As we reported, on June 21, 2021, the U.S. Supreme Court declined to revisit the rigid Brunner standard for determining “undue hardship” capable of discharging student debt. The same day, United States Bankruptcy Judge Michelle M.
On Monday, the United States Supreme Court denied Thelma McCoy’s petition for a writ of certiorari to the United States Court of Appeals for the Fifth Circuit, passing up a golden opportunity to bring uniformity to the “important and recurring question” of how to determine the sort of “undue hardship” that qualifies a debtor for a discharge of student loans under 11 U.S.C. § 523(a)(8).
In March, we reported on a brief filed by the Solicitor General recommending denial of a petition for certiorari filed by Tribune creditors seeking Supreme Court review of the Second Circuit ruling dismissing their state-law fraudulent transfer claims.
State governments can be creditors of individuals, businesses and institutions that are debtors in bankruptcy in a variety of ways, most notably as tax and fine collectors but also as lenders. They can also be debtors of debtors, in their role, for example, as the purchasers of vast quantities of goods and services on credit. And they can also be transferees of a debtor’s property in (at least) every role in which they can be creditors.
Consider these facts. A debtor in bankruptcy sued two parties for breach of contract. The debtor assigned its rights and interests in the cause of action to another entity. The defendants moved to dismiss the lawsuit, arguing that the court now lacked jurisdiction over the case. They asserted that the debtor’s assignment of the cause of action destroyed the bankruptcy court’s “related to” jurisdiction. Who wins?
Although it may be difficult to define precisely what an “executory contract” is (with the Bankruptcy Code providing no definition), I think most bankruptcy lawyers feel how the late Supreme Court Justice Potter Stewart famously felt about obscenity--we know one when we see it. Determining that a patent license was executory in the first place was an issue in the Fifth Circuit’s recent decision in RPD Holdings, L.L.C. v.
In hindsight, it seems inevitable that constitutional and other jurisdictional problems would arise when Congress, in enacting the Bankruptcy Reform Act of 1978, created impressive new powers and responsibilities for the bankruptcy courts (along with a considerable degree of independence) but denied them the status of Article III courts under the Constitution (by denying its judges lifetime tenure, as Article III requires). And it didn’t take long for the problems to arise.
The Supreme Court has granted certiorari in Merit Management Group L.P. v. FTI Consulting Inc. to resolve a circuit split over the interpretation of Section 546(e) of the Bankruptcy Code, the “safe harbor” provision that shields specified types of payments “made by or to (or for the benefit of)” a financial institution from avoidance on fraudulent transfer grounds.