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Certiorari and the Bankruptcy Code: the statutory interpretation cases.

Abstract:

This Study opens a window on Supreme Court review practices by examining the context in which the Court's Bankruptcy Code decisions have come before the Court. It hypothesizes that the type of legal analysis a case requires the Court to employ significantly impacts the manner in which the Court applies its stated criteria for granting certiorari. Specifically, the Court's decision making on certiorari varies depending on whether the Court expects to focus on statutory interpretation, constitutional questions, or interactions between the Bankruptcy Code and other law. This first article of a three-part series examines the cases that present Bankruptcy Code statutory interpretation questions; the second explores the cases that present constitutional questions; the third explores the cases that present interaction between the Bankruptcy Code and other law. The Study informs the larger debate regarding the factors that influence Supreme Court review, including the hypothesized impact of ideology on Supreme Court agenda setting.

This Study reveals distinct patterns with respect to the grant of certiorari, including the impact of a circuit split and other factors on the Court's decision to grant certiorari. It concludes that the Court generally applies neutral, process oriented decision making in determining whether to grant certiorari in cases that require the Court to engage only in federal Bankruptcy Code statutory interpretation. In those cases, the existence of a cleanly presented circuit split is essential to the grant of certiorari. A circuit split generally leads to a prompt grant of certiorari; however, this article also reveals specific circumstances in which the Court may deny certiorari in statutory interpretation cases notwithstanding a circuit split. The second and third articles examine the significance of circuit splits and other critical factors that affect the grant of certiorari in cases that require the Court to do more than single statute statutory interpretation.

The Study urges practitioners to consider the nature of these patterns in determining whether to petition for certiorari and in framing their certiorari petitions. It urges scholars to consider the extent to which the Court's non-bankruptcy review practices reflect similar patterns.

I. INTRODUCTION

Each Term, the Supreme Court issues an opinion in perhaps one percent of the cases in which certiorari petitions are filed. (1) The cases in which certiorari petitions are filed, in turn, constitute perhaps one-half of one percent of the cases the circuit courts of appeal and state high courts consider each year. (2) Given the extremely limited number of cases the Court reviews, and the fact that the Court's docket is largely discretionary, the Court's certiorari determinations profoundly shape its jurisprudence. (3)

The importance of the Court's role as final judicial arbiter has motivated scholars, practitioners, and other observers to study both the factors that animate the Court's choices, and the signals those choices send to other actors in the legal system. (4) Some express concern that the breadth of the Court's discretionary jurisdiction accords the Court largely unconstrained power to set its own agenda. (5) Others are less interested in making normative assessments, and more interested in endeavoring to understand and articulate the Court's decision making processes. The latter do so by constructing models that seek to explain both how the Court makes decisions (on certiorari and on the merits), and whether the structures of law and legal institutions might constrain or facilitate the Justices' ability to pursue policy preferences and engage in strategic behavior. (6)

Models for analyzing the Supreme Court's decision making on certiorari fall into three general categories. Legal process models presume that the Court chooses cases for certiorari based largely on case related factors. Scholars who employ this type of model seek to articulate the factors the Court expressly identifies as relevant, as well as those the Court applies in actual practice. (7) Attitudinal models presume that the Justices seek to further their own policy preferences. This type of model hypothesizes that the Justices' decision making on certiorari is shaped significantly by ideological considerations. (8) Strategic models presume that the Justices take into account the pre' dieted behavior of their own colleagues on the Supreme Court, and perhaps external forces as well (such as Congress) in determining whether to review a case. (9) Some element of strategic decision making may appear in attitudinal models as well (e.g., an attitudinal model may suggest that Justices seeking to pursue their own policy preference might consider how their colleagues might vote).

This Study hypothesizes that the Court's decision making on certiorari may vary depending on the type of legal analysis a case requires the Court to employ. To explore this hypothesis, the Study examines the relationship between the type of legal analysis a certiorari petition appears to require and the particular characteristics the Court identifies as relevant to guiding the decision on certiorari.

As Part II of this article explains, a certiorari petition might appear to require that the Court engage in statutory analysis, constitutional analysis, analysis of how two federal laws intersect, analysis of how federal and state law intersect, some other type of analysis, or some combination thereof. Against this backdrop, the Court's rules suggest that it might consider whether the case presents an important federal question, a lower court split, an error of law, a conflict with Supreme Court precedent, or other characteristics that may warrant certiorari. (10) The Study explores whether distinctive differences in the expected mode of legal analysis significantly affect the weight, balance, or mix of case characteristics the Court applies to the decision whether to grant certiorari. This inquiry has the potential to expose and demarcate the realms in which considerations external to these case characteristics--such as policy preferences and strategic choices--might operate.

In one sense, this approach shares some traits with legal process models because, by necessity, it must closely examine the impact of neutral case related factors on the Court's decision making. In a broader and more important sense, however, this approach stands outside the three general models of Supreme Court certiorari decision making. It considers not whether a single model explains the Court's decisions on certiorari, but rather whether different models may explain the Court's certiorari decisions in different types of cases and, if so, whether those differences correlate to the type of legal analysis the Court expects to employ if it grants certiorari. For example, might legal process models coherently explain the Court's grants of certiorari in simple statutory interpretation cases? Might more complex applications of attitudinal or strategic models (or some combination of either or both of those models and legal process models) be necessary to explain constitutional cases, or cases presenting interactions between different bodies of law? These queries embody the fundamental contribution this Study offers to the ongoing debate.

The Court's bankruptcy jurisprudence provides an excellent context in which to analyze interactions between the type of legal analysis required and the case characteristics that drive certiorari. The Supreme Court has issued a relatively robust body of eighty-two bankruptcy decisions within a discrete timeframe, i.e., since the Bankruptcy Code became effective in 1979. As Part II elaborates, the Bankruptcy Code's broad reach and particular jurisdiction have required the Court to engage in a rich mix of statutory interpretation, constitutional interpretation, and resolution of interactions between the Bankruptcy Code and other state and federal law. The diversity of the Court's bankruptcy decisions allows one to consider the implications of different types of legal analysis within one area of law. This context reduces the potential that differences in the nature of the underlying law might account for differences in the Court's decision making on certiorari.

Although this Study's specific findings apply only to the Court's bankruptcy jurisprudence, the Study reveals patterns and themes that may have broader, if not universal, application. It also identifies factors that may warrant and limit the extension of its findings. Other scholars are encouraged to apply this Study's approach to other areas of law.

Part III analyzes the factors the Court appears to have applied in its decisions to grant certiorari in the thirty-six Bankruptcy Code decisions that present questions of statutory interpretation uncomplicated by interactions with other law or constitutional questions. To explore these factors, it (i) examines the chronologies, case characteristics, and circumstances surrounding the cases in which the Court granted certiorari; (ii) compares the cases in which the Court granted certiorari to other cases in which the Court declined to grant certiorari on the same issues of Bankruptcy Code statutory interpretation; and (iii) identifies coherent patterns and corollaries that generally explain the Court's decision making and predict the outcome of the certiorari petitions in these cases.

