Supreme Court In Review: Recent Notable Decisions

Kaytie Hobbs, Blog Chair, University of Cincinnati Law Review

The Supreme Court is spending these hot June days handing down decision from its 2018 term. This blog post surveys a few of the more interesting holdings so far: 

Gamble v. United States[1]

Held: Dual-sovereignty doctrine is upheld, allowing states and the federal government to prosecute people for the same conduct separately under their own laws. 

The Fifth Amendment of the U.S. Constitution provides that it is unconstitutional for any person to be “twice put in jeopardy” “for the same offence.”[2]Terance Gamble relied on this clause when he argued that his prosecution in state and federal court for the same conduct violated the Constitution.[3]Gamble, a felon, was convicted by Alabama for unlawfully possessing a firearm before the U.S. instituted a separate proceeding against him for the same conduct.[4]

However, the Court has held repeatedly that a crime under one sovereign is not the same offenceas a crime under another sovereign within the meaning of the Amendment.[5]What followed was the dual-sovereignty doctrine: a state and the federal government may prosecute an individual for the same conduct that is brought separately under state law and federal law.[6]

Writing for the majority, Justice Alito explained that “at its core,” this provision prohibited second prosecutions against people who are acquitted or convicted of offenses.[7]The next question, then, is what can be considered an “offence” within the meaning of the Amendment. 

Looking at the text of the Fifth Amendment, the Court concluded that the dual-sovereignty rule flows from the language of the Amendment itself.[8]Because those in 1791 would understand an “offence” to be a violation of a law, and because those laws would be written by one sovereign, the Court found that two sovereigns would create two laws, and therefore two “offences.” [9]

The Court also looked to precedent to strengthen its conclusion. The cited cases noted that one act might constitute two offences,[10]and that extraneous concerns like public safety could dictate separate prosecutions by states and federal governments.[11]

A practical issue concerning foreign courts was raised as well. Illustrating the problem, the majority crafted an example of a murder of a U.S. citizen in another country.[12]Without the dual-sovereignty rule, American courts would be unable to prosecute offenses that a foreign court has tried – in this example, the offense being the fictitious murder.[13]The U.S. has a valid interest in prosecuting that crime for several reasons, ranging from national-security concerns to doubting the foreign country’s judicial system.[14]

For all of those reasons, the Court upheld the dual-sovereignty rule; practically speaking, this means that prosecutors on state and federal levels will continue to prosecute people under both legal systems without fear that convictions would be later overturned. 

Mission Product Holdings, Inc. v. Tempnology, LLC[15]

Held: A debtor’s rejection of a contract constitutes a breach and therefore does not take away the other party’s rights under that contract. 

Debtors filing for bankruptcy have the option to reject executory contracts—contracts that have not been fully performed—under Section 365 of the Bankruptcy Code.[16]The Code further states that a debtor’s rejection of such a contract constitutes a breach.[17]In this case, the Court considered whether a debtor who rejected such a contract would rescind the licensee’s rights under that contract.[18]

Writing for the majority, Justice Kagan answered in the negative, holding that a rejection of the contract does not rescindit, but instead is considered a breach.[19]Because “breach” is not a specialized bankruptcy term, the Court looked to contract law, which provides certain avenues to the injured party of a contractual breach. 

To explain the concept under ordinary contract law, the Court provided an imaginary example of an executory contract outside of the bankruptcy world: a photocopier being leased to a law firm by a dealer.[20]The dealer breaks the agreement by no longer servicing the photocopier, leaving the law firm with two choices: (1) sue for damages and continue to use the photocopier, or (2) return the machine and stop payments.[21]Delving back into the bankruptcy realm, the Court concluded that in bankruptcy, the same rule applies.[22]

From a practical standpoint, this decision could be monumental. As the majority pointed out, this section applies to any executory contracts – which applies to many types of licensing agreements, ranging from trademarks (at issue in this case) to other types of property.[23]

Manhattan Community Access Corp. v. Halleck[24]

Held: Operating a public access channel on a cable system is not a traditionally and exclusive public function, and private entities are not transformed into state actors subject to the First Amendment through that operation alone.

