Thursday, October 12, 2017

NCBJ Report: Dean Chemerinsky Says It's Formalism for the Foreseeable Future

The Commercial Law League of America presented a keynote address from Dean. Erwin Chemerinsky, of UC Berkeley Law School at its annual luncheon.  Dean. Chemerinsky discussed his main area of expertise in a talk entitled The Supreme Court:   Appointments to and Statutory and Constitutional Interpretation by the Court in Bankruptcy Cases.   He spoke for over an hour without notes.

He started by talking about the place of bankruptcy cases in the Supreme Court's jurisprudence.  Although bankruptcy cases outnumber every other case in the federal system, the Supreme Court only takes two or three bankruptcy cases in a given term.   He noted that of the current justices on the court only one had served as a trial court judge and several justices had never argued a case in any court before being appointed to the Supreme Court.   As a result, the Court is taking fewer and fewer cases.   For much of the 20th Century, the Court heard as many as 200 cases a term.  Last term the Court heard only 59 cases (not counting cases decided without argument). 

The bulk of his talk discussed the battle between the formalists and the realists on the Court.  He offered three theses:  1)  we have and are likely to continue to have a conservative Supreme Court; 2)  the conservatives and some of the liberals tend to be quite formalistic; and 3) this trend is undesirable.  

A Conservative Court

Since 1971, the Supreme Court has had five to eight justices appointed by Republican presidents.  With the death of Antonin Scalia, the Court was split 4-4 for a brief period of time.   This led to a remarkable fight in Congress.   In recent years (I missed the exact number), there have been twenty-four justices nominated during the final two years of a president's term.  Of those, 21 were confirmed and three were voted down.  However, until the nomination of Merrick Garland, there had never been a nominee who was simply ignored.   Until the nomination of Neil Gorsuch, no nominee had ever been filibustered.   The Senate had to change its rules to end the filibuster by a majority vote.  

Dean Erwin Chemerinsky
Justice Gorsuch appears to be very conservative.   Since taking the bench, he has voted with Clarence Thomas 100% of the time.  In contrast, Antonin Scalia only voted with Thomas 81% of the time.   The Court's current makeup consists of three consistently conservative justice (Alito, Gorsuch and Thomas), one most conservative justice (Roberts), four consistently liberal justices (Breyer, Ginsberg, Kagan and Sotomayor) and Anthony Kennedy as the swing vote.   Justice Kennedy votes with the majority 97% of the time.  Eliminating unanimous decisions, he still sides with the majority 94% of the time.   The Dean tells his students to shamelessly pander to Justice Kennedy in their Supreme Court briefs.

The age of the current justices indicates that conservative domination is likely to continue for decades.    Since 1960, the average age where justices retired from the court was 78.  Three of the liberal/swing justices are currently over 78 (Ginsberg, Breyer and Kennedy).   In contrast, three Republican appointees are likely to serve for an additional fifteen years (Alito, Thomas and Roberts) while Justice Gorsuch could possibly serve as many as forty years.   Thus, the Court is likely to remain very conservative for decades to come.

Formalists Formulate More Opinions

Dean Chemerinsky said that the conservatives and some liberals tend to be very formalistic.  Formalism is the view that judges take undisputed legal premises and apply them to the facts.   Formalism is often dominated by "plain meaning" analysis.    Formalism was the dominant approach to constitutional law through the 19th Century when the legal realists tried to blow it up. The legal realists argued that there are political decisions which form the basis for so-called undisputed legal premises so that courts should look at the values being served rather than pretending to apply neutral principles.  However, formalism is alive and well in the Supreme Court, especially when it comes to bankruptcy decisions.

Formalism in Statutory Interpretation

Dean Chemerinsky argued that Henson v. Santander Consumer USA, Inc., 137 S.Ct. 1718 (2017) was an example of formalism.   The question was whether the FDCPA should apply to anyone who has purchased debts.   The Court ruled that it did not apply to creditors who purchased debts prior to default.   He described this as very formalistic.   He said that formalism rejects consideration of the legislative purpose, let alone the legal history.    The definition of "debt collector" under the FDCPA includes a person who regularly collects or attempts to collect debts owed to another.  He claimed that it was just as reasonable to construe this provision to anyone who collects debts.   He said that the purpose of the statute would be furthered by applying it to all persons who collect debts.   (I'm not sure I buy that analysis, but he is a really smart guy).   

In Midland Funding, LLC v. Johnson, 137 S.Ct. 1407 (2017), the Court was asked whether a proof of claim filed on a debt that was barred by the statute of limitations violates the FDCPA. There is nothing in the Bankruptcy Code which bars the filing of a time-barred debt.    According to Dean Chemerinsky, Justice Breyer wanted to take a plain meaning approach to what is false, deceptive, misleading, unfair, or unconscionable.  However, Justice Sotomayor, in dissent, was concerned by the fact that the courts were being "deluged" with bad debts.       The professor asked why it wouldn't be unfair to file a debt that the creditor knew was time-barred?

