How Would Supreme Court Nominee Brett Kavanaugh Approach Bankruptcy?

President Donald Trump has selected D.C. Circuit Judge Brett Kavanaugh to be his second Supreme Court nominee.    A post describing his bankruptcy opinions would be very short.  I could find only one opinion authored by Judge Kavanaugh arising out of bankruptcy court and that case dealt with equitable subrogation under the laws of the District of Columbia.   Smith v. First American Title Ins. Co. (In re Stevenson), 789 F.3d 197 (D.C. Cir. 2015). This is not surprising given the D.C. Circuit's footprint.   The D.C. Circuit has one bankruptcy court with one bankruptcy judge.  By contrast, the Fifth Circuit has nine districts staffed by 26 judges.   

The Slim Experience of Judge Kavanaugh with Bankruptcy and the FDCPA

Judge Kavanaugh also was on the panel which decided several unremarkable decisions on cases originating in bankruptcy court.    In Capitol Hill Group v. Pillsbury, Winthrop, Shaw, Pittman, LLC, 569 F.3d 485 (D.C. Cir. 2009), Judge Kavanaugh was on a panel that held that malpractice claims against a firm that represented a chapter 11 debtor were subject to "arising in" jurisdiction and that the bankruptcy court's order granting the firm's fee application was res judicata.    He was also on panels that decided two cases against the Pension Benefit Guaranty Corporation which arose from bankruptcy filings.    United Steel Workers v. Pension Benefit Guaranty Corp., 707 F.3d 319 (D.C. Cir.  2013); Davis v. Pension Guaranty Benefit Corp., 571 F.3d 1288 (D.C. Cir. 2009).

There is also another case where Judge Kavanaugh could have been exposed to some arguments about how bankruptcy courts are structured.   Ali Hamza Ahmad Suliman Al Bahlul v. United States, 840 F.3d 757 (D.C. Cir. 2016)(en banc) was a case brought by a member of al Qaeda who sought to challenge his conviction for conspiracy by a military tribunal.   One of Al Bahlul's arguments was that he was entitled to be tried by an Article III tribunal.   Judge Kavanaugh's concurrence relied on the long history of using military commissions to try enemy war criminals.   However, Judge Millett's concurrence concluded that structural Article III challenges could be forfeited by failure to raise them below.  In making this argument, he discussed the Supreme Court's opinion in Wellness International Network, Ltd. v. Sharif, 135 S.Ct. 1932 (2015).   You can see that I am reaching where the most exciting discussion of bankruptcy that I can find is a concurrence by another judge in a case that did not itself involve bankruptcy.

Judge Kavanaugh also appears to have very little experience with the Fair Debt Collection Practices Act.    He was on the panel that decided Jones v. Dufek, 830 F.3d 523 (D.C. Cir. 2016).   This case held that a collection letter sent by a law firm did not misrepresent that an attorney was meaningfully involved where it contained a prominent disclaimer stating that the attorney was acting as a debt collector and did not threaten legal action.   (My partner Manny Newburger argued this case).

Judge Kavanaugh and the CFPB

One area where Judge Kavanaugh does have a lot of experience is the Consumer Financial Protection Bureau.   He authored an opinion holding that the CFPB was unconstitutional because it was headed by a single director who could only be removed for cause.    PHH Corp. v. Consumer Financial Protection Bureau, 839 F.3d 1 (D.C. Cir. 2016).   However, that opinion was reversed by the en banc D.C. Circuit leaving Judge Kavanaugh in dissent.    PHH Corp. v. Consumer Financial Protection Bureau, 881 F.3d 75 (D.C. Cir. 2018)(en banc).  He also dissented from an opinion which held that a company could not obtain a preliminary injunction to block a civil investigative demand by the CFPB.   Doe Co. v. Cordray, 849 F.3d 1129 (D.C. Cir. 2017).   Judge Kavanaugh would have ruled that "the Company as a regulated entity has standing to raise its free-standing constitutional claim (that the structure of the CFPB is unconstitutional) and the claim is ripe."    

