Bankruptcy and the u s supreme court

Mann Frontmatter More Information In this illuminating work, Ronald Mann offers readers a comprehensive study of bankruptcy cases in the Supreme Court of the United States.. He provides

Ronald J Mann

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In this illuminating work, Ronald Mann offers readers a comprehensive study of

bankruptcy cases in the Supreme Court of the United States He provides detailed

case studies based on the Justices’ private papers on the most closely divided cases,

statistical analysis of variation among the Justices in their votes for and against

effective bankruptcy relief, and new information about the appearance in

opin-ions of citatopin-ions taken from party and amici briefs By focusing on cases that have

neither a clear answer under the statute nor important policy constraints, the book

unveils the decision-making process of the Justices themselves – what they do

when they are left to their own devices It should be read by anyone interested

not only in the jurisprudence of bankruptcy, but also in the inner workings of the

Supreme Court

Ronald Mann has been a commercial law professor at Columbia University for the

last ten years Previously he has taught at the University of Texas, the University of

Michigan, and Washington University in St Louis He has also argued bankruptcy

cases in the Supreme Court while working in the Office of the Solicitor General,

and he has clerked for Justice Powell in the United States Supreme Court

Ronald J Mann

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education, learning, and research at the highest international levels of excellence.

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© Ronald J Mann 2017

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Names: Mann, Ronald J., 1961- author.

Title: Bankruptcy and the U.S Supreme Court / Ronald J Mann.

Other titles: Bankruptcy and the US Supreme Court | Bankruptcy and the United

States Supreme Court

Description: Oxford [UK] ; New York : Cambridge University Press,

2017 | Includes bibliographical references and index.

Identifiers: LCCN 2017009672 | ISBN 9781107160187 (hardback)

Subjects: LCSH: Bankruptcy–United States | Bankruptcy–United

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v

Ronald J Mann

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5From Marathon to Wellness: Assessing the “Public[ity]” of

5.2 Setting the Stage: From Referees and Summary

Jurisdiction to the Comprehensive Bankruptcy Vision of

5.4 Retrenchment Extended from Article III to the 7th

6 Sovereign Immunity and the Bankruptcy Power: From

6.6 The Unfortunate Irrelevance of Bankruptcy to

Ronald J Mann

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12 The Supreme Court, the Solicitor General, and Statutory

APPENDIX E : Sources from the Solicitor General and Other

Ronald J Mann

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Figures

2.2 Justice O’Connor’s Memorandum in Norwest Bank

ix

Ronald J Mann

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Tables

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Ronald J Mann

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Preface

My work on this project has proceeded for so long that the number of people

to whom I owe gratitude is surely longer than I can name in this context To

mention just a few, I should start with the tireless work that Samuel Lemley

did collecting and organizing the papers of the Justices and presenting them

on the Web site I would thank Loring Veenstra on the same account had he

not also worked so hard on the project as to justify his status as a

collabora-tor Jennifer Wertkin and Marty Witt at the Columbia Law School Library

also deserve special thanks for their indefatigable efforts to help me obtain the

relevant papers from the Library of Congress John Jacob, the archivist of the

Lewis F Powell Jr Archives at the School of Law at Washington and Lee

Uni-versity, also deserves special thanks for his prompt responses to my numerous

inquiries about the contents of those papers

The work of collecting and organizing the papers would not have been

possible without a generous grant from the Endowment for Education of

the National Conference of Bankruptcy Judges Their support of empirical

research about bankruptcy is a remarkable testament to the oft-overlooked

care and thoughtfulness with which bankruptcy judges operate the system

that this book examines

So many people have provided so much input at so many different times

that I cannot possibly list them all I should, though, single out Greg Dovel,

Roy Englert, Richard Lazarus, Deborah Malamud, Tom Merrill, Henry

Monaghan, Bob Rasmussen, Jim Rogers, and Gil Seinfeld

Finally, any thanks I can offer to my family are wholly inadequate

They have tolerated my intermittent obsession and procrastination on this

project for longer than I care to admit The intellectual contributions of my

spouse, Allison, to this project go far beyond any call of collegial or familial

responsibility

xi

I can pinpoint almost to the hour when my thoughts first turned to the subject

of this book: Thursday morning, October 9, 1986 I was a law clerk for JusticePowell, and the Supreme Court had heard arguments the previous day in an

obscure bankruptcy case captioned Kelly v Robinson, in a month in which the Court also heard arguments in the landmark McCleskey v Kemp (1987),

which upheld the constitutionality of the death penalty despite statistical

evi-dence of a pervasive racial bias The issue in Kelly was whether a bankruptcy

filing discharged the debtor’s obligation to pay restitution imposed as part of

a criminal sentence I had worked hard preparing for this case and had vided the Justice with a detailed bench memorandum explaining my viewthat the language of the statute compelled the conclusion that the bankruptcydischarge absolved the debtor of the obligation to pay restitution The basicpoint was that restitution is compensatory in nature and thus is not properlyconsidered a “penalty” exempted from discharge under Bankruptcy CodeSection 523 Because I had focused on commercial law courses in my lawschool studies, including multiple courses involving the Bankruptcy Code,

pro-I felt well qualified to examine the question My confidence was buttressed

by the knowledge that the other eight law clerks working on the case shared

my view, including, among others, Dan Bussel (now a successful bankruptcyprofessor at UCLA) and my colleague at Columbia Eben Moglen

I was anxious and excited when I entered the Justice’s office to discussthe case It was the first argued case I had discussed with him, and so I didnot know what to expect As always, he was most gracious He had read mymemorandum with care, annotating it throughout He waited patiently andattentively through my brief presentation summarizing my views of the statute.When I was finished, he smiled and nodded approvingly He then told me that

he was sure my statutory analysis was meticulous, but that he was just as surethat his colleagues would not decide that a bankruptcy court had the power

to absolve a state criminal sentence I left his office doubtful at best that hecould be right – the statute seemed so clear.

Not surprisingly, the expectations of the Justice were more accurate thanthose of his young law clerk At the conference the next morning, the Justicesdecided by a 7–2 margin that the Bankruptcy Code did not discharge the resti-tutionary obligation The opinion was assigned to Justice Powell His opinionexplained that the tradition of federal deference to the state criminal processwas so important that only the clearest possible language could convince theCourt that Congress intended to interfere with the enforcement of the sen-tence of a state criminal court Because the language of Section 523 was notincontrovertible, the Court concluded that the Bankruptcy Code should not

be interpreted to interfere with the state criminal process Justice Marshall,joined by Justice Stevens, offered a stinging dissent emphasizing the stark ten-sion between the Court’s conclusion and the plain language of the statute.Despite what I regarded (and still regard) as its direct inconsistency with thelanguage of the Code, the decision sank like a small pebble into the UnitedStates Reports, leaving not a ripple of controversy.1

Kelly is a useful starting point not only because of its prominence in my

pro-fessional consciousness but also because it underscores the themes that havemotivated me to write this book focusing on how the Justices interpret theBankruptcy Code Perhaps the easiest answer, the one I hear most commonly

in conversations with other lawyers who have clerked at the Court, is thatthe Justices don’t care about these cases: they didn’t become judges to inter-pret obscure provisions of federal statutes like the Bankruptcy Code They arethere for the big questions: the First Amendment, the death penalty, abortion,affirmative action, gay marriage, and the other leading issues of the particularera in which they serve Probably the most famous example of this perspec-tive is the oft-cited anecdote in which Justice Blackmun complained aboutreceiving an undue share of tax cases, which he regarded as “dogs” (Wasby

