Seyfarth Synopsis: A bankruptcy court overseeing an employer’s Chapter 11 bankruptcy proceeding allowed the employer to pay certain unsecured creditors before paying Worker Adjustment And Retraining Notification Act (“WARN”) creditors – workers who had sued the company – monies owed pursuant to a judgment, even though the bulk of the WARN monies owed were for back wages that hold priority over other unsecured claims under the Bankruptcy Code.
We previously wrote about the U.S. Supreme Court’s decision to hear a group of truck drivers’ challenge to the dismissal of a chapter 11 bankruptcy case that was designed to avoid paying the drivers’ claims. Today, the U.S. Supreme Court issued its decision in Czyzewski v.
Czyzewski v. Jevic Holding Corp., No. 15-649 (2017)
The U.S. Supreme Court issued two rulings in 2016 involving issues of bankruptcy law.
The U.S. Supreme Court heard oral argument Tuesday in Midland Funding v. Johnson. A primary issue before the Court is whether the federal Fair Debt Collection Practices Act is violated by the filing in a Chapter 13 bankruptcy case of a proof of claim representing a debt subject to an expired limitations period. The case originated from the Eleventh Circuit Court of Appeals, which along with its earlier decision in Crawford v. LVNV, held the FDCPA is violated in those instances. Every other Circuit Court of Appeals has since found otherwise.
The United States Supreme Court will review a decision of the Eleventh Circuit Court of Appeals, Johnson v. Midland Funding, LLC, to resolve a dispute between the circuits regarding whether the Bankruptcy Code provides the exclusive mechanism to determine the validity of a Proof of Claim or whether the filing of a faulty Proof of Claim gives rise to a debtor’s right to sue under the Fair Debt Collection Practices Act (the “FDCPA”). The Bankruptcy Code permits a creditor to file a claim if, among other things, the creditor has a right to payment.
The Supreme Court is considering whether to grant review of two bankruptcy cases. On October 3, 2016, the Supreme Court invited the Solicitor General to file briefs expressing the views of the United States. Because the Supreme Court’s justices normally give significant weight to the federal government’s recommendations regarding interpretations of federal statutes (here, the Bankruptcy Code), the Solicitor General’s forthcoming briefs could influence whether the Supreme Court grants cert. on the two notable bankruptcy cases.
Southwest Securities v. Segner
On October 11, 2016, the Supreme Court of the United States granted cert in Midland Funding, LLC v. Johnson, No. 16-348 (Oct. Term 2016) to resolve a split among the Circuits as to the FDCPA’s prohibition against deceptive collection practices in the context of filing proofs of claim for debts where a collection action would otherwise be time-barred.
The Supreme Court of the United States has decided it will review the decision of the U.S. Court of Appeals for the Eleventh Circuit in Johnson v. Midland Funding LLC.
A link to the docket is available here: Link to Docket.