Was Justice Scalia’s Judicial Philosophy Right for the Bankruptcy Code?

Much has been written about U.S. Supreme Court Justice Antonin Scalia’s interpretive philosophy and his overall impact on the law.  But surprisingly little attention has been paid to his contributions to modern bankruptcy law.

In an article about Justice Scalia’s legacy, I argue that bankruptcy law is a prime area in which to develop and refine Scalia-centric debates about the proper interaction between the judicial and legislative branches.  The complex and lengthy Bankruptcy Code reliably produces a dazzling array of interpretive questions for courts to resolve. Meanwhile, the absence of any intermediate force to channel interpretation (such as an administrative agency) means that judges can use the full range of interpretive tools in trying to answer these questions.   The different ways in which judges approach this task highlight competing approaches to statutory interpretation and provide fertile ground for testing theories about the benefit of rules versus standards to achieve broader social goals.

In turn, Justice Scalia’s contributions to bankruptcy law are a particularly rich source for examining both sets of questions.  Indeed, over his 30 years on the Court, Justice Scalia played a leading role in its development of the modern Bankruptcy Code.  For sheer volume of bankruptcy writings, Scalia was rivaled only by justices Clarence Thomas and John Paul Stevens, with many of the current members of the court trailing far behind.  In order to create a framework for evaluating Justice Scalia’s impact on bankruptcy law, I argue that most of his bankruptcy writings exemplify a rule-based textualism that was characterized by four significant features.

First, Justice Scalia modeled a holistic approach in which he encouraged judges to use the text of the Code to answer the many questions that Congress had left unanswered.  Thus, in decisions like Timbers and Hartford Underwriters, we see Justice Scalia examining several seemingly unrelated provisions of the Code to try to determine Congress’ intentions for important questions that the Code does not directly address.  This holistic approach served as a guide for litigants about how to approach and argue new questions that the Bankruptcy Code does not clearly address, and as a guide for courts about how to evaluate these new arguments.

Second, Justice Scalia often demonstrated a Kantian commitment to textual justice.  Immanuel Kant’s philosophy is perhaps best known for the phrase “Do justice though the world may perish.”   Likewise, many of Justice Scalia’s bankruptcy decisions can be summarized with the phrase, “Do justice to the text of the Bankruptcy Code, though the commercial markets may perish.”  His often extreme commitment to carrying out textual commands is best articulated in pro-consumer dissents like Dewsnup and Ransom, but is also apparent in lead opinions like FCC v. Nextwave (which is also strongly pro-debtor).

Third, Justice Scalia’s notorious distaste for legislative history is quite pronounced in his bankruptcy writings, especially his concurrences.   My article highlights the variety of tactics that Justice Scalia used over the years to attempt to persuade his colleagues to join his fight against the use of legislative history.

Fourth, in a pushback against those who favor broad discretion for bankruptcy judges, Justice Scalia advocated for clear rules to define and limit the scope of bankruptcy courts’ authority.  His efforts to constrain the scope of bankruptcy judges’ authority are apparent in jurisdictional decisions like Stern v. Marshall, procedural decisions like Granfinanciera, and substantive decisions like Radlax and Law v. Siegel.

Another clear theme in Justice Scalia’s bankruptcy writings was his belief that the Supreme Court played a critical role in providing guidance for the bankruptcy system.  In particular, he frequently noted the Court’s duty to provide clarity and predictability for bankruptcy courts and the stakeholders they serve.  That said, these exhortations sometimes rang hollow, as even Justice Scalia himself was not fully consistent in applying his rule-based philosophy.

Indeed, my article points to several notable deviations that may have undermined the overall impact of his rule-based approach to the Code.  Some of these deviations are well-known: his refusal to apply fraudulent transfer law to state foreclosures in BFP v. Resolution Trust springs to mind, as does his endorsement in Till v. SCS Commercial Corp. of a judicially created presumption that would level the playing field for secured creditors in Chapter 13 cases, which he argued unfairly favored debtors.  But for both decisions, Justice Scalia drew heavy criticism, both on the court and off, for not following the clear text of the Code.  In turn these controversial decisions dampened enthusiasm for Justice Scalia’s rule-based approach to bankruptcy law.

Other decisions in which Justice Scalia deviated from a clear and predictable rule-based approach are less well-known, but still problematic.  Such decisions include unanimous opinions like Young v. United States, in which the Court held that equitable tolling applies to the three-year lookback period for the non-dischargeability of taxes, and Citizens Bank v. Strumpf, in which the Court concluded that banks do not violate the automatic stay when they place a temporary hold on debtor funds in order to assess the possibility of set-off.  Though these decisions were not especially controversial, they demonstrate how challenging it is for a rule based textualist to abide by the rules at every turn.

Nonetheless, I argue that Justice Scalia’s brand of rule-based textualism should not be considered a failure merely because its leading proponent was not perfect in executing it.   Although much depends on the Supreme Court’s approach to bankruptcy cases in the years to come, the field may still see real benefits from the clear and predictable decision-making that Justice Scalia so often advocated.

This post comes to us from Megan McDermott, a lecturer at the University of Wisconsin Law School. It is based on her recent article, “Justice Scalia’s Bankruptcy Jurisprudence: The Right Judicial Philosophy for the Modern Bankruptcy Code?” available here.