Part IV summarizes the Study's findings and conclusions with respect to the Bankruptcy Code statutory interpretation cases; previews the contrasts between these cases and the cases that present constitutional questions or interactions between the Bankruptcy Code and other law (which are examined in separate articles reporting on this Study); makes recommendations for practitioners regarding the selection of cases for certiorari and the framing of issues in certiorari petitions; and urges other scholars to engage in similar analyses of the Court's review practices in other areas of law.

II. CASE CHARACTERISTICS AND SUPREME COURT BANKRUPTCY REVIEW

This Part identifies the considerations that may influence the Court's certiorari review determinations. Part II.A examines the factors the Court and Court rules expressly identify as being relevant to the Court's grant of certiorari. Part II.B identifies four primary types of legal analysis the Court might undertake if it grants certiorari in a bankruptcy case, and suggests that the distinctive characteristics of those different analytical approaches may affect the Court's decision making on certiorari.

A. GUIDING CRITERIA FOR THE GRANT OF CERTIORARI

Supreme Court jurisdiction may be discretionary or non-discretionary. (11) The Court's non-discretionary jurisdiction, however, is confined to original jurisdiction, (12) and narrowly limited appellate jurisdiction. (13) The overwhelming majority of the Court's docket arises from discretionary jurisdiction, through the process of certiorari. (14) Under current jurisdictional rules, bankruptcy matters typically arise through certiorari to a circuit court of appeals. (15)

Supreme Court Rule 10, which identifies the case characteristics the Court considers in determining whether to grant certiorari, provides in its entirety:

Rule 10. Considerations Governing Review on Certiorari Review on a writ of certiorari is not a matter of right, but of judicial discretion. A petition for a writ of certiorari will be granted only for compelling reasons. The following, although neither controlling nor fully measuring the Court's discretion, indicate the character of the reasons the Court considers:

(a) a United States court of appeals has entered a decision in conflict with the decision of another United States court of appeals on the same important matter; has decided an important federal question in a way that conflicts with a decision by a state court of last resort; or has so far departed from the accepted and usual course of judicial proceedings, or sanctioned such a departure by a lower court, as to call for an exercise of this Court's supervisory power;

(b) a state court of last resort has decided an important federal question in a way that conflicts with the decision of another state court of last resort or of a United States court of appeals;

(c) a state court or a United States court of appeals has decided an important question of federal law that has not been, but should be, settled by this Court, or has decided an important federal question in a way that conflicts with relevant decisions of this Court.

A petition for a writ of certiorari is rarely granted when the asserted error consists of erroneous factual findings or the misapplication of a properly stated rule of law. (16)

Rule 10 suggests an "importance plus" guideline for the Court's discretionary jurisdiction. That is, in order to establish a "compelling reason" (17) for the Court to grant certiorari, the petitioner must demonstrate that the case presents both an important federal question, and either (i) a split (between circuits, between state high courts, or between a circuit and a state high court); (18) (ii) a conflict with existing Supreme Court precedent; (19) (iii) an extraordinary departure from judicial process; (20) or (iv) some other reason the question "should be settled by" the Court. (21) The Rule cautions that the Court generally will not grant certiorari merely to correct an error, such as an erroneous finding of fact, or an erroneous application of a correctly stated rule of law. (22)

The characteristics that Rule 10 and its predecessors (23) identify are simple enough to state. Understanding their import, however, requires an examination of how the Court applies them in practice. Before turning to how the Court has applied these factors to its bankruptcy cases, a couple of definitional guidelines and observations (which emerge from the Court's commentary and practices) warrant mention.

As a threshold matter, (24) a party must establish the existence of an "important federal question," (25) by showing that there is a recurring problem of practical application, that has importance to the public and not merely to the litigants. A question that is merely academic or episodic will not satisfy this criterion. (26)

Because the Court routinely denies upwards of seven thousand petitions each Term without stating the reasons for denial, (27) it is difficult to identify with certainty specific petitions the Court has denied based purely on lack of "importance." Some insight into this factor emerges, however, from cases in which the Court has granted certiorari, but has later dismissed the matter as having been improvidently granted review. A classic illustration of this scenario occurs when a pending constitutional question is subsequently addressed by the enactment of a statutory solution. If the statutory change obviates the likelihood that the problem will recur, the case no longer presents an "important federal question." Rice v. Sioux City Memorial Park Cemetery (28) represents a striking example of this scenario. In Rice, the Court (unanimously) dismissed the case following oral argument even though the relevant statutory change did not apply retroactively and consequently left the actual petitioner without a remedy. (29)

Conversely, even if a case presents an important recurring problem, the Court may dismiss the case if it is no longer of import to the parties. For example, after the Court granted certiorari in U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership (30) to address an intractable circuit split concerning the application of the "new value" corollary to the "absolute priority rule" in bankruptcy cases, the parties settled their dispute. The Court dismissed the case. (31)

Even if the important federal question criterion is satisfied, however, the Court cannot hear every matter that presents a recurring question of interest to the public. The next inquiry, therefore, is whether the case falls within one of the four categories of important federal question that may warrant a grant of certiorari under Supreme Court Rule 10. These are: a lower court split, conflict with Supreme Court precedent, extraordinary departure from judicial process, or question that "should be settled" by the Court. The last of these provides something of a catchall category and, perhaps, the greatest latitude for discretionary decision making.

The Justices (and their clerks) acknowledge that they apply these criteria with a presumption in favor of denial, and an eye toward narrowing the Court's docket to the most worthwhile cases. (32) Whether their docket narrowing decisions rest on neutral case characteristics, ideological or strategic concerns, or some combination thereof remains debatable. What is clear is that cases with certain characteristics dominate the Court's docket.

Cases presenting splits among the circuit courts of appeal constitute a particularly large portion of the Court's docket. (33) For decades, commentators have debated whether the Court is overworked and whether the task of resolving circuit splits is important enough to merit so much of the Court's attention. (34) Those who believe that resolving circuit splits leaves the Court with inadequate time to address more compelling issues have urged a variety of means to reduce the Court's split-resolution docket, such as inter-circuit binding precedent, an inter-circuit tribunal, or a national court of appeals. (35) With no indication that Congress intends to adopt any of these proposals in the near future, however, Rule 10 and the Court's docket make clear that the existence of a circuit split remains a weighty factor in the Court's determination whether to grant certiorari. (36)

Consequently, the immediate and fundamental question is whether the Court's selection decisions shed any particular light on the significance of circuit splits in the Court's certiorari decisions. When might the Court deny certiorari notwithstanding a circuit split? When might the Court grant certiorari in the absence of a circuit split? Might these inquiries illuminate the role (if any) of neutral case characteristics, ideology, strategy, or other factors that might influence the Court's certiorari decisions?

This Study explores these questions in the context of the Court's bankruptcy jurisprudence, with a particular focus on intersections between the considerations identified in Rule 10, on the one hand (i.e., important federal question, split, conflict with precedent, departure from judicial process, and other reason the Court should resolve), and the methods of legal analysis in which the Court may expect to engage, on the other hand (i.e., statutory interpretation, constitutional question, interaction between federal law and other law, etc.). Part II.B. briefly elaborates the latter considerations.

B. THE SUPREME COURT BANKRUPTCY LANDSCAPE: THE TYPE OF ANALYSIS REQUIRED TO ADDRESS THE QUESTIONS PRESENTED

Congress enacted the Bankruptcy Code in 1978. (37) The first cases testing the new law came before the Court during the 1981 Term. From the 1981 Term through the 2014 Term, (38) the Court issued eighty-two Bankruptcy Code related decisions. The Court did not issue any Bankruptcy Code decisions during the 2000 Term. In every other Term from 1981 through 2014, it issued at least one, and up to nine (in the 1991 Term), bankruptcy decisions. (39) As of the writing of this article, three bankruptcy related petitions were pending for consideration during the 2015 Term. (40)

Appendix A, post, identifies each of the Court's Bankruptcy Code decisions, by Term. (41) Appendix B, post, establishes a foundation for exploring the implications of circuit splits by identifying the circuit of origin decision 42 and, in the event of a circuit split, the related sleeper circuit decisions (43) underlying each Supreme Court Bankruptcy Code decision.

Although eighty-two decisions over thirty-Four years (an average of 2.4 bankruptcy decisions per Term) may seem like a large number of Supreme Court decisions addressing a single federal law, the number is not surprising given (i) the broad reach of the Bankruptcy Code; and (ii) the fact that, each year, roughly twice as many cases are filed in the bankruptcy courts as are filed in all of the federal district courts and circuit courts, combined. (44)

The Bankruptcy Code's broad reach explains the wide diversity of bankruptcy related issues the Court has considered, and the divergent types of legal analysis the Court must employ to resolve bankruptcy related questions.

Federal bankruptcy law embodies a comprehensive scheme that reaches deeply into other areas of federal, state, and constitutional law in pursuit of its substantive objectives of facilitating the restructuring of debtor / creditor relationships, granting the debtor a "fresh start," and maximizing and equitably distributing value for creditors. (45) For example, (46) the commencement of a case under the Bankruptcy Code automatically stays virtually all federal and state court litigation and out of court collection efforts with respect to the debtor and its property. (47) The Bankruptcy Code vests in the bankruptcy court not only in rem jurisdiction over all of the debtor's property, wherever located and by whomever held, (48) but also broad jurisdiction designed to consolidate in a single forum virtually all claims against and interests in the debtor and its property. (49) In some circumstances, bankruptcy law permits the rejection of pre-bankruptcy contracts, (50) the impairment of rights established under non-bankruptcy law, (51) and the recovery of pre-bankruptcy transfers. (52) The "honest but unfortunate" debtor will generally be discharged from all debts not paid through the bankruptcy case; and the discharge will generally bind all creditors and interest holders, without the ability to opt out. (53) Similarly, a confirmed plan of reorganization not only binds all creditors and interest holders, (54) but may allow majorities in properly drawn classes to bind dissenting minorities, subject to minimum standards established under the "cram-down" provisions. (55) Moreover, bankruptcy jurisdictional statutes contemplate that all of these functions will occur principally in the non-Article III bankruptcy courts, which serve as units of the federal district courts. (56)

Bankruptcy scholars have explored myriad aspects of the Court's bankruptcy jurisprudence. This scholarship ranges from granular analyses of substantive bankruptcy law and of intersections between bankruptcy law and other fields of law, (57) to intricate studies of the Court's interpretive methods in bankruptcy cases, (58) to sophisticated explorations of the Court's bankruptcy constitutional legacy. (59) None, however, have explored the Supreme Court's bankruptcy certiorari review practices in the manner that this Study does. (60)

Because the Court's bankruptcy decisions may engage in statutory interpretation, constitutional analysis, and / or the reconciliation of bankruptcy and other law, these decisions provide an excellent vehicle for exploring how the type of legal analysis the Court expects to undertake might interact with the Court's Rule 10 considerations for the grant of certiorari. To examine those intersections, this Study first separates the Court's eighty-two bankruptcy decisions into four categories that reflect the types of legal analysis a petition for certiorari may appear to require.

The first category comprises cases that present questions of Bankruptcy Code interpretation without constitutional implications or intersections with other law. When the Court reviews a petition for certiorari in this type of case, the Court may anticipate that its task will be limited to statutory interpretation of a single federal law. Thirty-six of the Court's eighty-two bankruptcy decisions (61) (approximately forty-four percent), presented themselves to the Court in a context that was not complicated by questions of bankruptcy jurisdiction or power, (62) constitutional issues, or interactions with non-bankruptcy law or legal doctrines. (63) In other words, the Court reviewing the petition essentially would have expected to consider a relatively pure Bankruptcy Code interpretation question if it granted certiorari.

The second category comprises cases that present interactions between the Bankruptcy Code and state law. In these cases, the Court might be required to (i) interpret the Bankruptcy Code; (ii) determine whether state law is settled; and (iii) potentially consider constitutional and quasi-constitutional principles that govern interactions between federal bankruptcy law and state law, including federalism and supremacy. In ten of the Court's Bankruptcy Code related decisions, the Code came into conversation with non-bankruptcy state law in this fashion. (64)

The third category comprises cases that present interactions between the Bankruptcy Code and other federal law. In these cases, the Court might be required to (i) interpret the Bankruptcy Code; (ii) interpret the other federal law(s); and (iii) determine how the federal laws interact. The last consideration might require the Court to determine whether tensions exist between the laws, and to articulate and apply principles designed to reconcile those tensions. In thirteen of the Supreme Court's bankruptcy related decisions, the Bankruptcy Code came into conversation with non-bankruptcy federal law in this fashion. (65)

The fourth category comprises cases that present constitutional and quasi-Constitutional questions, including with respect to the scope of the bankruptcy court's jurisdiction or powers as a non-Article III court. In the classic constitutional cases, the Court may be required to (i) interpret the Bankruptcy Code; (ii) determine whether the issue can be resolved without raising a constitutional question; and (iii) if the constitutional question cannot be avoided, perhaps determine whether provisions of the Bankruptcy Code violate the Constitution. The quasi-Constitutional cases (for lack of a more precise term) may require the Court to (i) interpret the Bankruptcy Code; and (ii) consider interactions between statutory language and concepts such as judicial power, jurisdiction, and judicial process and procedure.

