Judge Markell Invokes Justice Antonin Scalia's Canons of Statutory Construction Over the Philosophical Theories of Ludwig Wittgenstein in Resolving the Judicial Debate Over How to Close BAPCPA's New "Mansion Loophole"

Bankruptcy Judge Bruce Markell, whose courtroom is in Las Vegas, has written extensively on bankruptcy law topics. His first article, written in 1988 following his becoming a partner in Sidley & Austin's LA office, was entitled Toward True and Plain Dealing: A Theory of Fraudulent Transfers Involving Unreasonably Small Capital, 21 Ind. L. Rev. 469 (1988). This extensively researched article was a major contribution to bankruptcy scholarship as it was the only one out there that hit every case you'd ever want to read on the topic back through the enactment in 1571 of the "Statute of Elizabeth" (a penal statute that prohibited conveyances made with "intent to delay, hinder or defraud creditors and others of their just and lawful actions"). I vividly recall this article because I was then a third year associate responsible for writing -- from scratch -- a comprehensive memo on the meaning of "unreasonably small capital" in fraudulent transfer law. The results of my research obviously were no match for Judge Markell's essay, so I could only marvel at the timely publication of this providential article that saved me and others hundreds of hours of painstaking research into cases well over 100 years old.

Since that very auspicious start, Judge Markell (who tutored logic in his four years of college, graduated 1st in his class at UC-Davis Law School, and clerked for then 9th Circuit Judge -- now Supreme Court Justice -- Anthony M. Kennedy) has written, taught, and lectured extensively on bankruptcy law and practice. He was appointed Bankruptcy Judge for the District of Nevada in July 2004 to fill a vacancy on the Court, and was again appointed for a full 14 year term in October 2004.

Judge Markell's latest scholarly contribution, however, is not about bankruptcy, but about that famed enigmatic philosopher, Ludwig Wittgenstein (don't go to sleep yet!), about whose works Judge Markell wrote a thesis in college entitled Grice's Recursive Definition of Truth and Wittgenstein's View on Meaning in Tractatus Logico Philosophicus and in the Philosophical Investigations. In his latest article, entitled Bewitched by Language: Wittgenstein and the Practice of Law, 32 Pepp. L. Rev. 801 (2005), Judge Markell asks a question few would dare to posit (and many more would not care to posit). He asks:

Have courts considered Wittgenstein's philosophy when deciding cases?

Judge Markell answers yes, but clearly he's not impressed by the overall level of judicial scholarship in the forty opinions of record that cite to Wittgenstein. Notably, even Judge Easterbrook's references to Wittgenstein fall short in Judge Markell's eyes. He writes:

In three opinions, Judge Easterbrook has touched briefly on Wittgenstein and the nature of statutory interpretation.... Judge Easterbrook's use of Wittgenstein, although in areas closer to the core of his later philosophy, is suspect. The brevity with which Judge Easterbrook deals with Wittgenstein itself shows that the citations are not serious, in the sense of being necessary or sufficient to establish the assertion being made. They are the judicial equivalent of using a "big" name to cover an otherwise unexceptional argument. Wittgenstein's observation is on the grammar of how he understood the use of a term. Judge Easterbrook, I take it, would disagree. In any event, Easterbrook's citations of Wittgenstein are odd, and likely wrong. [32 Pepp. L. Rev. at 837].

As to Wittgenstein's view "on the issue of legislative intent," which really lies at the heart of Judge Markell's opinion on BAPCPA's new apparent "mansion loophole" (i.e., the raging debate -- reported here, here, here, and here -- on whether BAPCPA's $125,000 cap on a debtor's homestead exemption extends to all 50 states), he writes:

Wittgenstein was quite willing to say that a law could have an intent even if no legislator held that intent at the time of consideration and passage. As he stated, "Might it not even be imagined that several people had carried out an intention without any one of them having it? In this way a government may have an intention that no man has." (Emphasis added.)

The bankruptcy case of In re Kane, 2006 WL 181369 (Bankr. D. Nev., 1/12/06) (pdf), gave Judge Markell the perfect opportunity to add a 41st opinion to the Wittgenstein case law annals. However, he chose to resolve the debate over BAPCPA's new "mansion loophole" on more traditional grounds. Had Judge Markell cited to Wittgenstein, he might have posited -- as Wittgenstein had -- that "several people [i.e., Congress] had carried out an intention without any one of them [i.e., any member] having it, [and that] in this way a government may have an intention that no man has." I suppose it wouldn't be the first time that Congress said one thing and did another.

