Supreme Court takes student loan bankruptcy case

The US Supreme Court on Monday granted certiorari in four cases. In United Student Aid Funds, Inc. v. Espinosa, the Court will decide on the requirements for discharging student loan debt via bankruptcy proceedings. Specifically at issue is whether such a bankruptcy discharge can be obtained without proving "undue hardship" as required by 11 USC § 523 and without commencing an adversarial proceeding as required by bankruptcy court rules. Petitioners appeal a decision from the US Court of Appeals for the Ninth Circuit, which held that student loans can be discharged within a Chapter 13 plan if the creditor receives notice of the plan and fails to object. The appellate-level decision found that creditors in the business of administering student loans are unlikely to be misled by customary bankruptcy procedures and "crafty student debtors," ruling that bankruptcy courts have "no business" interfering in such procedures.

In Stolt-Nielsen S.A. v. AnimalFeeds International Corp., the Court will decide if imposing class arbitration on parties when that issue is silent in their arbitration clauses is consistent with the Federal Arbitration Act. The US Court of Appeals for the Second Circuit ruled that construing the arbitration clause to permit class arbitration "did not manifestly disregard the law" because the parties specifically agreed that the arbitration panel would decide on the scope of the clause and, therefore, the panel did not exceed its authority.

In the combined cases of Mac’s Shell Service, Inc. v. Shell Oil Prodsucts Co. and Shell Oil Products Co. v. Mac’s Shell Service, Inc., the Court will consider whether a service station operator can bring a constructive termination action under the Petroleum Marketing Practices Act when the operator continues to run the franchise with the same trademark, fuel, and premises. Additionally, the Court will decide on the requirements for constructive non-renewal of a franchise-franchisee agreement under the Act. The US Court of Appeals for the First Circuit affirmed a district court ruling that a franchise may recover for constructive termination even if it continues to use the same trademark, fuel, and premises. The First Circuit additionally reversed the district ruling on constructive non-renewal of an agreement, holding that a franchisee faced with an unlawful lease has to either sign the lease and forego any potential actions under the Act or refuse to sign and bring a challenge to it after receiving a notice of non-renewal. In an amicus brief requesting certiorari, the US Solicitor General contests the First Circuit's ruling on constructive termination and agrees with that court's ruling against constructive renewal.

In Stop the Beach Renourishment, Inc. v. Florida Department of Environmental Protection, the Court will determine the constitutional scope of states' authority to modify property boundaries without a judicial hearing. At issue is the due process permissibility of Florida's restoration of storm-eroded beaches by modifying private property boundaries under their Beach and Shore Preservation Act. The appeal follows a Supreme Court of Florida ruling that the legislation in question does not unconstitutionally deprive upland owners of littoral rights without just compensation, confining their judgment to the context of eroded beaches only. Littoral rights concern the use and enjoyment of ocean, sea, or lake shores.

(Published by Jurist - June 15, 2009)