The US Supreme Court [official website] ruled unanimously [opinion, PDF] Tuesday in RadLAX Gateway Hotel, LLC v. Amalgamated Bank [SCOTUSblog backgrounder] that debtors are not entitled to a "cramdown" plan including the sale of collateral that avoids a bank's lien. However, the court ruled that the bank is also not entitled to credit-bid at the sale. The former was declared inequitable under 11 USC § 1129(b)(2)(A) [text]. As for credit bidding, the court declared that there is no statutory guarantee to it. Justice Antonin Scalia delivered the opinion for the court:
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. 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. 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.Justice Anthony Kennedy recused himself from the decision.
The Supreme Court granted certiorari in the case in December and heard oral arguments [JURIST reports] last month. It affirmed the decision [opinion text] of the US Court of Appeals for the Seventh Circuit.