The Volokh Conspiracy
Mostly law professors | Sometimes contrarian | Often libertarian | Always independent
Bank of America v. Caulkett is one of today's cases that you may have glossed over because, after all, its (9-0) holding is:
A debtor in a Chapter 7 bankruptcy proceeding may not void a junior mortgage lien under § 506(d) when the debt owed on a senior mortgage lien exceeds the current value of the collateral if the creditor's claim is both secured by a lien and allowed under § 502 of the Bankruptcy Code.
But in fact, there are at least two interesting things about the opinion to non-bankruptcy people like myself.
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First, the star footnote - after "Justice Thomas delivered the opinion of the Court" - says:
Justice Kennedy, Justice Breyer, and Justice Sotomayor join this opinion, except as to the footnote.
Fun logic puzzle: do Justices Kennedy, Breyer, and Sotomayor join that footnote?
O.K., spoiler: "the footnote" referred to in the star footnote is actually the dagger footnote a few pages later. This could have been worded better, and it also could have said where the dagger footnote could be found (p. 5 - not too harmful in this case because the opinion itself is only seven pages long).
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The second interesting thing has to do with overruling Supreme Court precedent, and for that, it helps to understand something about Mr. Caulkett's finances.
Caulkett has a house with two mortgages, one senior and the other junior. The house is worth less than the senior mortgage lien, so the junior mortgage lien is actually worth nothing right now. Here's an illustration, though people who actually know about this should feel free to correct me: Suppose you have a $1 million home where you now owe the bank $500,000 (that's the bank's mortgage lien). Now you need more money, so you borrow another $200,000, again using the house as collateral. This is a junior mortgage lien: if you default, they sell your house, but the original mortgage lien gets satisfied first.
As long as the house is worth over $700,000, no problem, because the proceeds from the sale of the house can cover both mortgage liens. But what if the house's value falls to $400,000? Then there's not even enough to satisfy the senior mortgage lien; the junior mortgage lienholder would get nothing.
Caulkett was in that situation. He filed for bankruptcy, and wanted to "strip off" (meaning "void") the junior mortgage lien under § 506(d) of the Bankruptcy Code. The bankruptcy court did this, and the district court and the Eleventh Circuit agreed.
Now the Supreme Court gets to the case. Under § 506(d) (emphasis added):
To the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void.
So whether Caulkett can void the lien depends on whether the the junior lienholder's claim is an "allowed secured claim".
Turns out that, under the Bankruptcy Code, it looks like this claim isn't "secured". Because § 506(a)(1) says (emphasis added):
An allowed claim of a creditor secured by a lien on property . . . is a secured claim to the extent of the value of such creditor's interest . . . in such property, . . . and is an unsecured claim to the extent that the value of such creditor's interest . . . is less than the amount of such allowed claim.
Since the value of the junior creditor's interest is now zero, that makes the whole claim an unsecured claim, and so under § 506(d), the lien is void.
Do I have that right, bankruptcy people?
Anyway, though this is the straightforward textual reading, the Court went the other way in Dewsnup v. Timm (1992). Dewsnup involved a lien that was partially underwater (the debt was $120,000, but the value of the collateral was only $39,000), but the Court didn't allow Dewsnup to strip the lien down to $39,000, holding that this situation didn't fall within § 506(d).
O.K., so the answer should be to overrule Dewsnup? (Courts tend to be more reluctant to overturn statutory precedent than to overturn other kinds of precedents, because Congress can just amend the statute, but still, it happens.)
No. The Court said:
The debtors do not ask us to overrule Dewsnup, but instead request that we limit that decision to partially - as opposed to wholly - underwater liens.
Since the lien here was entirely underwater, the debtors would win if Dewsnup were limited in that way. Unfortunately for the debtors, the Court decided that this interpretation would make no sense, and refused to do it. As a result, the bank won.
But look at the dagger footnote associated with this sentence (some citations altered):
From its inception, Dewsnup has been the target of criticism. See, e.g., [Scalia's own dissent in that case]; [a Tenth Circuit case]; [a Bankruptcy Court case]; [two law review articles]; see also Bank of America Nat. Trust and Sav. Assn. v. 203 North LaSalle Street Partnership (1999) (THOMAS, J., concurring in judgment) (collecting cases and observing that "[t]he methodological confusion created by Dewsnup has enshrouded both the Courts of Appeals and . . . Bankruptcy Courts"). Despite this criticism, the debtors have repeatedly insisted that they are not asking us to overrule Dewsnup.
