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SUPREME COURT OF THE UNITED STATES
_________________
No. 11–166
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RADLAX GATEWAY HOTEL, LLC, et al.,
PETITION- ERS
v. AMALGAMATED BANK
on writ of certiorari to the united states
court of appeals for the seventh circuit
[May 29, 2012]
Justice Scalia delivered the opinion of the
Court.
We consider whether a Chapter 11 bankruptcy plan
may be confirmed over the objection of a secured creditor pursuant
to 11 U. S. C. §1129(b)(2)(A) if the plan provides for
the sale of collateral free and clear of the creditor’s lien, but
does not permit the creditor to “credit-bid” at the sale.
I
In 2007, petitioners RadLAX Gateway Hotel,
LLC, and RadLAX Gateway Deck, LLC (hereinafter debtors), purchased
the Radisson Hotel at Los Angeles International Airport, together
with an adjacent lot on which the debtors planned to build a
parking structure. To finance the purchase, the renovation of the
hotel, and construction of the parking structure, the debtors
obtained a $142 million loan from Longview Ultra Construction Loan
Investment Fund, for which respondent Amalgamated Bank (hereinafter
creditor or Bank) serves as trustee. The lenders obtained a blanket
lien on all of the debtors’ assets to secure the loan.
Completing the parking structure proved more
expensive than anticipated, and within two years the debtors had
run out of funds and were forced to halt construction. By August
2009, they owed more than $120 million on the loan, with over $1
million in interest accruing every month and no prospect for
obtaining additional funds to complete the project. Both debtors
filed voluntary petitions for relief under Chapter 11 of the
Bankruptcy Code.
A Chapter 11 bankruptcy is implemented according
to a “plan,” typically proposed by the debtor, which divides claims
against the debtor into separate “classes” and specifies the
treatment each class will receive. See 11 U. S. C. §1123.
Generally, a bankruptcy court may confirm a Chapter 11 plan only if
each class of creditors affected by the plan consents. See
§1129(a)(8). Section 1129(b) creates an exception to that general
rule, per- mitting confirmation of nonconsensual plans—commonly
known as “cramdown” plans—if “the plan does not discriminate
unfairly, and is fair and equitable, with respect to each class of
claims or interests that is impaired under, and has not accepted,
the plan.” Section 1129(b)(2)(A), which we review in further depth
below, establishes criteria for determining whether a cramdown plan
is “fair and equitable” with respect to secured claims like the
Bank’s.
In 2010, the RadLAX debtors submitted a Chapter
11 plan to the United States Bankruptcy Court for the Northern
District of Illinois. The plan proposed to dissolve the debtors and
to sell substantially all of their assets pursuant to procedures
set out in a contemporaneously filed “Sale and Bid Procedures
Motion.” Specifically, the debtors sought to auction their assets
to the highest bidder, with the initial bid submitted by a
“stalking horse”—a potential purchaser who was willing to make an
advance bid of $47.5 million.[
1] The sale proceeds would be used to fund the plan,
primarily by repaying the Bank. Of course the Bank itself might
wish to obtain the property if the alternative would be receiving
auction proceeds that fall short of the property’s full value.
Under the debtors’ proposed auction procedures, however, the Bank
would not be permitted to bid for the property using the debt it is
owed to offset the purchase price, a practice known as
“credit-bidding.” Instead, the Bank would be forced to bid cash.
Correctly anticipating that the Bank would object to this
arrangement, the debtors sought to confirm their plan under the
cramdown provisions of §1129(b)(2)(A).
The Bankruptcy Court denied the debtors’ Sale
and Bid Procedures Motion, concluding that the proposed auction
procedures did not comply with §1129(b)(2)(A)’s requirements for
cramdown plans.
In re River Road Hotel Partners, LLC,
Case No. 09 B 30029 (ND Ill., Oct. 5, 2010), App. to
Pet. for Cert. 40a. The Bankruptcy Court certified an appeal
directly to the United States Court of Appeals for the Seventh
Circuit. That court accepted the certifi- cation and affirmed,
holding that §1129(b)(2)(A) does not permit debtors to sell an
encumbered asset free and clear of a lien without permitting the
lienholder to credit-bid.
River Road Hotel Partners, LLC,
et al. v.
Amalgamated Bank, 651 F.3d 642 (2011). We
granted certiorari. 565 U. S. ___ (2011).
II
A
A Chapter 11 plan confirmed over the objection
of a “class of secured claims” must meet one of three requirements
in order to be deemed “fair and equitable” with respect to the
nonconsenting creditor’s claim. The plan must provide:
“(i)(I) that the holders of such claims retain
the liens securing such claims, whether the property subject to
such liens is retained by the debtor or transferred to another
entity, to the extent of the allowed amount of such claims; and
(II) that each holder of a claim of such class receive on account
of such claim deferred cash payments totaling at least the allowed
amount of such claim, of a value, as of the effective date of the
plan, of at least the value of such holder’s interest in the
estate’s interest in such property;
“(ii) for the sale, subject to section 363(k)
of this title, of any property that is subject to the liens
securing such claims, free and clear of such liens, with such liens
to attach to the proceeds of such sale, and the treatment of such
liens on proceeds under clause (i) or (iii) of this subparagraph;
or
“(iii) for the realization by such holders of
the indubitable equivalent of such claims.” 11 U. S. C.
