Case Highlights
2003-2004 Term
Following are case highlights for the topic areas of Bankruptcy and Bribery. To access other case highlights for the 2003-2004 Term or other terms, or to return to the main Case Highlights page, use the Topic Area menu to the right.
BANKRUPTCY
BANKRUPTCY
Kontrick v. Ryan
Docket No. 02-819
Affirmed: The Seventh Circuit
Argued: November 3, 2003
Decided: January 14, 2004
For Case Analysis: See ABA Preview 57
Does a debtor forfeit the right to rely on Rule 4004 if the debtor does not raise the rule's time limitation before the bankruptcy court reaches the merits of the creditor's objection to discharge?
Yes. A unanimous Court ruled that Rule 4004's time prescription is not jurisdictional and that the debtor's issue could be raised, at the latest, at the trial on the merits.
From the unanimous opinion by Justice Ginsburg:
Under the Bankruptcy Rules governing Chapter 7 liquidation proceedings, a creditor has "60 days after the first date set for the meeting of creditors" to file a complaint objecting to the debtor's discharge. Fed. Rule Bkrtcy. Proc. 4004(a). … [In this case] a creditor, in an untimely pleading, objected to the debtor's discharge. The debtor, however, did not promptly move to dismiss the creditor's plea as impermissibly late. Only after the Bankruptcy Court decided, on the merits, that the discharge should be refused did the debtor, in a motion for reconsideration, urge the untimeliness of the creditor's plea. … [U]nder the Bankruptcy Rules as under the Civil Rules, a defense is lost if it is not included in the answer or amended answer. … Even if a defense based on Bankruptcy Rule 4004 could be equated to "failure to state a claim upon which relief can be granted," the issue could be raised, at the latest, "at the trial on the merits." … No reasonable construction of complaint-processing rules, in sum, would allow a litigant situated as Kontrick is to defeat a claim, as filed too late, after the party has litigated and lost the case on the merits.
BANKRUPTCY
Lamie v. United States Trustee
Docket No. 02-693
Affirmed: The Fourth Circuit
Argued: November 10, 2003
Decided: January 26, 2004
For Case Analysis: See ABA Preview 80
Is a bankruptcy attorney entitled to compensation from the bankruptcy estate for the time he spent working on a behalf of a debtor in a chapter 7 proceeding, if he is not employed by the estate trustee and approved by the court under § 327?
No. The Court ruled that under the Bankruptcy Code's plain language, § 330(a)(1) does not authorize compensation awards to debtors' attorneys from estate funds, unless they are employed as authorized by § 327.
From the opinion by Justice Kennedy (joined by Chief Justice Rehnquist and Justices O'Connor, Souter, Thomas, Ginsburg, and Breyer and in part by Justice Scalia):
Petitioner argues that the existing statutory text is ambiguous and so requires us to consult legislative history to determine whether Congress intended to allow fees for services rendered by a debtor's attorney in a chapter 7 proceeding, where that attorney is not authorized under § 327. He makes the case for ambiguity, for the most part, by comparing the present statute with its predecessor. … The statute is awkward, and even ungrammatical; but that does not make it ambiguous on the point at issue. In its first part, the statute authorizes an award of compensation to one of three types of persons: trustees, examiners, and § 327 professional persons. A debtor's attorney not engaged as provided by § 327 is simply not included within the class of persons eligible for compensation. … The plain meaning that § 330(a)(1) sets forth does not lead to absurd results requiring us to treat the text as if it were ambiguous.
Concurring: Justice Stevens (joined by Justices Souter and Breyer)
BANKRUPTCY
Till et ux. v. SCS Credit Corporation
Docket No. 02-1016
Reversed: The Seventh Circuit
Argued: December 2, 2003
Decided: May 17, 2004
For Case Analysis: See ABA Preview 160
In a Chapter 13 payment plan, under the "cram-down option," which allows the debtor to pay the secured creditor in installments, is the creditor entitled to payments at the original contract loan rate?
No. The Court ruled that the prime-plus or formula rate, which is reached by augmenting the national prime rate to account for the nonpayment risk posed by borrowers in the petitioners' financial position, best meets the purposes of the Bankruptcy Code.
From the opinion by Justice Stevens (joined by Justices Souter, Ginsburg, and Breyer):
The Bankruptcy Code provides little guidance as to which of the rates of interest advocated by the four opinions in this case … Congress had in mind when it adopted the cram down provision. … Taking its cue from ordinary lending practices, the [formula, or prime-plus] approach begins by looking to the national prime rate, reported daily in the press, which reflects the financial market's estimate of the amount a commercial bank should charge a creditworthy commercial borrower to compensate for the opportunity costs of the loan, the risk of inflation, and the relatively slight risk of default. Because bankrupt debtors typically pose a greater risk of nonpayment than solvent commercial borrowers, the approach then requires a bankruptcy court to adjust the prime rate accordingly. The appropriate size of that risk adjustment depends, of course, on such factors as the circumstances of the estate, the nature of the security, and the duration and feasibility of the reorganization plan. … [T]he resulting "prime-plus" rate of interest depends only on the state of financial markets, the circumstances of the bankruptcy estate, and the characteristics of the loan, not on the creditor's circumstances or its prior interactions with the debtor.
Concurring: Justice Thomas
Dissenting: Justice Scalia (joined by Chief Justice Rehnquist and Justices O'Connor and Kennedy)
BRIBERY
BRIBERY
Sabri v. United States
Docket No. 03-44
Affirmed: The Eighth Circuit
Argued: March 3, 2004
Decided: May 17, 2004
For Case Analysis: See ABA Preview 267
Is 18 U. S. C. § 666(a)(2), proscribing bribery of state, local, and tribal officials of entities that receive at least $10,000 in federal funds, a valid exercise of congressional authority under Article I of the Constitution, when the statute does not require proof of connection with federal money?
Yes. The Court ruled that there is no occasion even to consider the need for such a requirement where there is no reason to suspect that enforcing a criminal statute would extend beyond a legitimate interest cognizable under Article I, § 8.
From the opinion by Justice Souter (joined by Chief Justice Rehnquist and Justices Stevens, O'Connor, Ginsburg, and Breyer and in part by Justices Kennedy and Scalia):
We can readily dispose of [Sabri's] position that, to qualify as a valid exercise of Article I power, the statute must require proof of connection with federal money as an element of the offense. … Congress has authority under the Spending Clause to appropriate federal monies to promote the general welfare, and it has corresponding authority under the Necessary and Proper Clause to see to it that taxpayer dollars appropriated under that power are in fact spent for the general welfare, and not frittered away in graft or on projects undermined when funds are siphoned off or corrupt public officers are derelict about demanding value for dollars. … It is true, just as Sabri says, that not every bribe or kickback offered or paid to agents of governments covered by § 666(b) will be traceably skimmed from specific federal payments, or show up in the guise of a quid pro quo for some dereliction in spending a federal grant. But this possibility portends no enforcement beyond the scope of federal interest, for the reason that corruption does not have to be that limited to affect the federal interest.
Concurring in part: Justice Kennedy (joined by Justice Scalia)
Concurring: Justice Thomas
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