In twenty-three (66) of the Court's eighty-two bankruptcy decisions (twenty-eight percent), the Court considered constitutional or quasi-constitutional issues, including (i) the constitutionally permissible scope of the bankruptcy court's statutory jurisdiction, as an adjunct of the district courts rather than an Article III court (five cases); (67) (ii) the impact of bankruptcy court jurisdiction and power on federal and state sovereign immunity (four cases); (68) (iii) the nature and extent of the bankruptcy court's express or inherent powers (four cases); (69) (iv) collateral attacks on bankruptcy court jurisdiction (four cases); (70) (v) court of appeals jurisdiction to review bankruptcy matters (two cases); (71) (vi) the right of parties in bankruptcy actions to a jury trial under the Seventh Amendment (two cases); (72) whether aspects of the Bankruptcy Code violate the First Amendment (one case); (73) and whether aspects of the Bankruptcy Code violate the Fifth Amendment (one case). (74)

This four-category taxonomy is based on the type of legal analysis the Court likely anticipates engaging in when it grants certiorari, rather than the method of analysis the Court ultimately applies to resolve the questions presented. For example, if a petition appears to implicate a constitutional question, but the Court ultimately resolves the case through statutory interpretation without addressing the constitutional question, the case is nevertheless grouped with the constitutional cases for purposes of analyzing the Court's decision whether to grant certiorari. (75)

This Study examines whether the manner in which the Court applies its stated considerations for granting certiorari varies depending on which of these four categories of legal analysis a case presents. It hypothesizes that the distinctively different tasks in which the Court must engage in cases presenting single statute interpretation, constitutional interpretation, and interpretation of interactions among laws (as outlined above), may significantly affect the weight, balance, and application of considerations the Court applies to its certiorari determinations. Although the Study's focus is bankruptcy cases, these same general categories, and the divergent approaches they demand of the Court, may apply (to varying degrees) to cases involving other federal statutes as well.

Part III of this article analyzes the Court's review practices in the thirty-six cases that present pure Bankruptcy Code interpretation questions. A second article (Certiorari and the Bankruptcy Code: The Constitutional Questions) analyzes the twenty-three cases that present constitutional and quasi-constitutional questions. A third article (Certiorari and the Bankruptcy Code: Bankruptcy Code Interaction with Other Law) analyzes the twenty-three cases that present interactions between the Bankruptcy Code and other state or federal law.

III. INTERSECTIONS BETWEEN CERTIORARI CONSIDERATIONS AND EXPECTED LEGAL ANALYSIS IN SINGLE STATUTE BANKRUPTCY CODE STATUTORY INTERPRETATION CASES

A. OVERVIEW

This Study finds a predictable relationship between the type of legal analysis anticipated and the Court's Rule 10 considerations for granting certiorari. Specifically, whether the Court has granted certiorari in the absence of a circuit split varies significantly depending on the type of legal analysis the case requires of the Court (at least in the bankruptcy context).

One hundred percent of the cases presenting single statute Bankruptcy Code interpretation questions arose from circuit splits. (76) Seventy percent of the cases presenting interactions between the Bankruptcy Code and state law arose from apparent circuit splits. (77) Sixty-one percent of the cases presenting interactions between the Bankruptcy Code and other federal law arose from apparent circuit splits. (78) Thirty-five percent of the cases presenting constitutional questions related to the Bankruptcy Code arose from apparent circuit splits. (79) As will be explored in subsequent articles reporting other aspects of this Study, in the cases that present constitutional questions or interactions between the Bankruptcy Code and other law, it is often difficult to determine in the first instance whether a circuit split existed and whether the split impacted the grant of certiorari. Consequently, the number of circuit splits in those cases is less definite than in the statutory interpretation cases. Nevertheless, the contrast between the omnipresence of circuit splits in the single statute Bankruptcy Code interpretation cases and the less persistent presence of circuit splits in the other cases is dramatic and indisputable.

The following discussion analyzes the thirty-six single statute Bankruptcy Code interpretation cases, in depth. In these cases, this analysis reveals a general pattern in which the Court denies certiorari in the absence of a circuit split, and grants certiorari at the first opportunity after a split arises. Moreover, in several cases, the Court denied certiorari, notwithstanding the presence of a circuit split, then subsequently granted certiorari in a different case presenting the same question. An analysis of these latter cases reveals especially important corollaries that refine and illuminate the Court's general pattern of granting certiorari in single statute statutory interpretation cases that present a clean circuit split.

B. THE BANKRUPTCY CODE INTERPRETATION CASES

1. Circuit Split Required: Single Statute Pure Statutory Interpretation

The Court's single statute, Bankruptcy Code interpretation cases require the Court to fashion and apply statutory interpretation principles applicable to the Bankruptcy Code. Much has been written, and undoubtedly much more will be written, about the complexities and idiosyncrasies of the Court's interpretive approach to the Bankruptcy Code. (80) The manner in which the Court reconciles competing interpretations of the Bankruptcy Code is beyond the scope of this article.

Rather, this article considers whether the fact that a petition for review asks the Court to engage only in Bankruptcy Code statutory interpretation, uncomplicated by interactions with other law or constitutional questions, affects how the Court applies its Rule 10 review criteria. Those criteria, as previously elaborated, are that the case presents an important federal question together with either a lower court split, a conflict with Supreme Court precedent, an extraordinary departure from judicial processes, or another compelling reason the Court should resolve the question.

The answer is striking. In the thirty-six years since Congress enacted the Bankruptcy Code, the Court has decided thirty-six pure Bankruptcy Code interpretation cases. In every one of these cases, the Supreme Court intervened to resolve a division in the lower courts. The Court has never granted certiorari in a pure Bankruptcy Code statutory interpretation case absent a circuit split. Moreover, although this Study extends only through the 2014 Term, the Court's certiorari decisions to date in the 2015 and 2016 Terms are consistent with and reinforce this pattern with respect to single statute Bankruptcy Code statutory interpretation cases. (81)

Where the question presented occurs frequently enough for the matter not only to have risen to the attention of the circuit courts but to have created a circuit split, the threshold finding of a recurring, important federal question appears to be satisfied almost by definition (absent some intervening statutory change or other action that obviates the likelihood that the problem will recur). (82) Once the threshold requirement of an important federal question has been satisfied, the Bankruptcy Code cases suggest that the Court will grant certiorari in a case presenting a question of statutory interpretation of a single federal statute only if there is a circuit split.

Thirty-four of the Court's single statute Bankruptcy Code interpretation cases presented a clear split among the circuit courts of appeal. (83) The provenance of the other two (Citizens Bank v. Strumpf (84) and Norwest Bank Worthington v. Ahlers (85)) is slightly murkier. Although there were clear splits among the lower federal courts (district and bankruptcy) on the particular issues and facts presented, the circuit court decisions presented somewhat less definitive splits because they arguably presented distinguishable facts. These latter two cases arguably introduce the notion that, in the event of doubt regarding the existence or strength of a circuit split, the Court might consider whether other characteristics tip the balance in favor of, or against, granting certiorari. This notion, which is only hinted at here due to the strong pattern of clearly identified circuit splits in Bankruptcy Code single statute, statutory interpretation cases, is explored more fully in subsequent aspects of this Study that focus on Bankruptcy Code constitutional cases and Bankruptcy Code interaction with other law cases.

