Fla. Dep't of Revenue v. Piccadilly Cafeterias, Inc. - 554 U.S. 33, 128 S. Ct. 2326 (2008)

Rule:

The most natural reading of 11 U.S.C.S. § 1146(a)'s text, the provision's placement within the Bankruptcy Code, and applicable substantive canons all lead to the same conclusion: § 1146(a) affords a stamp-tax exemption only to transfers made pursuant to a Chapter 11 plan that has been confirmed.

Facts:

After respondent Piccadilly Cafeterias, Inc. declared bankruptcy under Chapter 11, but before its plan was submitted to the Bankruptcy Court, that court authorized respondent to sell its assets, approved its settlement agreement with creditors, and granted it an exemption under 11 U.S.C. § 1146(a), which provided a stamp-tax exemption for any asset transfer "under a plan confirmed under section 1129." After the sale, respondent filed its Chapter 11 plan, but before the plan could be confirmed, petitioner Florida Department of Revenue objected, arguing that the stamp taxes it had assessed on certain of the transferred assets fell outside § 1146(a)'s exemption because the transfer had not been under a confirmed plan. The court granted respondent summary judgment. The Eleventh Circuit affirmed, holding that § 1146(a)'s exemption applied to preconfirmation transfers necessary to the consummation of a confirmed Chapter 11 plan, provided there was some nexus between such transfers and the plan; that § 1146(a)'s text was ambiguous and should be interpreted consistent with the principle that a remedial statute should be construed liberally; and that this interpretation better accounted for the practicalities of Chapter 11 cases because a debtor may need to transfer assets to induce relevant parties to endorse a proposed plan's confirmation. Petitioner challenged the decision. 

Issue:

Did the § 1146(a)'s stamp-tax exemption apply to pre-confirmation transfers under Chapter 11? 

Answer:

No.

Conclusion:

The court reversed the judgment of the Eleventh Circuit, holding thar the most natural reading of § 1146(a)'s text, the provision's placement within the Bankruptcy Code, and applicable substantive canons, such as the federalism canon, all led to the same conclusion: Section 1146(a) afforded a stamp-tax exemption only to transfers made pursuant to a Chapter 11 plan that had been confirmed. Since in this case, the respondent transferred its assets before its Chapter 11 plan was confirmed by the bankruptcy court, it could not rely on § 1146(a) to avoid the state revenue department's stamp taxes.