Monthly Archives: December 2012

Our brief in opposition to certiorari from Richardson v Schafer, US Supreme Court Case No. 12-643

No. 12-643
================================================================
In The
Supreme Court of the United States
———————————  ———————————
THOMAS C. RICHARDSON,
TRUSTEE OF THE BANKRUPTCY
ESTATE OF STEVEN M. SCHAFER,
Petitioner,
v.
STEVEN M. SCHAFER AND
THE STATE OF MICHIGAN,
Respondents.
———————————  ———————————
On Petition For Writ Of Certiorari
To The United States Court Of Appeals
For The Sixth Circuit
———————————  ———————————
BRIEF IN OPPOSITION TO
PETITION FOR WRIT OF CERTIORARI
———————————  ———————————
SCOTT P. ZOCHOWSKI
Counsel of Record
ZOCHOWSKI LAW, PLLC
100 E. Big Beaver Rd., Suite 900
Troy, Michigan 48083
(248) 548-6800 (Telephone)
(248) 720-0507 (Facsimile)
scott@zlpllc.com
Counsel for Respondent December 21, 2012
Steven M. Schafer
================================================================
COCKLE LAW BRIEF PRINTING CO. (800) 225-6964
OR CALL COLLECT (402) 342-2831
i
COUNTERSTATEMENT OF
QUESTIONS PRESENTED
Under its authority granted by the Bankruptcy
Clause of the Constitution, Congress has enacted a
federal system of bankruptcy laws by way of the
Bankruptcy Abuse Prevention and Consumer Protection
Act of 2005 (BAPCPA) (the “Bankruptcy Code”).
Congress provided that the individual states may
each choose the exemption scheme available to any
debtor filing for bankruptcy relief within their borders.
11 U.S.C. 522(b). This “opt out” provision of the
Bankruptcy Code means that, depending on the
decision of his state, a bankruptcy debtor may either
be limited to only using state bankruptcy exemptions
(in “opt out” states) or may be able to use both state
and federal bankruptcy exemptions. The Code further
provides that a bankruptcy debtor may exempt
property “under federal . . . or state or local law that
is applicable on the date of the filing of the (bankruptcy)
petition.” 11 U.S.C. 522(b)(3)(A).
Michigan is one of fifteen (15) jurisdictions that
is not an “opt out” state. A bankruptcy debtor residing
in Michigan may elect to protect his property under
either state or federal exemptions. The Michigan law
at issue was enacted concurrently with BAPCPA in
2005. It created a special homestead exemption that
protected up to $45,000.00 of equity in the principal
residence of a disabled or senior citizen debtor in
bankruptcy [$51,650.00 in 2012]. The Michigan law is
bankruptcy-specific in that it only applies to protect
ii
COUNTERSTATEMENT OF
QUESTIONS PRESENTED – Continued
the property of debtors in bankruptcy proceedings
and does not exempt property from seizure outside of
bankruptcy.
The United States (US) Court of Appeals for the
Sixth Circuit heard the Petitioner’s constitutional
challenges to the Michigan law, made under the
Supremacy Clause, U.S. Const. art. I, sec. 8, cl. 4, and
the uniformity provisions of the Bankruptcy Clause.
U.S. Const. art. VI, cl. 2. In a published opinion, the
Sixth Circuit rejected both constitutional challenges
and upheld the Michigan law.
The questions presented are:
1. Whether the Sixth Circuit erred by holding
that 11 U.S.C. 522(b)(2) is a recognition
of the concurrent legislative power
of the state legislatures to enact laws
governing bankruptcy exemptions and
not an unconstitutional delegation of
congressional legislative power under
the Supremacy Clause.