The First Amendment provides that “Congress shall make no law . . . abridging the freedom of speech.”[25]Because the First Amendment applies to governmentactors, the Court has crafted a test to evaluate situations where private entities become state actors.[26]

There are three avenues available to prove a private actor has transformed into a state actor: (1) when it performs a “traditional public function”; (2) the government compels the private entity to act a certain way; or (3) the government and the private entity work together.[27]

Here, the private entity was MNN, a private nonprofit corporation that operated public access channels.[28]MNN declined to air a film made by respondents, who then sued, arguing violation of their First Amendment rights based on content discrimination. 

The Court was tasked with determining whether MNN was a private or state actor. The filmmakers argued that operating the public access channels was a government function, but the Court disagreed and found that historically, it was not exclusively a government action. The Court noted that operation was performed by private cable operators, private nonprofits, cities, and other community organizations.[29]

They also argued that MNN transformed itself into a state actor due to operating a public place for speech; again, the Court disagreed. Justice Kavanaugh stated that private entities frequently opened itself to speech, likening this situation to a comedy club open mic night or a grocery store’s community bulletin.[30]

By holding that MNN was not a state actor solely by virtue of operating public access channels allows it to retain editorial discretion, and sets favorable precedent for other private entities operating similar channels. 


[1]Gamble v. United States, Slip Op. No. 17-646 (U.S. Jun. 17, 2019).

[2]U.S. Const. amend. V. 

[3]Gamble, Slip. Op. No. 17-646.

[4]Id.

[5]See Fox v. Ohio, 46 U.S. 410 (1847); United States v. Marigold, 50 U.S. 560 (1850).

[6]United States v. Lanza, 260 U.S. 377, 382 (1922) (holding that conduct constituting crimes by both federal and state sovereignties are offenses against both, and therefore “may be punished by each.”) 

[7]Gamble, Slip. Op. No. 17-646.

[8]Id.

[9]Id.

[10]50 U.S. 560.

[11]Fox v. Ohio, 46 U.S. 410 (1847).

[12]Gamble, Slip. Op. No. 17-646 at *5.

[13]Id.  

[14]Id.

[15]Mission Prod. Holdings, Inc. v. Tempnology, LLC, No. 17-1657 (U.S. May. 20, 2019)

[16]11 U.S.C.§ 365(a). 

[17]11 U.S.C. § 365(g).

[18]Mission, No. 17-1657.

[19]Id

[20]Id. at *6. 

[21]Id. 

[22]Id. 

[23]Id. See also The Fashion Law,The Supreme Court’s Decision in Mission Product Holdings is Significant for the Bankruptcy-Prone Fashion Industry, May 20, 2019, http://www.thefashionlaw.com/home/the-supreme-courts-decision-in-mission-product-holdings-is-significant-for-fashion. This article recognizes that the retail industry is no stranger to bankruptcy proceedings – and that it can affect brands who file for bankruptcy and attempt to end licensing agreements to use their brands. 

[24]Manhattan Community Access Corp. v. Halleck, No. 17-1702 (U.S. Jun. 17, 2019).

[25]U.S. Const. amend. I.

[26]See, e.g., Flagg Bros., Inc. v. Brooks, 436 U.S. 149 (1978).

[27]Halleck, No. 17-1702at *5. 

[28]Id. at *2. 

[29]Id. at 6.

[30]Id. 

A Real Life Monty Brewster: Can You Spend $30 Million To Escape From the IRS?

