The Supreme Court has banned the term “nunc pro tunc” from the bankruptcy lexicon.
In a per curiam opinion on February 24, the Court also ruled that a state court altogether lacks jurisdiction in a removed action until the case has been formally remanded. Merely terminating the basis for federal jurisdiction does not restore the state court’s jurisdiction and power to act.
The Catholic Church in Puerto Rico filed a petition for certiorari in January 2019, contending that rulings by the Puerto Rico Supreme Court violated the Free Exercise and Establishment Clauses of the First Amendment. The Solicitor General filed a brief in December 2019 recommending that the Court grant certiorari and reverse the Puerto Rico Supreme Court.
Without holding argument, the Court granted the petition, reversed and remanded, but not on First Amendment grounds. Instead, the Supreme Court ruled that the Puerto Rico courts were without jurisdiction to enter orders at the critical time.
The Complex Facts
The facts and procedural history are complex, but they boil down to this: The Catholic Church in Puerto Rico terminated a pension plan for workers in the island’s parochial schools. The workers sued in an island court. Reversing the intermediate appellate court, the Puerto Rico Supreme Court reinstated the orders of the trial court in favor of the workers by directing the church to deposit $4.7 million with the court. Another order directed the sheriff to seize church assets.
Based on the Treaty of Paris of 1898, the Puerto Rico Supreme Court believed that all church entities in Puerto Rico — including schools and parishes — are liable for the debts of their brother and sister Catholic institutions. Because the high court in Puerto Rico had disregarded the corporate separateness of Catholic entities, the church filed a petition for certiorari, raising complex questions under the First Amendment.
For the courts in Puerto Rico, there was a jurisdiction problem that had been overlooked. Before the trial court entered its orders to deposit money and seize assets, the church had removed the suit to federal court, contending that it was related to a bankruptcy case that had been filed by the schools’ pension trust.
Nothing Happened
The exact timing of events in the island and federal courts was critical to the outcome in the Supreme Court.
On March 13, 2018, the bankruptcy court dismissed the pension trust’s bankruptcy, thus ostensibly terminating the basis for removal of the suit against the church entities. Later in March 2018, the Puerto Rico trial court entered the orders to deposit money and attach assets, but the case had not yet been remanded to the island court when the orders were entered.
In fact, the federal court did not enter an order remanding the suit to the Puerto Rico court until August 2018, five months after the island court had entered orders in that suit to deposit money and attach assets. However, the remand order in August 2018 stated that it was nunc pro tunc to March 13, the day the bankruptcy was dismissed.
In Latin, the phrase means “now for then.”
Jurisdiction Strictly Interpreted
A stickler for details, the Supreme Court ruled on the Puerto Rico court’s lack of jurisdiction without reaching the merits on the First Amendment.
Because the suit had not been remanded to the island court when the orders were entered, the Supreme Court ruled in its eight-page opinion that the Puerto Rico court “had no jurisdiction over the proceedings. The orders are therefore void.”
Citing 19th century authority, the Court said that removal divests the state court of “‘all jurisdiction over the case, and, being without jurisdiction, its subsequent proceedings and judgment [are] not . . . simply erroneous, but absolutely void.’” Kern v. Huidekoper, 103 U.S. 485, 493 (1881).
The federal court’s nunc pro tunc order did not save the day. The high court said that a nunc pro tunc order may “‘reflect[] the reality’” of what has occurred, citing Missouri v. Jenkins, 495 U.S. 33, 49 (1990). A nunc pro tunc order, the Court said, “presupposes” that a court has made a decree that was not entered on account of “inadvertence,” citing Cuebas y Arredondo v. Cuebas y Arredondo, 223 U.S. 376, 390 (1912).
The Supreme Court said that nothing had occurred in the federal court in terms of remand on March 13, the date to which the court had made the remand nunc pro tunc. Therefore, the high court ruled that a “court ‘cannot make the record what it is not,’” citing Jenkins, 495 U.S. at 49.
What Does It Mean for Bankruptcy?
Bankruptcy courts often make orders nunc pro tunc. Based on the Supreme Court’s opinion, a nunc pro tunc order is proper only if the court announces its ruling without immediate entry of an order.
May a bankruptcy court nonetheless make an order retroactive? For example, a retention order at the outset of a case may not be entered for several days or weeks. May retention be made retroactive to the date the application was filed, assuming it was later granted? Or, will courts be required to enter provisional orders immediately?
The Supreme Court has banned the term “nunc pro tunc” from the bankruptcy lexicon.
In a per curiam opinion on February 24, the Court also ruled that a state court altogether lacks jurisdiction in a removed action until the case has been formally remanded. Merely terminating the basis for federal jurisdiction does not restore the state court’s jurisdiction and power to act.
The Catholic Church in Puerto Rico filed a petition for certiorari in January 2019, contending that rulings by the Puerto Rico Supreme Court violated the Free Exercise and Establishment Clauses of the First Amendment. The Solicitor General filed a brief in December 2019 recommending that the Court grant certiorari and reverse the Puerto Rico Supreme Court.
Without holding argument, the Court granted the petition, reversed and remanded, but not on First Amendment grounds. Instead, the Supreme Court ruled that the Puerto Rico courts were without jurisdiction to enter orders at the critical time.