Court Opinion

ID: 9691627
Source: CourtListenerOpinion
Date Created: 2023-08-24 20:45:50.694624+00
Date Added: 2024-06-11T18:19:23.947805
License: Public Domain

MARLAR, Bankruptcy Judge,
concurring.
While I join in Parts I, II, and IV and concur with the result affirming the bankruptcy court’s decision, I cannot agree with the conclusion in Part III that our standard of review is de novo rather than abuse of discretion.
Although the track to appellate decision is clearly quicker on an exclusivity issue, I do not envision that as requiring a divergence from well-established law and changing to a de novo standard of review. District courts and bankruptcy courts have consistently held that the applicable standard of review for § 1121(d) cases is abuse of discretion. See, e.g., Geriatrics Nursing Home, Inc. v. First Fid. Bank, N.A. (In re Geriatrics Nursing Home, Inc.), 187 B.R. 128, 130-31 (D.N.J.1995); In re Murray, 116 B.R. 6, 9 n. 3 (D.Mass.1990); Rosin v. RCN II (In re RCN II), 118 B.R. 460, 463 (W.D.Mich.1990); In re Gibson & Cushman Dredging Corp., 101 B.R. 405, 409 (E.D.N.Y.1989); In re Washington-St. Tammany Elec. Co-op. Inc., 97 B.R. 852, 854 (E.D.La.1989); Gaines v. Perkins (In re Perkins), 71 B.R. 294, 297 (W.D.Tenn.1987). See also hi re Sletteland, 260 B.R. 657, 661 (Bankr.S.D.N.Y.2001); In re All Seasons Indus., Inc., 121 B.R. 1002, 1004 (Bankr.N.D.Ind.1990); In re Tony Downs Foods Co., 34 B.R. 405, 406 (Bankr.D.Minn.1983); In re Sharon Steel Corp., 78 B.R. 762 (Bankr.W.D.Pa.1987).
The question of whether or not a trial court chooses to extend or deny exclusivity upon a showing of “cause” is, at its heart, always a discretionary one. Section 1121(d) specifically provides that on request of a party in interest, “the court may for cause reduce or increase” the exclusivity period. 11 U.S.C. § 1121(d) (emphasis added). The plain language of the statute denotes its discretionary nature by using the term “may.” Oyama v. Sheehan (In re Sheehan), 253 F.3d 507, 513 (9th Cir.2001) (“may” is a discretionary term); First Interstate Bank of Nev., N.A. v. CIC Inv. Corp. (In re CIC Inv. Corp.), 192 B.R. 549, 552 (9th Cir. BAP 1996) (same). We presume that Congress says in a statute what it means and means what it says. Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1, 6, 120 S.Ct. 1942, 147 L.Ed.2d 1 (2000).
The majority supports its position that review should be de novo with the Congressional report made during the 1994 amendments, when it was stated that it was Congress’ intention that “the district court carefully consider the circumstances of each case so appealed with a view to encouraging a fair and equitable resolution of the bankruptcy.” H.R.Rep. No. 103-835, at 36 (1994), reprinted in 1994 *455U.S.C.C.A.N. 3340, 3345. (emphasis added).
This statement does not mandate a particular standard of review, however, and in my view, is “standard neutral.” Congress could easily have stated that it intended any review to be “de novo.”
The majority also cites, for support of the de novo standard, an opinion which addressed the mixed question of law and fact of what constitutes “just cause or excuse” for an injury under § 523(a)(6). See Murray v. Bammer (In re Bammer), 131 F.3d 788, 791-92 (9th Cir.1997). In Bammer, “cause” was modified by “just,” and the court wrestled with the legal definition of that term. Id. at 792. Therefore, this comparison is not on point.
