Online King LLC

UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF NEW YORK

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In re:

Case No. 1-20-42591-las

Online King LLC,

Chapter 11

Debtor.

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MEMORANDUM DECISION DENYING DEBTOR’S MOTION FOR

AN ORDER EXTENDING TIME TO FILE A PLAN1

On July 10, 2020, Online King LLC (the “Debtor”) filed a chapter 11 petition and

elected application of subchapter V of chapter 11, codified in 11 U.S.C. §§ 1181-1195.2 In a

subchapter V case, only the debtor may file a plan. 11 U.S.C. § 1189(a). The plan must be

filed within 90 days of the entry of the order for relief, except that the court may extend the

90-day period under limited circumstances, to wit, if a debtor demonstrates that the “need

for the extension is attributable to circumstances for which the debtor should not justly be

held accountable.” 11 U.S.C. § 1189(b). Here, the 90-day period expired on October 8, 2020.

The Debtor did not file a plan nor request an extension of the 90-day period prior to October

8, 2020.

Now before the Court is a motion filed by the Debtor, dated October 21, 20203 [Dkt.

No. 63] (the “Motion”), for entry of an order extending the 90-day period by an additional 90

days without prejudice to the Debtor’s right to request a further extension of time. The Motion

1 As explained below, this Memorandum Decision is consistent with and explains further the bases of the Court’s

ruling at the conclusion of oral argument on November 12, 2020. Consistent with that oral ruling, an order

denying the Motion was entered on November 24, 2020. [Dkt. No. 75].

2 All statutory references to sections of the United States Bankruptcy Code, 11 U.S.C. § 101 et seq., will hereinafter

be referred to as “§ (section number).”

3 The Debtor filed an amended notice of the Motion, dated October 23, 2020 [Dkt. No. 64]. The only difference

between the original notice and the amended notice is the address to which parties in interest must file a written

response or request for hearing. In the original notice, the Debtor included the address of the Conrad B.

Duberstein United States Courthouse, located at 271-C Cadman Plaza East, Suite 1595, Brooklyn, New York

11201. In the amended notice, the Debtor changed the address to the Alfonse D’Amato United States Courthouse,

located at 290 Federal Plaza, Central Islip, New York 11722. [Compare Dkt. No. 63, with Dkt. No. 64].

does not mention that the 90-day period has expired nor does it cite to any authority to

support the request for an extension other than a passing reference to § 1189(b). No affidavit

or declaration was submitted by the principal of the Debtor, and the Motion is signed by

counsel. The Motion asserts, in conclusory fashion, that an extension is justified because of

(i) “the amount of work entailed in negotiating and proposing a plan,” (ii) “the intervening

Jewish holidays during which the Debtor and its Counsel could not work,” (iii) “the competing

demands upon Debtors [sic] advisors and personnel,” and (iv) “the inherent issues faced by

all parties because of the current pandemic.” Motion ¶ 8. No explanation is given as to how

the religious holidays or the pandemic affected the Debtor and its operations, nor does the

Motion describe what steps the Debtor has taken to propose a plan since this chapter 11 case

was commenced on July 10, 2020 and when a plan might be forthcoming. In short, the Motion

consists of factually unsupported and conclusory labels, and it is on that basis that the Debtor

asks this Court to retroactively extend its time to file a plan by an additional 90 days.

While neither the Debtor nor any other party has raised the question of whether this

Court has the authority to grant retroactive relief by entering a nunc pro tunc order to erase

the gap occasioned by the expiration of the 90-day time period within which a debtor shall

file a plan, it is a question that the Court must address in light of the United States Supreme

Court decision in Roman Catholic Archdiocese of San Juan, Puerto Rico v. Acevedo Felicianio,

140 S. Ct. 696 (2020). See In re Benitez, No. 8-19-70230-reg, 2020 WL 1272258, at *1 (Bankr.

E.D.N.Y. Mar. 13, 2020). Accordingly, the Court first considers whether, in view of Acevedo,

which limited the use of nunc pro tunc (“now for then”) orders, it is appropriate to extend by

90 days the Debtor’s time to file a plan nunc pro tunc to October 8, 2020. Next, the Court

addresses the merits of the Debtor’s request for an extension of time under § 1189(b) as if the

Motion had been filed and heard before the expiration of the 90-day period. In other words,

even if this Court has the authority to enter a nunc pro tunc order extending by 90 days the

Debtor’s time to file its plan, did the Debtor meet its burden of demonstrating, by affirmative

evidence, that an extension is justified in this case. The answer to each of these questions is

of great consequence to the Debtor because the failure to file a plan within the statutory time

period constitutes “cause” to convert or dismiss a chapter 11 case under § 1112(b)(4)(J).4

No objection to the Motion was filed.5 The Court heard oral argument on November

12, 2020. Joseph Y. Balisok, Esq., appeared on behalf of the Debtor in support of the Motion.