1993, 70–71)

But the “they just don’t care” explanation withstands little scrutiny Forone thing, it seems inconsistent with my own personal experience – admit-tedly anecdotal If the Justices did not care about these cases, why would they

take the trouble (as in Kelly) to reject the advice of their clerks? The path of

1 Justice Marshall did, in a sense, get the last word When a similar question (the ability of restitution orders in Chapter 13 cases) reached the Court several years later in

discharge-Pennsylvania v Davenport (1990), Justice Marshall wrote for the Court, limiting Kelly and

holding that those orders can be discharged in Chapter 13 (over the objection of Justices

Blackmun and O’Connor from the Kelly majority) I discuss Kelly and Davenport in more

detail in Chapter 9.

least resistance in such cases would be to accept the legalistic resolution ofthe controversy and agree to a brief opinion explicating that point (presum-ably largely written by law clerks) The attention of the Justices to these cases

is evident from Justice Powell’s notes, added in red down the side of his ference notes in an early environmental bankruptcy case: “None of us has

con-a clecon-ar rcon-ationcon-ale for deciding this ccon-ase I’ve rcon-arely hecon-ard such divergent con-andunclear views by all of us” (OKOV002)

But Justice Powell’s correct expectation that the Court would pay no heed

to the settled view of the law clerks at least suggests a principled frameworkfor issue resolution Whatever that framework is (and that is the central topic

of this book), it is the antithesis of apathy Indeed, the Kelly anecdote suggests

a framework far removed from abject submission to the text of the statute

To put it another way, saying that the Justices don’t care about a particularclass of cases tells us nothing about how they decide them: Whether they areimportant or not, the Court still reaches decisions in those cases What thisbook attempts to understand is how they reach those decisions in bankruptcycases If there is a discernible pattern of issue resolution in bankruptcy cases,that suggests that the Justices do care about those cases More empirically, thecase studies that occupy the bulk of this book demonstrate that the Justices infact care deeply about these cases The files are replete with back-and-forthnegotiations about the precise wordings of opinions, changes of position afterthe initial decision, and substantial changes in doctrinal approach over time.Those are not the features of apathetic and disinterested decisionmaking

My project, then, is to open up the black box of the Court’s making, to understand as best as I can what the Court actually does when itdecides cases under statutes like the Bankruptcy Code The core of the book is

decision-a set of cdecision-ase studies decision-andecision-alyzing severdecision-al of those cdecision-ases in detdecision-ail For edecision-ach of thosecases, I have collected all of the available papers of the Justices (which I havecataloged, imaged, and archived online at www.bksct.net) I have collected all

of the briefs of the parties and as much as I can locate of the records of ceedings in the lower courts I have corresponded with law clerks that worked

pro-on each of those cases Finally, I have searched news archives for informatipro-onabout the parties to the dispute, all with a view to developing as rich and broad

an understanding as possible of the disputes, the competing policy interests,and how the Justices resolved them It is my hope that the case narrativesproceed at four distinct though overlapping levels Collectively, the differentlevels of analysis reflect the different goals I hope the project advances

• At the highest level of generality, I am trying to show where courts lookfor knowledge in an area in which positive law provides little guidance

and where political preconceptions have little power or salience.

As Posner (2010, 47) emphasizes, this is an important question forthe still underexamined topic of judicial reasoning As I explain inChapter 2, it also advances the extensive literature on the Court’sdecisionmaking

• At a second level, the case studies illustrate how courts interpretstatutes when they have limited guidance from reliable externalsources By moving beyond the simple labels of “textualist” and “pur-posive” to a narrative that provides a richer institutional framework, Ihope this study advances conceptions of statutory interpretation

• At the level of bankruptcy policy, the primary focus of the book’s rative, the case studies show how the Court’s decisions systematicallyhave underenforced the Bankruptcy Code Faced with ambiguousstatutory language and a conflict with other state, federal, or constitu-tional interests, the Court in almost every close case has ruled against

nar-a bronar-ad nar-applicnar-ation of the Bnar-ankruptcy Power Given the increnar-asedimportance of appropriate responses to financial distress in our ever-more volatile economy, the infirmity of the Court’s bankruptcyinstincts have handicapped the Code’s ability to fill the constitutionalrole set out for it The view that the bankruptcy system should play

a powerfully positive view in our society is of course not a commonone It is not, however, completely unprecedented, as a glance at therecent work of David Skeel (2009) will demonstrate

• Finally, at the lowest level of generality, the narratives of the vidual cases are compelling From the shockingly toxic pollution

indi-presented in Midlantic to the rare-coin fraud behind BFP, the Court’s

bankruptcy cases provide a fascinating glimpse at the world of mercial and financial failure

com-A brief word about the authorship of the project is also appropriate LoringVeenstra worked extensively on Chapters 7, 8, and 10 For that reason he islisted as the coauthor of those chapters and the collaborator on the book as awhole He bears no responsibility for any errors of judgment or omissions inthe remainder of this work

S E T T I N G T H E S T A G E

Literature Review

I am not the first to consider the sources of Supreme Court decisions Is myapproach an arbitrary personal predilection drawn entirely from my anecdo-tal recollections? Or can I justify it as a contribution to the disparate efforts

in the literature that explains Supreme Court decisionmaking? The purpose

of this chapter is to put the case studies in context by exploring existing demic approaches to Supreme Court decisionmaking and relating them tothe framework I use for understanding the Court’s bankruptcy jurisprudence.For analytical purposes, I perceive much of the existing literature as start-ing from one or the other of two polar opposites: the legal perspective thatthe statutory law for the most part controls decisions; or the political-scienceperspective that the political predilections of the Justices for the most part con-trol decisions However interesting that controversy might be, it is largely off tothe side of the work I present here Because this work emphasizes influencesthat are neither strictly legal nor strictly attitudinal, it is in tension with both ofthose perspectives But that tension is of little importance, because this projectdoes not aim to reassess those perspectives My goal is not so much to under-stand what types of information are more (or most) important to the Justices,but rather to understand the sources of the information on which they rely.The existing literature is important to my inquiry – I cannot understand howJustices obtain the relevant information without understanding what informa-tion is likely to be important to them But it is important primarily as thebackground against which I write; I have no need to stake out any particularposition on the major issues that previous scholars have analyzed so divisively.Because my strategy is to isolate the cases in which neither legal nor policyinformation is likely to be immediately dispositive, the relative weight that theJustices give the different types of information is much less important thanthe basic idea that their decisions rest on various types of information notimmediately apparent even to a trained observer

aca-1.1 THE POLITICAL-SCIENCE PERSPECTIVE: FROM

“ATTITUDINAL” TO “CONSTRAINED” DECISIONMAKING

The idea that something external to the legal materials plays an importantpart in Supreme Court decisionmaking is an old one It has been a dominanttheme in political-science literature on the subject since the 1940s work of

Herman Pritchett His seminal book on The Roosevelt Court (1948) examines

the pattern of voting in non-unanimous decisions of the Supreme Court from

1937 to 1947 Presenting only the simplest of descriptive statistics, Pritchettdraws detailed portraits of the individual Justices, illustrating that their atti-tudes in different subject-matter areas made them predictably more or lesslikely to fall on particular sides of controversies

