Ellipsat, Inc.

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF COLUMBIA
In re
ELLIPSO, INC.,
Debtor.
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Case No. 09-00148
(Chapter 11)
Not for Publication in
West’s Bankruptcy Reporter
MEMORANDUM DECISION RE MOTION TO ACCEPT
BALLOT MISDIRECTED TO COUNSEL FOR THE DEBTOR-IN-POSSESSION
Mark S. Zaid, P.C. has filed a motion to enlarge the time
for submission of its ballot on the proposed chapter 11 plan of
John B. Mann so that the ballot is counted as a vote against the
plan. 	The motion will be granted based on the following findings
of fact and conclusions of law.
I
Mark S. Zaid, P.C. holds a prepetition claim against the
debtor, Ellipso, Inc., for $10,000. 	Mark S. Zaid, the president
of Mark S. Zaid, P.C., timely received copies of the proposed
The document below is hereby signed.
Signed: April 02, 2010.
_____________________________
S. Martin Teel, Jr.
United States Bankruptcy Judge
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plan, disclosure statement, ballot and balloting instructions. 1
Zaid was peripherally aware that there was a ballot to be voted
on by December 15, 2009, but he had not turned his attention to
the documents before he received an e-mail from John Mann on
December 12, 2009, which stated:
Bob Patterson suggested that I email the attached to
you, instead of relying on snail-mail. As you may be
aware, Ellipso has filed for Chapter 11 bankruptcy, and
the Court has approved my plan for reorganizing the
debtor.
While I regret that so many creditors have been hurt by
Ellipso, the Plan offers some prospect of recovery.
The attached Ballot is due back to me no later than
Tuesday, Dec. 15, 2009, so that I may report the
results to the Court.
1 	The record does not reveal that Mann sent Zaid a copy of
the order approving the disclosure statement, setting the
deadline for sending a ballot to Mann, and giving notice of the
confirmation hearing. 	That three-page order recited that it was
to be mailed by November 20, 2009, to all creditors, and in
paragraph B stated:
December 15, 2009, is fixed as the last day on which
the holders of claims and interests may accept or
reject the amended plan by causing receipt by the
proponent of a completed ballot by said date;
The order listed Mann’s mailing address at the foot of the last
page of the order. 	Within five days of mailing, Mann was
required to file a certificate reflecting that he mailed the
order with the disclosure statement, plan, and ballot to each
creditor. 	My review of the docket does not disclose that a
certificate of mailing was filed. 	Nevertheless, without deciding
the issue, I will assume, in favor of the parties opposing Zaid’s
motion, that Mann sent Zaid a copy of the order approving the
disclosure statement, as that assumption does not alter the
outcome. 	If Mann did not send a copy of the order to Zaid, that
would weigh heavily in favor of finding excusable neglect, and
might even require that the motion be granted without addressing
the issue of excusable neglect.
2
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You may sign and fill out the Ballot and sign it, scan
it and email it to this address if that is most
convenient. 	Ellipso has listed your claim at $10,000.
While Zaid is a lawyer, he has little experience in bankruptcy
matters. 	Zaid had little expectation of recovering any of the
debt owed him, and he did not want to spend much, if any, more
wasted time on matters relating to Ellipso, Inc. 	Therefore, he
did not immediately turn his attention to the rather voluminous
documents he had received. 	Nevertheless, he did respond to
Mann's e-mail on December 14, 2009, at 8:02 p.m., stating:
My apologies for not getting back to you sooner. Mr.
Patterson has also tried to reach me. 	I have a very
important hearing tomorrow that is dominating my time
so Ellipso is not high on my priority list.
Candidly, I don't anticipate ever getting any money
from Castiel/Ellipso.
Can you elaborate how my voting in favor of your plan
would impact me, if at all?
Mann apparently did not respond to this e-mail. 2
On or about December 14, 2009, Zaid was also contacted by
both David Castiel (the chief executive officer of the debtor)
and James Bailey, a creditor and former employee of the debtor.
They asked Zaid to vote against the plan.
The debtor at that time was serving as a debtor in
possession with fiduciary duties regarding the bankruptcy estate
2 	Zaid does not recall if Mann responded, and Mann has not
suggested that he did respond. 	(Zaid inadvertently deleted his
December 2009 e-mails, and thus could not verify from them
whether Mann responded.)
