Holland & Knight recently advised on the use of the word "shall" in legal documents. If the authors' arguments in the June 6, 2021, blog post, "Canceling the Word 'Shall' in Leases, Contracts and Legal Forms," were not sufficient impetus to find and replace every "shall" in legal documents, there is another supporting decision to consider - this time in the bankruptcy context.
On June 9, 2021, the U.S. Court of Appeals for the Sixth Circuit chimed in with its view of the difference in meaning between the words "may" and "shall" in the bankruptcy context.
"On request of a debtor at any time, if the case has not been converted [from a case under Chapter 7, 11, or 12] . The court shall dismiss a case under [Chapter 13]. Any waiver of the right to dismiss under this subsection is unenforceable."
In the case, the bankruptcy court denied a debtor's motion to dismiss his own Chapter 13 case. The bankruptcy court denied the motion to dismiss, indicating that the debtor's motion had been filed in bad faith and relied on some of the same excellent grammatical points raised by the Holland & Knight authors in their blog post. The Sixth Circuit reversed, and it did so based solely on its interpretation of the word "shall" in a statutory context in which other Bankruptcy Code sections afforded courts a degree of discretion through using the word "may." More specifically, the Sixth Circuit held the following:
By its plain terms, this provision is mandatory: upon the debtor's request, subject to one exception not applicable here (namely that the case was not converted to Chapter 13 from another chapter) the court "shall dismiss" a Chapter 13 case .. Congress . specified the circumstances in which a bankruptcy court "may dismiss" a Chapter 13 case, and those in which it "shall" do so. The circumstances here were undisputedly those that mandated dismissal under § 1307(b)."
Consider these holdings as well as the cases references in the earlier blog post when drafting legal documents and determining strategies. While one may consider the courts' holdings on this issue, one shall be well advised to carefully consider intent when drafting.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
