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Case: 14-3923

Document: 003111846664

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Date Filed: 01/12/2015

United States Court of Appeals


for the

Third Circuit

No. 14-3923
IN RE: NEW CENTURY TRS HOLDING, INC., et al.,
Debtors,

ALAN M. JACOBS, IN HIS CAPACITY AS LIQUIDATING TRUSTEE TO


NEW CENTURY LIQUIDATION TRUST,
Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

BRIEF FOR APPELLANT and APPENDIX


Volume I of II (Pages A-1 to A-38)

HAHN & HESSEN


488 Madison Avenue
New York, New York 10022
(212) 478-7200
and
BLANK ROME
1201 Market Street, Suite 800
Wilmington, Delaware 19801
(302) 425-6423
Attorneys for Appellant

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CORPORATE DISCLOSURE STATEMENT


Appellant Alan M. Jacobs is the liquidating trustee of the New Century
Liquidating Trust (the Trust), established pursuant to the confirmed liquidating
chapter 11 plan of New Century TRS Holdings, Inc., et al. (the Debtors). The
beneficiaries1 of the Trust are creditors holding allowed unsecured claims against
the Debtors. The Trust has no parent corporation.

The largest beneficiaries of the Trust are identified in the corporate disclosure
statement previously filed with this Court.
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TABLE OF CONTENTS
Page
CORPORATE DISCLOSURE STATEMENT ...........................................

TABLE OF CONTENTS .............................................................................

ii

TABLE OF AUTHORITIES .......................................................................

iv

PRELIMINARY STATEMENT .................................................................

STATEMENT OF BASIS FOR APPELLATE JURISDICTION ...............

STATEMENT OF ISSUES PRESENTED ON APPEAL...........................

STATEMENT OF RELATED CASES AND PROCEEDINGS ................

10

APPLICABLE STANDARD OF APPELLATE REVIEW ........................

11

NATURE AND STAGE OF THE PROCEEDINGS ..................................

11

STATEMENT OF THE CASE AND FACTS ............................................

14

SUMMARY OF THE ARGUMENT ..........................................................

18

ARGUMENT ...............................................................................................

20

I.

THE DISTRICT COURT OVERSTEPPED ITS AUTHORITY


BY MAKING ADDITIONAL FINDINGS OF FACT AND
DRAWING OPPOSING INFERENCES FROM
THE RECORD ON APPEAL ...........................................................

20

II. THE DEBTORS BORROWERS ARE UNKNOWN


CREDITORS AND WERE CONSIDERED BY THE
DEBTORS WHEN PROVIDING CONSTRUCTIVE
NOTICE OF THE BAR DATE .........................................................

22

A. The Bankruptcy Court Correctly Relied Upon Evidence


Establishing that the Debtors Borrowers Were Unknown
Creditors and that the Debtors Considered the Borrowers
in Providing Publication Notice..................................................

24

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B. The District Courts Finding That the Debtors Did Not


Consider Their Borrowers in Providing Publication
Notice is Unsupported by the Record .........................................

26

III. NATIONWIDE NOTICE OF THE BAR DATE PROVIDED BY


PUBLICATION IN THE WALL STREET JOURNAL,
SUPPLEMENTED WITH PUBLICATION IN THE ORANGE
COUNTY REGISTER WAS SUFFICIENT TO SATISFY DUE
PROCESS ..........................................................................................

29

A. The Bankruptcy Court Correctly Determined that the Debtors


Publication of the Bar Date Was Sufficient................................

30

B. The District Courts Holding is in Direct Contradiction to the


Record and Well-Established Law and Establishes a New,
More Onerous Standard for Satisfying Due Process ..................

36

IV. THE DISTRICT COURTS SUGGESTION THAT NOTICE


WAS INSUFFICIENT NOTWITHSTANDING THE DEBTORS
COMPLIANCE WITH FED. R. BANKR. P. 2002(A)(7) IS
REVERSIBLE ERROR .....................................................................

41

V. THE DISTRICT COURT IMPROPERLY CONCLUDED


THAT THE BANKRUPTCY COURT DID NOT
MEANINGFULLY CONSIDER THE ADEQUACY
OF THE NOTICE PROVIDED ........................................................

42

CONCLUSION ............................................................................................

44

COMBINED CERTIFICATION .................................................................

45

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TABLE OF AUTHORITIES
Page(s)
Cases:
Avellino & Bienes v. M. Frenville Co. (Matter of M. Frenville Co.),
744 F.2d 332 (3d Cir. 1984) .....................................................................
Brown v. Seaman Furniture Co., Inc., 171 B.R. 26
(E.D. Pa. 1994) ...........................................................................

39

28, 29, 30, 35

Charter Intl Oil Co. v. Ziegler (In re The Charter Co.), 113 B.R. 725
(M.D. Fla. 1990) .......................................................................................

23, 37

Chemetron v. Jones, 72 F.3d 341 (3d Cir. 1995) .........................................

passim

City of New York v. New York, N.H. & H.R. Co., 344 U.S. 293
(1953)........................................................................................................

22

Cromwell v. New Century Liquidating Trust, No. 14-cv-00822 (SLR) .....

10

Gentry v. Circuit City Stores, Inc. (In re Circuit City Stores, Inc.),
439 B.R. 652 (E.D. Va. 2010) ..................................................................

23, 34

Harvard Industries, Inc. v. Conway (In re Harvard Industries, Inc.), No.


91-404, 1995 Bankr. LEXIS 932 (Bankr. D. Del. June 20, 1995) .........

30

In re Am. Home Mtg. Holdings, Inc., Case No. 07-11047


(Bankr. D. Del. Oct. 30, 2007) .................................................................

41

In re Best Products Co., 140 B.R. 353 (Bankr. S.D.N.Y. 1992) ............

29, 30, 33

In re BGI, Inc., 476 B.R. 812 (Bankr. S.D.N.Y. 2012) ......................

30, 41, 42

In re Chicago Pacific Corp., 773 F.2d 909 (7th Cir. 1985) .........................

30

In re Chicago, Milwaukee, St. Paul and Pacific Railroad Co.,


112 B.R. 920 (N.D. Ill. 1990) ...............................................................

30, 36

In re Credit-Based Asset Servicing and Securitization, LLC,


Case No. 10-16040, 2014 Bankr. LEXIS 4958
(Bankr. S.D.N.Y. Dec. 9, 2014) .........................................................

39-40

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In re Delta Financial Corporation, Case No. 07-11880


(Bankr. D. Del. Mar. 19, 2008) ................................................................
In re Govt Securities Corp., 107 B.R. 1012 (S.D. Fla. 1989)...................

40
23, 30

In re Lehman Brothers Holdings, Inc., Case No. 08-13555


(Bankr. S.D.N.Y. July 2, 2009) ................................................................

40

In re Miller, 730 F.3d 198 (3d Cir. 2013) ....................................................

11

In re Neis, 723 F.2d 584 (7th Cir. 1983)......................................................

20, 21

In re OBrien Envtl. Energy, Inc., 188 F.3d 116 (3d Cir. 1999) .................

11

In re Phila. Newspapers, LLC, 690 F.3d 161 (3d Cir. 2012).......................

11

In re Trans World Airlines, Inc., 145 F.3d 124 (3d Cir. 1998) ...................

11

IRS v. Pransky (In re Pransky), 318 F.3d 536 (3d Cir. 2003) .....................

11

JELD-WEN, Inc. v. Van Brunt (In re Grossmans Inc., et al.),


607 F.3d 114 (3d Cir. 2010) .....................................................................

39

Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306
(1950)........................................................................................................

22

Russell v. New Century Liquidating Trust, No. 14-cv-00821 (SLR)..........

10

Silber v. Mabon, 18 F.3d 1449 (9th Cir. 1994) ...........................................

38

SLW Capital, LLC v. Mansaray-Ruffin (In re Mansaray-Ruffin),


530 F.3d 230 (3d Cir. 2008) .....................................................................

23

Universal Minerals, Inc. v. C.A. Hughes & Company, 669 F.2d 98


(3d Cir. 1981) ...........................................................................................

20, 21

Vancouver Womens Health Collective Soc. v. A.H. Robins Co.,


820 F.2d 1359 (4th Cir. 1987) ............................................................
White v. Jacobs, as liquidating trustee of the New Century Liquidating
Trust, Case No. 13-01719 (SLR) (D. Del.) ..............................................
Wright v. Owens Corning, 679 F.3d 101 (3d Cir. 2012) ....................

23, 33, 43
12
38, 39

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Wright v. Placid Oil Co. (In re Placid Oil Co.), 107 B.R. 104
(N.D. Tex. 1989) ......................................................................................

30

Statutes:
Fed. R. Bankr. P. 2002(a)(7) ......................................................................6, 7, 41, 42
28 U.S.C. 158(a) .......................................................................................

28 U.S.C. 158(d) .......................................................................................

28 U.S.C. 1291 ..........................................................................................

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PRELIMINARY STATEMENT2
This is an appeal from an order of the United States District Court for the
District of Delaware (the District Court), which vacated an order of the United
States Bankruptcy Court for the District of Delaware (the Bankruptcy Court)
determining that the Debtors constructive notice of the claims bar date established
in their chapter 11 cases satisfied constitutional requirements of due process for
unknown creditors. The Bankruptcy Court held a full-day evidentiary hearing which
included testimony by Debtors counsel specifically detailing how the Debtors
reasonably calculated the means by which they would provide constructive notice
of the claims bar date to unknown creditors. After developing a full factual record,
the Bankruptcy Court concluded that the constructive notice of the bar date provided
by the Debtors via publication in the national edition of the Wall Street Journal and
the Orange County Register, a newspaper circulated in the region in which the
Debtors headquarters were located, was constitutionally sufficient notice for
unknown creditors. The District Court vacated the Bankruptcy Courts decision on
the grounds that the adequacy of the notice provided was not meaningfully explored

Capitalized terms not defined in this Preliminary Statement shall have the
meanings ascribed to them below.
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and likely was not reasonably calculated to apprise appellants [former borrowers of
the Debtors]3 of the bar date. The District Courts decision is reversible error.
The Bankruptcy Courts decision correctly begins with an analysis of the
procedures for and purposes of establishing a claims bar date in a bankruptcy case.
Recognizing the importance of enforcement of bar dates, the Bankruptcy Court
noted that the rule for establishing bar dates contributes to one of the main purposes
of bankruptcy law, securing, within a limited time, the prompt and effectual
administration and settlement of the debtors estate. The bar date is a means by
which finality can be achieved. It not only protects the interests of the debtor and
all of its diligent creditors who timely file claims, but also is essential to the
expeditious administration of a bankruptcy estate.
Against this backdrop and applying the rule promulgated by this Court in
Chemetron,4 the Bankruptcy Court undertook an extensive analysis of the means by
which the Debtors provided constructive notice of the bar date to unknown creditors.
It is well-settled that, for due process purposes, constructive notice of a bar date
provided to unknown creditors by publication is constitutionally sufficient.

In

determining that the constructive notice of the Bar Date provided by publication

Prior to their 2007 chapter 11 filing, the Debtors were one of the largest
originators of sub-prime mortgages in the United States.
4

Chemetron v. Jones, 72 F.3d 341 (3d Cir. 1995).


2

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satisfied the requirements of due process, the Bankruptcy Court first correctly
considered the testimony of the Debtors counsel that the Debtors considered their
borrowers initially to be account-debtors, not creditors, of the Debtors. As such, the
Debtors did not consider a borrower to be a creditor of the Debtors, unless and until
a borrower filed a complaint or some other form of grievance or commenced
litigation against the Debtors, at which time a borrower would have been considered
a potential litigation creditor.

Accordingly, the Bankruptcy Court correctly

concluded that the Debtors, in their reasonable discretion, did not consider borrowers
generally to be known creditors of the Debtors. Instead, the Debtors considered their
borrowers, at best, to be unknown creditors entitled to publication notice of the Bar
Date.
After consideration of evidence and testimony submitted during the full-day
evidentiary hearing, the Bankruptcy Court also correctly determined that the
publication of the Bar Date in two newspapers satisfied the requirements of due
process for unknown creditors.

The evidence demonstrates that the Debtors

published notice in the Wall Street Journal because it (i) was a newspaper of
nationwide circulation that would provide notice to the largest number of potential
unknown creditors nationwide, (ii) was a customary place to publish legal notices,
including bar date notices, and (iii) would provide nationwide notice to all types of
unknown creditors, whether institutional or individual creditors. The evidence

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further demonstrates that the Debtors published notice in the Orange County
Register because the Debtors (i) were concerned with the potential of unknown
claims being asserted by the Debtors former employees as a result of several recent
reductions in force, (ii) knew that the Orange County Register had been providing
extensive coverage of the Debtors chapter 11 proceedings, thereby reaching any
individuals who may have been reading it to keep track of the Debtors bankruptcy
cases, and (iii) was circulated in the location in which the Debtors central offices
were located.
The Bankruptcy Court also properly considered testimony establishing that
the Debtors considered the costs associated with providing publication notice of the
Bar Date in its analysis of the type and manner of publication notice to provide. The
evidence established, and the Bankruptcy Court correctly noted, that cost was a
concern because the Debtors were liquidating and, at the time the Bar Date Notice
was published, were particularly concerned about significant administrative costs
given the then-existing cash available to pay such expenses. The Bankruptcy Court
also rightly found that publication of the Bar Date Notice 39 days prior to the Bar
Date was appropriate because the Bar Date Order, consistent with the Bankruptcy
Rules, required the Bar Date Notice to be published no less than 30 days prior to the
Bar Date.

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Upon consideration of all of the relevant facts, evidence, and testimony, the
Bankruptcy Court correctly concluded that the Debtors decision to publish the Bar
Date Notice in the national edition of the Wall Street Journal, supplemented with
notice in the Orange County Register, was reasonably calculated, under the
circumstances, to apprise interested parties nationwide of the Bar Date and afford
them an opportunity to file claims.
Conversely, the District Courts vacatur is reversible error for at least four
reasons. First, the District Court erred in concluding that the Debtors apparently
did not consider their customers (borrowers) at all in connection with the question
of notice. This conclusion simply is incorrect and contradicted by the record.
Second, the District Court erred in inferring that the notice provided was
likely not reasonably calculated to reach unknown creditors because it was
published in the Wall Street Journal. The Wall Street Journal, as the District Court
acknowledges, is a national newspaper and one where bar date notices are often
published. However, the District Court surmised, without any evidence, that the
Wall Street Journal is not one that enjoy[s] broad circulation among less than
sophisticated, focused readers. Further, the District Court erred in suggesting,
without any evidence, that consumer-mortgagors are less than sophisticated,
focused readers.

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The District Courts decision disrupts well-settled case law holding that the
Wall Street Journal is an appropriate vehicle to provide constitutionally sufficient
notice to a nationwide audience of unknown creditors. Indeed, it is squarely at odds
with the constitutional standards that have guided bankruptcy practitioners for
decades in determining how to provide constructive notice to unknown creditors.
Moreover, the District Courts reasoning has the perverse effect of requiring a debtor
to know that which is, by definition, unknown: the sophistication of its unknown
creditors. No court has imposed such an opaque requirement, and the District Court
cites to no authority to support its conclusion that notice was insufficient because a
debtor chose the wrong newspaper of national circulation, one that is not likely to
be read by a less than sophisticated, focused unknown creditor.

If upheld, the

District Courts decision also would have the disastrous effect of rendering invalid
every bar date order that, in reliance on the Third Circuits pronouncement in
Chemetron, provides for publication notice in much the same manner as the
publication notice provided in this case.
Third, the District Courts conclusion that notice was insufficient because it
was not geographically widespread enough in light of the fact that the notice was
published 39 days prior to the claims bar date is unsupported in law. The District
Court cites to no authority for this conclusion, and Fed. R. Bankr. P. 2002(a)(7)
provides that notice of a claims bar date is sufficient if it is provided at least 21 days

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prior to the bar date. The requirement of at least 21 days notice is not linked to the
geographical reach of the notice. Allowing the District Courts conclusion to stand
would render Fed. R. Bankr. P. 2002(a)(7) meaningless.
Finally, in light of the extensive record on which the Bankruptcy Court based
its well-reasoned decision, the District Court incorrectly concluded that the
adequacy of the notice provided was not meaningfully explored by the Bankruptcy
Court. The Bankruptcy Court held a full-day evidentiary hearing at which the
Bankruptcy Court considered evidence and testimony provided by Debtors counsel
and the Trustee (both of whom were subject to cross-examination by multiple
individual borrowers). That testimony established both the Debtors process to
determine how to provide constructive notice of the Bar Date and that the process
was reasonably calculated, under the circumstances, to provide notice to all
unknown creditors, including the borrowers. The District Court did not dispute the
Bankruptcy Courts factual findings, nor did the District Court find any error in the
Bankruptcy Courts conclusion that publication in the Wall Street Journal is
sufficient to reach a nationwide audience. The District Court nevertheless vacated,
apparently because the District Court believed that the Wall Street Journal is not
read by less than sophisticated, focused readers, despite the fact that it is one of
the most used publications for legal notices. The District Courts decision is both
without evidentiary support and without legal basis. Since the Bankruptcy Courts

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factual findings amply support its legal conclusions, the District Courts decision
should be reversed, and the Bankruptcy Courts decision should be reinstated.
STATEMENT OF BASIS FOR APPELLATE JURISDICTION
Appellant is Alan M. Jacobs, as liquidating trustee (the Trustee) of the New
Century Liquidating Trust (the Trust), established pursuant to a confirmed chapter
11 plan of New Century TRS Holdings, Inc., and its affiliated debtors (the
Debtors).5 The Trustee appeals from a final order entered by the District Court
on August 20, 2014, vacating an order entered by the Bankruptcy Court on August
30, 2013. The Trustee timely filed a notice of appeal on September 15, 2014. The
District Court had subject matter jurisdiction over the appeal under 28 U.S.C.
158(a), and this Court has jurisdiction over this appeal under 28 U.S.C. 158(d)
and 1291.