It is not surprising that policy views are an important part of the Court’sdoctrinal work It is central to the work of mainstream judicial writers of tradi-tions as far removed from each other as Cardozo (1921) and Posner (2010) Butimplicit in Pritchett’s work, and explicit in the later attitudinal work, is theconception of “policy” inputs as preexisting perspectives held in the mindsand personalities of the individual Justices Thus, the most prominent strand

of the political-science literature in this domain has expanded Pritchett’s ysis into a large-scale quantitative argument that the attitudes of the Justicesare, in substance, the only important determinant of Supreme Court decision-making The leading proponents of this view in its strongest form are JeffreySegal and Harold Spaeth.1Although the early work of Segal and Spaeth (1993)was largely anecdotal, it has grown over time to include a database of all ofthe Supreme Court’s merits decisions since 1953 and is now the foundationfor nearly all quantitative studies in the field Chapter 2 uses that database

anal-as the foundation of its introductory quantitative discussion of the Court’sbankruptcy decisions

Segal and Spaeth use the database to estimate the importance of judicialattitudes quantitatively (Segal and Spaeth 2002, ch 8) Specifically, they usenewspaper editorials at the time of each Justice’s appointment to derive anindex of each Justice’s place on a liberal/conservative continuum They show

an impressive correlation (0.76) between votes and the Justices’ individualideological indices, and provide a regression model documenting a statisti-cally significant relation between the index and the votes More dubiously,Segal and Spaeth argue that they can demonstrate the irrelevance of law by

1 Strangely enough, as many political scientists have moved on to institutionally richer modes

of analysis, much of the most recent work in this area has come from legal academics (George 1997; Martin et al 2004; Miles and Sunstein 2006; Sunstein et al 2006).

showing that the predictive power of their model is enhanced only slightly bythe addition of a series of variables accounting for the different facts of thecases that should be relevant as a doctrinal matter (whether there was a war-rant, whether the search involved a car, etc.) Their absolutist perspective iswell captured by Spaeth’s description of law as “a low form of rational behavior[akin to] necromancy or finger painting” (Spaeth 1979, 64).

Although the Supreme Court database that Segal and Spaeth originated

is without a doubt the dominant tool for quantitative analysis of SupremeCourt decisionmaking, it has come under increasing scrutiny in recent years

as scholars express concerns about the methodology by which the databasecodes decisions as “liberal” or “conservative.” For example, Judge RichardPosner and his co-authors have created a modified database reflecting recod-ing of a large number of decisions based on Judge Posner’s sensibilitiesabout what should count as “liberal” and “conservative” (Landes and Pos-ner 2009; Epstein et al 2013) More ambitiously, Anna Harvey argues (2013)that the methodology for defining decisions as liberal and conservative reflects

an inherent “confirmation” bias in the minds of those making the ing decisions She goes on to present (2014) a book-length analysis of anew methodology for assigning conservative/liberal codes based on whetherthe decision upholds or invalidates a decision adopted during a time of

cod-a Democrcod-atic or Republiccod-an mcod-ajority in Congress Whcod-atever impcod-act thcod-atmethodology might have in the political-science literature, it is of limited usefor this project because it does not extend to statutory cases

A closely related body of scholarship, building on the work of Murphy(1964), emphasizes strategic interactions among the Justices themselves: cir-cumstances in which Justices cast votes that do not reflect their sincerepreferences That literature, rooted in game theory, seems to me less a reaction

to the Segal–Spaeth premise that only attitudes matter than an explanation

of how rational Justices would act if Segal and Spaeth were correct (Posner

2010, 30) That work has been particularly prominent in the last few decades(see McNollgast 1994; Knight and Epstein 1997; Wahlbeck et al 1998; Maltz-man et al 2000; Arrington and Brenner 2004; Hammond et al 2005; Daughetyand Reinganum 2006; Bonneau et al 2007) More recently, it has entered thelaw-review literature (Jacobi and Sag 2009), as legal academics have used it aspart of the “New Legal Realism” movement (Miles and Sunstein 2008)

The polar opposite of Segal and Spaeth is a wholly positivist tive, that legal decisionmaking applies a self-contained set of principles totexts, producing determinist results wholly independent of the individualviews of the actors involved Although it dominates the legal scholarly debate(discussed in the next section), that perspective has not played a major role in

perspec-the scholarly debate among political scientists Raperspec-ther, perspec-the intra-disciplinarychallenges to Segal and Spaeth have come for the most part from two fronts:those who argue that their notion of “attitude” is impoverished and those whoargue that an adequate model of decisionmaking must accept the importancenot only of judicial attitudes, however defined, but also of law itself.

On the first front, many scholars have emphasized the broader institutionalbackdrop against which the Court operates: The Court’s decisions reflectnot only the preexisting attitudes of the nine Justices, but also the views ofCongress, the executive, state political systems, and even nongovernmentalelites Law necessarily exists within a network, including those parties andany others with substantial interests in the content of the law Essentially, thelaw represents the alignment of all of those contested interests From that per-spective, the stability of any particular alignment is a function of the apparentcosts of reopening the “sealed object”; stare decisis is a doctrinal vessel formanaging those costs The positive statutory and constitutional law obviously

is one of the most important constraints, but its strength in any particular text varies directly with the strength of other competing interests in the topic

con-at hand

Again, there is nothing new about this idea Even Pritchett could note thisreality and quote Dooley’s aphorism about the Court’s propensity for follow-ing “th’ illiction returns” (Pritchett 1948, 8–9, referring to Dunne 1901, 26)

In modern years, this is reflected in the American Political DevelopmentTradition, which includes an entire volume of detailed case studies about par-ticular Supreme Court decisions (Kahn and Kersch 2006), a book-length study

by Powe (2009) emphasizing the importance of nongovernmental elites, andnumerous careful empirical studies Within that tradition or working along-side it, political scientists in the last twenty years have gone a long way towarddocumenting and quantifying the role of the multifarious interests that con-strain the Court in its determination and development of legal rules (Crossand Nelson 2000; Caporale and Winter 2002; Bergara et al 2003; Hume 2014;Owens 2010; Segal et al 2011) For my purposes, that work is primarily caution-ary Specifically, I need to distinguish between the ability of elites to influencedecisions strategically (the Court is disciplined to follow the views of elitesbecause of a fear of retribution) and the ability of elites to influence decisions

by providing information that shapes the Justices’ independently developedlegal views (the Court’s decisions take account of factual information thatelites provide to it)

The second broad reaction to Segal and Spaeth has accepted that lawindependently constrains the influence of attitudes, whether they come fromthe Justices’ preexisting dispositions or from some sense of the desires of

powerful actors external to the Court Although the interaction of attitudesand external influences has been an important theme of work for years (Lim2000; Richards and Kritzer 2002; Bartels 2009; Posner 2010), the 2011 publica-

tion of Bailey and Maltzman’s The Constrained Court makes that interaction

the foundation for a comprehensive synthesis of the attitudinal, legal, andelitist perspectives Using a newly developed methodology for comparingthe ideal policy points of actors in the judicial, executive, and legislativebranches, Bailey and Maltzman provide compelling empirical evidence thatthe attitudes of the Justices are substantially constrained by both law (legalprinciples) and politics (signals from the executive and Congress).2By inte-grating the various perspectives into a single quantitative model, their worklargely redefines the debate for all future writers in the area They provide arelatively moderate structure against which I can situate my project, which Ihope is sufficiently capacious to appeal both to political scientists and legalscholars

