OPINION AND ORDER
This proceeding is before the court upon Puerto Rico Electric Power Authority’s (“PREPA”) Motion to Dismiss [Dkt. No. 6] and Amended Motion to Dismiss [Dkt. No. 12]; the Trustee’s Opposition to the Amended Motion to Dismiss [Dkt. No. 13]; PREPA’s Reply to the Opposition to the Amended Motion to Dismiss [Dkt. No. 15]; and lastly, the Trustee’s Sur-Reply to Opposition to Motion to Dismiss [Dkt. No. 16]. For the reasons stated below PREPA’s Motion to Dismiss filed on June 11, 2012, as amended on July 10, 2012 [Dkt’s No. 6 and 12, respectively] is hereby DENIED.
In its motion to dismiss, PREPA asserts that the complaint filed on March 2, 2012 is time barred and must be dismissed with
PREPA’s second argument is that 11 U.S.C. § 702(b) allows creditors to elect a permanent trustee until the 11 U.S.C. § 341 meeting of creditors (hereinafter “meeting”) is concluded. Because the meeting has not been closed, creditors are still able to elect a permanent trustee. Consequently, the interim trustee has not become the permanent trustee on or before March 18, 2011 which was the deadline to file the captioned complaint.
PREPA’s argument as to the interim status of the Trustee hinges on the fact that the Trustee failed to conclude the meeting when she continued the same sine die. Therefore, her automatic conversion from interim to permanent trustee under section 702(d) never occurred, effectively eliminating section 546(a)(1)(B). Left with only section 546(a)(1)(A), the interim Trustee filed her first extension of the term to file an avoidance of a preferential transfer on May 3, 2011, beyond the March 18, 2011 statute of limitations. The Trustee’s Opposition cites two recent cases in the District of Puerto Rico regarding closure of a meeting. PREPA contends in its reply that those cases are limited to those instances involving the 30 day exemption objection period under Fed. R. Bankr.P. 4003(b)(1). PREPA argues those cases are distinguishable from the present one because the controversy before those courts involved the effect of non-closure as it relates to the exemption objection period rather than the conversion of the interim trustee to a permanent trustee under section 702(d).
In her rebuttal, the Trustee argues that she was indeed elected as permanent trustee on September 23, 2010, the date of the last meeting, which falls well within the two year time frame of section 546(a)(1)(A). Because her election occurred within the section 546(a)(1)(A) term, the Trustee argues that she is entitled to the additional year under section 546(a)(1)(B). Therefore, the deadline to file avoidance actions would be September 23, 2011. This term was further extended by numerous timely filed requests for extension, which were granted.
1. Factual Background
Debtor filed a voluntary petition under chapter 11 of the Bankruptcy Code on March 18, 2009. On May 19, 2010, Debt-
II. Legal Analysis and Discussion
The arguments presently before the court center on the question of whether a meeting continued sine die can be deemed closed if another meeting is never convened. Section 341(a) of the Bankruptcy Code requires that a meeting of creditors be convened “[w]ithin a reasonable time after the order for relief.” Rule 2003(a) of the Fed. R. Bankr.P. provides the time frame within which a meeting must be scheduled for each chapter. Rule 2003(e) states that “[t]he meeting may be adjourned from time to time by announcement at the meeting of the adjourned date and time.” An amendment to Rule 2003(e) which became effective on December 1, 2011, adds the requirement that the trustee promptly file a written notice specifying the date and time to which the meeting is adjourned.
The case law in the First Circuit has uniformly concluded that a chapter 7 trustee may not hold the meeting open indefinitely or sine die as such a continuance will unduly prolong the time to object to the debtor’s claimed exemptions. In re Newman,
The lead case in this Circuit, Newman, held that the meeting was concluded when the proceedings ended without announcement of adjournment of any kind. This case was decided before the amendment to Rule 2003(e) took effect. In that case, the Panel cited the then applicable Rule 2003(e) and noted that “Rule 2003(e) has been understood to permit a continuance sine die.” Neuman,
As will be addressed below, Newman continues to offer the court the necessary framework with which to conduct the legal analysis of the issue at hand. PREPA maintains that Newman, as well as the more recent Ramon, are distinguishable from the case at bar. PREPA argues that these cases deal with the determination of when the 30 day period to object to exemptions commences to run under Fed. R. Bankr.P. 4003(b)(1), and not the interim versus permanent trustee quandary under section 702(d). This Court disagrees. There is nothing in the holding of the BAP cases that would lead this Court to view them as restrictive. The determination of whether a meeting continued sine die is concluded is a distinct exercise. It is a first step, if you will, that must be resolved before you can move forward with the limitations imposed by either Rule 4003 or sections 546 and 702.
