“(b) Duties.—The [Subchapter V] trustee shall— . . . (7)facilitatethe development of a consensual plan of reorganization.”

• From 11 U.S.C § 1183(b)(7)(emphasis added).

Facilitation is, by statute, a duty of every Subchapter V trustee—something a Subchapter V trustee must do. But the nature and boundaries of the facilitation role have always been fuzzy and, therefore, misunderstood.

My purpose in this multi-part series is to provide observations on the facilitation role.

The stakes in the appeal from a recent case in Alberta,  Qualex-Landmark Towers  Inc  v  12-10  Capital Corp (“Qualex”) are rising with the recent decision of the Court of Appeal of Alberta granting leave to intervene to the Canadian Bankers Association [Qualex-Landmark Towers Inc v 12-10 Capital Corp, 2023 ABCA 177].  The Canadian Bankers Association sought leave to intervene on the basis that the decision in Qualex creates significant uncertainty for secured lending, particularly where the borrower may have environmental remediat

“Learn something new every day,” is a well-worn adage.

And it’s mostly true (I only question giving a literal meaning to the “every day” part).

Nevertheless, I’m embarrassed to acknowledge learning only recently of the existence of a noteworthy, bankruptcy-related statute: 28 U.S.C. § 959(a). Such statute reads in part (emphasis added):

Excluded from Subchapter V eligibility is a “single asset real estate” debtor.

We have a recent opinion on a Subchapter V debtor who beats that exclusion: In re Evergreen Site Holdings, Inc., [Fn. 1]

What follows is a summary of that opinion.

Eligibility Issue & Standards

The Evergreen issue is this:

In a mass-tort bankruptcy, when 95% of 120,000 creditors vote to accept a mediated plan paying over $7 billion to creditors, shouldn’t the plan be confirmed?

Subchapter V eligibility requires a debtor to be “engaged in” commercial/business activities.

Case Law Consensus

Case law consensus is that such activities must exist on the petition filing date. That means a debtor cannot utilize Subchapter V when:

• business assets are fully-liquidated;
• unpaid debts are the only remnant of the failed business; and
• prospects for resuming such activities are nil.

So . . . here’s the question: Is that the right eligibility standard?

I say, “No.”

A Hypothetical

Lenders beware, Canada is one step closer to establishing a framework that will provide significant enhanced protections for suppliers of perishable food items. Bill C-280, or the Financial Protection for Fresh Fruit and Vegetable Farmers Act (the “Act”), has passed the Second of Three Readings in the House of Commons.

Contrasting opinions from any court, issued a month apart, are always instructive.

And we have a new such thing—from the U.S. Supreme Court, no less, and from May and June of this year. The contrast is on this subject: whether sovereign immunities of Puerto Rico and of a federally recognized tribe are abrogated in bankruptcy.

“Were Congress to . . . intervene and expand § 524(g) beyond asbestos cases, bankruptcy would become a more suitable alternative for resolving mass tort cases. Until then, such cases will likely remain problematic under the Code in the face of creditor opposition.”

Subchapter V of the Bankruptcy Code’s Chapter 11 is relatively new: it took effect as a new law on February 19, 2020. Accordingly, new questions continue to arise on how its terms and provisions should be applied.

A Trustee Fees Question

One Subchapter V question is this:

• When does a Subchapter V trustee’s administrative claim for fees and costs get paid?

A Regular Chapter 11 Answer

The answer in regular Chapter 11 has always been this: