U.S. Bank National Association v. Village at Lakeridge
Issues
What is the appropriate standard of review in determining non-statutory insider status under the Bankruptcy Code?
In this case, the Supreme Court will decide whether a lower court’s determination of an individual’s non-statutory insider status during a bankruptcy proceedings should be reviewed using the de novo standard or the clearly erroneous standard. The designation of insider status matters because, under 11 U.S.C. § 1129(a)(10), an insider—both as officially defined by the statute and as defined by the more expansive case law (a non-statutory insider)— is not permitted to vote during the consideration of a debt restructuring plan, even if his debt interests are harmed by the plan. U.S. Bank National Association argues that when a party appeals its designation as a non-statutory insider, courts should apply a de novo standard of review to such analysis, because it is either a pure question of law or at least a mixed question of law and fact. In contrast, Village at Lakeridge contends that courts should apply a clear error standard to this question because it involves pure fact. U.S. Bank National Association argues that de novo review prevents forum shopping and promotes judicial uniformity. Village at Lakeridge counters that de novo review undermines judicial economy and wastes party resources.
Questions as Framed for the Court by the Parties
Whether the Ninth Circuit Court of Appeals erroneously applied a clear error standard of review for determining non-statutory insider status under the Bankruptcy Code where the material facts were undisputed, rather than a de novo standard of review applied by the majority of circuit courts that have addressed the issue.
U.S. Bank National Association (“U.S. Bank”) is a creditor of Village at Lakeridge, LLC (“Lakeridge”) for a $10 million secured claim. U.S. Bank National Association v. Village at Lakeridge, 814 F.3d 993, 996 (9th Cir.
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Additional Resources
Diane Davis, Creditor Not An ‘Insider’; Can Vote on Chapter 11 Plan, Bloomberg BNA (Feb. 16, 2016).
Amy Howe, Today’s orders – Two grants, one CVSG, still no Masterpiece Cakeshop, SCOTUSBlog (Mar. 27, 2017).
Amy Howe, Justices issue additional orders from September 26 conference (Update), SCOTUSBlog (Oct. 3, 2017).