Brown v. UAL Corporation (In re UAL Corporation, et al.)
- Summarized by Kurt Carlson , Carlson Dash LLC
- 9 years 1 week ago
- Citation:
- Brown v. UAL Corporation, et al., Court of Appeals, 7th Circuit 2015 (unpublished)
- Tag(s):
-
- Ruling:
- A bankruptcy court does not abuse its discretion in refusing to reopen a Chapter 11 case when an unsecured creditor moves to reopen the case in order to pursue state-law claims but has otherwise failed to pursue those claims for nearly a decade.
- Procedural context:
- In 2002, United Airlines Corporation (the “Debtor”) filed for Chapter 11 bankruptcy in the Northern District of Illinois. In 2004, Jeffrey Brown (the “Unsecured Creditor”) sued the Debtor in California state court for $500,000 alleging employment discrimination on the basis of disability and sexual orientation. The Debtor removed the lawsuit to California federal court and requested the case to be transferred to Illinois. In response, the Unsecured Creditor requested the bankruptcy court for the Northern District of Illinois to modify the automatic stay so that he could litigate his state-law claims against the Debtor in the California state courts. The district court denied his request, reasoning that the Unsecured Creditor’s claims had to be resolved through the bankruptcy case. During the year and a half following that ruling, the Unsecured Creditor did nothing more to pursue the case in California or Illinois, even though the Debtor’s motion had not yet been granted. In 2006, the bankruptcy court in California granted the Debtor’s motion to transfer the Unsecured Creditor’s lawsuit. Three days later, the Chapter 11 reorganization plan was confirmed, and the district judge entered a minute order confirming that the Unsecured Creditor’s lawsuit had been referred automatically to the bankruptcy court for disposition. The district court clerk mistakenly sent the file to the bankruptcy court in California instead of forwarding it to the judge handling the Debtor’s Chapter 11 case in Illinois. Despite the docket note indicating where the case file had been sent, the Unsecured Creditor took no further action in connection with the lawsuit for four years.
The bankruptcy case was closed in 2009. Subsequently, the Unsecured Creditor’s new attorney spoke to Debtor’s counsel and was incorrectly informed that the Unsecured Creditor’s claim had already been paid. The Unsecured Creditor failed to follow up on this information, and waited another two and a half years to take any further action. In 2013, the Unsecured Creditor filed a motion in the bankruptcy court for the Northern District of Illinois to reopen the Debtor’s Chapter 11 bankruptcy so that he could pursue state-law claims against the Debtor. The court denied the motion, reasoning that the Unsecured Creditor had failed to prosecute his claims by ignoring them for years. The district court affirmed, concluding that the Unsecured Creditor’s years of inaction amounted to an abandonment of his claims. The Unsecured Creditor appealed. The Court of Appeals affirmed, reasoning that the Unsecured Creditor’s delay in moving to reopen the Debtor’s bankruptcy was inexcusable and precluded a finding of an abuse of discretion. The Court of Appeals emphasized that the Unsecured Creditor failed (1) to provide any reason for waiting so many years to inform the court of its clerical error; (2) to appeal the bankruptcy court’s decision that the state-law claims could be pursued only in the bankruptcy court; and (3) to follow up when the Debtor’s attorney stated that the Unsecured Creditor had already been paid on his claim.
- Facts:
- The relevant facts are procedural in nature, and are thus addressed above.
- Judge(s):
- Bauer, Posner, Hamilton
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