Tronox Incorporated

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK 	NOT FOR PUBLICATION
--------------------------------------------------------x
In re: 	: 	Chapter 11
:
TRONOX INCORPORATED, et al., 	: 	Case No. 09-10156 (ALG)
:
Debtors. 	: 	(Jointly Administered)
--------------------------------------------------------x
ORDER DENYING MOTION TO ENLARGE TIME FOR
FILING PROOF OF CLAIM
APPEARANCES:
LOWENSTEIN SANDLER PC
Attorneys for Claimants LaGrange Capital Partners, LP and LaGrange Capital Partners
Offshore Fund, Ltd.
1251 Avenue of the Americas, 18th Floor
New York, New York 10020
By: 	Michael S. Etkin
Ira M. Levee
KIRKLAND & ELLIS LLP
Attorneys for Debtors
601 Lexington Avenue
New York, New York 10022
By: 	Richard M. Cieri
Jonathan S. Henes
Patrick J. Nash, Jr.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
Attorneys for the Official Committee of Unsecured Creditors
1285 Avenue of the Americas
New York, New York 10019
By: 	Alan W. Kornberg
Brian S. Hermann
Elizabeth R. McColm
Lindsay F. Cohen
PILLSBURY WINTHROP SHAW PITTMAN LLP
Attorneys for the Official Committee of Equity Holders
1540 Broadway
New York, New York 10036
By: 	Craig A Barbarosh
David A. Crichlow
Karen B. Dine
09-10156-mew Doc 1536 Filed 05/07/10 Entered 05/07/10 10:20:12 Main Document
Pg 1 of 9

2
ALLAN L. GROPPER
UNITED STATES BANKRUPTCY JUDGE
Before the Court is a motion by LaGrange Capital Partners, LP and LaGrange
Capital Partners Offshore Fund, Ltd., lead plaintiffs (“Lead Plaintiffs”) in securities
litigation against the above-captioned debtors and others, to enlarge their time for filing a
class proof of claim. For the reasons stated below, the motion is denied.
Background
The Debtors filed petitions under chapter 11 of the Bankruptcy Code on January
12, 2009. Pursuant to Court order of May 28, 2009, the bar date for the filing of claims
against the Debtors was established as August 12, 2009 (the “Bar Date”). (Dckt. No.
466). Notice of the Bar Date (the “Bar Date Notice”) was mailed to thousands of
potential claim holders, as well as the registered holders of the Class A and Class B
common stock of debtor Tronox Incorporated. Brokers and dealers who held stock in
nominee name were instructed to provide notice to the beneficial owners. It is
uncontested that the Lead Plaintiffs were provided individual notice of the bankruptcy
proceedings and the Bar Date. The Bar Date Notice specifically required an entity with a
claim based on securities fraud to file a Proof of Claim by the Bar Date, stating:
09-10156-mew Doc 1536 Filed 05/07/10 Entered 05/07/10 10:20:12 Main Document
Pg 2 of 9

3
[I]f you wish to assert a Claim against any of the Debtors based on,
without 	limitation, 	Claims 	for 	damages 	or 	rescission 	based 	on 	the
purchase or sale of an equity security, you MUST submit a Proof of Claim
by the Bar Date.
(Dckt. No. 466) (emphasis in original).
On July 10, 2009, a month before the Bar Date, federal securities fraud lawsuits
were filed against certain of the Debtors’ officers and directors, their former affiliate,
Kerr-McGee Corp., and its parent corporation.1 One of the lawsuits was filed by the
Lead Plaintiffs on behalf of a class of all similarly situated shareholders. On September
9, 2009, Lead Plaintiffs filed a motion seeking to be appointed lead plaintiffs in the
securities litigation in the Southern District of New York. That motion was granted on
October 13, 2009, by order of the Hon. Shira A. Scheindlin. See In re Tronox, Inc.
Securities Litigation, No. 09 Civ. 6220 (S.D.N.Y. Oct. 13, 2009) (Dckt. No. 50). After
their appointment, the Lead Plaintiffs began to prosecute the securities litigation lawsuits
and also participated in these bankruptcy cases, filing responses to motions on December
1, 2009 and December 24, 2009.
On January 5, 2010, five months after the Bar Date and three months after being
appointed in the securities litigation, Lead Plaintiffs filed a motion seeking leave to file a
late proof of claim on behalf of a class of shareholders in these bankruptcy proceedings.
The motion is opposed by the Debtors, the Official Creditors Committee and the Official
Equity Committee, appointed to represent the interests of the current holders of equity in
these cases. A hearing was held on April 28, 2010.
1 Tronox Incorporated was not named as a defendant in the securities litigation, presumably because of the
automatic stay of § 362 of the Bankruptcy Code.
09-10156-mew Doc 1536 Filed 05/07/10 Entered 05/07/10 10:20:12 Main Document
Pg 3 of 9