1.2 THE LEGAL ACADEMIC PERSPECTIVE ON BANKRUPTCY: A

CASE STUDY IN TEXTUALISMDespite its relative obscurity as a subject matter when compared to moresalient topics like abortion, affirmative action, and civil rights, the decision-making frame of the Supreme Court’s bankruptcy decisions has spawned

a substantial literature in the law reviews That literature is almost entirelyseparate from, and largely uninformed by, the extensive literatures discussedabove For the most part, the law-review literature on bankruptcy decision-making has started from the premise that, for better or worse, the SupremeCourt’s bankruptcy decisions are predominantly textualist (see Carroll 1993;Cuevas 1994; Effross 1992; Rasmussen 1993; Schwartz 2001; Tabb and Law-less 1991) The best example in this tradition is Rasmussen (1993) Analyzingthe Supreme Court’s twenty-eight bankruptcy decisions from 1986 to 1993,

he concludes that the text almost always drives the decisions, with limiteddepartures in cases that involve important governmental interests Interest-ingly, Rasmussen reads the decisions of lower courts (principally the federalcourts of appeals) as being much more “dynamic” in their interpretive strategy– more likely than the Supreme Court to read the text in light of the under-lying policies and purposes of the statute Rasmussen vigorously criticizes theCourt for its failure to articulate a coherent bankruptcy policy (Rasmussen

2 Pacelle (2015) follows in that vein, providing an updated statistical analysis that underscores the effects of congressional majorities on the Court’s decisionmaking process.

1993, 565–571) Ultimately, however, Rasmussen concludes that textualismworks better at the Supreme Court than a dynamic approach He contendsthat few of the cases would have been decided differently under any approach,that the harm of following the text to a bad policy decision is relatively small(principally because Congress can repair the damage), and that textualism

is valuable because it saves the Court’s resources for more important anddifficult cases (Rasmussen 1993, 595–597) Schwartz (2001) offers a slightly dif-ferent take on the problem, arguing that the Court’s emphasis on predictabletextualism has prevented it from developing coherent policies or goals in itsbankruptcy cases Finally, complementing Rasmussen’s work, Bussel (2000)surveys the court of appeals bankruptcy decisions that claim to adopt textu-alist reasoning and finds that they are more commonly reversed by statutethan other decisions; the work suggests both that wholly textualist decisionsare more likely to be pernicious and that their ill effects easily are remedied

a judge himself, Dembart and Markell emphasize the ease with which theauthors of opinions easily can cloak themselves in the plain meaning of thestatute to justify decisions that the language of the statute does not compel.Thus, among other cases, Dembart and Markell (2004, 391) emphasize the

inconsistency of Justice Scalia’s opinion in BFP (the subject of Chapter 11)

with the language of the Bankruptcy Code They also emphasize the

appar-ent dominance of policy in Bildisco and Midlantic, the subjects of Chapters 7

and 8 (Dembart and Markell 2004, 392) Lawless takes a similar perspective.Although he had argued earlier that the Court’s decisions are inordinately tex-tualist (Tabb and Lawless 1991), Lawless (1996) embraces the difficulty of thetextualist interpretation, criticizing the Court as unreasonably favorable to theGovernment and institutional creditors and insufficiently attentive to broaderbankruptcy policies

Tabb (1987) offers the only substantial effort to situate the Court’sbankruptcy decisions as a group against broader patterns of decisionmaking

He provides detailed discussions of the Court’s first nine decisions under theBankruptcy Reform Act and suggests a number of “principles of decision”other than pure textualism that might explain those decisions In general,however, he concludes that the Court applies none of the principles he

discusses consistently across all of the cases.3Still, his frank recognition thattextualism alone provides a poor explanation of the pattern of results standsout against the other writing in the field.

The inadequacy of textualism as an explanation for the Court’s decisions

is not simply a straw man that I aim to debunk Rather, it is a premise fromwhich I start, central to the motivation of this project: Although the Courtemphasizes the text as a matter of course in all statutory cases, even the Courtacknowledges the importance of other factors in many cases To be sure, thatidea is not novel It is central in the voluminous literature about statutory inter-pretation – the backdrop against which the legal scholars situate their work.The point of this project is to tie the way in which the Court weighs pol-icy against text to the specific institutional framework in which a case arises.That tie is to my knowledge absent from the legal literature about statutoryinterpretation, presumably because it makes no sense within the purely legaltradition to assert that the “correct” answer to a legal question is (or shouldbe) influenced by issues of external institutional design.4

1.3 THE ROLE OF EXTERNAL KNOWLEDGE IN JUDICIAL

DECISIONMAKINGThis, then, is my point of departure – to focus on the source of information,

of knowledge, on which the Court draws when it decides routine cases aboutwhich the Justices lack strong preconceptions The principal study of thatquestion to date has involved the importance of amici – nonparties who volun-tarily provide information to the Court Generally, that literature documentsthe importance of the information those parties provide – its importance to theCourt’s decision (see Caldeira and Wright 1988; Collins 2007, 2008) That isespecially true when the information comes from particularly reliable parties,like the Solicitor General in the Department of Justice (Provine 1980; Kear-ney and Merrill 1999; Bailey et al 2005; Owens and Wohlfarth 2014) Indeed,Black and Owens (2014) provide persuasive statistical evidence that the Solic-itor General’s participation actually influences the Court’s decisions In most

of that literature, though, the theory is that the information provided by the

3 Because Tabb wrote so soon after adoption of the Bankruptcy Reform Act, he had a much smaller universe of decisions to examine Moreover, because he did not yet have access to any

of the Justices’ papers, his discussion of the cases rests almost entirely on the opinions of the Court As we will see in the case studies that follow, the published opinions often tell little of the story of the Court’s decisionmaking process.

4 Pildes (2013) comes close to this problem, asking whether the Court’s decisions should rest on institutional design (in theory) or institutional capacity (in fact).

brief is simply that the case is important to the party in question – there israrely discussion of underlying legal or policy arguments that would bringthe amicus effect closer to a legalist conception of decisionmaking (Epsteinand Knight 1999) Only in the last few years have scholars begun to considerthe possibility that amici might influence the analytical structure of the opin-ion (Collins et al 2015; Larsen and Devins 2016) Because this study rests on

a firm distinction between a strategic effect of that information (discussedabove, depending entirely on the identity of the advocate) and the direct value

of the information as inputs for the decisionmaking process, that literatureprovides a baseline for the work I undertake in the closing chapters of thisbook

To explore how the judicial process integrates the available informationinto the decisions that it produces, I delineate three separate stages of analysis.First, how much room does positive law leave unresolved? Although positivelaw might provide a compelling answer in many (perhaps most) disputes, itwill rarely be dispositive in cases that reach the Supreme Court; the cases that

divide the Court closely should be those where positive law is least dispositive.

