[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 9110 Introduced in House (IH)]
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118th CONGRESS
2d Session
H. R. 9110
To amend title 11, United States Code, to make the filing of a petition
for relief under chapter 11 that is objectively futile or in subjective
bad faith a cause for dismissal of the case, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
July 23, 2024
Mrs. Sykes (for herself, Mr. Nadler, and Mr. Gooden of Texas)
introduced the following bill; which was referred to the Committee on
the Judiciary
_______________________________________________________________________
A BILL
To amend title 11, United States Code, to make the filing of a petition
for relief under chapter 11 that is objectively futile or in subjective
bad faith a cause for dismissal of the case, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Ending Corporate Bankruptcy Abuse
Act of 2024''.
SEC. 2. CONVERSION OR DISMISSAL UNDER CHAPTER 11.
Section 1112(b) of title 11, United States Code, is amended--
(1) in paragraph (2)(A), by striking ``within a reasonable
period of time'' and inserting ``not later than 24 months after
the date of the filing of the petition'';
(2) in paragraph (4)--
(A) subparagraph (O), by striking ``and'' at the
end;
(B) in subparagraph (P), by striking the period at
the end and inserting ``; and''; and
(C) by adding at the end the following:
``(Q) with respect to the dismissal of a case under this
chapter, the filing of a petition for relief or the
continuation of a case under this title that is--
``(i) objectively futile; or
``(ii) in subjective bad faith.''; and
(3) by adding at the end the following:
``(g)(1) For the purpose of subsection (b)(4)(Q), the court shall
presume that a petition has been filed or that a case is continuing
under this title in subjective bad faith if the court determines that
the debtor manufactured the venue for the case.
``(2) The presumption under paragraph (1) may be rebutted only
based on clear and convincing evidence.
``(h)(1) For the purpose of subsection (b)(4)(Q), the court shall
conclusively presume that a petition has been filed or that a case
under this title that is continuing in subjective bad faith if the
court determines that--
``(A) a purpose or effect of the filing or continuation is
to--
``(i) gain a tactical litigation advantage;
``(ii) impose undue delay upon creditors; or
``(iii) cap the total amount of the liability of
the debtor to 2 or more creditors holding protected
claims (as defined in section 362(p)(1)) that the
debtor or any affiliate has property of value
sufficient to pay in full as those claims would come
due;
``(B) during the 4-year period preceding the date of the
filing of the petition, the debtor was the subject of, or was
formed or organized in connection with, a divisional merger or
similar transaction changing the corporate structure of and
affecting the financial condition of the debtor or an
affiliate;
``(C) during the 4-year period preceding the date of the
filing of the petition, the debtor engaged in a transfer of
substantial assets to or for benefit of or incurred substantial
obligations from or for the benefit of any insider or affiliate
that, notwithstanding subsections (e) through (g) and (j) of
section 546, is avoidable under section 544(b) or subsection
(a)(1) or (e) of section 548; or
``(D) the debtor does not have a valid reorganizational
purpose.
``(2) In making a determination under paragraph (1)(D), the court
shall consider and give weight to whether any appointed creditors'
committee supports the dismissal of the case.
``(i) In a determination under subsection (g) or (h), the debtor
shall have the burden of proof.''.
SEC. 3. LIMITATIONS ON CERTAIN STAYS AND INJUNCTIONS.
Section 105 of title 11, United States Code, is amended by adding
at the end the following:
``(e) Notwithstanding subsection (a) of this section, any provision
of title 28, the Federal Rules of Bankruptcy Procedure, or any
applicable nonbankruptcy law, the court may not issue any order,
process, or judgment that has the purpose or effect of overriding or
nullifying section 362(b)(27) of this title.''.
SEC. 4. AUTOMATIC STAY.
