Memorandum of Decision Re: Late Claim

IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA
In re EUREKA SOUTHERN RAILROAD                                                                                          No. 1-86-01976        Debtor. ___________________________/ In re NORTHWESTERN PACIFIC ACQUIRING                                                                              No. 1-86-01977 CORPORATION,        Debtor. ____________________________/
Memorandum of Decision
     Prior to the commencement of this railroad reorganization proceeding in 1986, claimant Delbert Craig was injured while working as an employee of Eureka Southern Railroad. His lawsuit under the Federal Employers' Liability Act was pending when the railroad's bankruptcy petition was filed.      Craig was not scheduled as a creditor. However, shortly after the commencement of the bankruptcy the counsel for the railroad wrote a letter to Craig's counsel informing him of the bankruptcy. Craig's counsel received the letter and understood it. He never sought relief from the automatic stay to pursue the lawsuit. He never filed a request for notice pursuant to FRBP 2002(g). Most significantly, he waited over six years to file a proof of claim. The claim was filed in April, 1993, five years after the bar date for claims set by the court, and a year and a half after the court confirmed a plan of reorganization. In the meantime, all of the railroad's assets had been sold pursuant to the plan and most of the proceeds have been distributed.      A creditor who had actual knowledge of a bankruptcy proceeding is deemed to have had notice of whatever bar dates were set in the case which he could have discovered using reasonable diligence. In re Coastal Alaska Lines, Inc., 920 F.2d 1428 (9th Cir.1990); In re Price, 871 F.2d 97 (9th Cir.1989). Craig's counsel puts forth no facts which justify ignoring the bankruptcy proceedings for more than six years. The bar date is certainly applicable to Craig, whether he actually knew about it or not.      The court does have the power, under some circumstances, to allow a late claim. Pioneer Investment Services Co. v. Brunswick Associates Limited Partnership, 507 U.S. --, 123 L.Ed.2d 74. However, an important factor in considering a request for such relief is the degree of prejudice to other parties and the proceedings. Pioneer, at 123 L.Ed.2d 89; In re Dix, 95 B.R. 134, 138 (9th Cir.BAP 1988). It is hard to see how there could be more prejudice than in this case. The confirmed plan called for the sale of the railroad and the distribution of the proceeds to creditors; the bar date was set so that creditors would have an idea, when voting, of what their dividend would be. The plan was confirmed on the basis of those votes, the assets were sold, and most of the proceeds have been distributed. It is far too late now to upset everything by allowing a substantial late claim.      The court will allow Craig a claim subordinate to all administrative expenses and timely filed claims. However, since there does not appear to be enough in the estate to pay the timely filed claims, this subordination is in all likelihood the equivalent of disallowance.      Counsel for the trustee shall submit an appropriate form of order forthwith.
Dated: December 13, 1993                                                                        _______________________                                                                                                                      Alan Jaroslovsky                                                                                                                       U.S. Bankruptcy