Brown v. UAL Corp. (In Re UAL Corp.) , 809 F.3d 361 ( 2015 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 13-2800
IN RE: UAL CORPORATION, et al.,
Debtors.
JEFFREY GLEN BROWN,
Plaintiff-Appellant,
v.
UAL CORPORATION,
Defendant-Appellee.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 13 cv 2385—Ronald A. Guzmán, Judge.
____________________
ARGUED DECEMBER 15, 2015 — DECIDED DECEMBER 31, 2015
Before BAUER, POSNER, and HAMILTON, Circuit Judges.
HAMILTON, Circuit Judge. Jeffrey Brown, a former flight
attendant for United Airlines, appeals from a district court
decision upholding the bankruptcy court’s denial of his mo-
tion to reopen the company’s Chapter 11 bankruptcy, which
was closed in 2009. Brown wanted the bankruptcy case reo-
pened so that he could pursue pre-petition state-law claims
of employment discrimination arising from his discharge in
2 No. 13-2800
2001. The district court agreed with the bankruptcy judge
that Brown’s years of inaction had amounted to an aban-
donment of those claims. We affirm. The bankruptcy court
did not abuse its discretion by denying Brown’s motion to
reopen.
Brown worked as a flight attendant for United from 1991
until he was fired in 2001. He suffered from depression and
undiagnosed bipolar disorder, which worsened in 1995 and
led to discipline for repeated absenteeism and unprofession-
alism. By October 2000 his condition had deteriorated to the
point that he required psychiatric hospitalization. Although
his newly diagnosed bipolar disorder had stabilized with
treatment, United still fired him based on his prior miscon-
duct. Brown, through counsel, contested that discharge to
the United Airlines Flight Attendants System Board of Ad-
justment, an arbitration panel comprised of two representa-
tives from the union, two from United, and a neutral chair.
In December 2003 the Board of Adjustment ruled that
Brown’s bipolar disorder mitigated the seriousness of his
misconduct and directed that he be permitted to return to
work provided, among other conditions, that his treating
physician and a doctor for United could agree that he was
medically fit. Brown never complied, though, with the Board
of Adjustment’s requirement that he submit to a medical ex-
amination, so United did not reinstate him. In March 2005,
the Board of Adjustment unanimously affirmed United’s de-
cision.
Meanwhile, UAL Corporation and more than two dozen
subsidiaries had filed for Chapter 11 bankruptcy in the
Northern District of Illinois in December 2002. In May 2003,
a week before the deadline for creditors to submit claims,
No. 13-2800 3
Brown filed a proof of claim seeking almost $80,000 in back
pay. Then in March 2004, the attorney representing Brown
before the Board of Adjustment also sued United on behalf
of Brown in a California state court. That lawsuit claimed
violations of California laws prohibiting workplace discrim-
ination on the basis of disability and sexual orientation, as
well as retaliation and termination of employment in viola-
tion of California public policy. Brown alleged that these
state-law violations began in 1995 and continued into 2004.
He asked for $500,000 in lost wages and benefits, plus un-
specified amounts for emotional distress and punitive dam-
ages. Although the airline deemed the filing of the state-
court lawsuit to be a violation of the automatic stay in the
bankruptcy case, see 11 U.S.C. § 362, the company opted to
remove the suit to the bankruptcy court for the Central Dis-
trict of California and asked not for dismissal but for transfer
to the bankruptcy court in Illinois.
In response to the removal, Brown’s lawyer asked the
bankruptcy court for the Northern District of Illinois to mod-
ify the automatic stay so that Brown could litigate his state-
law claims against United in the California state courts. The
bankruptcy court denied that request in June 2004, reasoning
that Brown’s state lawsuit alleged pre-petition claims that
had to be resolved through the bankruptcy case. The bank-
ruptcy judge did modify the stay, however, so that the then-
pending arbitration proceedings before the Board of Ad-
justment could continue to a conclusion. For the next 18
months after that ruling, Brown’s lawyer did nothing more
to pursue the case in California or Illinois, even though
United’s motion to transfer the lawsuit to Illinois was sitting
dormant in the bankruptcy court in California. Finally, in
January 2006, the bankruptcy court in California granted
4 No. 13-2800
United’s motion to transfer Brown’s lawsuit, which that
court characterized as an adversary proceeding, to the
Northern District of Illinois.
