City of Chicago v. Fulton

In an 8-0 decision in City of Chicago v. Fulton, the U.S. Supreme Court held that the City of Chicago didn’t violate the Bankruptcy Code’s automatic stay provision by holding onto a vehicle impounded after a bankruptcy petition was filed.  The State and Local Legal Center (SLLC) filed an amicus brief in this case asking the Court to reach this result.

The City of Chicago impounds vehicles where debtors have three or more unpaid fines. Robbin Fulton’s vehicle was impounded for this reason. She filed for bankruptcy and asked the City to return her vehicle; it refused. The Seventh Circuit held the City violated the Bankruptcy Code’s automatic stay provision. The Supreme Court unanimously reversed.

When a bankruptcy petition is filed, an “estate” is created which includes most of the debtor’s property. An automatic consequence of the bankruptcy petition is a “stay” which prevents creditors from trying to collect outside of the bankruptcy forum. The automatic stay prohibits “any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate.”

 

The Bankruptcy Code also has a “turnover” provision which requires those in possession of property of the bankruptcy estate to “deliver to the trustee, and account for” that property.

 

The Supreme Court held that “mere retention” of a debtor’s property after a bankruptcy petition is filed doesn’t violate the automatic stay. According to Justice Alito, “[t]aken together, the most natural reading of . . . ‘stay,’ ‘act,’ and ‘exercise control’—is that [the automatic stay provision] prohibits affirmative acts that would disturb the status quo of estate property as of the time when the bankruptcy petition was filed.”

 

However, the Court, conceded it did not “maintain that these terms definitively rule out” an alternative interpretation. According to the Court, “[a]ny ambiguity in the text of [the automatic stay provision] is resolved decidedly in the City’s favor” by the turnover provision. First, reading “any act . . . to exercise control” in the automatic stay provision “to include merely retaining possession of a debtor’s property would make that section a blanket turnover provision,” rendering the turnover provision “largely superfluous.” Second, the turnover provision includes exceptions that the automatic stay provision doesn’t include. “Under respondents’ reading, in cases where those exceptions to turnover . . .  would apply, [the automatic stay provision] would command turnover all the same.”

 

According to Justice Sotomayor, in a concurring opinion, “the City’s policy of refusing to return impounded vehicles satisfies the letter of the Code, it hardly comports with its spirit.” Justice Sotomayor opined that the City may have violated a number of other provisions of the Bankruptcy Code, including the turnover provision.

 

The SLLC amicus brief argued for the rule the Supreme Court adopted. According to the brief, “[t]his rule protects the efficacy of traffic and parking regulations, as well as avoiding perverse incentives for owners of impounded vehicles to file bankruptcy petitions.” The SLLC brief also pointed out that “construing the automatic stay as requiring the immediate release of assets would undermine the government’s ability to enforce tax, licensing, and regulatory laws.”

 

Scott Burnett Smith, Alexandra E. Dugan, and Stephen C. Parsley Bradley of Arant Boult Cummings LLP wrote the SLLC amicus brief which the following organizations joined:  National Association of Counties, National League of Cities, U.S. Conference of Mayors, International City/County Management Association, International Municipal Lawyers Association, and Government Finance Officers Association.

 

Carney v. Adams

In Carney v. Adams the Supreme Court held unanimously that James Adams lacked standing to challenge a Delaware constitutional provision that requires that appointments to Delaware’s major courts reflect a partisan balance.

Delaware’s Constitution states that no more than a bare majority of members of any of its five major courts may belong to any one political party. It also requires, with respect to three of those courts, that the remaining members belong to “the other major political party.” So, as a practical matter, to be on three of Delaware’s courts a person must belong to one of the two major political parties.

 

James Adams, a Delaware lawyer and political independent, sued Governor Carney claiming Delaware’s major party requirement is unconstitutional. The Court, in an opinion written by Justice Breyer, concluded Adams lacks standing to bring this lawsuit.

 

To have standing a litigant must “prove that he has suffered a concrete and particularized injury that is fairly traceable to the challenged conduct, and is likely to be redressed by a favorable judicial decision.” For Adams to prove he was harmed he had to “at least show that he is likely to apply to become a judge in the reasonably foreseeable future if Delaware did not bar him because of political affiliation.” According to Justice Breyer, “three considerations, taken together, convince us that the record evidence fails to show that, at the time he commenced the lawsuit, Adams was ‘able and ready’ to apply for a judgeship in the reasonably foreseeable future.”

 

First, while Adams twice said he would apply for judicial openings, he made these statements “without any actual past injury, without reference to an anticipated timeframe, without prior judgeship applications, without prior relevant conversations, without efforts to determine likely openings, without other preparations or investigations, and without any other supporting evidence.”

 

Second, “Adams’ failure to apply previously when he was eligible, his reading of the law review article [suggesting the major party rule was unconstitutional], his change of party affiliation [from Democrat to Independent], and his swift subsequent filing of the complaint show a desire to vindicate his view of the law,” rather than to actually obtain a judgeship.

 

Finally, “if we were to hold that Adams’ few words of general intent—without more and against all contrary evidence—were sufficient here to show an ‘injury in fact,’ we would significantly weaken the longstanding legal doctrine preventing this Court from providing advisory opinions at the request of one who, without other concrete injury, believes that the government is not following the law.”

 

While the Supreme Court didn’t discuss the merits of this case, Adams argued that the First Amendment prohibits the governor from making judicial appointments based on political party. The State and Local Legal Center (SLLC) filed an amicus brief disagreeing.

 

In a brief concurring opinion, Justice Sotomayor picked up on an argument in the SLLC’s brief that states and local governments routinely rely on bipartisan decision-making processes in judicial selection, elections administration, ethics enforcement, and more. Justice Sotomayor noted that partisan balance requirements “have existed in various forums for roughly 150 years, currently feature in a large number of public bodies, and have been shown to help achieve ideological diversity.”

Kirti Datla and Kristina Alekseyeva, Hogan Lovells, wrote the SLLC amicus brief in this case which the following organizations joined:  National Conference of State Legislatures, National Association of Counties, National League of Cities, U.S. Conference of Mayors, International City/County Management Association, and International Municipal Lawyers Association.

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