FedEx Failure to Deliver on Time Not Fatal to Complaint

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By Daniel Gill

A complaint in bankruptcy that was filed late because of a handling error by FedEx Corp. can go forward as if it were timely filed, a California district court ruled March 3 ( Berkowitz v. Turchin (In re Turchin) , 2017 BL 68834, C.D. Cal., No. CV 16-06160-AB, 3/3/17 ).

The opinion by Judge André Birotte Jr., U.S. District Judge for the Central District of California, clarifies that unique and extraordinary circumstances justifying a late-filed complaint aren’t restricted to misleading information provided by a court.

Steven Berkowitz obtained a judgment on Nov. 5, 2015, for more than $624,000 against Michael A. Turchin in a Colorado court.

Turchin filed for Chapter 7 bankruptcy on March 11, 2016. In Chapter 7, a debtor’s non-exempt assets, those he can’t keep, are liquidated by a trustee and the proceeds are distributed to creditors. Subject to certain exceptions, the debtor is awarded a discharge, effectively wiping out his debts.

Section 523(a) of the Bankruptcy Code allows creditors to sue to have their individual debts declared non-dischargeable. Berkowitz attempted to file a complaint to do just that on grounds he was defrauded by Turchin.

The last day to file the complaint under the Bankruptcy Rules was June 10, 2016. On June 9, Berkowitz sent his complaint to the court via FedEx for guaranteed overnight delivery. However, due to a “handling error” by the logistics giant, the complaint wasn’t delivered to the court until June 13, one business day late, the court said.

Berkowitz filed a motion to have the complaint deemed timely, but the bankruptcy court denied it, the court said.

The district court reversed that ruling, stating that the bankruptcy court was wrong when it said that only a mistake of the court would justify allowing a late-filed non-dischargeability complaint.

"[T]he Court finds the untimely filing is attributable not to Berkowitz, but rather an ‘external force’ that falls into the realm of ‘unique and extraordinary’ circumstances,” the court said.

“Berkowitz had done all that reasonable diligence requires,” it said.

Berkowitz was represented by R. Parker Semler, Denver. Michael F. Chekian, Los Angeles, represented Turchin.

To contact the reporter on this story: Daniel Gill in Washington at dgill@bna.com

To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com

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