Last week I posted here about the Sixth Circuit's sudden awakening to it duty to insure that lower courts provide justice in a timely manner. Read it here. In short, the appellate court ordered the lower District Court (which is the first to hear appeals from the Bankruptcy Court) to rule on a matter vital to the interests of Syncora, Inc., a bond insurer. Something like, "justice delayed is justice denied."
Tu quoque, the District Court might reply. After all, there are already a variety of matters from the Detroit bankruptcy on appeal to the Sixth Circuit on which that higher court itself is sitting. Read about them in a post by Professor Melissa Jacoby here. It seems, however, that the Sixth Circuit has heard its own message because it's scheduled oral arguments for July 30 in one of the most important matters: Is Detroit eligible for Chapter 9 relief? A negative answer would mean that many folks have spent a lot of time and money for naught so here's a bet that the court will affirm the Bankruptcy Court decision on that issue (which, for what it's worth, I believe is correct).
I don't know how long after oral arguments the Sixth Circuit will take to issue its decision; not too long, I suspect. And if it upholds Detroit's eligibility to be in Chapter 9 before the hearing on confirmation, then the logjam will be broken for yet more cases on appeal to the the District Court.
Matters need not have come to such a pass. As Professor Jacoby remarks, "rights to appeal on major legal questions are not inherently second fiddle to expedience in restructuring." Indeed they are not. As I argued in my article, Municipal Bankruptcy: When Doing Less Is Doing Best (download here), the Bankruptcy Code is contradictory when it comes to cramming down a municipal plan of adjustment when (1) bondholders are paid less than retirees and (2) when bondholders are paid the same as retirees. If the parties cannot cut a deal, the Bankruptcy Court should dismiss the case. Hence, my conclusion that Chapter 9 is a forum for a high-stakes game of Chicken.
This statutory incoherence should drive the parties to settle. Failure by a court to carry out its duty to decide an appeal, without the consent of both parties, should not.
Tu quoque, the District Court might reply. After all, there are already a variety of matters from the Detroit bankruptcy on appeal to the Sixth Circuit on which that higher court itself is sitting. Read about them in a post by Professor Melissa Jacoby here. It seems, however, that the Sixth Circuit has heard its own message because it's scheduled oral arguments for July 30 in one of the most important matters: Is Detroit eligible for Chapter 9 relief? A negative answer would mean that many folks have spent a lot of time and money for naught so here's a bet that the court will affirm the Bankruptcy Court decision on that issue (which, for what it's worth, I believe is correct).
I don't know how long after oral arguments the Sixth Circuit will take to issue its decision; not too long, I suspect. And if it upholds Detroit's eligibility to be in Chapter 9 before the hearing on confirmation, then the logjam will be broken for yet more cases on appeal to the the District Court.
Matters need not have come to such a pass. As Professor Jacoby remarks, "rights to appeal on major legal questions are not inherently second fiddle to expedience in restructuring." Indeed they are not. As I argued in my article, Municipal Bankruptcy: When Doing Less Is Doing Best (download here), the Bankruptcy Code is contradictory when it comes to cramming down a municipal plan of adjustment when (1) bondholders are paid less than retirees and (2) when bondholders are paid the same as retirees. If the parties cannot cut a deal, the Bankruptcy Court should dismiss the case. Hence, my conclusion that Chapter 9 is a forum for a high-stakes game of Chicken.
This statutory incoherence should drive the parties to settle. Failure by a court to carry out its duty to decide an appeal, without the consent of both parties, should not.
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