In re American Pad & Paper Co.

• Decision Date: 02 March 2007
• Docket Number: No. 05-1379.,No. 05-1382.,No. 05-1380.,No. 05-1381.,05-1379.,05-1380.,05-1381.,05-1382.
• Citation: 478 F.3d 546
• Parties: In re AMERICAN PAD & PAPER COMPANY, Debtor. Steven G. Singer, Chapter 7 Trustee, Appellant v. Franklin Boxboard Co. a/k/a Franklin Boxboard Company; Bennington Paperboard Company, Divisions of the Newark Group Inc. Margaret Harrison, Trustee. In re American Pad & Paper Company, Debtor. Steven G. Singer, Chapter 7 Trustee, Appellant v. Kimberly-Clark Corporation d/b/a/ Neenah Papers. Margaret Harrison, Trustee. In re American Pad & Paper Company, Debtor. Steven G. Singer, Chapter 7 Trustee, Appellant v. Frontier Communications of America Inc.; Frontier Communications of Fairmont Inc.; Frontier Communications of Georgia Inc., d/b/a Frontier Communications Service. Margaret Harrison, Trustee. In re American Pad & Paper Company, Debtor. Steven G. Singer, Chapter 7 Trustee, Appellant v. Strategic Paper Group, LLC. Margaret Harrison, Trustee.
• Court: U.S. Court of Appeals — Third Circuit

478 F.3d 546

In re AMERICAN PAD & PAPER COMPANY, Debtor.

Steven G. Singer, Chapter 7 Trustee, Appellant v. Franklin Boxboard Co. a/k/a Franklin Boxboard Company; Bennington Paperboard Company, Divisions of the Newark Group Inc.

Margaret Harrison, Trustee.

In re American Pad & Paper Company, Debtor.

Steven G. Singer, Chapter 7 Trustee, Appellant v. Kimberly-Clark Corporation d/b/a/ Neenah Papers.

Margaret Harrison, Trustee.

In re American Pad & Paper Company, Debtor.

Steven G. Singer, Chapter 7 Trustee, Appellant v. Frontier Communications of America Inc.; Frontier Communications of Fairmont Inc.; Frontier Communications of Georgia Inc., d/b/a Frontier Communications Service.

Margaret Harrison, Trustee.

In re American Pad & Paper Company, Debtor.

Steven G. Singer, Chapter 7 Trustee, Appellant v. Strategic Paper Group, LLC.

Margaret Harrison, Trustee.

No. 05-1379.

No. 05-1380.

No. 05-1381.

No. 05-1382.

United States Court of Appeals, Third Circuit.

Argued November 6, 2006.

Filed March 2, 2007.

Adam Singer (Argued), Cooch & Taylor, Wilmington, DE, Attorney for Appellant Steven G. Singer.

Jeffrey M. Schlerf, The Bayard Firm, Wilmington, DE, Bruce Buechler, Lowenstein Sandler, Roseland, NJ, Attorneys for Appellees Franklin Boxboard Co. and Bennington Paperboard Co.

Katherine M. Perhach, Quarles & Brady, Milwaukee, WI, Attorney for Appellee Fox River Paper Co.

George M. Cheever, Kirkpatrick & Lockhart Preston Gates Ellis, Pittsburgh, PA, Attorney for Appellee W + D Machinery Co., Inc.

Joseph J. Bodnar, Monzack & Monaco, Wilmington, DE, Attorney for Appellees W + D Machinery Co., Inc., and Fibermark Inc.

John J. Schmidt, Dinsmore & Shohl, Cincinnati, OH, Victoria W. Counihan, Dennis A. Meloro, Greenberg Traurig, Wilmington, DE, Attorneys for Appellee JBM Envelope Co., Inc.

Christopher P. Simon, Cross & Simon, Wilmington, DE, Attorney for Appellee Dwyer Associates, Inc.

Ashley B. Stitzer, The Bayard Firm, Wilmington, DE, Attorney for Appellees Beautone Specialties and Crown Roll Leaf Inc.

E. Franklin Childress, Jr., Baker, Donelson, Bearman, & Caldwell, Memphis, TN, Stephanie A. Fox, Maron, Marvel, Bradley & Anderson, Wilmington, DE, Attorneys for Appellees Champion International Corp., Nationwide Papers, International Paper Co., d/b/a Beckett Papers, d/b/a XPEDX, d/b/a Strathmore Paper Co., d/b/a Queen City Paper Co.

David M. Fournier, Pepper Hamilton, Wilmington, DE, Michael H. Traison, Donald J. Hutchinson (Argued), Miller, Canfield, Paddock & Stone, Detroit, MI, Attorneys for Appellees Georgia Pacific Corp, Great Northern Nekoosa Corp., Unisource Worldwide, Fort James Corp., d/b/a Fort James Communications Papers.

Kathleen M. Miller, Smith, Katzenstein & Furlow, Wilmington, DE, Attorney for Appellee Kimberly Clark Corp.

Lisa C. McLaughlin, Phillips, Goldman & Spence, Wilmington, DE, Attorney for Appellees Frontier Communications, Frontier Communications of America, Inc.,

Frontier Communications GA, Inc., and Strategic Paper Group.

Gilbert L. Hamberg, Yardley, PA, Attorney for Appellees Frontier Communications, Frontier Communications of America, Inc., and Frontier Communications GA, Inc.

David N. Crapo, Gibbons, Del Deo, Dolan, Griffinger & Vecchione, Newark, NJ, Attorney for Appellee Strategic Paper Group.

Before SLOVITER, CHAGARES, and NYGAARD, Circuit Judges.

OPINION OF THE COURT

SLOVITER, Circuit Judge.

