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The Supreme Court is welcome to have its opinions. But it is not welcome to have its own facts. Fact-finding is at the core of the judicial enterprise, and once the Court starts simply making things up, it loses its legitimacy.
The Court took a dangerous step in that direction today with its opinion granting the President's order for a stay of the District Court's injunction of the President's removal of a member of the National Labor Relations Board and of the Merit Systems Protection Board.
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The Supreme Court, in a decision that will surely be beloved of law professors, held that the bank fraud statute applicable to loan applications covers only actually false statements, not merely misleading statements. The Court got to flex its "oh look at how smart we are" muscle with clever illustrations of the difference between false and misleading statements:
If a tennis player says she “won the championship” when her opponent forfeited, her statement—even if true—might be misleading because it could lead people to think she had won a contested match. The Government also agreed at oral argument with another example: If a doctor tells a patient, “I’ve done a hundred of these surgeries,”
when 99 of those patients died, the statement—even if true—would be misleading because it might lead people to think those surgeries were successful.
And not to be outdone, Justice Alito adds in his own precocious observation in a concurrence:
After noticing that a plate of 12 fresh-baked cookies has only crumbs remaining, a mother asks her daughter, “Did you eat all the cookies?” If the child says “I ate three” when she actually had all 12, her words would be literally true in isolation but false in context. The child did eat three cookies (then nine more). In context, however, the child is implicitly saying that she ate only three cookies, and that is false.
Come on. Would common sense possibly suggest that Congress intended to allow misleading, but not literally false statements on bank loan applications? The result is absurd. Nothing in the legislative history would suggest that Congress wanted such a constrained view of the statute; indeed the legislative history isn't discussed, but there's lots of dictionary definition discussed. Apparently we are ruled by Merriam-Websters, rather than common sense. (And if that's the case, lets just have an AI judge and avoid all the SCOTUS nomination strum und drang). The Court's ruling is an invitation to the Holmesian bad man to go right up to the line of what is false. It all but invites Clintonian sophistry.
But given the Court's casuistry, let me pose my own: if a bank's credit application included a question "Have you made any misleading statements on this application?" and the answer was false, would that trigger a violation of 18 U.S.C. § 1014?
I think the answer is yes. That suggests a simple regulatory fix to this bad decision: bank regulators should insist that bank loan applications include a declaration that the applicant has not made any misleading statements in connection with the application.
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News reports this morning are confirming the rumors that went around the bankruptcy community last night. The Trump Administration has fired Tara Twomey as executive director of the Office of U.S. Trustees. This is a short-sighted and likely illegal decision.
The executive directorship of the US Trustee Program is a nonpolitical position. Twomey's predecessor served under both Republican and Democratic administrations. One report said the termination notice for another DOJ official cited Article II of the Constitution, meaning the Trump Administration must be relying on the wacky and ahistorical "unitary executive theory" where the president has unchecked power. That some judges and law professors have signed up for this idea does not make it any less wacky and ahistorical. The action against Twomey demonstrates that the only thing that matters now is loyalty to the president. Ability does not count. Twomey was a most able leader of the UST Program.
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Juliet Moringiello was an amazing person. Her alchemy of brain and spirit and energy and heart and common sense made a positive difference for so many people, across disparate places and professions. She could teach you how to navigate a commercial law and to downhill ski.
Testaments from Widener University Commonwealth Law School and professional organizations illustrate how Juliet served academic and legal communities with distinction. Examples include the Uniform Law Commission (including an instrumental role in the development of the 2022 amendments to the Uniform Commercial Code), American Law Institute projects, and as a scholar-in-residence for the American Bankruptcy Institute. Juliet did these things while also serving in critical leadership roles at Widener and offering engaged and committed classroom teaching, including first-year property law and an array of upper level classes and seminars.
Chris Odinet's memorial captures beautifully Juliet's commitment to helping others and building communities. As reflected in the mentoring award she recently received from the Commercial and Consumer Law Section of the Association of American Law Schools, Juliet did so much behind the scenes to lift up others and to help them improve their research and analysis.
Juliet was ideally positioned for mentoring because her own scholarship was creative and wide-ranging and yet reflected care and attention to detail. She offered important insights on municipal bankruptcy and related state law procedures. Whereas scholars and jurists long have referred to the "Butner principle" in the abstract, Juliet closely studied the case for which the principle is named, which turned out not to match how it was remembered. She explored poorly drafted statutory language that since 2005 has affected the treatment of car loans in Chapter 13 repayment plans for individuals and proposed an analytical framework accordingly. These are just a few of the examples of her writings in which a reader can find careful and sustained attention to the relationship between state and federal law.
With respect to state secured transactions law, Juliet comfortably traversed the border between real property and personal property. The problems dwelling from the tangible-intangible divide of personal property particularly attracted her attention. She explored puzzles that arise, for example, when one tries to apply fundamental concepts such as possession to remotely controlled activities.