The Debtors are the following entities: New Century Financial Corporation
(f/k/a New Century REIT, Inc.); New Century TRS Holdings, Inc. (f/k/a New
Century Financial Corporation); New Century Mortgage Corporation (f/k/a JBE
Mortgage); NC Capital Corporation; Home123 Corporation (f/k/a The Anyloan
Corporation, 1800anyloan.com, Anyloan.com); New Century Credit Corporation
(f/k/a Worth Funding Incorporated); NC Asset Holding, L.P. (f/k/a NC Residual II
Corporation); NC Residual III Corporation; NC Residual IV Corporation; New
Century R.E.O. Corp.; New Century R.E.O. II Corp.; New Century R.E.O. III Corp.;
New Century Mortgage Ventures, LLC (d/b/a Summit Resort Lending, Total
Mortgage Resource, Select Mortgage Group, Monticello Mortgage Services, Ad
Astra Mortgage, Midwest Home Mortgage, TRATS Financial Services, Elite
Financial Services, Buyers Advantage Mortgage); NC Deltex, LLC; NCoral, L.P.;
and New Century Warehouse Corporation.
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STATEMENT OF ISSUES PRESENTED ON APPEAL


1.

Whether the Bankruptcy Court correctly determined that the

constructive notice of the Bar Date provided by the Debtors was reasonably
calculated, under the circumstances, to apprise all interested parties, in accordance
with the constitutional requirements of due process, where the Debtors provided
publication notice in a national newspaper and supplemented that notice with
publication in a local newspaper in the location where the Debtors main business
operations were located? A-24, A-37, Bankr. D.I. 10824, and Bankr. D.I. 10841.
2.

Whether the Bankruptcy Court correctly determined, after a full

evidentiary hearing, that publication notice of the Bar Date in (i) the Wall Street
Journal (national edition), which provided notice to the widest audience of unknown
creditors nationwide and was determined to be a customary place to publish legal
notices, and (ii) the Orange County Register, which had been providing extensive
coverage of the Debtors bankruptcy cases in the location in which the Debtors
primary operations were based was reasonably calculated, under the circumstances
of this case, to apprise all interested parties of the Bar Date? A-25 A-37.
3.

Whether the District Court erred in adding a requirement that, in order

to meet the constitutional standards necessary for due process, the sophistication
of the yet unidentified, unknown creditor must be considered? A-19 A-20.

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Whether the District Court erred in suggesting that due process requires

a debtor to provide more than the 21 day notice period required by Rule 2002(a)(7)
of the Federal Rules of Bankruptcy Procedure when the bar date is set so close to
the publication date[?] A-20.
5.

Whether the District Court erred in holding that the Bankruptcy Court

did not meaningfully explore[] the adequacy of the constructive notice provided
by the Debtors where the Bankruptcy Court held a full evidentiary hearing at which
the Bankruptcy Court considered evidence and testimony provided by Debtors
counsel, which established the Debtors reasonable analysis of the facts of this case
to determine how to provide constructive notice of the bar date? A-20.
STATEMENT OF RELATED CASES AND PROCEEDINGS
Currently, there are two bankruptcy appeals pending before the District Court
(i) Russell v. New Century Liquidating Trust, No. 14-cv-00821 (SLR) and (ii)
Cromwell v. New Century Liquidating Trust, No. 14-cv-00822 (SLR). These
appeals turn, in part, upon the underlying Bankruptcy Court decision that is the
subject of this appeal. Briefing on those bankruptcy appeals has not commenced.6

By stipulation dated January 6, 2015, the Trustee and claimant Cromwell


agreed to stay the appeal captioned as Cromwell v. New Century Liquidating Trust,
No. 14-cv-00822 (SLR) pending disposition of this matter.
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APPLICABLE STANDARD OF APPELLATE REVIEW


On an appeal from a bankruptcy case, the circuit court stand[s] in the shoes
of the District Court and review[s] the Bankruptcy Court's decision. IRS v. Pransky
(In re Pransky), 318 F.3d 536, 542 (3d Cir. 2003) (internal citations and quotations
omitted). This Court, therefore, exercise[s] plenary review over the District Courts
appellate review of the Bankruptcy Courts decision and exercise[s] the same
standard of review as the District Court in reviewing the Bankruptcy Courts
determinations. In re Miller, 730 F.3d 198, 203 (3d Cir. 2013) (internal quotation
marks and citation omitted). Accordingly, this Court review[s] the Bankruptcy
Courts legal determinations de novo, its factual findings for clear error, and its
exercise of discretion for abuse thereof. In re OBrien Envtl. Energy, Inc., 188 F.3d
116, 122 (3d Cir. 1999) (citing In re Trans World Airlines, Inc., 145 F.3d 124, 130
(3d Cir. 1998)). Due process claims are reviewed de novo. See In re Phila.
Newspapers, LLC, 690 F.3d 161, 171 (3d Cir. 2012).
NATURE AND STAGE OF THE PROCEEDINGS
On April 2, 2012, the Trustee filed a motion (the Global Constructive Notice
Motion) seeking a determination that the Debtors (i) complied with the
requirements of the Bankruptcy Courts Order Establishing Bar Dates for Filing
Proofs of Claim and Approving Form, Manner and Sufficiency of Notice Thereof,
dated June 28, 2007 (the Bar Date Order), and (ii) provided constructive notice of

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the bar date (the Bar Date Notice) by publication that satisfied the requirements of
due process for all unknown creditors. See Bankr. D.I. 10824.7 On April 18, 2012,
appellees Ralph N. White and Molly S. White (the Appellees), among others, filed
an objection to the Global Constructive Notice Motion. See Bankr. D.I. 10841. On
April 20, 2012, the Trustee filed an omnibus reply in further support of the Global
Constructive Notice Motion and in response to the objections filed by the Appellees
and other pro se litigants. See Bankr. D.I. 10853.
On May 23, 2012, the Bankruptcy Court held an evidentiary hearing (the
Evidentiary Hearing) to consider the relief requested in the Global Constructive
Notice Motion and the objections filed thereto. Bankr. D.I. 10916. Appellee Ralph
N. White appeared at and participated in the Evidentiary Hearing. A-151 (Hrg Tr.
9:11).

The Debtors counsel provided testimony concerning the Debtors

considerations in deciding the appropriate means of providing constructive notice of


the Bar Date (as defined below). A-196 A-284 (Hrg Tr. 54:4-142:21). At the

Record Citation Nomenclature:


(a) A-___: Pages of the Appendix filed by Appellant.
(b) Bankr. D.I.__: Items filed on the docket in the chapter 11 bankruptcy
case captioned as In re New Century TRS Holdings, Inc., et al., Case No.
07-10416 (BLS) (Bankr. D. Del.).
(c) Dist. D.I.__: Items filed on the docket in the bankruptcy appeal captioned
as White v. Jacobs, as liquidating trustee of the New Century Liquidating
Trust, Case No. 13-01719 (SLR) (D. Del.).
(d) Hrg Tr.__: Transcript of the May 23, 2012 Evidentiary Hearing [Bankr.
D.I. 10916] held before the Bankruptcy Court to consider the Global
Constructive Notice Motion and the objections thereto.
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conclusion of the Evidentiary Hearing, the Bankruptcy Court took the matter under
advisement. A-317 (Hrg Tr. 175:1-2).
On August 30, 2013, the Bankruptcy Court issued a memorandum decision
(the Global Constructive Notice Decision) and order (the Global Constructive
Notice Order), which, inter alia, determined that the Debtors (i) complied with the
requirements of the Bar Date Order, and (ii) published the Bar Date Notice in a
manner that was reasonably calculated, under the circumstances, to apprise
interested parties nationwide of the Bar Date and afford them an opportunity to file
claims. A-37 (Global Constructive Notice Decision, p. 17).
On September 13, 2013, the Appellees filed a notice of appeal of the Global
Constructive Notice Order. See Bankr. D.I. 11252.8
On August 20, 2014, the District Court issued a memorandum decision (the
District Court Decision) and order (the District Court Order) vacating the Global
Constructive Notice Order. A-20 (District Court Decision, p. 14).
On September 15, 2014, the Trustee timely filed this appeal of the District
Court Order. A-1 A-3.

By order dated January 31, 2014, the Debtors chapter 11 cases and all
adversary proceedings related thereto (excluding certain Retained Matters) were
transferred to Chief United States Bankruptcy Judge Brendan Linehan Shannon.
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STATEMENT OF THE CASE AND FACTS


On April 2, 2007, the Debtors (with the exception of New Century Warehouse
Corporation) filed voluntary petitions for relief under chapter 11 of the Bankruptcy
Code. On June 8, 2007, the Debtors filed a motion pursuant to Bankruptcy Rules
2002, 3003(c)(2) and 9007 requesting that the Bankruptcy Court fix the time within
which proofs of claim must be filed. A-43 A-78 (Bankr. D.I. 1173). On June 28,
2007, the Bankruptcy Court entered the Bar Date Order, establishing August 31,
2007 at 5:00 p.m. (prevailing Pacific Time) as the last date and time for the filing of
proofs of claim by non-governmental units in the Debtors chapter 11 cases (the Bar
Date). A-79 A95 (Bankr. D.I. 1721).
In accordance with the procedures in the Bar Date Order, the Debtors then
court-approved claims and noticing agent, XRoads Case Management Services LLC
(a) provided actual notice of the Bar Date to all known entities holding potential prepetition claims, and (b) published the Bar Date Notice in the Wall Street Journal
(national edition) and the Orange County Register. A-96 A-114 (Bankr. D.I.
1861). On August 3, 2007, the Debtors filed the Affidavits of Publication of the Bar
Date Notice in the Wall Street Journal and in the Orange County Register with the
Bankruptcy Court. A-115 A-121 (Bankr. D.I. 2148 and Bankr. D.I. 2149).
On November 22, 2008, the Appellees filed claim number 4073 in the
Debtors bankruptcy case as a secured and/or priority claim in the amount of

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$272,500.00, plus accruing interest. On or about January 21, 2009, the Appellees
filed claim number 4074 and claim number 4080, which are duplicates of claim
number 4073 (together, claim numbers 4073, 4074 and 4080 are referred to herein
as the Claims).
On November 20, 2009, the Bankruptcy Court entered an order confirming
the Debtors Modified Second Amended Joint Chapter 11 Plan of Liquidation (the
Modified Plan). Bankr. D.I. 9905.9 The Modified Plan adopted, ratified, and
confirmed the New Century Liquidating Trust Agreement, dated as of August 1,
2008, which created the Trust and appointed Alan M. Jacobs as Trustee of the Trust
and Plan Administrator of New Century Warehouse Corporation.
On August 13, 2010, the Trustee filed an objection to the Claims on the basis
that they (i) lacked merit, and (ii) were filed after the Bar Date.
On or about November 15, 2010, the Appellees commenced an adversary
proceeding against the Debtors by filing a complaint to determine the

The Bankruptcy Court entered an order confirming the Second Amended Joint
Chapter 11 Plan of Liquidation of the Debtors and the Official Committee of
Unsecured Creditors Dated as of April 23, 2008 (the Original Confirmation
Order). Bankr. D.I. 8596. On July 16, 2009, the District Court issued a
memorandum opinion reversing the Original Confirmation Order. On July 27, 2009,
the Bankruptcy Court entered an order granting the Trustees motion to preserve the
status quo including maintenance of Alan M. Jacobs as liquidating trustee, plan
administrator, and sole officer and director of the Debtors, pending entry of a final
order consistent with the District Courts memorandum opinion. Bankr. D.I. 9750.
On September 30, 2009, the Trust filed the Modified Plan. Bankr. D.I. 9905.
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dischargeability of debt (the Complaint). On December 15, 2010, the Trustee filed
a motion to dismiss the Complaint (the Motion to Dismiss). On June 7, 2011, the
Bankruptcy Court issued a memorandum decision and order granting the Motion to
Dismiss, in part by dismissing Counts II, VIII, and XII of the Complaint for lack of
subject matter jurisdiction, and denying the remainder of the Motion to Dismiss (the
Dismissal Decision).10 A-122 A-135. The Bankruptcy Court stated,
[a]lthough the Debtors arguably complied with the stated
minimum requirements of the Bar Date Order, without a
more fully developed factual record, I am unable to
determine whether the publication notice was reasonably
calculated to provide notice to consumer mortgagors like
the Whites. At this stage in the proceeding, the Trustee
has not met his burden of proving that publication in one
national edition newspaper and one local newspaper is
sufficient to meet due process requirements as applied to
the Whites as unknown creditors.
A-135.

10

On June 16, 2011, the Appellees filed a motion for reconsideration of the
Dismissal Decision (the First Reconsideration Motion) with respect to Counts II
and VIII, which the Trustee opposed. White v. New Century TRS Holdings, Inc., et
al., Case No. 10-55357 (BLS), Dkt Nos. 61 and 64. On December 6, 2013, the
Bankruptcy Court issued a memorandum decision and an order (together, the
Omnibus Order) denying, among other things, the First Reconsideration Motion.
White, Case No. 10-55357 (BLS), Dkt Nos. 128 and 129. On December 23, 2013,
the Appellees filed a pleading which the Trustee interpreted in his opposition thereto
as (i) a second motion for reconsideration of the Dismissal Decision, and (ii) a
motion seeking reconsideration of the Omnibus Order to the extent that it denied the
First Reconsideration Motion. White, Case No. 10-55357 (BLS), Dkt. Nos. 131 and
134. The Trustee believes that no further briefing on this matter is contemplated.
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On or about July 29, 2011, claimant Helen Galope filed proof of claim number
4131 (the Galope Claim). On August 26, 2011, the Trustee filed an omnibus
objection to claims (the Claim Objection) requesting that the Bankruptcy Court
disallow and expunge, among others, the Galope Claim. Bankr. D.I. 10562. Ms.
Galope and other claimants filed responses in opposition to the Claim Objection, and
the Bankruptcy Court held an evidentiary hearing on December 13, 2011 to consider
whether the Galope Claim should be disallowed because it was filed after the Bar
Date. Bankr. D.I. 11256. On February 7, 2012, the Bankruptcy Court issued a
memorandum decision and order disallowing and expunging the Galope Claim,
which determined, in part, that the Debtors publication of the Bar Date Notice was
constitutionally adequate for Ms. Galope, who was an unknown creditor. Bankr.
D.I. 10725 and 10726.
On April 2, 2012, the Trustee filed the Global Constructive Notice Motion
seeking a determination, consistent with the February 7, 2012 memorandum decision
and order, that the Debtors publication of the Bar Date Notice was constitutionally
adequate for all unknown creditors, relief which was opposed by the Appellees and
others. Bankr. D.I. 10824. On May 23, 2012, the Bankruptcy Court held the
Evidentiary Hearing at which Appellee Ralph N. White participated and at which
the Trustee presented testimony of the Debtors counsel to substantiate the Trustees
contention that the Debtors reasonably calculated the means by which publication

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notice of the Bar Date would be provided to unknown creditors. The Bankruptcy
Court issued the Global Constructive Notice Decision and Order granting the relief
requested by the Trustee. Appellees appealed to the District Court, which vacated
the Global Constructive Notice Order. The District Courts vacatur of the Global
Constructive Notice Order is the subject of this appeal.
SUMMARY OF THE ARGUMENT
The Bankruptcy Court correctly concluded, based upon prevailing legal
standards and the facts of this particular case, that the constructive notice of the Bar
Date provided by publication in the national edition of the Wall Street Journal and
the Orange County Register was sufficient to satisfy the requirements of due
process. In making this determination, the Bankruptcy Court correctly relied upon
an extensive evidentiary record establishing that the Debtors carefully considered
how and where to provide notice to their unknown creditors. The District Court
found no error in the Bankruptcy Courts reliance upon this evidence, nor did the
District Court dispute the Bankruptcy Courts finding that the notice provided by the
Debtors in this case was published in a newspaper that reached a nationwide
audience.
Nevertheless, the District Court vacated the Bankruptcy Courts decision
apparently because the District Court believed that (i) the Debtors did not consider
their borrowers specifically in connection with the provision of notice to unknown

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creditors, (ii) the borrowers were unsophisticated, and (iii) the Wall Street Journal
was an insufficient forum in which to publish the Bar Date Notice because it likely
would not have reached unsophisticated unknown creditors. These new factual
findings by the District Court are improper given the District Courts role as
appellate court and have no basis of support in the evidentiary record. Based on
these erroneous findings, the District Court establishes a new, more onerous legal
standard for satisfying due process when publishing notice of bar dates, a standard
that is contrary to well settled case law.
The District Court also apparently took issue with the timing of the publication
notice, noting that the publication notice provided should have been more
widespread because it was provided so close to the bar date. This conclusion is
belied by the plain language of the Federal Rules of Bankruptcy Proceedure.
Because the District Courts decision omits or disregards key facts,
establishes new, unsupported facts and creates legal standards that do not comport
with that which is necessary to satisfy due process requirements, the District Courts
decision should be reversed, and the Bankruptcy Courts decision should be
reinstated.

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ARGUMENT
I.

THE DISTRICT COURT OVERSTEPPED ITS AUTHORITY BY


MAKING ADDITIONAL FINDINGS OF FACT AND DRAWING
OPPOSING INFERENCES FROM THE RECORD ON APPEAL
As a threshold matter, sitting as an appellate court, the District Court does

not sit as a finder of facts . . . as a court of review. Universal Minerals, Inc. v. C.A.
Hughes & Company, 669 F.2d 98, 101-02 (3d Cir. 1981). Rather, the District
Courts role is limited to a review of the Bankruptcy Courts factual findings for
clear error, and the District Court cannot engage in additional fact-finding having
the effect of supplanting the Bankruptcy Courts factual determinations in favor of
its own. See Universal, 669 F.2d at 104 (A reviewing court may not substitute its
own findings for those of the primary tribunal merely because it finds other
inferences more likely.); see also In re Neis, 723 F.2d 584, 589 (7th Cir. 1983)
([T]he district court may not accept the findings of the bankruptcy court and then
go on to make additional findings having the effect of contradicting the conclusions
of the bankruptcy court.).
Here, the District Court does not dispute any of the Bankruptcy Courts factual
findings and, in fact, accepts the facts found by the Bankruptcy Court. A-16 A17; A-19 (District Court Decision, p. 10-11; 13, n.7) (The bankruptcy court did not
abuse its discretion in determining that a notice placed in the Wall Street Journal
reached a nationwide audience).

