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SCOTUS declines to hear same-sex parent case

Supreme Court building graphic

By Janet A. Hendrick and Mark E. Hornbeek

On December 14, 2020, the United States Supreme Court declined to review the Seventh Circuit Court of Appeals’ decision requiring the State of Indiana to list two females on the birth certificate of a child of a lesbian couple who was conceived by in-vitro fertilization. Ashlee and Ruby Henderson brought suit against the Indiana State Health Commissioner claiming that the State’s practice of listing only the birth mother and her husband, if any, violated their rights to equal protection under the United States Constitution. Indiana argued that forcing it to identify both women as parents would prevent the State from treating the sperm donor as a parent, while providing parental rights to an individual who provided neither the sperm nor the egg.

Same sex parents graphicThe trial court ruled in favor of the couple and ordered Indiana to treat same-sex couples the same as opposite-sex couples with regard to parentage on birth certificates. Indiana appealed, and the appeals court upheld the trial court’s decision. Indiana then filed a petition of certiorari asking the Supreme Court to hear the case.

Court-watchers have monitored this case, waiting to see if the Supreme Court’s 6-3 conservative majority, given the addition of new Justice Amy Coney Barrett, would take this opportunity to roll back rights of same-sex couples as established by the Court’s 2015 decision in Obergefell v. Hodges, legalizing same-sex marriage, and confirmed by the Court’s 2017 decision in Pavan v. Smith, which requires the government to provide the same rights to all couples with respect to parentage on birth certificates, regardless of the parents’ genders.

Many observers have been particularly interested whether Justice Coney Barrett, who has been critical of same-sex marriage, will seek to disturb Obergefell and Pavan and whether this case would present the opportunity for her to do so.

Once a party has appealed a lower court’s decision to the Supreme Court, it requires the vote of four justices before the Court will grant certiorari agreeing to hear the case. While we know that the Court denied certiorari, neither the margin of the vote, nor the vote cast by any individual justice, is publicly revealed, so we cannot know how any particular justice, including Justice Coney Barrett, voted. At least six justices, including at least three of the justices typically considered to be conservative, voted against hearing Indiana’s appeal.

The Court’s refusal to take this case may be a signal that the current Supreme Court is not interested in reversing or narrowing the rights established by its recent opinions. The value of the Court’s denial of certiorari in Box, however, is somewhat limited, as the denial does not necessarily indicate that the majority of justices agree with the lower court’s ruling. Rather, refusal to take the case means that fewer than four justices felt this particular case was worth review.  Because the Court refused to hear the case, it will not issue an opinion either confirming or upsetting the rights of same-sex couples or set any new precedent that would bind future courts.

As a result, the Seventh Circuit’s Box decision will continue to guide courts, at least within that court’s jurisdiction, which includes Wisconsin, Illinois, and Indiana. While other appellate courts will undoubtedly consider the Seventh Circuit’s opinion when faced with similar cases, it is possible that another court may reach a conflicting conclusion.  While the Supreme Court’s decision not to consider Box may signal some stability of same-sex rights, the door remains open for future challenges.


Janet Hendrick

Janet Hendrick is an experienced employment litigator who tackles each of her client’s problems with a tailored, results-oriented approach.

For more information on this article, please call 214.615.6391 or email Janet A. Hendrick.

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ALERT: Supreme Court ruling impacts property and title rights across large portion of Oklahoma

SCOTUS Ruling graphicToday, the Supreme Court ruled nearly half of the State of Oklahoma is an Indian Reservation.

From a New York Times article:

  • The 5-to-4 decision, potentially one of the most consequential legal victories for Native Americans in decades, could have far-reaching implications for the 1.8 million people who live across what is now deemed “Indian Country” by the high court.
  • Justice Neil M. Gorsuch said that Congress had granted the Creek a reservation, and that the United States needed to abide by its promises.

The outcome could have far-reaching implications for the State of Oklahoma and its citizens as it relates to property rights and land titles, taxation, and other matters involving tribal affairs.


To discuss how this may affect your business, contact Zac Bradt at the contact information below:

Zachary K. Bradt, Director
Phillips Murrah P.C.
EMAIL: zkbradt@phillipsmurrah.com
PHONE: 405.552.2447

Phillips Murrah

SCOTUS overturns structured bankruptcy dismissal in favor of payment priority rules

“Chapter 11 permits some flexibility, but a court still cannot confirm a plan that contains priority-violating distributions over the objection of an impaired creditor class.” – U.S. Supreme Court Ruling in Czyzewski v. Jevic Holding Corp.

A landmark decision handed down last Wednesday from the U.S. Supreme Court reversed a bankruptcy court ruling that approved a “structured” Chapter 11 bankruptcy dismissal settlement for a collapsed trucking company. WSJ reported that, in the highly anticipated ruling, SCOTUS overturned a controversial payout plan that disregarded important bankruptcy rules.

In Czyzewski v. Jevic Holding Corp., the High Court ruled that the dismissal violates payment priority rules of the Bankruptcy Code as set out by Congress, which gives a special priority creditor status to employees who are owed unpaid wages. In the decision, SCOTUS sent the case back to bankruptcy court so that it may be properly adjudicated.

The Backstory

In 2006, private-equity firm Sun Capital Partners’ acquired Jevic Transportation, Inc. in a leveraged buyout, according to the Wall Street Journal. By the following year, the company had started experiencing financial difficulty. In 2008, Jevic Transportation filed its Chapter 11 petition.

