Friday, July 13, 2018

Rule 9006 Creates Trap for Date-Specific Deadlines

A debtor was liberated from an objection to discharge where the deadline was extended to January 15, 2018, which was Martin Luther King, Jr. Day and the objection was not filed until the next day.    Smart-Fill Management Group, Inc. v. Froiland (In re Froiland), 18-1006 (Bankr. W.D. Tex. 7/6/18).    While most practitioners are familiar with the rule which extends deadlines that fall on a Saturday, Sunday or national holiday, there is an important caveat:  the rule only applies to deadlines stated in days or a longer unit of time.   Where a deadline is set for a date certain, there is no extension.

What Happened

 The Debtor filed bankruptcy on August 7, 2017.   The deadline for objections to discharge was set based on sixty days after the first date set for the first meeting of creditors.   The deadline was extended twice.   The second extended date was set for January 15, 2018.   January 15, 2018 was Martin Luther King, Jr. Day, a federal holiday.    The creditor filed a complaint objecting to discharge on January 16, 2018 and the Debtor moved to dismiss the complaint as being untimely.

The Court's Ruling

Judge H. Christopher Mott noted that Rule 9006(a) once stated that "In computing any period of time prescribed by or allowed by these rules, by the local rules, by order of court, or by any applicable statute, . . . (t)he last day of the period so computed shall be include, unless it is a Saturday, Sunday, or a legal holiday . . . "    In Chapman Investment Associates v. American Healthcare Management (Matter of American Healthcare Management),  900 F.2d 832 (5th Cir. 1990), the Fifth Circuit held that this rule extended a deadline set on a date specific which expired on a Saturday, Sunday or legal holiday.   (Note: I worked on the brief for the losing side arguing that the specific date controlled).   

 In 2009, Rule 9006(a) was amended to provide:
When the period is stated in days or a longer unit of time . . . include the last day of the period, but if the last day is a Saturday, Sunday, or legal holiday, the period continues to run until the end of the next day that is not a Saturday, Sunday, or legal holiday.
To make it perfectly clear, the Advisory Committee stated that it was rejecting American Healthcare Management
The time-computation provisions of subdivision (a) apply only when a time period must be computed. They do not apply when a fixed time to act is set. The amendments thus carry forward the approach taken in Violette v. P.A. Days, Inc., 427 F.3d 1015, 1016 (6th Cir. 2005) . . . and reject the contrary holding of In re American Healthcare Management, Inc., 900 F.2d 827, 832 (5th Cir. 1990) . . . . If, for example, the date for filing is “no later than November 1, 2007,” subdivision (a) does not govern. But if a filing is required to be made “within 10 days” or “within 72 hours,” subdivision (a) describes how that deadline is computed.
Judge Mott noted that  "An Advisory Committee Note accompanying a federal rule is highly persuasive and afforded substantial weight in interpreting federal rules, even if it is not binding."  Opinion, p. 7.   As a result, Judge Mott found that the complaint was untimely and dismissed it.

As I mentioned above, I worked on American Healthcare Management and unsuccessfully argued that the date is the date.   Until I read this opinion, I was not aware that the rule had been amended and had assumed that any deadline falling on a Saturday, Sunday or holiday was automatically extended.   This opinion is a warning that the rules we grew up with do not remain static.  In some cases they can change with serious consequences.    

The new rule makes sense in the age of e-filing.  In the old days, the courthouse had to be open to file a document.   In some cases, courts had overnight dropboxes but there was always the risk that the pleading would be file-marked for the next day when the clerk actually received it.  With e-filing, the clerk's office is open for business 24/7.   There is nothing to prevent an enterprising lawyer from filing a document at 11:59 p.m. on Christmas Day.   

There are two practice tips to be gleaned from this opinion.   First, in setting specific dates in scheduling orders and the like, make sure not to set a deadline on a Saturday, Sunday or legal holiday.  Second, if a deadline ends up falling on one of these dates and you don't want to work on a weekend or holiday, ask opposing counsel for an extension before the deadline expires.  

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