Newly appointed Justice Neil M. Gorsuch may hold the deciding fourth vote on whether the Supreme Court tackles the safe harbor for “settlement payments” under Section 546(e) by granting certiorari in Deutsche Bank Trust Co. Americas v. Robert R. McCormick Foundation.
That case would allow the Supreme Court to decide whether the Second Circuit was correct when it went beyond other courts of appeals by holding that the Bankruptcy Code’s safe harbor supersedes state law and precludes even individual creditors from filing fraudulent transfer suits when leveraged buyouts saddle companies with so much new debt that insolvency results.
The high court denied the certiorari petition in General Motors LLC v. Elliott, 16-674, on April 21. This writer speculated, evidently incorrectly, that the Court had postponed the GM petition three times to afford Justice Gorsuch a chance to vote, perhaps because there were three votes for a “grant” and Justice Gorsuch’s would be the fourth required for allowing an appeal.
However, the order denying certiorari said that Justice Gorsuch did not participate in the consideration of the GM petition. Consequently, it’s a fair conclusion that there were not three other votes in favor of a “grant,” because a vote by Justice Gorsuch could have been the fourth and would have allowed the Court to consider the case.
In Deutsche Bank, which arises from the mammoth reorganization of Tribune Co., the justices’ conference on the certiorari petition has been postponed nine times. Consideration of the petition is now scheduled to take place behind closed doors today, with an announcement of the disposition of the petition likely to be made public on Monday, May 1.
If there were four votes for a “grant” before the advent of Justice Gorsuch, the Court would have granted the Deutsche Bank petition already. Conversely, if there were only two, they would have denied the petition already, as perhaps happened with General Motors.
Deutsche Bank would allow the Supreme Court to resolve what the petitioners claim are several circuit splits on Section 546(e). Whether the Bankruptcy Code superseded state law without an explicit statement from Congress may entice some of the justices to grant the petition. As a judge inclined to limit the power of the courts, Justice Gorsuch might be the fourth vote for a “grant.”
Therefore, it’s at least plausible that three justices already favor hearing Deutsche Bank. Justice Gorsuch could be the fourth needed for a “grant.” Or, perhaps the other justices want to know Justice Gorsuch’s opinion before deciding how to vote.
While on the Tenth Circuit, Justice Gorsuch was on a panel considering more than 30 bankruptcy appeals, or more bankruptcy cases than any of the sitting justices have heard during their tenure on the Supreme Court. In a collegial fashion, perhaps the other eight justices are keen to know the views of their newest colleague on a case that has intellectual significance in bankruptcy circles and practical importance for the financial and business communities.
Finally, if there are three or four justices willing to hear Deutsche Bank, how will they vote on the merits? Does repeated rescheduling of the conference imply an affirmance or reversal?
You be the judge, and let us know how you read the tea leaves.
To read ABI’s discussion of the Second Circuit opinion in Deutsche Bank, click here.