Section 546(a) of the Bankruptcy Code sets a two-year limit for the commencement of avoidance actions on behalf of the bankruptcy estate to recover money or property transfers. This provision was amended in 1994 to provide an additional year for such actions running from the date of the appointment or election of certain trustees, if such appointment or election occurs before the expiration of the aforementioned two-year period.

Appellant Steven G. Singer, the elected Chapter 7 Trustee for the debtors in this proceeding, filed numerous actions to avoid certain preferences that were made by the debtor. Those actions were dismissed as untimely by the Bankruptcy Court and affirmed by the District Court. He appeals, asking us to interpret the statutory language regarding the statute of limitations so as to make timely the avoidance actions he filed. As discussed below, the language of the statute will not bear such an interpretation.

I.

On January 10, 2000, a number of creditors filed involuntary Chapter 11 petitions in the Bankruptcy Court for the District of Delaware against American Pad & Paper Company and six related companies (the "debtors"), which had been in the business of manufacturing and marketing a variety of paper and stationery products. On January 14, 2000, each debtor filed a voluntary Chapter 11 petition, as well as a request that the Bankruptcy Court enter an order for relief upon the debtors' joint consent. That same day, the Bankruptcy Court entered the order for relief, as well as an order directing the joint administration of the cases. Almost two years later, on December 21, 2001, the Bankruptcy Court entered an order granting a motion made by the creditors' committee to convert the cases to Chapter 7. By the terms of the order, the conversion to Chapter 7 was to be effective on January 3, 2002.

Also on January 3, 2002, the United States Trustee appointed Jeoffrey Burtch as interim Chapter 7 trustee pursuant to section 701 of the Bankruptcy Code. That section provides:

Interim trustee

(a) (1) Promptly after the order for relief under this chapter, the United States trustee shall appoint one disinterested person that is a member of the panel of private trustees established under section 586(a)(1) of title 28 or that is serving as trustee in the case immediately before the order for relief under this chapter to serve as interim trustee in the case.

(2) If none of the members of such panel is willing to serve as interim trustee in the case, then the United States trustee may serve as interim trustee in the case.

(b) The service of an interim trustee under this section terminates when a trustee elected or designated under section 702 of this title to serve as trustee in the case qualifies under section 322 of this title.

(c) An interim trustee serving under this section is a trustee in a case under this title.

11 U.S.C. § 701 (emphasis added).¹

It is significant for the issue before us that the date of the appointment of Burtch as the Chapter 7 trustee under section 701, January 3, 2002, was a mere eleven days prior to the two-year anniversary of the entry of the order for relief. A notice dated January 15, 2002 scheduled the meeting of creditors pursuant to section 341 of the Code for February 13, 2002. See 11 U.S.C. § 341 ("Within a reasonable time after the order for relief in a case under this title, the United States trustee shall convene and preside at a meeting of creditors."); 3 Collier on Bankruptcy ¶ 341.01 (15th ed. rev.2006) ("The chief function of the meeting of creditors is to provide the machinery for creditors to elect a trustee, examine the debtor and be heard generally in an advisory capacity on questions concerning the administration of the estate."). It is also evident that the creditors' meeting was scheduled for a date more than two years after the entry of the order for relief.

At the meeting, certain creditors requested the election of a trustee pursuant to section 702 of the Code,² and a new individual, Steven Singer, the appellant in the instant case, was so elected on that date, more than two years after the entry of the order for relief.

It appears that trustees are infrequently elected under section 702, "primarily because of the substantial creditor effort needed to meet the statutory requirements for an election. [In cases where] no election takes place, the interim trustee [will] continue[] to serve as the trustee for the Chapter 7 case [pursuant to section 702(d)]." George M. Treister et al., Fundamentals of Bankruptcy Law § 2.03(a)(3) (2d ed.1988); 5 Collier on Bankruptcy ¶ 546.02(2)(a)(i) ("Since trustee elections under section 702 are rare, the date of the section 341 meeting usually will be the date of appointment of the trustee for purposes of section 546(a)(1)(B)."). Thus, had Singer not been elected the section 702 trustee at the section 341 meeting, interim trustee Burtch would have continued to serve as trustee by operation of section 702(d) of the Code, which provides that "[i]f a trustee is not elected under this section, then the interim trustee shall serve as trustee in the case." See also 5 Collier on Bankruptcy ¶ 546.02(2)(a) ("The interim trustee, who is appointed promptly [by the U.S. Trustee] after entry of the order for relief under section 701, automatically becomes the permanent trustee at the meeting of creditors pursuant to section 341 if creditors do not elect a trustee under section 702."). We note that notwithstanding the language in the excerpt from Collier, the term "permanent trustee" does not appear in the relevant sections of the Bankruptcy Code.

Between August and December 2002,³ trustee Singer filed approximately 150 avoidance actions under section 547 of the Code, which exists to prevent "debtors from depleting the estate to pay favored creditors with assets that otherwise would have been apportioned among creditors according to the prioritization scheme of the Bankruptcy Code." In re Pillowtex, Inc., 304 F.3d 246, 252 (3d Cir.2002). A number of defendants in the adversary actions moved the Bankruptcy Court to dismiss on the ground that they were filed beyond the applicable two-year statute of limitations. The Bankruptcy Court granted the motions to dismiss on October 28, 2003 and March 15, 2004. Singer v. Franklin Boxboard Co. (In re American Pad & Paper Co.), 303 B.R. 27 (Bankr.D.Del.2003); Singer v. Kimberly-Clark Corp. (In re American Pad & Paper Co.), 307 B.R. 459 (Bankr.D.Del.2004). The District Court affirmed on January 10, 2005 in Singer v. Franklin Boxboard Co. (In re American Pad &...