Author: Dan Stroh, Associate Member, University of Cincinnati Law Review

A current circuit split poses an imperative question: Can a hypothetical multi-millionaire, like Monty Brewster, spend his millions frivolously without fear of a tax penalty following him through bankruptcy?[1] The United States Bankruptcy Code generally allows debtors to discharge all debts arising prior to filing of bankruptcy.[2] One exception to this general rule prohibits a debtor from discharging any tax debt “with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax.”[3] However, the Ninth and Tenth Circuits disagree on the debtor’s degree of culpability required to deny a discharge of indebtedness under this exception.[4] Continue reading “A Real Life Monty Brewster: Can You Spend $30 Million To Escape From the IRS?”

Bankruptcy Discharges: Why Courts Should Discharge the Civil Contempt Standard for “Refusals”

Author: Stephen Doyle, Associate Member, University of Cincinnati Law Review

Because of the Great Recession beginning around 2008, the number of bankruptcy filings increased by nearly 150% between 2008 and 2010, before leveling off in recent years.[1] With the increased caseload on bankruptcy courts came increased confusion about some of the Bankruptcy Code’s provisions. Recently, courts have split over the requisite level of intent when a debtor “refuses” to comply with an aspect of the case as the term applies to revocation of a discharge of debt.[2] The Fourth, Ninth, Tenth, and Eleventh Circuit Courts of Appeal have held that the party seeking revocation of a discharge must demonstrate willful or intentional misconduct on behalf of the debtor,[3] while all but one of the bankruptcy courts in the Sixth Circuit have held that the standard mirrors that of civil contempt.[4] The former application—the willfulness standard—is more appropriate to such refusals given the purpose of the Bankruptcy Code and the meaning of the word “refuse.”

Continue reading “Bankruptcy Discharges: Why Courts Should Discharge the Civil Contempt Standard for “Refusals””

Robbing Peter to Pay Paul: Irving Picard’s Quest to Repay Bernie Madoff’s Victims

Author: Dan Stroh, Associate Member, University of Cincinnati Law Review

Charles Ponzi did not intend to have his name become synonymous with financial fraud; he intended to get rich quickly. While he was not the first to perpetrate such a scheme, Ponzi’s name is attached to a type of fraud in which a fund pays its first investors with the money contributed by later investors—a Ponzi scheme. In 2008, Bernie Madoff was discovered to have been running a Ponzi scheme with investments estimated at $17.5 billion[1] and claimed returns in excess of $65 billion.[2] While Ponzi’s name is still mentioned frequently, many people now view Madoff as the face of Ponzi schemes due to his decades-long run as a famous investment professional all while never actually investing client funds.

When Madoff’s scheme unraveled, Irving Picard was assigned as trustee for Bernard L. Madoff Investment Securities LLC under the Securities Investor Protection Act (SIPA) and was given the task of attempting to recover as much money as possible to repay the initial investments of Madoff clients.[3] Six years later, the victims of Madoff’s fraud are still seeking repayment of their initial investments.[4] Picard has successfully recovered approximately 60% of the stolen assets to distribute to victims, but he continues to seek more.[5] Recently, the Second Circuit placed a major obstacle in his path when it determined that investors who withdrew more from their accounts than they initially invested were protected by the stockbroker defense in § 546(e) of the Bankruptcy Code.[6] Picard argued that these investors profited from Madoff’s scheme and whether they knew of the scheme or not, the profits they enjoyed should be shared by all of the defrauded investors.[7] On March 17, 2015 he filed a petition for certiorari with the Supreme Court, which has the potential to increase the amount of recovered assets by at least $2 billion and possibly up to $4 billion. With the holders of these funds currently protected by the “stockbroker defense” under the Second Circuit’s ruling,[8] Picard hopes that the Supreme Court will take the case and rule that this defense should only apply when actual securities are involved, not fictitious ones as is the case with Ponzi schemes. While some see the efforts of Picard as simply robbing Peter to pay Paul,[9] the return of these funds would allow for all defrauded investors to be treated equally and fairly without conveying benefits on those who were lucky enough to withdraw their money from Madoff’s Ponzi scheme first.

