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    City of Chicago, Illinois v. Fulton

    From Ballotpedia - Reading time: 8 min

    Supreme Court of the United States
    City of Chicago, Illinois v. Fulton
    Term: 2020-2021
    (Originally 2019-2020)
    Important Dates
    Argument: October 13, 2020
    (Postponed from April 20, 2020)
    Decided: January 14, 2021
    Outcome
    vacated and remanded
    Vote
    8-0
    Majority
    Samuel Alito • Chief Justice John G. Roberts • Clarence Thomas • Stephen Breyer • Sonia Sotomayor • Elena Kagan • Neil Gorsuch • Brett Kavanaugh
    Concurring
    Sonia Sotomayor


    City of Chicago, Illinois v. Fulton is a case argued before the Supreme Court of the United States on October 13, 2020, during the court's October 2020-2021 term. The case came on a writ of certiorari to the United States Court of Appeals for the 7th Circuit.[1]

    Oral argument for City of Chicago, Illinois v. Fulton was initially scheduled for April 20, 2020, during the court's October 2019-2020 term. However, the U.S. Supreme Court announced on April 3 that it was postponing the eight oral arguments originally scheduled during its April sitting. In a press release, the court said the delay was "in keeping with public health guidance in response to COVID-19."[2]

    In a unanimous opinion, the court vacated the 7th Circuit's ruling and remanded the case, holding that retaining property after a bankruptcy petition is filed does not violate the Bankruptcy Code. Justice Samuel Alito delivered the majority opinion of the court. Justice Sonia Sotomayor filed a concurring opinion. Justice Amy Coney Barrett took no part in the consideration or decision of the case.[3] Click here for more information about the ruling.

    HIGHLIGHTS
  • The case: The City of Chicago towed and impounded Robbin Fulton's vehicle. Fulton filed a petition for Chapter 13 bankruptcy and a repayment plan in federal bankruptcy court. Fulton requested that the City return her vehicle. The City declined to do so. Then, Fulton moved for sanctions against the City of Chicago. The City asserted that it would retain possession of the vehicle and cited an exemption from the Bankruptcy Code's automatic stay. The bankruptcy court ruled that the City was required to return the vehicle, imposed sanctions, and sustained Fulton's objection to the City's assertion of its status as a secured creditor. The City moved to stay the order, but the court denied the request. The City returned the vehicle and appealed to the 7th Circuit. The court affirmed the bankruptcy court's ruling.
  • The issue: "Whether an entity that is passively retaining possession of property in which a bankruptcy estate has an interest has an affirmative obligation under the Bankruptcy Code’s automatic stay, 11 U.S.C § 362, to return that property to the debtor or trustee immediately upon the filing of the bankruptcy petition."[1]
  • The outcome: In an 8-0 opinion, the court vacated the 7th Circuit's ruling and remanded the case, holding that retaining property after a bankruptcy petition is filed does not violate the Bankruptcy Code.


    • You can review the lower court's opinion here.[4]

    Timeline[edit]

    The following timeline details key events in this case:

    Background[edit]

    In December 2017, the City of Chicago towed and impounded Robbin Fulton's vehicle for a prior citation for driving on a suspended license. Fulton filed a petition for Chapter 13 bankruptcy on January 31, 2018, and filed a repayment plan on February 5, 2019, naming the City as a general unsecured creditor.[5][6] The City filed a general unsecured proof of claim for $9,391.20 on February 23.[7] In March, the bankruptcy court confirmed Fulton's repayment plan. Then, Fulton requested that the City of Chicago return the impounded vehicle to her. The City amended its proof of claim with the addition of impound fees for a total of $11,831.20 and the assertion of its status as a secured creditor.[8] The City did not return Fulton's vehicle.[4]

    In May 2018, Fulton moved for sanctions against the City, arguing that it was required to return her vehicle. The City argued that Fulton was required to seek the vehicle's return through an adversary proceeding, that the City would retain possession of the vehicle to perfect its possessory lien, and stated that it was exempt from the Bankruptcy Code's automatic stay.[4][9][10][11]

    Later that month, the bankruptcy court held that the City of Chicago was required to return Fulton's vehicle and that it was not excepted from the automatic stay. The court ordered the return of Fulton's vehicle, imposed a sanction of $100 per day for every day that the City failed to comply, and sustained Fulton's objection to the City's secured creditor claim. The City moved to stay the order pending appeal. The court denied the City's stay request on September 10. The City of Chicago returned the vehicle to Fulton and did not initiate proceedings to assert its rights under Title 11 of the United States Code.[4][12]

    In 2019, the City of Chicago filed a consolidated appeal with the Seventh Circuit regarding four Chapter 13 bankruptcies that included the Fulton case. On June 19, the Seventh Circuit affirmed the district court's ruling.[4]

    Definition of automatic stay[edit]

    The following quote is sourced from Title 11, Subchapter IV, Section 362(b)(3) of the United States Code:[9]

    “ (b) The filing of a petition under section 301, 302, or 303 of this title, or of an application under section 5(a)(3) of the Securities Investor Protection Act of 1970, does not operate as a stay-


    (3) under subsection (a) of this section, of any act to perfect, or to maintain or continue the perfection of, an interest in property to the extent that the trustee's rights and powers are subject to such perfection under section 546(b) of this title or to the extent that such act is accomplished within the period provided under section 547(e)(2)(A) of this title;[13]

    		”

    Definition of use, sale, or lease of property[edit]

    The following quote is sourced from Title 11, Subchapter IV, Section 363(e) of the United States Code:[12]