Strumpf considered whether a bank violated the Bankruptcy Code's automatic stay by placing an administrative hold on the debtor's bank account pending adjudication of a motion for relief from the stay with respect to the bank's claimed setoff rights. (86) The district courts and bankruptcy courts had split, directly, with respect to whether an administrative hold violated the stay. (87) The circuit courts had also split regarding whether a creditor's refusal to pay a debt to the debtor pending determination of setoff rights violated the stay, but not all of the circuits had addressed the question in the context of an administrative hold. Three circuits had held that an administrative hold by the Small Business Administration, Internal Revenue Service, or commercial bank was tantamount to an impermissible setoff. (88) In contrast, two circuits had noted that creditors could decline, in one fashion or another (but not necessarily via an administrative hold), to turn over funds in the debtor's account pending a judicial determination of the creditor's setoff rights in those funds. (89) The petitioner and amici cited these cases as constituting a circuit split; the debtor disagreed because the latter cases did not involve administrative holds, per se. (90) The Court's brief opinion does not expressly state whether it granted certiorari to resolve a split. (91) If the Court had had any doubt regarding the existence, clarity, or strength of the split, however, the presence of an amicus brief by the United States supporting the grant of certiorari on the basis of both a circuit split and compelling governmental interest may have tipped the scale toward recognizing a split and granting certiorari to resolve it. (92)

In Ahlers, the petitioner asked the Court to consider both (i) an adequate protection issue, as to which the circuit courts were clearly split; and (ii) an absolute priority issue. (93) The Court granted certiorari in another case to address the adequate protection question while the Ahlers petition was pending. (94) The Court subsequently granted certiorari in Ahlers solely to consider whether family farmers could use "sweat equity" to retain their interest in their farm under the "new value corollary" to the "absolute priority rule." (95) Ahlers did not present a precise circuit split because no circuit court decision had expressly held that sweat equity did not satisfy the new value corollary. Moreover, at the time of the Ahlers petition, there arguably was not a clear circuit split on the larger question whether the new value corollary had survived the enactment of the Bankruptcy Code. Nevertheless, the petitioner and United States argued (96) that the Eighth Circuit decision in Ahlers (sweat equity satisfies the corollary) was a clear departure from the Court's Bankruptcy Act decision in Case v. Los Angeles Lumber (97) (promise to contribute expertise and experience does not satisfy the corollary), (98) and conflicted with Bankruptcy Code circuit court decisions interpreting Los Angeles Lumber (only a new capital contribution satisfies the corollary). (99) In Ahlers, the Court declined to determine whether the new value corollary remained viable, but found that it would not be satisfied by a farmer's sweat equity. (100) The Court subsequently granted certiorari in two additional cases to address clear post-Bankruptcy Code circuit splits regarding the parameters of the absolute priority rule and new value corollary. (101)

If the Court had had any doubt regarding the existence or clarity of a split, the fact that the petitioner and United States argued that Ahlers conflicted not only with other Bankruptcy Code circuit court decisions, but also with the Court's precedent in Los Angeles Lumber, may have tipped the scale toward granting certiorari. (102) In this sense, the presence in Ahlers of a second Rule 10 factor, i.e., the potential departure from Supreme Court precedent, may have resolved any question about the split in favor of review. (103)

2. Grant of Certiorari After a Circuit Split

A deeper examination of these cases reveals several additional insights that both (i) generally support the suggestion that a circuit split is essential to the Court's grant of certiorari in pure Bankruptcy Code statutory interpretation cases; and (ii) shed light on specific circumstances in which the Court may deny certiorari notwithstanding an apparent circuit split.

In thirty-one (eighty-six percent) of the Court's thirty-six pure Bankruptcy Code statutory interpretation cases, the case on which the Court granted certiorari presented the Court with its first opportunity to consider the issue and resolve the circuit split. In twenty-two of these cases, the Court granted certiorari on the first petition filed with respect to the issue (III.B.2.a). In four additional cases, contemporaneous petitions were filed for certiorari to different circuits. In each of these cases, the Court granted the first petition to be filed. After issuing its decision in that case, the Court then either denied certiorari, or granted certiorari and vacated, in the others (III.B.2.b). In five additional cases, the Court denied certiorari before a circuit split arose, then granted certiorari on the first petition filed after a circuit split had arisen (III.B.2.c).

These thirty-one cases are consistent with the suggestion that the Court weighs the existence of a circuit split heavily in determining whether to grant certiorari in a case presenting a matter that will require the Court only to interpret a single federal statute, in the absence of constitutional questions or interactions with other law. Moreover, the five cases in which the Court denied certiorari on the same issue prior to the circuit split, then granted certiorari after the circuit split, suggest that the presence of a split may be essential to the grant of certiorari in single statute statutory interpretation cases.

Finally, these thirty-one cases may appear to suggest that the Court will promptly grant certiorari at the first opportunity to resolve a circuit split in a single statute, Bankruptcy Code interpretation case. In the five remaining cases, however, the Court denied certiorari on one petition notwithstanding the presence of a circuit split at that time, and subsequently granted certiorari on a different petition presenting the same issue. These cases provide a particularly useful venue for considering the corollary circumstances in which the Court might deny certiorari even when faced with a question of importance that has divided the circuits (III.B.3).

a. Circuit Split: Certiorari Granted on the First Petition

In twenty-two of the Court's thirty-six pure Bankruptcy Code interpretation cases, the Court granted certiorari on the first petition it received with respect to the issue, which was the first opportunity it was offered to resolve the circuit split. (104) In all but two of these cases, either the Court expressly stated it was granting certiorari to resolve the split, the Court commented on the existence of a circuit split, or the circuit court to which certiorari was granted expressly noted the circuit split. (105)

In reverse chronological order, these cases are Harris v. Viegelahn, (106) Bank of America v. Caulkett, (107) Clark v. Rameker, (108) RadLAX Gateway Hotel v. Amalgamated Bank, (109) Ransom v. FIA Card Services, (110) Schwab v. Reilly, (111) Hamilton v. Fanning, (112) Travelers Casualty & Surety Co. v. Pacific Gas & Electric Co., (113) Rousey v. Jacoway, (114) Lamie v. United States Trustee, (115) Archer v. Warner, (116) Citizens Bank v. Strumpf, (117) Ffobelman v. American Savings Bank, (118) Taylor v. Freeland & Kronz, (119) Dewsnup v. Timm, (120) Union Bank v. Wolas, (121) Toibb v. Radloff, (122) Johnson v. Home State Bank, (123) Farrey v. Sanderfoot, (124) Norwest Bank Worthington v. Ahlers, (125) United Savings Association v. Timbers of Inwood Forest Associates, (126) and Commodity Futures Trading Commission v. Weintraub. (127) Appendix B, post, identifies the circuit court decisions that constitute the split in each case.