2. Whether the Sixth Circuit erred by holding
that the Bankruptcy Clause does not
require geographic uniformity between
the property exemptions available to
debtors in bankruptcy and debtors outside
of bankruptcy.
iii
TABLE OF CONTENTS
Page
QUESTIONS PRESENTED ………………………….. i
TABLE OF CONTENTS ……………………………….. iii
TABLE OF AUTHORITIES …………………………… v
STATEMENT OF THE CASE ………………………… 1
REASONS FOR DENYING THE PETITION ….. 3
I. INTRODUCTION ……………………………….. 3
II. THIS COURT DOES NOT ADDRESS
ARGUMENTS NOT RAISED BELOW ….. 5
III. THERE IS NO COMPELLING REASON
UNDER RULE 10 FOR THE PETITION
TO BE GRANTED ………………………………. 7
A. There is no split between the federal
Circuit Courts of Appeals ……………….. 7
B. There is no conflict with Supreme
Court precedent …………………………….. 8
C. There is no important issue of federal
law to be settled ……………………………. 10
D. There is no conflict between state and
federal law ……………………………………. 11
IV. THERE IS NO OTHER COMPELLING
REASON FOR THE PETITION TO BE
GRANTED …………………………………………. 12
A. The parties’ legal dispute may become
moot …………………………………………….. 12
1. A bill in the Michigan legislature
could make this dispute moot ……… 12
iv
TABLE OF CONTENTS – Continued
Page
2. Changes to federal exemptions
and property values could make
the dispute moot on remand ……….. 13
B. The Petitioner lacks standing to request
certiorari ……………………………… 13
CONCLUSION …………………………………………….. 15
v
TABLE OF AUTHORITIES
Page
CASES
UNITED STATES SUPREME COURT CASES
Granfinanciera, S.A. v. Nordberg, 492 U.S. 33
(1989) ………………………………………………………………. 6
Grogan v. Garner, 498 U.S. 279 (1991) ……………… 9, 11
Hanover Nat’l Bank v. Moyses, 186 U.S. 181
(1902) …………………………………………………………… 6, 9
International Shoe Co. v. Pinkus, 278 U.S. 261
(1929) ………………………………………………………………. 6
Marrama v. Citizens Bank of Mass., 549 U.S.
365 (2007) …………………………………………………… 9, 11
NLRB v. Pittsburgh S.S. Co., 340 U.S. 498
(1951) ………………………………………………………………. 4
Perez v. Campbell, 402 U.S. 637 (1971) ………………….. 9
Ry. Labor Execs. Ass’n v. Gibbons, 455 U.S. 457
(1982) ………………………………………………………………. 9
Sheehan v. Jackson, ___ U.S. ___, 130 S. Ct.
1066 (2010) ………………………………………… 6, 7, 10, 11
Stellwagen v. Clum, 245 U.S. 605 (1918) ……………. 6, 8
Sturges v. Crowninshield, 17 U.S. 112 (1819) …………. 6
Woods v. City Nat’l Bank & Trust Co., 312 U.S.
262 (1941) ………………………………………………………. 14
UNITED STATES CIRCUIT COURT OF APPEALS CASES
Kulp v. Zeman (In Re Kulp), 949 F.2d 1106
(10th Cir. 1991) ……………………………………….. 6, 7, 10
vi
TABLE OF AUTHORITIES – Continued
Page
Richardson v. Schafer (In Re Schafer), 689 F.3d
601 (6th Cir. 2012) …………………………………… passim
Schultz v. United States, 529 F.3d 343 (6th Cir.
2008) ……………………………………………………………….. 9
Sheehan v. Peveich (In Re Peveich), 574 F.3d
248 (4th Cir. 2009), cert. denied sub nom,
Sheehan v. Jackson, ___ U.S. ___, 130 S. Ct.
1066 (2010) ……………………………………………… 6, 7, 10
UNITED STATES BANKRUPTCY APPELLATE PANEL CASES
Richardson v. Schafer (In Re Schafer), 455 B.R.
590 (6th Cir. BAP 2011), reversed by In Re
Schafer, 689 F.3d 601 (6th Cir. 2012) ………………….. 2
Sticka v. Applebaum (In Re Applebaum), 422
B.R. 684 (9th Cir. BAP 2010) …………………….. 6, 7, 10
UNITED STATES DISTRICT COURT AND
UNITED STATES BANKRUPTCY COURT CASES
In Re Dorothy Jones, 428 B.R. 720 (Bankr.
W.D. Mich. 2010), aff ’d by Richardson v.