Also appearing were the subchapter V trustee, Gerard R. Luckman, Esq., and counsel from

the Office of the United States Trustee for the Eastern District of New York (the “United

States Trustee”), Jeremy S. Sussman, Esq. At oral argument, the Debtor did not ask for time

to brief the issue of whether, after Acevedo, the Court has authority to grant retroactive relief

in this case, nor did the Debtor request leave to address this Court’s inquiry as to how it was

affected by the pandemic and by the religious holidays such that it was, in the first instance,

unable to file a plan within the 90-day period and, in the second instance, unable to move for

an extension of time before the 90-day period expired.

After careful consideration of the Motion and the arguments of counsel, for the reasons

set forth on the record at the November 12, 2020 hearing, the Court denied the Motion,

having determined that the Debtor failed to justify that an extension of its time to file a plan

4 The United States Trustee moved to dismiss the Debtor’s chapter 11 case. [Dkt. No. 70]. On December 3, 2020,

the Debtor filed opposition to the motion to dismiss. [Dkt. No. 82]. On December 30, 2020, the Debtor’s secured

creditor, Amazon Capital Services, Inc., filed a joinder to the United States Trustee’s motion [Dkt. Nos. 86, 87],

as did PopSockets LLC, the holder of the largest unsecured claim against the Debtor. [Dkt. No. 85]. The Court

heard oral argument on the motion on January 7, 2021, at which the Debtor consented to the dismissal of its

chapter 11 case.

5 The fact that the Motion was unopposed is not in itself a reason to grant the requested relief. The Court is not a

rubber stamp. In short, the fact that no party in interest opposed the Motion does not alone relieve the Debtor of

its burden to establish that an extension is warranted under the circumstances of this case. See In re Bear Stearns

High-Grade Structured Credit Strategies Master Fund, Ltd., 374 B.R. 122, 130 (Bankr. S.D.N.Y. 2007), aff'd, 389

B.R. 325 (S.D.N.Y. 2008) (“Rubber-stamp approval, even in the absence of objections, is improper.” (quoting Staton

v. Boeing Co., 327 F.3d 938, 970 (9th Cir. 2003))).

in this subchapter V case is warranted under the circumstances presented here.6 An Order

was entered on November 24, 2020 denying the Debtor’s request for an extension of time to

file a plan. [Dkt. No. 75]. This Memorandum Decision is consistent with and explains further

the bases of the Court’s ruling on November 12, 2020.

Jurisdiction

The Court has jurisdiction over the Motion under 28 U.S.C. § 1334(b) and the Standing

Order of Reference entered by the United States District Court for the Eastern District of

New York pursuant to 28 U.S.C. § 157(a), dated August 28, 1986, as amended by Order dated

December 5, 2012. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A) in which final

orders or judgment may be entered by this Court pursuant to 28 U.S.C. § 157(b)(1).

Background and Procedural History

The relevant facts are not in dispute. This was a rather straightforward case, until it

wasn’t. The Debtor is a vendor who fulfills orders through the Amazon.com online

marketplace. See Debtor’s Cash Collateral Motion ¶ 15 [Dkt. No. 7]. The Debtor commenced

this chapter 11 case on July 10, 2020 and elected to proceed as a small business debtor under

subchapter V of chapter 11. [Dkt No. 1]. Pursuant to § 1183(a), the United States Trustee

appointed Gerard R. Luckman, Esq. to serve as trustee in this subchapter V case. [Dkt. No.

8]. On July 15, 2020, the Court entered an Order scheduling the status conference required

by § 1188(a) for August 25, 2020. [Dkt. No. 11]. Pursuant to § 1188(c), not later than 14 days

before the status conference, a debtor is required to “file with the court and serve on the

[subchapter V] trustee and all parties in interest a report that details the efforts the debtor

6 As noted below, because the Court concludes that § 1189(b), by its terms, implies that the Court may, in its

discretion, grant retroactive relief, it is not necessary for the Court to visit further the question of whether, after

Acevedo, this Court has the inherent authority to issue a nunc pro tunc order extending the Debtor’s time to file

a plan in this subchapter V case.

has undertaken and will undertake to attain a consensual plan of reorganization.” 11 U.S.C.

§ 1188(c). On August 11, 2020, the Debtor filed its report with the Court. [Dkt. No. 41].7 In

its report, the Debtor stated that it (i) had discussions with its secured and unsecured

creditors, as well as the subchapter V trustee, concerning the plan, (ii) had drafted a plan

and sent the proposed plan to all creditors, (iii) was gathering additional information

requested by secured creditor Amazon Capital Services, Inc., and (iv) intended to file a plan

within the 90-day time period set forth in § 1189(b). Id. At the August 25, 2020 status

conference, the Debtor did not state that a chapter 11 plan would not be filed before the

expiration of the 90-day time period, nor did the Debtor state that it would be seeking an

extension of time by which to file a plan.

Additionally, the record in this case reflects that each of the monthly operating reports

filed by the Debtor for July, August, September and October state that the Debtor operated

its business for the entire reporting period. [Dkt. Nos. 48, 53, 59, 74]. The record also reflects

that Debtor’s counsel continued to file pleadings weeks before the October 8, 2020 deadline

to file a plan in this subchapter V case [Dkt. Nos. 47, 54] and that he appeared before the

Court for hearings on September 15, 2020 and September 29, 2020 in connection with those

pleadings.8 Counsel did not advise the Court or the parties in attendance at each of the

hearings that the Debtor did not intend to file a plan before the October 8, 2020 deadline nor

did counsel advise that the Debtor intended to move for an extension of its time to do so.

7 The Debtor did not file with the Court a certificate of service relating to service of the report on the subchapter

V trustee and all parties in interest. The August 25, 2020 status conference was attended by counsel to the Debtor,

the subchapter V trustee, counsel for the United States Trustee, and counsel for Amazon Capital Services, Inc.

8 Of note, the record reflects that the Debtor made time to file written opposition on September 22, 2020 [Dkt. No.

54] to the application of creditor PopSockets LLC seeking the production of documents and an examination of the

Debtor pursuant to Bankruptcy Rule 2004, yet the Debtor did not make time to move to extend its time to file a

plan before the October 8, 2020 deadline.

Discussion

Under § 1189(a), only the debtor may file a plan in a subchapter V case; neither the

subchapter V trustee nor creditors are permitted to do so. The deadline to file a plan in a

subchapter V case is governed by § 1189(b). Pursuant to § 1189(b), a debtor proceeding under

subchapter V “shall file a plan not later than 90 days after the order for relief under this

chapter, except that the court may extend the period if the need for the extension is

attributable to circumstances for which the debtor should not justly be held accountable.” 11

U.S.C. § 1189(b) (emphasis added). Here, the 90-day period for the Debtor to file its plan

expired on October 8, 2020. The Debtor did not file a plan by the 90-day statutory deadline

nor move to extend its time to do so prior to October 8, 2020. Rather, thirteen days after the

time period expired, on October 21, 2020, the Debtor filed the Motion seeking an extension of

its time to file a plan by 90 days without prejudice to any further requests to extend the time

period. In short, the Debtor is asking this Court to extend its time to file a plan effective as

of October 8, 2020.

As noted, the Motion raises two issue. First, it requires this Court to examine whether

it may issue a nunc pro tunc order to retroactively extend the Debtor’s time to file a plan in

view of Acevedo, where the United States Supreme Court made clear that “[f]ederal courts

may issue nunc pro tunc orders or ‘now for then’ orders . . . to ‘reflect the reality’ of what has

already occurred.” Acevedo Feliciano, 140 S. Ct. at 700–01 (quoting Black’s Law Dictionary,

at 1287, and Missouri v. Jenkins, 495 U.S. 33, 49 (1990)). Second, if the Court has authority

to grant retroactive relief and erase the gap occasioned by the expiration of the 90-day

statutory time period, the Motion requires the Court to examine whether the Debtor has met

its burden of proof to establish that an extension of time to file a plan is warranted under the

limited circumstances set forth in § 1189(b). Because the Court concludes that the language

of § 1189(b) implies that the Court may, in its discretion, grant retroactive relief, the Court

need not visit whether under the circumstances presented here, Acevedo precludes the use of

a nunc pro tunc order to fashion relief retroactively to an earlier point in time.9 That said,

the question remains as to whether it is appropriate to grant retroactive relief based on the

record placed before the Court. It is that question that the Court now addresses.

A. 11 U.S.C. § 1189(b)

The Court begins, as it must, with textual analysis. See Raila v. United States, 355

F.3d 118, 120 (2d Cir. 2004) (“Statutory construction begins with the plain text, and, where

the statutory language provides a clear answer, it ends there as well.” (internal quotation

marks and citation omitted)).

Section 1189(b) controls when a plan must be filed in a subchapter V case. It provides

that “[t]he debtor shall file a plan not later than 90 days after the order for relief under this

chapter, except that the court may extend the period if the need for the extension is

attributable to circumstances for which the debtor should not justly be held accountable.” 11

U.S.C. § 1189(b). Thus, upon an appropriate showing, § 1189(b) authorizes a request to

extend the statutory time limit by which a debtor must file a plan.

