In re United Press Intern., Inc., Bankruptcy No. 85-00257.

• Decision Date: 22 April 1986
• Docket Number: Bankruptcy No. 85-00257.
• Citation: 60 BR 265
• Parties: In re UNITED PRESS INTERNATIONAL, INC., Debtor.
• Court: United States Bankruptcy Courts – District of Columbia Circuit

60 B.R. 265 (1986)

In re UNITED PRESS INTERNATIONAL, INC., Debtor.

Bankruptcy No. 85-00257.

United States Bankruptcy Court, District of Columbia.

April 22, 1986.

Charles R. Dougherty, Hill & Barlow, Boston, Mass., for debtor.

Emil Hirsch, Washington, D.C., for Media News Corp.

OPINION

GEORGE FRANCIS BASON, Jr., Bankruptcy Judge.

This opinion explains why this Court, having twice extended the period of the Debtor's exclusive right to file a plan, has now, by Order dated March 31, 1986, again extended the exclusivity period for filing a plan, and also extended the exclusivity period for obtaining acceptances, from March 31 to June 30, 1986. Part III of this opinion also explains why this Court is today signing an Order, nunc pro tunc as of April 8, 1986 (the date of the Court's oral ruling from the bench), (i) granting the Debtor's application for leave to file a plan and (ii) overruling Media News Corporation's objection to the Debtor's filing of a plan. This Opinion constitutes the Court's findings of fact and conclusions of law in support of today's Order.

Media News Corporation ("MNC") has opposed the Debtor's motion for the further extension of the exclusivity period to June 30 and has advanced three principal arguments in support of its position.

I. Further extension of the Debtor's exclusivity period is not barred by 11 U.S.C. § 1121(c)(3).

First, MNC has argued that the Debtor's exclusive right to file a plan has already expired automatically by operation of law because of the expiration of the 180-day period of 11 U.S.C. § 1121(c)(3).¹ Two cases support MNC's argument, In re Trainer's, Inc., 17 B.R. 246 (Bankr.E.D.Pa.1982), and In re Barker Estates, Inc., 14 B.R. 683 (Bankr.W.D.N.Y.1981). In both cases, the courts pointed out that the three alternatives set out in subsection 1121(c) are disjunctive. That is, the exclusivity period ends automatically if any one of the three conditions is met: (1) if a trustee is appointed;² or (2) if "the debtor has not filed a plan before 120 days after the . . . voluntary Chapter 11 petition was filed";³ or (3) if "the debtor has not filed a plan that has been accepted, before 180 days after the same date . . ., by each class of claims or interests that is impaired under the plan."⁴ Moreover, § 1121(d) is also in the disjunctive: ". . . the court may . . . increase the 120-day period or the 180-day period . . ." (Emphasis added.) The Trainer's court concluded (17 B.R. 247-248):

. . . that the language of the Code is clear: the debtors must meet both the 120-day and the 180-day deadlines (or obtain extensions of both of those deadlines) in order to prevent anyone else from being permitted to file plans. Furthermore, an extension of one of the deadlines does not automatically extend the other.

In Barker, the debtor had argued that the intent of Congress was to provide for a 60-day grace period after filing a plan within which to obtain acceptances. The court acknowledged that such a grace period "may be implied" but held that "a fixed 60-day grace period is only a possible conclusion not a necessary one." 14 B.R. at 684. The court then turned to legislative history and declared (14 B.R. at 684, 685):

The legislative history of § 1121 provides no compelling answer to the issue at hand, but it is helpful to the extent it provides a background against which the provisions of § 1121 must be read as a limitation on rather than a grant of debtor\'s rights.

* * * * * *

When compared to prior law, the effect of 11 U.S.C. § 1121 is sharply to limit a debtor\'s exclusive right to file a plan. Creditors with ideas of their own can only be silenced if the debtor files a plan within 120 days and secures acceptance within 180 days. Both these time periods run from the date the order for relief was granted and are set out in separate paragraphs without reference to the other. A straightforward reading of the statute suggests that each time limitation is independant sic of the other and each has its own purpose, force and effect. The debtor\'s theory that the time limits are necessarily connected and a 60-day grace period must be implied can be credited only if the apparent meaning of the statute is discredited. Therefore, extension of one time period should not extend the other automatically.