Thus, several scholars in recent years, most successfully Bailey and Maltzman(2011), have emphasized how other factors are especially likely to come tothe fore in cases in which law is indeterminate (Maltzman and Wahlbeck1996; Johnson et al 2012; Epstein et al 2013) If we accept the legal skills

of all the Justices, then any case that divides the Justices closely is one onwhich the legal materials themselves are not definitive In that vein, Sunstein

et al (2006, 130) document the limited importance of attitudinal norms whenpolitical salience is limited

The second step is to consider the sources to which the Justices turn whenlegal constraints are relaxed Although attitudes and predispositions are cer-tainly part of the process – something all would admit even in the absence ofthe compelling statistical demonstrations of the attitudinalists – there is muchmore I argue here that the Justices, seeking to resolve cases as best as they can,search in close cases for expertise to which they can defer, at least in part tominimize the risk of unforeseeably disruptive decisions that are not compelled

by legal doctrine Expert federal agencies, for example, are likely sources forthe Justices seeking guidance in resolving difficult cases Eskridge and Frickey(1994) discuss the difficulties of deciding when to defer to agencies

The third and final step is how to incorporate the information and tise brought to bear on the question into a final and definitive ruling Here,the problem is one of judgment, constructing a coherent narrative of legaldoctrine that incorporates the knowledge and expertise the Justices havegleaned from external sources Aggregating those sources into a single lucid

exper-framework is of course not an easy, or inevitably successful, task (Jasanoff1990; Whiteman 1985) Indeed, with this Court, as with supreme courts inother nations, the preliminary question of identifying the point on which thecase will turn is itself a delicate one (Latour 2010) Most often (and always inthe cases at the heart of this project), the question can be viewed as one ofaccommodation of disparate and incompatible interests.

As applied to the context of this project, the central question in the casestudies typically will be which of a pair of competing interests will prevail: theinterest in a broadly effective bankruptcy proceeding or the opposing interestseeking to escape invalidation in bankruptcy, whatever that interest might be(labor policy, environmental policy, criminal enforcement, state autonomy,and so forth) Analyzing the resolution of that question across a range of closecases, the book presents an “information-based” explanation that the absence

of a reliable and articulate advocate of bankruptcy policy – the absence of acrucial information resource – has led to a course of decisions in which thebankruptcy policy gives way for the most part to the opposing interest

Data and Methods

The question of how the Justices determine their votes in cases that lacknotable salience or political importance is not only multifaceted but also one

as to which there is little direct evidence To be sure, the literature rized in Chapter 1 includes a rich history of quantitative studies which providetechniques and data that certainly can shed some light on the subject But for

summa-an inquiry that ultimately seeks to summa-analyze the Justices’ actual motivations, apurely quantitative study seemed inadequate As a result, a thorough studywould mix methods, including elements of both quantitative and qualitativeinquiry

2.1 DEFINING THE SUBJECTThe first task is to define and justify the boundaries of the inquiry My selec-tion process is the opposite of the method in much of the existing literature

It is well recognized that one of the weaknesses of the attitudinal literature isits “preoccupation with politically charged cases,” an exaggerated impression

of the “permeation of American judging by politics” (Posner 2010; Friedman

2006 (arguing that the emphasis on votes instead of opinions overstates themeaning of votes in hard cases)) Instead of analyzing the most controversialcases (where preexisting policy attitudes are most likely to be important), Iwant to identify cases where preexisting attitudes are relatively unlikely andwhere law is similarly indeterminate By identifying the cases least likely to beresolved by the statutory text or preexisting attitudes, I can most readily exam-ine the process by which the Court acquires and processes the informationthat would be likely to inform policy Metaphorically, my goal is to removethe “noise” introduced by overpowering legal and attitudinal effects so that Ican observe the routine underlying processes of information collection and

processing – just as scientists can examine gravity waves only by insulatingtheir apparatus from the noise of the everyday environment.

For this study, I have chosen the Court’s cases evaluating the BankruptcyCode of 1978 Although the statute has sufficient economic and social signif-icance to produce a steady diet of cases before the Court, it is not among theissues that are politically salient or controversial to the Court This reducesthe likelihood of strong preexisting intuitions at the Justice level (Nash andPardo 2011 (documenting lack of ideological bias at the court of appeals inbankruptcy cases))

To give the study coherence, I begin with the adoption of the BankruptcyCode of 1978 As Chapter 3 explains in more detail, the Code’s adoption was

a watershed event, substantially rewriting American bankruptcy law, generally

to extend relief much more broadly than had been the case previously (Skeel2003) The adoption of the new statute rapidly brought the Court a relativelylarge set of cases presenting parallel questions about how to fit the new form ofrelief into the background of existing bankruptcy law and the array of state andfederal policies that the new statute affected This study examines the universe

of the Supreme Court’s cases under that act, which first reached the Court inOctober Term 1981 Appendix A lists the universe of those cases, eighty-two as

of the fall of 2015

2.2 QUANTITATIVE ANALYSISThe wealth of quantitative analysis of Supreme Court decisions discussed inChapter 1 provides a ready set of tools for analyzing the cases in this study Istart with a dataset of the eighty-two cases identified in Appendix A In addi-tion to basic identifying information, the principal variable of interest is a newhand-coded variable that classifies the decisions based on the effect of thedecision on the scope of the bankruptcy power Specifically, I code a case as

“broad” if it broadens (or broadly interprets) the relief available in bankruptcyand as “narrow” if it narrows (or narrowly interprets) such relief So, for exam-ple, a case that denies the ability of a bankrupt to abandon contaminatedproperty would be coded as narrow, while a case allowing discharge of debtsarguably incurred by defalcation would be coded as broad.1The general idea

is to capture the extent to which the Justices give credence to the importance

1 Few of the cases are difficult to code under that conception When in doubt (occasionally

in cases like Timbers of Inwood Forest that involve disputes among creditors that are wholly

internal to the bankruptcy process), I assess whether the decision positively (or negatively) affects the assets available to the estate Appendix A displays the coding for all of the cases in the dataset.

of Congress’s adoption of the Code (or the constitutional Bankruptcy Powerthat justified Congress’s action) by interpreting the Code to establish a morerobust system of relief.

I merged the dataset of Supreme Court bankruptcy cases with the Segal–Spaeth Supreme Court Database, including Quinn-Martin and Segal–Coverideology scores I also added to that dataset the “salience” scores of the cases(all available at the web site for the Supreme Court Database), which score acase as salient if it is mentioned on the front page of the New York Times when

it is decided or in the Congressional Quarterly Using the resulting database,

I can examine the extent to which the decisions (or votes) in bankruptcy casesmap onto traditional estimations of “conservative” and “liberal,” and also theextent to which the decisions (or votes) favor a broader or narrower bankruptcysystem For comparative purposes, I collected parallel data for the securitiesand tax cases dating back to 1954 (the starting point of the Supreme CourtDatabase)

2.3 QUALITATIVE ANALYSISBecause the ultimate goal of the project is to understand the Justice-levelmotivations for the votes in individual cases, the quantitative analysis sum-marized above is inherently limited Accordingly, I decided at the earlieststage that the project also would include detailed studies of particular cases,using the Justices’ papers to broaden the information beyond the informationavailable from the Court’s published opinions Of course I am far from thefirst scholar to use the Justices’ papers as a resource; some of the most impor-tant books discussed in Chapter 1 rely heavily on those papers (Knight andEpstein 1997; Maltzman et al 2000), but the political science literature thatuses those papers has grown far beyond the context discussed there (Corley2008; Johnson et al 2006; Owens 2010; Wahlbeck et al 1999)

Legal scholars also have used those papers frequently Much of that erature focuses on the decisions of a particular Justice (Greenhouse 2006(Harry Blackmun); Hutchinson 1998 (Byron White); Jeffries 2001 (Lewis Pow-ell); Purcell 2000 (Louis Brandeis); Schwartz 1983 (Earl Warren); Stern andWermiel 2010 (Bill Brennan)), or, occasionally, to examine doctrinal devel-opments in a particular area (Pritchard 2002; Pritchard and Thompson 2009).The effort here – to understand the Court’s decision-making process itself andthe influences on it – is closest to the work by Richard Lazarus (2007; 2011)

lit-on the Court’s envirlit-onmental decisilit-ons, although it also resembles in someways work by Black and Owens (2014) (analyzing the influence of the SolicitorGeneral), Maltzman et al (2000) (documenting the importance of strategic

decisionmaking by the individual Justices), and Schwartz (1997) (analyzingthe shifting role of the Chief Justice from the 1970s to the 1990s).

