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Brief for Petitioner No. 19-357 IN THE Supreme Court of the United States CITY OF CHICAGO, Petitioner, v. ROBBIN L. FULTON, JASON S. HOWARD, GEORGE PEAKE, AND TIMOTHY SHANNON, Respondents. ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT BRIEF FOR PETITIONER MARK A. FLESSNER CRAIG GOLDBLATT BENNA RUTH SOLOMON Counsel of Record MYRIAM ZRECZNY KASPER DANIELLE SPINELLI ELLEN W. MCLAUGHLIN JOEL MILLAR CITY OF CHICAGO ISLEY GOSTIN OFFICE OF CORPORATION WILMER CUTLER PICKERING COUNSEL HALE AND DORR LLP 30 N. LaSalle Street 1875 Pennsylvania Ave., NW Suite 800 Washington, DC 20006 Chicago, Illinois 60602 (202) 663-6000 (312) 744-7764 [email protected] ALLYSON M. PIERCE WILMER CUTLER PICKERING HALE AND DORR LLP 250 Greenwich Street New York, NY 10007 (212) 230-8800 QUESTION PRESENTED Whether an entity that is passively retaining pos- session of property in which a bankruptcy estate has an interest has an affirmative obligation under the Bank- ruptcy Code’s automatic stay, 11 U.S.C. § 362, to return that property to the debtor or trustee immediately up- on the filing of the bankruptcy petition. (i) PARTIES TO THE PROCEEDING Petitioner is the City of Chicago. Respondents are Robbin L. Fulton, Jason S. How- ard, George Peake and Timothy Shannon. (ii) TABLE OF CONTENTS Page QUESTION PRESENTED ............................................... i PARTIES TO THE PROCEEDING .............................. ii TABLE OF AUTHORITIES .......................................... vi INTRODUCTION .............................................................. 1 OPINIONS BELOW .......................................................... 5 JURISDICTION ................................................................. 5 STATUTORY PROVISIONS INVOLVED .................. 5 STATEMENT ..................................................................... 6 A. Statutory Background .......................................... 6 B. Factual And Procedural Background .............. 10 SUMMARY OF ARGUMENT ....................................... 15 ARGUMENT ..................................................................... 16 I. A CREDITOR DOES NOT VIOLATE THE AU- TOMATIC STAY BY RETAINING POSSESSION OF PROPERTY LAWFULLY OBTAINED BE- FORE BANKRUPTCY .................................................... 16 A. Section 362(a)(3)’s Plain Text Stays Acts That Alter The Status Quo As Of The Petition Date; It Does Not Re- quire Such Acts ................................................... 17 B. The Debtors’ Interpretation Turns The Role Of The Automatic Stay On Its Head ...................................................................... 21 (iii) iv TABLE OF CONTENTS—Continued Page C. The Automatic Stay’s History Con- firms That § 362(a)(3) Does Not Com- pel Creditors To Turn Over Lawfully Repossessed Property ........................................ 25 II. THE DEBTORS’ INTERPRETATION OF § 362(a)(3) WOULD RENDER THE TURNO- VER PROVISION SUPERFLUOUS AND DE- PRIVE SECURED CREDITORS OF CRITICAL STATUTORY PROTECTIONS ........................................ 32 A. Section 542 Contemplates A Procedure Under Which Creditors May Raise Statutory Defenses To Turnover ..................... 33 B. While Section 542 Imposes A Mandato- ry Duty To Turn Over, It Does Not Operate As An Injunction ................................. 36 C. Reading Section 362(a)(3) To Compel Immediate Turnover Of Property Is Inconsistent With This Court’s Deci- sion In Strumpf .................................................... 42 III. THE ‘‘POLICY CONSIDERATIONS’’ UNDER- LYING THE SEVENTH CIRCUIT’S RULE ARE UNPERSUASIVE .......................................................... 43 CONCLUSION ................................................................. 45 v TABLE OF CONTENTS—Continued Page ADDENDUM: Relevant Statutory Provisions 11 U.S.C. § 361 ............................................................ 1a 11 U.S.C. § 362 ............................................................ 2a 11 U.S.C. § 363 .......................................................... 28a 11 U.S.C. § 541 .......................................................... 35a 11 U.S.C. § 542 .......................................................... 44a Fed. R. Bankr. P. 7001 ............................................. 46a vi TABLE OF AUTHORITIES CASES Page(s) Bullard v. Blue Hills Bank, 135 S. Ct. 1686 (2015) .............................................................................. 7 Checkers Drive-In Restaurants, Inc. v. Commissioner of Patents & Trademarks, 51 F.3d 1078 (D.C. Cir. 1995) .............................. 22, 23 Citizens Bank of Maryland v. Strumpf, 516 U.S. 16 (1995) .................................................. 16, 42, 43 City of Chicago v. Kennedy, 2018 WL 2087453 (N.D. Ill. May 4, 2018) ................................................ 