Supreme Court Action Today: Habeas Corpus and Credit-Bidding Under the Bankruptcy Code

The Supreme Court issued two opinions this morning.  The first is Coleman v. Johnson (11-1053).  Johnson was convicted in Pennsylvania as an accomplice and a co-conspirator in a murder.  His conviction was affirmed in the Pennsylvania courts and he sought relief via a habeas corpus petition in federal court.  The District Court denied relief, but was overturned by the Third Circuit Court of Appeals on the grounds that the evidence was insufficient in supporting the conviction.  The issue in the case concerns the deference that a reviewing federal court should give a state court decision in habeas petition cases.  

The Court stated the standard is that a reviewing court may set aside a jury’s verdict only if no rational trier of fact could have agreed with the jury, and on habeas review a federal court may not overturn a state court decision simply because it disagrees with it.  The Court then recounted the evidence in the case, including testimony that Johnson was present earlier in the day when the perpetrator and the victim had a fight over money and the perpetrator threatened to kill the victim; that Johnson later that evening helped the perpetrator walk the victim into an alley; that the perpetrator was wearing a coat with a bulge; that the victim was shot with a shotgun, and that the gun was found abandoned in the alley. 

The Court of Appeals reasoned that there was a common intent to threaten the victim, but to infer intent to kill was mere speculation.  The Court said the Court of Appeals committed error in looking to Pennsylvania law to determine the difference between inference and speculation.  Federal law is the appropriate source and only requires juries to draw reasonable inferences from basic facts to ultimate facts.  The Court reviewed the evidence a bit further and concluded that there was enough for the jury to draw its conclusions of guilt and defeat the due process challenge.  The decision of the Third Circuit is reversed in a Per Curiam opinion. 

The second case is RadLAX Gateway Hotel, LLC v. Amalgamted Bank (11-166).  The case involves the interpretation of the Bankruptcy Code that covers cramdown reorganization plans where the lien holder is not permitted to credit-bid in the ensuing auction of the distressed asset.  RadLAX purchased a hotel at the Los Angeles airport and began to build a parking garage.  The project ran out of money and went into bankruptcy.  The debtor proposed a sale of the property where Amalgamated would be one of the bidders but required to bid with cash rather than with their debt interest in the property as an offset.  The Bankruptcy Court denied the plan and was affirmed by the Seventh Circuit.  The Supreme Court affirmed both in that the debtors may not get court approval for a plan that sells the asset free and clear of the Bank’s lien but does not permit the Bank to credit-bid at the sale. 

The relevant statute of the Bankruptcy Code, 11 U.S.C. §1129(b)(2)(A), offers three options that the debtor plan must meet.  The creditor may retain its lien and receive deferred cash payments;  the debtors may sell the property free and clear of the lien provided the lien holder can credit bid at the sale and provide the creditor with a lien on the sale proceeds; or the plan may provide the secured creditor with the “indubitable equivalent” of the claim.  The debtors argued that their proposed sale would fall under the third option by giving the Bank the proceeds of the sale. 

The Court stated that under the canons of statutory construction, the specific governs the general.  The statutory text of the third option is more general than the text of the second option.  Under the rule, it would make parts of the text of the second option superfluous.  As such, it will not apply to a matter specifically dealt with in the second option.  The Court reviews arguments to the contrary and rejects them.  Justice Scalia delivered the opinion for the Court, joined by all other members except Justice Kennedy who did not participate in the case.  [MG]