Court Opinion

ID: 6936742
Source: CourtListenerOpinion
Date Created: 2022-07-24 00:37:39.877397+00
Date Added: 2024-06-11T16:07:30.798585
License: Public Domain

FLAUM, Circuit Judge,
concurring in the judgment.
I agree with the court’s conclusion that the two-year statute of limitations in § 546(a)(1) does not apply to debtors in possession. I write separately because I am unable to adopt the majority’s approach to interpreting the applicable statutory provisions.
Before the court are two provisions of the Bankruptcy Code with apparently conflicting plain meaning. Section 546(a)(1) unambiguously states that its two year statute of limitations runs from “the appointment of a trustee under section 702, 1104, 1163, 1302, or 1202....” Yet section 1107 specifically provides that a debtor in possession is “[s]ubject to any limitations on a trustee....” Four courts of appeals have held that § 546(a)(1)’s two-year limitations period applies to debtors in possession. In re Century Brass Products, Inc., 22 F.3d 37 (2d Cir.1994); In re Coastal Group, Inc., 13 F.3d 81 (3d Cir.1994); In re Softwaire Centre Int’l, Inc., 994 F.2d 682 (9th Cir.1993); Zilkha Energy Co. v. Leighton, 920 F.2d 1520 (10th Cir.1990). These courts reason that since § 1107 subjects debtors in possession to any limitation on trustees, § 546(a)(1)’s limitations period must apply to debtors in possession as well as trustees. However, this approach contravenes the specific language of § 546(a)(1), which states that the statute of limitation applies to trustees under certain enumerated Bankruptcy Code sections.
The majority of this court follows the Fourth Circuit by reading § 546(a) literally and consequently holding that the two-year limit in § 546(a)(1) does not apply to debtors in possession. The majority dismisses § 1107 by concluding that a statute of limitations is not a “limitation” contemplated by § 1107. I respectfully suggest that this is a strained reading of § 1107. The term “limitation” is not specifically defined in the Bankruptcy Code. Therefore, we must “start with the assumption that the legislative purpose is expressed by the ordinary meaning of the words used.” Russello v. United States, 464 U.S. 16, 21, 104 S.Ct. 296, 299, 78 L.Ed.2d 17 (1983) (quoting Richards v. United States, 369 U.S. 1, 9, 82 S.Ct. 585, 590-91, 7 L.Ed.2d 492 (1962)). The ordinary meaning of “limitation” clearly includes the two-year statute of limitations in § 546(a)(1). Section 546(a)(1) establishes a limitation on when trustees are able to commence suits under various code sections. Although § 546(a)(1) imposes a “time” limitation on trustees, rather than a “power” limitation as the majority emphasizes, the language of § 1107 broadly states that debtors in possession are subject to any limitation on trustees. The inability of trustees to commence suits beyond two years from the date of their appointment is certainly one such limitation. Admittedly, § 546(a)(2) contains a time limit that applies universally — debtors in possession, as well as trustees, cannot commence actions after “the time the case is closed or dismissed.” Yet § 546(a)(1) imposes an independent limitation in addition to § 546(a)(2) because suits may not be commenced after the earlier of the times referenced in the two subsections. Since § 1107 plainly states that any limitation on trustees must also apply to debtors in possession, the existence of the limitation in § 546(a)(2) is not relevant to determining whether the additional limitation in § 546(a)(1) applies to debtors in possession.
Despite the clear text of § 1107, which subjects the debtor in possession to “any *1236limitations on a trustee,” the majority imports policy concerns to circumscribe the meaning of “limitation.” Yet policy concerns certainly do not dictate this narrow reading of § 1107.1 Instead of interpreting the unambiguous language of § 1107, this court should apply its plain meaning as written. See Connecticut Nat’l Bank v. Germain, 503 U.S. 249, 253-54, 112 S.Ct. 1146, 1149-50, 117 L.Ed.2d 391 (1992). Section 1107 provides that a debtor in possession shall be “[sjubject to any limitations on a trustee ... and shall have all the rights ... and powers ... of a trustee.... ” Structurally, the Bankruptcy Code gives debtors in possession the powers of trustees through a combination of § 1107 and specific code sections that generally refer to a “trustee.” See, e.g., 11 U.S.C. § 547(b) (“trustee” may avoid preferential payment); § 544 (“trustee” has the rights of a lien creditor). In contrast, § 546(a)(1) states that its two-year limitations period applies to trustees that are appointed under specifically enumerated code sections. Congress carefully phrased this section to apply only to certain types of trustees.2 Section 1107 equates a debtor in possession with a general “trustee,” but does not refer to specific types of trustees. Therefore, the plain language of § 1107 gives debtors in possession only those powers and limitations that are shared by all classes of trustees. Section 1107 does not, however, impose on debtors in possession those powers and limitations, such as § 546(a)(1), that clearly apply only to certain types of trustees.
Since both § 546(a)(1) and § 1107 are unambiguous when read in concert, our judicial inquiry should be at an end. See United States v. Ron Pair Enter., Inc., 489 U.S. 235, 240-41, 109 S.Ct. 1026, 1029-30, 103 L.Ed.2d 290 (1989). Desire for what we may consider a more sensible result cannot justify a judicial rewrite of either section. See United States v. Indoor Cultivation Equip., 55 F.3d 1311, 1315 (7th Cir.1995).

. Although debtors in possession and trustees undoubtedly have different incentives to commence preference-recovery actions, Congress may well have decided to respect the interest of potential defendants against all stale claims by choosing a two-year period applicable to both debtors in possession and trustees. In re Century Brass Products, Inc., 22 F.3d at 41. The majority's reliance on its stated policy concerns is especially troubling because today's amended § 546(a) forbids the filing of suits more than two years after the entry of the order for relief if a trustee is not appointed within two years of the entry. 11 U.S.C. § 546(a) (1995). Thus, the two-year statute of limitations currently runs while the debtor in possession manages the firm. A trustee appointed after this two year period has no ability to commence preference-recovery actions, a result the majority believes is inconsistent with the function of the old § 546(a). Although "the views of a subsequent Congress form a hazardous basis for inferring the intent of an earlier one,” Jefferson County Pharmaceutical Ass’n v. Abbott Lab., 460 U.S. 150, 165 n. 27, 103 S.Ct. 1011, 1021 n. 27, 74 L.Ed.2d 882 (1983) (quoting United States v. Price, 361 U.S. 304, 313, 80 S.Ct 326, 331-32, 4 L.Ed.2d 334 (1960)), the current § 546(a) demonstrates the weakness of relying on policy concerns to determine that the two-year limitations period does not apply to debtors in possession. The fact that the majority’s policy-oriented conclusion conflicts with the policy embodied in the current law amply illustrates that it is inappropriate for us to rewrite either § 546(a) or § 1107 to reach what we consider a sensible result.

. For example, § 546(a)(1) does not apply to interim trustees, which are appointed under 11 U.S.C. § 702.