More generally, the attention to qualitative case studies as an alternative

or supplement to quantitative work has become increasingly common in thepolitical science literature, especially in work about the Supreme Court Tomention just a few of the most prominent, that methodology has been partic-ularly successful in work from Howard Gillman (2001), Mark Graber (1998),Thomas Keck (2007), and Keith Whittington (2001) Indeed, as emphasized

in Chapter 1, the American Political Development Tradition is founded oncase studies (Kahn and Kersch 2006) To offer one salient example of directrelevance to this project, Keck (2007) compares the political alignments thatsupported the enactment of statutes with the presumed political alignments

of Justices that voted to invalidate statutes, concluding that a large share ofthe invalidations can be explained only on the basis of a “legal sensibility,” asopposed to any “partisan platform.”

The question in each case is whether the internal papers reliably shedlight on anything that cannot more easily be determined from the final pub-lished opinion In particular, because the papers come from the files of aparticular Justice, the risk that they will be self-justifying or reflect the sin-gle perspective of one Justice rather than the Court as a whole is apparent.Those problems do not undermine the value of the papers for what I amdoing here For the purposes of this work, some of the most important doc-uments in the files are the documents that represent the views of particularJustices: the drafts that show how opinions developed over time, the docu-ments they circulate among each other seeking changes to opinions, and themissives to and from their clerks discussing the issues they find important.Those internal documents provide a valuable glimpse at the differing per-spectives of the various Justices and their clerks, as well as how the positionsshifted through the decisionmaking process As prior scholars have recognized(Maltzman et al 2000), the Justices’ papers are valuable sources for that type

of information

The papers also provide a valuable window on the sort of questions thatthe Justices consider during the process of reaching a decision When wethink of the making of law as the combination and reconciliation of disparateinformation, a central part of the process is the identification and selection(to use the term of Latour 2010) of the “moyen” – the point of decision onwhich the case will turn It is commonplace that legal reasoning requiresthat law at least appear to be a “delicately knitted lace” that is seamlesslyinterwoven with the social institutions out of which it arises (Latour 2010;Pritchett 1948, 47 (discussing the importance of reconciling continuity and

adaptability)) That necessity, in turn, makes it incumbent on the Justices tounderstand the institutional background into which their decisions will beplaced.

The papers of the individual Justices often provide a far richer resource forthat inquiry than the final published opinions Among other things, they oftendocument an interplay between legal and extra-legal concerns that is not evi-

dent from the published opinions For example, the papers related to Owen v.

Owen2include a remarkable note by Justice Scalia, to whom the opinion inthat case had been assigned In the process of drafting the opinion, he appar-ently determined that the law imposed an insuperable constraint to writing anopinion explaining the result that all nine of the Justices had supported whenthey first discussed the case He commented:

I was as firm as any of you in my opinion that the judgment in this case

had to be an affirmance I have found it impossible, however, to write it

that way The principal difficulty is that the case-law [on a relevant point] is

unanimous I am unwilling to contradict this unanimous line of authority;

and I cannot find a way to distinguish this authority OWEN009

The files from Norwest Bank Worthington v Ahlers3 provide a similarexample of the way in which law provides a constraint to concerns related

to broader social policies The Court in that case rejected a plan for thereorganization of a family farm, but the opinion did include a substantial pas-sage acknowledging the plight of family farmers In her note joining JusticeWhite’s opinion, Justice O’Connor commented that she “particularly appre-ciate[d] your inclusion [of] a recognition of the plight and worth of the familyfarm While we can’t help solve the problem, at least we acknowledge it”(NBWA021).4

Given the goals of the undertaking, it is ambitious to think that it can ceed even with access to the Justices’ papers, but almost pointless even totry without them Because at the time this study was designed none of thosepapers were available beyond October Term 1993, I terminate the case studies

suc-at thsuc-at point (with the 1994 decision in BFP v Resolution Trust Corporsuc-ation).

As a basis for the case studies, I collected all of the available papers of theJustices that relate to any of the eighty-two cases in the dataset, scanned all ofthe individual documents in the files of the Justices, assigned each document

a standardized document identification code, and then posted them online

2 500 U.S 305 (1991).

3 485 U.S 197 (1988).

4 On his copy of the note, Justice Blackmun added a wry comment: “Still running for high public office?” (NBWA021).

F I G U R E 2.1 Justice Scalia’s Memorandum in Owen v Owen (OWEN009).

at www.bksct.net.5For each case, the site includes a timeline, constructed byarranging in chronological order all of the papers of all of the Justices Becausethe individual documents are identified by date, type, and chamber of origin,they should permit ready reference for future scholars For the purposes of thisproject, citations to papers available at that site use the web site’s documentidentification codes

The next problem was to decide which cases to examine in detail.Bankruptcy cases rarely present high-profile policy questions likely to speak

to Justice-level predispositions, and in many cases the statutory text or evant doctrine will be sufficiently clear that resort to external informationwill not be important to the decision Information external to the statu-tory text obviously will be most important when the legal doctrine is notdirectly dispositive (Richards and Kritzer 2002; Bartels 2009 (analyzing the

rel-5 A generous grant from the National Conference of Bankruptcy Judges supported that work.

F I G U R E 2.2 Justice O’Connor’s Memorandum in Norwest Bank

Worthington v Ahlers (NBWA021) Justice Blackmun’s handwritten

comment reads: “Still running for high public office?”

“constraining” power of doctrine)) Recognizing the difficulty of identifyingany objective (or positive) measure of ambiguity (Farnsworth et al 2010), Ifollow Pritchett’s example of studying cases in which the Justices disagree Inthat respect, the work resembles Gebbia-Pinetti (2000) (descriptive analysis ofinterpretive methodologies in non-unanimous bankruptcy cases) To empha-size the cases in which the law is least likely to be dispositive, I decided topresent case studies for all of the cases in which the Justices are closely divided(either 6–3 or 5–4) The last of those cases for which papers are available is the

1994 decision in BFP v Resolution Trust Corporation.6Chapters 5 through 8,

10, and 11 present case studies of each of the close cases through and including

6 Interestingly enough – after ten closely decided cases in the twelve years leading up to BFP –

there was not another such case until 2004, far too recent for any of the Justices’ papers to be available.

BFP Although it mars the elegance of the project design, I add a discussion

in Chapter 9 of the relatively “easy” decision in Kelly v Robinson, decided

by a 7–2 vote, both because it is such an excellent example of my thesis andbecause of its role in the development of this project.7

7 I have collected and studied the papers in all of the cases that are not unanimous, but consider

in the detailed case studies only the more closely divided cases Where appropriate, I refer to

the papers in those other cases I should add that I excluded the 5–4 decision in Pioneer v.

Brunswick because it involved neither the constitutionality of the Code nor interpretation

of the Code itself, but rather interpretation of the Bankruptcy Rules (promulgated by the judiciary) that govern the rights of creditors that fail to file a timely proof of their claim.

Although it was a closer call, I also excluded the 6–3 decision in PBGC v LTV Corp., which

seemed to me much more a decision about ERISA than a decision about the Bankruptcy Code.