During all of this time, the Chapter 11 case also had pro-
ceeded without Brown’s participation. Brown had never
filed, before the May 2003 deadline, a new or amended proof
of claim identifying specifically his state-law claims or his
demands for more than $500,000. Neither did his lawyer,
who entered his appearance in the Chicago bankruptcy
court in June 2004, object to United’s plan of reorganization.
That plan was confirmed in January 2006, just three days af-
ter Brown’s lawsuit had been transferred from the bankrupt-
cy court in California to the Northern District of Illinois. The
plan discharged “all Proofs of Claim filed by Union-
represented employees pertaining to rights collectively bar-
gained for,” and further provided that all such disputes
would be resolved in accordance with the relevant collective
bargaining agreement, i.e., by arbitration before the Board of
Adjustment.
In April 2006, with United’s plan already confirmed, a
district judge in the Northern District of Illinois entered a
minute order confirming that Brown’s lawsuit, which the
judge designated an adversary proceeding with case number
6 C 745, had been referred automatically to the bankruptcy
court for disposition. See N.D. Ill. Internal Operating Proce-
dure 15(a). The minute entry directed that the lawsuit be
“Remanded to the Bankruptcy Court as related to United
Airlines Case No. 02 B 48191,” which the clerk of the district
court apparently understood to mean remanded back to the
bankruptcy court in California. The clerk’s office mailed the
file back to that court instead of forwarding it to the bank-
No. 13-2800 5
ruptcy judge handling United’s Chapter 11 case in the
Northern District of Illinois.
None of the three courts took any further action in con-
nection with Brown’s adversary proceeding. And neither did
Brown. Although the clerk of the district court in the North-
ern District of Illinois noted on the docket that the case file
had been returned to California, Brown and his counsel of
record did not call that mistake to anyone’s attention.
Some four years later, after the bankruptcy closed in
2009, Brown hired a new lawyer. That attorney, says Brown,
contacted United’s lawyers and was told—incorrectly—that
Brown’s claim in the bankruptcy court had already been
paid. Brown again let the matter drop. Not until another two
and a half years had passed, in January 2013, did he take fur-
ther action. Only then, through yet another attorney, did he
move to reopen United’s bankruptcy so that his claims in the
March 2004 California state-court complaint could be litiga-
ted. The bankruptcy court in Northern Illinois denied that
motion, reasoning that Brown had failed to prosecute his
claims by ignoring them for years. The district court af-
firmed that decision.
On appeal Brown argues that the bankruptcy court
should have reopened the Chapter 11 case, primarily be-
cause his adversary proceeding was never properly docket-
ed in the bankruptcy court. A bankruptcy court has the pow-
er to reopen a closed bankruptcy case “to administer assets,
to accord relief to the debtor, or for other cause.” 11 U.S.C.
§ 350(b). This court “reviews a district court’s decision to af-
firm the decision of the bankruptcy court de novo, but the
denial of a motion to reopen a closed bankruptcy case is re-
viewed for abuse of discretion.” In re Herman, 737 F.3d 449,
6 No. 13-2800
452 (7th Cir. 2013); see In re Bianucci, 4 F.3d 526, 528 (7th Cir.
1993). Two of the nonexclusive factors that a bankruptcy
court should consider in deciding whether to reopen a
closed case are whether the moving party would be entitled
to relief if the case were reopened and the length of time it
has been closed. Redmond v. Fifth Third Bank, 624 F.3d 793,
798 (7th Cir. 2010).
