COVID-19 Special Coverage
Supreme Court hears arguments on race discrimination and creditor’s rights
skeeze / Pixabay
Supreme Court hears arguments on race discrimination and creditor’s rights

The US Supreme Court heard oral arguments Wednesday in cases concerning race discrimination in contracting and bankruptcy. The first involves whether a plaintiff must show in its pleadings that the defendant’s action would not have been taken but for the alleged discrimination. And the second will decide whether an order denying a creditor’s motion to lift an automatic stay is considered a final order that the creditor can appeal.

Comcast v. National Association of African American-Owned Media concerns the pleading standards necessary to bring a lawsuit under the 1866 Civil Rights Act, which guarantees black and white citizens the equal right to make and enforce contracts. Media mogul and former comedian, Byron Allen, filed the initial lawsuit alleging that Comcast discriminated against him over the course of seven years when it declined to carry several of his television channels while instead entering into contracts to carry lesser-known, white-owned channels.

Miguel Estrada, attorney for petitioner Comcast, characterized Allen’s allegations as a “conspiracy theory,” arguing that the “default rule” among the courts of appeal is that a plaintiff must allege race as the but-for cause of discrimination to properly state a claim.

Constitutional scholar and attorney for Allen, Erwin Chemerinski, presented an alternative argument that Congress’ broad remedial purpose for enacting the 1866 Civil Rights Act “did not mean to impose a requirement for but-for causation at the pleading or at the prima facie” stages in a lawsuit. However, Chemerinski conceded that but-for causation is ultimately the proof required to prevail on such a claim.

The second case, Ritzen Group Inc. v. Jackson Masonry, LLC, involves when a creditor may appeal an order denying relief from an automatic stay in a bankruptcy proceeding. In bankruptcy, a creditor’s rights to collect a debt are automatically stayed once a debtor files a bankruptcy petition. The creditor must then obtain an order from the bankruptcy court granting relief from that stay to attempt collection or enforcement of other legal remedies. Often

The issue in Ritzen is whether an order denying relief from the automatic stay constitutes a per se “final order” under 28 USC § 158(a)(1) thus, rendering the order immediately appealable. Petitioner Ritzen Group Inc., is a creditor in the underlying bankruptcy case for Jackson Masonry.

Prior to the bankruptcy in 2014, Ritzen sued Jackson in Tennessee state court over a failed $1.55 million real estate deal. However, just before trial, Jackson filed for bankruptcy, halting the lawsuit under the automatic stay. Ritzen was subsequently denied relief from the automatic stay and forced to litigate the matter in the bankruptcy court. Ultimately, the bankruptcy court found in favor of Jackson triggering Ritzen’s appeal to district court on both the merits of the case and the bankruptcy court’s original denial for relief from stay.

In turn, both the District Court and Sixth Circuit affirmed the bankruptcy court’s ruling on the merits and considered Ritzen’s appeal untimely by holding that the original denial of the request for relief from stay was a final order and therefore only appealable within 14-days from the entry of the order.

The arguments for both sides hinged on the Supreme Court’s interpretation of their 2015 opinion in Bullard v. Blue Hills Bank. In Bullard, the Court wrestled with whether a debtor had a right to an immediate appeal of a court order denying confirmation of a bankruptcy plan under Chapter 13, which enables debtors to use their future income to repay all or part of their debts. The Bullard court held that such an order was not subject to immediate appeal, because of the real possibility that a debtor can quickly present an alternative confirmable plan.

Ritzen used the holding in Bullard to explain why that they did not appeal the denial of the automatic stay, arguing that because they did not view the denial as resolving the proceeding, they were not entitled to appeal at that time. Ritzen further argued that permitting creditors to take up appeals immediately would unfairly “tilt the playing field” and force debtors to argue more appeals at the preliminary stages of a bankruptcy.

Jackson countered by arguing that the motion to lift the stay was predicated on an allegation of bad faith and therefore the bankruptcy court’s denial was a final and immediately appealable. Appearing as amicus curiae, the Department of Justice sided with Jackson arguing that a request for relief from an automatic stay constitutes a discrete proceeding and therefore any order determining such request should be considered a final order.

Decisions in these cases are expected by the summer.