Legal Docket: A brain-bending bankruptcy case

NICK EICHER, HOST: It’s The World and Everything in It for this 5th day of February, 2024. We’re so glad you’ve joined us today. Good morning! I’m Nick Eicher.

MARY REICHARD, HOST: And I’m Mary Reichard. It’s time for Legal Docket.

The Supreme Court is back on the bench this week for oral arguments following a short break.

And when I say “break,” I don’t mean the justices are on vacation. It’s not like that. It’s more a break from the public-facing work of the court.

No, they’ve been busy. Busy with things like petitions for certiorari, meaning whittling through arguments for and against cases that ought or ought not to come to the court.

And it should come as no surprise to know that the justices are seeing more and more cases around the gender confusion that’s gotten so much media attention.

EICHER: Yeah, now it’s getting legal attention.

One of those petitions is inviting the court to decide whether a couple of state laws are constitutional. Both Kentucky and Tennessee ban the use of medications and surgical procedures that attempt to bring about sex change. The use of hormones and puberty blockers and actual amputation of healthy body parts. These things are known in the medical world as “gender-affirming care.”

The challengers of these laws are parents of children diagnosed with gender dysphoria, and they’re looking for these drugs and procedures to try to make their bodies more closely approximate their ideas about what sex they are.

REICHARD: Another petition for certiorari is from Christian parents of another child who has a gender-dysphoria diagnosis.

Indiana’s Department of Child Services accused Jeremy and Mary Cox of abuse and neglect following disagreements about their child’s gender identity. The state then removed the child from the home and didn’t return him, even after the abuse charges were dropped and a court found the mom and dad fit parents.

In response, the parents say this violates their rights to free speech and free exercise of religion, not to mention their parental rights to raise their child according to their values.

EICHER: Today, we’ll analyze two oral arguments heard last month—one of them a brain-bending bankruptcy case—sorry—and the other an immigration case.

So let’s do bankruptcy first.

The main party here is a privately owned hotel company based in Missouri, John Q. Hammons Hotels and Resorts.

Eight years ago, the hotel filed for Chapter 11. That allows overwhelming debts to be restructured in such a way that they can be repaid while allowing the company to survive.

As part of that bankruptcy process, debtors have to pay fees to fund the system that oversees these complicated transactions.

While the hotel’s bankruptcy was pending, Congress passed a law that significantly increased those fees and the hotel paid them.

REICHARD: But just a few years later, the Supreme Court ruled that fee increase was unconstitutional.

So now the hotel wants a refund. It paid millions of dollars levied by a law found to be unconstitutional. The hotel argues the higher fee was applied in an unequal way and applied retroactively, which Congress didn’t intend.

Daniel Geyser represents the hotel:

GEYSER: If the government unlawfully collects funds, it is required to rectify that violation with meaningful backward-looking relief. It cannot simply keep the unconstitutional fees and promise not to do it again.

But the federal government argues taxpayers will be on the hook for those refunds. Therefore, the remedy cries out for a practical solution: fund the system with fee hikes across the board.

EICHER: One thing to understand about the bankruptcy system: a political compromise back in the 1980s resulted in different systems of bankruptcy. Two states have a system in which administrative courts oversee bankruptcies and those courts are funded out of the general budget of the federal courts.

REICHARD: But all the other states do things differently. The Department of Justice oversees those bankruptcy proceedings. DOJ funds those proceedings using fees paid by the Chapter 11 debtors.

The hotel bankruptcy is under that latter system—the debtor-funded DOJ system. That’s where the big fee hike hammered debtors and the high court later struck down the increase.

EICHER: The hotel argues that it violates the uniformity requirement of the Constitution to have two systems, one of which is more expensive for debtors than the other. The Constitution says Congress is to establish “uniform laws on the subject of bankruptcies throughout the United States.”

But Department of Justice lawyer Masha Hansford argues for a practical resolution. When she says “respondent,” she means the hotel.

