; for whatever reason, the case did not resume until after July 25, 2019.

On November 14, 2019, WEC filed a motion for summary judgment in the Pennsylvania Action. Case No. 2:18cv1442 (W.D. Pa. (ECF No. 31). WEC argued that that WEC itself had been discharged from all pre-Effective Date liabilities of Westinghouse and that Mr. Ellis should have filed a claim against Wind Down Co. in the bankruptcy proceedings. More particularly, WEC argued:

Any liability of WEC for Mr. Ellis' termination prior to the Effective Date of the Plan would have constituted an administrative claim under the Bankruptcy Code that was unambiguously discharged under the plain terms of the Plan. Further, the Plan clearly enjoined Mr. Ellis from continuing to pursue his claim against WEC. The Plan permitted Mr. Ellis to seek recovery from Wind Down Co, but Mr. Ellis failed to timely file a request for payment.

Brief in Support of summary judgment motion (Case No. 2:18 cv 1442 (ECF No. 32 at 9); see also id. at 19 (arguing that the Plan "did not leave Mr. Ellis with no recourse" and that he should have filed a claim against Wind Down Co. by the Administrative Bar Date).

On November 21, 2019, WEC also filed a motion in this Court asking this Court to enforce the Plan and Confirmation Order and the injunctions set forth therein and to compel Mr. Ellis to dismiss the Pennsylvania Action. (ECF No. 4485). WEC made arguments similar to those that it had made a week earlier in the papers it filed in Pennsylvania in support of its motion for summary judgment. Four days later, on November 25, 2019, Mr. Ellis asked the Pennsylvania District Court to stop WEC from proceeding with its motion in this Court. No hearing ever was held on the...