Notwithstanding the District Courts broad

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agreement with the Bankruptcy Courts factual findings, the District Court proceeds
to infer from the record two brand new findings of fact, namely (i) that the Wall
Street Journal does not enjoy a broad circulation among less than sophisticated,
focused readers and (ii) the Debtors borrowers are unsophisticated persons.11 A19 A-20 (District Court Decision, p. 13-14). These new findings are the lynchpin
facts upon which the District Court relies to vacate the Global Constructive Notice
Order. See id. However, the District Court was not free to infer from the record
these new findings of fact and, in doing so, committed reversible error. See
Universal, 669 F.2d at 104 (The district court chose . . . to emphasize other facts
not mentioned in the bankruptcy courts opinion and to draw opposing inferences
from the record. In so doing, the district court erred.); Neis 723 F.2d at 590 ([T]he
district court erred in engaging in additional fact finding and in basing its decision
on these additional facts.).
Moreover, even if the District Court had the authority to make these new
findings, for the reasons set for the below, they are wholly unsupported by the wellestablished evidentiary record and largely irrelevant to the inquiry regarding the
sufficiency of the publication notice in this case.

11

Similarly, the District Court suggests, without any evidentiary basis, that the USA
Today enjoys a broader circulation among such less than sophisticated, focused
readers.
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THE DEBTORS BORROWERS ARE UNKNOWN CREDITORS


AND WERE CONSIDERED BY THE DEBTORS WHEN
PROVIDING CONSTRUCTIVE NOTICE OF THE BAR DATE
For notice purposes, bankruptcy law divides claimants into two types

known creditors and unknown creditors. Chemetron, 72 F.3d at 346. While known
creditors must be provided with actual written notice of a debtors bankruptcy filing
and claims bar date, unknown creditors need only receive constructive notice by
publication. Id.
The requirements for providing constructive notice that satisfies due process
are firmly rooted in both existing Supreme Court and Third Circuit precedent. While
notice by publication has limitations, its use has been recognized as constitutionally
adequate. See City of New York v. New York, N.H. & H.R. Co., 344 U.S. 293, 296
(1953); see also Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314
(1950); Chemetron, 72 F.3d at 348 ([I]n providing notice to unknown creditors,
constructive notice of the bar claims date by publication satisfies the requirements
of due process.).
It is well-established that due process requires constructive notice that is
reasonably calculated, under the circumstances, to apprise interested parties of the
pendency of the action and afford them an opportunity to present their objections.
Mullane, 339 U.S. at 317; Chemetron, 72 F.3d at 347-48 (due process requires
notice that is reasonably calculated to reach all interested parties, reasonably

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conveys all the required information, and permits a reasonable time for a response.
(internal quotations omitted)). Whether a particular method of notice is reasonable
depends on the circumstances of the case. See SLW Capital, LLC v. MansarayRuffin (In re Mansaray-Ruffin), 530 F.3d 230, 239 (3d Cir. 2008); Gentry v. Circuit
City Stores, Inc. (In re Circuit City Stores, Inc.), 439 B.R. 652, 660 (E.D. Va. 2010).
The proper evaluation of whether notice satisfies due process is whether a party
acted reasonably in selecting means likely to inform persons affected, not whether
each person actually received notice. See Charter Intl Oil Co. v. Ziegler (In re The
Charter Co.), 113 B.R. 725, 728 (M.D. Fla. 1990) (citations omitted).
Importantly, due process considerations and obligations to potential unknown
creditors must be tempered by considerations of the costs and the effect of such
costs upon the estate and its creditors as a whole. In re Govt Securities Corp., 107
B.R. 1012, 1021 (S.D. Fla. 1989). Moreover, bankruptcy courts are cognizant of the
fact that [a] bankrupt estates resources are always limited and the bankruptcy court
must use discretion in balancing [the interests of all creditors] when deciding how
much to spend on notification. Vancouver Womens Health Collective Soc. v. A.H.
Robins Co., 820 F.2d 1359, 1364 (4th Cir. 1987).

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A. The Bankruptcy Court Correctly Relied Upon Evidence


Establishing that the Debtors Borrowers Were Unknown Creditors
and that the Debtors Considered the Borrowers in Providing
Publication Notice
In making the determination concerning appropriate notice for this bankruptcy
case, the Debtors first determined that their borrowers generally were unknown
creditors entitled to constructive notice of the Bar Date. A known creditor is one
whose identity is either known or reasonably ascertainable by the debtor[,] and
an unknown creditor is one whose interests are either conjectural or future or,
although they could be discovered upon investigation, do not in due course of
business come to knowledge [of the debtor]. Chemetron, 72 F.3d at 346 (internal
citations omitted).
With respect to borrowers for whom the Debtors originated loans, as set forth
in the Uhland Declaration and in Ms. Uhlands testimony at the Evidentiary Hearing,
the Debtors borrowers were viewed generally as account-debtors, not known
creditors. A-203 A-204; A-260 (Hrg Tr. 61:17 62:4; Hrg Tr. 118:2-20). The
borrowers were not considered to be known creditors of the Debtors unless and until
a particular borrower filed a complaint or commenced litigation, at which point they
were considered litigation creditors or potential creditors who were included on the
litigation schedule of creditors provided with actual notice of the Bar Date. A-216
A-218 (Hrg Tr. 74:4-5; Hrg Tr. 76:6-8, 13-15). Accordingly, the Debtors, after
considering their likely classes of creditors, made the conscious decision that their
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borrowers, to the extent no complaint or litigation was filed, were not known
creditors and chose not to provide all of their borrowers (over a million) with
individualized notice of the Bar Date. A-203 A-204 (Hrg Tr. 61:17-62:9).
The Debtors did however consider borrowers to be unknown creditors in the
context of their decision to publish in a newspaper of nationwide circulation. To
that end, Debtors counsel testified that the Debtors had nationwide operations and
did business (with their borrowers) throughout the country. A-201 A-202; A-234
A-235 (Hrg Tr. 59:18-60:1; Hrg Tr. 92:18-93:6); A-139 (Uhland Declaration,
5(b)). The Debtors had more than a million borrowers, and the Wall Street Journal
was selected, in part, because it was likely to reach the broadest audience. A-139
(Uhland Declaration, 5(c)). The Debtors also considered the fact that the Wall
Street Journal was a customary place to publish legal notices and reasonably
believed that publishing notice in a place where parties might expect to find it was
sufficient notice. A-202 (Hrg Tr. 60:2-60:9). Thus, the Debtors specifically
considered their nationwide business operations and dealings (both with individual
borrowers and institutional creditors) in deciding to publish in the Wall Street
Journal.
Based upon this evidence, the Bankruptcy Court correctly concluded that the
Debtors considered their borrowers in connection with the decision as to where to
publish the Bar Date Notice, and, by choosing to publish in the Wall Street Journal,

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the Debtors reached a nationwide audience of unknown creditors, which necessarily


includes borrowers. A-30 (Global Constructive Notice Decision, p. 10). The
District Court did not dispute these facts and expressly found that the Bankruptcy
Court did not abuse its discretion in finding that the Wall Street Journal reached a
nationwide audience. A-16 A-17; A-19 (District Court Decision, p. 10-11; 13,
n.7). Thus, the evidence establishes both that the Debtors had business operations
(and thus borrowers) nationwide, and that the Debtors provided publication notice
of the Bar Date in a newspaper that reached a nationwide audience, including
borrowers.
B. The District Courts Finding That the Debtors Did Not Consider
Their Borrowers in Providing Publication Notice is Unsupported by
the Record
The District Courts finding that the Debtors did not consider the borrowers
at all with respect to the question of notice is belied by the record upon which the
Bankruptcy Court appropriately relied. Specifically, the District Court overlooks
crucial testimony from Debtors counsel that specifically contradicts the District
Courts conclusion that the Debtors did not consider their borrowers in connection
with the question of notice. On more than one occasion, Ms. Uhland was asked, in
various ways, if and how the Debtors considered the borrowers in their consideration
of providing notice of the Bar Date. On cross examination, one claimant stated,
none of your decision was made to address any of possible homeowners . . . so that

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was really not addressed in your decision for publications. A-247 (Hrg Tr. 105:1215). Ms. Uhland unequivocally denied that statement, responding:
No, thats not true. Because even though they were not
known creditors, they potentially couldve been unknown
creditors that we wouldve sought to address for
publication notice.
A-247 (Hrg Tr. 105:12-19).
Ms. Uhland further testified that the Debtors didnt consider the borrowers
as creditors . . . [but] [t]he borrowers were potential unknown creditors. A-259
A-260 (Hrg Tr. 117:5-118:1). The fact that the Debtors did not consider the
borrowers to be known creditors does not mean the Debtors did not consider the
borrowers in connection with the notice calculation. It simply means the Debtors
did not consider the borrowers to be known creditors. In fact, Ms. Uhland expressly
acknowledged that the borrowers were unknown creditors who were considered in
the Debtors calculation to determine the appropriate means of providing notice. On
cross-examination by Appellee Ralph White, Ms. Uhland specifically acknowledged
that the Debtors considered the borrowers in connection with their decision to
provide nationwide notice of the Bar Date:
Q:
[F]or the most part, you didnt really consider the
borrowers at the time that you were doing the publication
notice, either form [sic], whether it be the Wall Street
Journal or Orange County Register, you didnt consider
the borrowers?
A:
I said we didnt consider the borrowers as creditors
of the entity, unless they had filed litigation.
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Q:
Okay. Unless they had filed litigation. Okay. As
far as the borrowers, did you take them into consideration
at all when you filed your notices?
A:
Yes. The borrowers were potential unknown
creditors, so therefore wouldve been affected by the
nationwide publication notice in the Wall Street Journal.
Q:
Okay. How did you consider the borrowers? I
know unknown, but how and what stance did you
consider the borrowers?
A:
As . . . potential unknown creditors who because
New Century did business throughout the country, they
were potentially unknown creditors that couldve been
located anywhere throughout the country. So therefore . .
. a nationwide publication was appropriate.
A-259 A-260 (Hrg Tr. 117:6-118:1).
The record demonstrates that the Debtors made a conscious decision to treat
certain borrowers who had asserted claims against the Debtors as known creditors
entitled to actual notice and to treat all other borrowers, who were considered to be
account-debtors, as unknown creditors. The record further reflects that the Debtors
specifically considered the borrowers in the calculation of providing constructive
notice.

Accordingly, the evidentiary record demonstrates that the Debtors

endeavored to provide notice to all unknown creditors, including borrowers, by


publication in the Wall Street Journal, a newspaper of nationwide publication that is
available at any corner newspaper vendor. See Brown v. Seaman Furniture Co.,
Inc., 171 B.R. 26, 27 (E.D. Pa. 1994). The District Courts analysis ignores this
crucial evidence.
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III.

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NATIONWIDE NOTICE OF THE BAR DATE PROVIDED BY


PUBLICATION IN THE WALL STREET JOURNAL,
SUPPLEMENTED WITH PUBLICATION IN THE ORANGE
COUNTY REGISTER WAS SUFFICIENT TO SATISFY DUE
PROCESS
As noted above and as the Bankruptcy Court correctly noted, courts have

routinely held that publication in national newspapers is sufficient notice to


unknown creditors and satisfies the requirements of due process, especially where
supplemented . . . with notice in papers of general circulation in locations where the
debtor is conducting business. Chemetron, 72 F.3d at 349 (publication in the New
York Times and the Wall Street Journal was sufficient even though creditors lived
in Cleveland); Brown, 171 B.R. at 27 (noting that national newspapers are sold
throughout the country and, therefore, are a reasonable means for alerting potential
unknown creditors of a claims bar date). Publication in dozens of newspapers where
a debtor conducts business can be onerous, cumbersome, and unduly expensive
and, therefore, is not required to satisfy the requirements of due process. In re Best
Products Co., 140 B.R. 353, 358 (Bankr. S.D.N.Y. 1992). Due process, therefore,
does not require a debtor to publish notice in every newspaper a possible unknown
creditor may read . . . . Chemetron, 72 F.3d at 348 (quoting Best Products, 140

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B.R. at 358). Rather, even publication notice in a single nationwide newspaper can
be constitutionally adequate notice.12
A. The Bankruptcy Court Correctly Determined that the Debtors
Publication of the Bar Date Was Sufficient
The Bankruptcy Court reached the correct result after considering testimony
that established that the Debtors complied with the requirements of due process by
publishing the Bar Date Notice in the Wall Street Journal and the Orange County
Register. First, in an effort to afford notice to the widest possible population of
unknown creditors, including borrowers, the Debtors chose the Wall Street Journal
because it was a newspaper of national circulation. A-139 (Uhland Declaration,
5(b)); A-201 (Hrg. Tr. 59:18-20). The Debtors operations were nationwide, and
the Debtors considered the fact that there could have been unknown creditors in a
12

See also In re Chicago Pacific Corp., 773 F.2d 909, 913 (7th Cir. 1985) (notice
published once in the Wall Street Journal was sufficient constructive notice of
hearing on reorganization plan); Brown, 171 B.R. at 27 (notice published in the local
and national editions of the New York Times was sufficient to satisfy due process);
In re Chicago, Milwaukee, St. Paul and Pacific Railroad Co., 112 B.R. 920, 922, 924
(N.D. Ill. 1990) (publication notice in the Wall Street Journal regarding applicable
bar dates was adequate under bankruptcy law and sufficient under the Due Process
Clause of the United States Constitution); Govt Secs. Corp., 107 B.R. at 1021 (one
day publication in the Wall Street Journal was sufficient to satisfy due process);
Wright v. Placid Oil Co. (In re Placid Oil Co.), 107 B.R. 104, 106 (N.D. Tex. 1989)
(publication of the bar date in the Wall Street Journal was sufficient notice to
unknown creditor); In re BGI, Inc., 476 B.R. 812, 823-24 (Bankr. S.D.N.Y. 2012)
(publication notice once in the New York Times sufficient for national retailer
bankruptcy); Harvard Industries, Inc. v. Conway (In re Harvard Industries, Inc.), No.
91-404, 1995 Bankr. LEXIS 932, at *2 (Bankr. D. Del. June 20, 1995) (notice of
the bar date in the New York Times for two consecutive business days was consistent
with due process).
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number of locations throughout the United States. A-139 (Uhland Declaration,


5(b)); A-201; A-234 A-235 (Hrg. Tr. 59:19-20; 92:24 93:6). Moreover, the
Debtors considered the fact that the Wall Street Journal was a customary place to
provide legal notices such as the Bar Date Notice. A-140 (Uhland Declaration,
5(e)); A-202; A-245 A-246; A-265 A-266 (Hrg. Tr. 60:2-60:9; Hrg Tr. 103:23104:5; Hrg Tr. 123:20-124:5). Accordingly, the Debtors concluded that the Wall
Street Journal was an appropriate forum in which to publish the Bar Date Notice
based on the fact that all unknown creditors including, but not limited to, those
transacting business with the Debtors and individual creditors might look to the Wall
Street Journal as the standard place for publication of such notices. See id. The
Bankruptcy Courts conclusion that this testimony was credible and justified the
Debtors decision to publish the notice in the Wall Street Journal is not clearly
erroneous and, indeed was accepted by the District Court. A-17 (District Court
Decision, p. 11). The Trustee submits that the inquiry can end here; constructive
notice was sufficient.
The evidence further demonstrates that the Debtors chose to supplement the
nationwide publication notice with a publication in the Orange County Register
because the Debtors (i) were concerned with the potential of unknown claims being
asserted by the Debtors former employees as a result of several reductions in force,
(ii) knew that the Orange County Register had been providing extensive coverage of

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the Debtors chapter 11 proceedings, thereby reaching any individuals who may
have been reading it to keep track of the Debtors bankruptcy cases, and (iii) was
circulated in the location in which the Debtors central offices were located. 13 A202 A-203 (Hrg Tr. 60:19-61:6). The Bankruptcy Court correctly found that the
Debtors reasonably considered various factors in an effort to afford the broadest
possible notice to all unknown creditors, and therefore, the constructive notice
provided by publication in the Wall Street Journal and the Orange County Register

13

The District Court, without evidence and in contrast to the testimony


presented to the Bankruptcy Court, erroneously found that the Debtors only concern
in publishing the Bar Date Notice in the Orange County Register was their
employees. A-19 (District Court Decision, p. 13). The District Court specifically
noted that debtors chose The Orange County Register as the publication most likely
to provide notice to their workforce, not to unknown creditors such as the borrowers
who apparently resided throughout the United States. Id., n.6. While the Debtors
were concerned with the potential for claims asserted by former employees holding
claims unknown to the Debtors, the Debtors also selected the Orange County
Register because (i) it had been providing extensive coverage of the Debtors
bankruptcy cases and, therefore, would reach unknown creditors who may have been
following the Debtors cases, A-235 A-236 (Hrg Tr. 93:18-94:1), and (ii) it was
circulated in the location in which the Debtors primary operations were based and
where its headquarters were located. A-252 (Hrg Tr. 110:1-7). Based on this
testimony, the Bankruptcy Court correctly noted that the Orange County Register
would have reached those who may have been reading it because that publication
was providing extensive coverage of the Debtors bankruptcy cases and was
circulated in the location in which the Debtors principal offices were located. The
District Court, however, failed to consider these facts.