Although § 1189(b) speaks to what a debtor must show when requesting an extension

of time to file a plan, it is noticeably silent as to the timing of such a request. Must the debtor

move before the time period has expired or is it permissible to request an extension after the

expiration of the 90-day period? Section 1189(b) does not speak one way or the other on this

issue. In other words, there is no statutory proscription against making a request after the

time period has expired. The lack of a date certain by which a motion under § 1189(b) must

9 “Nunc pro tunc, Latin for ‘now for then’ refers to a court’s inherent power to enter an order having retroactive

effect.” In re World Trade Ctr. Lower Manhattan Disaster Site Litig., 758 F. 3d 202, 214 (2d Cir. 2014) (quoting

Iouri v. Ashcroft, 478 F. 3d 76, 87 (2d Cir. 2007). That inherent power is not given by statute or rule, which may

in turn allow a court to grant retroactive relief. See In re Miller, 620 B.R. 637, 641 (Bankr. E.D. Cal. 2020).

(“Statutes may also serve as a basis, express or implied, for orders that have retroactive effect without need for

inherent power nunc pro tunc orders.”).

be made is a notable contrast to the timing of a motion for an extension of a debtor’s time to

file a plan in a non-small business chapter 11 case (i.e., a regular chapter 11 case) or in a

non-subchapter V small business case. Compare 11 U.S.C. § 1189(b), with id. § 1121(d)(1)

(“[O]n request of a party in interest made within the respective periods specified in subsections

(b) and (c) of this section . . . the court may for cause reduce or increase the 120-day period or

180-day period referred to in this section.” (emphasis added)), and id. § 1121(e)(3)(C) (stating

that the time period in which the debtor may file a plan may be extended only if, inter alia,

“the order extending time is signed before the existing deadline has expired” (emphasis

added)).10

There is a distinct difference between § 1189(b) and § 1121. Section 1121 mandates

when a motion to extend the time to file a plan must be made, whereas § 1189(b) contains no

such mandate. Given that § 1189(b) was enacted after § 1121, Congress could have added a

similar mandate to § 1189(b). It chose not to do so. “It is well settled that ‘[w]here Congress

includes particular language in one section of a statute but omits it in another section of the

same Act, it is generally presumed that Congress acts intentionally and purposely in the

disparate inclusion or exclusion.”’ Duncan v. Walker, 533 U.S. 167, 173 (2001) (alteration in

original) (citations omitted). The marked difference in the language of these two sections

leads this Court to conclude that no timing requirement exists for a motion to extend brought

under § 1189(b). See Auburn Hous. Auth. v. Martinez, 277 F.3d 138, 144 (2d Cir. 2002) (“[T]he

preferred meaning of a statutory provision is one that is consonant with the rest of the

statute.”). Support for this Court’s conclusion is found in the interpretation of a related

section of the Bankruptcy Code, § 1221. Section 1221 controls the filing of a plan in a chapter

12 case which allows relief for “family farmers and “family fisherman” with regular annual

10 Section 1181 provides that § 1121 does not apply in a case under subchapter V.

income. The text of § 1221 is identical to that of § 1189(b). It provides that “[t]he debtor shall

file a plan not later than 90 days after the order for relief under this chapter, except that the

court may extend such period if the need for an extension is attributable to circumstances for

which the debtor should not justly be held accountable.” 11 U.S.C. § 1221. When faced with

a motion to extend the time for the debtors to file a chapter 12 plan made after expiration of

the 90-day statutory time period, the court in In re Lundberg, 621 B.R. 561, 562 (Bankr.

W.D.N.Y. 2020) stated that “nothing in the text of section 1221 prohibits relief nunc pro tunc.”

The Lundberg court noted the striking difference between § 1112 and § 1121(e), stating that

the provisions for Chapter 12 contrast markedly with the language of

11 U.S.C. § 1121(e), which addresses the extension of time for filing a

plan in a [non-subchapter V] small business case under Chapter 11. For

such cases, section 1112(e)(3) states that the filing deadline may be

extended “only if … (C) the order extending time is signed before the

existing deadline has expired.”

Id. The omission of this language in § 1221 led the Lundberg court to conclude that

retroactive relief may be granted upon proper showing by a debtor stating that “[t]he absence

of such language in section 1221 suggests that in Chapter 12, an extension is allowed when

otherwise appropriate, even after the expiration of the time for filing a plan of

reorganization.” Id. The leading bankruptcy treatise is in accord.

The 90-day time limit for filing a subchapter V plan may be extended

without the requirement of section 1121(e)(3)(C) in a small business

chapter 11 case that provides that the order extending the time limit

must be signed before the existing deadline has expired. Accordingly,

there is no requirement in subchapter V that the debtor request the

extension before the 90-day limit has expired.