Schafer (In Re Schafer), 689 F.3d 601 (6th
Cir. 2012) ……………………………………………………… 2, 5
In Re Westby, 473 B.R. 392 (Bankr. Kan. 2012) ………. 8
CONSTITUTIONAL PROVISIONS
U.S. Const. art. I, sec. 8, cl. 4 (Bankruptcy
Clause) ………………………………………………. 2, 5, 7, 8, 9
U.S. Const. art. VI, cl. 2 (Supremacy Clause) … passim
vii
TABLE OF AUTHORITIES – Continued
Page
FEDERAL STATUTES
11 U.S.C. 327 (Employment of Professional Persons
in a bankruptcy) ………………………………………. 14
11 U.S.C. 522 (Bankruptcy Exemptions) ……….. 1, 2, 11
11 U.S.C. 541 (Property of the Bankruptcy Estate)
………………………………………………………………… 1
STATE STATUTES
Mich. Comp. Laws 600.5451 (Michigan bankruptcy
exemptions) ………………………………….. 1, 2, 12
RULES
Sup. Ct. Rule 10 …………………………………… 3, 4, 7, 8, 10
Sup. Ct. Rule 15 ……………………………………………… 8, 12
Fed. Bankr. R. 2014 ……………………………………………. 14
Bankr. W.D. Mich. R. 2014 ………………………………….. 14
OTHER AUTHORITIES
Thomas R. Morris, “The Michigan Exemption
Initiative,” 31 Mich. Bus. L.J. 14 (Summer
2011) ……………………………………………………………… 12
H.R. 5427, 96th Leg. (Mich. 2012) ……………………….. 12
1
STATEMENT OF THE CASE
None of the underlying facts are in dispute in the
case at hand. Respondent Steven Schafer voluntarily
filed a Chapter 7 bankruptcy on March 23, 2009 in
the US Bankruptcy Court for the Western District
of Michigan (the “Bankruptcy Court”). In the time
between becoming disabled as an adult, losing his
employment and eventually qualifying for Social
Security, Mr. Schafer incurred $24,248.00 in unsecured
debt related to medical treatment and living
expenses. Despite efforts to repay this debt, Mr.
Schafer’s income was reduced to a point where he
could no longer afford to pay the monthly minimum
installments in addition to housing, food and medical
costs.
When a Debtor files for Chapter 7 bankruptcy,
his assets become the property of the bankruptcy
estate. 11 U.S.C. 541. A Trustee is appointed in each
Chapter 7 case and is responsible for liquidating any
non-exempt property in order to repay creditors. The
Petitioner is the Chapter 7 Trustee for the Respondent’s
bankruptcy.
Michigan is one of fifteen (15) jurisdictions that
is not an “opt out” state under the Bankruptcy Code,
11 U.S.C. 522(b)(2), so Michigan residents who file for
bankruptcy may use either the federal or state bankruptcy
exemptions. Mr. Schafer elected to use the
Michigan exemptions. In particular, he used Michigan’s
state homestead exemption, Mich. Comp. Laws
600.5451(1)(n), to protect his home (estimated to have
2
$44,695.00 in equity at the time) from bankruptcy
liquidation while petitioning to discharge his unsecured
debt.
The legal fight between the parties to the case
at hand initially had a dollar value of $24,495.00.
This is the difference between the amount of home
equity a disabled debtor could exempt in 2009 under
the Michigan law ($45,000.00 maximum in
2009; $44,695.00 exempted by Mr. Schafer), MCL
600.5451(1)(n), versus the federal homestead and
wild card exemptions ($20,200.00 plus $800.00 in
2009). 11 U.S.C. 522(d)(1) and (d)(5).
The Petitioner objected to Mr. Schafer’s use of the
Michigan law, claiming it was unconstitutional under
the Supremacy Clause and the uniformity provision
of the Bankruptcy Clause. The Bankruptcy Court
denied the Petitioner’s objections and found the
Michigan law to be constitutional. In Re Dorothy
Jones, 428 B.R. 720 (Bankr. W.D. 2010).
The Petitioner appealed to the Sixth Circuit
Bankruptcy Appellate Panel (BAP). The BAP reversed
the Bankruptcy Court decision, finding the
Michigan law unconstitutional under the Bankruptcy
Clause. Richardson v. Schafer (In Re Schafer), 455
B.R. 590 (6th Cir. BAP 2011). The BAP opinion did
not address the Supremacy Clause argument.