3
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under 11 U.S.C. § 1107(a). 	In an e-mail, Castiel, the debtor’s
chief executive officer, asked that Zaid e-mail or fax his ballot
either to him or to Kermit Rosenberg, counsel for the debtor in
possession. 	Zaid assumed that Castiel (as chief executive
officer of the debtor) was saying that sending the ballot to
Castiel or to Rosenberg was all that he needed to do. 	Not having
had a response to his e-mail of 8:02 p.m. on the evening of
December 14, 2009, to Mann, Zaid sent his executed ballot to
Kermit Rosenberg by e-mail early the next day, December 15, 2009,
at 1:57 a.m. 	He assumed that Rosenberg would transmit the ballot
to Mann.
Based on his thinking that Castiel was saying that he only
needed to send the ballot to Castiel or Rosenberg, Zaid failed to
comply with the ballot’s clear and conspicuous instruction that
the ballot be sent to Mann. 	But it was not a deliberate failure
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to comply with the instruction. 3
Zaid did not learn of his mistake until Mr. Mann e-mailed
him on December 23, 2009, stating:
I did not receive your ballot in the Ellipso
reorganization.
However, at the plan confirmation hearing on Dec. 22,
2009, Ellipso's bankruptcy counsel, Mr. Kermit
Rosenberg, Esq. provided the Court with what he and Mr.
Castiel asserted was your signed ballot, rejecting the
plan, and dated Dec. 14, 2009.
3 	The instruction appeared, first, on the front page of the
ballot as part of the following language in bold letters:
You should review the Disclosure Statement and the Plan
before you vote. 	You may wish to seek legal advice
concerning the Plan and your classification and
treatment under the Plan. Your claim has been placed in
class IV under the Plan. If you hold claims or equity
interests in more than one class, you will receive a
ballot for each class in which you are entitled to
vote.
If your ballot is not received by John Mann, 9330 Harts
Mill Road, Warrenton, VA 20186 on or before December
15, 2009, and such deadline is not extended, your vote
will not count as either an acceptance or rejection of
the Plan.
If the Plan is confirmed by the Bankruptcy Court it
will be binding on you whether or not you vote.
The ballot on its second page, underneath the space for signing
of the ballot, repeated the instruction in summary terms by
stating:
RETURN THIS BALLOT TO:
John Mann
9330 Harts Mill Road
Warrenton, VA 20186
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However, given the timing of our limited correspondence
on Dec. 14, and since as of this date I have not even
received a late copy of your ballot, I am puzzled by
the document that Mr. Castiel provided the Court.
Ordinarily, I would consider this just an inadvertent
failure to meet a voting deadline. 	But since Ellipso
and David Castiel have been found to have lied in
discovery, to the District Court, and to the Court of
Appeals, I'm sure you will understand my concern that
your ballot (attached) was genuine and obtained in good
faith.
If you would be so kind to confirm its authenticity,
and the circumstances under which it was obtained, it
would set my mind at ease that not yet another
misrepresentation has been made in Federal Court.
On January 4, 2010, Zaid replied by e-mail, stating:
Sorry for the delay in my response. I was away on
vacation.
The ballot was authentic. I was told, contrary to what
was stated on the ballot, that I could simply send it
to Ellipso's counsel.
Zaid believed, in light of Mr. Mann’s statement, that Mann would
consider Zaid’s apparent failure to properly direct the ballot to
Mr. Mann “just an inadvertent failure,” and that if Zaid
confirmed the ballot’s authenticity, the ballot would be counted.
Zaid did not learn until the week before filing his motion on
March 12, 2010, that Mann did not count Zaid’s vote in the ballot
summary he provided to the court, and that Zaid’s vote was
important in determining whether the court would approve the
plan.
Mann’s plan was not in a procedural posture that it could be
confirmed at the confirmation hearing on December 22, 2009. 	In
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an attempt to obtain confirmation of the plan, Mann and creditors
allied with Mann have filed objections to numerous claims seeking
to disallow those claims so that their votes against the plan
will not be counted, or if counted will be counted in a reduced
dollar amount. 	That claims-objection process is not completed
even as of this date. 	Moreover, Mann has moved to modify his
plan, and that will entail further delay and potentially the
necessity of re-balloting.
