All posts in Supreme Court

The 9th Circuit Weighs in on Stern v Marshall (In re Bellingham); What Isn't The Public Rights Exception?

By | December 7, 2012 | Supreme Court | 1 Comment

The 9th Circuit Weighs In On Stern v. Marshall (In re Bellingham)

What Isn’t The Public Rights Exception?

Since the establishment of the English monarchy, the “law of the land” provides a “public right” to assess and collect property from citizens, without the requirement of prior notice and a hearing.  Due process of law is satisfied by virtue of the “public right” to arbitrarily assess taxes, for example.

Under the “law of the land,” “private rights” were recognized under the English monarchy system, since the Magna Carta of 1215, as a limit to the government’s (the King’s) right to arbitrarily deprive citizens of property without a judgment resulting from prior notice and a hearing.  For a “private right” due process of law requires notice and an hearing before a judgment for money damages resulting from a cause of action for breach of contract or tort, for example.

In essence, this country was founded as the result of the citizens’ frustration with the arbitrary exercise of the “public right” under the English monarchy, “because the King of Great Britain ‘made Judges dependent on his will alone, for the tenure of their offices, and payment of their salaries.’”  Stern v. Marshall at 17-18 citing The Declaration of Independence ¶ 11.

The individual states first adopted the English system’s “law of the land” with the diversity of “public rights” and “private rights” and eventually the United States Constitution did the same and addressed the concern for arbitrary exercise of the “public right” by trifurcation the power of the monarchy using Article I (Legislative), Article II (Executive) and Article III (Judicial).

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Supreme Court Grants Cert in Bankruptcy Case

By | October 30, 2012 | Supreme Court | No comments

The Supreme Court has granted cert in the 11th Circuit case of Bullock v. BankChampaign, N.A.  You can get all the briefs from the link.  This is a section 523(a)(4) action.  The debtor/defendant was the trustee of a trust.  He caused the trust to loan money to his mother and himself.  They used the funds to buy real property.  They later paid back the loans with interest but the benys of the trust want the “profits” earned by the debtor in the form of increase in value of the real property that were purchased with the money.  The state court proceeding awarded the profits to the benys plus attorneys fees.  Given there is no “loss of trust property,” is there a defalcation?

Oral argument will probably be in March or April, 2013.

Supreme Court Stat Pack

By | July 2, 2012 | Bankruptcy Data, Supreme Court | 1 Comment

Here are fascinating facts about the Supreme Court this last term.    Here is a five-page summary.   Both of these can be found on the Scotusblog.

Does RadLAX Opinion Help re Absolute Priority Rule in Individual Cases?

By | June 14, 2012 | Absolute Priority Rule, Chapter 11, Supreme Court | 1 Comment

A friend commented that the last paragraph of Justice Scalia’s opnion in RadLAX gives us a clue to how the Supremes may rule in Friedman, if the absolute priority rule issue in that case gets to the Supreme Court.  He is certainly right (again).  The code says what it says.

“The Bankruptcy Code standardizes an expansive (and sometimes unruly) area of law, and it is our obligation to interpret the Code clearly and predictably using well established principles of statutory construction.  See United States v. Ron Pair Enterprises, Inc., 489 U. S. 235–241 (1989).  Under that approach, this is an easy case.”

The previous paragraph states:

“[N]othing in the generalized statutory purpose of protecting secured creditors can overcome the specific manner of that protection which the text of §1129(b)(2)(A) contains.  As for pre-Code practices, they can be relevant to the interpretation of an ambiguous text, but we find no textual ambiguity here.  And the pros and cons of credit-bidding are for the consideration of Congress, not the courts.”

Supreme Court Affirms Bank’s Right to Credit Bid in RadLAX Hotel

By | June 14, 2012 | Case Briefs, Chapter 11, Supreme Court | No comments

RadLAX Gateway Hotel, LLC v. Amalgamated Bank, — U.S. —, — S.Ct. — (May, 2012)

Issue:  Where a debtor proposes to sell property of the estate as part of a chapter 11 plan, must the secured creditors be entitled to credit bid?

Holding:  Yes.

Justice Antonin Scalia for 8-0 court, Kennedy did not take part

This chapter 11 debtor owned a hotel valued at roughly $50 million.  Amalgamated Bank was the first priority lienholder and was owed approximately $120 million.  The debtor submitted a chapter 11 which proposed to sell the hotel for $55 million, subject to overbids.  The sale was to be free and clear of liens.  The plan provided that the bank would not be permitted to “credit bid” at the sale.  The debtor filed a Motion to Approve Sale at the same time.  The bank objected to both on the basis that it had the right to credit bid pursuant to section 1129(b)(2)(A)(ii).  The debtor argued that if the bank had no right to credit bid, it was more likely that there would actually be bidders which was good for everyone.   The debtor argued that it was required by section 1129(b)(2)(A)(iii) only to give the bank the indubitable equivalent of its claim and since the bank was to receive all of the net proceeds of the sale, that was the indubitable equivalent of its secured claim.  The bankruptcy court denied the motion.  The Seventh Circuit Court of Appeals affirmed.

