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Bankruptcy and the U.S. Supreme Court

By Ronald J. Mann (Columbia Law School)

The continuing struggle of the United States to emerge from the Great Recession gives policy responses to financial distress an immediacy they have lacked for 75 years. The Constitution directly grants Congress a broadly worded Bankruptcy Power, which Congress exercised with vigor in its 1978 enactment of the Bankruptcy Code. But the Code has played little or no role in mitigating the dislocation of the Great Recession. The slight rise in filings under the Code during the early years of financial distress contrasts markedly with the unprecedented rise in foreclosures, to say nothing of the more general social and economic turmoil of the last decade.

My forthcoming book, Bankruptcy and the U.S. Supreme Court, considers the role that the Supreme Court has played in the relatively anemic bankruptcy regime of the 21st century. The book’s main point is that the Supreme Court’s 82 decisions evaluating the Code systematically have taken a narrow interpretive approach that has left the Code much less effective than it might have been. The book includes some quantitative analysis. It is interesting, for example, that only 32 of the 82 decisions (39%) have come down in favor of a broad application of the Code. If you look at close cases (those with three or more dissenting votes), the results are even more stark, with only 5 of the 19 decisions (26%) applying the Code expansively.

But the bulk of the book is a series of case studies of nine of the close cases in the early days of the Code. Because the case studies focus much more on the process of the Court’s decision making than on the doctrinal results, they rely heavily on the internal papers of the Justices. Probably the single most important thing that the case studies demonstrate is the Justices’ attention to these cases. Many readers doubtless think of the bankruptcy cases as the “dogs” that the Justices turn to only after they’ve devoted their attention to the exciting constitutional and civil rights cases. But what you find when you go back to look the Justices’ papers is a great deal of back and forth in the crafting of opinions. In one case (Midlantic v. New Jersey Dep’t of Environmental Protection), Justice Powell’s majority opinion originally was crafted as a dissent; it became a majority when Justice Stevens switched his vote. Similarly, in Bildisco v. NLRB, Justice Rehnquist managed to get a court for his opinion only after months of negotiation that eventually led to the removal and rewriting of a large portion of the original opinion.

If you want to know more about how the Court goes about deciding these cases, then I encourage you to look at the book when it comes out from Cambridge University Press this spring.

Written by:
Editor
Published on:
February 14, 2017

Categories: Bankruptcy Administration and JurisdictionTags: Chapter 11, Ronald Mann, Supreme Court

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