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Conway Hosp., Inc. v. Lehman Bros. Holdings, Inc.

United States District Court, S.D. New York

May 11, 2015

CONWAY HOSPITAL, INC., Appellant,
v.
LEHMAN BROTHERS HOLDINGS INC., Appellee

Decided May  8, 2015

For Conway Hospital, Inc., Appellant: Thomas G. MacAuley, LEAD ATTORNEY, MacAuley LLC, Wilmington, DE.

For Lehman Brothers Holdings Inc., Appellee: Ralph Irad Miller, LEAD ATTORNEY, Weil, Gotshal & Manges LLP (NYC), New York, NY.

MEMORANDUM OPINION AND ORDER

John G. Koeltl, United States District Judge.

The appellant, Conway Hospital, Inc. (" Conway" ), appeals from an order of the United States Bankruptcy Court for the Southern District of New York disallowing its proof of claim. In 2012, Conway filed a proof of claim that arose from a 1998 debt service reserve fund agreement (the " 1998 Agreement" ) between Conway and Lehman Brothers Special Financing Inc. (" LBSF" ). The bankruptcy court held that the appellant's claim against Lehman Brothers Holdings Inc. (" LBHI" ) was time-barred.

The bankruptcy court's Bar Date Order provided that " any holder of a claim against the Debtors who is required, but fails to file a proof of such claim in accordance with the Bar Date Order on or before the Bar Date [September 22, 2009] . . . shall be forever barred, estopped and enjoined from asserting such claim against the Debtors." (App. at 44-45.) The corresponding Bar Date Notice contains similar language. (App. at 58.) Conway filed its proof of claim in 2012. (App. at 69.)

Conway argues that its claim is not time-barred because it arose after LBHI petitioned for bankruptcy and that the Bar Date Notice was constitutionally insufficient. The bankruptcy court rejected both arguments and disallowed the claim. This Court agrees with the bankruptcy court, and therefore the disallowance order is affirmed.

I.

The following facts are undisputed unless otherwise noted.

A.

Under the terms of the 1998 Agreement between Conway and LBSF, a designated trustee agreed to purchase a series of securities at Conway's direction from Lehman Brothers Inc. or other qualified dealers. (App. at 78-79.) Beginning on September 15, 2008, twenty-three of LBSF's affiliates, including LBHI, (collectively, " Lehman" ) filed for voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code. (App. at 130.) On October 3, 2008, LBSF filed its Chapter 11 petition (the " LBSF Commencement Date" ). (App. at 130.)

LBSF's bankruptcy qualified as an " Event of Default" pursuant to Section 6.1(e) of the 1998 Agreement. (App. at 83.) As a result, Conway could terminate the contract and recover damages from LBSF. (App. at 130-31.) On November 18, 2008, Conway sent a notice to LBSF that terminated the contract and calculated the amount due under the 1998 Agreement. (App. at 102-03.) LBSF logged the notice upon receipt. (App. at 153-54.)

On July 2, 2009, the bankruptcy court entered a Bar Date Order setting September 22, 2009 as the date by which prepetition claims against LBHI and its affiliates (the " Debtors" ) were required to be filed with the bankruptcy court. (App. at 37.) The Debtors provided actual notice of the deadline to Conway on July 8, 2009. (App. at 154.) The Bar Date Notice provided that " September 22, 2009 . . . [was] the last date . . . for each person or entity . . . to file a proof of claim . . . based on prepetition claims against the Debtors." It provided that " the word 'claim' means . . . a right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, [or] contingent . . . ." (App. at 53.) It also stated that " [a]ny person or entity that holds a claim arising from the rejection of an executory contract or unexpired lease must file a Proof of Claim based on such rejection by the later of (i) the Bar Date, and (ii) the date which is forty-five (45) days following the effective date of such rejection or be forever barred from doing so." (App. at 55.)

On December 6, 2011, the bankruptcy court approved and confirmed the Modified Third Amended Joint Chapter 11 Plan (" Plan" ) of the Debtors. (App. at 31-34.) The Plan became ...


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