BAPCPA Outline: Part I, Section B - Judicial Commentary: BAPCPA's "Plain Meaning" Not Followed

This second post, corresponding to Part I, Section B of the BAPCPA / Consumer Bankruptcy Law Outline is titled:  BAPCPA's "Plain Meaning" Not Followed.

This section points to 5 cases over the past year where bankruptcy judges were so confounded by BAPCPA that they felt compelled to deviate from its "plain meaning" in order to avoid virtually nullifying certain of its key provisions.

B.  BAPCPA's "Plain Meaning" Not Followed

1.           "After reading the several hundred pages of text in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (the "Reform Act"), one conclusion is inescapable. The new law is not a model of clarity. Implementing the changes will present a daunting challenge to judges, clerk's offices, attorneys and the parties who seek relief in the bankruptcy court after October 17, 2005, the date most of the provisions become effective." The plain meaning of the statute will be rebutted when a contrary legislative intent is clearly expressed. "In such cases, the intention of the drafters, rather than the strict language, controls."  In re Kaplan, 331 B.R. 483 (Bankr. S.D. Fla. 2005) (Mark, J.).

2.           In concluding that what appears to be true "at first blush" is actually incorrect, Judge Isgur rejects the Code section 362(c)(4)(B)'s apparent "plain meaning." To do otherwise, he concludes, would effectively render exactly 278 words in BAPCPA superfluous, a result Congress could not have intended. "Coincidentally," he notes, the Gettysburg Address (which is quoted in its entirety) was also 278 words. From this, he concludes: "Although the meaning of this subsection [of BAPCPA] cannot be compared to the importance of the Gettysburg Address, the Court presumes that Congress did not codify words of comparable length with no meaning whatsoever…. In Lamie, the Court was concerned that a single word--perhaps inadvertently included in the statute--would produce surplusage. In this case, the surplusage would constitute an entire section comprised of 278 words and multiple paragraphs. The Court is unable to locate any authority for such a wholesale disregard of the normal method of statutory construction…. After full consideration, the Court concludes that the "first blush" interpretation is incorrect.  The Court will give meaning to the entirety of the statute." In re Toro-Arcila, 334 B.R. 224 (Bankr. S.D. Tex. 2005) (Isgur, J.).

3.           Like Judges Mark and Riegle before him, Judge Markell was unwilling to find -- as Judge Haines did -- that the "legislative history is virtually useless as an aid to understanding the language and intent of BAPCPA" on such a fundamental issue as BAPCPA's "closing of the mansion loophole." Instead, he found that an important objective of BAPCPA was to prevent wealthy individuals from shielding millions of dollars from creditors by filing bankruptcy in one of a handful of states that have unlimited homestead exemptions. Whereas Judge Mark basically ignored the "as a result of electing" language of BAPCPA's new Code section 522(p) in favor of the clear and unambiguous legislative intent, and whereas Judge Riegle adopted a strained -- though theoretically plausible -- reading that enabled her to reconcile the seemingly contradictory "as a result of electing" language of Code section 522(p) with Congressional intent favoring the closing of the "mansion loophole," Judge Markell employed a different -- entirely logic-based -- construct. In so doing, he concluded that even a strict textualist like Justice Scalia would apply BAPCPA's homestead exemption cap to all states and ascribe the offending "as a result of electing" language in Code section 522(p) as merely "scrivener's error." Such a finding of "scrivener's error" was warranted, Judge Markell noted, because two necessary conditions were met: first, "the intended meaning to be used [is] obvious"; and second, "the plain meaning of the statute under consideration lack[s] any ... plausible congressional purpose." In re Kane, 336 B.R. 447 (Bankr. D. Nev. 2006) (Markell, J.).

4.           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 as 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." All these factors could never simultaneously exist within a corporate debtor.  Indeed, 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! In re TCR of Denver, LLC, 338 B.R. 494 (Bankr. D. Colo. 2006) (Brooks, J.).

5.           "It would be irresponsible for this Court to rule that an amendment added to existing law after considerable debate is inoperative in circumstances that are not clearly spelled out either in the statute itself or in its legislative history." In re Landahl, 338 B.R. 920 (Bankr. M.D. Fla. 2006) (May, J.).

[NB:  Links are to Westlaw.  Those who do not have access to Westlaw may contact me directly if they would like to view a particular case, though all federal courts maintain their own websites where judicial opinions may be accessed by the public free of charge (e.g., Bankr. N.D. Ill. - Judge Wedoff opinions).  Because all the outline's case references identify the deciding judge, you should be able to find the opinions online with minimal effort.]

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