Yesterday, we discussed cases the Supreme Court will decide this term and several where the high court might grant certiorari in the next several months. Today, we examine important appeals in the circuit courts that might end up in the Supreme Court a year or two from now.
En Banc in the Ninth & Eleventh Circuits
A hot item on the West Coast is First Southern National Bank v. Sunnyslope Housing LP (In re Sunnyslope Housing LP), where the Ninth Circuit granted rehearing en banc in September and scheduled oral argument for January.
The panel held that valuation of collateral for the purpose of cramdown under Section 1129 is determined from the creditor’s perspective, contrary to the Collier treatise that advocates working from the debtor’s contemplated use of the property. The en banc panel will decide whether the three judges properly interpreted the Supreme Court’s 1997 decision in Rash, a chapter 13 case.
The decision might also turn on equitable mootness, where Ninth Circuit judges do not agree among themselves.
The Eleventh Circuit’s en banc opinion in Slater v. U.S. Steel Corp. may produce a seminal decision on judicial estoppel. Overturning the three judge panel’s opinion will put the Atlanta-based court in league with the Fifth Circuit, which also sat en banc to hold in Reed v. City of Arlington that trustees and creditors must not be punished for the misdeeds of debtors.
In Slater, the Eleventh Circuit panel was in a tight box because a prior decision from that circuit commanded the result: The debtor’s failure to list a claim barred the trustee from pursuing a lawsuit.
Circuit Judge Gerald B. Tjoflat, one of the three judges on the Slater panel, wrote an encyclopedic, 78-page special concurrence that reads like a dissent. He urged his brothers and sister on the circuit to overrule Eleventh Circuit precedents that, in his view, were “wrongly decided.” Judge Tjoflat’s scholarly opinion analyzes everything there is to know about judicial estoppel.
Issues in the Circuits
Second Circuit:
In Credit One Financial v. Anderson (In re Anderson), the Second Circuit will decide which of two district judges in New York better analyzed the enforceability of arbitration agreements in bankruptcy.
In Anderson, District Judge Nelson S. Román disagreed with District Judge Vincent L. Briccetti, who had compelled arbitration a few months earlier in a different class action involving an alleged violation of the discharge injunction. In Anderson, the appellant’s brief is due at the end of October.
Zair v HSBC Bank NA will ask the Second Circuit to decide whether a debtor can use a chapter 13 plan to compel a mortgagee to take title to property. Debtors usually have been on the losing side in forced-vesting cases. The appeals court may never reach the merits because there is a pending motion to dismiss on the theory that reversal of confirmation in the district court did not give rise to a final, appealable order.
Retired Bankruptcy Judge Eugene Wedoff is counsel for the debtor in Zair.
Fifth Circuit:
On direct appeal from a decision by Bankruptcy Judge Marvin Isgur of Houston, the Fifth Circuit will decide in Peake v. Ayobami whether appreciation in the value of an exempted asset is retained by the debtor and cannot be captured by the trustee, even if it turns out that the property was later proven to be worth more than the permissible amount of the exemption. Judge Isgur gave the prize to the debtor.
Sixth Circuit:
In Brown v. Ellmann (In re Brown), the Cincinnati-based appeals court will take on a case that tears at the heart strings, because crafty lenders concocted a sale where unsecured creditors took home a few hundred dollars whereas the debtor got nothing for her homestead exemption.
Ordinarily, exemptions come before claims of unsecured creditors. The upcoming Supreme Court’s Jevic opinion may inform the Sixth Circuit’s decision in Brown.
Eighth Circuit:
In June, the Eighth Circuit Bankruptcy Appellate Panel seemingly held that the holder of a priority domestic support claim can ignore a bankruptcy court order reducing the amount of the claim and collect the disallowed portion of the claim after discharge in chapter 13 without violating the discharge injunction. Spencer v. Missouri brings the issue to the Eighth Circuit.
Eleventh Circuit:
In addition to the judicial estoppel case to be reheard en banc, the Eleventh Circuit has an important appeal dealing with student loans.
Discharging a student loan is hard enough, but in EMC v. Acosta-Coniff a district judge in Alabama reversed the bankruptcy court in May, interpreting the Third Circuit’s Brightful decision to mean that student loans will not be discharged if incurring the debt was within the debtor’s control. He did not limit that case to situations where improving the debtor’s income was within the debtor’s control, which were the circumstances in Brightful. The Alabama district judge seemed to believe that accepting the risk that higher education will not pay off makes a student loan nondischargeable.
Former Judge Wedoff is pursuing the appeal for the debtor pro bono, with support from amicus briefs by Tara A. Twomey on behalf of the National Consumer Law Center and National Association of Consumer Bankruptcy Attorneys.
The cases in the order in which they are discussed are below.
First Southern National Bank v. Sunnyslope Housing LP (In re Sunnyslope Housing LP), 12-17241 (9th Cir. April 8, 2016). For ABI’s discussion, click here.
Slater v. U.S. Steel Corp., 12-15548 (11th Cir. Feb. 24, 2016). For ABI’s discussion, click here.
Credit One Financial v. Anderson (In re Anderson), 16-2496 (2d Cir.). For ABI’s discussion, click here.
Zair v HSBC Bank NA, 16-1648 (2d Cir.). For ABI’s discussion, click here.
Peake v. Ayobami, 16-2496 (2d Cir.). For ABI’s discussion, click here.
Brown v. Ellmann (In re Brown), 16-1967 (6th Cir.). For ABI’s discussion, click here.
Spencer v. Missouri, 16-3182 (8th Cir.). For ABI’s discussion, click here.
EMC v. Acosta-Coniff, 16-12884 (11th Cir.). For ABI’s discussion, click here.
Slater v. U.S. Steel Corp., 12-15548 (11th Cir. Feb. 24, 2016).
Credit One Financial v. Anderson (In re Anderson), 16-2496 (2d Cir.).
Zair v HSBC Bank NA, 16-1648 (2d Cir.).
Peake v. Ayobami, 16-2496 (2d Cir.).
Brown v. Ellmann (In re Brown), 16-1967 (6th Cir.).
Spencer v. Missouri, 16-3182 (8th Cir.).
EMC v. Acosta-Coniff, 16-12884 (11th Cir.).