§1129(b)(2)(A).
Under clause (i), the secured creditor retains
its lien on the property and receives deferred cash payments. Under
clause (ii), the property is sold free and clear of the lien,
“subject to section 363(k),” and the creditor receives a lien on
the proceeds of the sale. Section 363(k), in turn, provides that
“unless the court for cause orders otherwise the holder of such
claim may bid at such sale, and, if the holder of such claim
purchases such property, such holder may offset such claim against
the purchase price of such property”—
i.e., the creditor may
credit-bid at the sale, up to the amount of its claim.[
2] Finally, under clause (iii), the
plan provides the secured creditor with the “indubitable
equivalent” of its claim.
The debtors in this case have proposed to sell
their property free and clear of the Bank’s liens, and to repay the
Bank using the sale proceeds—precisely, it would seem, the
disposition contemplated by clause (ii). Yet since the debtors’
proposed auction procedures do not permit the Bank to credit-bid,
the proposed sale cannot satisfy the requirements of clause
(ii).[
3] Recognizing this
problem, the debtors instead seek plan confirmation pursuant to
clause (iii), which—unlike clause (ii)—does not expressly foreclose
the possibility of a sale without credit-bidding. According to the
debtors, their plan can satisfy clause (iii) by ultimately
providing the Bank with the “indubitable equivalent” of its secured
claim, in the form of cash generated by the auction.
We find the debtors’ reading of
§1129(b)(2)(A)—under which clause (iii) permits precisely what
clause (ii) proscribes—to be hyperliteral and contrary to common
sense. A well established canon of statutory interpretation
succinctly captures the problem: “[I]t is a commonplace of
statutory construction that the specific governs the general.”
Morales v.
Trans World Airlines, Inc.,
504 U.S.
374, 384 (1992). That is particularly true where, as in
§1129(b)(2)(A), “Congress has enacted a comprehensive scheme and
has deliberately targeted specific problems with specific
solutions.”
Varity Corp. v.
Howe,
516 U.S.
489, 519 (1996) (Thomas, J., dissenting); see also
HCSC-Laundry v.
United States,
450 U.S.
1, 6 (1981)
(per curiam) (the specific governs the
general “particularly when the two are interrelated and closely
positioned, both in fact being parts of [the same statutory
scheme]”).
The general/specific canon is perhaps most
frequently applied to statutes in which a general permission or
prohibition is contradicted by a specific prohibition or
permission. To eliminate the contradiction, the specific provision
is construed as an exception to the general one. See,
e.g.,
Morton v.
Mancari,
417 U.S.
535, 550–551 (1974). But the canon has full application as well
to statutes such as the one here, in which a general authorization
and a more limited, specific authorization exist side-by-side.
There the canon avoids not contradiction but the superfluity of a
specific provision that is swallowed by the general one,
“violat[ing] the cardinal rule that, if possible, effect shall be
given to every clause and part of a statute.”
D. Ginsberg &
Sons, Inc. v.
Popkin,
285 U.S.
204, 208 (1932). The terms of the specific authorization must
be complied with. For example, in the last cited case a provision
of the Bankruptcy Act prescribed in great detail the procedures
governing the arrest and detention of bankrupts about to leave the
district in order to avoid examination. The Court held that those
prescriptions could not be avoided by relying upon a general
provision of the Act authoriz- ing bankruptcy courts to
“ ‘make such orders, issue such process, and enter such
judgments in addition to those spe- cifically provided for as may
be necessary for the enforcement of the provisions of [the]
Act.’ ”
Id., at 206 (quoting Bankruptcy Act of 1898,
§2(15), 30Stat. 546). The Court said that “[g]eneral language of a
statutory provision, although broad enough to include it, will not
be held to apply to a matter specifically dealt with in another
part of the same enactment.” 285 U. S., at 208. We recently
quoted that language approvingly in
Bloate v.
United
States, 559 U. S. ___, ___ (2010) (slip op., at 10). Or as
we said in a much earlier case:
“It is an old and familiar rule that,
where there is, in the same statute, a particular enactment, and
also a general one, which, in its most comprehensive sense, would
include what is embraced in the former, the particular enactment
must be operative, and the general enactment must be taken to
affect only such cases within its general language as are not
within the provisions of the particular enactment. This rule
applies wherever an act contains general provisions and also
special ones upon a subject, which, standing alone, the general
provisions would include.”
United States v.
Chase,
135 U.S.
255, 260 (1890) (citations and internal quotation marks
omitted).
Here, clause (ii) is a detailed provision that
spells out the requirements for selling collateral free of liens,
while clause (iii) is a broadly worded provision that says nothing
about such a sale. The general/specific canon explains that the
“general language” of clause (iii), “although broad enough to
include it, will not be held to apply to a matter specifically
dealt with” in clause (ii).
D. Ginsberg & Sons, Inc.,
supra, at 208.