Continue reading “Robbing Peter to Pay Paul: Irving Picard’s Quest to Repay Bernie Madoff’s Victims”

Filing Time-Barred Claims in Bankruptcy Subjects Creditors to FDCPA Sanctions in the Eleventh Circuit (and Maybe the Seventh)

Author: A.J. Webb, Articles Editor, University of Cincinnati Law Review

Another clash between the Fair Debt Collection Practices Act[1] and the Bankruptcy Code[2] is on the horizon. A recent decision by the Eleventh Circuit Court of Appeals might lead to additional liabilities against creditors seeking to collect on debts from consumers who file for bankruptcy. In July, the Eleventh Circuit held that debt collectors are barred from filing proofs of claims in bankruptcy when those claims are based on unenforceable consumer debts under state law.[3] This issue is likely to be addressed by the Seventh Circuit Court of Appeals in a separate proceeding currently underway in the District Court of the Southern District of Indiana.[4] In order to fulfill the policy aims of the FDCPA and protect consumer debtors from abusive and deceptive debt collection practices, the Seventh Circuit should follow suit and adopt the holding of the Eleventh Circuit.

Continue reading “Filing Time-Barred Claims in Bankruptcy Subjects Creditors to FDCPA Sanctions in the Eleventh Circuit (and Maybe the Seventh)”

Protecting Attorneys and Jeopardizing Creditors: In re Thelen LLP and Rejection of the “Unfinished Business Rule”

Author: A.J. Webb, Articles Editor, University of Cincinnati Law Review

In recent years, numerous multinational law firms have declared bankruptcy amidst dwindling demand for legal services. Generally, the bankruptcy of a law firm is similar to that of any other debtor: a trustee must carefully scrutinize the debtor’s assets, ensuring their availability for distribution to outstanding creditors. These assets are essential in repaying the partnership’s previous debts.

The New York Court of Appeals, however, holds a different view of how a bankrupt law firm should be treated, at least with respect to legal fees generated after the law firm declares bankruptcy. In a decision this past July, the Court of Appeals held that the “unfinished business” rule of partnership law, which provides that any “profits arising from work begun by former partners of dissolved law firms are a partnership asset that must be finished for the benefit of the dissolved partnership,” is inapplicable to pending hourly fee matters.[1] Fees generated after the declaration of bankruptcy concerning pending matters prior to the firm’s bankruptcy belong to the attorney, not the bankruptcy estate.[2] This single decision by the Court of Appeals will have major ramifications in bankruptcy law. While rejecting the unfinished business rule increases attorney and client independence, it seriously harms a creditor’s chance of recovery from the firm in bankruptcy.

Continue reading “Protecting Attorneys and Jeopardizing Creditors: In re Thelen LLP and Rejection of the “Unfinished Business Rule””

Don’t Let the Door Hit You on the Way Out: Smith v. Robbins (In re IFS Financial Corporation) [1]

Author: A.J. Webb, Articles Editor, University of Cincinnati Law Review

In November 2011, W. Steve Smith traveled to New Orleans, Louisiana, to attend a bankruptcy hearing for IFS Financial, for which he served as a bankruptcy trustee in a chapter seven liquidation.[2] While the hearing lasted only one day, Smith extended his stay by three additional days. This decision ultimately cost him his job as a trustee on all of his bankruptcy cases.[3] The Bankruptcy Court for the Southern District of Texas removed Smith as a trustee under Bankruptcy Code (Code) § 324, a provision that allows the court to remove a trustee for cause after notice and a hearing.[4] The District Court for the Southern District of Texas recently affirmed this decision.[5] The decision by the district court highlights three important issues with regard to bankruptcy trustees. First, it demonstrates the willingness of courts to remove trustees for relatively minor improprieties. Second, it demonstrates the fundamental principle of a trustee’s job in bankruptcy: to protect estate assets and ensure their distribution to creditors. Finally, it raises the question as to whether trustees have a “right” to their job under the Code or the United States Constitution.

Continue reading “Don’t Let the Door Hit You on the Way Out: Smith v. Robbins (In re IFS Financial Corporation) [1]”