07 June 2010

Bread and Butter Decisions From SCOTUS

The Supreme Court made sensible decisions on non-constitutional legal issues that impact lawyers and litigants in bankruptcy and civil procedure today.

One holds that bankruptcy courts may consider changes in income and expenses that are known or virtually certain, rather than looking at past experience, when determining how much income a debtor in a Chapter 13 wage earner's plan must pay to creditors. Otherwise, minimum payments to creditors in Chapter 13 plans must be based on actual numbers from the past six months. The case involved a debtor with a new low paying job whose income in the last six months was artificially inflated by a severance payment and a better paying old job. The court held that the debtor could base payments on the new rather than the old job.

The other case involved a lawsuit brought against a cruise line that named the wrong one of two related companies. The party bringing the lawsuit wanted to amend a complaint after the statute of limitations had run against the correct company. This is allowed, but only if the amendment of the complaint "relates back" to the date of the filing of the original complaint. In this case, a complication is that the party bringing suit wasn't particularly prompt in correcting the original error. The Supreme Court held that whether an amended complaint that adds a new party relates back "depends on what the party to be added knew or should have known, not on the amending party’s knowledge or timeliness in seeking to amend the pleading" (syllabus rather than opinion text quoted). Thus, it is fair to add a party if that party knew or should have known that the plaintiff actually intended to sue it. The result is a victory for the person suing the cruise line.

There was also a ruling 6-3 involving an unusual lineup of justices that upheld a current anti-defendant rule concerning how good time is calculated for inmates in federal prisons. While the issues were arcane, the decision means that about 200,000 inmates at any given time will be serving longer sentences than they would have under a proposed more lenient interpretation of the good time statute.

All of the rulings enhance certainty, are understandable, are relatively simple to apply in practice, and can be changed legislatively, or in the case of the relation back and good time issues, through a regulatory process.

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