The Michigan case, which is also cited by the majority, is not authoritative in our Circuit, and although it is good law, it has not been cited by any appellate court for the application of the de novo standard of review to a decision under § 1121(d). See In re Lake in the Woods, 10 B.R. 338, 342-43 (E.D.Mich.1981). In fact, Lake in the Woods was decided many years before the 1994 amendment. The court looked to former Bankruptcy Rule 906 (now Federal Rule of Bankruptcy Procedure 9006 — the general enlargement provision) and observed that § 1121(d) did not use the words “in its discretion” in addition to “may”. Rule 9006(b)(1) provides, in part, that “the court for cause shown may at any time in its discretion....”. Lake in the Woods, 10 B.R. at 342-43. The words “in its discretion” appear to be superfluous, however, since “may” alone means a permissive and discretionary act. Therefore, this case authority is not persuasive.
A court abuses its discretion if its decision is based on an erroneous view of the law or a clearly erroneous factual finding. Beech Aircraft Corp. v. United States, 51 F.3d 834, 841 (9th Cir.1995). The majority acknowledges that the question of § 1121(d) “cause” is “inherently fact-specific.” The bankruptcy court must balance the rights between the debtor and its creditors and must interpret § 1121 in a way “to limit the delay that makes creditors the hostages of Chapter 11 debtors.” United Sav. Ass’n v. Timbers of Inwood Forest Assocs., Ltd. (In re Timbers of Inwood Forest Assocs., Ltd.), 808 F.2d 363, 372 (5th Cir.1987) (en banc), aff'd, 484 U.S. 365, 108 S.Ct. 626, 98 L.Ed.2d 740 (1988). Section 1121 “was designed to strike a balance between the rights and obligations of a debtor in possession and its creditors.” Sharon Steel, 78 B.R. at 764.6
Therefore, the trial court, rather than the appellate court, must apply the type of judgment which is sensitive to the fluidity of each case. The Timbers court spoke of this duty as the bankruptcy judge’s “obligation to decide, fairly and impartially, the hard questions.” Timbers, 808 F.2d at 373. Indeed, Timbers saw this duty as an extension of the judge’s discretionary authority “to manage the cases in front of him, fairly and impartially, in such a way as to promote their orderly and prompt disposition.” Id. at 374. See also Chambers v. NASCO, Inc., 501 U.S. 32, 43, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991). A trial court’s inherent authority to manage its caseload is also reviewed for an abuse of discretion. United States v. Goode, 814 F.2d 1353, 1354 (9th Cir.1987).
I believe that “cause” under § 1121(d) is akin to the determination of “cause” for relief from the automatic stay, or “cause” *456to grant an extension of the time to accept or reject a lease under § 365(d)(4), and each of these types of decisions is also reviewed for an abuse of discretion. Mac Donald v. Mac Donald (In re Mac Donald), 755 F.2d 715, 716 (9th Cir.1985) (“cause” under § 362(d) is discretionary and is reviewed for an abuse of discretion.); BC Brickyard Assocs., Ltd. v. Ernst Home Ctr., Inc. (In re Ernst Home Ctr., Inc.), 221 B.R. 243, 248 (9th Cir. BAP 1998) (“An order to extend the time to assume or reject nonresidential real property leases is subject to the abuse of discretion standard.”). See also Willamette Water Front, Ltd. v. Victoria Station Inc. (In re Victoria Station Inc.), 88 B.R. 231, 237 n. 9 (9th Cir. BAP 1988), aff'd, 875 F.2d 1380 (9th Cir.1989) (comparing extension under § 365(d)(4) to the enlargement of the debtor’s exclusive period to file a chapter 11 plan under § 1121(d)).
The policy considerations are similar for analyzing the merits of stay relief and exclusivity. The bankruptcy court is the “jealous guardian” of the automatic stay, which is fundamental to the reorganization process. Farm Credit Servs. v. Roth (In re Roth), 171 B.R. 357, 364 (Bankr.D.S.D.1994); Mataya v. Kissinger (In re Kissinger), 72 F.3d 107, 109 (9th Cir.1995) (the automatic stay is a “vital protection” of the debtor). The automatic stay allows the bankruptcy court “an opportunity to harmonize the interests of both debtor and creditors while preserving the debtor’s assets for repayment and reorganization of his or her obligations.” McCarthy, Johnson & Miller v. North Bay Plumbing, Inc. (In re Pettit), 217 F.3d 1072, 1077 (9th Cir.2000).