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was constitutionally sufficient notice of the Bar Date. See Chemetron, 72 F.3d at
348-49.
In addition, part of the consideration in providing notice to unknown creditors
was the cost of publication, a factor considered by the Bankruptcy Court, but not
mentioned in the District Court Decision. See Vancouver, 820 F.2d at 1364 (cost is
a factor to consider when determining adequacy of notice). The testimony presented
to the Bankruptcy Court demonstrates that the Debtors considered the costs
associated with publication in choosing the Wall Street Journal and the Orange
County Register as the appropriate places to provide notice of the Bar Date. A-203
(Hrg. Tr. 61:11-16); A-142 (Uhland Declaration, 6(c)). The Debtors had limited
resources, and early administrative costs and expenses associated with noticing the
case and preparing the Debtors schedules of assets and liabilities and statements of
financial affairs were significant.

A-203 (Hrg. Tr. 61:11-16).

Additional

publication in dozens of locations where the Debtors had been conducting


business would have consumed a disproportionate share of the Debtors thenexisting limited assets. Id.; see Best Products, 140 B.R. at 358. Requiring the
Debtors to publish in a host of additional locations would have been onerous,
cumbersome and unduly expensive and is simply not required to comply with due
process. Id. Indeed, at the Evidentiary Hearing, the Bankruptcy Court specifically
considered and correctly rejected any argument that publication in additional

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locations was required to satisfy due process. A-312 A-313 (Hrg Tr. 170:19
171:1).
Facts similar to this case were addressed by the United States Bankruptcy
Court for the Eastern District of Virginia in In re Circuit City. In Circuit City, the
debtors, a national retail chain with stores throughout the United States, published
notice of the claims bar date in the national edition of the Wall Street Journal and
the Richmond Times-Dispatch, a local publication circulated where the debtors
corporate headquarters were located and where the majority of their employees
worked. See Gentry, 439 B.R. at 655. When the adequacy of such constructive
notice was challenged by certain unknown claimants, the court expressly held that
publication notice was sufficient where the bar date notice was published both in a
nationally circulated newspaper and in a newspaper circulated in the location where
the debtors headquarters were situated. See id. at 660-61 (Because notice by
publication was given to the unknown creditors, the notice was constitutionally
adequate.).
In this case, as in Circuit City, the Debtors published the Bar Date Notice in
both the national edition of the Wall Street Journal and a local publication which
had been covering the Debtors bankruptcy extensively and was circulated in the
region where the Debtors central offices were located and where virtually all of the
loans originated by the Debtors were processed. A-203; A-252 (Hrg. Tr. 61:1-4;

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110: 1-7); A-141 (Uhland Declaration, 6(a)). As publication notice in national


newspapers, supplemented with a local publication circulated in the region where a
debtors central offices are located, is widely accepted as constitutionally sufficient
to satisfy due process requirements, the Debtors publication of the Bar Date Notice
in this case was sufficient to satisfy the requirements of due process. See Chemetron,
72 F.3d at 349; Brown, 171 B.R. at 27. As such, the Bankruptcy Court correctly
concluded that the requirements of due process were satisfied.
Finally, the Bankruptcy Courts analysis necessarily included a discussion
about the nature and purpose of the claims bar date in bankruptcy cases. A-26; A35 A-36 (Global Constructive Notice Decision, p. 6, 15-16). The Bankruptcy
Court noted that an overriding principle in bankruptcy is finality, and a claims bar
date provides that finality. A-35. It protects the interests of the debtor and creditors
because it allows the debtor to reasonably assume that, after passage of the bar date,
all claimants have come forward to assert their claims. A-36 (internal quotations
and citations omitted). This allows the debtor to calculate its liabilities for purposes
of effectuating a chapter 11 plan and eventually pay its creditors based upon a
finalized pool of claims. A-36. Permitting late claims of unknown creditors to be
asserted solely because a claimant did not have actual knowledge of the bar date
would render publication notice a meaningless mechanism. A-36. Cognizant of the
purpose of a bar date and the finality it is designed to provide, the Bankruptcy Court

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correctly determined that the constructive notice provided by publication in a


national newspaper, as supplemented by publication in a local newspaper circulated
in the location of the Debtors central business operations, was constitutionally
sufficient.

The Bankruptcy Courts conclusion is well-reasoned based on the

credible facts before the Court and not an abuse of the Courts discretion.
B. The District Courts Holding is in Direct Contradiction to the
Record and Well-Established Law and Establishes a New, More
Onerous Standard for Satisfying Due Process
The District Courts decision fails to follow binding case law concerning the
sufficiency of nationwide notice of the Bar Date, makes certain findings that are not
supported by evidence, and imposes additional requirements that are not only
unrealistic but also are simply not necessary to satisfy due process.
The District Courts decision rests largely on the District Courts
unsubstantiated belief that the Debtors chosen publication, the Wall Street Journal,
was unlikely to have been read by unsophisticated persons and implies that the
Debtors borrowers were unsophisticated persons. A-19 A-20 (District Court
Decision, p. 13-14). These findings are not supported by the record in this case, and
no court has given credence to such an argument. Indeed, at least one court has taken
the direct opposite view. See Chicago, 112 B.R. at 922, 924 (N.D. Ill. 1990)
(rejecting claimants argument that notice of the bar date in the Wall Street Journal
was constitutionally insufficient because, due to their poor education, they had never

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heard of the Wall Street Journal). Moreover, no court has held that publication in
the Wall Street Journal is insufficient to reach a nationwide audience, and the
District Court acknowledges that the bankruptcy court did not abuse its discretion
in determining that a notice placed in The Wall Street Journal reached a nationwide
audience. A-19 (District Court Decision, p. 13, n.7).
The District Court, nonetheless, takes issue with the Wall Street Journal
because, according to the District Court, it does not enjoy broad circulation among
less than sophisticated readers.14 From a practical perspective, the District Courts
decision puts debtors in an untenable position of having to consider that which is
unknown, that is, the sophistication of its unknown creditors and what publications,
if any, they read. The requirements of due process do not require such an inquiry.
Rather, due process requires notice reasonably calculated to reach all interested
parties. Chemetron, 72 F.3d at 346. No case has held that nationwide notice was
insufficient because it failed to actually reach certain individuals, and in fact, at least
one court, quite rightly, has held precisely the opposite. See Charter, 113 B.R. at

14

It bears noting that the District Courts entire ruling is predicated upon the
notion, completely unsubstantiated by the record, that the Debtors borrowers were
unsophisticated and less than focused. Similarly unsubstantiated by the record
is the District Courts suggestion that the USA Today enjoys a broader circulation
among such less than sophisticated, focused readers. Finally, the District Courts
decision is entirely devoid of any legal authority establishing the appropriate
standard for determining when someone is less than sophisticated or what
newspapers are considered to be publications circulated among less than
sophisticated readers.
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728 (noting that the relevant inquiry is whether the party acted reasonably in
selecting means likely to inform persons affected, not whether each person actually
received notice); see also Silber v. Mabon, 18 F.3d 1449, 1453-54 (9th Cir. 1994)
(concluding that the standard for class notice is best practicable, rather than
actually received notice). The publication notice in this case was reasonably
calculated to reach the widest audience of unknown creditors and, therefore, satisfies
the requirements of due process.
The District Court Decision relies heavily on this Courts decision in Wright
v. Owens Corning, 679 F.3d 101 (3d Cir. 2012) when determining, in contradiction
to well-established law, that publication notice must be sufficient for various
groups of unknown claimants. A-18 A-19 (District Court Decision, p. 12-13).
However, the District Court applies an overbroad interpretation of this Courts
holding in Wright. In Wright, this Court confirmed that, publication notice in
national newspapers ordinarily is sufficient to satisfy due process for unknown
creditors, particularly if it is supplemented by notice in local newspapers. Wright,
679 F.3d at 107-08. However, the factual circumstances that informed this Courts
decision in Wright were entirely inapposite to this case. Wright involved a situation
where unknown creditors did not receive sufficient notice of a bar date because an
intervening change in the law, if applied retroactively, would have deprived them of

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an ability to assert a timely claim.15 On the other hand, this case involves a simple
situation in which the publication notice of the bar date has been invalidated because
it was allegedly unlikely to reach unsophisticated unknown creditors. What
Wright decidedly does not do is create different classes of unknown creditors entitled
to different treatment.

Simply, Wright, does not support the District Courts

decision.
Finally, the District Courts decision, if upheld, has the potential to invalidate
on due process grounds every bar date order that provides for similar publication.
Specifically, in similar bankruptcy cases involving sub-prime lenders, originators,
and/or servicers, bankruptcy courts both within this Circuit and elsewhere have
approved publication notices quite similar to the notice provided in this case. See,
e.g., In re Credit-Based Asset Servicing and Securitization, LLC, Case No. 10-16040

15

At the time the claimants in Wright received constructive notice of the bar
date, the then-prevailing test for determining if a claim had arisen was governed by
this Courts decision in Avellino & Bienes v. M. Frenville Co. (Matter of M.
Frenville Co.), 744 F.2d 332 (3d Cir. 1984). Under Frenville, the claimants in
Wright did not hold claims, and therefore, would not have taken any action to ensure
that their interests were protected. Wright, 679 F.3d at 108. After Frenville was
overruled by this Court in JELD-WEN, Inc. v. Van Brunt (In re Grossmans Inc., et
al.), 607 F.3d 114 (3d Cir. 2010), under the new test pronounced in Grossmans, the
Wright claimants held claims which would have been discharged by the
confirmation order if Grossmans was applied retroactively. To avoid this result,
which would have deprived the Wright claimants of the ability to assert claims
without having been provided constitutionally sufficient notice, this Court held in
Wright that, for this limited class of unknown creditors, publication notice was
insufficient.
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(Bankr. S.D.N.Y. Dec. 9, 2010) (approving publication once in the Wall Street
Journal at least 28 days prior to the bar date for nationwide securitizer and servicer
of mortgage loans);16 Order Pursuant to Section 502(b)(9) of the Bankruptcy Code
and Bankruptcy Rule 3003(c)(3) Establishing the Deadline for Filing Proofs of
Claim, Approving the Form and Manner of Notice Thereof and Approving the Proof
of Claim Form, In re Lehman Brothers Holdings, Inc., Case No. 08-13555 (Bankr.
S.D.N.Y. July 2, 2009) (approving publication notice for pre-petition claims,
excluding program securities claims, once in two international newspapers and the
Financial Times for the largest chapter 11 case ever filed); Order Establishing
Deadline for Filing Proofs of Claim and Approving the Form and Manner of Notice
Thereof,; Order Establishing Bar Dates for Filing Proofs of Claim and Approving
the Form, Manner and Notice Thereof, In re Delta Financial Corporation, Case No.
07-11880 (Bankr. D. Del. Mar. 19, 2008) (approving publication once in national
newspaper and a newspaper in the location of debtors headquarters); Order
Pursuant to Bankruptcy Rule 3003(c)(3) and Local Rule 2002-1(e) Establishing Bar
Dates for Filing Proofs of Claim and Approving the Form and Manner of Notice

16

In a decision dated December 9, 2014, the Bankruptcy Court for the Southern
District of New York sustained a claim objection on the grounds that the claimants,
also homeowner-mortgagors like the Appellees, did not file their claims prior to the
expiration of the bar date. See In re Credit-Based Asset Servicing and Securitization,
LLC, Case No. 10-16040, 2014 Bankr. LEXIS 4958, at *7 (Bankr. S.D.N.Y. Dec. 9,
2014). The Bankruptcy Court there concluded that the claimants were unknown
creditors who received sufficient publication notice of the bar date. Id. at*6.
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Thereof, In re Am. Home Mtg. Holdings, Inc., Case No. 07-11047 (Bankr. D. Del.
Oct. 30, 2007) (approving publication notice in one national and two local
newspapers for nationwide originator of mortgage loans).
In sum, the Bankruptcy Courts decision accurately finds that the publication
notice provided in this case was constitutionally sufficient. Given that the District
Court Decision directly contradicts well-established principles of due process as it
relates to constructive notice and, instead, imposes requirements that simply are not
legally required to comply with due process standards, the District Courts legal
conclusions are incorrect, and the Bankruptcy Courts decision should be reinstated.
IV.

THE DISTRICT COURTS SUGGESTION THAT NOTICE WAS


INSUFFICIENT NOTWITHSTANDING THE DEBTORS
COMPLIANCE WITH FED. R. BANKR. P. 2002(A)(7) IS
REVERSIBLE ERROR
The District Court suggests that notice was insufficient because it was not

geographically widespread enough in light of the fact that the notice was published
39 days prior to the claims bar date. A-20 (District Court Decision, p. 14, n.8). The
District Court cites to no authority for this conclusion, nor does the District Court
acknowledge Fed. R. Bankr. P. 2002(a)(7), which provides that notice of a claims
bar date is sufficient if it is provided at least 21 days prior to the bar date.
The Bankruptcy Court for the Southern District of New York recently upheld
as valid a similar publication with nearly identical timing. See In re BGI, Inc., 476
B.R. 812, 823-24 (Bankr. S.D.N.Y. 2012). There, the bankruptcy court entered an
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order on April 8, 2011 establishing June 1, 2011 as the bar date. Id. at 815-16. The
notice was published on April 25, 2011, or 37 days prior to the bar date. Id. at 816.
The bankruptcy court held that the publication notice complied with the
requirements of the bar date order, the Bankruptcy Rules, and due process. Id. at
823-24. The District Courts observation concerning the timing of publication
contradicts the Bankruptcy Rules and creates a vague requirement for enhanced
notice that is not necessary to comply with due process. Id. at 824 (Notice beyond
this was not required, nor should it have been expected.). Allowing the District
Courts conclusion to stand would render Fed. R. Bankr. P. 2002(a)(7) meaningless.
V.

THE DISTRICT COURT IMPROPERLY CONCLUDED THAT THE


BANKRUPTCY COURT DID NOT MEANINGFULLY CONSIDER
THE ADEQUACY OF THE NOTICE PROVIDED
Finally, in light of the extensive record on which the Bankruptcy Court based

its well-reasoned decision, the District Courts conclusion that the adequacy of the
notice provided was not meaningfully explored is reversible error.

The

Bankruptcy Court held a full-day Evidentiary Hearing at which the Bankruptcy


Court considered evidence and testimony provided by Debtors counsel and the
Trustee. That evidence provided factual and evidentiary support for the Trustees
legal argument that the publication notice of the Bar Date was constitutionally
sufficient in this case. As indicated above, the Bankruptcy Court considered critical
factual testimony that the District Court either overlooked or disregarded in its

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decision. For example, the Bankruptcy Court considered Ms. Uhlands testimony
concerning the Debtors consideration of the borrowers and their desire to provide
nationwide notice to reach all unknown creditors. The Bankruptcy Court also
considered Ms. Uhlands testimony which established that the Orange County
Register was chosen not only because the Debtors wanted to ensure adequate notice
to former employees (which is where the District Courts analysis ends), but also
because it was a newspaper circulated in the region in which the Debtors central
offices were located and was providing extensive coverage of the Debtors
bankruptcy. The Bankruptcy Court correctly considered these facts, which amply
support the Bankruptcy Courts factual findings and sound legal conclusions.
The Bankruptcy Court also considered legal arguments that the District Court
did not address. Specifically, the Bankruptcy Court considered the arguments and
testimony presented in connection with the cost of publication and the Debtors
consideration of same concerning their reasoning on where and how to provide
publication notice. The District Court Decision makes no mention of this point,
notwithstanding the fact that well-established case law considers such facts to be
relevant in establishing a framework in which the cost of publication must be
balanced against the courts and the debtors obligation to existing creditors. See
Vancouver, 820 F.2d at 1364. The District Courts review of the Bankruptcy Courts
decision, therefore, is incomplete and should be reversed.

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CONCLUSION
For the foregoing reasons, Appellant respectfully requests that the Court
reverse the District Courts decision and reinstate the Bankruptcy Courts decision
concluding that the constructive notice of the claims bar date provided by publication
was sufficient to satisfy the requirements of due process.
Dated: January 12, 2015
HAHN & HESSEN LLP

BLANK ROME LLP

Mark S. Indelicato
Edward L. Schnitzer
Christopher J. Hunker
488 Madison Avenue
New York, New York 10022
Telephone: (212) 478-7200
Facsimile: (212) 478-7400

/s/ Bonnie Glantz Fatell


Bonnie Glantz Fatell (No. 3809)
Michael D. DeBaecke (No. 3186)
Alan M. Root (No. 5427)
1201 N. Market Street, Ste. 800
Wilmington, Delaware 19801-1254
Telephone: (302) 425-6400
Facsimile: (302) 425-6464

Co-Counsel for Appellant Alan M. Jacobs, in his capacity as Liquidating Trustee


of the New Century Liquidating Trust

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COMBINED CERTIFICATION
I, Bonnie Glantz Fatell, whose name appears on the foregoing Opening Brief
for Appellant Alan M. Jacobs, in his capacity as Liquidating Trustee of the New
Century Liquidating Trust, certifies as follows:
Certification of Admission-Bar Membership
I am admitted to practice before the United States Court of Appeals for the
Third Circuit and am a member in good standing.
Certificate of Compliance With F.R.A.P. 32(A)
The foregoing Opening Brief was prepared on a computer using a Microsoft
Word 2010 word processing program and complies with the typeface-style-volume
limitation because,
A proportionally spaced typeface was used, as follows:
Name of Typeface:

Times New Roman

Point Size:

14 point font

Line Spacing

Double Spacing

The Total number of words in the brief, inclusive of point headings and
footnotes, and exclusive of pages containing the table of contents, table of citations,
certification of bar membership, certification of service, certificate of compliance
and virus check, or any authorized addendum containing statutes, rules, and
regulations, etc., is 9,686.

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Certification of Service upon the Appellant


I have caused the Opening Brief for Appellant and the Appendix to be
electronically filed and to be sent to the following persons:
Ralph N. White
Molly S. White
5948 Doraville Drive
Port Orange, FL 32127
Certification of Identical Compliance and Virus Check Pursuant to Rule 31.1
The Text of the e-brief filed on January 12, 2015, and the text of the hard
copies of the Opening Brief filed by Appellant, are identical. A virus check was
performed on the e-brief and no viruses have been detected.
Dated:

January 12, 2015


Wilmington, Delaware
By:

46

Bonnie Glantz Fatell


Bonnie Glantz Fatell

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APPENDIX
VOLUME I OF II (Pages A-1 to A-38)

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Table of Contents
Page
VOLUME I
Notice of Appeal, Dated September 15, 2014,
with Certificate of Service.......................................................

