Supreme Court Deadlocks in Eighth Circuit Bankruptcy Case

Hawkins vs. Community Bank of Raymore

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The Supreme Court of the United States Deadlocks in a Bankruptcy Case after the death of Justice Antonin Scalia. Getty Images

What many court watchers feared would happen in fact occurred this week when the US Supreme Court issued its first deadlocked opinion after the death of Justice Antonin Scalia. With a one sentence decision, “The judgment is affirmed by an equally divided court,” a bankruptcy case on an obscure point of law left the justices split evenly in a four to four tie.

Hawkins v. Community Bank of Raymore

The case was the Eighth Circuit opinion in Hawkins v. Community Bank of Raymore.

 In the Hawkins case, two couples owned a real estate development company. When the husbands sought financing from the Community Bank of Raymore, the bank required that the wives guarantee the debt. The development company filed bankruptcy, and the bank sought payment from the wives under the guarantee. The wives filed a lawsuit against the bank, claiming that the bank discriminated against them under the Equal Credit Opportunity Act of 1974 when it required that they guarantee their husbands’ loans.

The Equal Credit Opportunity Act of 1974

The Equal Credit Opportunity Act was designed to prevent lender discrimination on the basis of race, color, religion, national origin, sex, marital status, or age. At the time of its enactment, the Act was especially significant for married women, who were often required by banks and other lending institutions to obtain their husbands’ guarantee when applying for debt in their own name.

The Hawkins case, and another decided previously by the Sixth Circuit (see below), concerns whether guarantors can be included in the Act's definition of "applicant."

The Lower Courts' Decisions

The Hawkins case presents a little different challenge and centers around the definition of “applicant,” the person the Act was intended to protect.

In Hawkins, the wives did not seek to take out debt in their own names. Instead, they were required by the bank to guarantee the business loans taken out by their husbands. The wives argued that they came within the definition of “applicant” in the Act, and therefore the bank discriminated against them when it required that they guarantee their husbands’ loans. The effect of the bank’s action, they argued, made them liable for payment of the loans and damaged their creditworthiness. The bank argued that the Act did not apply to this type of situation because the women were not applying for credit in their own names, but were merely asked to guarantee their husband’s indebtedness.

The trial court agreed with and ruled for the bank. The wives appealed, and a three judge panel of the Eighth Circuit Court of Appeals also ruled for the bank.

The Appeal to the Supreme Court

Determined, the wives took the case to the Supreme Court. All nine justices heard the arguments in the case on the opening day of the Court’s term in October 2015. Although no one could know what the court might have decided had Justice Scalia survived, court watchers had expected from questioning at oral argument that the Court would eventually rule in favor of the bank.

When the Court finally issued its per curium opinion, the effect of the deadlock meant that the decision of the Eighth Circuit Court of Appeals was affirmed. In this case, because the decision was issued per curium, the decision does not specify which justices voted to affirm and which voted otherwise. The opinion had been on the court’s decision docket since October, a relatively long time for cases of this type, and might indicate that there had been some back and forth among the justices as they made their decisions and wrote opinions. None of that, however, is evident in the final per curium opinion.

The Split in the Circuits

With twelve separate federal Circuit Courts of Appeal, fairly regularly circuits will hear and decide cases with similar issues. Also with some regularity, those decisions will conflict.

Such conflicting decisions will lead to an uneven and sometimes unfair application of law across circuits. If the conflict is significant or the point of law is important, the Supreme Court will choose to hear a case that it believes will settle an issue.

In the case the Equal Credit Opportunity Act and interpretation of "applicant," the Supreme Court took on the Hawkins case to resolve a split between the Eighth and the Sixth Circuits. In RL BB Acquisition, LLC v. Bridgemill Commons Development Group, LLC, the Sixth Circuit Court of Appeals held that guarantors are “applicants” for purpose of the Act. With the Sixth Circuit’s ruling in contravention to the decision in the Eighth Circuit, the Supreme Court was set to resolve this split with final guidelines on interpretation of “applicant.” The four to four tie, however, will do little to resolve this split of authority. As it stands, the Hawkins case will serve as precedent in the Eighth Circuit and the RL BB Acquisition case will serve as precedent in the Sixth Circuit until the Supreme Court chooses to take on another case interpreting this same federal law.

When the Supreme Court Deadlocks

There are no rules or laws that would prevent a justice from casting a ballot in any case while he or she is a member of the Court. There are also no rules governing whether justices are restricted from participating in decisions if they cannot attend oral argument. Four to four decisions are rare, but do occur from time to time, most often when a justice recuses him or herself because of a conflict of interest in the case or because he or she was not present to hear oral argument. For example, in 2002, having just been on the bench for two months, then Chief Justice William Rehnquist chose to abstain from a decision because he had not been present for the oral argument. On the other hand, just two years later, Chief Justice Rehnquist suffered thyroid cancer and was confined to his home for some time while he recuperated after treatment. Even then he continued to work from home. As the Chief Justice did, they will often rely on a transcript of the argument and special briefing by their law clerks in addition to the briefs, evidence, and transcripts from the original proceeding.