In re: Helios And Matheson Analytics, Inc. et al.,1 Debtors MEMORANDUM OF DECISION AND ORDER GRANTING MOTION FOR AN ORDER DEEMING PROOF OF CLAIM AS TIMELY FILED KLDiscovery Ontrack, LLC d/b/a/ KLDiscovery2 (“KLDiscovery”), a creditor in the above-captioned proceeding, has moved for entry of an order deeming its proof of claim timely filed pursuant to Rule 3002(c)(6)(A) of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”). See ECF No. 137 (the “Motion”). KLDiscovery’s claim sought compensation for pre-petition electronic discovery services that it provided to one or more of the debtors in this proceeding (each, a “Debtor” and, collectively, the “Debtors”)3; as is discussed below, KLDiscovery was not included in the Debtors’ creditor matrixes (each, a “Creditor Matrix”) and did not receive formal notice of the claim bar date (the “Bar Date”), although some KLDiscovery employees did receive communications referencing the bankruptcy before the Bar Date expired. See, e.g., Motion 10. The Chapter 7 Trustee (the “Trustee”), Alan Nisselson, opposes KLDiscovery’s request, asserting that KLDiscovery is not entitled to relief under Bankruptcy Rule 3002(c)(6)(A), and that the proof of claim should instead remain classified as late-filed pursuant to 11 U.S.C. §§502(b)(9) and 726(a)(3). See Trustee’s Opposition to Motion of KLDiscovery, LLC for an Order Deeming Proof of Claim as Timely Filed [ECF No. 145] (the “Opposition”) at 2. For the reasons set forth below, the Court grants the Motion. In brief, KLDiscovery was a known creditor whose omission from the Debtors’ Creditor Matrix caused KLDiscovery not to receive formal bankruptcy notices including of the Bar Date, and, although each Debtor filed a Creditor Matrix that purported to comply with the requirements of the Bankruptcy Code and Rules, the omission of KLDiscovery rendered the Creditor Matrix noncompliant with Bankruptcy Rule 1007(a) as to that creditor. This failure makes potentially available the extension of time to file a claim that KLDiscovery seeks, but, as the governing rule puts it, only if KLDiscovery received notice that was “insufficient under the circumstances to give the creditor a reasonable time to file a proof of claim because the debtor failed to timely file the list of creditors’ names and addresses required by Rule 1007(a).” Fed. R. Bankr. P. 3002(c)(6)(A). Determining whether KLDiscovery received notice that was “insufficient under the circumstances” requires consideration of communications that the Trustee asserts afforded “actual notice” to KLDiscovery notwithstanding the lack of formal bankruptcy court notices. The Court concludes that those communications did not provide sufficient notice, and that, accordingly, relief under Bankruptcy Rule 3002(c)(6)(A) is warranted. BACKGROUND A. The Chapter 7 Proceedings On January 28, 2020 (the “Petition Date”), Helios and Matheson Analytics, Inc. a/k/a MovieFone (“Helios”) and certain of its affiliates filed voluntary petitions (each, a “Petition”) for Chapter 7 relief. See Chapter 7 Voluntary Petition for Non-Individuals Filing for Bankruptcy [ECF No. 1]; Chapter 7 Voluntary Petition for Non-Individuals Filing for Bankruptcy [Case No. 20-10243, ECF No. 1]; Chapter 7 Voluntary Petition for Non-Individuals Filing for Bankruptcy [Case No. 20-10244, ECF No. 1]. On the day after the filing, Alan Nisselson was appointed Chapter 7 Trustee in these proceedings (the “Trustee”). The Debtors’ bankruptcy cases are procedurally consolidated and jointly administered. See Order Directing Joint Administration and Procedural Consolidation and Granting Related Relief [ECF No. 16]. Each Debtor attempted to comply with Bankruptcy Rule 1007(a) by filing a Creditor Matrix in conjunction with its respective Petition, purporting to set forth “a list containing the name and address of each entity included or to be included on Schedules D, E/F, G, and H.” Fed. R. Bankr. P. 1007(a)(1); see, e.g., Chapter 7 Voluntary Petition for Non-Individuals Filing for Bankruptcy at 84-98 (copy of Helios’s Creditor Matrix); see also In re Ditech Holding Corp., Case No. 19-10412 (JLG), 2021 WL 28072, at *6 n.18 (Bankr. S.D.N.Y. Jan. 2, 2021) (noting that the “list of creditors” provided for under Bankruptcy Rule 1007(a)(1) is “commonly referred to as the ‘Creditor Matrix,’ and is distinct from a debtor’s schedules”) (citation omitted). As the Trustee acknowledges, KLDiscovery, a creditor of Helios, was “not listed in the schedules of creditors, nor in the creditor mailing matrix subsequently used to send notices to creditors,” and, accordingly, KLDiscovery did not receive notice of the relevant Petition’s filing or the meeting of creditors pursuant to 11 U.S.C. §341. Declaration of Ben J. Kusmin in Opposition to Motion of KLDiscovery, LLC for an Order Deeming Proof of Claim as Timely Filed [ECF No. 145-1] (“Kusmin Decl.”) 4; see Opposition 15 (noting that KLDiscovery did not receive notice of the Section 341 “meeting of creditors”). B. The Bar Date and Related Bar Date Notice At the Trustee’s request, the Court entered the Notice of Possible Payment of Dividends and of Last Date to File Claims [ECF No. 39] (the “Bar Date Notice”), establishing