While this Circuit has yet to adopt a single approach to determine what constitutes a meeting closure, the First Circuit BAP has provided positive feedback for both the “bright-line” approach and the “case-by-case” approach. Newman,
Under the “bright-line” approach, a meeting continued sine die and thus “without a follow-up date will be deemed to have been concluded....” Id. at 262. The BAP went on to explain that the bright-line approach addresses “concerns expressed by the Supreme Court about promptness and finality.” Id. at 263. Further, as noted by the Sixth Circuit BAP, the bright-line approach “provides certainty to trustees as to what assets are to be administered, and allows debtors to move on with their fresh start....” Id. (quoting In re Dutkiewicz,
Applying the “bright-line” approach to this instant case, PREPA admitted in its Amended Motion to Dismiss that although the Trustee continued the meeting on several occasions after its commencement on June 30, 2010, the Trustee did not provide a specific date and time for a continuance from the September 23, 2010 meeting. It was continued sine die. Conclusively, under this approach, because the meeting can be deemed closed on September 23, 2010, the Trustee’s action adequately met the requirements of section 546(a). See e.g., Cushing; McGowan v. Ries (In re McGowan),
Under the “case-by-case” approach, circumstantial evidence will be examined to include at least some of the following factors in regards to the reasonableness of a trustee’s delay in adjourning the meeting: (1) the length of the delay; (2) the complexity of the estate (3) the cooperativeness of the debtor; and (4) the existence of any ambiguity regarding whether the trustee continued or concluded the meeting. Newman,
Although the cooperativeness of the debtor and the complexity of the estate weigh in favor of reasonableness,
Lastly, there is no existence of any ambiguity regarding the Trustee’s intention to continue the meeting. The Trustee in her Sur-Reply clarified her intent to not hold further meetings after the September 23, 2010 date. The Trustee pointed out that because no formal announcements were made in regards to any future meetings, her intention was clear that there would not be any future meetings. Cf., In re Cherry,
Reading the Code and Rules together creates a system where debtors, within a short timeframe, can attain finality about their retained assets and predict their finances more accurately moving forward. Strictly construing the Code and the Rules effectuates congressional intent because the carefully drafted text reflects both the policy and the goals underlying the mandate. The Code contains the numerous, and often conflicting, objectives of the consumer bankruptcy system: (1) equitably distributing assets among creditors; (2) expeditiously and efficiently resolving cases; (3) giving the individual debtor a fresh start; and (4) providing both debtors and creditors with a sense of finality.
When interpreting and applying the Code and the Rules, analysis necessarily begins with the text. Lamie v. U.S. Tr.,
Most significant, prior to the December 1, 2011 amendments, Rule 2003(e) provided that “[t]he meeting may be adjourned from time to time by announcement at the meeting of the adjourned date and time without further written notice.” (emphasis added). A natural reading of the prior Rule indicates that the trustee has discretion to adjourn the meeting but that the trustee lacks discretion regarding the announcement of a specific future date and time at the meeting. Though the statute’s language is plain, and thus, must be enforced according to its terms, courts have interpreted the language of the Rule permissively, finding that the trustee “may,” but is not required to, announce a future date and time at the meeting. Newman,
The 2011 amendment to Rule 2003(e) added clarity to the matter. It required trustee’s to take formal steps to effectuate a continuance by adding the language “[t]he presiding official shall promptly file a statement specifying the date and time to which the meeting is adjourned,” thereby eliminating the use of the term sine die.
III. Conclusion
In view of the above, this Court hereby denies PREPA’s Motion to Dismiss. Because this Court reached the same result under both the “bright-line” and “case-by-case” approach, it will stay true to the guidelines provided by the First Circuit BAP and not exercise a preference for one approach over another. Further, because this Court has concluded that the Trustee has not violated section 546(a), the Court will not delve unnecessarily into the merits of PREPA’s argument in regards to section 702(b).
SO ORDERED.
Notes
. The terms "interim” and "permanent” trustee refer to the differentiation made in 11 U.S.C. §§ 701 and 702.
. See docket numbers 978, 980, 984, 985, 995, 996, 1004, 1005, 1011 and 1012 in the legal case.
. The October 1, 2012 edition of the Executive Office of the United States Trustee’s "Handbook for Chapter 7 Trustees” complements Rule 2003(e) in that it now requires that meetings be closed or continued with a specific date and time.
. In PREPA’s Reply to the Trustee's Opposition [Dkt. No. 15], PREPA pointed out that the Debtor was highly uncooperative. The Debtor failed to provide several documents including paper copies of its books, records or documents. The Debtor provided to the Trustee several disks allegedly containing information necessary for the filing of complaints against various creditors that were in a format or program that was not easily accessible. Cf., In re Bace,
. Keith Sharfman, Derivative Suits in Bankruptcy, 10 STAN. J.L. BUS. & FIN. 1, 16 (2004).
. Carlos J. Cuevas, The Rehnquist Court, Strict Statutory Construction and the Bankruptcy Code, 42 CLEV. ST. L.REV. 435, 455 (1994).