8 Collier on Bankruptcy ¶ 1189.03 (16th ed. 2020) (emphasis added).

While there is no statutory mandate that the debtor request an extension before the

plan-filing deadline has expired, the failure to do so may spell the end of its reorganization

effort. The failure to timely file a plan constitutes “cause” to convert the chapter 11 case to a

case under chapter 7 or to dismiss the chapter 11 case. 11 U.S.C. § 1112(b)(4)(J) (“cause” to

convert or dismiss a chapter 11 case includes failure “to file . . . a plan, within the time fixed

by this title”). See 8 Collier ¶ 1189.03 (“[B]ecause failure to file a plan within the 90-day

deadline constitutes cause for dismissal of the case or conversion of the case to chapter 7, the

debtor should, if possible, file the motion for extension in enough time for the motion to be

acted on by the court before the time expires.”).

With that said, it defies logic for a debtor to delay moving to extend its time to file a

plan for it runs the risk of facing a motion to convert or dismiss its chapter 11 case. And what

then, what would be the debtor’s defense? Section 1112(b) is clear; once “cause” is found to

exist, “the court shall” convert or dismiss the case, “whichever is in the best interest of

creditors and the estate.” 11 U.S.C. § 1112(b)(1).11 Why run the risk? It doesn’t make sense.

The 90-day period in a subchapter V case affords a debtor the opportunity to propose a

chapter 11 plan free of any concern that its reorganization efforts will be disrupted or

thwarted by a competing plan filed by a creditor. If a debtor in subchapter V finds that the

90-day period is insufficient for it to propose and move forward with confirmation of a plan,

§ 1189(b) allows the court to extend the statutory time frame upon a proper showing by the

debtor that an extension is justified. The better practice is to identify early on whether the

time limitation will be met and, if it cannot be met, move to extend the plan filing date

sufficiently in advance of the deadline so that a hearing can be held before the time has

expired. That said, the Court realizes that identifying an inability to meet the statutory

deadline may not be readily apparent until the debtor is on the cusp of the deadline. In those

instances, the debtor should move to extend its time before the deadline and request a

11 There are two limited exceptions in § 1112(b)(1) and (2) to conversion or dismissal once “cause” has been shown.

The first, under § 1112(b)(1), speaks to the appointment of a trustee or examiner under § 1104. Section § 1104,

however, is not applicable to subchapter V. See 11 U.S.C. § 1181(a). The second exception, set forth in § 1112(b)(2),

is fact intense and, absent a proper showing, may not salvage the debtor’s case.

hearing on shortened notice, or alternatively, request entry of a bridge order extending the

plan-filing period until the motion can be heard and resolved.12

Having found that nothing in the language of § 1189(b) requires a motion to extend

the plan-filing period be brought, heard or granted before the expiration of the 90-day time

frame, and that § 1189(b), by its terms, implies that the Court may, in its discretion, grant

retroactive relief, the Court takes up next the issue of whether the Debtor has made a proper

showing to warrant the requested relief. The power to grant retroactive relief is one thing,

whether it should be exercised is another.

B. The Debtor’s Motion

In addressing the issue of whether the Debtor has met its burden to establish that an

extension is justified here, the Court returns to the text of § 1189(b). To prevail on its request

for additional time to file a plan, the Debtor must show that the “the need for the extension

is attributable to circumstances for which the debtor should not justly be held accountable.”

11 U.S.C. § 1189(b). As discussed above, the text of § 1189(b) is identical to the language set

forth in § 1221 concerning what a debtor must establish to justify an extension of the 90-day

statutory deadline. See 8 Collier ¶ 1189.03; In re Trepetin, 617 B.R. 841, 848 (Bankr. D. Md.

2020) (“Several aspects of Subchapter V are premised on the provisions of chapter 12 of the

Code for family farmers and fishermen, including the deadline for filing the proposed plan.”).

In considering a motion to extend under § 1189(b), there can be no dispute that the

burden of proof rests with the debtor to establish the limited circumstances under which a

court may grant an extension of the statutory deadline. This is readily apparent by analogy

to motions to reduce or extend the debtor’s exclusive time to file a plan in a non-subchapter

12 In some jurisdictions, where a motion to extend the time to take action is filed before the expiration of the

prescribed deadline, a bridge order extending the time is not necessary as the time is automatically extended until

the court resolves the motion to extend the time. See, e.g., S.D.N.Y. LBR 9006-2; Del. Bankr. L.R. 9006-2.

V chapter 11 case. In a non-subchapter V case, the burden is on the moving party to establish

“cause” to reduce or extend the debtor’s exclusive time to file a plan. See In re Borders Grp.,

Inc., 460 B.R. 818, 821 (Bankr. S.D.N.Y. 2011) (“The Bankruptcy Code allows the court, for

cause, on request of any party in interest, to reduce or increase the exclusivity periods. 11

U.S.C. § 1121(d)(1). The burden of proving cause to reduce or increase exclusivity is on the

moving party, in this case the Debtors.”); In re GMG Capital Partners III, L.P., 503 B.R. 596,

