Bradley Helps Municipality Secure U.S. Supreme Court Hearing in Case Concerning Federal Bankruptcy Law

Firm News

Bradley is pleased to announce that it drafted and submitted for its pro bono client, the International Municipal Lawyers Association (IMLA), an amicus curiae brief in support of a petition for certiorari in the case Chicago v. Fulton. The U.S. Supreme Court granted certiorari on December 18, 2019.

The IMLA was represented in the amicus brief filing by Bradley partners Scott Burnett Smith and Alexandra Dugan and associate Stephen C. Parsley.

The case presents the Supreme Court with a recurring question of federal bankruptcy law that has left the courts of appeals divided: whether the Bankruptcy Code’s automatic stay mandates that creditors turn over a debtor’s impounded vehicle as soon as the bankruptcy petition is filed, or whether creditors that may have statutory defenses to turnover may assert those defenses in bankruptcy and retain possession while awaiting an order of the Bankruptcy Court resolving the issue in an adversary proceeding.

Several circuits, including the Seventh Circuit, have held that the automatic stay of 11 U.S.C. § 362(a) requires a local government immediately to release an impounded vehicle when the owner files for bankruptcy. The Third, Tenth and D.C. Circuits, by contrast, have rejected this argument.

The City of Chicago was the petitioner in the case, with respondents Robbin L. Fulton, Jason S. Howard, George Peak, and Timothy Shannon.

This case is of particular concern to the IMLA — which is an organization of local government attorneys who advise towns, cities, and counties across the country — because of the uncertainty surrounding the legal avenues available to enforce traffic safety laws after a car owner has filed for bankruptcy. Impounding automobiles for serious safety violations, and as a last resort after an owner’s failure to pay traffic fines, is a widespread practice among local governments. But the split between the circuit courts has hampered those efforts and caused uncertainty for local governments.

“The IMLA’s members were united in the belief that a clear and consistent requirement nationwide was preferable to the current circuit split,” said Mr. Smith. “Our amicus brief explained how the issue presented in this case affects nearly 39,000 cities, counties, and towns nationwide.”

Ms. Dugan added, “It further explained that the rule adopted by the Seventh Circuit burdens local governments by undermining the efficacy of their traffic and parking regulations, as well stressing the court system by incentivizing the filing of bankruptcy petitions solely to recover an impounded vehicle.”