The court in In re Ravenna Industries, Inc., 20 B.R. 886, 891 (Bankr.N.D. Ohio 1982) disagreed (in dictum) with Trainer's and Barker, stating:

This Court is of the opinion that where a debtor asks for an extension of the 120-day period and an extension is granted without objection by any party in interest, then the extension automatically operates to extend the 180-day period as well. Such a conclusion follows as when a debtor has obtained an extension of the exclusive time in which to file a Plan under 11 U.S.C. § 1121(c)(2) to later hold that the Debtor has lost the exclusive right to file a Plan due to its failure to have both time periods extended by express Court order, is to deny the debtor the right obtained by virtue of the order extending the 120-day time period.

* * * * * *

Otherwise, the order of the Court granting the extension would be a vain act and would be misleading to all parties in the arrangement proceedings.

In addition, 5 Collier on Bankruptcy, ¶ 1121.03 states (at p. 1121-9):

A technical reading of section 1121 would require independent extensions of the two periods; there is no specific suggestion in the Code to the contrary. Such a reading of section 1121, however, may lead to anomalous results in those cases in which only the 120-day period is extended and especially in those cases in which that period is extended beyond 180 days. If the statute requires independent extension of both periods, then any extension of the 120-day period beyond the date of expiration of the 180-day period would have no effect due to the continued application of the 180-day period. The Code should not be construed so strictly as to nullify the effect of judicial action proper on its face. This is not to say that automatic extension of the exclusivity period for acceptance to 60 days beyond the date to which the court has extended the exclusivity period for filing can be supported by the language of the Code. A more judicious course would be to extend the acceptance period automatically only in those cases where the filing period has been extended beyond the expiration of the acceptance period and only to the date to which the filing period has been extended. On or before the time of filing its plan, the debtor would have to make a motion to extend the period for soliciting acceptances and the court would be required to determine such matter consistent with the circumstances of the case.

The arguments in Ravenna and Collier's are persuasive, to the effect that the Trainer's and Barker decisions lead to an "anomalous result," in which the debtor would be denied a right explicitly granted by a court order "for cause" and in which the court order granting the extension "would be a vain" and "misleading" act. This Court further agrees with Ravenna that, "by requiring the Plan to be confirmed within 180 days, Congress intended to prevent the debtor from filing a Plan and then failing to obtain confirmation within a reasonable period." 20 B.R. at 891.

This Court believes that the "anomalous result" of Trainer's and Barker can be avoided, and the result favored as "more judicious" by Collier's can be achieved, by construing § 1121(c)(3) as not becoming operative at all unless and until the debtor files a plan. Thus, § 1121(c)(3) can and should be construed as if it read that the exclusive period ends if "the debtor has filed a plan but that plan has not been accepted" within 180 days (or any extension thereof).

Sections 1121(c)(2) and (c)(3) relate to two different acts, within two consecutive time periods. But unless and until the first act takes place, the second act — and its time period — simply do not yet come into play. Logically, a plan cannot be accepted until it has been filed; hence, § 1121(c)(3) does not become operative until a plan has been filed.⁵ Therefore, however many times and for whatever periods extensions are granted for the carrying out of the first act, the time limit for carrying out the second act has no applicability until the first act — the filing of the debtor's plan — has actually taken place. At that point, the time period for accomplishing the second act becomes relevant again, and at or before that point the debtor must request an extension for completion of the second act — obtaining acceptances of the plan that has been filed.

This construction of the statutory language may not be the most obvious, but it avoids both the Scylla of the "anomalous result" in Trainer's and Barker and the Charybdis of ignoring and disobeying the "strictly" "technical reading" of the words Congress has chosen.⁶ And the result is what Collier describes as "a more judicious course": "to extend the acceptance period automatically . . . only to the date to which the filing period has been extended subject to further extension on timely motion."⁷

II. The Debtor has amply demonstrated "cause" for the requested extension.

MNC's second principal argument — that the Debtor has not shown sufficient "cause" for another extension — can be quickly disposed of.

The Debtor in this major and complex case has shown extraordinary diligence, speed and skill, in the face of major obstacles, in progressing to the point where, less than a year after the filing of the petition, a plan and disclosure statement have already been filed and a disclosure statement hearing has been scheduled.

Major conflicts between management and owners and between management and labor were averted only at the very brink of the precipice of disaster and only after intensive court-sponsored negotiations. The Debtor's immediate, pressing needs at the outset of the case for the use of cash collateral, for a...