Received or Not? That is the question.

Written by Grace Ha Eun Hwang

 

Abstract: The Third Circuit Court of Appeals held that in order for goods to be considered “received” under section 503(b)(9) of the Bankruptcy Code, goods must be delivered into the physical possession of the debtor or its agents within 20 days before the debtor files for bankruptcy.

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On July 10, 2017, the Third Circuit clarified what would happen if a creditor sold goods to a debtor soon before the debtor files a Chapter 11 bankruptcy.

Traditionally, under 11 U.S.C. § 503(b)(9), creditors may recover the value of the good that they sold to the debtor if the good was received by the debtor within 20 days before the bankruptcy petition was filed. But what exactly does “received” mean? In re World Imports answered this question.

In In re World Imports, appellants Haining Wanshen Sofa Company (“Haining”) and Fujian Zhangzhou Foreign Trade Company (“Fujian”) were Chinese companies that sold and shipped furniture to World Imports, a furniture retailer in the United States. Goods were typically shipped from China to the United States “free on board.”

Both the Creditors (Haining and Fujian) and Debtor (World Imports) agreed to the following facts:

Haining’s shipment of goods to World Imports left China on May 26, 2013

Fujian’s three separate shipments of goods to World Imports left China on May 17, May 31, and June 7 of 2013

World Imports took physical possession of Haining’s shipment in the United States on June 21, 2013

World Imports accepted all three of Fujian’s shipments in the United States within 20 days of July 3, 2013, the day on which World Imports filed its Chapter 11 petition

After gaining wind of World Import’s bankruptcy filing, both Haining and Fujian filed Motions for Allowance and Payment of Administrative Expense Claims (“the Motion”) pursuant to 11 U.S.C. § 503(b)(9). Under this administrative claim, if successful, creditors are able to reclaim payments in full value of the goods received by the debtor.

Both creditors claimed that they were entitled to relief under § 503(b)(9) because the goods were sold in the ordinary course of business to the debtor and were received by the debtor within 20 days before the debtor filed for bankruptcy. The Bankruptcy Court hearing the original motion disagreed. The Bankruptcy Court denied the Appellants’ motions after concluding that the goods were “constructively received” when they were shipped from China. The Bankruptcy Court relied on the definition of “received” under the Contracts for the International Sale of Goods (CISG) which allowed receipt by delivery to a common carrier.  The District Court affirmed the Bankruptcy Court’s ruling and the Appellants appealed to the Third Circuit.

The Third Circuit reversed the lower courts’ rulings. The Third Circuit looked to the ordinary meaning and the statutory context and found that the term “received” required physical possession.

When looking at the ordinary meaning of the term, the Court found that the Black’s Law Dictionary and the Oxford English Dictionary both interpreted the term “received” to require some type of physical possession. The Court also found that the UCC defined “receipt” of goods as taking some sort of physical possession of them. The Court then concluded that Congress could not have meant to deviate from all these well-known definitions when it adopted 11 U.S.C. § 503(b)(9).

Next, the Court looked to the statutory context surrounding 11 U.S.C. § 503(b)(9). The Court noted that because § 503(b)(9) was enacted to provide exemptions to the rules provided in § 546(c), the interpretation of the term “received” must be consistent between the two sections. The Court then looked to the ruling in In re Marin Motor Oil, 740 F.2d 220 (3d Cir. 1984) which interpreted § 546(c). In re Marin Motor Oil held that the term “received” meant the same as defined in the UCC, namely that taking physical possession is required for goods to be considered “received.” Since § 503(b)(9) has an interrelationship with § 546(c), the Third Circuit concluded that it would be greatly deviating from well-established authority if it did not also follow the UCC’s definition. The Court was also quick to note that even if the risk transfers upon shipment of goods, common carriers are not agents and thus goods are not received even when risk is transferred.

Because World Imports received their goods through a common carrier outside of the 20-day period but actually physically received possession of the goods within the 20-day period before filing for bankruptcy, both Haining and Fujian qualified for relief.

This ruling not only clarified the meaning of the term “received” but also illustrated the weighty consequences of choosing the method of acceptance for shipped goods.

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Source Cited

Haining Wansheng Sofa Co., Ltd. V. World Imports Ltd. (In re World Imports, Ltd. Et al.), No. 16-1357, 2017 WL 2925429 (3d Cir. Mar. 8, 2017).

Making a Murderer: Seventh Circuit Agrees Dassey’s Confession was Coerced

Photo courtesy of Lex18.com

Written by Melanie-Ann DeLancey

Brandon Dassey, one of two men convicted of murder and featured in the Netflix docu-series Making a Murderer, made headlines again when the Seventh Circuit Court of Appeals upheld an August 2016 federal magistrate judge’s ruling regarding Dassey’s confession. The three-judge panel found that the confession of Brendan Dassey, the nephew of Steven Avery, was coerced and involuntary. Prosecutors must now decide whether to appeal to the Supreme Court of the United States, request review by the full Seventh Circuit, or retry Brendan Dassey within 90 days.

Making a Murderer, released in 2015, was filmed over a ten-year period, following Steven Avery’s trials and tribulations as he went from prison, to DNA exoneration, to prison again. The series specifically focuses on Avery’s and Dassey’s convictions for the murder of Teresa Halbach.

Specifically, in episode four, the series documents how investigators brought high-school sophomore Brandon Dassey, who has an IQ between 74 and 81, in for questioning without a parent or guardian. The investigators then proceeded to various interrogation tactics that ultimately led to Dassey giving a confession.

In its ruling, the Seventh Circuit pointed out how the investigators would chastise Dassey when he failed to answer questions in a way that investigators would like.

“[T]hroughout the interrogation it became clear that ‘honesty’ meant those things that the investigators wanted Dassey to say. Whenever Dassey reported a fact that did not fit with the investigators’ theory, he was chastised and told that he would not be ‘okay’ unless he told the truth. And this pattern continued until Dassey finally voiced what the investigators wanted him to say, seemingly by guessing, or the investigators fed him the information they wanted. Once he spoke ‘correctly,’ the investigators anchored the story by telling Dassey, “now we believe you” to signal to him that this was the version that would allow him to be ‘okay,’ or ‘set him free.’ By doing this—by linking promises to the words that the investigators wanted to hear, or allowing Dassey to avoid confrontation by telling the investigators what they wanted to hear—the confession became a story crafted by the investigators instead of by Dassey. And, as we will see, it was a confession that therefore cannot not be viewed as voluntary.”

During one interview, Special Agent Tom Fassbender said to Dassey, “I’m a father that has a kid your age, too. There’s nothing I’d like more than to come over and give you a hug ‘cuz I know you’re hurtin’.”

The Court’s decision discussed assurances made by investigators that they would not leave Dassey “high and dry” and discussed how Dassey’s account of the murder began to change throughout his interrogations. According to the Court, his own responsibility in the murder seemed to increase in response to the suggestions made by investigators.

The Court noted that “special caution” is required under the Supreme Court’s ruling in J.D.B. v. North Carolina when assessing the voluntariness of juvenile confessions. The State of Wisconsin never evaluated any of the factors such as age, experience, education, background, and intelligence.

Furthermore, the Court discussed the risks of coercion in evaluating a defendant’s so-called voluntary confession. The Court concluded that “[n]o reasonable court could have come to the conclusion that Dassey’s confession was voluntary.”

Dassey is now 27 years old and serving a life sentence. He is represented by The Center on Wrongful Convictions at Northwestern University. The Wisconsin Department of Justice reportedly plans to either request a review by the entire Seventh Circuit or to petition the Supreme Court.

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Sources Cited:

Kristine Phillips, Making a Murderer’ Confession was Coerced and ‘Crafted by Investigators,’ Court Affirms, Wash. Post (June 23, 2017).

Dassey v. Dittmann, No. 16-3397, 2017 U.S. App. LEXIS 11113, at *38-39 (7th Cir. June 22, 2017).

J.D.B. v. North Carolina, 564 U.S. 261, 269 (2011).

Trump’s Travel Ban: What comes next?

Written by: Conor Tallet

On January 27, 2017, President Donald J. Trump issued Executive Order No. 13769, commonly known as the “travel ban.” When the Ninth Circuit blocked it, President Trump issued a “revised travel ban”on March 6, 2017 via Executive Order No. 13780. The Department of Justice has appealed the blocking of the orders to the Supreme Court, and the question as to whether or not the Court will act remains.

