JUSTICE SCALIA AND CONSUMER
BANKRUPTCY
By Brett Weiss, Esq.
Senior Partner at Chung & Press, LLC
(This article first appeared on http://www.bankruptcylawnetwork.com/)
I
n light of Justice Antonin Scalia’s
death, I wanted to highlight several of
his opinions in consumer bankruptcy
cases, both in the majority and in
dissent. (He has a host of opinions
in corporate cases as well; see an
excellent summary here.)
In Law v. Siegel, 571 U.S. ___, 134
S.Ct. 1188 (2014), Justice Scalia,
writing for a unanimous Court, held that
the Bankruptcy Court could not ignore
statutory protections, even where the
Debtor acted badly. This case narrowed
the Court’s holding in Marrama v.
Citizen’s Bank of Massachusetts, 127
S. Ct. 1105, 549 US 365 (2007), which
had added an equitable good faith
requirement into a Debtor’s previously
absolute right to convert a Chapter 7 to
a Chapter 13.
Justice Scalia said:
A bankruptcy court has statutory
authority to “issue any order, process,
or judgment that is necessary or
appropriate to carry out the provisions
of” the Bankruptcy Code. 11 U. S. C.
§105(a). And it may also possess
40
CONSUMER BANKRUPTCY JOURNAL
“inherent power . . . to sanction ‘abusive
litigation practices.’ ” (citation omitted).
But in exercising those statutory and
inherent powers, a bankruptcy court
may not contravene specific statutory
provisions. It is hornbook law that
§105(a) “does not allow the bankruptcy
court to override explicit mandates
of other sections of the Bankruptcy
Code.” (citation omitted). Section
105(a) confers authority to “carry out”
the provisions of the Code, but it is
quite impossible to do that by taking
action that the Code prohibits. That is
simply an application of the axiom that
a statute’s general permission to take
actions of a certain type must yield to
a specific prohibition found elsewhere.
(citations omitted). Courts’ inherent
sanctioning powers are likewise
subordinate to valid statutory directives
and prohibitions. (citation omitted). We
have long held that “whatever equitable
powers remain in the bankruptcy courts
must and can only be exercised within
the confines of” the Bankruptcy Code.
(citations omitted).
571 S.Ct. at 1194-5.
Spring 2016
Ransom v. FIA Card Services, 562 U.S.
61, 131 S.Ct. 716 (2011) was an 8-1
decision, with Justice Scalia writing in
dissent. The majority opinion, written by
Justice Kagan, held that the allowance
under the Means Test for car ownership
(11 U.S.C. § 707(b)(2)(A)) applied only
if a debtor was obligated to make a car
or lease payment. Drawing a distinction
between the IRS’ “National Standards
and Local Standards (NSLS)” and a
directive in its “Collection Financial
Standards (CFS),” Justice Scalia’s
dissent noted that the later formed
no part of the former. Since only the
NSLS were to be applied to the Means
Test, and the NSLS did not exclude
a deduction for car ownership in the
absence of a car or lease payment,
the Bankruptcy Code should not be
interpreted to add the CFS directive
disallowing this deduction.
Justice Scalia said:
I do not find the normal meaning of
the text undermined by the fact that
it produces a situation in which a
debtor who owes no payments on his
car nonetheless gets the operating-
National Association of Consumer Bankruptcy Attorneys