A-1

Order of the Honorable Sue L. Robinson, U.S.D.J.,


Dated August 19, 2014, Appealed From .................................

A-5

Memorandum Opinion of the Honorable Sue L. Robinson,


U.S.D.J., Dated August 19, 2014 ............................................

A-6

Memorandum of the Honorable Kevin J. Carey, U.S.B.J.,


Dated August 30, 2013 ............................................................ A-21
Order of the Honorable Kevin J. Carey, U.S.B.J.,
Dated August 30, 2013 ............................................................ A-38
VOLUME II
District Court Docket Entries ...................................................... A-39
Motion, by Debtors and Debtors in Possession, for an Order
Establishing Bar Dates for Filing Proofs of Claim and
Approving Form, Manner and Sufficiency of Notice
Thereof, Dated June 8, 2007 ................................................... A-43
Notice of Motion and Hearing, by Debtors and Debtors
in Possession, Dated June 8, 2007........................................... A-55
Exhibit A to Motion Proposed Order Establishing Bar Dates for Filing Proofs
of Claim and Approving Form, Manner and Sufficiency
of Notice Thereof, Undated, and Filed on June 8, 2007 ......... A-57
Exhibit B to Motion Proposed Notice of Bar Dates for Filing of Proofs of Claim,
Undated, and Filed on June 8, 2007 ........................................ A-65
Exhibit C to Motion Form of Proof of Claim, Undated, and Filed on
June 8, 2007 ............................................................................ A-72
Exhibit D to Motion Proposed Notice of Deadline for the Filing of Proofs
of Claim, Undated, and Filed on June 8, 2007 ........................ A-76

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ii

Page
Order Establishing Bar Dates for Filing Proofs of Claim and
Approving Form, Manner and Sufficiency of Notice
Thereof, Dated June 28, 2007 ................................................. A-79
Exhibit A to Order Proposed Notice of Bar Dates and Notice of Deadline
for the Filing of Proofs of Claim, Undated,
and Filed on June 28, 2007 ..................................................... A-87
Declaration of Jamie L. Edmonson, Dated July 9, 2007 ............. A-96
Exhibit A to Edmonson Declaration Notice of Bar Dates for Filing of Proofs of Claim,
Dated June 28, 2007 ................................................................ A-97
Exhibit B to Edmonson Declaration Proof of Claim, Undated, and Filed on July 9, 2007............... A-104
Exhibit C to Edmonson Declaration First Class Service List............................................................ A-107
Affidavit of Glenn Hellums Jr., Sworn to July 23, 2007,
with Attachment ...................................................................... A-115
Affidavit of Julie Trammell, Sworn to July 23, 2007,
with Attachment ...................................................................... A-118
Memorandum of the Honorable Kevin J. Carey, U.S.B.J.,
Dated June 7, 2011 .................................................................. A-122
Declaration of Suzzane Uhland, for Debtors and Debtors in
Possession, in Support of Motion Establishing Bar Dates for
Filing Proofs of Claim and Approving Form, Manner and
Sufficiency of Notice Thereof, Dated March 30, 2012 ........... A-136
Transcript of Hearing Held before the Honorable
Kevin J. Carey, U.S.B.J., Dated May 23, 2012 ....................... A-143
Appellants Designation of Items to Be Included in the Record
on Appeal and Statement of Issues on Appeal,
Dated September 29, 2014 ...................................................... A-416

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Case 1:13-cv-01719-SLR Document 20 Filed 09/15/14 Page 1 of 3 PagelD #: 163

IN THE UNITED STATES DISTRICT COURT


FOR THE DISTRICT OF DELAWARE
In re:

)
)

NEW CENTURY TRS HOLDINGS, INC., et al., 1


Debtors.

MOLLY S. WHITE and RALPH N. WHITE,


Appellant,

v.

)
)
)
)
)
)
)

Bankruptcy Case No. 07-10416 (BLS)


(Jointly Administered)

Civil Action No. 13-1719 (SLR)

ALAN M. JACOBS, as liquidating trustee of the


New Century Liquidating Trust,

)
)
)
)

Appellee.

NOTICE OF APPEAL TO THE UNITED STATES


COURT OF APPEALS FOR THE THIRD CIRCUIT
Notice is hereby given that defendant-appellee, Alan M. Jacobs, in his capacity as
liquidating trustee of the New Century Liquidating Trust, hereby appeals to the United States
Court of Appeals for the Third Circuit from the Order of the United States District Court for the
District of Delaware (Hon. Sue L. Robinson), entered in this bankruptcy appeal on August 20,

The pre-confirmation Debtors were the following entities: New Century Financial Corporation (f/k/a New
Century REIT, Inc.), a Maryland corporation; New Century TRS Holdings, Inc. (f/k/a new Century Financial
Corporation), a Delaware corporation; New Century Mortgage Corporation (f/k/a JBE Mortgage) (d/b/a NCMC
Mortgage Corporate, New Century Corporation, New Century Mortgage Ventures, LLC), a California corporation;
NC Capital Corporation, a California corporation; Homel23 Corporation (f/k/a The Anyloan Corporation,
i800anyioan.com, Anyioan.com), a Caiifornia corporation; New Century Credit Corporation (fi'k/a Worth Funding
Incorporated), a California corporation; NC Asset Holding, L.P. (f/k/a NC Residual II Corporation), a Delaware
limited partnership; NC Residual III Corporation, a Delaware corporation; NC Residual IV Corporation, a Delaware
corporation; New Century R.E.O. Corp., a California corporation; New Century R.E.O. II Corp., a California
corporation; New Century R.E.O. III Corp., a California corporation; New Century Mortgage Ventures, LLC (d/b/a
Summit Resort Lending, Total Mortgage Resource, Select Mortgage Group, Monticello Mortgage Services, Ad
Astra Mortgage, Midwest Home Mortgage, TRA TS Financial Services, Elite Financial Services, Buyers Advantage
Mortgage), a Delaware limited liability company; NC Deltex, LLC, a Delaware limited liability company; NCoral,
L.P., a Delaware limited partnership; and New Century Warehouse Corporation, a California corporation.

130566.01600/40212291 v.1

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2014 [D.I. 19], vacating the order of the United States Bankruptcy Court for the District of
Delaware (Hon. Kevin J. Carey) entered in the bankruptcy case on August 30, 2013 [Bankr. D.I.
11234].
The parties to the Order appealed from and their names and addresses (including counsel,
if applicable) are as follows:
Plaintiff-Appellant, Molly S. White and Ralph N. White

5948 Doraville Drive


Port Orange, FL 32127
Defendant-Appellee, Alan M. Jacobs. as liquidating trustee of the New Century
Liquidating Trust

Bonnie Glantz Fatell, Esq.


Aian M. Root, Esq.
BLANK ROME LLP
1201 Market Street, Suite 800
Wilmington, Delaware 1980 I
Tel: (302) 425-6400
-andMark S. Indelicato, Esq.
Edward L. Schnitzer, Esq.
Christopher J. Hunker, Esq.
HAHN & HESSEN LLP
488 Madison Avenue
New York, New York 10022
Tel: (212) 478-7200
Dated: September 15, 2014
BLANK ROME LLP

By: Isl Alan M Root


Bonnie Glantz Fatell (No. 3809)
Alan M. Root (No. 5427)
1201 Market Street, Suite 800
Wilmington, Delaware 19801
(302) 425-6400 - Telephone
2
130566.01600/40212291 v.1

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(302) 425-6464 - Facsimile


- andHAHN & HESSEN LLP
488 Madison A venue
New York, New York 10022
(212) 478-7200 -Telephone
(212) 478-7400 - Facsimile
Attn: Mark S. Indelicato, Esq.
Edward L. Schnitzer, Esq.
Christopher J. Hunker, Esq.

Co-Counsel to the New Century Liquidating Trust


Defendant-Appellant

3
130566.01600/40212291 v.1

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CERTIFICATE OF SERVICE

I, Alan M. Root, hereby certify that on a September 15, 2014, I caused a copy of the
Notice of Appeal to the United States Court of Appeals for the Third Circuit to be served

upon the parties listed below via first class mail and e-mail.
Ralph N. White
Molly S. White
5948 Doraville Drive
Port Orange, FL 32127
Rawhit3 3@ao I.com

Isl Alan M Root


Alan M. Root (No. 5427)

130566.0I 600/40212293v. I

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IN THE UNITED STATES DISTRICT COURT


FOR THE DISTRICT OF DELAWARE
In re:
NEW CENTURY TRS HOLDINGS, INC.,
a Delaware Corporation, et al.,
Debtors.

)
)
}
}
}

Chapter 11
Bankr. No. 07-10416-BLS
Jointly Administered

MOLLY S. WHITE and RALPH N. WHITE,


Appeiiants,

v.
ALAN M. JACOBS, as liquidating trustee
of the New Century Liquidating Trust,
Appellee.

)
)
)
)
)
)
)
)

Civ. No. 13-1719-SLR

ORDER
At Wilmington this ~day of August, 2014, consistent with the memorandum
opinion issued this date;
IT IS HEREBY ORDERED that the bankruptcy court's August 30, 2013 order is

vacated, and the matter is remanded for further proceedings.

UNITED STASDJSTRICT JUDGE

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IN THE UNITED STATES DISTRICT COURT


FOR THE DISTRICT OF DELAWARE
In re:
NEW CENTURY TRS HOLDINGS, INC.,
a Delaware Corporation, et al.,

Chapter 11
Bankr. No. 07-10416-BLS
Jointly Administered

Debtors.
MOLLY S. WHITE and RALPH N. WHITE,
Civ. No. 13-1719-SLR

Appeiiants,

v.
ALAN M. JACOBS, as liquidating trustee
of the New Century Liquidating Trust,
Appellee.

Molly S. White and Ralph N. White, Port Orange, Florida. Prose Appellants.
Bonnie Glantz Fatell and Alan M. Root, Esquires, Blank Rome LLP, Wilmington,
Delaware. Counsel for Appellee.

MEMORANDUM OPINION

Dated: August 1q , 2014


Wilmington, Delaware

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kiJsl/~udge
I. INTRODUCTION
Appellants Molly S. White and Ralph N. White ("White") ("appellants") filed this
bankruptcy appeal on October 18, 2013. (D.I. 1) They appear prose. The appeal
arises from an order entered by the bankruptcy court on August 30, 2013, that
determined debtors complied with the bankruptcy court's order establishing bar dates
for filing proofs of claim and approving the form, manner. and sufficiency of the notice
as applied to unknown creditors. The court has jurisdiction to hear an appeal from the
bankruptcy court pursuant to 28 U.S.C. 158(a).

!!. BACKGROUND
Appellants entered into a consumer mortgage loan transaction that closed on or
about July 26, 2006. White v. New Century TRS Holdings, Inc., Adv. No. 10-55357BLS, D.I. 59. 1 In April 2007, New Century TRS Holdings, Inc. ("TRS Holdings") and its
affiliates (collectively, "debtors"2) filed chapter 11 bankruptcy petitions in the United
1

The lead case (07-10416) and adversary proceeding were originally assigned to
United States Bankruptcy Judge Kevin J. Carey. The cases were reassigned to United
States Bankruptcy Chief Judge Brendan Linehan Shannon on January 31, 2014.
(Bankr. No. 07-10416-BLS, D.I. 11340)
2

Debtors are the following entities: New Century Financial Corporation (f/k/a New
Century REIT, Inc.), a Maryland corporation; New Century TRS Holdings, Inc. (f/k/a
New Century Financial Corporation), a Delaware corporation; New Century Mortgage
Corporation (f/k/a JBE Mortgage) (d/b/a NCMC Mortgage Corporate, New Century
Corporation, Nevi Centur7 Mortgage Ventures, LLC), a California corporation; NC
Capital Corporation, a California corporation; Home123 Corporation (f/k/a The Anyloan
Corporation, 1800anyloan.com, Anyloan.com), a California corporation; New Century
Credit Corporation (f/k/a Worth Funding Incorporated), a California corporation; NC
Asset Holding, L.P. (f/k/a NC Residual II Corporation), a Delaware limited partnership;
NC Residual Corporation, a Delaware corporation; NC Residual IV Corporation, a
Delaware corporation; New Century R.E.O. Corp., a California corporation; New
Century R.E.O. II Corp., a California corporation; New Century R.E.O. Ill Corp., a
California corporation; New Century Mortgage Ventures, LLC (d/b/a Summit Resort

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States Bankruptcy Court for the District of Delaware ("bankruptcy court") in Bankr. No.
07-10416-BLS (the "bankruptcy proceeding"). See In re New Century TRS Holdings,
Inc., 407 B.R. 675 (D. Del. 2009). On June 8, 2007, debtors filed a motion pursuant to
Fed. R. Bankr. P. 2002, 3003(c)(3), and 9007, asking the bankruptcy court to fix the
time within which proofs of claim may be filed ("debtors' bar date motion"). (Bankr. No.
07-10416-BLS at D.I. 1173) On June 28, 2007, the bankruptcy court entered an order
{the "bar date order") that established August 31, 2007 at 5:00 p.m. (prevailing Pacific
Time) as the deadline for filing proofs of claim in the chapter 11 case (the "bar date").

(Id. at D.I. 1721) On July 9, 2007, debtors' claims and noticing agent, Xroads Case
Management Service LLC ("claims agent") filed a declaration of service, stating that it
mailed a copy of the notice of bar date (the "bar date notice") and a proof of claim form
substantially similar to Official Form No. 10 to "parties listed on the master mailing
matrix as set forth on a list maintained by debtors' counsel." (Id. at D.I. 1861) On
August 3, 2007, the claims agent filed affidavits of publication stating that the bar date
notice was published in the national edition of The Wall Street Journal and The Orange
County Register on July 23, 2007. (Id. at D.I. 2148, D.I. 2149)
On November 22, 2008, appellants filed claim 4073, and later, on or about
January 21, 2009, they filed claim numbers 4074 and 4080 in debtors' bankruptcy

Lending, Total Mortgage Resource, Select Mortgage Group, Monticello Mortgage


Services, Ad Astra Mortgage, Midwest Home Mortgage, TRATS Financial Services,
Elite Financial Services, Buyers Advantage Mortgage), a Delaware limited liability
company; NC Deltex, LLC, a Delaware limited liability company; and NCoral, L.P., a
Delaware limited liability partnership. (bankruptcy proceeding, 0.1. 8254 at 1 n.1)
"Debtors" also include New Century Warehouse Corporation (a/k/a Access Lending), a
California corporation, which filed its voluntary chapter 11 petition on August 3, 2007.
(Id.)

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case. 3 (Adv. No. 10-55357-BLS, D.I. 59) On November 20, 2009, the bankruptcy court
entered an order confirming the modified second amended joint chapter 11 plan of
liquidation that adopted, ratified and confirmed the New Century Liquidating Trust
Agreement, dated as of August 1, 2008, which created the New Century Liquidating
Trust and appointed Alan M. Jacobs as Liquidating Trustee of New Century Liquidating
Trust and Plan Administrator of New Century Warehouse Corporation ("Trustee"). (Id.

at 9905, 9957}
On August 13, 2010, the Trustee filed an objection to appellants' claims on the
grounds they lacked merit and were filed after the bar date. (Adv. No. 10-55357-BLS,
D.I. 59) On November 10, 2010, appellants filed adversary proceeding White v. New
Century TRS Holdings, Adv. No. 10-55356-BLS. Disputes regarding appellants' claims
and the adversary proceeding complaint were consolidated in a scheduling order that
was entered in the adversary proceeding on December 13, 2010. (Id. at D.I. 9) On
June 7, 2011, the bankruptcy court granted in part and denied in part the Trustee's
motion to dismiss appellant's adversary complaint. (Id. at D.I. 59, 60) The bankruptcy
court stated, "(a]lthough the [d]ebtors arguably complied with the stated minimum
requirements of the [b]ar [d]ate [o]rder, without a more fully developed factual record, I
am unable to determine whether the publication notice was reasonably calculated to
provide notice to consumer mortgagors like the Whites. At this stage in the proceeding,
the Trustee has not met his burden of proving that publication in one national edition

The bankruptcy court believes that claim numbers 4074 and 4080 are
duplicative of claim number 4073. (Adv. No. 10-55357-BLS, D.I. 59)

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newspaper and one local newspaper is sufficient to meet due process requirements as
applied to the Whites as unknown creditors." (Id. at D.I. 59 at 14)
In July 2011, Helen Galope ("Galope") filed proof of claim number 4131, objected
to by the Trustee, and an evidentiary hearing was held on December 13, 2011 to
determine whether the claim should be disallowed as filed after the claims bar date.
(Bankr. No. 07-10416-BLS at D.I. 11256) On February 7, 2012, the bankruptcy court

entered a memorandum and order that disa!lm1ed and expunged Ga!ope's claim. (Id.
at 10725, 10726) The February 7, 2012 memorandum and order determined, in part,
that debtors' publication of the bar date notice in the national edition of The Wall Street
Journal, supplemented with notice in The Orange County Register, was constitutionally
adequate for Galope, who was an unknown creditor at the time the bar date notice was
served. The bankruptcy court subsequently denied two motions for reconsideration of
the February 7, 2012 order filed by Galope. (Id. at D.I. 10742, 11256)
On April 2, 2012, the Trustee filed a global constructive notice motion seeking a
determination that the debtors had: (1) complied with the requirements of the
bankruptcy court's June 28, 2007 order establishing bar dates for filing proofs of claim
and approving form, manner and sufficiency of notice; and (2) provided constructive
notice of the bar date by publication that satisfied the requirements of due process for
all unknown creditors. (Id. at D.I. 10824) The Trustee sought an order consistent with
the February 7, 2012 Ga!ope decision and first reconsideration order that concluded
debtors' publication notice of the bar date complied with the requirements set forth in
the bar date order and satisfied the requirements of due process for unknown creditors.
On April 18, 2012, appellants (and others) filed an objection to the global constructive

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notice motion and, on April 20, 2012, the Trustee filed an omnibus reply in further
support of the motion and in response to the objections filed by the Whites and other
pro se litigants. (Id. at D. I. 10841, 10853)
The bankruptcy court held an evidentiary hearing on the matter on May 23, 2012.
(Id. at 10916) White appeared at the hearing but, due to his scheduled flight home,

was unable to fully participate in the hearing. (Id. at 10916 at 145). During the hearing,
VVhite was told that this was his opportunity to crnss-examine witnesses. (Id. at 145-46)
The matter was taken under advisement and, on August 30, 2013, the bankruptcy court
entered an order finding that debtors had complied with the requirements of the bar
date order, and that debtors had published the bar date notice in a manner that was
"reasonably calculated, under the circumstances, to apprise interested parties
nationwide of the bar date and afford them an opportunity to file claims". (Id. at D.I.
11233, 11234). The bankruptcy court specifically stated that the memorandum
"addresses only the constitutional sufficiency of the publication of the bar date notice as
it applies to unknown creditors," that it made no "determination about whether particular
creditors were unknown creditors or known creditors entitled to actual notice," that it did
not "address whether any particular individual claimants have met the requirements of
excusable neglect for a late-filed proof of claim," and that the decision did not "address
the merits of any underlying borrower claims." (Id. at 11233 at 4-5 n.9, 15) The order is
the subject of this appeal.

