So far, the Supreme Court has agreed to hear one bankruptcy case in the new term that began this week. Yesterday, the high court indicated that it is seriously considering a second.
In U.S. Bank NA v. The Village at Lakeridge LLC (In re The Village at Lakeridge LLC), the Ninth Circuit held in February that a “person does not become a statutory insider solely by acquiring a claim from a statutory insider.”
The issue is important when insiders hold the only unsecured claims, thus obviating the debtor’s ability to cram a chapter 11 plan down on a secured creditor who opposes. Two of the three judges on the Ninth Circuit panel affirmed the ruling by the Bankruptcy Appellate Panel. The majority held that the insider status of the claim was lost when the general partner sold the claim in good faith to a non-insider third party. The circuit denied rehearing en banc.
Contrary authority was a Ninth Circuit decision in 1996 holding that the law of assignment permanently infected a claim with insider status. The majority said the prior opinion should not even have been cited because it was non-precedential and not binding on a later panel. The bank believes there is a circuit split on the appellate standard of review for determinations of non-statutory insider status.
The bank filed a petition for certiorari in June. On Oct. 3, the first day of the new term, the Supreme Court invited the Acting Solicitor General to file a brief “expressing the views of the United States.” In addition to suggesting whether the Supreme Court should hear the case, the Solicitor General can tell the justices how they should rule on the merits.
Compared to the hundreds of cases for which the justices denied certiorari yesterday, Lakeridge was the only one of six where the Supreme Court sought the Solicitor General’s opinion. Seeking the Solicitor General’s views indicates a heightened probability of granting certiorari. To read ABI’s discussion of Lakeridge in the Ninth Circuit, click here.
The only bankruptcy case so far accepted for argument this term is Official Committee of Unsecured Creditors v. CIT Group/Business Credit Inc. (In re Jevic Holding Corp.), where the Supreme Court will decide whether bankruptcy courts can utilize so-called structured dismissals where the case is dismissed and property is distributed in a settlement that violates the priorities contained in Section 507 of the Bankruptcy Code. In Jevic, the respondent’s merits brief is due Oct. 12.
The Jevic case in the Supreme Court is Czyzewski v. Jevic Holding Corp., 15-649. The opinion in the Third Circuit is Official Committee of Unsecured Creditors v. CIT Group/Business Credit Inc. (In re Jevic Holding Corp.), 787 F.3d 173 (3d Cir. May 21, 2015).