Two-Year Look-Back Period in 11 U.S.C. § 548 is Not a Statute of Limitations Subject to Equitable Tolling
Industrial Enterprises of America, Inc. v. Burtis (In re Pitt Penn Holding Co., Inc.), Case No. 09-11475 (BLS) (Jointly Administered), Adv. No. 11-51868 (BLS) (January 24, 2012) (J. Shannon)
The Court was faced with numerous adversary proceedings filed on similar factual bases including, in relevant part, claims under 11 U.S.C. § 548 to recover transfers which occurred more than two years prior to the petition date. In the Industrial Enterprises of America, Inc. v. Burtis adversary (the “Burtis Adversary”), the Court granted the motion to dismiss of two of the defendants (the “Collyer Defendants”) with respect to the § 548 claims alleged against them in light of the fact that the claims were based entirely upon transfers which occurred prior to the two-year look-back period.
Plaintiff Industrial Enterprises of America, Inc. (the “Plaintiff” or “IEAM”) filed a motion for reconsideration, arguing that the Court’s grant of the motion to dismiss was both inconsistent with the Court’s rulings in other IEAM adversaries wherein the Court equitably tolled the two-year look-back period and with the case law. When the inconsistent rulings and grounds for the motion for reconsideration were brought to the Court’s attention at a hearing, the Court welcomed submissions from defendants in other similar pending IEAM adversaries.
First, the Court recounted IEAM’s argument and the plethora of cases cited by IEAM in support of its contention – with which the Court agreed – that “statutes of limitations are customarily equitably tolled to avoid technical forfeitures that would unfairly thwart a trial on the merits, unless tolling would be ‘inconsistent with the text of the relevant statute.’” At 5. The Court went on to state that “IEAM’s argument fails, not on that score, but because it assumes without discussion that § 548’s two-year look-back period is a statute of limitations. It is not; the look-back period is a substantive element of a § 548 claim, there to cabin the broad power given to the trustee to pursue fraudulent transfers.” Id.
Next, once the Court made clear that time periods which are “substantive statutory element[s] cannot be equitably tolled,” the Court compared the § 548 look-back period with statutes of limitations, observing that the two were distinct in the multiple respects, including: (1) the § 548 look-back period does not cap or regulate how far into the future the trustee may bring a claim, whereas a statute of limitations begins running when a cause of action accrues and limits the time in which a claim may be brought; (2) the look-back period does not refer to an act which is within the trustee’s control, but to the universe of transfers that are recoverable. In light of the Court’s conclusion that the look-back period was not a statute of limitations, and noting that “no other published decision from a bankruptcy court in this district has squarely confronted the issue presented here,” the Court declined to adopt the rulings cited by IEAM in support of its conclusion and, instead, declined to alter or amend its earlier opinion dismissing the § 548 claim against the Collyer Defendants.
