File your proof of claim before the bar date.  That’s a principle every creditor in a bankruptcy case should adhere by.  But on June 7, 2024, the United States Bankruptcy Court for the Southern District of New York may have increased the degree of diligence parties need to conduct to determine whether they are a potential creditor in a case and therefore required to file a proof of claim.  The decision, which is on appeal, stands for the proposition that a party in interest should file a protective proof of claim when the party (a) has received notice of the bar date and (b) should recognize that there is some possibility that it could face liability in the future related to its prepetition relationship with the debtor.


On March 17, 2023, SVB Financial Group (the “Debtor”) filed a chapter 11 petition in the court.  The deadline for non-governmental claimants to file proofs of claim against the Debtor was August 11, 2023 (the “Bar Date”).  Prior to the petition date, on July 1, 2021, the Debtor acquired Boston Private Financial Holdings, Inc. (“Boston Private”) pursuant to a merger transaction whereby Morgan Stanley & Co., LLC (“Morgan Stanley”) served as the underwriter and financial advisor to Boston Private (the “Merger”).  Boston Private shareholders were mailed a prospectus concerning the Merger on March 19, 2021, and litigation spawned almost immediately after the Merger was announced. 

After the collapse of Silicon Valley Bank and the filing of the Debtor’s bankruptcy case (but before the Bar Date), several securities class action complaints were filed against the Debtor’s former directors and officers and Morgan Stanley, one of which related to the offering materials mailed to Boston Private shareholders in connection with the Merger (the “2023 Rossi Class Action”).  On February 15, 2024, approximately six months after the Bar Date, Morgan Stanley, Anthony DeChellis (Boston Private’s CEO), and Christopher Cooper (Head of Legal and Corporate Secretary for Boston Private’s Board of Directors) (collectively, the “Movants”), were named in a new putative class action lawsuit that was substantively identical to the claims asserted in the 2023 Rossi Class Action (the “2024 Rossi Class Action”).

Motions for Relief to File Late Proofs of Claim

Each Movant filed a separate motion requesting authority to file a late claim.  Prior to filing its motion, Morgan Stanley timely filed a proof of claim for contribution and indemnification narrowly related to one litigation that arose before the Bar Date.  Morgan Stanley argued that it could not have anticipated the “unprecedented” theory of liability set forth in the 2024 Rossi Class Action and that filing the late claim would not prejudice the Debtor.  Morgan Stanley further asserted that under its financial advisory engagement letter it held claims for indemnification as Boston Private’s underwriter and held claims for contribution against the Debtor.

DeChellis also filed a timely proof of claim seeking $2.3 million allegedly owed to him under his deferred compensation plan.  But DeChellis did not file a proof of claim related to liabilities that could arise on account of the Merger.  DeChellis asserted in his motion that his only tie to the Merger was a letter he signed, which recommended that Boston Private shareholders approve the Merger.  DeChellis believed that he possessed both a contribution and indemnification claim against the Debtor pursuant to the Merger Agreement and Boston Private’s bylaws and certificates of incorporation.

Cooper did not file a proof of claim and asserted in his motion that he had no role in preparing the Merger offering materials—he only signed the materials in his capacity as Corporate Secretary for Boston Private’s Board of Directors.  Cooper argued that he was never served with the motion or order establishing the Bar Date and that he had no reason to expect to be a defendant in the 2024 Rossi Class Action, as he was never previously named as a defendant.

Debtor’s Omnibus Objection

In response to the motions, the Debtor filed a consolidated objection on the grounds that the Movants are highly sophisticated parties represented by elite law firms, the claims accrued before the petition date, the 2024 Rossi Class Action was foreseeable, and the Movants’ delay was unjustified.  Specifically, the Debtor asserted the following defenses in response to the motions:

  • The Movants cannot pursue their indemnification claims because they were aware that they were entitled to seek indemnification from the Debtor before the expiration of the Bar Date because the underlying facts and circumstances alleged in the 2024 Rossi Class Action existed prior to the petition date (e.g., existing contracts, organizational documents).
  • The Movants cannot pursue their contribution claims because the 2024 Rossi Class Action was “totally foreseeable” in light of certain postpetition litigation and the 2023 Rossi Class Action.
  • Neither Morgan Stanley’s nor DeChellis’ proposed late claims relate back to their timely filed proofs of claim because they arise out of separate documents and transactions, and therefore neither Movant timely preserved their purported “blanket” reservation of right to assert a claim for indemnification or contribution.
  • Cooper, an “unknown” creditor at the time the Bar Date was set, received ample constructive notice via publication of the Bar Date in two national newspapers.