Ill. STANDARD OF REVIEW


In undertaking a review of the issues on appeal, the court applies a clearly
erroneous standard to the bankruptcy court's findings of fact and a plenary standard to

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that court's legal conclusions. See American Flint Glass Workers Union v. Anchor

Resolution Corp., 197 F.3d 76, 80 (3d Cir. 1999). With mixed questions of law and fact,
the court must accept the bankruptcy court's "finding of historical or narrative facts
unless clearly erroneous, but exercise[s] 'plenary review of the [bankruptcy] court's
choice and interpretation of legal precepts and its application of those precepts to the
historical facts."' Mellon Bank, N.A. v. Metro Commc'ns, Inc., 945 F.2d 635, 642 (3d
Cir. 1991) (citing Universal Minerals, Inc. v. C.A. Hughes & Co., 669 F.2d 98, 101-02
(3d Cir. 1981 )). The district court's appellate responsibilities are further informed by the
directive of the United States Court of Appeals for the Third Circuit, which effectively
reviews on a de novo basis bankruptcy court opinions. See In re Hechinger, 298 F.3d
219, 224 (3d Cir. 2002); In re Telegroup, 281 F.3d 133, 136 (3d Cir. 2002). A factual
finding is clearly erroneous when "the reviewing court on the entire evidence is left with
the definite and firm conviction that a mistake has been committed." In re Cellnet Data

Sys., Inc., 327 F.3d 242, 244 (3d Cir. 2003) (citing United States v. United States
Gypsum Co., 333 U.S. 364, 395 (1948)). "Findings of fact, whether based on oral or
documentary evidence, shall not be set aside unless clearly erroneous, and due regard
shall be given to the opportunity of the bankruptcy court to judge the credibility of the
witness." Fed. R. Bankr. P. 8013.

IV. ISSUES RAISED ON APPEAL

(1) whether the bankruptcy court abused its discretion by assuming


without competent evidentiary support that the publication notice of the
bar date placed in the national edition of The Wall Street Journal was in
fact distributed nationwide throughout the United States when the
declaration of the advertising clerk specifically declares and limits such

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published and general circulation to (3) three locations, New York, New
York, DePage County, Illinois and Dallas, Texas;
(2) whether the bankruptcy court erred in considering the declaration of
Suzzanne Uhland CUUhland") despite contradiction in the declarant's
testimony and evidence on record that the declaration was not based on
the declarant's personal knowledge;

(3) whether the bankruptcy court misapplied the controlling law in effect
pertaining to the claims process and noticing as articulated in Wright v.
Owens Coming, 679 F.3d 101 (3d Cir. 2012), cert. denied, _U.S._, 133
S.Ct. 1239 (2013);
(4) whether the bankruptcy court erred in permitting and allowing one
group of potential unknown creditors to be treated differently as it pertains
to the right to receive the bar date notice than another group of potential
unknown creditors; and
(5) whether the bankruptcy court abused its discretion to exclude relevant
evidence presented at the May 23, 2012 hearing pertinent to the
reasonableness of debtors' publication of the bar date notice.
Appellee's counter-statement raises four issues on appeal (D.I. 3):
(1) whether the bankruptcy court made a clear error in its finding in the
memorandum and order that the debtors complied with the terms of the
bar date order;

(2) whether the bankruptcy court abused its discretion in considering the
declaration and testimony of the debtors' former lead counsel in making
its determination in the memorandum and order that the debtors
considered publications that would provide nationwide notice of the bar
date to apprise all interested parties such that constitutional requirements
of due process were satisfied;
(3) whether the appellants waived their rights to challenge the bankruptcy
court's alleged exclusion of evidence presented at the May 23, 2012
evidentiary hearing where the appellants failed to request the admission
of such evidence; and
(4) whether there is a credible challenge to the bankruptcy court's
determination in the memorandum and order that the constructive notice
of the bar date provided by publication, including the size, placement, and
manner thereof, was reasonably calculated, under the circumstances, to
apprise all interested parties nationwide such that constitutional
requirements of due process were satisfied.

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V. DISCUSSION
Appellants raise a number of issues that challenge the ruling of the bankruptcy
court on the grounds that the bankruptcy court abused its discretion, erred, and
misapplied the law. Appellants contend that they were entitled to receive actual notice
of the bar date and, because they were not, they were not afforded due process. That
issue, however, is not before the court. As discussed by the bankruptcy court, the
August 30, 2013 order was iimited soieiy to the issue of the constitutionai sufficiency of
the publication of the bar date notice as applied to unknown creditors. No ruling was
made on the issue of whether any particular creditors were entitled to receive actual
notice. Appellants further contend that the constructive notice was insufficiently
published to provide unknown creditors with any meaningful opportunity to participate in
debtors' chapter 11 proceedings.

A. Unknown Creditors and Notice


An "unknown" creditor is one whose "interests are either conjectural or future or,
although they could be discovered upon investigation, do not in due course of business
come to knowledge [of the debtor]." Chemetron Corp. v. Jones, 72 F. 3d 341, 346 (3d
Cir. 1995) (quoting Mullane

v. Central Hanover Bank & Trust Co., 339 U.S. 306, 317

(1950)). Notice is "[a]n elementary and fundamental requirement of due process in any
proceeding which is to be accorded finality .... " Mullane, 339 U.S. at 314. Whether
adequate notice has been provided depends on the circumstances of a particular case.
In re Grossman's, Inc., 607 F.3d 114, 127 (3d Cir. 2010). Due process requires "notice
reasonably calculated, under all the circumstances, to apprise interested parties of the
pend ency of the action and afford them an opportunity to present their objections."

Wright v. Owens Coming, 679 F.3d at 108 (quoting Mullane, 339 U.S. at 314). "Lack or
8

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inadequacy of notice of a bankruptcy prevents a claimant from having the opportunity to


participate meaningfully in a bankruptcy proceeding to protect his or her claim." Wright

v. Owens Coming, 679 F.3d at 107 (citing 11 U.S.C. 342(a) ("There shall be given
such notice as is appropriate ... of an order for relief ... under [the Bankruptcy
Code].")). Inadequate notice accordingly "precludes discharge of a claim in
bankruptcy." Chemetron, 72 F.3d at 346.
it is weii settied that constructive notice of the ciaims bar date by pubiication
satisfies the requirements of due process for unknown creditors. Id. at 348. Publication
in national newspapers is regularly deemed sufficient notice to unknown creditors,
especially when supplemented with notice in papers of general circulation in locations
where the debtor is conducting business. Id. at 348; see also City of New York v. New

York, N.H. & H.R. Co., 344 U.S. 293, 296 (1953) ("Notice by publication is a poor and
sometimes a hopeless substitute for actual service of notice. Its justification is difficult
at best. ... But when the names, interests and addresses of persons are unknown,
plain necessity may cause a resort to publication.").
The bar date order provided for debtors to cause the publication notice to be
published once in the national edition of The Wall Street Journal and any such other
local publications as debtors deemed appropriate not less than thirty days prior to the
general bar date. (Bankr. No. 07-10416-BLS, D.I. 1729 ~ 18) Debtors published notice
of the bar date in The VVall Street Joumal and The Orange County Register on July 23,
2007.

B. Evidence Considered by the Bankruptcy Court


In its August 30, 2013 ruling, the bankruptcy court referred to its prior February 7,
2012 memorandum and order wherein it considered the testimony of Uhland, debtors'

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former lead counsel, regarding the decision-making behind the publication of the bar
date notice with regard to Galope, an unknown creditor, and found the publication in the
national edition of The Wall Street Journal supplemented with notice in The Orange
County Register passed constitutional muster. {Bankr. No. 07-10416-BLS, D.I. 11233
at 4) In addition, the bankruptcy court considered the May 23, 2012 testimony
presented by Uhland as well as a declaration she submitted in support of the bar date
motion. That evidence inciuded Uh land's testimony and declaration that notice of the
bar date was published in the national edition of The Wall Street Journal because
debtors had business operations throughout the United States and publication in a
newspaper that was published and available nationwide would provide notice to
unknown creditors {whether institutional or individual) as broadly as possible throughout
the country. (Id. at D.I. 10825, ex. Uhland decl. at ,-r,-r 5(b), (d); D.I. 10916 at 59-60, 9293) Debtors had been doing business throughout the nation and had more than a
million borrowers. (Id. at D.I. 10825, ex. Uhland decl. at 1f 5(c)) Debtors determined
that The Wall Street Journal was a customary place to publish legal notices and
believed it was prudent to publish notice in a newspaper where parties might expect to
find a bar date notice. (Id. at D.I. 10825, ex. Uhland decl.

at~

5(c); D.I. 10916 at 60)

The bar date order required publication in the national edition of The Wall Street
Journal and "such local newspapers as the debtors deem appropriate, "and debtors

published notice of the bar date in The Orange County Register because debtors' main
office was located in the City of Irvine in Orange County, California. (Id. at D.I. 10825,
ex. Uhland decl. at 1f 6(a)) A large concentration of debtors' employees were based in
Orange County, and debtors were concerned about the potential for unknown claims
asserted by former employees affected by debtors' substantial workforce reduction in
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the weeks and months prior to the bankruptcy filing. (Id. at D.I. 10825, ex. Uhland decl.
at 1J 6(a); D.I. 10916 at 60-61) Debtors were aware that The Orange County Register
was providing extensive coverage of debtors' bankruptcy, and debtors believed that
supplementary notice in the local publication would reach individuals who may have
been reading The Orange County Register to keep track of the chapter 11 cases. (Id.
at D.I. 10825, ex. Uhland dee!. at 1J 6(b)}

C. Anaiysis
Appellants proceed prose and generally contend, as characterized by appellee
in his statement of issues raised on appeal, that the constructive notice of the bar date
provided by publication, including the size, placement, and manner thereof, was not
reasonably calculated, under the circumstances, to apprise all interested parties
nationwide such that constitutional requirements of due process were satisfied. The
court starts its analysis with the reminder that the August 30, 2013 memorandum
specifically excludes the issues of whether particular creditors were unknown creditors
or known creditors entitled to actual notice or whether individual claimants met the
requirements for excusable neglect for a late-filed proof of claim. Therefore, those
issues will not be addressed on appeal.
With respect to the question of whether the constructive notice provided passes
constitutional muster, the court finds no error by the bankruptcy court in its reliance
upon Uhland's testimony and declaration to the extent that Uhland explained why The
Wall Street Journal and The Orange County Register were chosen as appropriate
publications in which to circulate notice of the bar date to unknown claimants. See In re

Myers, 491 F.3d 120, 126 (3d Cir. 2007) ('The bankruptcy court is best positioned to
assess the facts, particularly those related to credibility .... "). Given "the due process
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concern in [Wright v. Owens Coming, 679 F.3d 101 (3d Cir 2012)]-that claimants
would lose any opportunity for relief without first receiving proper notice," In re WR.
Grace & Co., 729 F.3d 311, 323 (2013), the question remains whether the constructive

notice provided in the instant bankruptcy proceeding was sufficient under the law.
As explained above,
[d]ischarge of the claims of future unknown claimants raises questions
regarding due process. Notice is '[a]n elementary and fundamental
requirement of due process in any proceeding which is to be accorded
finality." ... Lack or inadequacy of notice of a bankruptcy prevents a
claimant from having the opportunity to participate meaningfully in a
bankruptcy to protect his or her claim. . . . Inadequate notice accordingly
"precludes discharge of a claim in bankruptcy."
Wright, 679 F.3d at 107 (citations omitted). While the Third Circuit generally deems

notice by publication in national newspapers sufficient to satisfy the requirements of


due process for unknown claimants, "whether adequate notice has been provided
depends on the circumstances of a particular case. . . . Due process requires "notice
reasonably calculated, under all the circumstances, to apprise interested parties of the
pendency of the action and afford them an opportunity to present their objections." Id.
at 108 {citations omitted).
Looking to the circumstances in this particular case, the court reiterates the
description of the landscape provided by Uhland. Debtors had business operations
throughout the United States and had more than a million borrowers. Debtors were
concemed about the potential for unknown claims asserted by former employees
(unknown employee claims) but apparently did not consider their customers {borrowers)
at all in connection with the question of notice. 4

Early in the case, Uhland declared that "the borrowers were not considered a
source of potential claims" as debtors did not associate troubled loans with potential
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In Wright, the Third Circuit found debtors' notices "sufficient as to most unknown
claimants,"5 to wit: In November 2001, the bankruptcy court set a claims bar date of
April 15, 2002. The bankruptcy court also approved a bar date notice, which was
published twice in The New York Times, twice in The Wall Street Journal, and twice in
USA Today, among other publications. Id. at 103. By comparison, unknown claimants
in the instant proceeding were given a mere 39 days' notice by a single publication. 6
That single publication was presented in The \Nall Street Journal, certainly a nev.;spaper
with a national distribution,7 but not one - like USA Today- that necessarily enjoys a

borrower claims. (Bankr. No. 07-10416-BLS, 0.1. 11233 at 14-15) In addition, during
the iviay 23, 2012 hearing, Uhiand testified, "we did not consider borrowers to be
creditors . . . . We considered the borrowers to be account debtors .... And
accordingly didn't - wouldn't have considered noticing them generally with the bar date .
. . ." (Id. at D.I. 10916 at 61-62)
5

The exceptions being for those persons whose claims were based solely on the
retroactive effect of the rule announced in In re Grossman's, Inc., 607 F .3d 113 (3d Cir.
2010), wherein the Third Circuit established that a '"claim' arises when an individual is
exposed pre-petition to a product or other conduct giving rise to an injury, which
underlies a 'right to payment' under the Bankruptcy Code."
6

ln this regard, debtors chose The Orange County Register as the publication
most likely to provide notice to their workforce, not to unknown creditors such as the
borrowers who apparently resided throughout the United States.
7

Appellants contend that the bankruptcy court abused its discretion in


determining that the evidence supported a finding that the publication notice of the bar
date was placed in the national edition of The Wall Street Journal. In the affidavit of
Glenn Hellums, Jr. ("Hellums"), advertising clerk of the publisher of The Wall Street
Journal, he describes The Wall Street Journal as a daily national newspaper published,
and of general circulation, in the City and County of New York, New York; City of
Naperville, DuPage County, Illinois; and City and County of Dallas, Texas. (Id. at D.I.
2148) With regard to publication of the bar date notice, Hellums' affidavit specifically
states that the notice was "regularly published in The Wall Street Journal for national
distribution" on July 23, 2007. (Id.) The bankruptcy court did not abuse its discretion
in determining that a notice placed in The Wall Street Journal reached a nationwide
audience. See e.g., In re Chicago, Milwaukee, St. Paul & Pac. R.R. Co., 112 B.R. 920
(N.D. Ill. 1990) (holding publication notice in the Wall Street Journal adequate under
bankruptcy law); Wright v. Placid Oil Co., 107 B.R. 104 (N.D. Tex.1989) (holding
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broad circulation among less than sophisticated, focused readers. The court concludes
that the adequacy of the notice provided in this case has not been meaningfully
explored and likely was not reasonably calculated to apprise appellants of the bar date.
The court concludes that "[d]ue process affords a re-do" under the circumstances of this
case. 8 Id. at 108.

