Office of Solicitor General: A Biased and Conflicted Protector of Bankruptcy Laws (Ritzen v. Jackson Oral Arguments)

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Conflicted

By: Donald L. Swanson

every creditor in the country should be lining up behind our side of the podium.”

–Respondent’s counsel in Ritzen v. Jackson oral arguments at U.S. Supreme Court on 11/13/2019. Here’s a link to the transcript.

On October 11, 2019, the Office of Solicitor General files an amicus brief in Ritzen v. Jackson “supporting respondent” and asking to participate in oral arguments because its views are “likely to be of material assistance to the Court.”

A Biased and Conflicted Position

It’s no surprise that the Solicitor General is “lining up behind” the creditor position—that’s what it usually does.

But such “lining up” is unfortunate because the Solicitor General needs to do better than that. I’ll try to explain.

–The Conflict

Neutral Responsibility. The image and role of the Solicitor General is of an impartial observer watching out, in a neutral and unbiased manner, for the benefit of the bankruptcy system as a whole. Here, for example, is how the Solicitor General explains such neutral responsibility in its Ritzen v. Jackson amici brief:

“United States Trustees, who are officials in the Department of Justice, supervise the administration of bankruptcy cases. . . . Resolution of the question presented may affect the sound administration of the bankruptcy laws.”

Biased Reality. The same amici brief of the Solicitor General in Ritzen v. Jackson reveals this conflicting interest:

“The United States is also the largest creditor in the Nation. . . . The United States thus has a substantial interest in the resolution of the question presented.”

–The Bias

And guess which posture (neutrality or bias) prevails in the Solicitor General’s Ritzen v. Jackson argument: the biased position, of course.

The Solicitor General takes the creditor position in its amici brief like this:

  • “the conclusive denial of the motion [for relief from stay] constitutes a final order.”

And it does so emphatically and totally like this:

  • “contrary arguments lack merit.”

Two Examples from Oral Argument

Oral arguments in Ritzen v. Jackson reveal the Solicitor General’s willingness to jettison it’s “sound administration” of bankruptcy responsibility in favor of a superseding desire to protect its creditor interests. Here are two examples.

–Ignoring a “Big Backlogs” Concern

In oral arguments, the Solicitor General ignores the following “big backlogs” concern raised by Justice Breyer.

JUSTICE BREYER: “If you give an immediate appeal”:

  • “You have all that time” of delay;
  • “If there are a thousand creditors, they might all do it. And God only knows how long this case is going to take”; and
  • “That’s why they have big backlogs in some other countries. They’re too kindhearted in allowing immediate appeals.”

Does the Solicitor General, as guardian of the “sound administration” of the U.S. bankruptcy system, have any concern about creating “big backlogs”? Apparently not: any such argument “lacks merit,” the Solicitor’s brief declares.

The interests of the “largest creditor in the Nation” obviously override the best interests of the bankruptcy system as a whole.

–A False Argument

And here’s an exchange where the Solicitor General’s argument appears false, in my experience:

JUSTICE GORSUCH: . . . the Sixth Circuit placed a great deal of stress, it seems, on the fact that the stay relief denial here was entered with prejudice in its view. But what difference does that really make in a bankruptcy proceeding where orders are revisable all the time? . . .

[SOLICITOR]: . . . if the bankruptcy court [denies] a motion for stay relief, the creditor can’t just come back and refile the motion [except] under Rule 60(b) . . .
[Also,] a preliminary denial of stay relief, where the bankruptcy judge says something like I’m denying relief because the debtor has a likelihood of success, but I want further proceedings. We don’t contend that that would be final . . .

JUSTICE GORSUCH: So they are tied up in a bow. The Sixth Circuit had it right. It just used the wrong terms. It’s not with or without prejudice. It’s preliminary versus final.

[SOLICITOR]: Yes, essentially.

Here’s the falsity:

  • Reorganization cases are fluid—one day’s facts can be entirely different from the next day’s facts, and relief can be denied one day yet granted under a refiled motion on next day’s facts.

Here’s an example:

  • A relief from stay denial on a car loan is based on payments being made and insurance in force—but when payments stop and insurance lapses, relief will be granted on a refiled motion.

Justice Gorsuch’s initial “what difference” comment above seems genuine, while his concluding “tied up in a bow” comment seems heavy with sarcasm (although its difficult to tell from a transcript, alone).

A “Pervasive” Solicitor General Role on Bankruptcy Issues at U.S. Supreme Court

“Pervasive” is a description of the Solicitor General’s role on bankruptcy issues before the U.S. Supreme Court. And pervasiveness creates a problem for the U.S. bankruptcy system, due to the Solicitor’s conflicted position.

One authority on this subject is Prof. Ronald J. Mann, who formerly, (i) argued bankruptcy cases in the Supreme Court while working in the Office of the Solicitor General, and (ii) clerked for Justice Powell at the U.S. Supreme Court. [Fn. 1]

Prof. Mann uses the word “pervasive” to describe the Solicitor General’s role at the U.S. Supreme Court on bankruptcy questions, as a party and as an amicus. Here’s why:

  • the Solicitor General has appeared in about 70% of the Court’s bankruptcy cases (57 of 82) – as a party in 22 and as an amicus in the other 35. [Fn. 2]

“Pervasive” also applies to the substance of the Solicitor General’s positions:

  • the Solicitor advocated a narrow construction of the Bankruptcy Power in more than 80% of the cases (47 out of 57 cases); and
  • was quite successful in those 47 cases (winning 36 out of 47 (77%)). [Fn. 3]

–Objection!

I object! [Not that anyone cares.]

The Solicitor General argues 80% of the time for “a narrow construction of the Bankruptcy Power”? Seriously?!

  • If there has been any problem with the bankruptcy system in these United States, since enactment of the Bankruptcy Code in 1978, it’s this: a narrow construction of the U.S. Constitution’s Bankruptcy Power.
  • And it appears that the Solicitor General has been a culprit in creating and fostering that problem.

Conclusion

The biased and conflicted position of the Office of Solicitor General in bankruptcy cases is unfortunate . . . in the extreme!

—————————-

Footnote 1: Ronald J. Mann, Bankruptcy and the U.S. Supreme Court (Cambridge University Press 2017).
Footnote 2: Id. at § 12.
Footnote 3: Id.

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