Danielson v. Flores (In Re Flores)

I. INTRODUCTION

This bankruptcy appeal concerns confirmation of a Chapter 13 plan of reorganization. The debtors, Cesar and Ana Flores, proposed a three-year plan. Rod Danielson, the Chapter 13 Trustee (“Trustee”), objected and argued that a five-year plan was required. The relevant legal question is whether, under 11 U.S.C. § 1325(b), a debtor with no “projected disposable income” may confirm a plan that is shorter in duration than the “applicable commitment period” found in § 1325(b).

Current Ninth Circuit precedent plainly allows debtors to confirm a shorter plan (e.g., a three-year plan) under the facts of this case. See Maney v. Kagenveama (In re Kagenveama), 541 F.3d 868, 872 (9th Cir. 2008). However, Trustee argued, and the bankruptcy judge agreed, that the Supreme Court’s intervening decision in Hamilton v. Lanning, 130 S. Ct. 2464 (2010), is irreconcilable with and thus implicitly overruled Kagenveama’s construction of “applicable commitment peri- od,” which permits shorter Chapter 13 plans. The question before this court is whether the bankruptcy judge erred when it declined to follow this court’s otherwise controlling holding in Kagenveama because the bankruptcy…

Opinion by Judge CHEN; Dissent by Judge GRABER.

OPINION

I. INTRODUCTION

This bankruptcy appeal concerns confirmation of a Chapter 13 plan of reorganization. The debtors, Cesar and Ana Flores, proposed a three-year plan. Rod Daniel-son, the Chapter 13 Trustee (“Trustee”), objected and argued that a five-year plan was required. The relevant legal question is whether, under 11 U.S.C. § 1325 (b), a debtor with no “projected disposable income” may confirm a plan that is shorter in duration than the “applicable commitment period” found in § 1325(b).

*1023 Current Ninth Circuit precedent plainly allows debtors to confirm a shorter plan (e.g., a three-year plan) under the facts of this case. See Maney v. Kagenveama (In re Kagenveama), 541 F.3d 868, 872 (9th Cir.2008). However, Trustee argued, and the bankruptcy judge agreed, that the Supreme Court’s intervening decision in Hamilton v. Lanning, — U.S. -, 130 S.Ct. 2464 , 177 L.Ed.2d 23 (2010), is irreconcilable with and thus implicitly overruled Kagenveama’s construction of “applicable commitment period,” which permits shorter Chapter 13 plans. The question before this court is whether the bankruptcy judge erred when it declined to…

dissenting:

I respectfully dissent. In my view, we are not compelled to follow Maney v. Kagenveama (In re Kagenveama), 541 F.3d 868 (9th Cir.2008), because it is “clearly irreconcilable” with Hamilton v. Lanning, — U.S. -, 130 S.Ct. 2464 , 177 L.Ed.2d 23 (2010). See Miller v. Gammie, 335 F.3d 889, 900 (9th Cir.2003) (en banc) (stating principle that a three-judge panel is not bound by a prior circuit precedent in this circumstance).

Kagenveama created a rule under which our circuit set no minimum duration on plans confirmable by certain debtors, such as the ones in this case. See 541 F.3d at 877 (holding that, when a debtor’s projected disposable income was negative, the applicable commitment period “did not apply” and offering no substitute durational requirement). 1 That aspect of Kagenvea-ma is clearly irreconcilable with Lanning , which interprets 11 U.S.C. § 1325 (b) (the “disposable income test”) as a vehicle for achieving the congressional intent of making debtors pay as much as they can, but no more, over a fixed period, while allowing discretion to adjust the payout up or down as required by the debtor’s evolving financial situation. In Lanning , the Court rejected the…