He wrote two other opinions dealing with standing to challenge the CFPB, one for the majority and one in dissent.    In State National Bank of Big Spring v. Lew, 795 F.3d 48 (D.C. Cir. 2015), he wrote that a Texas bank regulated by the CFPB had standing to challenge the constitutionality of the CFPB's structure as well as the recess appointment of its director.   However, he found that a bank did not have standing to argue that a competitor's designation as "too big to fail" gave it a competitive advantage.   In Morgan Drexen, Inc. v. Consumer Financial Protection Bureau, 785 F.3d 684 (D.C. Cir. 2015), he dissented from an opinion that found that an attorney who contracted with a debt settlement company did not have standing to challenge the bureau's structure.  He wrote:

The Bureau is therefore regulating a business that Pisinksi engages in.  That is enough for standing.   We have a tendency to make standing law more complicated than it needs to be.   When a regulated party such as Pisinksi challenges the legality of the regulating agency or of a regulation issued by that agency, "there is ordinarily little question that the party has standing" as the Supreme Court has indicated.

The Dissents of Judge Kavanaugh

One important qualification for a Supreme Court justice is the ability to dissent.   A dissent allows a losing justice to unleash his fire and fury on the majority while positioning himself to fight another day.   I found 26 dissents by Judge Kavanaugh.   Many of them were more interesting than his majority opinions.

His most consequential dissent was in Heller v. District of Columbia, 670 F.3d 1244 (D.C. Cir. 2011). In an opinion written by Judge Douglas Ginsberg*, the D.C. Circuit ruled that the Second Amendment did not establish an individual right to keep and bear arms. Judge Kavanaugh dissented and said that it did.   The Supreme Court agreed with Judge Kavanaugh.

In United States Telecom Association v. FCC, 855 F.3d 381 (D.C. Cir. 2017), Judge Kavanaugh took on net neutrality.   A panel of the D.C. Circuit found that the FCC had authority to craft the Open Internet Order known as net neutrality.   Judge Kavanaugh dissented from the decision to deny en banc review.  He argued that Congress had not granted the FCC the power to enact the rule and that it violated the First Amendment.   He wrote:

The FCC's 2015 net neutrality rule is one of the most consequential regulations ever issued by any executive or independent agency in the history of the United States.   the rule transforms the internet by imposing common-carrier obligations on internet service providers and there by prohibiting internet service providers from exercising control over the content they transmit to consumers.  The rule will affect every internet service provider, and every internet consumer.  The economic and political significance of the rule is vast.

The net neutrality rule is unlawful and must be vacated, however, for two alternative and independent reasons. 

Of some interest to Austinites is his dissent in FTC v. Whole Foods Market,  548 F.3d 1028 (D.C. Cir. 2008).(Whole Foods is based in Austin).   The FTC sought an injunction to block a merger between Whole Foods and Wild Oats.  The District Court denied the injunction and the majority reversed.  Judge Kavanaugh would have affirmed the denial of the injunction (meaning that the merger could go forward) because he felt that the relevant market was all supermarkets (of which Whole Foods had a small market share) as opposed to "organic supermarkets" (in which it was a behemoth).  Whole Foods later agreed to divest some Wild Oats locations and then was itself acquired by Amazon.

Judge Kavanaugh also objected to OSHA's attempt to cite Sea World for having a dangerous workplace in connection with its killer whales.  In pointing out that many occupations are full of danger, he wrote:

Many sports events and entertainment shows can be extremely dangerous for the participants.  Football.  Ice hockey.  Downhill skiing.  Air Shows.  The circus.  Horse racing.  Tiger taming.  Standing in the batter's box against a 95 mile per hour fastball.  Bull riding at the rodeo.  Skydiving into the stadium before a football game.  Daredevil motorcycle jumps.  Stock car racing.  Cheerleading vaults.  Boxing.  The balance beam.  The ironman triathalon.  Animal trainer shows.  Movie stunts.  The list goes on.

But the participants in those activities want to take part, sometimes even to make a career of it, despite and occasionally because of the known risk of serious injury. . . .

The broad question implicated by this case is this:  When should we as a society paternalistically decide that the participants in these sports and entertainment activities must be protected from themselves--that the risk of significant physical injury is simply too great even for eager and willing participants?    

SeaWorld of Florida, LLC v. Perez, 748 F.3d 1202, 1216-17 (D.C. Cir. 2014)(Kavanaugh, Dissenting).

This is perhaps his most lyrical dissent and it is also the one where he breaks from a formal writing style and abandons complete sentences for emphasis.