VI. CONCLUSION
Based on the reasoning above, the bankruptcy court's August 30, 2013 order will
be vacated and the matter remanded for further proceedings consistent with this
memorandum opinion. 9 An appropriate order shall follow.

publication in The Wall Street Journal sufficient notice to unknown creditor injured in
Louisiana).
8

lt strikes the court that, when the bar date is set so close to the publication date,
debtors have a heavier burden to ensure that notice is widespread.
9

1n this regard, the court finds that the bankruptcy court did not err in excluding
the publication Landier, Augustine & Sraer, David & Thesmar, David, 2010. "Going for
Broke: New Century Financial Corporation, 2004-2006). The transcript of the May 23,
2012 hearing indicates that the publication was marked as exhibit W-1, and opposing
counsel objected on the grounds of hearsay. (Bankr. No. 07-10416-BLS, D.I. 10916 at
130) The bankruptcy court indicated that there might be an exception to hearsay and
White was allowed to question Uhland about the publication. (Id. at D.I. 10919 at 12735) Although the publication was marked as an exhibit, White did not move for its
admission into evidence. (Id. at D.I. 10919 at 125-35) Appellants later filed a motion
for the bankruptcy court to take judicial notice of the publication. (Id. at D.I. 11011)
While appellants contend that the bankruptcy court did not consider the publication,
there is no indication from the record that the bankruptcy court did not consider the
publication.
14

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UNITED STATES BANKRUPTCY COURT


FOR THE DISTRICT OF DELAWARE

In re

CHAPTER 11
(Jointly Administered)

NEW CENTURY TRS HOLDINGS, INC,:


et al. 1
Debtors

Case No. 07-10416 (KJC)

MEMORANDUM 2
BY: KEVIN J. CAREY, UNITED STATES BANKRUPTCY JUDGE
Before the Court is The New Century Liquidating Trust's Motion for Entry of an Order
to Determine that the Debtors have Complied with the Order Establishing Bar Dates for Filing
Pioofs of Claim and Appioving F onn,

~v1anner

and Sufficiency of ~.J otice Thereof (the "Trustee's

Bar Date Motion") (D.I. 10824). A number of objections to the Trustee's Bar Date Motion were
filed on or about April 18, 2012. The Court held an evidentiary hearing and, for the reasons set
forth below, the Trustee's Bar Date Motion will be granted.
1

The Debtors are the following entities: New Century Financial Corporation (f/k/a New Century
REIT, Inc.), a Maryland corporation; New Century TRS Holdings, Inc. (f/k/a New Century Financial
Corporation), a Delaware corporation; New Century Mortgage Corporation (f/k/a JBE Mortgage) (d/b/a
NCMC Mortgage Corporate, New Century Corporation, New Century Mortgage Ventures, LLC), a
California corporation; NC Capital Corporation, a California corporation; Homel23 Corporation (f/k/a
The Anyloan Corporation, 1800anyloan.com, Anyloan.com), a California corporation; New Century
Credit Corporation (f/k/a Worth Funding Incorporated), a California corporation; NC Asset Holding, L.P.
(f/k/a NC Residual II Corporation), a Delaware limited partnership; NC Residual III Corporation, a
Delaware corporation; NC Residual IV Corporation, a Delaware corporation; New Century R.E.O. Corp.,
a California corporation; New Century R.E.O. II Corp., a California corporation; New Century R.E.O. III
Corp., a California corporation; New Century Mortgage Ventures, LLC (d/b/a Summit Resort Lending,
Total Mortgage Resource, Select Mortgage Group, Monticello Mortgage Services, Ad Astra Mortgage,
Midwest Home Mortgage, TRATS Financial Services, Elite Financial Services, Buyers Advantage
Mortgage), a Delaware limited liability company; NC Deltex, LLC, a Delaware limited liability company;
and NCoral, L.P., a Delaware limited liability partnership. On August 3, 2007, New Century Warehouse
Corporation, a California corporation, which is also known as "Access Lending," filed a voluntary
chapter 11 bankruptcy petition. These entities are referred to herein as the "Debtors," collectively, or any
individual entity may be referred to herein as the "Debtor."
2

This Court has jurisdiction over this matter pursuant to 28 U.S.C. 1334 and 157(a). This is a
core proceeding pursuant to 28 U.S.C. 157(b)(l) and (b)(2)(A) and (B).

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FACTS 3
On April 2, 2007, the Debtors filed voluntary petitions for relief under chapter 11 of the
Bankruptcy Code. On June 8, 2007, the Debtors filed a motion pursuant to Fed.R.Bankr.P. 2002,
3003(c)(3) and 9007 asking the Court to fix the time within which proofs of claim may be filed
(the "Debtors' Bar Date Motion"). (D.I. 1173). After a hearing on the Debtors' Bar Date
Motion, this Court entered an Order dated June 28, 2007 (the "Bar Date Order") establishing

Augu.st 31, 2007 at 5:00 p.m. (prevailing Pacific Time) as the deadline for filing proofs of claim
in this chapter 11 case (the "Bar Date") (Trustee Ex. 2, D.I. 1721). On July 9, 2007, the Debtors'
claims and noticing agent, Xroads Case Management Service LLC (the "Claims Agent") filed a
Declaration of Service, stating that it mailed a copy of the Notice ofBar Date (the "Bar Date
Notice") and a proof of claim form substantially similar to Official Form No. 10 to "parties listed
on the Master Mailing Matrix as set forth on a list maintained by Debtors' counsel." (D.1. 1861).
On August 3, 2007, the Claims Agent filed affidavits of publication stating that it had published
the Bar Date Notice in the Wall Street Journal (National Edition) and the Orange County
Register on July 23, 2007. (D.I. 2148 and D.I. 2149).

On November 20, 2009, the Court entered an Order confirming the Modified Second
Amended Joint Chapter 11 Plan of Liquidation (the "Modified Plan") (D.1. 9905).4 The

3
Because this matter involves the same factual background, some of the facts set forth herein are
repeated from this Court's Memorandum dated February 7, 2012 In re New Century TRS Holdings, Inc.,
465 B.R. 38 (Bankr.D.Del. 2012) (described infra as the "February 7 Decision").

This Court entered an Order Confirming the Second Amended Joint Chapter 11 Plan of
Liquidation of the Debtors and the Official Committee of Unsecured Creditors Dated as of April 23, 2008
(the "Confirmation Order") on July 15, 2008 (D.I. 8596), which became effective on August 1, 2008. An
appeal was taken and, on July 16, 2009, the United States District Court for the District of Delaware
issued a Memorandum Opinion reversing the Confirmation Order. On July 27, 2009, the Bankruptcy

(continued... )
2

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Modified Plan adopted, ratified and confirmed the New Century Liquidating Trust Agreement,
dated as of August 1, 2008, which created the New Century Liquidating Trust (the "Trust") and
appointed Alan M. Jacobs as Liquidating Trustee of New Century Liquidating Trust and Plan
Administrator of New Century Warehouse Corporation (the "Trustee").
On or about July 29, 2011, Helen Galope filed proof of claim number 4131 (the "Galope
Claim"). On August 26, 2011, the Trustee filed The New Century Liquidating Trust's Forty-

Second Orru1ibus Objection to Claims (the "Claim Objection") asking the Cow'1: to disallow an.d
expunge the Galope Claim. 5 Ms. Galope and other claimants filed responses in opposition to the
Trustee's Claim Objection. 6 The Court held an evidentiary hearing on December 13, 2011 on
the issue of whether the Galope Claim should be disallowed because it was filed after the claims
bar date.
On February 7, 2012, the Court entered a Memorandum and Order (D.I. 10725 and
10726) (the "February 7 Decision") disallowing and expunging the Galope Claim. The Court
considered the testimony of the Debtors' former lead counsel about the decision-making process

4(... continued)
Court entered the Order Granting Motion of the Trustee for an Order Preserving the Status Quo Including
Maintenance of Alan M. Jacobs as Liquidating Trustee, Plan Administrator and Sole Officer and Director
of the Debtors, Pending Entry of a Final Order Consistent with the District Court's Memorandum
Opinion (the "Status Quo Order") (D.I. 9750). On September 30, 2009, the New Century Liquidating
Trust filed the Modified Plan.
5

The Claim Objection also challenged proof of claim 4132 filed by Tiphanie Goines on July 20,
2011, in the amount of $432,000 (secured) (the "Goines Claim") and proof of claim number 4133 filed by
Karan J. Russell on July 20, 2011 in the amount of $880,000 (secured) (the "Russell Claim"). The
Goines Claim was disallowed pursuant to Order dated April 23, 2012 (D.I. 10860). The objection to the
Russell Claim is under advisement with the Court.
6

See D.I. 10574 (Russell's Response), D.I. 10575 (Goines' Response) and D.I. 10578 (Galope's
Response). A response was also filed on behalf of claimants Kimberly S. Cromwell, Mary Guinto and
Thomas A. Guinto, W. Mark Frazer and Konilynn Frazer (D.I. 10576).

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behind publication of the Bar Date Notice. The February 7 Decision determined, in part, that the
Debtors' publication of the Bar Date Notice in the national edition of the Wall Street Journal,
supplemented with notice in the Orange County Register, was constitutionally adequate for
Helen Galope, who was an unknown creditor at the time the Bar Date Notice was served.
On February 21, 2012, Ms. Galope filed a motion for reconsideration of the February 7
Decision arguing, among other things, that the Court erred in deciding that the Debtors'
publication of the Bar Date Notice was constitutionally adequate as applied to unknown
creditors. By a Memorandum and Order dated May 17, 2012, (D.I. 10742) the Court denied
Galope's Motion for Reconsideration of the February 7 Decision (the "Reconsideration
Decision"). 7
On April 2, 2012, the Trustee filed the Trustee's Bar Date Motion, asking the Court to
find that the Debtors' published notice of the Bar Date satisfied the requirements of due process
for all unknown creditors. On or about April 18, 2012, Galope and other claimants filed
responses in opposition to the Trustee's Motion. 8 On April 20, 2012, the Trustee filed an
Omnibus Reply to the objections (D.1. 10853). On May 23, 2012, the Court held an evidentiary
hearing on the Trustee's Bar Date Motion.
DISCUSSION9

Ms. Galope filed a second motion for reconsideration (D.I. 10917). Oral argument on the
motion was held on June 20, 2013 and the motion is currently under advisement.
8

See D.I. 10835 (Konar's Response), D.I. 10841 (White's Response), D.L 10842 (Guinto's
Response), D.I. 10848 (Galope's Response), D.I. 10849 (Cromwell and Russell's Response) (collectively,
the "Objectors").
9

This Memorandum addresses only the constitutional sufficiency of the publication of the Bar
Date Notice as it applies to unknown creditors. I do not make any determination about whether particular

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The Trustee seeks an order consistent with the February 7 Decision and the
Reconsideration Decision, concluding that the Debtors' publication notice of the Bar Date
complied with the requirements set forth in the Bar Date Order and satisfied the requirements of
due process for unknown creditors.
The objections to the Trustee's Bar Date Motion fall into two categories. First, the
Objectors argue that the Bar Date publication was a "mere gesture" and that the Debtors did not

publish notice in a manner that \Vas reasonably calculated to inform potential claimants of the
Bar Date. To support this objection, the Objectors argue that the Debtors (i) did not consider
readership profiles of the newspaper used for national notice; (ii) did not spend an adequate
amount of funds to publish notice, considering the size and complexity of the case; (iii) did not
provide sufficient time for claimants to file claims after the notice publication; and (iv) did not
ensure that the font size and placement of the published notice was adequate. Second, the
Objectors argue that the Debtors, aware of the potential for a large number of claims by
borrowers, published the Bar Date Notice in a manner to ensure that potential borrower
claimants would not receive adequate notice. 10
As discussed in the February 7 Decision, the purpose and procedures for setting a claims
bar date were aptly described by my colleague, Judge Gross, in In re Smidth & Co., 413 B.R.

continued)

creditors were unknown creditors or known creditors entitled to actual notice. Also, I do not address
whether any particular individual claimants have met the requirements for excusable neglect for a latefiled proof of claim.
10

Although not specifically defined in the pleadings, I understand that the term "borrowers," as
used by the parties, refers to individuals who assert claims against the Debtors based upon pre-petition
loan transactions in which those individuals borrowed funds from a Debtor entity secured by a mortgage
lien against their residence or other real property (the "Borrowers").

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161 (Bankr.D.Del. 2009):


Rule 3003(c)(3) of the Federal Rules of Bankruptcy Procedure authorizes courts
to set bar dates by which proofs of claim or interest may be filed. This rule
contributes to one of the main purposes of bankruptcy law, securing, within a
limited time, the prompt and effectual administration and settlement of the
debtor's estate. Setting an outside limit for the time to assert a right triggers due
process concerns of which every court must be cognizant. This concern is
resolved through notice: when a debtor provides proper notice to its creditors, due
process is satisfied, and a court can bar creditors from asserting claims. What
qualifies as proper notice, however, is dependent upon whether the creditor is
known or unknown. If a creditor is known, the debtor must provide actual notice

of the bank..y-Juptcy proceedings, whereas if the creditor is unkno\vn, notice by


publication is sufficient.
Id. at 165 citing, inter alia, City ofNew Yorkv. New York, NH. & H.R. Co., 344 U.S. 293, 297,
73 S.Ct. 299, 97 L.Ed. 333 (1953), Chemetron Corp. v. Jones, 72 F.3d 341, 346 (3d Cir. 1995).
For creditors who receive the required notice, the bar date is a "drop-dead date" that prevents a
creditor from asserting prepetition claims after passage of the Bar Date unless that creditor can
demonstrate that failure to file a claim timely was due to the creditor's excusable neglect.
Berger v. Trans World Airlines, Inc. (In re Trans World Airlines, Inc.), 96 F.3d 687, 690 (3d Cir.
1996).
The discharge of claims of future or unknown claimants raises questions of due process.
Wright v. Owens Corning, 679 F.3d 101, 107 (3d Cir. 2012). "The level of process due to a party
prior to the deprivation of a property interest ... is highly dependent on the context." SL W
Capital, LLC v. Mansaray-Ruffin (In re Mansaray-Ruffin), 530 F.3d 230, 239 (3d Cir. 2008).
The Wright Court recognized that:
Notice is "[a]n elementary and fundamental requirement of due process in any
proceeding which is to be accorded finality .... " Lack or inadequacy of notice of
a bankruptcy prevents a claimant from having the opportunity to participate
meaningfully in a bankruptcy proceeding to protect his or her claim.

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Wright, 679 F.3d at 107 quoting Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306,
314, 70 S.Ct. 652, 94 L.Ed. 865 (1950).
Due process concerns are satisfied if the published notice is "reasonably calculated to
reach all interested parties, reasonably conveys all the required information, and permits a
reasonable time for response." Chemetron, 72 F.3d at 346. "The proper inquiry in evaluating
notice is whether a party acted reasonably in selecting means likely to inform persons affected,

not whether each person actually received notice." Lvz re Charter Co., 113 B.R. 725, 728
(M.D.Fla. 1990) citing Weigner v. City ofNew York, 852 F.2d 646, 649 (2d Cir. 1988), cert.

denied 488 U.S. 1005, 109 S.Ct. 785, 102 L.Ed.2d 777 (1989).
Here, the Debtor published notice of the Bar Date in the national edition of the Wall

Street Journal and in the Orange County Register. The Objectors argue that publishing notice in
those two newspapers was a "mere gesture" to comply with notice requirements, rather than a
decision made after an in-depth analysis of potential unknown creditors. See Mullane, 339 U.S.
at 315 ("[W]hen notice is a person's due, process which is a mere gesture is not due process.").
Suzzanne Uhland, whose law firm was lead counsel to the Debtors during these chapter
11 bankruptcy cases, submitted a declaration in support of the Trustee's Bar Date Motion and
testified at the May 23, 2012 hearing. Ms. Uhland stated that notice of the Bar Date was
published in the national edition of the Wall Street Journal because the Debtors had business
operations throughout the United States and publication in a newspaper that was published and
available nationwide would provide notice to unknown creditors as broadiy as possibie
throughout the country. Tr. 59:18 - 60:1; Tr. 92:18 - 93:6; Trustee Ex. 5 (Uhland Deel.), ~5(b).
The Debtors had been doing business throughout the nation and had more than a million

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borrowers. Id. at ~5(c). Further, the Debtors determined that the Wall Street Journal was a
customary place to publish legal notices and believed it was prudent to publish notice in a
newspaper where parties might expect to find a bar date notice. Tr. 60:2 - 60:9, Trustee Ex. 5
(Uhland Deel.), ~5(c).
The Bar Date Order required publication in the national edition of the Wall Street Journal
and "such local newspapers as the Debtors deem appropriate." Trustee Ex. 2, ~18. The Debtors

also published notice of the Bar Date in the Orange Count}' Register because the Debtors' main
office was located in Irvine, California, which is located in Orange County, California. Trustee
Ex. 5 (Uhland Deel.), ~6(a). A large concentration of the Debtors' employees were based in
Orange County, and the Debtors were concerned about the potential for unknown claims asserted
by former employees affected by the Debtors' substantial workforce reduction in the weeks and
months prior to the bankruptcy filing. Id., Tr. 60: 15 - 61 :6. Also, the Debtors knew that the

Orange County Register was providing extensive coverage of the Debtors' bankruptcy, and the
Debtors believed that supplementary notice in the local publication would reach any individuals
who may have been reading the Orange County Register to keep track of the Debtors' chapter 11
cases. Trustee Ex. 5 (Uhland Deel.), ~6(b). 11

11

The Liquidating Trust has asserted throughout this and related proceedings that entry of the Bar
Date Order approving this provision for publication notice served as a final and inviolate determination
by the Court that notice thus given was constitutionally sufficient. See, e.g., Trustee's Bar Date Motion, at
~~16-18.

At the June 27, 2007 hearing on the Debtor's Bar Motion, no party objected to the manner or
breadth of the proposed pubiication notice, which ieft to the Debtors' discretion whether pubiication
notice beyond that in the Wall Street Journal was appropriate. The Court approved this particular
provision, in support of which no evidence was offered. The Court could not - - at that stage - - assess
circumstances of which neither the Court nor any party was (or, arguably, could have been) aware. I view
this as a significant reason why the United States Supreme Court, along with others, including the Third
Circuit Court of Appeals, have adopted both due process standards (see, e.g., City of New York v. New

(continued... )
8

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In Wright, the Third Circuit held generally that, for unknown claimants, "notice by
publication in national newspapers is sufficient to satisfy the requirements of due process,
particularly if it is supplemented by notice in local papers." Wright, 679 F.3d at 107-08 citing
Chemetron, 72 F.3d at 348-49. See also, e.g., Gentry v. Circuit City Stores, Inc. (Jn re Circuit
City Stores, Inc.), 439 B.R. 652, 660 (E.D. Va. 2010) quoting In re J.A. Jones, Inc., 492 F.3d

242, 251 (4th Cir. 2007) ("where the creditor is unknown to the debtor, constructive notice - typically Lri the form of publication - - is generally sufficient to pass constitutional muster.").
However, the United States Supreme Court has recognized the limitations of notice by
publication:
Notice by publication is a poor and sometimes a hopeless substitute for actual service of
notice. Its justification is difficult at best. ... But when the names, interests and
addresses of persons are unknown, plain necessity may cause a resort to publication.
City ofNew York, 344 U.S. at 296; and

[I]n the case of persons missing or unknown, employment of an indirect and even a
probably futile means of notification [by publication] is all that the situation permits and
creates no constitutional bar to a final decrees foreclosing their rights.
Mullane, 339 U.S. at 317. Whether that notice is adequate depends upon the circumstances of

the particular case. Wright, 679 F.3d at 108.