4
Discussion
The motion filed by the Lead Plaintiffs seeks an extension of the Bar Date on a
claim of excusable neglect, as provided in Bankruptcy Rule 9006(b)(1). While a decision
to allow the filing of a late proof of claim is ultimately an equitable one, the Supreme
Court has identified several important factors that must be considered in determining
whether there has been “excusable neglect,” including:
the danger of prejudice to the debtor, the length of the delay and its
potential 	impact 	on 	judicial 	proceedings, 	the 	reason 	for 	the 	delay,
including whether it was within the reasonable control of the movant, and
whether the movant acted in good faith.
Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380, 395 (1993). The
Second Circuit has repeatedly “‘taken a hard line’ in applying the Pioneer test.” Midland
Cogeneration Venture L.P. v. Enron Corp. (In re Enron Corp.), 419 F.3d 115, 122-23 (2d
Cir. 2005), quoting Silivanch v. Celebrity Cruises, Inc., 333 F.3d 355, 366-68 (2d Cir.
2003).
The Reason for the Delay
As the Second Circuit has held, “‘the four Pioneer factors do not carry equal
weight; the excuse given for the late filing must have the greatest import. While
prejudice, length of delay, and good faith might have more relevance in a close[] case, the
reason-for-delay factor will always be critical to the inquiry.’” See In re Enron Corp.,
419 F.3d at123 (alterations in original), quoting Silivanch, 333 F.3d at 368; see also
Graphic Commc’ns Int'l Union v. Quebecor Printing Providence, Inc., 270 F.3d 1, 5-6
(1st Cir. 2001). In their papers and at the Hearing, Lead Plaintiffs offer as the primary
reason for their delay, the contention that they lacked the authority to file a proof of claim
09-10156-mew Doc 1536 Filed 05/07/10 Entered 05/07/10 10:20:12 Main Document
Pg 4 of 9

5
on behalf of the class until after their appointment by the District Court on October 13,
2009.
There is no substance to this argument. Courts have without exception found that
a putative class representative is not precluded from filing a class proof of claim in a
bankruptcy case, whether or not appointed as a class representative in other litigation. As
the District Court said in In re Chateaugay Corp., 104 B.R. 626, 634 (S.D.N.Y. 1989),
“Proofs of claim filed on behalf of a class may be filed as of right and in such
circumstances the bankruptcy court must exercise its discretion, pursuant to rule 9014 to
apply or not apply Rule 7023, once an objection has been made to those claims.” The
decision whether to recognize or refuse class status, made by the Bankruptcy Court on
the basis of issues germane to the bankruptcy case, is not conditional on a party’s status
as “lead plaintiff” in a securities fraud case. See In re Musicland Holding Corp., 362
B.R. 644, 652 (Bankr. S.D.N.Y. 2007) (“If the court certifies the class, … the self-
appointed agent has become ‘authorized’, and the original filing is effective for the whole
class....”(quoting In re American Reserve Corp., 840 F.2d 487 (7th Cir. 1988))); see also
In re Charter Co., 876 F.2d 866, 876 (11th Cir. 1989). When a class is certified, the
“court effectively ratifies the agent’s authority nunc pro tunc.” Musicland, 362 B.R. at
652.
There simply is no overlap between an appointment as lead plaintiff in securities
litigation and the right of a party to file and prosecute a class proof of claim in chapter 11
proceedings. See In re Charter Co., 876 F.2d at 876-77. Recognition of class status in
securities litigation does not guaranty recognition of class status in a bankruptcy case, nor
is the pendency of class securities litigation a prerequisite to the filing of a class proof of
09-10156-mew Doc 1536 Filed 05/07/10 Entered 05/07/10 10:20:12 Main Document
Pg 5 of 9

