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SCOTUS Hears Arguments: Can Gov't Freeze Money to Pay Lawyers?

Today the U.S. Supreme Court will hear oral arguments for the case of Luis v. United States, a case of first impression for SCOTUS that asks probing questions about the role of government forfeiture of personal assets.

The legal issue at the core of Luis is this: Can prosecutors freeze all of the defendant's assets even if they are unrelated to any criminal activity and even if freezing them would hinder the defendant's ability to hire counsel?

Also Decided at SCOTUS: Bankruptcy and Whistleblowing

What else happened at the Supreme Court this week? As we reported yesterday, a case that's going to be of significance to patent trolls and the people who fight against them.

But there were two other opinions released yesterday, dealing with more the more prosaic topics of bankruptcy and whistleblowing. ("Patents aren't prosaic?" you're asking. The answer is "no." They're very exciting.)

So, let's see what else the Court did to put your tax dollars to work.

4 Grants: Bankruptcy, Patent Royalties, Life Sentences for Minors

The U.S. Supreme Court released its latest orders list Friday, granting certiorari in four cases. And unlike the typical list of snoozers, this list contained a case of national importance: Toca v. Louisiana.

Toca is all about clarifying the Court's Miller v. Alabama decision -- the one from 2012 where the Court declared that mandatory minimum life sentences for juvenile offenders were cruel and unusual under the Eighth Amendment. Since then, federal and state courts and legislatures have split over whether that decision applied retroactively to past convictions (and therefore required resentencing).

Besides that massive case, the court granted three other petitions: two bankruptcy cases and a reexamination of patent royalty precedent.

2 Burning Questions Answered Re: Inherited IRAs and Lanham Claims

Have you ever stayed up late at night, unable to sleep, wondering if maybe, just maybe, your inherited IRA assets might be exposed to creditors in bankruptcy? Don't worry, you are not alone.

Or perhaps, maybe, just maybe, you thought to yourself: Pomegranate juice? Coca Cola, dag nabbit, there ain't hardly any juice in this here drink at all! And instead of lying there, disillusioned over the lies of a corporate behemoth, you sought to strike back. Have you ever wondered if you could, perhaps using the Lanham Act?

Today's Notable Denials, SCOTUS Snoozers, and More Odd Lineups

Were you one of those people who loved logic games? I was.

As an LSAT teacher, I did every logic game ever released, including the weird non-standard games from the 1980s. Despite my affinity for logic games, however, today's batch of opinions was no fun at all: pluralities, partial concurrences and dissents, and one decision sure to titillate Court-watchers: a unanimous opinion dealing with the bankruptcy courts' ability to hear "core" and "non-core" matters as defined in Stern. (And no, there won't be a quiz on that last part.)

But it wasn't all mind-numbing news -- there were notable denials, interesting cross-ideological splits in the Court, and more. Here's the quick version of the day's news:

Defalcation Defined By SCOTUS; FAA Doesn't Preempt Your Tow Truck

Earlier this week, we took a look at the Monsanto case, which had major implications for patent law and our nation’s farming industry. We also hinted at the outcome of the Court’s two other unanimous decisions for this week, one dealing with bankruptcy and defalcation, and the other dealing with a shady tow truck lot and the limits of federal law preemption.

Defalcation Defined

It is undisputed that Randy Bullock was not acting in bad faith when he violated his fiduciary duty as trustee to family life insurance trust. On three occasions, he borrowed funds from the trust, and each time, he paid the trust back — with interest. Nonetheless, his brothers sued and won a judgment against him. He sought to discharge that debt in bankruptcy. The code, however, prevents discharge of debts resulting from defalcation.

Credit Bids and Cramdown Provisions: Court Rules in RadLAX

Secured creditors had a big win in the Supreme Court this week. The Court ruled 8-0 Tuesday that debtors may not obtain confirmation of a Chapter 11 cramdown plan that provides for the sale of collateral free and clear of the bank's lien, but does not permit the bank to credit-bid at the sale.

In the opinion, Justice Antonin Scalia outlined the Bankruptcy Code's three alternative standards for determining if a Chapter 11 plan is "fair and equitable" to an objecting class of secured creditors. The alternatives are:

SCOTUS: Chapter 12 Tax Theory on Selling the Farm Buys the Farm

The Supreme Court ruled Monday that bankrupt farmers owe capital gains taxes from a bankruptcy sale, reports The Associated Press.

In a 5-4 opinion written by Justice Sonia Sotomayor, the Court held that the federal income tax liability resulting from a post-petition farm sale is not “incurred by the estate” under §503(b) of the Bankruptcy Code, and is neither collectible nor dischargeable in the Chapter 12 plan.

Ransom v. FIA Card Servs., N.A., No. 09-907

Car-Ownership Deduction Disallowed

In Ransom v. FIA Card Servs., N.A., No. 09-907, a petition for Chapter 13 bankruptcy relief, the Supreme Court affirmed the Ninth Circuit's affirmance of the Bankruptcy Appellate Panel's order denying the confirmation of the debtor's proposed plan, where a debtor who does not make loan or lease payments may not take the car-ownership deduction.

Schwab v. Reilly, No. 08-538, involved a Chapter 7 bankruptcy trustee's appeal from the Third Circuit's affirmance of the bankruptcy court's order denying the trustee permission to auction certain equipment so that the debtor could receive the money she claimed exempt and the estate could distribute the remaining value to creditors.  The Court reversed, holding that because debtor gave "the value of [her] claimed exemption[s]" on Schedule C dollar amounts within the range the Code allows for what it defines as the "property claimed as exempt," the trustee was not required to object to the exemptions in order to preserve the estate's right to retain any value in the equipment beyond the value of the exempt interest.

As the Court wrote:  "When a debtor files a Chapter 7 bankruptcy petition, all of the debtor's assets become property of the bankruptcy estate, see 11 U. S. C. §541, subject to the debtor's right to reclaim certain property as "exempt," §522(l). The Bankruptcy Code specifies the types of property debtors may exempt, §522(b), as well as the maximum value of the exemptions a debtor may claim in certain assets, §522(d). Property a debtor claims as exempt will be excluded from the bankruptcy estate "[u]nless a party in interest" objects. §522(l)."

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