The Respondent next appealed to the US Court of
Appeals for the Sixth Circuit. The Sixth Circuit
reversed the BAP, affirmed the lower court’s decision
and upheld the Michigan law as constitutional.
3
Richardson v. Schafer (In Re Schafer), 689 F.3d 601
(6th Cir. 2012). No motion for panel rehearing or
motion for rehearing en banc was filed.
———————————  ———————————
REASONS FOR DENYING THE PETITION
I. INTRODUCTION
While the Petitioner restates an argument that
was rejected by the Sixth Circuit and even attempts
to add a new argument that was never previously
raised, he does not meet his burden for this Court to
grant certiorari. The Petition should be denied for the
reasons set forth below.
“Review on a writ of certiorari is not a matter of
right, but of judicial discretion. A petition for writ of
certiorari will be granted only for compelling reasons.”
Sup. Ct. Rule 10 (emphasis added). Supreme
Court Rule 10 provides that it may be appropriate to
grant a petition for certiorari when:
“(a) [A] United States court of appeals has
entered a decision in conflict with the decision
of another United States court of appeals
on the same important matter;
has decided an important federal question in
a way that conflicts with a decision by a
state court of last resort; or
has so far departed from the accepted and
usual course of judicial proceedings, or sanctioned
such a departure by a lower court, as
4
to call for an exercise of this Court’s supervisory
power. . . .”
Pursuant to Rule 10, granting certiorari may also be
appropriate when:
“(c) [A] United States court of appeals has
decided an important question of federal law
that has not been, but should be, settled by
this Court, or has decided an important federal
question in a way that conflicts with relevant
decisions of this Court.”
The Petitioner has failed to state any valid ground for
this Court to grant his Petition under Rule 10.
Although the considerations of Rule 10 are
“neither controlling nor fully measuring the Court’s
discretion,” Sup. Ct. Rule 10, the Petitioner has also
failed to state any other compelling reason for this
Court to grant his Petition. It is well-established that
this Court’s review “is discretionary and depends on
numerous factors other than the perceived correctness
of the judgment [the Supreme Court] is asked to
review.” NLRB v. Pittsburgh S.S. Co., 340 U.S. 498,
502 (1951). This Court has previously held that it “is
not the place . . . to reverse a Court of Appeals because
were we in its place we would find the record
tilting one way rather than the other, though fairminded
judges could find it tilting either way.” Id.
5
II. THIS COURT DOES NOT ADDRESS ARGUMENTS
NOT RAISED BELOW
The Questions Presented section of the Petition
includes a legal argument that was not raised in the
courts below. In the Bankruptcy Court, at the BAP
and in the Sixth Circuit, the two constitutional challenges
by the Petitioner have been made under the
Supremacy Clause and the Bankruptcy Clause. This
is evidenced by the Petitioner’s Objection to Exemptions,
Document 34 in the Bankruptcy Court Electronic
Case Filing (ECF) records for In Re Steven
Schafer; the Transcript of the hearing on the Trustee’s
Objections, Document 26 in the ECF records for
In Re Dorothy Jones; the Statement of the Issues
Presented to the BAP in the Petitioner’s Brief on
Appeal, Document 006110668645 in the BAP ECF
records for In Re Schafer; and the Petitioner’s Appellee
Brief in the Sixth Circuit ECF records for In Re
Schafer. The Petitioner is attempting to improperly
introduce a new, re-codification argument that has
never been argued below.
The burden on the Petitioner is to persuade this
Court that there are grounds for granting certiorari
in light of the actual decision of the Sixth Circuit that
was made after reviewing the issues that were argued
before it. A Petition for Writ of Certiorari is not
an opportunity to reinvent a losing argument. The
Questions Presented section of the Petition provides
an incoherent statement of the Petitioner’s reimagined
issues for this case.
6
The Petition itself, in making this new, recodification
argument, relies upon the Bankruptcy
Act of 1898 and century-old case law. E.g., see Sturges
v. Crowninshield, 17 U.S. 112 (1819); Hanover Nat’l
Bank v. Moyses, 186 U.S. 181 (1902); Stellwagen v.
Clum, 245 U.S. 605 (1918), and International Shoe
Co. v. Pinkus, 278 U.S. 261 (1929). The Sixth Circuit
concluded that the Petitioner misunderstood and
misapplied the holdings in these cases. And the
Bankruptcy Act of 1898 has been legislatively overturned.