Brown’s delay in moving to reopen the airline’s bank-
ruptcy was inexcusable and precludes finding an abuse of
discretion. See Redmond, 624 F.3d at 799; Bianucci, 4 F.3d at
528–29. Brown cites several decisions showing that bank-
ruptcy courts sometimes use their discretion under § 350(b)
to reopen closed cases. Such decisions do not show, however,
that a bankruptcy court abuses its discretion by denying
such relief. In this case, the reasons supporting the bank-
ruptcy court’s denial are plain. The court declined to reopen
a complex bankruptcy a full three years after it ended, and
the moving party had done nothing to protect his interests
for nearly a decade. Indeed, we have upheld denials of mo-
tions to reopen in situations involving even shorter delays.
See Redmond, 624 F.3d 793 (four years); Bianucci, 4 F.3d at
527–29 (two years); see also In re Hawkins, 727 F.2d 324, 327
(4th Cir. 1984) (eight months).
“The longer a party waits to file a motion to reopen a
closed bankruptcy case, the more compelling the reason to
reopen must be.” Redmond, 624 F.3d at 799. Brown offers
several excuses for his years of inaction, but only three war-
rant discussion. None of his excuses, even considered collec-
tively, show that the bankruptcy court abused its discretion
in refusing to reopen the Chapter 11 case.
No. 13-2800 7
Brown casts primary blame on the court itself for not
docketing his case as an adversary proceeding. That was an
unfortunate clerical error, but Brown has offered no reason
for waiting so many years to tell the court of its mistake. See
In re Brach, 195 B.R. 897, 904 (Bankr. W.D. Wis. 1995) (recog-
nizing that even innocent party may bear burden of bank-
ruptcy court’s mistake if party had ability and incentive to
notify court about mistake but failed to do so). Even if, as the
parties seem to agree, Brown was unrepresented by counsel
for part of the time between 2006 and 2013, the record shows
that his counsel had ample opportunity and reason to moni-
tor the status of his claims. Brown does not attempt to
blame his attorneys, but even if he did that would not mat-
ter. See Pioneer Investment Servs. Co. v. Brunswick Assocs. Ltd.
P’ship, 507 U.S. 380, 397 (1993).
Brown’s attempt to blame United for the delay is frivo-
lous. It is true that United removed Brown’s state lawsuit to
federal court in California and asked that it be transferred to
Illinois. It was entitled to do so, and those steps would not
have been necessary if Brown had not violated the automatic
stay. The bankruptcy court for the Northern District of Illi-
nois found that Brown’s state lawsuit asserted pre-petition
claims that could be pursued only in the bankruptcy court.
Brown did not appeal that decision even though the bank-
ruptcy judge specifically advised Brown’s attorney of that
right. See In re James Wilson Assocs., 965 F.2d 160, 166 (7th Cir.
1992) (recognizing that orders denying requests to modify
automatic stays are final and appealable). United cannot be
faulted for trying to protect itself in bankruptcy by ensuring
that Brown’s state-law claims, like other claims against the
company, were resolved through the Chapter 11 case.
8 No. 13-2800
More puzzling is Brown’s assertion that United’s attorney
may have misled him about the status of his case. Brown
hired a new attorney in 2010 to “figure out what had hap-
pen[ed] to his claims in the bankruptcy case.” United’s attor-
ney allegedly informed that lawyer that a check for between
4% and 8% of the amounts claimed (presumably the $80,000
asserted in Brown’s pro se proof of claim) “had been mailed
to him care of his former counsel in California.” Brown de-
nies receiving a check, but he does not say whether he tried
to follow-up with his former counsel about the matter. His
position now appears to be that United’s counsel was mis-
taken in reporting that Brown’s claim had been paid. We as-
sume for our purposes that that is correct, but surely Brown
himself knew that United had never paid him on his claim.
Even the possibility of some initial confusion on Brown’s
part could not explain either why he had already waited
years to inquire about the adversary action or why he then
waited an additional two and a half years to move to reopen
the bankruptcy.
The bankruptcy court did not abuse its discretion by
denying Brown’s motion to reopen the UAL bankruptcy, so
the judgment of the district court is AFFIRMED.