And those projects dovetailed with Juliet's longstanding interest in understanding emerging technologies, and her ability to demystify how foundational commercial law concepts can be squared with innovation – from software licensing agreements and electronic contracting, to cyberspace and domain names and Second Life, to non-fungible tokens. As popular subjects for scholarship, writings on hot tech topics risk ephemerality. Juliet's work is built to last. She made these issues accessible while demonstrating how they could and should be situated in broader legal frameworks.
Of course, these professional interests were part of a rich multi-faceted life of family and friends, of appreciating the sights and nature in Pennsylvania, in Quebec, and anywhere and everywhere she traveled. When there wasn't enough snow for skiis, you might find her on a hike. Or on a bike. Or a paddleboard.
Juliet Moringiello offers inspiration to do impactful work, to help others, and to spend time on the the things you love. Deepest condolences to her family.
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Brady Williamson, a remarkable person, has died at the age of 79. Brady's engagement with the field of bankruptcy law is diverse and of long standing, from arguing before the United States Supreme Court to chairing the National Bankruptcy Review Commission, where I first met and worked for him as a staff attorney. More recently, Brady had a range of professional roles in big bankruptcies, such as those involving the Commonwealth of Puerto Rico, Purdue Pharma, and in cases that implicated air and water quality.
Brady also had tremendous expertise in foundational constitutional law matters and a commitment to democracy, the rule of law, and fair elections at home and around the world. He recently worked with students on such matters from coast to coast, after teaching with some regularity over the years at the University of Wisconsin-Madison. The challenges and joys of university teaching was a topic of what turned out to be our last telephone conversation.
Brady's impact during his lifetime was broad and deep; it will be enduring. Deepest condolences to his loved ones.
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The Supreme Court's opinion in Harrington v. Purdue Pharma left open a lot of questions about the extent of its scope. We now have one of the first opinions exploring those questions. Judge Craig Goldblatt of the Delaware bankruptcy court faced a request for a preliminary injunction in the bankruptcy of right-wing social media platform Parler. Judge Goldblatt concluded that "authority to 'extend the stay' survives Purdue Pharma." I'm skeptical.
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This term's Supreme Court decisions have completely remade administrative law, both by eliminating Chevron deference and by effectively eliminating the Administrative Procedures Act's statute of limitations. In Loper Bright Enterprises v. Raimondo, the Court held that as a constitutional matter federal courts could not give deference to federal agencies' interpretations of ambiguous statutes. And then the Court opened the door to APA challenges to virtually every existing federal regulation, no matter how old, with Corner Post Inc. v. Board of Governors of the Federal Reserve System, a statutory ruling that the APA's six-year statute of limitations runs from the date a plaintiff is allegedly injured by the regulation, rather than from the date of the regulation's finalization. That means that a business that is incorporated tomorrow has at least six years to challenge any regulation that affects it, and maybe more depending on when it is affected. In other words even New Deal or Progressive era regulations could be challenged tomorrow and there would be no deference to the agency's long-standing interpretation of the statute authorizing the regulations. I pity my colleagues who teach admin law–their course lost at least a credit hour's worth of material. Maybe they'll decide to take up commercial law….
These decisions are, taken together, a major rolling back of the administrative state. But these decisions will affect different agencies differently, and the Court's rulings may have some unintended consequences. To wit, many federal agencies have both rulemaking and enforcement powers. In some instances, enforcement is dependent on rulemaking, as the agency lacks a general statutory prohibition to enforce, but can only enforce its particular rules. The EPA is (I think) an example of this type of agency. It doesn't have a general statutory prohibition of "don't pollute." OSHA and the FDA and NLRB and Dept. of Commerce. For agencies in this category, Loper Bright Enterprises and Corner Post clip not only the agencies' rulemaking power, but also their enforcement power, because they will have to defend the rules they are enforcing.
In other instances, however, the enforcement powers are independent of rulemaking, as there is a broad statutory prohibition that the agency can enforce without rules. This is where federal financial regulators sit. In these cases, Loper Bright Enterprises and Corner Post will have a hydraulic effect: agencies are going to do what they're going to do, so if they can't do it through rulemaking, they'll do it through enforcement and supervision. In other words, what the Supreme Court did was to supercharge regulation by enforcement in the financial regulatory space.
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First, thanks to Bob Lawless for his post about my new book. It has been great to engage with people about Unjust Debts so far, and especially appreciated the book making a new Financial Times best books list (links to that and other coverage here). Wanted to note a few upcoming book events for Credit Slips readers:
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Karl Marx's famously quipped how historical figures appear twice, "the first time as tragedy, the second time as farce." So too with the legal arguments about the constitutionality of the CFPB's funding: we are firmly in farce territory at this point.
Nevertheless, over at Ballard Spahr's Consumer Finance Monitor blog my friend Alan Kaplinsky doesn't seem to get the joke and has earnestly taken issue with my criticisms of Hal Scott's claim that the CFPB's funding is unauthorized both by statute and under the Constitution. I find the legal arguments involved here so thin that I wouldn't bother with a second blog post about them, other than that they've found a welcoming audience from some members of Congress (yes, I can hear the remarks from the peanut gallery…). So let's go through this again.