The Petition ignores the developing body of case
law in the Circuit Courts of Appeals that mirror the
opinion of the Sixth Circuit on the two constitutional
law issues that were presented below. Oddly, the
Petition makes absolutely no reference to any of the
post-BAPCPA case law that is actually on point. E.g.,
see Sheehan v. Peveich (In Re Peveich), 574 F.3d 248
(4th Cir. 2009), cert. denied sub nom, Sheehan v.
Jackson, ___ U.S. ___, 130 S. Ct. 1066 (2010); Kulp v.
Zeman (In Re Kulp), 949 F.2d 1106 (10th Cir. 1991),
and Sticka v. Applebaum (In Re Applebaum), 422 B.R.
684 (9th Cir. BAP 2010).
The Petition’s re-codification argument was not
an issue before the courts below and therefore was
not preserved for review on appeal. As a general rule,
this Court does not address arguments not raised
below. Granfinanciera, S.A. v. Nordberg, 492 U.S. 33
(1989). The Petitioner is well aware of this fact, as
only two years ago his attorney unsuccessfully attempted
the same tactic in a similar state bankruptcy
7
exemption challenge case where this Court denied the
Petition for Writ of Certiorari. Sheehan v. Jackson,
supra. There is no reason for this Court to address
the Petitioner’s re-codification argument issues until
the US Bankruptcy Court for the Western District of
Michigan, the BAP and the US Court of Appeals for
the Sixth Circuit are given the opportunity to address
those issues in some other case.
III. THERE IS NO COMPELLING REASON
UNDER RULE 10 FOR THE PETITION TO
BE GRANTED
A. There is no split between the federal
Circuit Courts of Appeals
The decision of the Sixth Circuit in the case at
hand does not “conflict with the decision of another
United States Court of Appeals.” Sup. Ct. R. 10(a).
The opinion expressly found guidance from other
Circuits’ rejection of challenges to similar bankruptcyspecific
state exemption statutes. Schafer, supra at
609 and 613, citing Peveich, supra (holding that a
state bankruptcy-specific exemption statute is constitutional
under the Supremacy Clause); Applebaum,
supra (holding that a state bankruptcy-specific exemption
statute is constitutional under the Supremacy
Clause and the Bankruptcy Clause); and Kulp, supra
at 109 n3 (holding that a state bankruptcy-specific
exemption statute is constitutional under the Bankruptcy
Clause). No Circuit has ever taken a contrary
position on the constitutionality of such state
laws. While the issue of exemption of property in
8
bankruptcy is an important federal issue, all of the
Circuits are presently in agreement on the constitutionality
of state bankruptcy-specific exemptions. At
best, the Petitioner’s constitutional challenges are not
yet ripe for review by this Court.
Pursuant to Rule 15.8, Respondent reserves the
right to file a supplemental brief concerning any
related cases that may be decided while the Petition
for Writ of Certiorari is pending. E.g., In Re Westby,
473 B.R. 392 (Bankr. Kan. 2012) (Constitutional
challenge to a Kansas bankruptcy-specific exemption
statute that went to oral argument before the BAP for
the 10th Circuit on December 7, 2012 (10th Cir. BAP
Case No. 12-27)).
B. There is no conflict with Supreme
Court precedent
The Sixth Circuit Court of Appeals has not
“decided an important federal issue in a way that
conflicts with relevant decisions of this Court.” Sup.
Ct. R. 10(c). There is no Supreme Court precedent on
the precise issue of the constitutionality of state
bankruptcy-specific exemption laws under the Supremacy
Clause and the uniformity provision of the
Bankruptcy Clause. However, this Court has previously
held that a bankruptcy statute’s incorporation
of state laws may, without presenting any constitutional
issue, “lead to different results in different
states.” Stellwagen, supra at 613.
While the Petitioner’s argument relies on this
Court’s “geographic uniformity” language in the
9
opinion of Moyses, supra, the Sixth Circuit correctly
observed that “the general rule of law laid down by
the Supreme Court in Moyses was that . . . variations
[in bankruptcy exemptions] resulting from differences
in state law are not unconstitutional.” Schafer, supra
at 610; see also Schultz v. United States, 529 F.3d 343,
353 (6th Cir. 2008). The Sixth Circuit further cited
Supreme Court precedent in holding that “the ‘uniform
laws’ language [of the Bankruptcy Clause]
serves as a substantive limit on statutory acts, but is
not meant to act as a ‘straightjacket that forbids’
distinguishing among different classes of debtors.”
