If an order confirming a Plan of Reorganization is procured by fraud, how many days from entry of order does one have to ask the court to revoke the order?
The answer depends on which chapter of the Bankruptcy Code we’re talking about! In a Chapter 12 or Chapter 13 case, one would have up to the 180th day after the date the order was entered to seek revocation of the discharge. In a Chapter 11 case, one would have up to the 179th day after the date the order was entered to seek revocation. That is a pretty tough lesson to learn the hard way.
The District Court’s decision affirming Judge Ahart can be found here.
The basis of the decision was statutory analysis, compare §§ 1230 and 1330 with § 1144:
§ 1144 “On request of a party in interest at any time before 180 days after the date of the entry of the order of confirmation…”
§ 1230 “On request of a party in interest at any time within 180 days after the date of the entry of an order of confirmation…”
§ 1330 “On request of a party in interest at any time within 180 days after the date of the entry of an order of confirmation…”
Congress apparently intended confirmation orders in Chapter 12 and 13 cases to be revocable if revocation was sought within 180 days but reduced that time by 1 day for Chapter 11 cases.
My first thought was, why not seek revocation of the order under FRCP Rule 60(b)(3) which provides that
“On motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceeding for the following reasons … (3) fraud (whether previously called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party;”
The time limit under §60(b)(3) is a year:
“A motion under Rule 60(b) must be made within a reasonable time—and for reasons (1), (2), and (3) no more than a year after the entry of the judgment or order or the date of the proceeding.”
But the problem is FRBP 9024 overrides FRCP Rule 60:
“Rule 60 F.R.Civ.P. applies in cases under the Code except that … (3) a complaint to revoke an order confirming a plan may be filed only within the time allowed by §1144,…”
In turn, FRBP 9024 is protected by FRBP 9006 which explicitly prohibits the Court from extending the time period in FRBP 9024:
“(2) Enlargement Not Permitted. The court may not enlarge the time for taking action under Rules … 9024.”
So what can be done? The Court may allow a party to seek damages caused by the fraud so long as any such award of damages is not an end run around confirmation of the plan. The plan itself may contain provisions which allow the aggrieved party to obtain some sort of relief.
If any of you have alternate suggestions, please leave a note in the comment box.
As an aside:
The original case and adversary proceeding are: 1:13-bk-11804 | Amber Hotel Corporation; 1:14-ap-01113 | Little v. Amber Hotel Corporation.
It is a shame considering how good the Plaintiff writes, I LOVE a good statement of facts,
On the night of March 24, 2008, Mr. Martini was told by Mr. Post to drive to Malibu to meet Mr. Post in the middle of the night, at a time when there would be no other “witnesses.” When Mr. Martini arrived at Mr. Post’s offices, all the lights were off and Mr. Martini was directed to enter the premises from the rear of the building. Upon doing so, he found Mr. Post sitting in a darkened room lit by a solitary light. Mr. Post handed Mr. Martini several bundles of hundred dollar bills, totaling $100,000. Mr. Post told Mr. Martini that he could never mention this payment to Plaintiff, because—if he did—he was certain that Plaintiff would sue him.