Going back a few years to Law v. Siegel, 134 S.Ct. 1188 (2014) a debtor sought to fraudulently invent liens which would keep the value of his property within the California exemption limit.   The Bankruptcy Court would have denied the exemption based on the fraud.   However, a unanimous Supreme Court reversed based on the plain language of Sec. 522.   He said that the formalists don't want to focus on the consequences of the decision and instead look just at the plain meaning.   

On the other hand, Marrama v. Citizens Bank, 549 U.S. 365 (2007) was a functional decision.   The Bankruptcy Code said that a debtor had an absolute right to convert to chapter 13.   The liberal justices said that it would be a waste of time to allow a debtor to convert to chapter 13 if the case would just be converted back to chapter 7.   The four conservatives said just follow the statute.

Dean Chemerinsky said that it is impossible to reconcile Law v. Siegel with Marrama.  

Formalism in Constitutional Analysis

Prof. Chemerinsky described Northern Pipeline Construction Co. v. Marathon Pipeline Co., 102 S.Ct. 2858 (1982) as one of the worst cases decided by the Supreme Court.    The issue was whether a Bankruptcy Court could enter a final judgment on a state law claim between two non-bankrupt parties.   The Court voted 6-3 to strike down the jurisdictional scheme of the original Bankruptcy Code.   However, no opinion commanded a majority.   He said that Justice Brennan's plurality opinion was the epitomy of formalism.  It gave no reasons why judges appointed under Article I could not rule on state law matters.  After all, he asked, who normally rules on state law matters?  State courts.  State judges do not have life tenure.  

However, the subtext of the opinion had nothing to do with bankruptcy. It was the Reagan era.  Congress was seeking to restrict the authority of courts to consider hot button issues, such as abortion and school busing.   In Northern Pipeline, the Supreme Court sent a message to Congress that if it attempted to restrict its jurisdiction, it would be unconstitutional.   After Northern Pipeline, the Court took a functional approach in cases such as Commodity Futures Trading Commission v. Schor, 478 U.S. 833 (1986) where they considered where a grant of power to a non-Article III court would undermine the Article III judiciary.   

The Court veered back into formalism with Stern v. Marshall, 131 S.Ct. 2594 (2011).   Chief Justice Roberts' majority opinion could not have been more formalistic.    While the majority acted as though practical consequences didn't matter, Justice Breyer's dissent was focused on the confusion that would result from the opinion.

Four terms later the Court backed away from formalism when it decided Wellness International Network, Ltd. v. Shariff, 135 S.Ct. 1932 (2015).  The issue was whether an Article I Bankruptcy Judge could render a final judgment with consent.  By a vote of 6-3, the Court said yes.   Justice Sotomayor's majority opinion followed the Schor case's doctrine that delegation to a non-Article III tribunal was only unconstitutional when it undermined the Article III courts.   The difference between Stern v. Marshall and Wellness was that Justices Alito and Kennedy changed their minds.   Why did they do this?   It had nothing to do with bankruptcy.  Rather, both Justices were concerned about Magistrate Judges.   If Stern was followed to its formalistic conclusion, it could render Magistrate Judges unconstitutional as well and both justices had previously written opinions upholding Magistrate Judges.

Dean Chemerinsky cautioned that Wellness will not put formalism to rest.   The Court vacillates between formalism and functionalism from case to case.

The Critique of Formalism

The legal realists offered a critique of formalism a century ago.  Formalism provided a false certainty.   Do fixed legal principles really provide answers with certainty?   Formalism makes it look like the justices are not deciding how a case should turn out; it hides what's really happening.

Dean Chemerinsky suggested that we should be asking what was Congress's purpose?   In his view, the Court got Congress's purpose wrong in both Henson and Midland Funding.   He said that there was no good reason to object to bankruptcy courts deciding state law issues.

In conclusion, he asked, what should we do?   He said that academics need to explode the myth of formalism.   The Dean said that he hoped that the academic criticism of Stern v. Marshall caused Justices Alito and Kennedy to back away in Wellness.

In the meantime, lawyers and judges should be aware that the Supreme Court is going to be receptive to formalistic arguments for a long time to come.   The take-away he said is the what if?   What if Hillary Clinton had defeated Donald Trump?  What if there had not been hanging chads in Florida in 2000?  What if John Kerry had been elected?   The Supreme Court would have looked much different today.   The bottom line is that elections matter.   And then he sat down.

Note:  I did not use direct quotes in this article because I was not confident in my note-taking.  In some passages, I added or rearranged words to better reflect the sense of what Dean Chemerinsky was saying when my notes came off as wooden and jerky.   Dean Chemerinsky was anything but wooden and jerky so I did not want to portray him in that way.  However, I am pretty sure that the last sentence of his address is pretty close to verbatim.     

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