Schafer, supra at 609, quoting Ry. Labor Execs. Ass’n
v. Gibbons, 455 U.S. 457, 469 (1982).
The Sixth Circuit opinion correctly applied this
Court’s precedent in evaluating the Michigan law to
be constitutional under the Supremacy Clause.
“Deciding whether a state statute is in conflict with a
federal statute and hence invalid under the Supremacy
Clause is essentially a two-step process of first
ascertaining the construction of the two statutes
and then determining the constitutional question
whether they are in conflict.” Schafer, supra at 613,
quoting Perez v. Campbell, 402 U.S. 637, 644 (1971).
The Sixth Circuit found that the state and federal
statutes have similar objectives and do not conflict.
Schafer, supra at 616, citing Marrama v. Citizens
Bank of Mass., 549 U.S. 365, 367 (2007) (“The principal
purpose of the Bankruptcy Code is to grant a
fresh start to the honest but unfortunate debtor.”)
(internal quotation marks omitted) and Grogan v.
10
Garner, 498 U.S. 279, 286 (1991) (Expressing that the
objective of bankruptcy is for a debtor to obtain “a
new opportunity in life with a clear field for future
effort, unhampered by the pressure and discouragement
of preexisting debt.”).
In 2009, this Court denied a similar Petition filed
by the Petitioner’s attorney concerning a Fourth
Circuit case. Sheehan v. Jackson, supra. Since that
time, this Court has not heard any subsequent case
challenging the constitutionality of a state bankruptcyspecific
exemption statute. In the meantime, the
issue of the constitutionality of such statutes has
been challenged, and upheld, through an expanded
body of lower court case law that has developed in the
last three years. E.g., see Kulp, supra; Applebaum,
supra; and Schafer, supra. This Court was correct in
denying the petition in Sheehan v. Jackson, and the
Petitioner has failed to state any new reason for this
Court to grant its nearly identical Petition now.
C. There is no important issue of federal
law to be settled
The Petitioner’s constitutional challenges in the
case at hand do not constitute “an important question
of federal law that has not, but should be, settled by
this Court.” Sup. Ct. R. 10(c). No amicus curiae has
supported the Petitioner’s argument at any stage of
the legal proceedings below. Nationwide, only Chapter
7 Trustees have supported the type of constitutional
challenges that are set forth in the case at hand.
11
State legislators, State attorneys general, consumer
groups, consumer bankruptcy attorneys representing
debtors, and even creditors’ organizations all
oppose the fringe argument of the Petitioner. Not
even the US Justice Department (whose Office of the
US Trustee appoints the Chapter 7 Trustee panelists)
has expressed support for the Petitioner’s radical
position. E.g., see Sheehan v. Jackson, supra. (Petition
denied by this Court was supported by amicus curiae,
Chapter 7 Trustees Roger Schlossberg, Morris L.
Horwitz and Jill L. Ford.)
D. There is no conflict between state and
federal law
Contrary to the Petitioner’s Supremacy Clause
argument, there is no conflict in the case at hand
between state and federal law for this Court to resolve.
Every one of the courts below has rejected
the Petitioner’s Supremacy Clause argument. The
Sixth Circuit was correctly guided by a series of case
law from other Circuits and the precedents of this
Court in finding that the challenged Michigan law
advances the goal of the Bankruptcy Code, in that (1)
it is expressly authorized by 11 U.S.C. 522 and (2) its
purpose of ensuring a fresh start in bankruptcy to
Michigan residents “actually furthers, rather than frustrates,
national bankruptcy policy.” Schafer, supra at
616, citing Marrama, supra at 367 and Grogan, supra
at 286.
12
IV. THERE IS NO OTHER COMPELLING
REASON FOR THE PETITION TO BE
GRANTED
A. The parties’ legal dispute may become
moot
1. A bill in the Michigan legislature
could make this dispute moot
In 2011, in response to the decision of the BAP
below, a sub-committee of the Debtor-Creditor Rights
Committee of the Business Law Section of the Michigan
State Bar Association was formed to propose
changes to the Michigan homestead exemption in the
state legislature to revise the Michigan homestead
exemption statute into a law that would no longer be
bankruptcy-specific. Thomas R. Morris, “The Michigan
Exemption Initiative,” 31 Mich. Bus. L.J. 14 (Summer
2011). On February 21, 2012, multiple state representatives
introduced House Bill 5427 in the Michigan
legislature, a bill to amend Mich. Comp. Laws
600.5451 to create state exemptions that would not be
bankruptcy-specific. As of the date of the Petition, the
bill has been referred to the House Committee on
Judiciary but has not yet become law. H.R. 5427, 96th
Leg. (Mich. 2012).
Pursuant to Rule 15.8, Respondent reserves the
right to file a supplemental brief concerning any new
legislation that may be enacted while the Petition for
Writ of Certiorari is pending.
13
2. Changes to federal exemptions and
property values could make the
dispute moot on remand
Assuming arguendo that this Court granted the
Petition and ultimately reversed the decision of the
Sixth Circuit, the case would be remanded to the
Bankruptcy Court. At such time, the Respondent
would be forced to amend his bankruptcy schedules to
claim the federal bankruptcy exemptions. The original
dispute (over whether the Debtor’s residence can
be liquidated and sold by the Chapter 7 Trustee) may
be moot at this time. Since 2009, the federal homestead
exemption has increased in value while the
home values in the Respondent’s community in
Michigan have decreased during an unprecedented
housing crisis. The result is that on remand, there
would be no non-exempt equity in Respondent’s
residence for the bankruptcy estate even if the Respondent
were to now elect to use the federal homestead
and wild card exemptions.
B. The Petitioner lacks standing to request
certiorari
The petition should be denied for lack of standing.
Mr. Sheehan is representing the Petitioner for
the first time in filing the current Petition. Previously,
the Petitioner was represented by other counsel,
Nicholas Daly of Lewis, Reed & Allen, P.C., in the
proceedings below.
14
The Bankruptcy Code expressly states that a
Chapter 7 Trustee, such as Petitioner, may only
employ an attorney “with the (bankruptcy) court’s
approval.” 11 U.S.C. 327(a). 11 U.S.C. 327, Fed.
Bankr. R. 2014 and Bankr. W.D. Mich. R. 2014 set
forth the procedure for a trustee to request court
approval to employ a professional. The purpose of
Section 327 is to ensure that any conflicts of interest
are disclosed and reviewed by the Court and to publically
disclose the projected cost of employing a professional
person at the expense of the bankruptcy estate.
Mr. Sheehan, himself a Chapter 7 Trustee, should be
aware of this strict requirement. Mr. Sheehan and
the Petitioner have ignored this requirement in filing
the Petition on November 16, 2012, without obtaining
proper authorization from the Bankruptcy Court.
Although the Petitioner has subsequently filed
an application in the Bankruptcy Court to employ
Mr. Sheehan, that application has not been granted
at this time. In his objections to the application, the
Respondent has argued that such an application
cannot be granted retroactively. That issue has yet to
be decided by the Bankruptcy Court.
In filing the Petition and identifying himself as
“Counsel for Petitioner,” Mr. Sheehan was not authorized
under 11 U.S.C. 327 to serve as an attorney for
the Petitioner. This Court has previously recognized
the authority of the lower bankruptcy courts to
authorize employment of professionals and the effect
of sanctions for violations of such requirements,
Woods v. City Nat’l Bank & Trust Co., 312 U.S. 262
15
(1941), and should deny the Petition based on Mr.
Sheehan’s failure to be properly appointed as the
attorney for Petitioner.
———————————  ———————————
CONCLUSION
The Petition for Writ of Certiorari should be
denied.
Respectfully submitted,
SCOTT P. ZOCHOWSKI
ZOCHOWSKI LAW, PLLC
100 E. Big Beaver Rd., Suite 900
Troy, Michigan 48083
(248) 548-6800 (Telephone)
(248) 720-0507 (Facsimile)
scott@zlpllc.com
Counsel for Respondent
Steven M. Schafer
December 21, 2012

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