Federal Circuits and Binding Case Law

16 Aug Federal Circuits and Binding Case Law

The Bankruptcy Code is a federal statute, so the law is the same all over the country, right? Well, maybe not.

The federal court system, including the bankruptcy courts, are divided into eleven federal circuits, plus the District of Columbia. South Carolina, where I live, is part of the Fourth Circuit. North Carolina and Virginia are also in the Fourth Circuit, but Georgia is part of the Eleventh Circuit.

The highest courts in each circuit are the Circuit Courts of Appeal. Only the Supreme Court can overturn a circuit court decision. As the name implies, the Courts of Appeal hear appeals from trial courts, usually the District Courts, but sometimes lower courts, like the Bankruptcy Courts, tax courts, Federal Magistrates, and a few others.

Most of us learned in our civics classes that our judicial system relies heavily on judicial interpretation of statutes, and bankruptcy is no exception. Once an issue has been decided by a Circuit Court of Appeal, that decsion is binding authority for the lower cours within that circuit, and may be persuasive to other courts where no binding authority exists. But, there are many instances where an issue will be decided differently between two or more Circuit Courts of Appeal. Often, when there is such a “conflict among circuits,” the United State Supreme Court will eventually decide the issue. However, it takes a long time to get a matter heard by the Supreme Court. Further, the Supreme Court does not issue advisory opinions, so it may deal with a narrow issue, and leave related questions unanswered. That means that the law can be interpreted differently in different parts of the country, sometimes for many years.

This is especially true at present. The major revision to the Bankruptcy Code that we call BAPCPA has been in effect for almost two years, but there are still many issues that are novel, i.e., courts have not dealt with before. With so many new issues to be decided, it is inevitable that conflicts will arise, and it will take years for those issues to make their way through the appellate courts. Remember, the initial decisions on these issues are made at the trial level first.

In practical terms, this means that certain issues may be treated differently, at least for now, depending on where you live. Where I practice in South Carolina, there are three bankruptcy judges who work together to avoid issuing conflicting opinions, but in some places there may be conflicts in the way individual bankruptcy judges in the same district interpret the law. That is also part of the reason that you will see a map when you click on the link above to “find an experienced bankruptcy lawyer near you.” Since the way the law is interpreted varies from location to location, you need to find a lawyer familiar with the way the law is interpreted where you live.
In the past two years, since BAPCPA went into effect, it has been a full-time job to keep track of court decisions, many of which are in conflict with each other, in order to stay up-to-date on the way the new law is being interpreted. The speed of developments has been breathtaking. That’s just one more reason to consult with experienced bankruptcy counsel before you file bankruptcy.

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