These cases convey a preliminary sense that the Court promptly responds to a certiorari petition when a circuit split exists on a matter of single statute federal Bankruptcy Code interpretation. The contemporaneous certiorari petition cases discussed below (III.B.2.b) are consistent with this preliminary hypothesis.

b. Contemporaneous Certiorari Petitions Following a Circuit Split

In four cases raising questions of Bankruptcy Code interpretation uncomplicated by constitutional questions or interactions with other law, the Court received essentially contemporaneous petitions for certiorari during the same Term. In each case, the Court granted the first petition to be filed, heard argument, issued its decision, and then promptly either denied the other petition or granted the petition and vacated the underlying decision. (128)

In reverse chronological order, these are Associates Commercial Corp. v. Rash, (129) Field v. Mans, (130) Grogan v. Garner, (131) and United States v. Ron Pair Enterprises, Inc. (132)

i. Associates Commercial Corp. v. Rash

When a chapter 11, 12 or 13 plan proposes that the debtor retain a secured creditor's collateral under the Bankruptcy Code's cram-down provisions, (133) the plan must provide the creditor with a stream of payments equal to the present value of the creditor's interest in the collateral. (134) The courts were divided over what standard to apply in valuing the collateral.

In 1992, the Ninth Circuit applied a wholesale (essentially, liquidation or foreclosure) value standard in General Motors Acceptance Corp. v. Mitchell (In re Mitchell), (135) a chapter 13 case. Although the secured party petitioned for certiorari, there was no clear circuit split at that time, (136) and the Court denied certiorari. (137)

In 1995, the Eighth Circuit applied a replacement value standard in Metrobank v. Trimble (In re Trimble), (138) a chapter 13 case. Trimble expressly adopted the reasoning of a 1994 Fifth Circuit panel decision in Associates Commercial Corp. v. Rash (In re Rash) (139) (herein, Rash (panel)), also a chapter 13 case. Eight days later, the First Circuit applied an analogous fair market value standard in Winthrop Old Farm Nurseries, Inc. v. New Bedford Institution for Savings (In re Winthrop Old Farm Nurseries, Inc.), (140) a chapter 11 case. Winthrop cited four other circuits (141) as holding the same view in chapter 13 cases, including the Fifth Circuit panel in Rash (panel). At this point, a circuit split existed, with the Ninth Circuit panel's decision in Mitchell standing as the outlier. The Court did not have an opportunity to address the question, however, because neither Trimble (Eighth Circuit) nor Winthrop (First Circuit) resulted in a certiorari petition.

Trimble and Winthrop were both decided in March of 1995, six months after the Fifth Circuit's decision in Rash (panel). In October of 1995, however, the Fifth Circuit granted an en banc rehearing of Rash (panel). (142) The en banc decision, issued in July of 1996 (herein, Rash), (143), overturned the panel decision, adopted a foreclosure value standard, and aligned the Fifth Circuit with the Ninth Circuit panel decision in Mitchell. Six weeks later, however, the Ninth Circuit, en banc, overruled Mitchell, and applied a replacement value standard in a chapter 11 case, Taffi v. United States (In re Taffi). (144) The Ninth Circuit thereby expressly re-aligned itself with the other circuits (replacement value), and left the Fifth Circuit as the outlier (liquidation value). (145) The parties in both Rash and Taffi petitioned for certiorari. (146)

While the Rash and Taffi petitions were pending, the Seventh Circuit acknowledged the split and added to it by applying a mid-point between foreclosure and replacement value standard in a chapter 13 case, In re Hoskins. (147) One month later, the Second Circuit acknowledged the split, (148) adopted a flexible standard that considered the purpose of the valuation and the proposed use or disposition of the collateral, and held that the bankruptcy court had discretion to apply a value mid-way between replacement and foreclosure value in a chapter 13 case, General Motors Acceptance Corp. v. Valenti (In re Valenti). (149) The parties in Hoskins and Valenti did not petition for certiorari.

Two days after Valenti was decided, the Court granted certiorari in Rash (150) to resolve the conflict. (151) The Court held the (subsequently filed) Taffi petition while the Court heard argument in Rash. In June of 1997, the Court issued its opinion in Associates Commercial Corp. v. Rash, (152) which reversed the Fifth Circuit and adopted a replacement value standard. One week later, the Court denied certiorari in Taffi (153) (which had also applied a replacement value standard).

ii. Field v. Mans

In an individual debtor's bankruptcy case, debts incurred through fraud may be non-dischargeable under Bankruptcy Code section 523(a)(2)(A). (154) In order to exclude a fraudulently obtained debt from discharge, the creditor must satisfy several elements of "actual fraud," including "reliance." The courts had divided over what level of reliance was necessary.

The first certiorari petition the Court received on the issue came in Field v. Mans, (155) a First Circuit decision that applied a reasonable reliance standard. (156) In May of 1995, the Court granted certiorari in Field (157) to resolve the split. (158) Two months later, the Court received a petition for certiorari to the Seventh Circuit in Mayer v. Spanel International, Ltd. (159) The Court held the Mayer petition while the Court considered Field. (160) In November of 1995, the Court issued its decision adopting a justifiable reliance standard and reversing Field. (161) Six days later, it denied certiorari in Mayer (which applied a justifiable reliance standard). (162)

iii. Grogan v. Garner

The courts had also divided over what standard of evidence to apply (preponderance versus the more stringent clear and convincing) (163) with respect to actions seeking to exclude a debt from discharge. (164)

The first petition for certiorari the Court received was to the Eighth Circuit, which had applied a clear and convincing standard to the fraud exception in Henson v. Garner (In re Garner). (165) The Court granted certiorari in Garner in April of 1990. (166) Subsequently, (167) the Court received a petition for certiorari to the Third Circuit in Laganella v. Braen (In re Braen). (168) Braen stated, in dictum, that a clear and convincing evidence standard would apply to the fraud exception, but applied a preponderance of the evidence standard to the willful and malicious injury exception. (169)

In January of 1991, the Court issued its decision in Grogan v. Garner, (170) which reversed the Eighth Circuit and adopted a preponderance of the evidence standard. (171) One week later, the Court denied certiorari to the Third Circuit in Braen. (172) The following year, the Third Circuit, in Graham v. Internal Revenue Service (In re Graham), (173) expressly recognized that Grogan v. Garner had abrogated Braen's suggestion that a clear and convincing evidence standard would apply to any of the non-dischargeability exceptions. (174)

iv. United States v. Ron Pair Enterprises, Inc.

Bankruptcy Code section 506(b) allows the holder of an over-collateralized, secured claim to recover "interest on such claim, and any reasonable fees, costs or charges provided for under the agreement under which such claim arose." (175) The courts were divided on whether the holder of an over-collateralized, non-consensual lien was entitled to postpetition interest under this provision. (176)

In March of 1988, the Court granted certiorari to resolve the split (177) between the Sixth Circuit decision in United States v. Ron Pair Enterprises, Inc. (In re Ron Pair Enterprises, Inc.), (178) which denied interest to non-consensual lien holders, and the Fourth Circuit decision in Best Repair Co. v. United States, (179) which allowed interest to non-consensual lien holders. Five weeks later, (180) the Court received a petition for certiorari to the First Circuit in Massachusetts v. Newbury Cafe, Inc. (In re Newbury Cafe, Inc.), (181) which (like Ron Pair) had declined to allow postpetition interest.