Notwithstanding the importance of the automatic stay to the dynamics of a bankruptcy case, the existence of “cause” for stay relief is “a question dependent upon facts .. and guided by a trial court’s discretion.” In re Brumlik, 185 B.R. 887, 890 (Bankr.M.D.Fla.1995); Sun Valley Newspapers Inc. v. Sun World Corp. (In re Sun Valley Newspapers, Inc.), 171 B.R. 71, 74 (9th Cir. BAP 1994) (bankruptcy court abuses its discretion if it “committed a clear error of judgment in the conclusion it reached upon a weighing of the relevant factors.”) The same factor-driven analysis applies to extensions of time to assume or reject leases under § 365(d)(4), Ernst Home Ctr., 221 B.R. at 253, as well as, in my view, to a determination of cause to extend or shorten the exclusivity period under § 1121(d). In re Express One Int’l, Inc., 194 B.R. 98, 100 (Bankr.E.D.Tex.1996) (listing relevant factors under § 1121(d)).
In a chapter 11 case, with the dynamics between the rights of the debtor, creditors and other interests in constant flux prior to confirmation, “cause” under § 1121(d) assumes practicality. It could be defined as “any reason cognizable to the equity power and conscience of the court” in order to preserve the symmetry of rights. See In re Sar-Manco, Inc., 70 B.R. 132, 136 (Bankr.M.D.Fla.1986) (discussing “cause” for stay relief under § 362(d)).
The 1994 amendment to 28 U.S.C. § 158(a) was intended to streamline the administration of chapter 11 cases by eliminating repeated and lengthy extensions of exclusivity and to carefully balance the positions of chapter 11 debtors and their creditors. See generally Angela K. Lay-den, Extensions of Exclusivity Under § 1121: Appeal as a Matter of Right, 14 Am.BanKR.Inst.J. 26 (Sept.1995). The amendment did this specifically by allowing interlocutory orders granting extensions or reductions of the exclusivity period to be appealed immediately.
However, this change did not alter the pragmatic nature of a § 1121(d) motion or of the “cause” analysis, but simply meant *457that creditors’ plans could not be put off indefinitely, in the absence of cause to extend the debtor’s exclusive period. In other words, Congress simply intended that reason, rather than tactics, should control a case.
In my opinion, the abuse of discretion standard already allows the appellate court to determine whether there exist clear errors of fact in the trial court’s analysis of the existence of “cause.” Beech Aircraft, 51 F.3d at 841. See also Perkins, 71 B.R. at 297 (bankruptcy court’s discretion to grant enlargements of the exclusivity period is “tempered by the section’s requirement that enlargements be granted for cause”).
After reviewing the legislative history of § 1121, which indicated the permissive nature of the grant of an extension or reduction of the exclusivity period, one court summed it up as follows:
It is clear that both the House and the Senate intended to vest in the Bankruptcy Court, discretion as to whether or not to grant an extension of exclusivity or a reduction of exclusivity and that such a decision should be for cause shown based upon all the facts and circumstances of the particular case.
Tony Downs Foods, 34 B.R. at 407.
For this appeal of a § 1121(d) order, therefore, I would hold that the applicable standard of review is whether, considering all of the fluid factors of an evolving chapter 11 case, the bankruptcy court abused its discretion. On that point, and that point alone, do I part company with my colleagues.

. Creditors also have important rights concerning timing and the filing of a plan, such as the right to seek reduction of the exclusivity period, or the appointment of a trustee, which would likewise end a debtor's exclusivity rights.