601 (Bankr. S.D.N.Y. 2014) (“The party seeking an extension of exclusivity has the burden of

proving ‘cause.’” (citations omitted)). While the standard under § 1121(d)(1), i.e., “for cause,”

is different than the limited circumstances set forth in § 1189(b) for an extension of time,

there is no reason to depart from established case law where courts grant an extension of a

debtor’s exclusive period to file a chapter 11 plan under § 1121(d) upon proper showing by

the debtor as moving party. To find otherwise in a subchapter V case is illogical, particularly

because only the debtor may file a plan in a subchapter V case. 11 U.S.C. § 1189(a). The

burden rests unquestionably on the debtor to establish that “the need for the extension is

attributable to circumstances for which the debtor should not justly be held accountable.” 11

U.S.C. § 1189(b). See also In re Gullicksrud, No. 16-11860-12, 2016 WL 5496569, at *1–2

(Bankr. W.D. Wis. Sept. 29, 2016) (discussing extension under § 1221 and finding burden is

on debtor to show that inability to file a plan is due to circumstances beyond debtor’s control).

Meeting that burden, however, is no small feat. It is a stringent one. See In re Seven

Stars on the Hudson Corp., 618 B.R. 333, 344 (Bankr. S.D. Fla. 2020) (“Based on a plain

reading of this phrase, it is a clearly higher standard than the mere ‘for cause’ standard set

forth in . . . Bankruptcy Code section 1121(d)(1) (governing extensions of a non-Subchapter

V debtor’s exclusive period to file a Chapter 11 plan).” (citation and footnote omitted)); 8

Collier ¶1221.01[2] (discussing burden under § 1221 and explaining rationale for stringent

requirement, i.e., the 90-day time frame “is [one of] the primary protections for creditors

against a debtor’s languishing in chapter 12 without confirming a plan”).

This stringent burden is in keeping with the design of a subchapter V case to move

the case expeditiously. It is a fast-tracked process aimed at giving the qualifying debtor a less

expensive and accelerated path to reorganize its business affairs, such as the exclusive right

to file a plan during the first 90 days of the subchapter V case, which period can neither be

reduced nor terminated. 11 U.S.C. § 1189(a). See In re Ventura, 615 B.R. 1, 12 (Bankr.

E.D.N.Y. 2020) (“By enacting [the Small Business Reorganization Act of 2019 (the “SBRA”)],

Congress intended to streamline the reorganization process for small business debtors

because small businesses have often struggled to reorganize under chapter 11.” (citation

omitted)); Seven Stars, 618 B.R. at 340 (setting forth “powerful and cost-saving restructuring

tools” available to subchapter V debtors and stating that “[s]ubchapter V by its very nature

is intended to be an expedited process. . . . And to balance the special new powers available

to small business debtors, Congress granted creditors a very important protection: the

requirement that a Subchapter V case proceed expeditiously”).

In moving for an extension of time, the Debtor does not mention that the 90-day plan

filing deadline had already passed, nor does the Debtor explain why it could not have moved

for such relief earlier. Instead, the Debtor simply requests entry of an order “extending the

time within which the Debtor must file its plan for reorganization by 90 days for a total of

180 days from the date the order for relief was entered on the Petition filing date of July 10,

2020.” Motion ¶ 3. The Debtor also asks that such extension be without prejudice to a request

for a further extension of the plan-filing date. Id. Before addressing the reasons given by the

Debtor as to why such an extension is necessary in this case, the Court observes that a

request for an additional 90 days without prejudice to a further extension is contrary to the

clear intent that a subchapter V case be an accelerated process, designed to assist the small

business debtor in its reorganization effort. See Ventura, 615 B.R. at 6 (“These amendments,

commonly referred to as the SBRA, were instituted to broaden the opportunity for small

businesses to successfully utilize the benefits of chapter 11 of the Bankruptcy Code.”). In

short, if the Debtor thought its case was such that it needed 180 days of exclusivity, it should

have elected to proceed as a non-subchapter V small business debtor. Under § 1121(e)(1), a

debtor in a non-subchapter V small business case has the exclusive right to file a plan during

the first 180 days of a chapter 11 case. Of course, a non-subchapter V small business chapter

11 case does not offer a debtor the multiple benefits of proceeding in subchapter V, including

the sole and exclusive right to file a plan. See Seven Stars, 618 B.R at 340. Here, it appears

that the Debtor wanted to take advantage of the benefits offered by proceeding under

subchapter V, but did not wish to be saddled with the prospect of moving the case along so

as to aid from the clear cost-savings envisioned by the SBRA. Having made that observation,

the Court turns to the Debtor’s request.

As discussed above, § 1189(b) sets a 90-day deadline for the debtor to file a chapter 11

plan. That deadline may be extended upon a proper showing that “the need for the extension

is attributable to circumstances for which the debtor should not justly be held accountable.”

