Justice Antonin Scalia died on Saturday at age 79 after almost 30 years on the U.S. Supreme Court. He consistently employed a judicial philosophy calling for courts to interpret statutes based on their common meaning, supported by an understanding of the reasoning of those who drafted the law — whether it be the Constitution or a statute like the Bankruptcy Code.
Commonly referred to as “originalism” or “plain meaning,” Justice Scalia’s philosophy led to a more static view of the Constitution. In the sphere of bankruptcy law, his approach was neither result-oriented nor tied to an economic theory favoring debtors or creditors. Consistently applied, Justice Scalia’s methodology produced noteworthy and sometimes unexpected results.
In time, some facets of bankruptcy law reverted to his way of thinking. For example, he authored a vigorous dissent when the Court held in the 1992 opinion of Dewsnup v. Timm that a chapter 7 debtor cannot strip down a lien to the value of collateral. At oral argument last year in Bank of America v. Caulkett, he noted that the majority in Dewsnup had disregarded the plain meaning of the statute to implement a policy without support in the law.
Justice Scalia must have been pleased in June with the unanimous opinion in Caulkett when Justice Clarence Thomas vindicated his Dewsnup dissent by saying that a “straightforward reading” of Section 506(d) would produce the result that Justice Scalia advocated 23 years earlier. Because the debtor was not asking to overrule Dewsnup, the Court continued to follow its 1992 precedent.
In 2007, Justice Scalia was one of four dissenters in Marrama v. Citizens Bank of Massachusetts who accused the majority of departing from the language of the statute. Although neither the majority nor the dissent used the words “plain meaning,” Marrama’s majority allowed the bankruptcy judge to exercise discretion when the statute seemed to allow none. The case dealt with a debtor’s right to convert a chapter 7 case to chapter 13.
Writing Law v. Siegel for the unanimous Court in 2014, Justice Scalia held that exemptions are sacrosanct, even in the face of compelling equitable arguments to the contrary. His opinion interpreting the intersection of Sections 105 and 522 arguably narrowed Marrama by precluding bankruptcy judges from exercising discretion when the statute authorizes none. Law v. Siegel can also be seen as a case that undercuts the traditional notion of bankruptcy courts as courts of equity, allowed to exercise powers not expressly granted by Congress.
Justice Scalia’s second bankruptcy opinion for a unanimous Court in the last four years, RadLAX Gateway Hotel LLC v. Amalgamated Bank, gives secured creditors the right to credit bid. He relied on the principle of statutory construction that the specific controls over the general, noting that reliance on “indubitable equivalent” to permit a sale without credit bidding would be “hypertechnical and contrary to common sense.”
In RadLAX, Justice Scalia overruled two circuit courts that had relied on what they saw as the “plain meaning” of the statute. Critics would say that Justice Scalia followed his notion of common sense and invoked his opinion about the plain meaning of a statute that other judges had read differently.
Impartial Toward Debtors and Creditors
Justice Scalia’s impartial approach to interpreting the Bankruptcy Code was on display in 2010 when he was the sole dissenter in Hamilton v. Lanning, where he took a position that disadvantaged the consumer debtor in the case before him. The majority sanctioned the so-called flexible approach where a chapter 13 debtor’s future income is not presumed to be the same as it was before bankruptcy.
The majority said that Justice Scalia’s mechanical approach “would produce senseless results that we do not think Congress intended.” Responding in a 14-page dissent, Justice Scalia said that even “undesirable outcomes” would “be entirely irrelevant to what the statute means.”
Just six months later, Justice Scalia again was the sole dissenter in Ransom v. MBNA. This time, he was partial to the plight of the debtor.
Eight justices came down on the side of creditors, holding that a “core purpose” of the 2005 amendments to the Bankruptcy Code was to ensure “that debtors devote their full disposable income to repaying creditors.” Justice Scalia’s debtor-friendly dissent would have allowed some bankrupts to walk away from chapter 13 with more money in their pockets. In both cases, Justice Scalia’s dissents arguably were more faithful to the literal meaning of the statute.
Limited View of Bankruptcy Court Powers
Despite the consequences flowing from his interpretation of Article III of the Constitution, Justice Scalia cheerfully adhered to beliefs that would nearly put bankruptcy courts out of business. In Stern v. Marshall in 2011, he said in a concurring opinion that a district judge is constitutionally required for all “federal adjudications,” with few exceptions. He even conjectured that bankruptcy judges may not have constitutional power to rule on the allowance or disallowance of claims. Because the issue had not been briefed, he did not express an opinion.
His views on the limited powers of bankruptcy judges were again evident in Wellness International v. Sharif. At oral argument in January 2015, he asked whether the bankruptcy court has power to resolve contested ownership of property. His questions hinted at an absolutist view allowing only life-tenured district judges to rule on rights arising under state law. Addressing a potential gap in the Judicial Code, Justice Scalia suggested at oral argument that district courts cannot confer power on bankruptcy courts if Congress by statute had not provided for the possibility of a reference.
If a ‘Stupid Law’ Results, That’s Ok
At oral argument on Milavetz Gallop & Milavetz v. U.S. in December 2009, Justice Scalia asked where the Constitution authorizes the Court to void a “stupid law.” When the Court upheld the Bankruptcy Code’s regulation of lawyers’ advertising, Justice Scalia wrote a concurring opinion, joined by Justice Thomas, excoriating other justices for relying on legislative history to reach the result with which he otherwise agreed.
Harris v. Viegelahn, a unanimous opinion in May 2015, also showed Justice Scalia’s ability to follow a statute’s plain meaning even when the result made no sense to him. The case dealt with the distribution of undistributed funds when a debtor converts a chapter 13 case to chapter 7. At the outset of oral argument, Justice Scalia observed that the statute did not say whether undistributed money should be returned to the debtor. Even though he said in the courtroom that giving money back to the debtor would be a “random rule of law,” he nonetheless sided with the other justices who did just that.
For good or ill, Justice Scalia was a man true to his beliefs. In bankruptcy, he let the chips fall where they may.