14 City of Springfield v. Kibbe, 480 U.S. 257 (1987) .......... 14 Cohen v. de la Cruz, 523 U.S. 213 (1998).............. 4, 28, 29 Continental National Bank & Trust Co. v. Chicago, Rock Island & Pacific Railwy Co., 294 U.S. 648 (1935) ............................................. 25 Duncan v. Walker, 533 U.S. 167 (2001) .......................... 29 Ex parte Robinson, 86 U.S. (19 Wall.) 505 (1874) ............................................................................ 38 Ex parte Young, 209 U.S. 123 (1908) .............................. 19 Hall v. United States, 566 U.S. 506 (2012) ............................................................................ 28 Hamilton v. Lanning, 560 U.S. 505 (2010) .............. 18, 28 Hillis Motors, Inc. v. Hawaii Automobile Dealers’ Ass’n, 997 F.2d 581 (9th Cir. 1993) ....................................................................... 22, 31 ICC v. Holmes Transportation, Inc., 931 F.2d 984 (1st Cir. 1991) ....................................................... 22 vii TABLE OF AUTHORITIES—Continued Page(s) In re Albion Disposal, Inc., 217 B.R. 394 (W.D.N.Y. 1997) .......................................................... 32 In re Avila, 566 B.R. 558 (Bankr. N.D. Ill. 2017) .......... 14 In re Cowen, 849 F.3d 943 (10th Cir. 2017) .................................................................... passim In re Decker, 465 F.2d 294 (3d Cir. 1972) ....................... 26 In re Del Mission Ltd., 98 F.3d 1147 (9th Cir. 1996) ....................................................................... 36, 37 In re Denby-Peterson, 576 B.R. 66 (Bankr. D.N.J. 2017) ................................................................... 8 In re Denby-Peterson, 941 F.3d 115 (3d Cir. 2019) ................................................. 8, 18, 20, 34, 37, 40 In re Dukes, 909 F.3d 1306 (11th Cir. 2018) ................... 22 In re Hall, 502 B.R. 650 (Bankr. D.D.C. 2014) ............................................... 27, 34, 35, 37, 39, 40 In re Knaus, 889 F.2d 773 (8th Cir. 1989) ................ 36, 37 In re Larson, 979 F.2d 625 (8th Cir. 1992) ..................... 22 In re Morton, 866 F.2d 561 (2d Cir. 1989) ...................... 22 In re National Cattle Congress, Inc., 179 B.R. 588 (Bankr. N.D. Iowa 1995) ..................................... 32 In re Prudential Lines Inc., 928 F.2d 565 (2d Cir. 1991) ...................................................................... 31 In re Securities Investor Protection Corp., 460 B.R. 106 (Bankr. S.D.N.Y. 2011) .............................. 31 In re Stanndco Developers, Inc., 534 F.2d 1050 (2d Cir. 1976) ............................................................... 26 viii TABLE OF AUTHORITIES—Continued Page(s) In re VistaCare Group, LLC, 678 F.3d 218 (3d Cir. 2012) ........................................................................ 9 In re Weber, 719 F.3d 72 (2d Cir. 2013) .......................... 36 International Union v. Bagwell, 512 U.S. 821 (1994) ............................................................................ 38 Kissinger v. Reporters Committee for Freedom of the Press, 45 U.S. 136 (1980) ................................. 38 Maggio v. Zeitz, 333 U.S. 56 (1948) ................................. 40 Marlyn Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co., 571 F.3d 873 (9th Cir. 2009) .............. 19 Meghrig v. KFC Western, Inc., 516 U.S. 479 (1996) ............................................................................ 19 Mission Product Holdings, Inc. v. Tempnology, LLC, 139 S. Ct. 1652 (2019) .......................................................... 23, 25, 36, 44 National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012) ................................ 20 Nken v. Holder, 556 U.S. 418 (2009) ......................... 19, 20 North American Soccer League, LLC v. United States Soccer Federation, Inc., 883 F.3d 32 (2d Cir. 2018) ............................................................... 19 Pennsylvania Department of Public Welfare v. Davenport, 495 U.S. 552 (1990) ................................ 35 Reconstruction Finance Corp. v. Kaplan, 185 F.2d 791 (1st Cir. 1950) .............................................. 40 ix TABLE OF AUTHORITIES—Continued Page(s) Ritzen Group, Inc. v. Jackson Masonry, LLC, No. 18-938, Slip Op. (U.S. Jan. 14, 2020) ............................................................. 9, 10, 18, 21 Robinson v. Shell Oil Co., 519 U.S. 337 (1997) .............. 20 Taggart v. Lorenzen, 139 S. Ct. 1795 (2019) ................................................................ 10, 21, 38 Thompson v. General Motors Acceptance Corp., 566 F.3d 699 (7th Cir. 2009) ............................................... 11,
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