Florida Dept. of Revenue v. Piccadilly Cafeterias
Issues
Do the words "under a plan confirmed" apply to transfers of assets occurring prior to a bankruptcy court's confirmation of a reorganization plan?
Soon after Piccadilly Cafeterias, Inc. filed for bankruptcy under Chapter 11, it sought and received authorization from the Bankruptcy Court to sell its assets under Section 363(b)(1) of the Bankruptcy Code. Piccadilly also sought and received an exemption, pursuant to Section 1146(c) of the Bankruptcy Code, from Florida state tax on this sale. The Florida Department of Revenue objected to this exemption because the sale took place before the bankruptcy plan was confirmed. On appeal, the U.S. District Court for the Southern District of Florida and the U.S. Court of Appeals for the 11th Circuit affirmed the decision of the Bankruptcy Court to exempt asset sales prior to confirmation of a bankruptcy plan. The Florida Department of Revenue argues that the Eleventh Circuit's interpretation of the statute is not justified by the rules of statutory interpretation and claims that the lower court's decision will create much unnecessary litigation and ambiguity in the law. Piccadilly Cafeterias argues, however, that the text is ambiguous and therefore can be read to support both points of view. For this reason, Piccadilly suggests looking beyond the text to congressional intent and policy concerns. Whichever way the Court interprets this statute, this case will have a profound impact on state and local revenue collection.
Questions as Framed for the Court by the Parties
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?
Prior to its bankruptcy, Piccadilly Cafeterias, Inc. ("Piccadilly") operated 145 cafeterias in the southeastern United States and was one of the largest cafeteria chains in the nation. See In Re Piccadilly Cafeterias, Inc., 379 B.R. 215, 217 (S.D. Fla.