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SUPREME COURT OF THE UNITED STATES
_________________
No. 11–166
_________________
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.