In Fogo de Chao (Holdings), Inc. v. United States Department of Homeland Security, 769 F.3d 1127 (D.C. Cir. 2014), he dissented from a decision which found that Brazilian chefs had "specialized knowledge" which would entitle them to L1-B visas to work in a Brazilian steakhouse.  He faulted the majority for refusing to accord deference to agency findings.   He also agreed with the agency that "one's country of origin, or cultural background, does not constitute specialized knowledge under this immigration statute for purposes of being a chef or otherwise working in an ethnic bar or restaurant in the United States."   Fortunately, the majority allowed the Brazilian chefs into the country and diners were able to eat expensive meals prepared by authentic culinary artists.

In Lorenzo v. SEC, 872 F.3d 578 (D.C. Cir. 2017), Judge Kavanaugh thought that the SEC had gone too far in punishing an employee of a registered broker-dealer for forwarding false statements prepared by his boss.   The employee was the director of investment banking at the firm.  However, Judge Kavanaugh's dissent made it sound as though he was a mere clerical employee:

Suppose you work for a securities firm.  Your boss drafts an email message and tells you to send the email on his behalf to two clients.  You promptly send the emails to the two clients without thinking too much about the contents of the emails.  You note in the emails that you are sending the message "at the request" of your boss.  It turns out, however, that the message from your boss to the clients is false and defrauds the clients out of a total of $15,000.  Your boss is then sanctioned by the Securities and Exchange Commission (as is appropriate) for the improper conduct.

What about you?  For sending along those emails at the direct behest of your boss, are you too on the hook for the securities law violation of willfully making a false statement or willfully engaging in a scheme to defraud?

Finally, Judge Kavanaugh dissented from an opinion allowing a former Congressional employee to sue her employer for racial discrimination and retaliation.   Howard v. Office of the Chief Administrative Office of the United States House of Representatives, 720 F.3d 939 (D.C. Cir. 2013).  LaTaunya Howard wanted to sue the Office of the Chief Administrative Officer of the United States House of Representatives for racial discrimination and retaliation under the Congressional Accountability Act.   The District Court dismissed the suit for lack of jurisdiction based on the Speech and Debate Clause of the Constitution which provides that "for any Speech or Debate in any House, shall not be questioned in any other Place."   The majority concluded that the Speech or Debate clause did not provide immunity to legislators if the case could proceed without inquiring into legislative acts or the motivation for legislative acts.  

Judge Kavanaugh disagreed.   He wrote:

Once we conclude (as we must here) that the employer's asserted reason for the decision involves legislative activity protected by the Speech or Debate Clause, I believe (unlike the majority opinion) that the case must come to an end.  I do not see how a plaintiff employee such as Howard can attempt to prove either that she in fact adequately performed her legislative duties or that her performance of legislative activities was not the actual reason for the employment action without forcing the employer to produce evidence that she did not perform her legislative activities and that her poor performance of legislative activities was the actual reason for the employment action. 

In the case, the stated reason for demoting and firing the employee had to do with her communications regarding the legislative branch's budget and her refusal to perform budget analysis for Congressional committees.   To my unschooled eye, it seems to me that Judge Kavanaugh took a Constitutional protection of Speech or Debate and expanded it to any activity related to the legislature.

What Does This All Say About Judge Kavanaugh?

While I haven't done a deep dive into his jurisprudence it certainly seems to me that there are some patterns.   When it comes to economic regulation or consumer protection, Judge Kavanaugh wants to keep federal agencies in their place.   Whether it is questioning the structure of the CFPB or the authority of the FCC to promulgate net neutrality rules, Judge Kavanaugh insists on crystal clear constitutional and statutory authority. He also takes what he considers to be a commonsense approach in restricting the actions of the SEC, the FTC and OSHA.  However, when a decision involves national security, such as the military commission case or the immigration case, he is much more deferential to the government.   What does this mean for bankruptcy?   Would he view bankruptcy courts as engaging in economic regulation and seek to strictly limit their powers?   Would he be skeptical of rules promulgated by the United States Trustee?   Based on the record presented, I can raise the questions but I don't have clear answers.

Note:  Because my focus was on cases that could affect bankruptcy, I focused primarily on business and consumer cases.   That is why I did not discuss Judge Kavanaugh's dissent in a case involving a pregnant teen who wanted an abortion.

*--An earlier version of this post incorrectly identified Judge Ginsberg as Ruth Bader Ginsberg.   However, Justice Ginsberg was already on the Supreme Court at this time.  Thank you to Lisa Fancher for pointing out the error.