U. S. Bank Nat. Assn. v. Village at Lakeridge, LLC (15-1509)

argument 15-1509

U. S. Bank Nat. Assn. v. Village at Lakeridge, LLC

Supreme Court of the United States 59 min 6 speakers 8 chapters transcribed 7 days ago official recording ↗

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What legal standard governs the application of the bankruptcy code in this case?

John G. Roberts 0:00

We will hear argument this morning, case fifteen fifteen oh nine, the United States Bank National Association trustee versus the village at Lakeridge. Mr Cross.

Mr. Cross 0:10

Mr Chief Justice, may it please the court. This case presents a paradigm example of a mixed question of law and fact. It's a polar case. The historical facts are not in dispute, and the legal measure is settled. The question today is what s le what standard of review should govern the application of the legal standard to the undisputed facts?

Unknown 0:29

What is the legal standard?

Mr. Cross 0:32

Legal standard should be de novo. The legal standard as articulated by the Ninth Circuit was a two pronged test. Whether the party's relationship was sufficiently close that it was comparable to the factors enunciated in one hundred one thirty one of the bankruptcy code, and whether the parties transacted at arm's length. to two pronged test. Historically, when this court has has applied

Elena Kagan 0:54

two prongs, that means let's assume the district court had found that this couple was an intimate couple that lived together, exchanged payments of Um their expenses uh were like a married couple, not like a fax found. Correct. Б інфа they transacted this in an arm's length way. He did due diligence He um he thought about it. He Um talked to investors, they all said, This is a great deal, take it. So it has the indicia of arm's length, but it is almost an insider relationship because He's essentially married to this woman.

Mr. Cross 1:36

Both elements are required, Your Honor.

Elena Kagan 1:38

That's fascinating. with uh traditional statutory insiders, which statutory insiders we presume that the transaction is tinged. Why don't we make the same presumption if these Um if these non statutory insiders are just like Insiders.

Mr. Cross 2:02

Well the test that we have, which is settled, is the two prong test. And with respect to the second element of the test, the first test is more of a presumption. What's the nature of the party's relationship? But the test goes to the nature of the transaction. And there's a subsidiary test for arm's length. The question is did the parties transact as if they were strangers? It doesn't include intent. It's an objective status test. You can, for example, have a close relationship and have an intent to transact with a party But you can nevertheless purchase through a f through a free market transaction, that would be an arm's length transaction, you would not qualify for insider status. Historically

Elena Kagan 2:40

asked us to take this as a question presented and we denied it.

Unknown 2:45

Correct.

Elena Kagan 2:46

Why did you think it was important if you're defending the standard now? Why did you ask us to take the question if you think the standard's okay?

Mr. Cross 2:55

Thought that when we asked for f when we asked for cert on that question, we thought the standard lacked sufficient definition. But since the court denied certain on that question, I'm

Elena Kagan 3:03

you're living with it.

Mr. Cross 3:04

I'm living with the standards that I have. That's exactly right. The Jones the the Court's approach to treat to defining s semen under the Jones Act is right on point for this case. You know, there as here there's no definition of semen, there's no definition of what is it, an insider under the bankruptcy code. And there as here the definition of insider and the definition of semen require the application of facts. But in those cases the court has drawn a distinction between clear error review attached to historical findings of fact made by the trial judge and de novo review with respect to the guidelines and principle for the application of the statute. If you look at McDermott, for example, It was the appropriate function of the trial court to determine that the individual was a painter and that he was a member of the crew.

Mr. Cross 3:52

But through the exercise of de novo review, the court said you do not need to aid in navigation to qualify for Siemen status.

John G. Roberts 3:59

So it sounds to me like you're taking the position that it is a mixed question, which means it has elements of both. uh but the standard of re review should turn on which element the Court is addressing. In other words, you can have uh