Creditors filed a joint motion requesting a stay of further proceedings in the bankruptcy case, pursuant to Federal Bankruptcy Rule 8007, until a determination is made on the appeal of the order sustaining an objection to the Creditors’ claims and denying the Creditors’ motion to allow late-filed claims. In that underlying order, the Court had determined that the factors necessary to a finding of excusable neglect, see Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380 (1993), did not weigh in favor of the Creditors. Critically, the Court found that the Creditors failed to provide a valid explanation for why the claims were filed late and why the delay was not entirely within the Creditors’ control, which numerous courts, including the Fourth Circuit Court of Appeals, have found to be the most critical factor in determining excusable neglect.
     To determine whether the Creditors’ request for a stay pending appeal was warranted, the Court employed the traditional four-factor test set forth by the Supreme Court in Nken v. Holder, 556 U.S. 418, 434 (2009). Although a balancing approach is applied to the factors, the first two factors—likelihood of success on the merits and irreparable injury absent a stay—are the most important in assessing the motion.
     The Court found the Creditors fell well short of the required “strong showing” of likelihood of success on appeal. In the motion for stay pending appeal, the Creditors did not offer any clear answer for why the claims were filed five days after the bar deadline and did not attempt to demonstrate that the delay was outside of their control. The single, out-of-circuit case relied upon by the Creditors for the argument that excusable neglect can still be found where no reason for the delay is proffered runs directly contrary to Fourth Circuit jurisprudence and emerging excusable neglect caselaw. The Court also found the Creditors’ asserted irreparable injury —lost time and costs associated with pursuing disgorgement actions — fails to satisfy the second factor because the Fourth Circuit has emphasized that irreparable injury must be more than monetary loss. Regarding the third factor, the Court found that further delaying plan payments to creditors, which were the product of extensive negotiations, would constitute substantial harm if the stay were granted. On the final factor, the Court found that the public interest in the issuance of a stay was minimal or non-existent and, in any event, tilted more toward denial of the Creditors’ motion.
     Having found that all four factors weighed against the Creditors, the Court denied the motion for stay pending appeal.
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* The U.S. District Court for the Middle District of North Carolina affirmed the underlying decision sustaining the objection to claims and denying the Creditors' motion to allow late-filed claims. See AAEB5 Fund 17, LLC v. Welington (In re Wellington), No. 1:21CV74, 2021 U.S. Dist. LEXIS 172956, 2021 WL 4147776 (M.D.N.C. Sept. 13, 2021)

         The Debtor filed an amended application seeking approval of compensation for its special counsel McGuireWoods LLP, including fees and expenses incurred prior to the special counsel’s effective date of employment. The Debtor filed an application to employ special counsel on March 4, 2020, which served as the effective date of employment, but special counsel had already performed the bulk of its compensable services prior to that date.
          The Court first found that, given the Supreme Court’s decision in Roman Catholic Archdiocese of San Juan v. Acevedo Feliciano, 140 S. Ct. 696 (2020), the use of nunc pro tunc employment orders to backdate a professional’s effective employment date under 11 U.S.C. § 327 no longer appears to be a permissible exercise of a bankruptcy court’s inherent powers or authority under 11 U.S.C. § 105(a).  While Acevedo may have eliminated nunc pro tunc employment orders, courts are not, however, prohibited from compensating professionals under 11 U.S.C. § 330 for work performed prior to an effective date of employment.
           As part of determining whether a professional’s compensation is reasonable, the Court will consider, as an additional factor under 11 U.S.C. § 330(a)(3), whether all or some of the fees and expenses sought are for work performed prior to a professional’s effective date of employment and, if so, whether the professional has provided a reasonable justification for why services were performed prior to the employment effective date. In determining whether a reasonable justification exists, the Court will consider, inter alia, factors such as the reason for the delay in filing an application to employ, whether the applicant was under pressure to begin service without approval, and the extent to which compensation to the applicant will prejudice third parties. The Court will view with skepticism any explanation that amounts to negligence or inadvertence.
          Applying this standard to the context of this application, the Court found that special counsel’s pre-employment services were of an unexpected and emergency nature. The Court also found that there would be no prejudice to creditors by awarding pre-employment compensation in this case. While the Court found cause to award pre-employment compensation to special counsel, the Court reduced that compensation by 10 percent due to the Debtor’s failure, on at least two occasions, to notify the Court and all interested parties that special counsel had provided extensive services prior to filing an application to employ and would seek fees for those services.

Creditor City of Winston-Salem filed a motion for relief from stay under 11 U.S.C. § 362 to allow the Creditor to file exercise reversionary powers contained in a warranty deed held by the Creditor on the Debtor’s real property. The Debtor contended the Creditor could not invoke the reversionary powers and intended to sell and leaseback the property as part of its subchapter V plan. While the Debtor and the Creditor filed a consent order providing for limited stay relief for the Creditor to pursue a resolution in state court, the Court found the three factors used in In re Robbins, 964 F.2d 342, 345 (4th Cir. 1992) did not favor stay relief in this instance. The first factor favored the Creditor as the litigation involved only matters of state law, but the other two Robbins factors weighed decidedly against stay relief. The litigation had not been initiated yet and there was a far greater likelihood that it would be completed sooner within the context of an adversary proceeding than if relegated to state court. The length of time required for the state court to reach a resolution would also delay consideration and confirmation of a chapter 11 plan, harming the estate far beyond what protection would be afforded by requiring the Creditor to seek enforcement of any judgment through the bankruptcy court. Given that the Robbins factors weighed against granting stay relief, the Court denied the Creditor’s motion, anticipating the parties would seek a resolution of the litigation through the filing of an adversary proceeding.

One day after it was due, the subchapter V Debtor requested an extension of the time in which to file its plan. In subchapter V, which was added to the Bankruptcy Code in February of 2020, a debtor must file a plan not later than 90 days after the order for relief. See 11 U.S.C. § 1189(b). While a request to extend the time under § 1189(b) does not have to be made prior to the expiration of the 90-day timeline, the moving party must meet a high burden by showing “the extension is attributable to circumstances for which the debtor should not justly be held accountable.” Persuasive caselaw interpreting 11 U.S.C. § 1221, which mirrors the extension language used in § 1189(b), shows this to be a more stringent standard than that required for extensions made under Federal Bankruptcy Rule 9006(b) or 11 U.S.C. § 1121(d)(1). The Court found the Debtor’s explanation for the delay in filing the plan — poor weather that delayed a walkthrough of a property to be sold — was unsupported by affidavits, exhibits or testimony and fell short of the circumstances warranting an extension of the plan filing deadline of § 1189(b). The Court therefore denied the Debtor’s motion to extend time.