When an enforcement authority issues guidelines to its personnel for making enforcement decisions and makes those guidelines public, all who are subject to that authority should sit-up and take notice.

On June 10, 2022, the U.S. Trustee’s Office, Department of Justice, issues “Guidelines” to its personnel for enforcing rules on “Bifurcated Chapter 7 Fee Agreements.”[Fn. 1]

Here is an internal description on the nature of the guidelines (at 6):

In a previous alert, we covered the Delaware Chancery Court’s decision in Stream TV Networks last year.

“the specter of sanctions and contempt spawns ancillary litigation that often eclipses the issues at the heart of the underlying dispute.”

—From In re A.T. Reynolds & Sons, Inc., 452 B.R. 374, 376 (S.D.N.Y. 2011), reversing a Bankruptcy Court order of contempt and sanctions for lack of “good faith” in a mandated mediation.

The interface between federal bankruptcy law and similar state laws has a long history, going back to at least 1819, when the U.S. Supreme Court rules that a state insolvency law:

The interface between federal bankruptcy law and similar state laws has a long history, going back to at least 1819, when the U.S. Supreme Court rules that a state insolvency law:

Mediation-in-bankruptcy has been an effective tool for resolving mass tort cases.

That effectiveness has been for the benefit of all parties involved, such as:

On July 5, 2022, cryptocurrency brokerage Voyager Digital filed for chapter 11 in the Southern District of New York Bankruptcy Court, citing a short-term “run on the bank” due to the “crypto winter” in the cryptocurrency industry generally and the default of a significant loan made to a third party as the reasons for its filing. At Voyager’s first day hearing on July 8, 2022, the Bankruptcy Court asked the critical question of whether the crypto assets on Voyager’s platform were property of the estate or its customers.

“2 There is one inconsequential difference — § 1228(a) refers to debt ‘of a kind specified,’ while § 1192(2) refers to debt ‘of the kind specified.’” [Fn. 1]

This “inconsequential difference” quotation, from footnote 2 in the Fourth Circuit’s Cantwell v. Clearyopinion, is on the application of § 523 discharge exceptions to corporations and LLCs. The “inconsequential difference” quote, is both:

Justice Stephen G. Breyer is now retired from the U.S. Supreme Court, serving from August 3, 1994, to June 30, 2022.

One of his legacies—and an exceedingly important one—is this: he has worked, successfully, to erase “public rights” from the lexicon of controlling bankruptcy law.

What follows is a summary of how “public rights” came to be part of that lexicon, and how Justice Breyer works to get it erased.

“PUBLIC RIGHTS” BEGINNING—Northern Pipeline

The case before the U.S. Supreme Court is MOAC Mall Holdings LLC v. Transform Holdco LLC, Case No. 21-1270.

The bankruptcy question upon which the U.S. Supreme Court granted certiorari is this: