IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
EUREKA SOUTHERN RAILROAD No. 1-86-01976
NORTHWESTERN PACIFIC ACQUIRING No. 1-86-01977
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
, 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
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 _______________________