This is the dagger footnote that six Justices joined, all except Kennedy, Breyer, and Sotomayor. So we know that Scalia (who dissented in Dewsnup) and Thomas (based on his concurrence in the judgment in 203 North LaSalle, plus based on the fact that he wrote this footnote) are sympathetic to overruling Dewsnup. We suspect that four other Justices might be sympathetic to overruling Dewsnup - because they joined the whole opinion, including the footnote. And we (more strongly) suspect that the three Justices who didn't join are unsympathetic to overruling Dewsnup - this includes Kennedy, the only other Justice from the Dewsnup Court who's still around (and who joined Blackmun's majority opinion there).
And if Dewsnup had been overruled, Caulkett would have won, rather than losing 9-0. If only Caulkett had asked for Dewsnup to be overruled, he might have gotten his wish, and might even have won 6-3, instead of losing 9-0. If only he had been a bit more aggressive in what he asked for!
Now maybe it was a rational decision of his lawyer to disclaim any intent to get Dewsnup overruled. Maybe his lawyer figured it was a low-probability thing and would also look bad in the brief. That's possible. But would it really have been that bad to just ask for that briefly, in a single sentence, and then say "But if this Court is unwilling to overrule Dewsnup…"? I'm not a litigator, and I'm not a bankruptcy guy. I'm really just asking.
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I've noticed this on a number of occasions - where someone could have gotten some relief, or at least swayed a Justice, just by asking for it, but where the Justice instead decided to take existing caselaw as given. I've particular noticed it in a few Thomas opinions, but maybe this happens more broadly and I've been missing it.
Look at Gonzales v. Carhart (2007), where the Court upheld (5-4) the federal Partial-Birth Abortion Ban Act of 2003. Justice Thomas, joined by Justice Scalia, wrote:
I join the Court's opinion because it accurately applies current jurisprudence, including Planned Parenthood of Southeastern Pa. v. Casey (1992). I write separately to reiterate my view that the Court's abortion jurisprudence, including Casey and Roe v. Wade (1973), has no basis in the Constitution. I also note that whether the Act constitutes a permissible exercise of Congress' power under the Commerce Clause is not before the Court. The parties did not raise or brief that issue; it is outside the question presented; and the lower courts did not address it.
So if only the challengers of the statute had raised a Commerce Clause argument (even briefly), they might have won 6-3 or 5-4 rather than losing 5-4?
Look at Troxel v. Granville (2000), where the Court held that parents have a substantive due process right to make decisions about the care, custody, and control of their children, and that this extends to a mother's decision to deny her late husband's parents access to her children. Justices Scalia and Thomas are sympathetic to this sort of argument on policy grounds but don't believe in substantive due process. And indeed, Scalia had a dissent where he said: "In my view, a right of parents to direct the upbringing of their children is among the 'unalienable Rights'" from the Declaration of Independence, and is also "among the 'othe[r] [rights] retained by the people'" under the Ninth Amendment - but protecting such unenumerated rights is beyond the proper judicial role.
But Justice Thomas wrote, instead:
I write separately to note that neither party has argued that our substantive due process cases were wrongly decided and that the original understanding of the Due Process Clause precludes judicial enforcement of unenumerated rights under that constitutional provision. As a result, I express no view on the merits of this matter, and I understand the plurality as well to leave the resolution of that issue for another day.
[Footnote:] This case also does not involve a challenge based upon the Privileges and Immunities Clause and thus does not present an opportunity to reevaluate the meaning of that Clause.
Consequently, I agree with the plurality that this Court's recognition of a fundamental right of parents to direct the upbringing of their children resolves this case. Our decision in Pierce v. Society of Sisters (1925) holds that parents have a fundamental constitutional right to rear their children, including the right to determine who shall educate and socialize them.
Here Thomas wasn't pivotal: the mother would have won 5-4 instead of 6-3 if Thomas had changed his vote. Still, this seems like a clear case where someone's failure to make an argument probably made a difference in Thomas's vote.
In light of this, I'd think that whenever someone wants to invalidate agency action and Justice Thomas isn't already on their side for other reasons, that party probably ought to briefly mention that the agency is unconstitutional based on Justice Thomas's theory of the non-delegation doctrine in DOT v. Ass'n of American Railroads. It could be a fifth vote that makes a difference.