What is an Omnibus Claim Objection?
A claim objection is a pleading filed with the Title III court in which the Debtor or another party seeks the disallowance of a specific creditor’s claim. A claim objection that seeks the disallowance of more than one claim is referred to as an “omnibus” claims objection.
The Omnibus Objection Procedures Order
On November 14, 2018, Judge Swain entered an order approving omnibus objection procedures for the Title III cases, and on June 14, 2019, Judge Swain entered an order approving amended omnibus objection procedures. Pursuant to these procedures, each omnibus objection must be provided in both English and Spanish, and contain an exhibit identifying the claims, the proof of claim numbers (if applicable), the asserted amount of the claims, the specific grounds for the objection, and other information as applicable, such as the amount by which the Debtors seek to reduce a claim. Each omnibus objection will be filed with the court and served upon any individual creditor affected by the omnibus objection, as well as certain other parties in interest.
The Omnibus Objection Notice
Omnibus claim objections will be served with a special notice containing important information with respect to the omnibus objection, including the deadline and requirements for filing a response, and the date and location for a court hearing with respect to such response. Any party disputing an omnibus objection is required to file a response.
If you receive notice of an omnibus claims objection, we recommend you consult an attorney to assist you.
Why Have the Debtors Filed an Omnibus Objection Against My Claim?
If you received notice of an omnibus claims objection, the notice and omnibus objection will state the grounds for which the Debtors are objecting to the claim.
Under the November 2018 omnibus objection procedures order, omnibus claims objections could only be filed on the non-substantive grounds that are set forth in Bankruptcy Rule 3007(d)(1)-(7), which allows for the filing of an omnibus objection on the grounds that claims:
· duplicate other claims (e.g., when an employee and his or her union both file claims for the same obligation);
· have been filed in the wrong case (e.g., when a creditor files a claim against PREPA in the Commonwealth case, or vice-a-versa);
· have been amended by subsequently filed proofs of claim (e.g., when a creditor files a later amended proof of claim to correct the amount that was listed on the original proof of claim);
· were not timely filed (i.e., when the proof of claim is filed after the deadline for filing—here, June 29, 2018);
· have been satisfied or released during the case in accordance with the Code, applicable rules, or a court order (e.g., when the debtor pays the creditor all the money asserted to be owed);
· were presented in a form that does not comply with applicable rules, and the objection states that the objector is unable to determine the validity of the claim because of the noncompliance (e.g., when the creditor provided no supporting documentation with the proof of claim form);
· are interests, rather than claims (this occurs when a proof of claim asserts equity ownership, and is not a grounds that is likely to be relevant in the Title III cases).
These grounds for objecting to claims are considered “non-substantive” because none of them dispute the legal basis of the Debtor’s liability for the claim. For example, if the Debtor objects to a claim because it was subsequently amended, the Debtor is not contesting that it owes money under the prior claim. Instead, it is proposing that the prior claim should be replaced by the later-filed amended claim. In the case of an objection to an untimely filed claim, the Debtor is, again, not contesting its liability for the debt, but is instead asserting that the claim should be disallowed for the purely technical reason that it was filed after the deadline for filing proofs of claim as required under the Bar Date Order.
Under the June 2019 amended omnibus objection procedures order, omnibus claims objections can also be filed on the following substantive grounds:
- Claims are inconsistent with the Debtors’ books and records (e.g., when the Debtor asserts it only owes the amount of claim reflected on its books and records and not the amount stated on the proof of claim);
- Claims fail to specify the asserted amount for each claim, or for each claim only list the amount as “unliquidated,” “undetermined,” or “unknown,” (e.g., when the Debtors assert a claim in an unliquidated amount should be liquidated to a particular sum (or zero));
- Claims seek recovery of amounts for which the Debtors are not liable (e.g., when the Debtors assert they are not liable based on some other legal grounds);
- Claims are incorrectly and/or improperly classified (e.g. when the Debtors assert a claim filed as secured is in fact unsecured, or that a claim filed as priority in fact non-priority);
- Claims are filed against non-Debtors (e.g., when a claim asserts a liability of a non-Debtor such as PBA or GDB)
These grounds for objecting to claims are considered “substantive” because they dispute the legal basis of the Debtor’s liability for the claim. For example, if a Debtor objects to an unliquidated claim and proposes that it be liquidated at a particular amount, the Debtor is essentially arguing that it is only properly liable for that amount. And if a Debtor objects that a claim is improperly classified as a secured claim when it is in fact unsecured, the Debtor is contesting the legal basis for the assertion of a security interest. Thus, these substantive claim objections may give rise to a number of legal and factual disputes. And, notably, because of the substantive nature of these grounds for objection, creditors have the right to take discovery against the Debtors in connection with these claim objections.