Say what?!.

“Hypothetical jurisdiction” for a bankruptcy appeal?!

Who knew? I sure didn’t.

But it is, apparently, a thing . . . and it may even be real.

At U.S. Supreme Court

A newly filed Petition in the U.S. Supreme Court is Waleski v. Montgomery, McCraken, Walker & Rhodes, LLP, Case No. 22-914 (Petition filed 3/16/2023).

–The Question

The Question Presented to the U.S. Supreme Court in Waleski v Montgomery is this:

What happens when a creditor class fails or refuses to vote on confirmation of a Subchapter V plan? Does that prevent a consensual confirmation?

We have a recent answer from In re Creason, Case No. 22-00988, Western Michigan Bankruptcy Court (opinion issued 2/23/2023).

Facts

The Subchapter V Debtor is a sole-proprietor dentist.

“Creative destruction” occurs when something new kills off whatever existed before it.

IPhone Example

Just think, for example, of all the creative destruction that the iPhone has wrought! It has destroyed businesses that provided telephones and phone books, cameras and film, audio recordings and players, newspapers and newsstands, and related services.

City of Chester is the oldest city in Pennsylvania, incorporated as a borough in 1701 and as a city in 1866, and is located on the Delaware River between Philadelphia and Wilmington.

Unfortunately, the City is also in Chapter 9—having filed bankruptcy on November 10, 2022.

The City’s bankruptcy filing causes a ruckus because:

In the recent decision of Greig William Alexander Mitchell & Ors v Sheikh Mohamed Bin Issa Al Jaber & Ors[2023] EWHC 364 (Ch), the English High Court was required to consider the question of what duties (if any) a director owes to a BVI company post-liquidation; in particular in light of section 175(1)(b) of the BVI Insolvency Act 2003 (hereinafter, the Act) which expressly provides that upon liquidation “the directors and other officers of the company remain in office, but they cease to have any powers, functions or duties

The U.S. Supreme Court does not like bankruptcy benefits for individual debtors. It really doesn’t.

An example from a couple years ago is Fulton v. City of Chicago, where the U.S. Supreme Court finds a way to declare:

Can a corporate debtor be denied a Subchapter V discharge under § 523(a), despite this § 523(a) language (emphasis added):

• “A discharge under section . . . 1192 [Subchapter V] . . . does not discharge an individual debtor from . . . ”?

A recent Bankruptcy Court opinion (in Avion Funding) says, essentially, this: “No! You can’t paint over explicit statutory language.”[Fn. 1]

Such recent opinion:

The U.S. Supreme Court issues its first-ever opinion—of any type—on August 3, 1791. [Fn. 1] But it does not address a bankruptcy question for quite some time thereafter. In fact, the first U.S. law on the subject of bankruptcy did not exist until the Bankruptcy Act of 1800.

First Bankruptcy Opinion

Here’s a hard-knocks rule:

• When you can’t or won’t explain the true reason for taking a position in negotiations or litigation, distrust and suspicion of the worst-possible motives will follow.

An Exhibit A for this rule is an opinion issued February 9, 2023, in In re Heaven’s Landing, LLC, Case No. 20-21350, Northern Georgia Bankruptcy Court (Doc. 145).

Here are illustrative statements from that opinion:

The Quincecare duty has become a popular tool for companies (or their liquidators) to claim against banks for funds misappropriated on wrongful payment instructions. It requires a bank to refrain from executing a payment order if and for so long as it was put on inquiry by having reasonable grounds for believing that the order was an attempt to misappropriate funds.