Add Bankruptcy Judge Sidney Brooks, Chief Judge for the Bankruptcy Court for the District of Colorado, to the growing list of prominent judges (such as those mentioned here (Judge Monroe), here (Judge Markell), here (Judge Isgur), here (Judge Mark), and here (Judge Small)), who have become so exasperated with BAPCPA’s reckless disregard of the English language that they wrote an opinion not only deciding an issue of first impression under BAPCPA, but also in the process taking the opportunity to bash Congress for having passed such poorly drafted legislation and having failed to first consult with the frontline judges and bankruptcy professionals who now have to try and make sense out of it.
In In re TCR of Denver, LLC, 2006 WL 626156 (Bankr. D. Colo., 2/17/06) (pdf), Judge Brooks had this to say about Congress’s shoddy drafting:
This is a case where the language of BAPCPA passed by Congress tends to defy logic and clash with common sense. This is an example of a specific revision to the Bankruptcy Code, if followed by the Court and applied as Congress seems to intend — i.e., by way of strict construction — would result in an absurd decision and totally unworkable legal precedent. These drafting problems have the potential of bringing the bankruptcy system to a halt while debtors, creditors, and the courts try to figure out just exactly what Congress intended. This Court would add that it appears that the largely overlooked changes to the bankruptcy provisions related to non-consumer cases, such as the case presently before the Court, may sometimes equal the poor crafting of the consumer provisions. Moreover, serious and consequential constitutional questions may be looming on the horizon because of inartful drafting.
What problem was Judge Brooks lamenting? Well, most people don’t need a course in logic from Judge Markell to know there’s a world of difference between items in a list connected by the word “or” and items in a list connected by the word “and.” Apparently, however, BAPCPA’s scriveners learned no such lesson, and so it was left to Judge Brooks to explain, in principled fashion, why it was that Congress really meant to use the word “or” when it instead wrote “and” in modifying Bankruptcy Code section 1112(b) (which determines when a Court “shall” dismiss a chapter 11 proceeding or convert it to a chapter 7 liquidation).
Before BAPCPA’s enactment, Bankruptcy Code section 1112(b) provided that the Court may dismiss or convert a case (but was not required to do so) for “cause.” The old law identified 10 possible grounds for dismissal or conversion that may constitute “cause.” Notably, these 10 possible grounds for dismissal or conversion were listed in the alternative or “disjunctive,” connected only by the word “or,” so that any one factor alone could have provided sufficient “cause” for dismissal or conversion.
With BAPCPA, however, Congress made a change to Code section 1112(b) that — if the “plain meaning” were followed — would have produced absurd results for it would have required the Bankruptcy Court to dismiss or convert the case “for cause” only upon the confluence of 16 separate factors, all connected by the word “and.” As Judge Brooks noted, however, all these factors could never simultaneously exist within a corporate debtor. Indeed, he observed, if all factors were ever applicable to a single individual debtor, criminal prosecution of the individual — rather than mere dismissal of its bankruptcy case — would be the most appropriate remedy!
To fix the problem, Judge Brooks pushed plain meaning aside and ruled that “a party in interest does not need to establish [under BAPCPA’s new Code section 1112(b)(4)] all of the items constituting ’cause’ before a case can be dismissed by the Court.” Before doing so, however, he made sure to extend a very well-deserved compliment to the attorneys for both the creditor movant and the debtor. These briefs, he wrote, “might well win prizes for their rhyme.” You’ll find these simultaneous submissions (which I highly recommend) here (creditor’s attorney, Cynthia Kennedy of Lafayette, CO) and here (debtor’s attorney, Barry Arrington of Arvada, CO). The US Trustee’s brief, which Judge Brooks described as “well-reasoned” (but not poetic), is here.
Here’s some more of what Judge Brooks had to say about BAPCPA’s butchering job:
The task of resolving the meaning of a statute begins where all such inquiries must begin: with the language of the statute itself. Unfortunately, here, the Plain Meaning Rule is not appropriate as it would lead to an absurd result. First, if this Court were to require that all the elements of section 1112(b)(4) had to be fulfilled, the Court would doubt very much that a corporate Chapter 11 could ever be dismissed because, for example, this Court can think of no instance where a corporate debtor would have a domestic support obligation. Thus, dismissal could only occur in a Chapter 11 case involving an individual debtor. Moreover, if every element of section 1112(b)(4) was met, the debtor must not only be dismissed, but probably deserves referral to the United States Attorney.
Second, if the statute truly requires, as the United States Trustee coined, a “perfect storm” of all the elements constituting cause, it would render 11 U.S.C. § 1112(b) a nullity and the statute cannot be interpreted that way….
A Debtor need not demonstrate that all of the elements of “cause” can be met. As with the pre-BAPCPA law, however, the Court may dismiss a Chapter 11 case for reasons other than those specified in section 1112(b) as long as those reasons satisfy “cause.” Despite Congress’s attempt to remove any discretion of the Bankruptcy Court, it appears that 11 U.S.C. § 1112(b) may still give the Court some limited discretion to dismiss, convert, or otherwise deal with the disposition of Chapter 11 cases as appropriate.
© Steve Jakubowski 2006