By: Donald L Swanson
What does “projected disposable income” mean as a statutory standard for plan confirmation?
U.S. Supreme Court—It means what it says
In Hamilton v. Lanning, 560 U.S. 505 (2010), the U.S. Supreme Court applies the term, “projected disposable income,” in a Chapter 13 plan confirmation context, like this:
- the Supreme Court has no problem with the plain meaning of the word “projected” and focuses, instead, on how disposable income is to be projected; and
- the Supreme Court’s opinion emphasizes that the “projected disposable income” standard for plan confirmation requires a “forward-looking” calculation that is to be determined “as of the effective date of the plan” based on the evidence submitted—because that’s what the statute says.
Old Eighth Circuit Opinion—It is ABSURD and does NOT mean what it says
Such U.S. Supreme Court position, on the meaning of “projected disposable income” as a plan confirmation standard, is “absurd.” That’s according to this opinion decided sixteen years earlier: Rowley v. Yarnall, 22 F.3d 190 (8th Cir. 1994).
Rowley v. Yarnall addresses the question of whether the “projected disposable income” standard for confirming a Chapter 12 plan means what it says. And the old Eighth Circuit Court answers the question with a resounding, “No”—reasoning that the plain meaning of such language is “absurd.”
Here’s the Eighth Circuit’s “absurd” analysis:
- “’Projected net disposable income’ seems to indicate that the statute only requires that the Chapter 12 debtor pay that amount which the plan projects will be available as disposable income over the plan period”; and
- “Such a reading of the statute, however, yields an absurd result. . . . It would essentially direct farmers to put forth a reorganization plan, which, if objected to by unsecured creditors, would be confirmed over such objections if they simply ‘predict’ that disposable income will be zero.”
The problem with the Eighth Circuit’s analysis is this: evidence. That’s because:
- a debtor must support its projection of disposable income with evidence;
- objecting creditors have the opportunity to do discovery and submit contrary evidence; and
- the idea that a debtor can simply “predict zero” and force a “zero” conclusion without supporting evidence and contrary to evidence presented by objecting creditors is, itself, absurd!
The Absurd Result Principle
A law review article provides a lengthy explanation of the absurd result principle of statutory interpretation, a portion of which explanation is summarized as follows.[Fn. 1]
–Explained
The absurd result principle:
- is an exception to the rule that a statute should be interpreted according to its plain meaning; and
- is extraordinarily powerful, authorizing a judge to ignore a statute’s plain words to avoid the outcome those words would require in a particular situation..
“This is a radical thing; judges are not supposed to rewrite laws.” Ordinarily, judges rewriting laws is condemned as a usurpation of the legislative role—an unconstitutional violation of the separation of powers.
Even when a genuine question exists about the actual meaning of the statute’s words, it is generally considered to be illegitimate for a judge to make the choice between possible meanings on the basis that the real-life result of one meaning strikes the judge as somehow objectionable.
The absurd result principle gives that very power and authority to a judge. Yet the principle enjoys almost universal endorsement, even by those who are the most critical of judicial discretion and most insistent that the words of the statute are the only legitimate basis of interpretation.
–Supreme Court Example
An early Supreme Court example of the absurd result principle is Kirby v. United States, 74 U.S. 482 (1868), involving a statute that prohibits a person from “knowingly and willfully obstructing or retarding the passage of the mail, or of any driver or carrier.”
Kirby is a county sheriff with a bench warrant commanding him to arrest a man named Farris, who, in addition to having been indicted for murder, also happens to be a mail carrier. Kirby and his posse arrest Farris while Farris is carrying the mail. Kirby is then indicted for violating the statute.
The Supreme Court rules, in Kirby v. United States, that the criminal statute does not apply under these facts. Instead, the Court sets up a presumption as to legislative intent. In doing so, it begins with this:
- exempting mail carriers from arrest should not be attributed to Congress “unless clearly manifested by [the criminal statute’s] language”; but
- all laws should receive a sensible construction; and
- general terms should be limited as not to lead to injustice, oppression, or an absurd consequence.
Then the Supreme Court declares:
- “It will always, therefore, be presumed that the legislature intended exceptions to its language, which would avoid results of this character”;and
- “The reason of the law in such cases should prevail over its letter.”
And the Supreme Court provides this “common sense” bases for its ruling:
- the common sense of man approves the judgment that the Bolognian law which enacted, “that whoever drew blood in the streets should be punished with the utmost severity” did not extend to the surgeon who opened the vein of a person that fell down in the street in a fit;
- the same common sense accepts the ruling, under an old England law, that a prisoner who breaks prison shall be guilty of felony does not extend to a prisoner who breaks out when the prison is on fire — “for he is not to be hanged because he would not stay to be burnt”; and
- a like common sense will sanction that the act of Congress which punishes the obstruction of the passage of the mail or of its carrier does not apply to a temporary detention of the mail caused by the arrest of the carrier upon an indictment for murder.
These are examples of the types of absurdity that will warrant a disregard of the plain meaning of a statute.
Conclusion
There is nothing about the evidence-based ruling of the U.S. Supreme Court, in Hamilton v. Lanning, that is “absurd.”
By contrast, the old Eighth Circuit finding of a statutory absurdity, surrounding the “projected disposable income” plan confirmation standard, is itself absurd because it ignores the foundational idea that such projections must be based on evidence (not merely “predicted”) and can be overcome by the presentation of contrary evidence.
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Footnote 1. The article is “Absurdity and the Limits of Literalism: Defining the Absurd Resupt Principle in Statutory Interpretation,” by Veronica Dougherty, published in 44 American University Law Review 127 (1994).
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