More About Judge Sotomayor and Bankruptcy

Supreme Court nominee Sonia Sotomayor’s questionnaire completed for the Senate Judiciary Committee contains a mind-numbing 173 pages of details about the prospective justice. If you need to know who she gave a speech to in 1993 or which single-sex club she belonged to until recently, this is the place to look. However, the questionnaire also contains some information of interest to bankruptcy practitioners.

First, Judge Sotomayor has seen the inside of a bankruptcy courtroom. When asked to name the ten most significant cases that she litigated, Judge Sotomayor included In re Van Ness Auto Plaza, Inc., a case in which she represented Ferrari North America, Inc. in the bankruptcy of one of its franchisees. As an attorney, Judge Sotomayor successfully opposed the debtor’s attempt to assume the franchise agreement while rejecting contracts to sell vehicles to customers. Thus, the prospective Justice is not only a wise Latina who came up from the projects, but also a defender of Ferrari purchasers.

Second, this Supreme Court term has not been kind to Judge Sotomayor. While Ricci v. Destefano received more media attention, Judge Sotomayor was also part of the panel whose decision was reversed in the only major bankruptcy case of the term. In Johns-Manville Corp. v. Chubb Indemnity Insurance Co., 517 F.3d 52 (2nd cir. 2008), the Second Circuit ruled that the bankruptcy court’s jurisdiction to enter a channeling injunction in the Johns-Manville bankruptcy case did not extend to claims arising from the insurance company’s conduct as opposed to the debtor’s conduct. The court found that the jurisdiction issue could be raised when the insurance company sought to enforce the bankruptcy court’s order even though it had not been challenged on direct appeal. The Supreme Court reversed, finding that the jurisdictional challenge was an improper collateral attack on the bankruptcy court’s order. Travelers Indemnity Company v. Bailey, 2009 U.S. LEXIS 4537 (June 18, 2009). Thus, Judge Sotomayor was on the losing side of a major bankruptcy precedent.