Of course the general/specific canon is not an
absolute rule, but is merely a strong indication of statutory
meaning that can be overcome by textual indications that point in
the other direction. The debtors point to no such indi- cation
here. One can conceive of a statutory scheme in which the specific
provision embraced within a general one is not superfluous, because
it creates a so-called safe harbor. The debtors effectively contend
that that is the case here—clause (iii) (“indubitable equivalent”)
being the general rule, and clauses (i) and (ii) setting forth
procedures that will always,
ipso facto, establish an
“indubitable equivalent,” with no need for judicial evaluation. But
the structure here would be a surpassingly strange manner of
accomplishing that result—which would normally be achieved by
setting forth the “indubitable equivalent” rule first (rather than
last), and establishing the two safe harbors as provisos to that
rule. The structure here suggests, to the contrary, that (i) is the
rule for plans under which the creditor’s lien remains on the
property, (ii) is the rule for plans under which the property is
sold free and clear of the creditor’s lien, and (iii) is a residual
provision covering dispositions under all other plans—for example,
one under which the creditor receives the property itself, the
“indubitable equivalent” of its secured claim. Thus, debtors may
not sell their property free of liens under §1129(b)(2)(A) without
allowing lienholders to credit-bid, as required by clause (ii).
B
None of the debtors’ objections to this
approach is valid.
The debtors’ principal textual argument is that
§1129(b)(2)(A) “unambiguously provides three distinct options for
confirming a Chapter 11 plan over the objection of a secured
creditor.” Brief for Petitioners 15 (capitalization and bold
typeface removed). With that much we agree; the three clauses of
§1129(b)(2)(A) are connected by the disjunctive “or.” The debtors
contend that our interpretation of §1129(b)(2)(A) “transforms ‘or’
into ‘and.’ ” Reply Brief for Petitioners 3. But that is not
so. The question here is not whether debtors must comply with more
than one clause, but rather which one of the three they must
satisfy. Debtors seeking to sell their property free of liens under
§1129(b)(2)(A) must satisfy the requirements of clause (ii), not
the requirements of
both clauses (ii) and (iii).
The debtors make several arguments against
applying the general/specific canon. They contend that clause (ii)
is no more specific than clause (iii), because the former provides
a procedural protection to secured creditors (credit-bidding) while
the latter provides a substantive protection (indubitable
equivalence). As a result, they say, clause (ii) is not “a limiting
subset” of clause (iii), which (according to their view)
application of the general/specific canon requires. Brief for
Petitioners 30–31; Reply Brief for Petitioners 5–6. To begin with,
we know of no authority for the proposition that the canon is
confined to situations in which the entirety of the specific
provision is a “subset” of the general one. When the conduct at
issue falls within the scope of
both provisions, the
specific presumptively governs, whether or not the specific
provision also applies to some conduct that falls outside the
general. In any case, we think clause (ii) is entirely a subset.
Clause (iii) applies to
all cramdown plans, which include
all of the plans within the more narrow category described in
clause (ii).[
4] That its
requirements are “substantive” whereas clause (ii)’s are
“procedural” is quite beside the point. What counts for application
of the general/specific canon is not the
nature of the
provisions’ prescriptions but their
scope.
Finally, the debtors contend that the Court of
Appeals conflated approval of bid procedures with plan
confirmation. Brief for Petitioners 39. They claim the right to
pursue their auction now, leaving it for the Bankruptcy Judge to
determine, at the confirmation stage, whether the resulting plan
(funded by auction proceeds) provides the Bank with the
“indubitable equivalent” of its secured claim. Under our
interpretation of §1129(b)(2)(A), how- ever, that approach is
simply a nonstarter. As a matter of law, no bid procedures like the
ones proposed here
could satisfy the requirements of
§1129(b)(2)(A), and the distinction between approval of bid
procedures and plan confirmation is therefore irrelevant.
III
The parties debate at some length the purposes
of the Bankruptcy Code, pre-Code practices, and the merits of
credit-bidding. To varying extents, some of those debates also
occupied the attention of the Courts of Appeals that considered the
question presented here. See,
e.g., In re Philadelphia
Newspapers, LLC, 599 F.3d 298, 314–317 (CA3 2010);
id.,
at 331–337 (Ambro, J., dissenting). But nothing in the generalized
statutory purpose of protecting secured creditors can overcome the
specific manner of that protection which the text of §1129(b)(2)(A)
contains. As for pre-Code practices, they can be relevant to the
interpretation of an ambiguous text, but we find no textual
ambiguity here. And the pros and cons of credit-bidding are for the
consideration of Congress, not the courts.
The Bankruptcy Code standardizes an expansive
(and sometimes unruly) area of law, and it is our obligation to
interpret the Code clearly and predictably using well established
principles of statutory construction. See
United States v.
Ron Pair Enterprises, Inc.,
489 U.S.
235, 240–241 (1989). Under that approach, this is an easy case.
Because the RadLAX debtors may not obtain confirmation of a Chapter
11 cramdown plan that provides for the sale of collateral free and
clear of the Bank’s lien, but does not permit the Bank to
credit-bid at the sale, we affirm the judgment of the Court of
Appeals.
It is so ordered.
Justice Kennedy took no part in the decision of
this case.