- Court: United States Supreme Court
- Area(s) of Law: Bankruptcy Law
- Date Filed: March 5, 2018
- Case #: 15-1509
- Judge(s)/Court Below: KAGAN, J., delivered the opinion for a unanimous Court. KENNEDY, J., filed a concurring opinion. SOTOMAYOR, J., filed a concurring opinion, in which KENNEDY, THOMAS, and GORSUCH, JJ., joined.
- Full Text Opinion
Respondent filed for Chapter 11 bankruptcy and submitted a reorganization plan which would harm the interests of two of its major creditors, including Petitioner, who rejected the plan. Despite this rejection, Respondent could obtain judicial approval of the plan if the second creditor consented. However, to validly consent, the second creditor cannot be an “insider of the debtor” as defined in the Bankruptcy Code, and cannot be a “non-statutory insider” as defined by the courts. Petitioner argued that the creditor in question qualifies as a non-statutory insider, due to a romantic relationship between Respondent and the creditor’s board member. The Bankruptcy Court rejected Petitioner’s view of the second creditor as a non-statutory insider and the Ninth Circuit affirmed. The Supreme Court upheld these decisions, reasoning that the bankruptcy court’s opinion was based on a finding that the Respondent’s dealings with the creditor occurred “at arm’s length” despite the romantic relationship. The Court referred to the Ninth Circuit’s two-part test: (1) whether the third party’s relationship with debtor is similar to those of insiders defined by statute, and (2) whether the transaction occurred at arm’s length – positing that this requires findings of either basic or historical fact. The Court held that such findings of fact may only be reviewed for clear error. AFFIRMED.