Congress and The Bankruptcy Code of 1978

A brief recounting of the Code’s adoption sets the stage for the quantitativeand qualitative analysis of how the Court has treated the Bankruptcy Code.The extent of Congress’s effort in designing the Bankruptcy Code can hardly

be overstated Unlike recent legislation in the area, the Code was not duced by the partisan designs of a single party or drafted to satisfy the interests

pro-of particular businesses (Jensen 2005; Whitford 2007) On the contrary, theCode was the end point of a decade of attention The process began withthe 1968 hearings of a subcommittee of the Senate Judiciary Committeeinvestigating the utility of appointing a Bankruptcy Commission (Tabb 1995;Skeel 2003, 136–41) Based on the information collected in those hearings,Congress proceeded with the 1970 appointment of the Commission on theBankruptcy Laws of the United States.1The commissioners were appointed

by the President, President of the Senate, the Speaker of the House, and theChief Justice The President appointed two distinguished bankruptcy experts(Harold Marsh, the Chairman, and Charles Seligson) The President of theSenate appointed a pair of Senators, the Speaker of the House a pair of Con-gressmen, and the Chief Justice two experienced judges, Edward Weinfeld(from New York) and Hubert Will (from Chicago) The Executive Direc-tor (and presumably the principal draftsman of the Commission’s work) waslong-time Michigan Law Professor Frank Kennedy

The Commission spent two years producing a detailed report ing wholesale changes to almost every aspect of the bankruptcy system in thiscountry (Commission on the Bankruptcy Laws of the United States 1973).Among other actions undertaken, the Commission authorized a series of stud-ies of the operations of the existing system, it held several conferences with

recommend-1 The discussion that follows draws heavily on the lucid discussion by Klee (1980), Skeel (2003), and Block-Lieb (2012).

important stakeholders around the country, and it enlisted the services of adistinguished list of scholars from business and law faculties, as well as note-worthy research institutes like the Brookings Institution and the American BarFoundation In stark contrast to the National Bankruptcy Review Commission

of the 1990s (for which then-Professor Elizabeth Warren was the Reporter),the 1970s Commission report was almost entirely unanimous, devoid of parti-san divides The sole exception was a brief dissent by Judge Weinfeld (of theSouthern District of New York), who argued that the reforms the Commis-sion advocated could be accomplished without the new tier of judges that theCommission recommended The breadth of the Commission’s vision is plainfrom the structure of its work as a response to three problems Congress empha-sized in the Joint Resolution (P.L No 91–354) that authorized the creation ofthe Commission: a radical upturn in bankruptcy filings; a shared sense amongparticipants that the system was functioning poorly; and the vast expansion ofcredit since the design and enactment of the then-extant Bankruptcy Act of1898

Even more importantly, the work of the 1970s Commission (unlike the work

of the National Bankruptcy Review Commission) set the framework for islation Although I discuss below Congress’s studied rejection of the judicialand executive framework that the Commission recommended, much of thestructure, and even the language, of the Bankruptcy Code of 1978 finds itssource in the Commission’s 1973 report Preoccupied with the question ofwhether the judges would be appointed for life with the constitutional pro-tections of the federal judiciary (the subject of Chapter 5), Congress largelyapproved the sweeping extensions of bankruptcy relief that the Commissionproposed as a response to the marked upturn in credit and financial distressduring the twentieth century With no dispute about the pressing need for

leg-“the modernization of the bankruptcy law” (House Committee on the ciary 1977, 3), both Houses of Congress adopted the Code by voice votes.President Carter signed it into law in November of 1978 It took effect, for themost part, on October 1, 1979

Judi-Looking back from the present day, it is difficult to convey the importance

of the Code’s adoption Perhaps the most salient indicator of the long-termvision behind the reform is the point noted by Tabb (1995), that this is theonly major revision of the bankruptcy laws not enacted as a response to asevere depression It is only a small exaggeration to suggest that the Code insubstance created the architecture of the bankruptcy system as we know it Itshould illustrate the point adequately to summarize the structure of what theCommission proposed and Congress created

Surely the most important innovation of the Commission’s report was itsrecommendation for a bankruptcy agency, in the Executive Branch, to beknown as the United States Bankruptcy Administration (Commission Bill

§§ 3–101 to 3–403 Commission on the Bankruptcy Laws of the United States1973; Kennedy 1973) The Commission on that point followed the lead of adetailed 1971 Brookings Institution study, which based its call for an admin-istrative agency on an empirical study of cases under the old Act2 (Stanleyand Girth 1971) The Commission explained that “a great part of the work

of the bankruptcy system is administrative rather than judicial in character,”and that separating those functions from the more conventional dispute-resolution functions would enhance both the objectivity of the judges (byremoving them from day-to-day administration) and the efficiency of thesystem (by limiting the tasks that the judges needed to perform) (Commis-sion on the Bankruptcy Laws of the United States 1973, 5–8) Related to thatpoint, the Commission recommended the creation of a new set of judges –specialist judges, with the constitutional status of the existing federal judi-ciary, who would decide all of the issues arising in bankruptcy cases, subject

to review by the district and appellate courts (Commission Bill §§ 2–101 to2–210)

Aside from the thorny problem of constitutional status, Congress acceptedthe need for new judges whole-heartedly Congress did not, however, go sofar as the Commission recommended to regularize the administrative process.Congress acknowledged the need to separate the administrative and judicialroles (House Committee on the Judiciary 1977, 89–91), crediting the commoncomplaint that “the bankruptcy court is the only court I appear in in whichthe judge is an interested party” (House Committee on the Judiciary 1977, 91).But instead of a separate federal agency, Congress chose a much less ambi-tious system of United States trustees, to be appointed in each of the federaljudicial districts, together with a minor officer in the Department of Justice tosupervise the trustees, the predecessor of what is now the Office of the UnitedStates Trustee (House Committee on the Judiciary 1977, 100–112) By creat-ing a group of trustees to administer the individual estates, separate from thejudges that adjudicate disputes about them, Congress thought it had resolvedthe problem of the self-interested decisionmaker that had plagued proceduresunder the Act

2 Although it is surprising from our vantage point - after three decades of the Code - the call for

an agency at the time was commonplace (Skeel 2003, 77 (discussing various early calls for an agency)).

It well might be that the chances of Congress at that time creating anymajor new agency were scant The SEC (probably the closest parallel) wascreated almost a half-century earlier in response to a firestorm of outrage atharms the entire nation suffered that were attributable, to some degree, toill-functioning securities markets.3 No such emergency faced the Congressthat considered the report On the other hand, as Rafael Pardo and KathrynWatts emphasize, “the Bankruptcy Code is one of the few major federal civilstatutory regimes administered almost exclusively through adjudication in thecourts – not through a federal regulatory agency” (Pardo and Watts 2012, 386).The result is to have the final decisions about the direction of the bankruptcysystem made by the appellate federal judges – generalists – rather than byinformed specialists in an agency More generally, the decision to operate thesystem through courts rather than an agency comes at the cost of the vari-ous potential benefits that usually justify the choice of an agency as the mosteffective tool for implementing complex policy on the ground: accountabil-ity, uniformity of outcome,4accessibility and transparency, prospective clarity,and flexibility in responding to unforeseen situations and issues (Pardo andWatts 2012, 423–445) Indeed, although it was not apparent at the time, hind-sight suggests that the rejection of the agency has pushed the system down

an adversarial path that is much more expensive, especially in large ness reorganizations, than the more “inquisitorial” system that might haveaccompanied an expert agency (Bussel 2016)

busi-In any event, Congress’s decision to reject the agency proposal rested atleast in part on the firm opposition of the bankruptcy judges to that proposal(Skeel 2003, 143–145) From a cynical perspective, the opposition could beviewed as a classic instinctive reaction on the part of officials anxious to pro-tect their “turf,” though presumably the individual actors sincerely doubtedthe effectiveness of the proposed agency Although this was by far the mostimportant departure from the Commission’s vision (in part because the cre-ation of the agency was the most notable feature of that vision), it receivedrelatively little attention in congressional deliberations; apparently judicialopposition made it a “non-starter” even before Congress began deliberations.From the perspective of this project, though, this relatively quiet moment

3 Moreover, as Ernst (2014) documents so persuasively, even during the Great Depression it required remarkable effort to manage the successful creation of the SEC and other New Deal agencies.