Section 362 of title 11, United States Code, is amended--
(1) in subsection (b)--
(A) by redesignating paragraphs (27), (28), and
(29) as paragraphs (28), (29), and (30), respectively;
and
(B) by inserting after paragraph (26) the
following:
``(27) under subsection (a) of this section, of the
commencement or continuation, including the issuance or
employment of process, of a judicial, administrative, or other
action or proceeding against an entity that is not a debtor in
a case under this title, or any act to obtain or recover
property of such entity, on account of or with respect to a
protected claim against such entity, the debtor, or the estate
(including a protected claim that is property of the debtor or
the estate against such entity), if, during the 4-year period
preceding the date of the filing of the petition, the debtor
was the subject of, or was formed or organized in connection
with, a divisional merger, spinoff, corporate restructuring, or
other transaction changing the corporate structure of, and
affecting the financial condition of, the debtor or an
affiliate;''; and
(2) by adding at the end the following:
``(p) For the purposes of paragraph (27):
``(1) The term `protected claim' means--
``(A) a claim that--
``(i) is against a nondebtor entity or
against property of a nondebtor entity that is
alleged to be directly or indirectly liable for
a claim described in subparagraph (B) against
the debtor; and
``(ii) arises by reason of--
``(I) the nondebtor entity's
ownership of a financial interest in
the debtor, a past or present affiliate
of the debtor, or a predecessor in
interest of the debtor;
``(II) the nondebtor entity's
involvement in the management of the
debtor or a predecessor in interest of
the debtor or the nondebtor entity's
service as an officer, director, or
employee of the debtor or a related
party;
``(III) the nondebtor entity's
provision of insurance to the debtor or
a related party; or
``(IV) the nondebtor entity's
involvement in a transaction changing
the corporate structure, or in a loan
or other financial transaction
affecting the financial condition, of
the debtor or a related party,
including--
``(aa) involvement in
providing financing (debt or
equity) or advice to an entity
involved in such a transaction;
or
``(bb) acquiring or selling
a financial interest in an
entity as part of such a
transaction; or
``(B) a claim--
``(i) against the debtor or a nondebtor
entity or property of the debtor or a nondebtor
entity;
``(ii) relating to injury, contamination,
damage, or loss, including any claim for
reimbursement, indemnity, contribution, or
subrogation;
``(iii) affecting, directly or indirectly,
not less than 100 individuals on or after the
date of the filing of the petition;
``(iv) allegedly caused, directly or
indirectly, by the presence of, or exposure to,
a product, material, or substance designed,
marketed, manufactured, sold, modified,
extracted, serviced, or in any way used by the
debtor or the nondebtor entity; and
``(v) arising, directly or indirectly, from
acts or omissions, of the debtor, a predecessor
in interest of the debtor, or a past or present
affiliate of the debtor.
``(2) The term `related party' has the meaning given the
term in section 524(g)(4)(A)(iii).''.
SEC. 5. TECHNICAL AMENDMENTS.
(a) Setoff.--Section 553 of title 11, United States Code, is
amended--
(1) in subsection (a)--
(A) in paragraph (2)(B)(ii), by striking
``362(b)(27)'' and inserting ``362(b)(28)''; and
(B) in paragraph (3)(C), ``362(b)(27)'' and
inserting ``362(b)(28)''; and
(2) in subsection (b)(1), ``362(b)(27)'' and inserting
``362(b)(28)''.
(b) Relief That May Be Granted Upon Filing Petition for
Recognition.--Section 1519(f) of title 11, United States Code, is
amended by striking ``(27)'' and inserting ``(28)''.
(c) Relief That May Be Granted Upon Recognition.--Section 1521(f)
of title 11, United States Code, is amended by striking ``(27)'' and
inserting ``(28)''.
SEC. 6. APPLICATION AND RULE OF CONSTRUCTION.
This Act and the amendments made by this Act shall--
(1) apply with respect to any case under title 11, United
States Code, filed or pending on or after the date of enactment
of this Act; and
(2) not be construed to affect the validity of any final
judgment or order confirming a plan under chapter 11 of title
11, United States Code, that was entered before the date of
enactment of this Act.
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