A day prior to the bankruptcy filing, Jevic ceased operations and about 90 percent of its employees were abruptly terminated. A group of the company’s truck-driver force filed a multi-million dollar class-action lawsuit claiming that the layoffs violated the Worker Adjustment and Retraining Notification (WARN) Acts. According to Federal Regulation Title 20, Section 639.1(a), employers are required to give a 60-day notice of plant closings and mass layoffs.

The suit included over $8 million in employee priority wage claims under Section 507(a)(4) of the Bankruptcy Code. Jevic truck drivers were awarded a judgment against Jevic, entitling the workers to payment ahead of general unsecured claims against the Jevic estate.

Another lawsuit was brought by the official committee of Jevic’s unsecured creditors claiming fraudulent conveyance and equitable subordination against secured creditors, Sun Capital and CIT Group, which funded the LBO. During the course of Chapter 11 proceedings, Jevic stated that it had run out of money to fight the claims, which set into motion a settlement with the unsecured creditors’ committee representing Jevic’s unsecured creditors in the form of a structured dismissal. A Delaware bankruptcy judge approved a payout plan and dismissed the case.

The Controversy

Under the settlement negotiated by Sun, CIT, Jevic and the committee, no assets were to be distributed to the truck drivers despite the WARN Act class-action judgment. The settlement did, however, provide for distributions to general unsecured claims. The group of Jevic truck drivers appealed the bankruptcy court ruling to the U.S District Court for the District of Delaware and the Third U.S. Circuit Court of Appeals, but was the appeals were denied.

This past summer, the Supreme Court agreed to review the case. At that time, the Wall Street Journal wrote:

“The question of what to do about bankruptcy rules that get in the way of a settlement has divided courts of appeal across the country, with some courts rejecting settlements that don’t comply with the scheme set out by Congress for who gets paid first.”

“The Bankruptcy Code contains a clearly-defined priority scheme for distributions to creditors of the bankruptcy estate, which is grounded on considerations of fairness to all creditors,” said Clayton D. Ketter, a Director at Phillips Murrah who specializes in financial restructurings and bankruptcy matters.

The negotiated structured dismissal did not include the consent of the group of Jevic truck drivers, the SCOTUS opinion stated, which allowed Jevic to evade its priority-creditor responsibility to the unpaid drivers. As long as priority creditors don’t consent to the deal, such settlements can’t be approved, the High Court said.

“In the case before us, a Bankruptcy Court dismissed a Chapter 11 bankruptcy. But the court did not simply restore the prepetition status quo. Instead, the court ordered a distribution of estate assets that gave money to high-priority secured creditors and to low-priority general unsecured creditors but which skipped certain dissenting mid-priority creditors. The skipped creditors would have been entitled to payment ahead of the general unsecured creditors in a Chapter 11 plan (or in a Chapter 7 liquidation). See §§507, 725, 726, 1129. The question before us is whether a bankruptcy court has the legal power to order this priority-skipping kind of distribution scheme in connection with a Chapter 11 dismissal.

In our view, a bankruptcy court does not have such a power. A distribution scheme ordered in connection with the dismissal of a Chapter 11 case cannot, without the consent of the affected parties, deviate from the basic priority rules that apply under the primary mechanisms the Code establishes for final distributions of estate value in business bankruptcies,” wrote Justice Breyer.

“The Supreme Court’s ruling reinforces the enforceability of those priorities and clarifies that priority line jumping through a structured settlement will not be permitted,” Ketter said.

The Jevic case will now head back to bankruptcy court for more work.

The Takeaway

What are the implications of this decision, beyond the fairly narrow Supreme Court’s ruling? Will it affect the overall utilization of structured dismissals across the industry?

Ketter said that he has noticed a rise of structured dismissals in bankruptcy cases, which typically follow a sale of a substantial portion of the debtor’s assets.

“I don’t foresee the Jevic decision changing that,” he added. “The Supreme Court Justices did not say that structured dismissals are not allowed.  Rather, they said that structured dismissals that violate the bankruptcy code’s priority scheme are not allowed.  Thus, we are likely to continue to see structured dismissals used, so long as they do not impermissibly skip a class of creditors in making distributions.”

However, Ketter added that decision may have broader implications outside the realm of structured dismissals.

“For example, there are types of plans within a bankruptcy case where a priority class voluntarily gifts a portion of the recovery it would otherwise be due to a lower priority class,” he added. “Sometimes, those gifted distributions skip other classes sitting higher on the priority scheme.  The Jevic decision raises the question of whether such plans are permissible.”

 

Clayton D. Ketter is a Director and a litigator whose practice involves a wide range of business litigation in both federal and state court, including extensive experience in financial restructurings and bankruptcy matters.

SCOTUS reverses lower court decision, Medicaid providers can’t bring injunction against Idaho officials

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United States Supreme Court Building

SCOTUS reverses a lower court decision in Armstrong v. Exceptional Child Center, Inc.:

Idaho residential care facilities sued the state for failure to implement higher reimbursement rates required by Medicaid which the Idaho legislature had not sufficiently funded.  The federal district court and the Ninth Circuit Court of Appeals sided with the facilities ruling that Idaho’s Medicaid rates were insufficient to support the federal requirements that payments had to be at such a level to provide for quality care and adequate access to services.  In Armstrong v. Exceptional Child Center Inc., the United States Supreme Court reversed the lower court ruling and held that the Supremacy Clause does not confer a private right of action and so Medicaid providers cannot sue for an injunction requiring the state to comply with the reimbursement rate provision of the federal Medicaid Act.  42 U.S.C. §1396a(a)(30)(A)

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