In February of 1989, the Court issued its decision reversing Ron Pair, (182) and allowing postpetition interest on over-collateralized, non-consensual liens. Five days later, the Court granted certiorari in Newbury and vacated the First Circuit decision. (183)

v. Summary: Certiorari Granted to First Post-Split Petition Filed; Second Petition Held Pending Decision

In Rash, Field, Grogan and Ron Pair, the Court received two petitions for certiorari contemporaneously. In each case, the Court granted the first petition, and held the second petition while the first case was briefed, argued and decided. (184) These cases are consistent with the twenty-two cases discussed in Part III.B.2.a, in which the Court granted the first petition it received with respect to a circuit split.

Consistent with all twenty-six of these cases, the next five cases reinforce the importance of a circuit split. These five cases suggest that the Court will deny certiorari in the absence of a circuit split if the case presents a question of Bankruptcy Code statutory interpretation uncomplicated by interactions with other law or constitutional questions.

c. Certiorari Denied Before Circuit Split, Then Granted After Circuit Split

In five cases, the Court denied certiorari when no circuit split existed, then later granted certiorari on the same issue after a split arose. In each case, the Court granted the first post-split certiorari petition it received. These cases appear to evince both the Court's prompt grant of certiorari to resolve a circuit split, and Court's denial of certiorari in the absence of a circuit split. Again, the anticipated method of legal analysis that the petitions in these cases appeared to present is single statute Bankruptcy Code interpretation uncomplicated by constitutional questions or interactions with other law.

In reverse chronological order, these cases are Bullard v. Blue Hills Bank, (185) Hartford Underwriters Insurance Co. v. Union Planters Bank, (186) Bank of America National Trust & Savings Ass'n v. 203 North LaSalle Street Partnership, (187) Cohen v. de la Cruz, (188) and Kawaauhau v. Geiger. (189)

i. Bullard v. Blue Hills Bank

The Bankruptcy Code allows debtors under chapter 11 (businesses and individuals), chapter 12 (family farmers and fishermen), and chapter 13 (individual wage earners) to restructure debts under a repayment or reorganization plan. (190) In chapters 12 and 13, the debtor has the exclusive right and obligation to propose a plan. (191) In chapter 11, the debtor typically has an exclusive right to file a plan for a limited period of time and a non-exclusive right to file a plan thereafter. (192) Other parties in interest may file a chapter 11 plan only if a trustee has been appointed, the debtor has not filed a plan during the prescribed period, or the debtor's plan has not been accepted within the prescribed period. (193) Under all three chapters, the plan must satisfy a host of requirements and the court must confirm the plan. (194) If the court denies confirmation, the debtor typically has leave to file an amended plan, unless the court dismisses the case or converts the case to chapter 7 liquidation. (195)

In 2015, in Bullard v. Blue Hills Bank, (196) the Court considered whether an order denying confirmation of a chapter 13 plan was final or interlocutory for purposes of appeal.

Between 1982 and 1993, the Second, (197) Eighth (198) and Tenth (199) Circuits had determined that an order denying confirmation of a chapter 13 plan was interlocutory, such that the court of appeals had no jurisdiction to determine the merits of the debtors' appeal from the order denying confirmation. The litigants in these cases did not petition for certiorari.

In 1997, the Ninth Circuit weighed in, in Lievsay v. Western Financial Savings Bank (In re Lievsay). (200) In Lievsay, the Ninth Circuit held that an order denying confirmation of a chapter 11 plan was interlocutory. The debtor petitioned for certiorari. Because the Ninth Circuit was in accord with the prior decisions of the Second, Eighth and Tenth Circuits, no circuit split existed at that time. The Court denied certiorari without comment. (201)

Three years later, a circuit split arose when the Fifth Circuit, in Bartee v. Tara Colony Homeowners Association (In re Bartee), (202) held that an order denying confirmation of a chapter 13 plan was final for purposes of appeal. (203) The Fifth Circuit denied rehearing and rehearing en banc, (204) but the parties did not petition for certiorari. Consequently, the Court had no opportunity to resolve the split at that time.

Between 2005 and 2013, three additional circuits (the Third, (205) Fourth (206) and Sixth (207)) contributed to the split, with two holding that orders denying confirmation were appealable (208) (in accord with Bartee), and one holding that an order denying plan confirmation was interlocutory (209) (in accord with Lievsay). Again, the litigants did not petition for certiorari and the Court had no opportunity to resolve the split.

Finally, in 2014, the First Circuit, in Bullard v. Hyde Park Savings Bank (In re Bullard), (210) held that an order denying confirmation of a chapter 13 plan was not a final, appealable order. (211) The debtor petitioned for certiorari, which gave the Court its first post-split opportunity to consider the issue. (212) The Court granted certiorari (213) to resolve the circuit split, (214) and affirmed. (215)

ii. Hartford Underwriters Insurance Co. v. Union Planters Bank

Bankruptcy Code section 506(c) permits "the trustee" to surcharge a secured creditor's collateral for the reasonable and necessary costs of preserving or disposing of that collateral, to the extent of any benefit to the secured creditor. (216) In 2000, in Hartford Underwriters Insurance Co. v. Union Planters Bank, (217) the Court considered whether an administrative claimant, as distinguished from the trustee in bankruptcy, had standing to invoke section 506(c). (218)

Between 1986 and 1991, the First, Third and Fifth Circuits had held that standing to pursue a surcharge motion was not limited to the trustee in bankruptcy. (219) In late 1991, the Ninth Circuit agreed, in North County Jeep & Renault, Inc. v. General Electric Capital Corp. (In re Palomar Truck Corp.). (220) The secured party in North County petitioned for certiorari. At that time, no circuit split existed. The Court denied certiorari without comment. (221)

In 1993, an Eighth Circuit panel agreed, in United States v. Boatmen's First 1Rational Bank. (222) Again, no split existed. The parties did not request a rehearing, and did not petition for certiorari.

A circuit split arose when the Fourth Circuit held, in 1994 (in Ford Motor Credit Co. v. Reynolds & Reynolds Co. (In re JKJ Chevrolet, Inc.)), (223) and again in 1997 (in Loudoun Leasing Development Co. v. Ford Motor Credit Co. (In re K&L Lakeland, Inc.)), (224) that only the trustee (225) has standing to pursue a surcharge under section 506(c). Because the parties in these cases did not petition for certiorari, the Court had no opportunity to consider the split at that time.