    “ (e) Notwithstanding any other provision of this section, at any time, on request of an entity that has an interest in property used, sold, or leased, or proposed to be used, sold, or leased, by the trustee, the court, with or without a hearing, shall prohibit or condition such use, sale, or lease as is necessary to provide adequate protection of such interest. This subsection also applies to property that is subject to any unexpired lease of personal property (to the exclusion of such property being subject to an order to grant relief from the stay under section 362).[13] ”

    Questions presented[edit]

    The petitioner presented the following questions to the court:

    Questions presented:
    • "Whether an entity that is passively retaining possession of property in which a bankruptcy estate has an interest has an affirmative obligation under the Bankruptcy Code’s automatic stay, 11 U.S.C § 362, to return that property to the debtor or trustee immediately upon the filing of the bankruptcy petition."[1]

    Outcome[edit]

    In an 8-0 opinion, the court vacated the 7th Circuit's ruling and remanded the case, holding that retaining property after a bankruptcy petition is filed does not violate the Bankruptcy Code. Justice Samuel Alito delivered the majority opinion of the court. Justice Sonia Sotomayor filed a concurring opinion. Justice Amy Coney Barrett took no part in the consideration or decision of the case.[3]

    Opinion[edit]

    In his opinion, Justice Samuel Alito wrote:[3]

    “ When a debtor files a petition for bankruptcy, the Bankruptcy Code protects the debtor’s interests by imposing an automatic stay on efforts to collect prepetition debts outside the bankruptcy forum. Ritzen Group, Inc. v. Jackson Masonry, LLC, 589 U. S. ___, ___–___ (2020) (slip op., at 6–7). Those prohibited efforts include “any act . . . to exercise control over property” of the bankruptcy estate. 11 U. S. C. §362(a)(3). The question in this case is whether an entity violates that prohibition by retaining possession of a debtor’s property after a bankruptcy petition is filed. We hold that mere retention of property does not violate §362(a)(3).[13] ”
    —Justice Samuel Alito

    Concurring[edit]

    Justice Sonia Sotomayor filed a concurring opinion.[3]

    In her concurring opinion, Justice Sotomayor wrote:

    “ I write separately to emphasize that the Court has not decided whether and when §362(a)’s other provisions may require a creditor to return a debtor’s property. Those provisions stay, among other things, “any act to create, perfect, or enforce any lien against property of the estate” and “any act to collect, assess, or recover a claim against [a] debtor” that arose prior to bankruptcy proceedings. §§362(a)(4), (6); see, e.g., In re Kuehn, 563 F. 3d 289, 294 (CA7 2009) (holding that a university’s refusal to provide a transcript to a student-debtor “was an act to collect a debt” that violated the automatic stay). Nor has the Court addressed how bankruptcy courts should go about enforcing creditors’ separate obligation to “deliver” estate property to the trustee or debtor under §542(a). The City’s conduct may very well violate one or both of these other provisions. The Court does not decide one way or the other.


    ...
    Ultimately, however, any gap left by the Court’s ruling today is best addressed by rule drafters and policymakers, not bankruptcy judges. It is up to the Advisory Committee on Rules of Bankruptcy Procedure to consider amendments to the Rules that ensure prompt resolution of debtors’ re-quests for turnover under §542(a), especially where debtors’ vehicles are concerned. Congress, too, could offer a statutory fix, either by ensuring that expedited review is available for §542(a) proceedings seeking turnover of a vehicle or by enacting entirely new statutory mechanisms that re-quire creditors to return cars to debtors in a timely manner.

    Nothing in today’s opinion forecloses these alternative solutions. With that understanding, I concur.[13]

    		”
    —Justice Sonia Sotomayor

    Text of the opinion[edit]

    Read the full opinion here.

    Oral argument[edit]

    Audio[edit]

    Audio of oral argument:[14]



    Transcript[edit]

    See also[edit]

    External links[edit]

    Footnotes[edit]

    1. ↑ 1.0 1.1 1.2 SCOTUSblog, "City of Chicago, Illinois v. Fulton," accessed December 18, 2019
    2. ↑ U.S. Supreme Court, "Press release from April 3, 2020," accessed April 3, 2020
    3. ↑ 3.0 3.1 3.2 3.3 Supreme Court of the United States, "Chicago v. Fulton: Opinion," decided January 14, 2021
    4. ↑ 4.0 4.1 4.2 4.3 4.4 United States Court of Appeals for the Seventh Circuit, "In re Fulton," decided June 19, 2019
    5. ↑ Investopedia, "Unsecured Creditor," accessed January 22, 2020
    6. ↑ USCourts.gov, "Chapter 13 - Bankruptcy Basics," accessed December 20, 2019
    7. ↑ USCourts.gov, "Proof of Claim," accessed January 22, 2020
    8. ↑ Investopedia, "Secured Creditor Definition," accessed January 22, 2020
    9. ↑ 9.0 9.1 United States Code, "Subchapter IV: Administrative powers, Section 362 - automatic stay," accessed December 20, 2019
    10. ↑ Investopedia, "Perfected Lien," accessed January 22, 2020
    11. ↑ Justia, "Adversary Proceedings," accessed February 21, 2020
    12. ↑ 12.0 12.1 United States Code, "Subchapter IV: Administrative powers, Section 363 - Use, sale, or lease of property," accessed December 20, 2019
    13. ↑ 13.0 13.1 13.2 13.3 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
    14. ↑ Supreme Court of the United States, "Oral Argument - Audio," accessed October 19, 2020
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