The Supreme Court may not be deciding whether the purchaser of a claim automatically takes on the seller’s insider status, because the Acting Solicitor General recommended denying the petition for certiorari.
In February 2016, all three judges on a Ninth Circuit panel held that a “person does not become a statutory insider solely by acquiring a claim from a statutory insider.” The Ninth Circuit upheld the Bankruptcy Appellate Panel, which had reversed the bankruptcy court.
The creditor on the losing side filed a petition for certiorari, claiming there were a plethora of circuit splits. In October, the Supreme Court invited the Acting Solicitor General to file a brief “expressing the views of the United States.”
The government filed its brief on Feb. 13, recommending denial of certiorari while saying that there are no splits among the circuits and that the Ninth Circuit had correctly decided all the issues.
The purchaser of a claim does not automatically take on the seller’s insider status, the government said, because the focus under Section 1129(a)(10) is “on whether the creditor who purports to accept the plan is an insider, not on any attribute of the claim itself or whether an insider previously owned the claim.” That section provides that a plan may be confirmed only if there is an accepting class, not including any acceptance by an “insider,” a defined term in Section 101(31).
Despite the petitioner’s arguments to the contrary, the government said there are in reality no circuit splits on two other issues laid out in the certiorari petition: (1) Review for clear error or de novo, and (2) the standard for determining non-statutory insider status. The Ninth Circuit also articulated the correct standards, the government said.
On insider status, the government said that the trial court’s “conclusions of law are reviewed de novo and its findings of fact are reviewed for clear error.”
On non-statutory insider status, the Acting Solicitor General said that the Ninth Circuit correctly focused on the closeness of the relationship between the parties and whether the sale was negotiated at arms’ length, citing the Collier treatise.
To read ABI’s discussion of the Ninth Circuit opinion, click here.