In 1999, the Eighth Circuit weighed in again, in Hartford Underwriters Insurance Co. v. Magna Bank (In re Hen House Interstate, Inc.). (226) The Eight Circuit panel, bound by Eighth Circuit precedent established in Boatmen's, held that an administrative claimant could pursue a surcharge against a secured creditor under section 506(c). (227) In the face of the circuit split that had arisen subsequent to the panel decision in Boatmen's, the Eighth Circuit granted en banc review, held that standing to pursue a section 506(c) surcharge was limited to the trustee, and overruled Boatmen's. (228) The administrative claimant who was denied standing petitioned for certiorari, which finally gave the Court its first post-split opportunity to consider the issue. The Court granted certiorari (229) and affirmed. (230)

iii. Bank of America National Trust & Savings Ass'n v. 203 North LaSalle Street Partnership

In chapter 11 cases, the cram-down provisions allow the court to confirm a plan of reorganization over the rejection of an impaired class if several requirements are met, including that the plan is fair and equitable. (231) A plan is fair and equitable to a rejecting class of unsecured creditors whose members are not paid in full, only if the pre-bankruptcy equity holders do not "receive or retain" any "property" "on account of" their old equity interests. (232) Under the former Bankruptcy Act, the courts had developed a corollary that allowed pre-bankruptcy equity holders to receive property (typically equity in the reorganized debtor) in exchange for new value. (233)

In Norwest Bank Worthington v. Ahlers, the Court declined to determine whether the new value corollary had survived the enactment of the Bankruptcy Code, but resolved a narrower question by holding that, even if new value remained viable, "sweat equity" would not qualify as new value. (234) Subsequently, a split developed in which some circuits approved new value plans, thereby at least tacitly concluding that the new value corollary had survived, whereas others declined to approve new value plans, without necessarily determining whether the new value corollary had survived. (235)

Between 1992 and 1997, the Court considered three certiorari petitions presenting new value questions, in Bryson Properties, XVIII v. Travelers Insurance Co. (1992), (236) U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership (1993), (237) and Bank of America National Trust & Savings Ass'n v. 203 North LaSalle Street Partnership (1997). (238)

The Bryson certiorari petition (1992) came to the Court before there was a clear circuit split on the new value question. LaSalle (1997) and Bonner Mall (1993), each of which approved a new value plan, had not yet been decided; Bryson was consistent with Ahlers, which had declined to approve a new value plan; and the only circuit level decision that had approved a post' Bankruptcy Code new value plan applied the exception without discussion and prior to the Court's decision in Ahlers, (239) Moreover, Bryson itself did not identify a clear post-Ahlers circuit split, and the certiorari pool memorandum noted that Bryson did not expressly decide whether the corollary had survived enactment of the Bankruptcy Code. (240) Consequently, the Court had no reason to believe that Bryson would provide an opportunity to resolve a circuit split. The Court denied certiorari in Bryson in October of 1992. (241)

In 1993, U.S. Bancorp, a creditor that had opposed confirmation of a new value plan petitioned for certiorari in the case of Bonner Mall. (242) By this time, there was a circuit split between Bryson (declining to approve new value plan) and Bonner Mall (approving a new value plan), although no circuit had expressly held that the new value corollary did not survive the Bankruptcy Code. The Court granted certiorari in Bonner Mall in January of 1994. (243) After partial briefing on the merits, however, the parties in Bonner Mall settled. (244) U.S. Bancorp asked the Court to vacate the circuit court decision. (245) The Court denied vacatur and dismissed the case as moot. (246) This was significant because it kept the split alive.

In 1998, in Coltex Loop Central Three Partners v. BT/SAP Pool C Associates (In re Coltex Loop Central Three Partners), the Second Circuit rejected a new value plan, without expressly determining whether the new value corollary had survived enactment of the Bankruptcy Code (in accord with Bryson). (247) In 1997, the Seventh Circuit approved a new value plan in LaSalle (in accord with Bonner Mall). (248) The debtor in Coltex did not petition for certiorari, but the creditor in LaSalle did.

The Court granted certiorari in LaSalle, (249) to resolve the conflict. (250) The Court did not require a split on the direct question whether the corollary had survived. Instead, as its rationale for finding a circuit split, the Court cited the four circuit court decisions that had either approved or declined to approve new value plans, (251) namely (i) LaSalle and Bonner Mall, each of which relied on the new value corollary to confirm plans, and (ii) Coltex and Bryson, each of which refused to confirm a new value plan, but neither of which expressly determined whether the new value corollary had survived the enactment of the Bankruptcy Code.

In LaSalle, the Court once again declined to approve a new value plan, and declined to determine whether the new value corollary remained viable under the Bankruptcy Code. The Court held that when the debtor has the exclusive right to file a plan, and the plan grants pre-bankruptcy equity holders the exclusive right to acquire the new equity for new value, the equity holders do receive property on account of their pre-bankruptcy equity. The Court held that this violates the absolute priority rule--whether or not the new value corollary survived the enactment of the Bankruptcy Code. (252)

iv. Cohen v. de la Cruz

As previously noted, in the case of an individual debtor, Bankruptcy Code section 523(a)(2)(A) excludes from discharge certain debts obtained by fraud. (253) The circuit courts were divided on whether this nondischargeability provision applied only to compensatory damages measured by the value the debtor received (or "obtained"), or extended as well to punitive damages, treble damages, and other awards such as attorneys' fees.

In 1991, the Ninth Circuit, in Palmer v. Levy (In re Levy), (254) held that the punitive damage portion of a fraud award is nondischargeable to the same extent as the compensatory portion of the award. (255) The debtor petitioned for certiorari. At that time, no circuit split had yet arisen. (256) The Court denied certiorari. (257)

A circuit split arose in 1993 when the Eleventh Circuit, in Laurent v. Ambrose (In re Laurent), (258) held that the non-dischargeability provision is limited to compensatory damages for value the debtor "obtains" through fraud, which does not extend to treble damages. (259) Because the creditor did not petition for certiorari, the Court did not have an opportunity at that time to consider the circuit split.

The Ninth Circuit weighed in, in 1997, in Cohen v. de la Cruz (In re Cohen). (260) In a divided opinion that acknowledged the circuit split, (261) the Ninth Circuit held that nondischargeability is not limited to compensatory damages for value the debtor has received. (262) The debtor petitioned for certiorari, which gave the Court its first post-split opportunity to address the issue. (263) The Court granted certiorari (264) to resolve the split, (265) and affirmed. (266)
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Title Annotation:Abstract through III. Intersections Between Certiorari Considerations and Expected Legal Analysis in Single Statute Bankruptcy Code Statutory Interpretation Cases B. The Bankruptcy Code Interpretation Cases 2. Grant of Certiorari After a Circuit Split c. Certiorari Denied Before Circuit Split, Then Granted After Circuit Split iv. Cohen v. de la Cruz, p. 503-550
Author:Gebbia, Karen M.
Publication:American Bankruptcy Law Journal
Date:Sep 22, 2016
Words:10278
Next Article:Certiorari and the Bankruptcy Code: the statutory interpretation cases.
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