Heavy Workload Is Not Excusable Neglect

Posted on February 8, 2012 by Michael Rigney

SHERMAN v. QUINN (January 3, 2012)

The 2009 "Illinois Jobs Now!" bill included grants to thousands of not-for-profit corporations and local governments. Robert Sherman filed suit against Governor Quinn seeking injunctive relief, contending that numerous grants to religious organizations and others violated the First Amendment’s Establishment Clause. On August 6, 2010, Chief Judge McCuskey (C.D. Ill.) granted defendants' motion to dismiss, on various grounds. The court denied a motion to reconsider on October 14. On November 16, one day after the period to appeal had expired, Sherman sought an extension of time within which to file his notice of appeal. The district court granted the motion and Sherman filed his notice of appeal within the extended time. Defendants appeal.

In their opinion, Seventh Circuit Judges Cudahy, Posner, and Williams dismissed for lack of jurisdiction. The Court noted that there was some confusion regarding the interpretation of Federal Rule of Appellate Procedure 4(a)(5). Prior to the 2002 amendments, the Court had held that the more lenient "good cause" standard applied if the request for extension was made within the 30-day appeal period and the "excusable neglect" standard applied after the period had run. The 2002 amendments clarified the rule. During or after the 30-day period does not matter. What matters is fault. The excusable neglect standard applies when there is fault and the good cause standard applies when there is no fault. Here, Sherman relied on the good cause standard but he concedes that the conditions leading to his need for an extension were within his control, and therefore constituted fault. The Court applied the excusable neglect standard. The only reason Sherman’s counsel gave was that he was overloaded with obligations, including running for governor. The Court stated that a heavy workload does not constitute excusable neglect. The district court abused its discretion in granting the extension and the Court lacks jurisdiction to hear the appeal.

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Bank's Lack Of Diligence Results In Denial Of Late Claim

Posted on May 25, 2011 by Michael Rigney

COMMODITY FUTURES TRADING COMMISSION v. LAKE SHORE ASSET MANAGEMENT LTD. (May 11, 2011)

A bank located in tiny Andorra invested over $7 million in Lake Shore Asset Management's commodity trading pools. Instead of receiving account statements, the Bank monitored its account on Lake Shore's website. When the website was taken down in late 2007, the Bank made inquiry. It learned that Lake Shore's assets were frozen and that it was under investigation for fraud. The bank made some assumptions about the similarity of U.S. and Andorran law and did nothing. Meanwhile, the CFTC sued Lake Shore, obtained a default judgment, and placed Lake Shore’s remaining assets with a receiver. In early 2009, the receiver notified Lake Shore’s creditors that they had 45 days within which to file a claim. Although the notice to the Bank was addressed properly, it contained no individual's name. The Bank claims that it never received the notice. By the time it contacted the receiver, the claims window had closed and the receiver denied the claim. The Bank sought permission from the district court. Judge Manning (N.D. Ill.) rejected the request to be included in the asset distribution. GAMAG, another Lake Shore investor, did file a claim that was allowed on the same pro-rata basis as the other investors’ claims. GAMAG, however, claims that it is a creditor rather than a shareholder and is entitled to priority. Judge Manning rejected GAMAG's position. The Bank and GAMAG both appeal.

In their opinion, Judges Posner, Kanne, and Sykes affirmed. The Court first determined that the correct standard for deciding whether to allow the late claim is the "excusable neglect" standard contained in Rule 60(b)(1). The excusable neglect standard is an "all relevant circumstances" one, which the Court simplified: on the one hand are the excuse’s validity and the negative consequences to the Bank of denying the late claim -- on the other hand is the negative consequences to the other parties of granting the late claim. The Court concluded that the district court did not err in finding that the Bank did not have a good excuse. It knew about Lake Shore’s troubles and did nothing, it didn't include the name of a bank officer on its account statement to ensure successful notice, and it made inexcusable assumptions about the similarity of U.S. and Andorran law. Although the adverse consequences of losing its entire claim are great, they are not enough to conclude that the district court erred in denying the claim. The prejudice to the others is not having to pay the Bank’s claim, since all agree that the claim is valid if timely. Rather, it is the delay resulting from the recalculation of shares, additional approval of the district court, and the potential "hornets nest" that could be created by the recalculations. The Court concluded that the district court did not abuse its discretion in denying the claim. With respect to the GAMAG claim, the Court rejected the creditor-versus-shareholder argument. Although GAMAG did have a different kind of arrangement with Lake Shore than most of the other investors, the Court concluded that the differences were not of the kind to make it a creditor. Creditors enjoy priority because they give up any upside benefit. Here, GAMAG's deal with Lake Shore was identical to other shareholders in terms of the allocation of risk.

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Movant Failed To Establish "Excusable Neglect" In Motion For Extension Of Time

Posted on July 8, 2010 by Michael Rigney

MURPHY v. EDDIE MURPHY PRODUCTIONS (July 1, 2010)]

Eddie Murphy Productions and the other defendants were involved in the creation of The PJs, an animated television show. In its three seasons on the air, the show won three Emmy Awards. Daryl Murphy (unrelated to Eddie) brought suit in 2004, asserting that the defendants used his copyrighted material for the show. The district court judge viewed videotapes of Murphy's material and The PJs and granted summary judgment to the defendants. The court concluded that the works were not substantially similar, there was evidence of prior creation, and there was no evidence of defendants' access to Murphy's material. While that decision was on appeal, Murphy filed another similar complaint. The district court promptly dismissed it. In 2008, Murphy filed a pro se pleading styled as a Rule 60 motion. Counsel for Murphy then appeared, withdrew the motion, and asked for leave to file an amended complaint. Several days after missing a second deadline, Murphy asked for another extension. Judge Darrah (N.D. Ill.) denied the request on the grounds both that he already missed two deadlines and that an amendment would be futile. Murphy appeals.

In their opinion, Judges Cudahy, Posner, and Evans affirmed. The Court noted the different standards governing a request for extension of time made before the deadline and one made after the deadline. The former may be granted for "good cause" while the latter should be granted only upon a showing of "excusable neglect." Here, the Court concluded that the district court acted within its discretion in finding no "excusable neglect." Both factors, prejudice to the defendant and reason for the delay, favored the defendants. The Court also concurred in the independent rationale for denial of the motion that an amendment would be futile.

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