The revised order reworked provisions of the first travel ban that were at issue in the Ninth Circuit. Specifically, Section 2(c) of the order temporarily suspends new visas for citizens of six countries: Iran, Libya, Somalia, Sudan, Syria, and Yemen. The ban’s stated purpose was to decrease the risk of terrorist organizations from entering into the United States. Consequently, the order explained that the six listed countries had been “significantly compromised by terrorist organizations, or contain active conflict zones.” While such a purpose may appear clear on its face, a key question in evaluating this ban has been whether it violates the Establishment Clause of the First Amendment of the Constitution.

The Establishment Clause prohibits the government from making any law “respecting an establishment of religion.” Essentially, this means that the government cannot establish an official religion of the United States or pass any laws that favor or inhibit a particular religion.

The primary Establishment Clause test utilized by courts today is derived from Lemon v. Kurtzman, and the rest requires that courts analyze a government action’s purpose, effect, and entanglement with religion. If a court finds the government acted with a primary religious purpose, had the effect of advancing or inhibiting religion, or was sufficiently entangled with religion, it will strike the law down as unconstitutional in violation of the Establishment Clause. Under this Lemon test, a challenger needs to show only one of the three prongs to succeed.

Here, six Muslim individuals, and three organizations that represented Muslim clients, asserted that they would be harmed by the implementation of the revised travel ban. In turn, they filed a lawsuit in the United States District Court of Maryland seeking a preliminary injunction. The District Court granted the injunction and determined that the plaintiffs were likely to succeed on the merits of an Establishment Clause claim.

After the ruling was appealed, the Fourth Circuit upheld the Maryland District Court’s decision to block the revised travel ban on May 25, 2017, finding the ban to be in violation of the Establishment Clause. In its analysis, the Fourth Circuit employed the Lemon test and viewed extrinsic evidence on the record from the viewpoint of a reasonable observer to determine that the revised travel ban had a primary religious purpose.

One question that arose revolved around whether or not courts should be permitted to consider extrinsic evidence when assessing the purpose. In the Lemon test analysis, a court determines not only the government’s stated purpose, but also the purpose from a reasonable observer’s standpoint. Thus, in analyzing the purpose from the standpoint of a reasonable observer, it is proper for a court to take extrinsic evidence surrounding the implementation of a government action into account, just as the Fourth Circuit did in this case. However, in an age where society is constantly bombarded with information through countless avenues of communication, it is worth asking how much extrinsic evidence a court should take into consideration when attempting to determine the primary purpose of a governmental action.

In this case, the District Court of Maryland looked to President Trump’s campaign statements, rallies, interviews, and tweets in order to assess the various discussions surrounding the travel ban. More specifically, the court assessed the choice of language such as banning “Muslims” as opposed to banning “terrorists.” Thus, the Fourth Circuit determined that the abundance of extrinsic evidence on the record, “viewed from the standpoint of the reasonable observer, creates a compelling case that [the revised travel ban’s] primary purpose is religious.”

Furthermore, in this case, the Fourth Circuit held that the District Court’s use of such extrinsic evidence, in holding that the order was a violation, was proper to show a primary religious purpose disguised in terms of national security to circumvent Establishment Clause scrutiny. Accordingly, the Fourth Circuit concluded that President Trump’s statements revealed his “desire to exclude Muslims from the United States” in violation of the Establishment Clause.

On June 1, 2017, the Department of Justice filed a petition with the Supreme Court, seeking review of the Fourth Circuit’s decision.

Whether or not the Supreme Court will hear the case remains to be seen. Some experts argue that the court will likely grant certiorari and hear the appeal, saying that “[w]hen a major presidential initiative is ruled unconstitutional by a federal appeals court, a review by the Supreme Court almost always follows.” On the other hand, rulings in the Hawaii District Court, Maryland District Court, Washington District Court, Fourth Circuit, and Ninth Circuit have remained consistent, blocking both the travel ban and the revised travel ban. With consistent interpretation and no circuit splits, some experts argue that there is no reason for the Supreme Court to hear the case. Only time will tell.

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Sources Cited      

Adam Liptak, The Supreme Court’s Options in the Travel Ban Case, NY Times (Jun. 2, 2017).

Int’l Refugee Assistance Project v. Trump, 2017 WL 2273306 (4th Cir. 2017).

Ryan Lovelace, Will the Supreme Court Take up Trump’s Travel Ban?, Washington Examiner (Jun. 3, 2017).

Int’l Refugee Assistance Project v. Trump, 2017 WL 1018235 (D. Md. 2017).