11 U.S.C. § 1189(b). The Debtor sets forth four reasons why it was unable to file a plan within

the 90-day statutory time frame and why it needs, at the very least, an additional 90 days to

file a plan. The four reasons advanced are conclusory statements, as no explanation is given

to support the argument that an extension is justified in this case. The reasons are (i) “the

amount of work entailed in negotiating and proposing a plan”; (ii) “the intervening Jewish

holidays during which the Debtor and its Counsel could not work”; (iii) “the competing

demands upon Debtors [sic] advisors and personnel”; and (iv) “the inherent issues faced by

all parties because of the current pandemic.” Motion ¶ 8. For these reasons, the Debtor

contends that it “cannot successfully negotiate and propose a feasible, appropriate and

acceptable plan within the required 90-day period.” Id. In making this request, the Debtor

does not set forth any legal authority in support of its position, other than a passing reference

to § 1189, nor does the Debtor offer any explanation as to why it could not have moved for

the relief sooner.

In its August 11, 2020 status conference report filed pursuant to § 1188(c), the Debtor

did not offer any preview as to why it could not meet the 90-day deadline to file a plan. To

the contrary the Debtor stated its intention to file a plan within the 90-day deadline imposed

by § 1189(b). [Dkt. No. 41]. In its report, the Debtor stated that it (i) had discussions with its

secured and unsecured creditors, as well as the subchapter V trustee, concerning the plan,

(ii) had drafted a plan and sent the proposed plan to all creditors, (iii) was gathering

additional information requested by secured creditor Amazon Capital Services, Inc. and (iv)

intended to file a plan within the 90-day time period set forth in § 1189(b). Id. At the August

25, 2020 status conference, the Debtor did not state that a chapter 11 plan would not be filed

before the expiration of the 90-day time period, nor did the Debtor state that it would be

seeking an extension of time by which to file a plan. At the November 12, 2020 hearing on its

motion for an extension of the plan-filing deadline, the Debtor stated that, approximately 60

days after the order for relief, which would be around September 10, 2020, it became apparent

that a plan would not be filed by the 90-day deadline. Yet, the Debtor offered no reason for

its delay in moving for an extension of this time limit. The record shows that the Motion was

filed 103 days after the petition date and approximately 40 days after it became apparent to

the Debtor that it would not be able to timely file a plan. It is undisputed that the Debtor

knew all too well that the deadline was fast approaching yet did not seek appropriate relief

from the Court before the time expired.

Two of the four reasons given by the Debtor for an extension of the 90-day deadline,

namely “the amount of work entailed in negotiating and proposing a plan” and “the competing

demands upon Debtors [sic] advisors and personnel,” are quickly put aside. The Court finds

these reasons unavailing. They are nothing more than a generalized excuse applicable to any

business bankruptcy case. Yes, there is much work to do in a reorganization case, including

formulating and filing a plan, and yes, it is not uncommon for there to be “competing

demands” for counsel’s time and that of a debtor’s personnel. Often parties are required to

multi-task and work on more than one matter at a time, particularly counsel. This, however,

falls far short of meeting the stringent burden placed upon a subchapter V debtor to establish

the limited circumstances under which an extension of the time to file a plan is justified.

The Debtor next contends that it was unable to file a plan by the 90-day time limit

because of “the intervening Jewish holidays during which the Debtor and its Counsel could

not work,” and “the inherent issues faced by all parties because of the current pandemic.”

These reasons too do not excuse the Debtor’s failure to meet the statutory deadline or move

earlier for an extension of its time to do so. And that is not because they are not valid reasons

in a bankruptcy case to support an extension of time by which an act must be done. Rather,

it is because the Debtor offered no explanation as to how any pandemic-related issues or the

religious holidays affected the Debtor or counsel during the 90-day period, and in particular,

during the 44 day period between the August 25, 2020 status conference and the October 8,

2020 deadline to file a plan such that the Debtor could not meet the foundational time limit

or move for an extension.

One thing for certain, this Court is mindful of the unprecedented challenges due to

the COVID-19 pandemic, and the disruption and hardship it has caused to both businesses

and individuals and has consistently afforded parties additional time to act. Also, this Court

has time and time again accommodated the requests of attorneys and pro se litigants that

court hearings be rescheduled, that additional time be given to file pleadings, or that matters

be adjourned because of the parties’ need to observe religious holidays. The Court cannot

think of one instance where such a request was ignored and not granted. What then is the

difference here? The answer lies in what the Debtor didn’t do. As noted, no explanation is

given as to how the religious holidays or the pandemic affected the Debtor and its operations,

nor does the Motion describe what steps the Debtor has taken to propose a plan since this

chapter 11 case was commenced on July 10, 2020 and when a plan might be forthcoming. The

Debtor does not state which dates or time periods the Debtor or its counsel could not work or

communicate because of the religious holidays, nor does the Debtor provide any reason why

it could not foresee how the religious holidays would impact both work schedules and the

timely administration of the bankruptcy case so that adjustments could be made from the

inception of this case on July 10, 2020, or at the very least from August 25, 2020, the date of

the status conference.