The parties objecting to Zaid’s motion noted only one
potential challenge to Zaid’s claim, an alleged statute of
limitations defense. 	That defense, if it is asserted via an
objection to Zaid’s claim, ought to be relatively straightforward
to resolve.
II
In Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P'ship,
507 U.S. 380 (1992), the Court addressed “excusable neglect” in
the context of a late proof of claim and Fed. R. Bankr. P.
9006(b)(1), stating:
Although inadvertence, ignorance of the rules, or
mistakes construing the rules do not usually constitute
“excusable” neglect, it is clear that “excusable
neglect” . . . is a somewhat “elastic concept” and is
not limited strictly to omissions caused by
circumstances beyond the control of the movant.
Id. at 392 (footnotes omitted). 	As to whether neglect is
“excusable,” the Court stated:
the determination is at bottom an equitable one, taking
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account of all relevant circumstances surrounding the
party's omission. 	These include ... the danger of
prejudice to the [non-moving party], 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.
Id. at 395 (citation and footnotes omitted).
Zaid has demonstrated that his ballot ought to be allowed to
be treated as timely based on excusable neglect. 	First, there is
no danger of prejudice to Mann. 	The existence of Zaid’s ballot
was made known to Mann at the confirmation hearing on December
22, 2009. 	Allowing the ballot to be submitted out of time will
not disrupt the confirmation process, which, at this juncture, is
not susceptible of being concluded until the objections to claims
process is resolved. 	Indeed, Mann’s e-mail of December 23, 2009,
to Zaid failed to voice any concern that Zaid’s ballot was
prejudicial to Mann.
Second, the length of the delay was minimal. 	Mann was made
aware of the ballot on December 22, 2009, and in response to
Mann’s e-mail of December 23, 2009, Zaid verified the ballot’s
authenticity on January 4, 2010, after the conclusion of the
Christmas and New Year’s holidays. 	Once he learned that Mann
(despite Mann’s e-mail of December 23, 2009, suggesting that Mann
only wanted assurances that the ballot was authentic) was taking
the position that the ballot ought not be counted, Zaid moved
promptly to allow the ballot to be counted.
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A final consideration under Pioneer, as noted above, is “the
reason for the delay, including whether it was within the
reasonable control of the movant, and whether the movant acted in
good faith.” 	Zaid timely completed the ballot, and his sending
the ballot by the deadline of December 15, 2009, to Kermit
Rosenberg, counsel for the debtor in possession, instead of to
Mann was inadvertent, based on a misunderstanding that mailing to
Rosenberg as counsel for the debtor in possession would suffice.
Mann expressly recognized in his e-mail of December 23, 2009, to
Zaid that the failure was inadvertent. 	Although it was within
the reasonable control of Zaid to comply with the explicit
instructions on the ballot and to mail the ballot to Mann, Zaid
clearly proceeded in good faith.
Although inadvertence usually does not constitute
"excusable" neglect, the relevant circumstances here convince me
that, as an equitable matter, Zaid’s failure to submit a ballot
to Mann in a timely fashion was excusable neglect.
An order follows.
[Signed and dated above.]
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Copies to: Office of U.S. Trustee; Ronald B. Patterson, Esq.;
Wendell W. Webster, Esq.; Kermit Rosenberg, Esq.; and:
Robert Patterson
9330 Harts Mill Rd.
Warrenton, VA 20186
c/o J. Mann
John B. Mann
9330 Harts Mill Rd.
Warrenton, VA 20186
David Castiel
2831 44th Street, NW
Washington, D.C. 20007
John Page
1077 30 th Street, NW, #411
Washington, DC 20007
David Castiel
2831 44th Street NW
Washington, DC 20007-1135
Mark S. Zaid, Esq.
Mark S. Zaid, P.C.
1250 Connecticut Avenue, N.W.
Suite 200
Washington, D.C. 20036
10	O:\TEEL\Judge Temp Docs\Ellipso - Mem Decsn re Mtn of Zaid PC to Late File Ballot_v2.wpd
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