By: Donald L Swanson
Here is a refresher on the proof of claim requirement for a “writing” attachment (under Fed.R.Bankr.P. 3001), and on the prima facie validity that can result (under subpart (f) thereof).
The opinion is In re SVB Financial Group, Case No. 23-10367 in SDNY Bankruptcy Court (decided October 23, 2024; Doc. 1534; Not for Publication).
Background
Debtor files an omnibus objection to claims, contesting five proofs of claims on grounds that insufficient documentation is attached. Each of these five proofs of claim indicates in box “8” that the claim is for “services”:
- two identify a “Bank” as the invoiced party in the attached invoices; and
- the other three identify Debtor as the invoiced party.
None of the five claimants files a reply to the omnibus objection.
Legal Standards for a Valid Claim
–Statute
11 U.S.C. § 502(a) provides: “A claim or interest, proof of which is filed under section 501 of [the Bankruptcy Code], is deemed allowed, unless a party in interest . . . objects.”
–Federal Rule
Fed.R.Bankr.P. 3001(c)(1) provides: “Claim Based on a Writing. . . . when a claim, or an interest in property of the debtor securing the claim, is based on a writing, a copy of the writing shall be filed with the proof of claim.”
Fed.R.Bankr.P. 3001(f) provides: “Evidentiary Effect. A proof of claim executed and filed in accordance with these rules shall constitute prima facie evidence of the validity and amount of the claim.”
–Case Law
Here are statements of law from prior legal opinions.
Courts look to applicable nonbankruptcy law to determine whether a claim is allowable by law, and Federal pleading standards apply when assessing the validity of a proof of claim. But Courts may accept proofs of claim supported by evidence that does not exactly conform to the provided form.
To receive the benefit of prima facie validity under Rule 3001(f), the proof of claim must set forth the facts necessary to support the claim. A proof of claim based on a writing must attach a copy of the writing to the proof of claim, and a failure to do so will result in a loss of the prima facie validity of the claim.
Proofs of claim filed by pro se parties are to be construed liberally, but such claims must still be supported by specific and detailed factual information that provides the basis for a fair understanding of what is being claimed and whether a legal basis for the claim exists.
On the whole, an objecting party bears the initial burden of production and must provide evidence showing the claim is legally insufficient under 11 U.S.C. § 502.
When a proof of claim is sufficient to have prima facie validity under Rule 3001(f), a party objecting to that proof of claim must provide evidence sufficient to refute one or more of the facts in the filed claim.
Legal Standards for Objecting to a Claim
A party can object to a proof of claim under Fed.R.Bankr.P 3007(d)(6) when (i) the claim is “presented in a form that does not comply with applicable rules,” and (ii) “the objection states that the objector is unable to determine the validity of the claim because of the noncompliance.”
Under Rule 3007, the objector need only say: due to the noncompliance, the objector is unable to verify the validity of the claim.
Once an objector identifies the noncompliance, the burden reverts to the claimant to prove the validity of the claim by a preponderance of the evidence.
In other words, the claimant must prove the claim and not sit back while the objector attempts to disprove it.
Insufficient Documentation Claims
Debtor/objector claims that documents attached to each of the five proofs of claim are insufficient to:
- verify that the Debtor is the contracting party;
- verify the existence or amount of the claim (Debtor notes that it has no record of any contract with any of the claimants as a counterparty); and
- identify and attach the written documents upon which the claim is based.
–Two Claims Identifying a Bank as the Invoiced Party
Two of the five proofs of claim attach invoices for “Security Services” and “Sales Tax” or for “Consulting” services.
And the invoices attached to both claims identify a Bank as the party being invoiced—not the Debtor.
For a claim to enjoy a presumption of validity, it must set forth facts supporting the claim. Here, the two claims fail to show that Debtor was the party who received the services. Instead the invoice attachments show that a Bank received the services.
Accordingly, the two proofs of claim fail to state sufficient facts to establish their validity, the objection to each of those two claims is sustained, and both proofs of claim are expunged from the record.
–Three Claims Identifying Debtor as the Invoiced Party
Three of the five proofs of claims attach invoices showing Debtor as the invoiced party for services provided.
Accordingly, each of these three proofs of claim:
- establishes a rebuttable presumption that Debtor was the party for whom the services were rendered; and
- provides sufficient facts to gain the benefit of prima facie validity under Fed.R.Bankr.P. 3001(f).
So, the Court declares that Debtor/objector has the burden of providing further evidence, due to the prima facie status of the proofs of claim. But:
- all Debtor offers is a conclusory statement that the proof of claim attachments “lack the requisite supporting documentation . . . to verify the existence of any claim against the Debtor”; and
- such a statement does not rebut the presumption of validity.
Debtor/objector also argues that the claims fail to attach the underlying contract for their respective claims and, therefore, the claims fail to comply with the “writing” attachment requirements of Fed.R.Bankr.P. 3001(c)(1). But this argument also fails, the Court declares, because:
- the claims are based on services performed—not on a written contract; and
- so, no other writing is necessary for the claimants to state sufficient facts to support the claims.
Accordingly, these three proofs of claim:
- comply with all applicable rules;
- establish their presumption of validity;
- are not rebutted under the Debtor/objector’s burden to show that the claims are legally insufficient; and
- so, Debtor’s objections to these claims are overruled without prejudice..
Conclusion
Here’s a “thank you” to the In re SVB Financial Group Court for this refresher on the Fed.R.Civ.P. 3001 requirements for “writing” attachments and on the prima facie validity that can result.
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