The Objectors argue that the Debtors did not adequately consider the readership profile

11

continued)

York, N.H. & H.R. Co., 344 U.S. 293, 297 (1953), Wright v. Owens-Corning, 679 F.3d iOi (3d Cir.
2012), Chemetron Corp. v. Jones, 72 F .3d 341 (3d Cir. 1995)), and excusable neglect standards (see, e.g.
Pioneer Inv. Serv. Co. v. Brunswick Assoc. Ltd. P 'ship, 507 U.S. 380 (1993), Jones v. Chemetron Corp.,
212 F .3d 199 (3d Cir. 2000)), to address circumstances that come to light - - inevitably - - after entry of a
bar date order.
Of course, the finality sought to be achieved by a bar date order is critical to the orderly
completion of the chapter 11 process and the disposition of claims. See, discussion, infra.

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of the Wall Street Journal when deciding to publish notice to unknown creditors. Cromwell Ex.
F. 12 They argue that notice of the Bar Date in the national edition of the Wall Street Journal was
not likely to reach individual Borrowers. However, the Debtors' decision to publish notice in the

Wall Street Journal was made, in part, in an effort to reach all types of unknown creditors
nationwide, whether institutional or individual creditors. Trustee Ex. 5 (Uhland Deel.), ~5(d).
The Debtors appropriately considered the wide-spread availability of the national edition of the

TX/all Street Journal to unkno\\11 creditors in deciding where to publish notice. See B;ovvn v.
Seaman Furniture Co, Inc., 171B.R.26, 27 (E.D.Pa. 1994) ("Since the national edition [of the
New York Times] is sold throughout the country and can be purchased from any comer
newspaper vendor here in Philadelphia, the Court finds that it is a reasonable means of alerting
potential creditors of the need to file a proof of claim."); Matter of Chicago, Milwaukee, St. Paul

and Pacific Railroad Co., 112 B.R. 920, 922, 924 (N.D.Ill. 1990) (The Court rejected the tort
claimants' argument that notice of the bar date in the Wall Street Journal was constitutionally
insufficient because, due to their poor education, they had never even heard of the Wall Street

Journal).
The Objectors also argue that the Debtors should have spent considerably more money on
publishing the Bar Date Notice to ensure that notice would appear in more local papers in
locations where the Debtors transacted business. They argue that the amount spent by the
Debtors for the Bar Date Notice pales in comparison to other cases. See Wright v. Owens

Corning, 450 B.R. 541, 557 (W.D.Pa. 2011) aJTd in part, rev'd in part 679 F.3d 101 (3d Cir.

12

Cromwell, Ex.Fis a Subscriber Study for the Wall Street Journal, prepared by the Advertising
Sales Office, which, Ms. Cromwell noted, states that the subscribers to the Wall Street Journal have an
annual household income above $253,000 and household net worth averaging nearly $2.5 million.

10

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2012) (noting that Owens Coming published notice of its bankruptcy proceedings, including the
bar date and entry of the confirmation order, in the New York Times, the Wall Street Journal, and

USA Today, as well as 250 regional or local newspapers in areas where Owens Corning had
significant business operations at the time of publication, and in approximately 35 trade
publications in the primary lines of business operated by Owens Corning). Notwithstanding the
Herculean publishing efforts in the Owens Coming bankruptcy case, other courts have

recol:!.1iized that "[i]t is impracticable ... to expect a debtor to publish notice in every newspaper
a possible unknown creditor may read." Chemetron, 72 F.3d at 348-49 quoting In re Best

Products Co., 140 B.R. 353, 358 (Bankr.S.D.N.Y. 1992).


The decision of the Third Circuit in Chemetron is instructive here. In Chemetron, tort
claimants filed a lawsuit against debtor Chemetron Corporation ("Chemetron") almost four years
after the claims bar date and 20 months after plan confirmation. The claimants alleged injuries
arising from a toxic landfill site in Ohio operated by Chemetron pre-bankruptcy. When
Chemetron sought to dismiss the lawsuit, the claimants sought permission from the bankruptcy
court to file late proofs of claim and filed motions seeking a declaratory judgment that their
claims were not discharged by the reorganization plan. Chemetron, 72 F.3d at 344-45.
The bankruptcy court in Chemetron granted the claimants' motion to file late claims,
finding that the claimants were known creditors entitled to actual notice of the bankruptcy
proceeding and bar date. On appeal by Chemetron, the district court reversed the bankruptcy
court, holding that the claimants were not known creditors and that publication notice of the bar
date was sufficient. Id. The Third Circuit affirmed the district court, in part, holding that the
claimants were unknown creditors and that notice of the bar date by publication satisfied the

11

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requirements of due process. 13 Id. at 348. The bar date order in Chemetron required the debtors
to publish notice in the national editions of the New York Times and the Wall Street Journal, and
the debtors also voluntarily published notice in seven other newspapers in areas where they were
doing business at the time of the filing. Id at 345. The Third Circuit rejected the claimants'
argument that due process required Chemetron to publish notice in a Cleveland area newspaper,
writing

Havir1g held that the claimants were "unJrJio-wn" creditors, we have little difficulty
holding that the notice which Chemetron published in the New York Times and the
Wall Street Journal was sufficient. It is well established that, in providing notice
to unknown creditors, constructive notice of the bar claims date by publication
satisfies the requirements of due process .... Such notice must be "reasonably
calculated, under the circumstances, to apprise interested parties of the pendency
of the action and afford them an opportunity to present their objection." Mullane,
339 U.S. at 314, 70 S.Ct. At 657. We find that Chemetron's notice met this
standard.
Id. at 348. 14 Similarly, here, the Debtors' publication of the Bar Date Notice in the national
edition of the Wall Street Journal was reasonably calculated to notify potential claimants of the
Bar Date across the United States. See also Brown, 171 B.R. at 27 (deciding that publishing
notice of the bar date in the local and national editions of the New York Times satisfied due
process for unknown creditors), In re U.S. Airways, Inc., 2005 WL 3676186, *6 (Bankr.E.D.Va.
Nov. 21, 2005) (deciding that publishing notice of the bar date in the Wall Street Journal, the
New York Times and USA Today satisfied due process for unknown creditors), In re Best

13

The Third Circuit vacated the district court's decision regarding dischargeability of the claims
for failure to demonstrate excusable neglect and remanded the matter to the bankruptcy court.
Chemetron, 72 F .3d at 350. See also Jones v. Chemetron Corp., 212 F .3d 199 (3d Cir. 2000).
14
The Third Circuit also noted that the claimants' argument for publication in a Cleveland area
newspaper was undermined by the fact none of the claimants resided near the Cleveland site at the time of
the publication notice. Chemetron, 72 F .3d at 349.

12

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Products Co., Inc., 140 B.R. 353, 358 (Bankr.S.D.N.Y. 1992) (deciding that notice published in
the national editions of the Wall Street Journal and the New York Times, as well as three local
papers, satisfied due process for unknown creditors).
The Debtors also cited consideration of costs as part of the decision-making process with
respect to publishing notice. Debtors' counsel testified that cost was always a concern because
the Debtors were liquidating and, in particular, at the time the Bar Date Notice was being

Ex. 5 (Uhland Deel.),~ 6(c). As noted in the February 7 Decision, publication in newspapers in
"dozens of locations" in which a Debtor is conducting business can be "onerous, cumbersome
and unduly expensive." Best Products, 140 B.R. at 358. The Fourth Circuit has said:

In bankruptcy, the court has an obligation not only to potential claimants, but also
to existing claimants and the petitioner's stockholders. The Court must balance
the needs of notification of potential claimants with the interests of existing
creditors and claimants. A bankrupt estate's resources are always limited and the
bankruptcy court must use discretion in balancing these interests when deciding
how much to spend on notification.
Vancouver Women's Health Collective Soc. v. A.H. Robins Co., 820 F.2d 1359, 1364 (4th Cir.
1987). While additional publication notice may have been desirable (although there is no proof
here that additional notice would have been availing), the notice given here was constitutionally
sufficient.
The Objectors also argue that the font size and placement of the published Bar Date
Notice, as well as the time given to creditors to file claims, was insufficient under due process
standards. The Bar Date Notice was published in both newspapers on July 23, 2007, requiring
claims to be filed prior to the Bar Date of August 31, 2007. The Bar Date Order required notice
to be published no less than 30 days prior to the Bar Date. Trustee Ex. 2, ~18. The parties have
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not provided any reason why publishing notice 39 days prior to the Bar Date was insufficient.
Despite any disadvantages, the font size and placement of the published notice were also
sufficient.
The Objectors also argue that the Debtors, aware of the potential for a large number of
claims by Borrowers, published the Bar Date Notice in a manner to ensure that potential
Borrower claimants would not receive adequate notice to file claims. On the record before me, I
cannot conclude that the Debtors published notice of the Bar Date in a manner to preclude
Borrower claims. In her Declaration, counsel for the Debtors stated that, early in the case, the
Borrowers were not considered a source of potential claims:
At the time the Bar Date Notice was published ... the Debtors generally did not
view borrowers as potential creditors, unless and until a borrower filed a
complaint or commenced litigation, at which point they were considered litigation
creditors or potential creditors who were included on the litigation schedule of
creditors provided with actual notice. Unless a borrower filed a complaint or
commenced litigation against the Debtors, thereby becoming a potential creditor
of the Debtors, the Debtors generally viewed the borrowers as account-debtors
who owed money to the Debtors.
Trustee Ex. 5 (Uhland Deel.), ~S(c) (emphasis added). Tr. 61:17 - 62:4. The Objectors assert
that the Debtors should have been aware of the potential for numerous claims by Borrowers
based on the Debtors' documentation of troubled loans as set forth in the "kick-out reports" or
"scratch and dent pools" described in the Examiner's Report. 15 However, the Debtors did not

15

The Objectors sought to introduce into evidence portions of the Final Report of Michael J.
Missal Bankruptcy Court Examiner, February 29, 2008 (docket no. 5518)(the "Examiner's Report") at the
hearing. Upon agreement by the Trustee, the entire Examiner's Report was admitted into evidence. Tr. at
161: 14 - 161 :25. The Examiner's Report describes "kickouts" as loans that New Century sought to sell to
investors in the secondary market that were rejected by those investors due to defective appraisals,
incorrect credit reports and missing documentation. Examiner Report, p. 109. "Kickouts," and loans with
egregious deficiencies (such as non-performing loans or loans that did not comply with New Century's
underwriting standards) were then moved into the "scratch and dent" category of New Century's loan

(continued... )
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associate those loans with potential Borrower claims. As explained by Debtors' counsel:
We viewed the scratch and dent pools as loans that had ... documentation
problems that affected their enforceability and therefore the loan value .... We
didn't correlate the scratch and dent loan pools with borrower claims.
Tr. 80:5 - 80:9. The same was true with respect to the "kickout loans." Tr. 82:9 - 82:16. ("My
view is that the fact a loan was kicked out doesn't correlate with the borrower having a claim
against New Century."). The Objectors' argument that the Debtors' intentionally published

notice in a manner to preclude Borrowers from asserting timely claims is completely


unsupported by the evidence.
Finally, I note again that this decision does not address the merits of any underlying
Borrower claims. As stated by the Third Circuit in Chemetron:

In reaching this result, we are not unsympathetic to the alleged injury suffered by
the claimants in this case. We stress that our holding addresses the burden placed
on the bankruptcy debtor to provide actual notice to potential claimants, not the
merits of a timely and properly filed tort suit. Where a debtor has sought the
protection of bankruptcy law, however, procedural protections such as the bar
claims date apply.
Chemetron, 72 F.3d at 348. As discussed in the February 7 Decision, an overriding principle in
bankruptcy is finality. The bar date provides that finality because it gives a date certain after
which a plan can be negotiated, formulated, and eventually confirmed, ultimately leading to the
rehabilitation of the debtor and the payment of claims under a plan of reorganization. See In re
Drexel Burnham Lambert Group Inc., 151 B.R. 674, 679 (Bankr. S.D.N.Y. 1993) affd, 157 B.R.
532 (S.D.N.Y. 1993). As quoted in the February 7 Decision, and as is so particularly apt here,
the U.S. Airways Court explained:

15

( continued)

inventory. Examiner Report, p. 67.

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The establishment and enforcement of a bar date for filing claims "furthers
the policy of finality designed to protect the interests of a debtor and his diligent
creditors and the expeditious administration of the bankruptcy case." In re Peters,
90 B.R. 588, 597 (Ban1cr. N.D.N.Y. 1988). Furthermore, "to allow the debtor to
be continually pursued by his creditors ad infinitum ... would be to sanction a
form of slow torture contrary to the spirit and purposes of the ban1cruptcy laws."
Id. (quoting Maine Bonding & Casualty Co. v. Grant (In re Grant), 45 B.R. 262,
264 (Bankr.D.Me.1984)).
In the instant case, the debtor would be prejudiced by allowing the
[claimants] to assert their claim six months after the bar date had passed,
particularly in a case as large as this. As noted above, U.S. Airways provided
mailed notice to all known creditors and notice by publication to all "unknown"
roJa;mantC" n.f't'ht3 annli,,..+'.lh1'3 ho.,.. r11'.l+a

""'U4.l..l..l..l.U.J..I.""' V.L '-LI.'"" upp.1..1.""'U.VJ.\.I UU.l

uu .. v

Pnl1nnr1TuT n.nCtetnrra

n.f'+ha

hn...- r1n+.o.

+ha .rfal...+,...,...,..

.l. Vl.J.UVY.1.1.1.5 pai:h3U5"" V.L u.J.V UQ..1 UQL.'"'' L.1.1'-" U\.IUL.U.1

should reasonably be able to assume that all claimants needing to be dealt with in
the plan have come forward to vindicate their rights, thereby allowing the debtor
to calculate its potential liabilities for purposes of effectuating its reorganization.
If the court were to allow the [claimants] to file a late claim solely because they
were unaware of the ban1cruptcy filing, it is difficult to see on what basis the court
could deny the same relief to dozens or perhaps hundreds of creditors who might
now come forward and assert a previously unknown claim. Such a policy would,
in effect, allow any creditor who has neglected to comply with a bar date to seek
an extension on the grounds of excusable neglect because it did not read the
notice. Hence, notice of a bar date by publication would be rendered a useless
means of establishing a date by which all claims must be filed or forever barred.
In re Best Products Co., Inc., 140 B.R. 353, 359 (Ban1cr.S.D.N.Y.1992).

U.S. Airways, 2005 WL 3676186 at *7 - *8. These considerations are equally applicable to the
case at bar. A finding that the Bar Date Order is effective against all unknown creditors furthers
the policy of finality.

CONCLUSION
During the May 23, 2012 evidentiary hearing, all parties were given the opportunity to
present evidence and to cross-examine Ms. Uhland. Upon consideration of the evidentiary record

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and relevant case law, nothing has been offered to change the conclusions reached in the
February 7 Decision. Therefore, based on the record before me and for the reasons set forth
above, I conclude that the Debtors' decision to publish the Bar Date Notice in the national
edition of the Wall Street Journal, supplemented with notice in the Orange County Register, was
reasonably calculated, under the circumstances, to apprise interested parties nationwide of the
Bar Date and afford them an opportunity to file claims. Accordingly, publication of the Bar Date

County Register, passes constitutional muster.

The Trustee's Bar Date Motion will be granted. An appropriate order follows.

BY THE COURT:

KEVIN J. CAREY
UNITED STATES BANKRUPTCY JUDGE
Dated: August 30, 2013

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UNITED STATES BANKRUPTCY COURT


FOR THE DISTRICT OF DELAWARE
In re

CHAPTER 11
(Jointly Administered)

NEW CENTURY TRS HOLDINGS, INC,:

et al.

Case No. 07-10416 (KJC)


Debtors

Re: DJ. I 0824

ORDER GRANTING THE NEW CENTURY LIQUIDATING TRUST'S


l\lr\TT\~ V\D Vl\.TTDV \1" ... l\.T nnnvn T " nVTVTilt.llT'l~TU TTI ... " ' TYIU
lY.l.'U' .I. .l.'U'.l ~ .I.' 'U'.I.' .&:Jl ~.I._.., .I. '-I.I.' .l"1J.-, '-1.n.l.IL.ft. .I.'-' .UL .I. .LftJ.T.1..1.1-,.L J. ~ J. J. .1..L

DEBTORS HAVE COMPLIED WITH THE ORDER ESTABLISIDNG


BAR DATES FOR FILING PROOFS OF CLAIM AND APPROVING
FORM, MANNER AND SUFFICIENCY OF NOTICE THEREOF
AND NOW, this 301h day of August, 2013, upon consideration of the New Century
Liquidating Trust's Motion for Entry of an Order to Determine that the Debtors have Complied
with the Order Establishing Bar Dates for Filing Proofs of Claim and Approving Form, Manner
and Sufficiency of Notice Thereof (the "Trustee's Bar Date Motion") (D.I. 10824), and the
objections thereto, and after an evidentiary hearing on May 23, 2012, and for the reasons set
forth in the foregoing Memorandum, it is hereby ORDERED that the Trustee's Bar Date Motion
is GRANTED.
BY THE COURT:

KEVIN J. CAREY
UNITED STATES BANKRUPTCY WDGE
cc: Alan M. Root, Esquire'

'Counsel shall serve a copy of this Order and the accompanying Memorandum upon all interested
parties and file a Certificate of Service with the Court.