On February 15, the Supreme Court will consider a petition for certiorari asking the justices to overrule the infamous Dewsnup decision.

Over a vigorous dissent, the high court ruled in 1992 that a chapter 7 debtor may not employ Sections 506(a) and 506(d) to “strip down” an undersecured mortgage. Dewsnup v. Timm, 502 U.S. 410 (1992). Largely ignoring the language of the statute and substituting the majority’s economic policy for choices made by Congress, Dewsnup has been the subject of withering criticism by commentators, and even by some sitting justices.

Joined by Justice David H. Souter, Justice Antonin Scala wrote the Dewsnup dissent, accusing the majority of ignoring the statute’s plain language. He said that Section 506 “unambiguously provides that to the extent a lien does not secure such a claim it is rendered void.” Id. at 420 (Scalia, J., dissenting).

Nonetheless, the majority in Dewsnup adopted their understanding of pre-Code law under the former Bankruptcy Act by holding that liens survive chapter 7 and cannot be stripped down. From a snippet of legislative history and a labored analysis of the statute, the majority drew a conclusion that defies the language of Section 506. The Bankruptcy Code effected a change or clarification in pre-Code law by adopting Sections 506(a) and (d), which together void a lien to the extent is it not supported by value in the underlying collateral.

Plainly, the majority believed it would be bad policy if debtors could retain their homes without paying their mortgages in full.

A closely related issue came before the Court in Bank of America N.A. v. Caulkett, 135 S. Ct. 1995 (2015), where the debtor was asking the high court to “strip off” a subordinate mortgage when there was no value in the property above the senior lien. Significantly, the debtor did not ask the justices to overrule Dewsnup.

Writing for a unanimous Court in Caulkett, Justice Clarence Thomas said that a “straightforward reading of the statute” would allow the debtor “to void the bank’s liens,” thereby allowing lien-stripping in chapter 7.

“Unfortunately for the debtors,” Justice Thomas said, Dewsnup already decided the meaning of the statute and “resolves the question presented here.” The high court therefore held in Caulkett that chapter 7 debtors may not strip off entirely underwater mortgages, just like they cannot strip down partially secured mortgages.

Oral argument and the opinion in Caulkett indicated that some justices believe Dewsnup was wrongly decided. Justice Elena Kagan said she agreed with Justice Scalia’s dissent in Dewsnup. Justice Sonia Sotomayor said that retaining a valueless mortgage interferes with the debtor’s “fresh start.” Of course, disagreeing with Dewsnup does not mean that the justices will vote to overrule the 1992 decision, given stare decisis.

None of the justices who decided Dewsnup are still on the Court.

The Certiorari Petition

In bankruptcy court in California, the chapter 7 debtor sought to strip off a wholly unsecured, subordinate mortgage. From the bankruptcy court to the Ninth Circuit Bankruptcy Appellate Panel and to the Ninth Circuit, the courts all summarily denied the debtor’s request, saying the issue had been decided definitively by the Supreme Court in Caulkett.

The debtor filed a petition for certiorari in December, asking the justices head-on to overrule Dewsnup.

The debtor says that Dewsnup is “plainly wrong[,] . . . ignores Section 506’s text,” and denies “people the fresh start that Congress promised.”

Professors and former judges filed amicus briefs urging the justices to grant certiorari and overrule Dewsnup. The list of amici reads like who’s who among bankruptcy intelligentsia.

Neither the trustee nor the lender filed briefs in the Supreme Court either supporting or opposing a grant of certiorari. For that matter, they did not participate in the lower court appeals, given how the result was a forgone conclusion and the lender had no economic incentive to pay lawyers.

Likewise, there have been no amicus briefs by banks or financial institutions urging the justices to uphold Dewsnup. Perhaps they reason that ignoring the petition increases the chances that the Court will deny certiorari. If the Court grants certiorari, financial institutions and organizations surely will weigh in supporting Dewsnup.

The Timeline

The justices are scheduled to consider the certiorari petition at a conference on February 15. If they grant the petition, the announcement may come late in the day on February 15. Often, however, the justices will consider a petition at two or more conferences before they decide on a “grant” or “denial.”

If the Court decides to deny the petition, an announcement may be made on the morning of February 20. If there is no announcement one way or the other by February 20, the Court likely will schedule the petition for consideration at a later conference.

For an issue that may grab the attention of the Court, the case is unusual because there is no opposition to a “grant.” A “grant” without opposition may indicate that a majority of justices are on a path to overruling Dewsnup. The odds that the Court will grant certiorari and overrule Dewsnup may decline if the justices call for a response to the petition or appoint counsel to write one.

Stare decisis is the major roadblock to overruling Dewsnup. The certiorari petition argues that the doctrine should not preclude correcting the Court’s mistake in 1992.

Overruling Dewsnup could be a double-edged sword for those who fear the Supreme Court may similarly revisit Roe v. Wade and ban abortion. However, Dewsnup presents a question of statutory interpretation, not an issue of constitutional law with wide-ranging social and political implications.

The Participants

The certiorari petition was submitted by Scott L. Nelson of the Public Citizen Litigation Group of Washington, D.C, and by Bradley Girard and Brian Wolfman of the Georgetown Law Appellate Court Immersion Clinic.

The amici include former judges Eugene Wedoff, the immediate past president of the American Bankruptcy Institute, and Leif M. Clark. Professors include Bruce A. Markell, a bankruptcy judge before returning to teaching, Kenneth N. Klee, Michael D. Sousa, Jack Williams, Margaret Howard, and David R. Kuney.

To read the petition and amicus briefs, click here, here and here.