Section 1121(e)(1) of the Bankruptcy Code provides a 180-day exclusive period for a small business debtor to file a plan, unless this period is extended by the court. Section 1121(e)(2) provides “the” plan and a disclosure statement (if any) shall be filed no later than 300 days after the order for relief. Section 1121(e)(3) provides that the deadlines in 1121(e)(1) and (e)(2) may be extended only if the debtor demonstrates that it is more likely than not that the court will confirm a plan within a reasonable period of time. These time periods in section 1121(e), and any extension of them, differ from the times periods in sections 1121(b) and (c) and the procedure in section 1121(d) for extending them.
In the context of a small business chapter 11 case, then, is a creditor prohibited from filing a plan more than 300 days following the order for relief (the deadline contained in sec. 1121(e)), or may the creditor still file a plan if it otherwise meets the provisions of section 1121(c)? In ruling that the provisions of section 1121(e) apply only to small business debtors, the Tenth Circuit BAP held that creditors of a small business debtor may file plans of reorganization more than 300 days following the order for relief. Thurner Industries, Inc. v. Gunnison Energy Corporation (In re Riviera Drilling & Exploration Company), 2013 WL 6623647 (10th Cir. BAP 2013).
In Riviera Drilling the debtor filed a plan but was unsuccessful in obtaining confirmation. The bankruptcy court then ordered the appointment of a chapter 11 trustee, who unsuccessfully sought to sell the debtor’s assets through a section 363 sale. When the trustee thereafter sought to have the case converted to a chapter 7 proceeding. Gunnison Energy, a creditor of the estate, opposed the trustee’s motion to convert and filed a liquidating plan. Thurner Industries objected to confirmation of Gunnison Energy’s plan in part on the ground that it was filed after the 300-day deadline of section 1121(e)(2), and the 300-day deadline had not been extended. The bankruptcy court concluded that the 300-day deadline applies only to plans filed by a debtor and confirmed the plan. The Bankruptcy Appellate Panel affirmed that ruling.
The BAP held that the provisions of section 1121 should be read as a whole in determining the extent of section 1121(e)’s reach. First, the court noted that section 1121(b) provides a 120-day exclusive period for a debtor to file a plan and, if the debtor does so, section 1121(c) extends this exclusive period an additional 60 days to enable the debtor to obtain confirmation of its plan. If the debtor fails to meet these deadlines, or if a chapter 11 trustee is appointed, the debtor’s exclusive period ends, and creditors may file plans. These deadlines may be extended in some respects by means of a request under section 1121(d) filed by a party in interest. However, if the debtor is a small business, the deadlines in sections 1121(b) and (c) a replaced by section 1121(e)(1) and (2), and the procedure for extending the small business deadlines is found in sections 1121(e)(1)(A) and (B) and section 1121(e)(3). Importantly, the court noted that in the small business context, extension of the 180-day and 300-day deadlines depends on affirmative action by the debtor with no right by creditors or other parties in interest to seek an extension.
In addition, the BAP looked to changes made to section 1121(e) in the 2005 BAPCPA amendments. Previously, the deadline for filing a plan could be requested by a party in interest, whereas the amendments removed this language and placed complete power to seek an extension in the debtor. In addition, the prior section 1121 required “all plans” to be filed within 160 days from the order for relief, whereas the amendment speak in terms of “the” plan must be filed within 300 days from the order for relief.
The BAP then reviewed other court decisions dealing with section 1121(e) and the effect of its deadlines on untimely filed plans. All but one reported decision dealt with plans filed only by the debtor. One, the decision of the Bankruptcy Court for the Southern District of Florida in In re Florida Coastal Airlines, Inc., 361 B.R. 286 (Bankr. S.D. Fla. 2007), involved competing plans by the debtor and a creditor, with the debtor’s plan being timely filed and the creditor’s plan falling outside the 300-day deadline. The court in Florida Coastal Airlines determined that, since only the debtor may file “a” plan until the exclusive period expires, and since “the” plan must be filed not later than 300 days after the order for relief, the phrase “the plan” in section (e)(2) referred only to “a plan” filed by the debtor. 361 B.R. at 291. In addition, because extension of the section 1121(e) deadlines can be accomplished only through the affirmative action of the debtor, the Florida Coastal Airlines court found it absurd to bind creditors to a deadline that only the debtor could seek to extend.
The Tenth Circuit BAP found the reasoning of the Florida Coastal Airlines case persuasive. The BAP agreed that applying the 300-day deadline of section 1121(e) to defeat a result that may otherwise be beneficial to creditors made no sense, and that it is absurd to hold creditors to the 300-day deadline when only the debtor may seek its extension. Reading section 1121(e) in harmony with the rest of section 1121 lead the court to conclude that the deadlines contained in section 1121(e) apply only to the small business debtor, and the deadlines contained in sections 1121(c) apply to creditors and parties in interest, even in small business cases.