Similarly, merely saying that an extension should be granted because of “the inherent

issues faced by all parties because of the current pandemic” does not itself carry the day. The

Debtor does not identify any inherent issues it or counsel faced by the pandemic such that

the Debtor was unable to file a plan before the 90-day deadline expired. Again, this Court

appreciates and is cognizant of the far-reaching impact caused by the COVID-19 pandemic,

and that its impact can without question affect a debtor’s ability to formulate and file a plan.

See In re Donghia, Inc., No. 20-30487 (JJT), 2020 WL 2465503, at *3 (Bankr. D. Conn. May

12, 2020), reconsideration denied, No. 20-30487 (JJT), 2020 WL 6813533 (Bankr. D. Conn.

July 9, 2020) (“All bankruptcy cases now confront public health restrictions and frozen

business realities.”). However, the issue here is that the Debtor simply said “pandemic” in a

generalized and conclusory fashion as a basis for an extension of time. There is no mention

in the Motion that anyone was taken ill, or unable to work due to COVID-19, or that offices

were closed for certain periods of time, or that the parties did not have access to their offices

or their work materials. When those reasons have been presented to the Court to support a

request for an extension of time or an adjournment, there has been no hesitation on the part

of the Court to grant the request. The request has been readily granted. Just as the Court is

respectful of the observance of religious holidays, it is respectful of the adversity confronting

all parties by reason of the COVID-19 pandemic. Without factual support or any affirmative

evidence, the non-specific and conclusory labels set forth in the Motion as the bases for an

extension do not establish the requisite circumstances for which the Debtor should not justly

be held accountable. The standard is not an easy one to meet, and the Debtor has fallen short.

The record also calls into question the arguments advanced by the Debtor. As noted

above, the Debtor filed a status conference report on August 14, 2020 and appeared at the

August 25, 2020 status conference. In the report and at the conference the Debtor made

known its intention to file a plan within the 90-day time period. No indication was given by

the Debtor that a plan was not forthcoming or that an extension of its time to do so was

needed. Additionally, the record in this case reflects that each of the monthly operating

reports filed by the Debtor for July, August, September and October state that the Debtor

operated its business for the entire reporting period. [Dkt. Nos. 48, 53, 59, 74].

The record also reflects that Debtor’s counsel continued to file pleadings weeks before

the October 8, 2020 deadline to file a plan in this subchapter V case [Dkt. Nos. 47, 54] and

that he appeared before the Court for hearings on September 15, 2020 and September 29,

2020 in connection with those pleadings. Counsel did not advise the Court or the parties in

attendance at each of those hearings that the Debtor did not intend to file a plan before the

October 8, 2020 deadline nor did counsel advise that the Debtor intended to move for an

extension of its time to do so. In particular, the record shows that on September 22, 2020, two

weeks before the expiration of the 90-day deadline, the Debtor filed an objection to a creditor’s

motion pursuant to Bankruptcy Rule 2004 [Dkt. No. 54] and appeared at the September 29,

2020 hearing on that motion. Additionally, the Debtor submitted a proposed interim cash

collateral order to this Court on September 30, 2020, which included a proposed budget for

the period of September 15, 2020 through October 14, 2020.

At the November 12, 2020 hearing to consider the Motion and the Debtor’s request for

retroactive relief, counsel to the Debtor asserted that, as to the dates of the religious holidays

that caused “the office” to close (counsel did not specify whether he was referring to his office

or the Debtor’s), such dates were from October 14, 2020 through October 24 or 25, 2020. The

Court was not persuaded for three reasons. First, those dates are after the October 8, 2020

deadline to file a plan. Second, counsel filed the Motion on October 21, 2020 and filed an

amended notice of motion on October 23, 2020. Third, he appeared before this Court at a

telephonic hearing on October 22, 2020 concerning the Debtor’s continued request to use cash

collateral. All this activity, both before and after the deadline to file a plan passed, belies the

reasoning given as to why the Debtor could not meet a critical time limitation in this case.

The conclusory arguments advanced by the Debtor in the Motion and at the November

12, 2020 hearing are contradicted by the record placed before the Court. In sum, the Motion

consists of factually unsupported and conclusory labels, and on that basis the Court cannot

find that the Debtor meets the stringent burden of showing that it was unable to timely file

a plan due to circumstances for which it should not justly be held accountable. Some may say

a harsh result, but words matter, as does evidence.

Conclusion

For the reasons set forth on the record at the November 12, 2020 hearing, and for the

above reasons, the Motion is denied.

SQ,

LT ©)

Dated: January 19, 2021 2 mes SS Louis A. Scarcella

Central Islip, New York ae United States Bankruptcy Judge

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