June 1, 2020 as the Bar Date, the last day for creditors to file a proof of claim. See Trustee’s Request for Clerk’s Entry of Notice of Possible Dividends [ECF No. 36]. Specifically, the Bar Date Notice states that claims must be filed “on or before June 1, 2020″ in order to share in any distribution regardless of “whether or not the debt is included in the list of creditors filed by the debtor.” Bar Date Notice at 1. The Debtors’ claims and noticing agent, Kurtzman Carson Consultants LLC (“KCC”), served the Bar Date Notice upon, among others, the notice parties listed in the related affidavits or certificates of service (collectively, the “Certificates of Service”). See Affidavit of Service [ECF No. 42], Ex. F (service list for the Bar Date Notice); Supplemental Certificate of Service [ECF No. 93], Ex. C (supplemental service list for the Bar Date Notice). KLDiscovery is not listed in any Certificate of Service as having received notice of the Bar Date, which the Trustee does not dispute. See Affidavit of Service [ECF No. 42], Ex. F; Supplemental Certificate of Service [ECF No. 93], Ex. C; see also Kusmin Decl. 5 (noting that KLDiscovery did not contact the Court or KCC to request, among other things, that it receive notice of the Bar Date). C. Events Leading to the Filing of KLDiscovery’s Late-Filed Proof of Claim Prior to the Petition Date, KLDiscovery provided electronic discovery services to Debtor Helios relating to an investigation conducted by the U.S. Attorney’s Office for the Eastern District of New York (the “EDNY Discovery Project”) involving the production of documents to the Department of Justice and the Securities Exchange Commission. Kusmin Decl. 3; Opposition 1; see also Proof of Claim No. 144 (stating that the claim is asserted in connection with “Relativity hosting and other electronic discovery services”). As early as February 2020, and thus well before the June 1 Bar Date, certain KLDiscovery employees received email communications in connection with their work on the EDNY Discovery Project that referenced the Debtors’ bankruptcy. See Motion 24 (“[I]t is true that KLDiscovery’s employees learned of the bankruptcy during the course of their employment.”). Specifically, at least two KLDiscovery employees who were working with non-bankruptcy counsel for one or more debtors on the EDNY Discovery Project received written or electronic communications that included references to the Debtors’ bankruptcy filing. Some of these communications included counsel to the Trustee. See Declaration of Gideon Kaplan in Support of Motion for an Order Deeming Proof of Claim as Timely Filed [ECF No. 139] (the “Kaplan Decl.”) 6 (stating that the Debtors’ non-bankruptcy counsel corresponded with KLDiscovery’s senior project manager, Moira Sweazey, on Feb. 13, 2020 concerning the EDNY Discovery Project, noting “in that email that the Debtor had filed for bankruptcy, but provided no further details”); Kusmin Decl., Ex. A at 6 (copy of email correspondence between the Debtors’ non-bankruptcy counsel, KLDiscovery’s senior project manager, and counsel to the Trustee, Karen Cullen, on Feb. 14, 2020, concerning the production of documents in connection with the Debtors’ bankruptcy proceedings); id. at 5 (correspondence from counsel to the Trustee to Sweazey on Feb. 18, 2020, stating that the transferred documents would be included on a “review platform [that] the Trustee will be setting up”); id. at 1 (correspondence from counsel to the Trustee to Sweazey and KLDiscovery employee Elizabeth Ashley on Feb. 23, 2020 regarding “Debtors’ e-Discovery vendor”); id. (correspondence from Ashley (in Sweazey’s absence) to counsel to the Trustee on Feb. 23, 2020). KLDiscovery does not deny that some of its employees who were tasked with working on the EDNY Discovery Project received these communications referencing the bankruptcy, but KLDiscovery represents that “no senior employee with decision making concerning a bankruptcy or agent of KLDiscovery was aware of the [Bar Date]” prior to its expiration. Kaplan Decl. 13 (emphasis added). A KLDiscovery accounts receivable employee, Shea Orlando, “first learned of the bankruptcy filing…on or about October 15, 2020,” while an associate general counsel of KLDiscovery attests that the company’s “accounts receivable team escalated the Debtor’s account to KLDiscovery’s legal department,” and then, on October 19, Orlando “contacted the Trustee in this matter to inquire about outstanding invoices…including [for] work continuing through October 12, 2020….” Declaration of Shea Orlando in Support of Motion for an Order Deeming Proof of Claim as Timely Filed [ECF No. 147-1] (“Orlando Decl.”)
1, 3; Kaplan Decl. 10; see also Orlando Decl. 4 (stating that Orlando’s role in accounts receivable is focused on pursuing collections of past due invoices and that, while Orlando does “escalate problem accounts to management,” Orlando generally does not “engage with accounts that are in bankruptcy or insolvency”). Also in October 2020, the KLDiscovery legal department investigated and confirmed that Debtor Helios had indeed filed for bankruptcy, and that a Bar Date had been established. Kaplan Decl.
