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| vol 16, num 4 | December, 2019 |
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| Co-Chair Corner |
| With more than 900 members, ABI’s Bankruptcy Litigation Committee remains one of the largest and most active of ABI’s committees. The committee, its leadership and its members were quite busy in 2019, so we wanted to take a moment to quickly update you about what we’ve been working on.
New members to our committee promptly receive a personal email from our Membership Relations Director, Kesha Tanabe (Tanabe Law; Minneapolis), welcoming them to our group. Kesha advises them about the educational and volunteer opportunities for our committee and encourages them to become more engaged. This is one of the many ways we try to identify new and diverse talent so that the committee can remain active for years to come.
All members are also added to our committee listserve, overseen by our Communications Manager, Isley M. Gostin (WilmerHale; Washington, D.C.). Isley closely monitors key bankruptcy decisions from across the country on a daily basis and routinely sends out summaries of groundbreaking and interesting decisions as group emails. These emails not only update members about key bankruptcy litigation issues, they also provide opportunities for discussion among members. The last post, released approximately one week ago, alerted our membership to a groundbreaking decision out of the U.S. Court of Appeals for the Fifth Circuit about bankruptcy court’s lack of jurisdiction to enforce discharge injunctions entered by courts in other judicial districts. |
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| The Finality Countdown: Why the Supreme Court Is Unlikely to Adopt a “Blanket Rule” of Finality for Orders Denying Stay Relief in Ritzen Group, Inc. v. Jackson Masonry LLC |
| This November, the Supreme Court will hear oral argument in Ritzen Group Inv. v. Jackson Masonry LLC and ultimately will determine whether a particular bankruptcy court order that denied a stay-relief motion is a final, immediately appealable order under 28 U.S.C. § 158(a)(1). But perhaps the most important issue in the case for practitioners generally is that the Court is poised to resolve a circuit split over whether all orders denying stay relief are final, immediately appealable orders as a categorical rule. In this article, I briefly outline three arguments against the rationales that have developed in the case law in favor of the
so-called “blanket rule” of finality, which I suggest will convince the Court not to adopt the blanket rule. |
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| Rodriguez v. Federal Deposit Insurance Corp.: Will Federal Common Law Trump State Law in Determining Whether a Tax Refund Is Property of the Estate? |
| When the IRS pays a tax refund to the corporate group, it always issues that refund to the corporate parent — even if some or all of the losses are attributable to one of its subsidiaries. That raises an oft-litigated and highly significant question: Who owns the refund? Is it the parent who holds it, or the subsidiary that gave rise (in whole or in part) to the underlying tax losses? Circuits are intractably divided on the answer to that question.
The U.S. Supreme Court may answer the question after hearing argument in Rodriguez v. Federal Deposit Insurance Corp. later this year. Specifically, the Supreme Court will consider whether ownership of a tax refund should be determined based on the federal common law “Bob Richards rule,” as three circuits have held, or based on relevant state law, as four circuits have held. The Bob Richards rule provides, “[a]bsent any differing agreement ... [that] a tax refund resulting solely from offsetting the losses of one member of a consolidated filing group against the income of that same member in a prior or subsequent year should inure to the benefit of that member.” The outcome of Rodriguez carries important ramifications in delineating property of the estate, as tax refunds paid to affiliated groups can reach into the hundreds of
millions of dollars.
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| Heightened Standard for Imposition of Civil Contempt Sanctions Arising from Violation of Discharge Order |
| On June 3, 2019, the U.S. Supreme Court released a unanimous decision in Taggart v. Lorenzen concluding that a court is authorized to “impose civil contempt sanctions when there is no objectively reasonable basis for concluding that the creditor's conduct might be lawful under the discharge order.” Put another way, “civil contempt ... may be appropriate when the creditor violates a discharge order based on an objectively unreasonable understanding of the discharge order or the statutes that govern its scope.” In doing so, the Supreme Court held that “the [Ninth] Court of Appeals erred in applying a subjective standard for
civil contempt. Based on the traditional principles that govern civil contempt, the proper standard is an objective one.”
Underlying Facts
The underlying litigation addressed by the Supreme Court involved an Oregon state court litigation brought by a company and two of its owners against Taggart, a former owner. Prior to trial, Taggart filed for chapter 7 bankruptcy protection in the U.S. Bankruptcy Court for the District of Oregon and obtained a discharge under § 727 of the Bankruptcy Code. Despite the discharge, the Oregon state court entered judgment against Taggart and awarded $45,000 in legal fees, holding that they were not barred by the discharge order.
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| Supreme Court May Consider Whether Tribal Sovereign Immunity Is Abrogated by Bankruptcy Code |
| A petition for certiorari is presently pending with respect to the Sixth Circuit’s decision in In re Greektown Holdings LLC. If granted, the U.S. Supreme Court will consider whether the Bankruptcy Code abrogates the sovereign immunity of Indian tribes.
Factual Background
This case arises from the bankruptcy of Greektown Casino, Greektown Holdings, LLC (“Holdings”) and certain affiliates (collectively, the “debtors”). The casino opened in November 2000 and was owned and managed by the Sault Ste. Marie Tribe of Chippewa Indians and its political subdivision defendant, Kewadin Casinos Gaming Authority (collectively, the “tribe”). After years of financial difficulties, in 2005 the tribe restructured the casino’s ownership and created Holdings, which became the owner of the casino. On Dec. 2, 2005, Holdings transferred approximately $177 million to various parties, including the tribe.
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