Florida Dept. of Revenue v. Piccadilly Cafeterias

Piccadilly Cafeterias filed for Chapter 11 bankruptcy and asked the bankruptcy court to conduct an auction of its assets. The winning bid of $80 million came from Piccadilly Investments, LLC. The bankruptcy court later approved the sale of Piccadilly Cafeteria’s assets to Piccadilly Investments and exempted the sale of assets from stamp taxes, pursuant to 11 U.S.C. § 1146(c). Such an exemption is appropriate under the Bankruptcy Code when the sale takes place pursuant to a confirmed plan of reorganization. The Florida Department of Revenue filed a complaint seeking a declaration that the stamp taxes were not exempt because the sale took place before Piccadilly Cafeterias’ Chapter 11 Plan of Liquidation was filed or confirmed by the court. The bankruptcy court granted summary judgment to Piccadilly Cafeterias, which the district court affirmed.

The Eleventh Circuit Court of Appeals affirmed. The court noted that the language of 11 U.S.C. § 1146(c) was ambiguous and that the Third and Fourth Circuits have previously held that pre-confirmation asset sales were not exempt from stamp taxes. However, the court held that since Congress did not expressly place a temporal restriction in § 1146(c) , a better reading of the statute required looking not at the timing of the asset sale, but instead at “the necessity of the transfers to the consummation of a confirmed plan of reorganization.”

Question Presented:

Whether section 1146(a) of the Bankruptcy Code, which exempts from stamp or similar taxes any asset transfer “under a plan confirmed under section 1129 of the Code,” applies to transfers of assets occurring prior to the actual confirmation of such a plan?

Decision under Review

Supreme Court Opinion