Supreme Court Update by Aaron Streett

Greetings, sportsfans! When Chief Justice Roberts testified in his confirmation hearing that he hoped to increase unanimity on the Court, skeptical observers did not realize that he had a secret plan: grant more Ninth Circuit cases. That strategy continued to pay dividends yesterday, as the Court unanimously reversed the CA9 for the sixth time this Term, and the CA9 ran its overall record to 0-9. Only time will tell whether the Ninth Circus can match the 1976 Buccaneers’ 0-14 mark. You may recall that the Bucs’ coach, when asked about the execution of the Tampa Bay offense, responded, “I’m in favor of it.” While no one is proposing execution here (which the CA9 would stay anyway), you have to admit that this is getting kind of ridiculous.

Travelers Casualty & Surety Co. of America v. Pacific Gas & Electric Co., 05-1429

The question here was whether federal bankruptcy law precludes the enforcement of a pre-petition contract that required a debtor to pay an unsecured creditor’s attorney’s fees. The Ninth Circuit had devised a unique rule that a creditor may not recover attorney’s fees it incurs while litigating issues peculiar to bankruptcy law. Justice Alito explained quite concisely that the CA9 rule “finds no support in the Bankruptcy Code.” Section 502(a) of the Code states that a court must allow a creditor’s contractual claim unless it falls within any of the exceptions set forth in § 502(b). None of those exceptions covers contractual claims involving creditor’s attorney’s fees. So the only question is whether the debtor’s contractual obligation to pay attorney’s fees is enforceable under state law, which applies to bankruptcy proceedings in the absence of conflicting federal law.

It turns out the court of appeals made up its rule out of whole cloth, apparently by misinterpreting earlier circuit precedent that had concluded attorney’s fees claims were barred as a matter of state law, not under the Bankruptcy Code. Seeing the writing on the wall, PG&E made “no effort to defend the [CA9’s] rule.” It did, however, come up with some creative statutory arguments why attorney’s fees still might not be allowed under the Code. Unfortunately for PG&E, it did not raise those arguments below, and the Court refused to consider them. Justice Alito wrote, “this demonstrates the critical importance of retaining appellate specialists in the early stages of litigation.” (In the interests of accuracy, I should note that I just now made that quote up.)

Travelers thus stands for one important legal principle that you won’t find mentioned in the syllabus: Even if you have CA9 precedent directly on-point, you might want to consider marshalling some additional support for your arguments (say, something with some basis in the western legal tradition).

Other Action

· No new cert grants on Monday’s Orders List. Now that the OT ’06 docket is full, the pendulum has swung back recently toward the stinginess with grants that we saw earlier this Term.

· The Court CVSG’d in Joblove v. Barr Labs, Inc. (06-830), whose question presented concerns a Big Pharma tactic that is becoming increasingly common: Whether the Sherman Act prohibits a manufacturer of a patented brand-name drug from agreeing to share profits with the manufacturer of a generic substitute, in exchange for the generic’s agreement not to market its product.

Until next time (opinions tomorrow??), that’s today’s baseball.

Aaron M. Streett is an associate in the Houston office of Baker Botts LLP, and a member of the firm’s Appellate and Supreme Court Practice. The statements, opinions, and subtle emotions expressed herein do not necessarily represent those of Baker Botts LLP; to the extent they are correct, insightful, and not offensive, they most definitely represent the views of the author. I’m Aaron Streett and I approve this message. If you would like to subscribe to these updates, please send an e-mail to [email protected]