HANSFORD: The appropriate remedy in this case is the mandate of higher fees nationwide. Now Respondents instead urge a refund remedy which when applied nationwide would require taxpayers to foot the bill for approximately $326 million to fund windfalls for the largest users of the bankruptcy system, like Respondents, who paid exactly what Congress intended that they pay.

Justice Elena Kagan leaned into the government’s position in this exchange with Geyser:

JUSTICE KAGAN: Congress never wants to impose burdens on the taxpayer with respect to bankruptcy, you know, it thinks that the people who use bankruptcy should pay for bankruptcy, then it seems to me that there's a pretty strong case that Ms. Hansford says that it should be equalization by collection.

GEYSER: Well, Your Honor, I think then, if that's true, then it's up to Congress to say that...

REICHARD: But Congress didn’t say that.

Geyser made the point that Congress needs to write better laws because it’s unfair for his client to pay up when others don’t have to.

The tenor of the questions overall leads me to think the hotel isn’t going to win this, although prediction is always risky with the high court. But clarity is needed so the lower courts have the guidance.

EICHER: On to the second and final argument for today: immigration. It’s a consolidated case of different disputes with similar facts and similar questions of law. So I’ll relate just one set of facts:

We’ll begin with a man named Moris Campos-Chaves. He’s a citizen of El Salvador who illegally entered the U.S. back in 2005. Within weeks, he received a notice to appear for a removal proceeding, and there he’d be allowed to make his case not to be removed.

The notice he received is the key. It contained no specifics as to time and place for the hearing. A subsequent notice did have that information.

But Campos-Chaves didn’t appear, so the judge in his absence ordered him deported.

REICHARD: Yet it’s 19 years later and he’s still here. Campos-Chaves made a motion in 2018 to reopen his deportation case. He argues the government didn’t follow the law governing Notices to Appear. It says all information about time and place of a hearing has to be on that one document.

His lawyer, Easha Anand:

ANAND: This is the third time the government has come before this Court and asked to be relieved of the consequences of flouting the plain text of the INA. For a third time, the government says the notice it gave is good enough.

EICHER: The government’s routine is to send two separate documents: one of them is the announcement of a deportation hearing with the time and place listed as TBD, to be determined. After setting the date, time, and courtroom, then the government sends a document revealing all that.

The delay is because it takes some time to get hearings scheduled.

And that should be okay, the government argued. Charles McCloud is assistant to the Solicitor General.

MCCLOUD: The Ninth Circuit is wrong that the omission of time and place information in a notice to appear renders all subsequent notices invalid. Congress created two distinct forms of notice, and it made both of them potential grounds for in absentia removal. The removal orders in these cases were based on notices of hearing that specified a new time and place for the removal proceedings and that warned the non-citizens of the consequences of failing to attend those proceedings. That's all Section 1229 requires for a notice of hearing to be valid.

REICHARD: Plenty of back and forth during argument about the word “change.” The law requires notice of any “change” to time and date of a hearing. McCloud for the government framed its meaning this way:

MCCLOUD: And we think that under the ordinary meaning of "change," particularly as it's used in this statutory scheme, going from an indeterminate time and place to a determined one is a kind of change.

But Anand for the alien framed it differently when Justice Brett Kavanaugh asked:

JUSTICE KAVANAUGH: And where does that come from in the text of the statute?

ANAND: Two pieces. First is the word "change," which, as we've explained, we don't think encompasses the difference between TBD and March 15th. The second is, it's a change of the time and place of such proceeding. So, again, this is my voter registration hypothetical. If you never filled out your voter registration form, your change of party affiliation form -- is not valid either.

EICHER: Justice Elena Kagan pointed out the elephant in the room.

JUSTICE KAGAN: We're living in this world where this is a strange statute because the government has been out of compliance for so long and it leads to some kind of strange results.

REICHARD: Strange results are what the high court would like to avoid. We’ll know how it does that by the end of June by which time decisions in all these cases must be handed down.

And that’s this week’s Legal Docket!

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