Month: June 2017

On March 22, 2017, the Supreme Court decided Czyzewski v. Jevic Holding Corporation. Jevic Transportation, Inc., a trucking company headquartered in New Jersey, was purchased by a subsidiary of Sun Capital Partners in 2006. In 2008 Jevic filed for bankruptcy under Chapter 11 of the Bankruptcy Code, at which that point it owed about $73 million to various creditors. Jevic’s former truck drivers then sued it for violating federal and state Worker Adjustment and Retraining Notification Acts, by failing to provide the requisite 60 days’ notice before a layoff. Separately, unsecured creditors filed a fraudulent conveyance action. In March 2012, representatives of all the major parties met to negotiate a settlement of the fraudulent conveyance suit. The representatives--except for the drivers’ representative--agreed to a settlement that would provide for payment of legal and administrative fees, a schedule for the payment of various creditors (though not the drivers), and ultimately a “structured dismissal” of the Chapter 11 bankruptcy. -- The drivers and US Trustee objected, arguing that the settlement would improperly distribute estate property to creditors with lower priority than the drivers, in violation of the Bankruptcy Code. The Bankruptcy Court rejected these objections and approved the proposed settlement. The U.S. District Court and then the U.S. Court of Appeals for the Third Circuit affirmed, holding that the Bankruptcy Court had not abused its discretion in approving a structured dismissal that did not adhere strictly to the Bankruptcy Code’s priority scheme. -- By a vote of 6-2, the U.S. Supreme Court reversed the judgment of the Third Circuit and remanded the case. In an opinion by Justice Breyer, the Court held that (1) the drivers have Article III standing to bring the present litigation; and (2) bankruptcy courts may not approve structured dismissals of Chapter 11 bankruptcy cases that provide for asset distributions which do not follow ordinary priority rules established by the Bankruptcy Code without the consent of affected creditors. Justice Breyer’s majority opinion was joined by the Chief Justice and Justices Kennedy, Ginsburg, Sotomayor, and Kagan. Justice Thomas filed a dissenting opinion, in which Justice Alito joined. -- To discuss the case, we have Thomas Plank, who is the Joel A. Katz Distinguished Professor of Law at the University of Tennessee College of Law.

On May 1, 2017, the Supreme Court decided Bank of America Corp. v. City of Miami, which was consolidated with Wells Fargo & Co. v. City of Miami. In this case, the city of Miami sued Bank of America Corporation and similar defendants under the Fair Housing Act (FHA), arguing that the banks engaged in predatory lending practices that targeted minorities for higher-risk loans, which resulted in high rates of default and caused financial harm to the city. Miami also alleged that the banks unjustly enriched themselves by taking advantage of benefits conferred by the city, thus denying the city expected property and tax revenues. -- The district court dismissed the FHA claims and held that Miami did not fall within the “zone of interests” the statute was meant to protect and therefore lacked standing under the statute. The court also held that Miami had not adequately shown that the banks’ conduct was the proximate cause of the harms the city claimed to have suffered. The U.S. Court of Appeals for the Eleventh Circuit reversed, holding that FHA standing extends as broadly as Article III of the Constitution permits, that Miami had established Article III standing here, and that it had sufficiently alleged proximate causation. -- By a vote of 5-3, the Supreme Court vacated the judgment of the Eleventh Circuit and remanded the case. In an opinion by Justice Breyer, the Court held that (1) the city of Miami was an "aggrieved person" authorized to bring suit under the Fair Housing Act; and (2) the Eleventh Circuit erred in concluding that the city's complaints met the FHA's proximate-cause requirement based solely on the finding that the city's alleged financial injuries were a foreseeable results of the banks' misconduct; proximate cause under the FHA requires “some direct relation between the injury asserted and the injurious conduct alleged”; the lower courts should define, in the first instance, the contours of proximate cause under the FHA and decide on remand how that standard applies to the city's claims for lost property-tax revenue and increased municipal expenses. Justice Breyer’s majority opinion was joined by the Chief Justice and Justices Ginsburg, Sotomayor, and Kagan. Justice Thomas filed an opinion concurring in part and dissenting in part, in which Justices Kennedy and Alito joined. Justice Gorsuch took no part in the consideration or decision of the cases. -- To discuss the case, we have Thaya Brook Knight, who is associate director of financial regulation studies at the Cato Institute.