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Supreme Court Quote

By | May 22, 2012 | Supreme Court | 1 Comment

“[The requirement of a speedy bankruptcy case] is a wise policy, and if those who administer the law could be induced to act upon its spirit, would do much to make the statute more acceptable than it is.  But instead of this the inferior courts are filled with suits by or against [trustees], each of whom as soon as appointed retains an attorney, if property enough comes to his hands to pay one, and then instead of speedy sales, reasonable compromises, and efforts to adjust differences, the estate is wasted in profitless litigation, and the fees of the officers who execute the law.”

Bailey v. Glover, 88 U.S. 342 (1874)

9th Circuit BAP Affirms that Bankruptcy Judges May Enter Final Monetary Judgments in Non-Dischargeability Cases

By | April 30, 2012 | Case Briefs, Chapter 7, Supreme Court | No comments

Dietz v. Ford (In re Deitz), — B.R. — (9th Cir. BAP April, 2012)

Issue:   May the bankruptcy court enter a final judgment for money in a non-dischargeability action given Stern v. Marshall?  Did the bankruptcy court properly find fraud on these facts?

Holding:   Yes on both    Judge Richard Ford, Eastern District of CA

Pappas, Dunn, Markell

Opinion by Pappas, concurring opinion by Markell

The debtor, a contractor, agreed to do work on Fords’ home.  His license was suspended at the time and, in any event, he collected 25% more than the contract price and ultimately did only about 65% of the work.  At trial, the bankruptcy court found fraud under 523(a)(2) as well as under 523(a)(4) and willful and malicious injury under 523(a)(6).  He entered judgment against the debtor for $368,000.  On appeal, the debtor argues that under Stern v. Marshall, the bankruptcy court cannot enter a final judgment either as to the dischargeability of the debt or the amount of the debt.

The BAP affirmed.  As to the court’s power to enter final judgment, the BAP said that non-dischargeability “claims arose under the Bankruptcy Code, subject matter jurisdiction existed in the district court, and by its referral, in the bankruptcy court, as well.  Moreover, “determinations as to the dischargeability of particular debts . . .” are expressly included in the statutory list of core proceedings. 28 U.S.C. § 157(b)(2)(I).  As a result, Congress has provided that the bankruptcy court may enter a final judgment on exception to discharge claims, subject only to appellate review. 28 U.S.C. § 157(b)(2)(I).  Indeed, since 1970, the bankruptcy court, via the reference from the district court, has had the exclusive authority to determine the dischargeability of debts under § 523(a)(2), (4) and (6). See § 523(c)”

As to entry of a monetary judgment, the BAP said, “The Ninth Circuit has also expressly held, pre-Stern, that a bankruptcy court may enter a monetary judgment on a disputed state law fraud claim in the course of determining that the debt is nondischargeable. Cowen v. Kennedy (In re Kennedy), 108 F.3d 1015 (9th Cir. 1997).”  It comments that it must follow the 9th circuit unless the Supreme Court unless it is “clearly irreconcilable.” As to the finding of fraud, the BAP said the court’s findings were not clearly erroneous.

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Transcript Available of Supreme Court Argument Yesterday in RADLAX Hotel

By | April 24, 2012 | Cases, Chapter 11, Supreme Court | 1 Comment

The transcript of oral argument yesterday can be accessed here.   It sure looks to me like secured creditors are going to retain the right to credit bid.  Kennedy asked no questions.

New Bankruptcy Case to be Argued at the Supreme Court Next Monday

By | April 18, 2012 | Cases, Chapter 11, Supreme Court | No comments

RadLAX Gateway Hotel, LLC v. Amalgamated Bank

Docket No. Op. Below Argument Opinion Vote Author Term
11-166 7th Cir. Apr 23, 2012 TBD TBD TBD OT 2011

 Issue: Whether a debtor may pursue a Chapter 11 plan that proposes to sell assets free of liens without allowing the secured creditor to credit bid, but instead providing it with the indubitable equivalent of its claim under Section 1129(b)(2)(A)(iii) of the Bankruptcy Code.

Great Article by Jan Hamilton a la Hamilton v. Lanning

By | February 22, 2012 | Supreme Court | No comments

Here is a great article by Jan Hamilton about the experience of going to the Supreme Court.  He spent $13,000 alone making copies/printing what he filed with the Supreme Court.  He debated about whether to carry his clothes or his files on the plane with him.  Which would be eaisest to replace if the luggage was lost?  He decided that no clothes was better than no files.   Hamilton-Rhodd Article

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