4 The triviality of many of the Supreme Court’s bankruptcy decisions would lead the casual observer to think that the Court’s exercise of its certiorari jurisdiction is an adequate mecha- nism for ensuring uniformity That is plainly not the case For example, one Federal Judicial Center study concluded that “bankruptcy law is less settled than in other areas of law–and it affects judges’ work” (McKenna and Wiggins 2002, 635).

was the single point on which all later events turn This is the point towonder about the shape of the path not taken: What would the bankruptcy

process look like if Congress had accepted the result of the Commission’s

considered deliberations instead of rejecting them out of hand? I am notalone in the structural inquiry Pardo and Watts recently presented an inci-sive plea (2012) for a resuscitation of the administrative model, though so far

as I know their call has received little or no attention in the policy-makingcommunity.5

Putting to the side the “personnel” question – agency versus judges sus pseudo-judges – the Code also comprehensively recast almost everyaspect of the relief available in bankruptcy As the Commission recognized,the inadequacy of consumer relief was one of the main factors motivatingCongress’s creation of the Commission (Commission on the BankruptcyLaws of the United States 1973, 9) The Commission proposed two chap-ters for consumer relief (the existing Chapters 7 and 13), both of which weremarkedly more generous than relief available under the old Act Among otherthings, the Commission recommended (and Congress adopted) a broaderdischarge for debtors in Chapter 7 and a provision for wage-earner plans

ver-in Chapter 13 without the consent of creditors Emphasizver-ing the dous rise” in consumer credit since World War II (House Committee

“tremen-on the Judiciary 1977, 116), C“tremen-ongress followed the Commissi“tremen-on’s lead bybroadening eligibility and relief for both of the consumer chapters, empha-sizing an effort to avoid creditor “techniques that enable them to avoidthe effects of a debtor’s bankruptcy” (House Committee on the Judiciary

1977, 117)

Probably even more important were the changes for business cies, which one study characterized as “the most ambitious effort yet toshift the concept of bankruptcy law from a legal mechanism for liquidating

bankrupt-a compbankrupt-any to bankrupt-an enbankrupt-abling mechbankrupt-anism for compbankrupt-any rescue, [bankrupt-an] emphbankrupt-asis[that] would eventually propagate across the world” (Halliday and Carruthers

2009, 2; Carruthers and Halliday 1998) Emphasizing that the lethargic pace

of procedures under the old Chapter XI had made companies reluctant touse the system until liquidation was the only option, the Commission rec-ommended relief that would be both more expeditious and more effective(Commission on the Bankruptcy Laws of the United States 1973, 14)

5 Littwin (2011) provides a provocative cautionary note Comparing the relative success of the judicial process of Chapter 7 with nascent administrative processing, she suggests that in fact the judicial process has done quite a good job, avoiding many of the pitfalls that have made administrative claims systems frequently ineffective.

Accepting that perspective, Congress responded with a new vision ofChapter 11 that gave debtors more control over the process, a broader stay ofcreditor collection efforts during the bankruptcy, and more effective powers

to recover pre-bankruptcy payments to creditors (Skeel 2003, 160–183) Thosechanges removed the primary role the Securities and Exchange Commissionpreviously had played in the reorganizations of major businesses Admittedly,the SEC’s efforts were not regarded as effective; they surely contributed to thelimited use of the old Chapter XI All in all, those changes have transformedthe institutions for restructuring failed businesses, with Chapter 11 now beingthe presumptive locus of relief – even for companies as central to the economy

as General Motors and Chrysler

Perhaps the most impressive testament to the success of the Code it isdurability To be sure, it has been amended more than twenty times, mostrecently by the Bankruptcy Technical Corrections Act of 2010 And some ofthose amendments have been quite important The Bankruptcy Amendmentsand Federal Judgeship Act of 1984 reshaped the role of the bankruptcy judges

(responding to the decision in Marathon discussed in Chapter 5) and

signif-icantly eased the availability of relief under Chapter 13 Most recently, theBankruptcy Abuse Prevention and Consumer Protection Act of 2005 (uni-versally referred to as “BAPCPA”) sharply truncated the relief available toconsumers, imposing a “means test” that limits the bankruptcy discharge torelatively impecunious filers But the basic architecture of Chapters 7, 11, and

13 that was founded on the Commission’s Report and implemented in theCode continues in force to this day

As I suggest above, one of the major claims of the book is that the Courtsystematically has interpreted the Code too narrowly One interesting piece

of evidence that underscores Congress’s perspective on that problem comesfrom the occasions on which Congress has decided to reject the Court’s deci-sions in this area.6 By my count, there are four such cases: Rake v Wade,7

6 I rely for this discussion on the data collected by Dan Bussel and presented in Bussel (2000).

My list omits two of the decisions that he lists as overruled (NLRB v Bildisco & Bildisco,

465 U.S 513 (1984) (analysis modified by 11 U.S.C § 1113); United Savings Ass’n v Timbers

of Inwood Forest, 484 U.S 365 (1988) (result undermined by 11 U.S.C § 362(d)(3)), because the statutory amendments do not seem to me to directly reject the Court’s holding (although they probably would change the result on the facts of the cases in question) I should mention

that Dan Bussel served as a law clerk for Justice O’Connor on Kelly v Robinson, the subject

Davenport,8Nordic Village,9and Hoffman.10In three out of those four cases,Congress overruled a decision interpreting the Code narrowly, substituting a

broader rule that the Court had rejected The only exception (Davenport) is

itself interesting, because it cut back substantially on the narrow reading of the

Code in Kelly v Robinson, the subject of Chapter 9 In that context at least,

the Court’s hesitant sensibility matched Congress’s ill-expressed intent

8 Pennsylvania Dep’t v Davenport, 495 U.S 552 (1990) (allowing discharge in Chapter 13

of certain restitution obligations), superseded by 11 U.S.C 1328(a) (prohibiting such a

dis-charge) I discuss Davenport in connection with my extended discussion of Kelly v Robinson

in Chapter 9.

9 United States v Nordic Village, 503 U.S 30 (1992) (holding federal government immune from

suit in bankruptcy), superseded by 11 U.S.C § 113 (abrogating immunity) I discuss Nordic

Village in detail in Chapter 6.

10 Hoffman v Connecticut Dep’t, 492 U.S 96 (1989) (holding state government immune from

suit in bankruptcy), superseded by 11 U.S.C § 113 (abrogating immunity) I discuss Hoffman

in detail in Chapter 6.