In re Randi’s, Inc., Ch. 11 Case No. 11-10431,

2012 Bankr. LEXIS 2920 (Bankr. S.D. Ga. June 27, 2012) (J. Barrett) (click here for .pdf copy of opinion).

The 2005 Amendments to the Bankruptcy Code ("BAPCPA") included new rules for Chapter 11 cases filed by small businesses.  The term "small business" is defined in Section 101(51D)  as:

… a person engaged in commercial or business activities (including any affiliate of such person that is also a debtor under this title and excluding a person whose primary activity is the business of owning or operating real property or activities incidental thereto) that has aggregate noncontingent liquidated secured and unsecured debts as of the date of the filing of the petition or the date of the order for relief in an amount not more than $2,000,000 (excluding debts owed to 1 or more affiliates or insiders) for a case in which the United States trustee has not appointed under section 1102 (a)(1) a committee of unsecured creditors or where the court has determined that the committee of unsecured creditors is not sufficiently active and representative to provide effective oversight of the debtor.In this Chapter 11 case,

Randi Beckworth, a shareholder of the debtor, a small business, sought to file and confirm a Chapter 11 plan more than 300 days after the date the case was filed.  The issue was whether the plan should be deemed timely filed.  The BAPCPA included deadlines for small business plans.  The relevant section, 11 U.S.C. §1121(e), now provides:

(e) In a small business case– 

(1) only the debtor may file a plan until after 180 days after the date of the order for relief. .
(2) the plan . . . shall be filed not later than 300 days after the date of the order for relief; and
(3) the time periods specified in paragraphs (1) and (2)… may be extended only if–

(A) the debtor, after providing notice to parties in interest (including the United States trustee), demonstrates by a preponderance of the evidence that it is more likely than not that the court will confirm a plan within a reasonable period of time;
(B) a new deadline is imposed at the time the extension is granted; and
(C) the order extending time is signed before the existing deadline has expired.

Once the 300 day deadline has passed with no plan being filed, causes for dismissal exists pursuant to 11 U.S.C. §1112(b)(4)(J).   The question at issue was whether the deadline in  §1121(e)(2) applies to all parties, or only the debtor. The court noting that there were few cases addressing this issue, held that the plan was not timely filed:

After considering the matter and the facts of this case, I conclude cause exists to dismiss or convert the case for the failure of any party to file a plan within the 300-day period or to timely obtain an extension…  Small business cases are on an expedited tract and follow the supervised procedure mandated by Congress. H.R. Rep. No. 109-31, at 158 (2005).  Section §1121(e)(2) requires "the plan. . . be filed not later than 300 days after the date of the order for relief." 11 U.S.C. §1121(e) (2). In this case, no plan was filed within the 300 days after the order for relief. Furthermore, pursuant to 11 U.S.C. §1121 (e) (3) (C), any order extending this time must be signed prior to the expiration of the dead-line. No such order was entered in this case. As a result of the failure to satisfy the provisions of 11 U.S.C. §1121(e), the proposed plan cannot be confirmed.

The debtor also argued that 11 U.S.C. §105(d)(2)(B)(iii) provided authority for the court to extend the deadline for a party other than the debtor.  Section 105(d)(2)(B)(iii) states:

The court, on its own motion or on the request of a party in interest–

(2) unless inconsistent with another provision of this title or with applicable Federal Rules of Bankruptcy Procedure, may issue an order at any such conference prescribing such limitations and conditions as the court deems appropriate to ensure that the case is handled expeditiously and economically, including an order that– (B) in a case under chapter 11 of this title … (iii) sets the date by which a party in interest other than a debtor may file a plan.

The court found that extending the deadline through this section would be inconsistent with 11 U.S.C. §1121(e). Further, it would be contrary to the rule of statutory construction that a more general statute gives way to a more specific one when there exists friction between the two.

Based upon the above opinion, the court denied confirmation and dismissed the case.

Scott Riddle’s practice focuses on bankruptcy and litigation. Scott has represented Chapter 7 and 11 debtors, creditors, creditor committees, trustees, court-appointed receivers and other interested parties in bankruptcy cases and bankruptcy litigation.  For more information, click here.