Court Denies Each Motion

At the outset, the court noted that Bankruptcy Rule 9006(b)(1) authorizes a party to file a claim after the bar date if such late-filing “was the result of excusable neglect.”  The Supreme Court’s decision in Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380 (1993) established the following four factors to evaluate “excusable neglect:”

  • 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.

Id. at 395.

After holding that each Movant had notice of the Bar Date, the court clarified that the Debtor is in the process of preparing for plan confirmation and conducting claim reconciliation on 1,274 proofs of claim.  The court thereafter denied each motion, stating that “[p]ermitting these late claims to proceed. . . would require the Debtor to expend resources to address them in the claims reconciliation process and delay the finality that courts have recognized is of vital importance in a chapter 11 case.”  The court continued by adding that the Merger, Silicon Valley Bank’s collapse, and the Debtor’s entry into bankruptcy was so highly publicized that if the Movants were authorized to file late claims, it “could entice others to do the same,” promote a “regimen of uncertainty in which time limitations were not rigorously enforced,” and discourage the need for finality. 

The court concluded by noting that Second Circuit courts adopt a “hard line” in applying the Pioneer test, meaning that the court will focus primarily on the third factor: reason for the delay and whether it was within the reasonable control of the movant.  Each Movant argued that they could not have anticipated being named a defendant in the 2024 Rossi Class Action.  But the court explained that the highly contentious nature of the Merger and the 2023 Rossi Class Action put the Movants on notice that claims relating to the Merger could have been brought against each Movant irrespective of whether such claims ultimately possess any merit.  Thus, the court reasoned that each Movant had the control and ability to timely file a protective proof of claim.  In short, based on all of the events that preceded the Bar Date, the Movants “should have known better” as sophisticated parties represented by counsel (or an attorney themselves) that a protective claim related to the Merger should have been filed.

On June 21, 2024, the Movants filed a notice that they were appealing the court’s holding to the United States District Court for the Southern District of New York.


The bankruptcy court faced an incredibly difficult decision in weighing whether to (a) authorize the three Movants to file late claims related to post-bar date events or (b) promote finality and enforce court deadlines in furtherance of completing and closing a chapter 11 proceeding.  In the end, based on the Second Circuit’s strict observance of bar dates, the court sided with the Debtor.  Time will tell whether the court’s decision is upheld on appeal, but the decision provides helpful guidance to practitioners and all parties in interest in a bankruptcy case.

First, it is crucial for all parties in interest to monitor material prepetition and postpetition events associated with the debtor to understand whether it is possible that the party may be sued based on the party’s relationship with a debtor.  Second, parties should review their prepetition contracts and/or leases with the debtor to understand what rights they have against the debtor (e.g., contribution, indemnification, advancement of expenses).  Third, if a party believes it may eventually be subject to liability based on its relationship with a debtor (e.g., existing litigation related to a matter that the party was involved with) and the party believes it has a claim against that debtor, at the very least the party should file a protective proof of claim, especially if the bankruptcy case was filed in the Second Circuit.  Fourth, a blanket reservation of rights in a proof of claim will not allow a party to amend the timely-filed claim if the amendment does not relate back to the original proof of claim—therefore, a proof of claim should include a reservation of rights section that lays out specific events that could eventually give rise to additional liability so that the proof of claim can merely be amended (and avoid the need to seek relief to file a late claim).  Finally, parties with potential claims against a debtor need to seriously consider filing a protective proof of claim if they have claims and/or contractual rights against a debtor, even if they are worried that the filing will signal to plaintiffs that they should be included as a defendant in future causes of action.

As the bankruptcy court’s decision highlights, considering when, if, and how to file a proof of claim is far more complicated than merely filling out and submitting Form 410.  Even parties who have a relationship with the debtor, but are unsure whether they have a potential claim, should consult experienced bankruptcy counsel to preserve their rights.