Bankruptcy Court Holds that Bankruptcy Rule 9006(b) Permits Bankruptcy Courts to Extend Statutes of Limitations

By Nelson Mullins Riley & Scarborough LLP

Feb 26, 2024

Federal Rule of Bankruptcy Procedure 9006(b) provides that, generally, “when an act is required to be done at or within a specified period by these rules or by a notice given thereunder or by order of court, the court for cause shown may at any time in its discretion ... order the period enlarged if the request therefor is made before the expiration of the period originally prescribed or as extended by a previous order.” Fed. R. Bankr. P. 9006(b).

In an opinion issued on February 15, 2024, by the United States Bankruptcy Court for the District of Connecticut, the court held that Bankruptcy Rule 9006(b) may be utilized to extend the statutes of limitation set forth in sections 108(a), 546(a), and 549(d) of the Bankruptcy Code. See In re Ho Wan Kwok, No. 22-550073 (JAM) ), 2024 WL 666646, at *3-4 (Bankr. D. Conn. Feb. 15, 2024).

The Trustee, relying on IBT International, Inc. v. Northern (In re International Administrative Services, Inc.), 408 F.3d 689 (11th Cir. 2005), and its progeny, argues that it is within the Court's discretion to extend the deadlines. The Objecting Parties – particularly G Club – rely on 28 U.S.C. § 2075, Joint Council Dining Car Employees Local 370 v. Delaware, Lackawanna & Western Railroad Company, 157 F.2d 417 (2d Cir. 1946), In re Walnut Hill, No. 16-50960 (JJT), 2018 WL 2672242 (Bankr. D. Conn. June 1, 2018) (Tancredi, J.), and In re Damach Inc., 235 B.R. 727 (Bankr. D. Conn. 1999) (Krechevsky, J.), to argue that Rule 9006(b) may not extend the deadlines set forth in sections 108(a), 546(a), and 549(d).

The bankruptcy court first addressed whether sections 108(a), 546(a), and 549(d) contain statutes of limitation – subject to tolling, extension, equitable estoppel, and other principles of equity – or statutes of repose, which are not susceptible to equity. The court stated that “sections 108(a), 546(a), and 549(d) have either no tolling provisions or tolling provisions that supplement rather than supplant traditional principles of equity. 11 U.S.C. §§ 108(a) (no tolling provision), 546(a) (potentially tolled by the first appointment of a trustee within the two-year period), 549(d) (no tolling provision).” Id.at *3. Relying on the Eleventh Circuit’s decision in IBT International, Inc. v. Northern (In re International Administrative Services, Inc.), 408 F.3d 689 (11th Cir. 2005), held that “sections 108(a), 546(a), and 549(d) are subject to extension under principles of equity.” Id.

The court next addressed whether Bankruptcy Rule 9006(b) provides a mechanism for such equitable extension. Disagreeing with two contrary decisions from different judges in the same court*, the court noted that “there is no binding precedent on this issue from the United States Supreme Court, the United States Court of Appeals for the Second Circuit, or the United States District Court for the District of Connecticut.” Id. As the court noted, the only United States Court of Appeals decision on this issue is the Eleventh Circuit’s decision in IBT International.There, the Eleventh Circuit held that a bankruptcy court has the discretion under Rule 9006(b) to enlarge the period of time to bring avoidance actions set forth in section 546(a), notwithstanding the omission of “statute” from the text of Rule 9006(b), because Rule 9006(b) governs the filing of adversary proceedings pursuant to Bankruptcy Rules 7001 and 7003. 408 F.3d at 699. *See, In re Walnut Hill, No. 16-50960 (JJT), 2018 WL 2672242 (Bankr. D. Conn. June 1, 2018) (Tancredi, J.); In re Damach Inc., 235 B.R. 727 (Bankr. D. Conn. 1999) (Krechevsky, J.).

The objectors relied on the Bankruptcy Rules Enabling Act, 28 U.S.C. § 2075, which provides: “Such rules shall not abridge, enlarge, or modify any substantive right.” The bankruptcy court dismissed the argument, saying, “Limitations periods are not, generally, substantive[,]” and held “that the Rules Enabling Act does not preclude Rule 9006(b) from providing a mechanism for extending the statutes of limitations set forth in sections 108(a), 546(a), and 549(d).” Id.

This decision is in line with the majority of courts to consider the issue and is likely to lead to a continued trend of courts following the majority position.