6
claim in this court, although it may be relevant. The Private Securities Litigation Reform
Act of 1995 (“PSLRA”), 15 U.S.C. §§ 77-78, which regulates class securities litigation in
the District Court, does not purport to regulate the filing of class claims in this court. It
would complicate and potentially delay bankruptcy proceedings – which are protracted
and expensive enough as they are – to recognize the rule sought by Lead Plaintiffs – that
the filing of a class proof of claim should await an order of a different court on a different
issue relating to the organization of litigation in that court.
Moreover, even after they were appointed by the District Court, Lead Plaintiffs
were dilatory in filing, failing to make the instant motion until January 5, 2010. The
reason offered for the three month delay is unpersuasive – Lead Plaintiffs merely contend
that they were preoccupied with the securities litigation. They had time, however, to
enter two appearances in these chapter 11 cases on discovery and insurance issues. A
shorter delay resulted in the denial of a motion to extend time in In re DDI Corp., 304
B.R. 626, 629 (Bankr. S.D.N.Y. 2004). There, plaintiffs in class action securities fraud
litigation attempted to file a class proof of claim against the debtor roughly two months
after the bar date had passed. Even though the Court there found that the plaintiffs had
not received actual notice of the bar date, it denied the motion, holding that “the
excusable neglect analysis must focus on the circumstances surrounding the individual
creditor's failure to file a timely proof of claim.” Id at 630. Otherwise, the Court noted,
“Extending the bar date to permit a late class claim may allow the lax creditor to avoid
his own fault in failing to file a timely, individual claim.” Id. at 629. Here, not only are
the same concerns present, but the Lead Plaintiffs had individual notice of the Bar Date.
09-10156-mew Doc 1536 Filed 05/07/10 Entered 05/07/10 10:20:12 Main Document
Pg 6 of 9

7
Based on all of the above, the Court finds that the excuses proffered for the delay
in filing are insubstantial, a conclusion that weighs strongly in favor of denying the
motion.
Length of the Delay and Prejudice to Debtor
Two of the other factors in the Pioneer analysis are the length of the delay and
prejudice – often discussed together. See In re Enron Corp., 419 F.3d at 130; In re Keene
Corp., 188 B.R. 903, 910 (Bankr.S.D.N.Y.1995). Also, since the length of the delay
“must be considered in the context of the proceeding as a whole,” it is evaluated in terms
of whether it contributes to prejudice to the Debtors. Enron, 419 F.3d at 128.
The Second Circuit has stated that,
A bar order serves the important purpose of enabling the parties to a
bankruptcy case to identify with reasonable promptness the identity of
those making claims against the bankruptcy estate and the general amount
of the claims, a necessary step in achieving the goal of successful
reorganization…. Thus, a bar order does not “function merely as a
procedural gauntlet,” Kolstad, 928 F.2d at 173, but as an integral part of
the reorganization process.
In re Hooker Invest., Inc., 937 F.2d 833, 840 (2d Cir. 1991). While the Lead
Plaintiffs waited five months after the Bar Date and three months after their
appointment to appear and seek permission to file a proof of claim, the parties in
interest in the bankruptcy case were making significant progress. On December
20, 2009, the Debtors filed a plan support agreement outlining the principal terms
of a plan of reorganization that had been agreed to by many of the main parties.
(Dckt. No. 1003, authorized Dec. 23, 2009, Dckt. No. 1030). The Equity
Committee, representing the current equity holders, was not a party, but it has
been an active participant in all court proceedings since its formation on March
13, 2009, and it is in a position to play a key role in connection with plan
09-10156-mew Doc 1536 Filed 05/07/10 Entered 05/07/10 10:20:12 Main Document
Pg 7 of 9

8
formulation issues. (Dckt. No. 244, amended Dckt. No. 245). The Plan Support
Agreement requires the Debtors to file a disclosure statement by June 30, 2010.
Granting Lead Plaintiffs’ motion would likely result in substantial delay and
expense and compromise the parties’ efforts to formulate a plan on the present
timeline. The potential for prejudice is thus greater than would be indicated by “a
simple dollar-for-dollar depletion of assets otherwise available for timely filed
claims.” Enron, 419 F.3d at 130, quoting In re R.H. Macy & Co., Inc., 166 B.R.
799, 802 (S.D.N.Y. 1994).
The two Pioneer factors – the length of the delay and the potential for
prejudice to the Debtors – also weigh heavily against granting Lead Plaintiffs’
motion.
Good Faith
The parties do not raise any issue as to the good faith of the Lead Plaintiffs, and it
is assumed that Lead Plaintiffs have acted in good faith. However, as three of the four
Pioneer factors weigh in favor of the Debtors, good faith alone is not enough.
09-10156-mew Doc 1536 Filed 05/07/10 Entered 05/07/10 10:20:12 Main Document
Pg 8 of 9

9
Conclusion
Lead Plaintiffs’ motion to enlarge the time for filing a class proof of claim is
denied.2
IT IS SO ORDERED.
Dated: New York, New York
May 6, 2010
____/s/ Allan L. Gropper________________
UNITED STATES BANKRUPTCY JUDGE
2 At the Hearing, Lead Plaintiffs’ counsel represented that the class may also be claimants against certain of
the Debtors’ insurance policies that provide both entity insurance and officer and director coverage.
Nothing in this opinion is intended to affect any claim with respect to any insurance policy.
09-10156-mew Doc 1536 Filed 05/07/10 Entered 05/07/10 10:20:12 Main Document
Pg 9 of 9