Still, Judge Markell refused to extend the law to the philosophical extreme to which Wittgenstein points. Nor, was he willing to follow Judge Haines, of the Bankruptcy Court for the District of Arizona, who -- in the first reported BAPCPA decision for you trivia buffs(In re McNabb, 326 B.R. 785 (Bankr. D. Ariz. 2005) -- employed the leading canon of statutory construction whereby (based on well-recognized bankruptcy-related Supreme Court precedent):

Courts must presume that a legislature says in a statute what it means and means in a statute what it says there.... [and] [w]hen the words of a statute are unambiguous, then, this first canon is also the last: "judicial inquiry is complete." Connecticut Nat. Bank v. Germain, 503 U.S. 249, 253, 112 S. Ct. 1146, 1149 (1992) (Thomas, J.) (citing United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 241-242, 109 S. Ct. 1026, 1030-1031, (1989) and Rubin v. United States, 449 U.S. 424, 430, 101 S.Ct. 698, 701 (1981)).

Rather, like Judges Mark and Riegle before him, Judge Markell was unwilling to find -- as Judge Haines did -- that the "legislative history is virtually useless as an aid to understanding the language and intent of BAPCPA" on such a fundamental issue as BAPCPA's "closing of the mansion loophole." Instead, he found that an important objective of BAPCPA was to prevent wealthy individuals from shielding millions of dollars from creditors by filing bankruptcy in one of a handful of states (identified here) that have unlimited homestead exemptions. [NB: Actually, other "loopholes" are identified in this letter to Senators Leahy and Sensenbrenner, signed by 67 distinguished bankruptcy professors from around the country (including Judge Markell!), that Congress saw fit to ignore. Judge Haines' literalist approach would carry more weight if the "as a resulting of electing" problem had been specifically identified in the letter or other communications.]

Whereas Judge Mark basically ignored the "as a result of electing" language of BAPCPA's new Code section 522(p) in favor of the clear and unambiguous legislative intent, and whereas Judge Riegle adopted a strained -- though theoretically plausible -- reading that enabled her to reconcile the seemingly contradictory "as a result of electing" language of Code section 522(p) with Congressional intent favoring the closing of the "mansion loophole," Judge Markell employed a different -- entirely logic-based -- construct. In so doing, he concluded that even a strict textualist like Justice Scalia would apply BAPCPA's homestead exemption cap to all states and ascribe the offending "as a result of electing" language in Code section 522(p) as merely "scrivenor's error." Such a finding of "scrivenor's error" was warranted, Judge Markell noted, because two necessary conditions were met: first, "the intended meaning to be used [is] obvious"; and second, "the plain meaning of the statute under consideration lack[s] any ... plausible congressional purpose." As such, Judge Markell -- like Judges Mark and Riegle before him -- concluded that BAPCPA's $125,000 cap on the homestead exemption (for properties obtained within 40 months of the filing) applies nationwide.

For those concerned that this case signals Judge Markell's possible shift to the dark side on matters of statutory construction (i.e., he's become a strict textualist), remember that Judge Markell tutored college logic, and for him, the right result was logically compelled by applying even the strictest of textualist approaches. As such, there was -- by necessity -- no need to inquire further on this issue given that the position representing the strongest textualist view imaginable to him yielded the result that he considered the proper one. Q.E.D.

From a practical perspective, it is critical that bankruptcy courts get it right on this issue as they're on the front lines of a battle that will be decided then and there. Rarely will the matter merit appellate review since the loser in these cases likely will be rendered broke by the decision and lack money to stay the judgment pending appeal. In most of these cases, therefore, by the time even the most expedited appeal winds its way to the appellate court (such as was ordered by Judge Riegle in the Virissimo case, as noted here), the debtors will have lost their house in a trustee's "free and clear" sale, and the matter will have been rendered moot. It is probably for this reason that one can't find any appeal by the Virissimos presently pending before the 9th Circuit despite Judge Riegle's order expediting the appeal directly to that appellate court.

© Steve Jakubowski 2006