case number sixteen fifty seven seventeen and case number sixteen fifty seven nineteen state of tennessee and metropolitan government of nashville nashville versus michael cor of applicable non bankruptcy law and the of the text your interpretation of five and my colleague with the state will speak for seven minutes on the issue of supremacy clause and then we'd like to reserve one minute for  honor your honors congress enacted section five eleven to fix a problem the trustee is asking this court to interpret the phrase applicable non bankruptcy law in such a way that it brings the problem back to metro contends that this phrase is a simple directive used to establish the difference between title eleven law or bankruptcy law and all other sources of law outside of title eleven or non bankruptcy law that this source based position is consistent with the plain language of section five eleven the context in which five eleven was an acted the legislative history and is supported by a cases that have interpreted that phrase in section five eleven and in other sections of the bankruptcy do not include the word penalty and so by implication it could be concluded that they are against penalties but in the case of in the case of states which are entitled to determine their own penalties and determine their own interest that about here is the penalty for payment of taxes during the period that the cases before the bankruptcy court yes if you are if if the statute the plain language of the tennessee statute established that it was penalty i would agree with that runner however the plain language of section five eleven establishes that it is an interest rate and which creditor to receive the present value of the ally old amount of the tax calling courtroom ok so that's where we are and so five eleven authorizes that when you when you get to the testimony it's in the record tennessee has admitted that eighteen percent exceeds what is required to maintain the present value of the tax so we've got the code law that says why you can charge interest we've got the admission that the eighteen percent exceeds that yet how can we do anything but think that if it exceeds what its author as to telling under the code then it is in fact a penalty or your honor with with respect to counsel for the state i think that whether or not that exceeds the present value first of all i'm not sure if that's actually part of the equation anymore i think that prior to fava lev bankruptcy courts were supposed to be in the business of determining whether the interest rate effectively reflected present value i think that's what it was however i think the language of five eleven especially the first part of living which is i think what we're traveling under which talks about for the interest rates for tax claims so it doesn't say anything about present value with respect to the interest rates for tax claims being deferring to applicable non bankruptcy law second of all i'd also like to point to help me with that i'm looking at five honor i thought you were traveling under the payment of interest to enable a creditor to receive the present value of the i'm a out of tax klein and that's because you fall in the category of an over secured creditor in which is that the specific thing it issues we are i think i may have missed i think i may misstated i believe we fall under the first part of that statement if any provision of this title requires the payment of interest on a tax claim but i'm struggling because it seems to me in the context in which this case arises as an over secured creditor there is a specific issue because over secured creditors are allowed to obtain interest for to receive the present value and if you have conceded that this is more than the present value i don't understand what you are traveling under that would allow you to then argue that the additional six percent is not in ok your honor i would take issue with the concession that we have that this is your fight to the present value i think the present value can exist in different ways in bankruptcy than it does in non bankruptcy for instance as a non bankruptcy claim but something that big can be subject to be collected immediately so a twelve percent interest may make sense there whereas and in bankruptcy you're not going to collect on that money until three or five years out and so president present value may be adequate for that so  isn't this a bankruptcy law as opposed to a non bankruptcy law well first of all you're i think that's the whole point you're trying to argue yes your honor that's that's my position the first of all the plain language only yields metro source base interpretation i don't when all due respect i don't get that in looking at this i think your tennessee section for purposes of any claim in a bankruptcy proceeding is a bankruptcy law i mean it just cries out bankruptcy and says bankruptcy but i think your honor what what non bankruptcy law was intended to do wasn't supposed to be a grand declaration of what state's rights were with respect to an act in bankruptcy legislation i think it's just a shorthand way of referring to law outside of the code and i think you're saying the only kind of quote little bankruptcy  big capital b bankruptcy code in the u s code sense that there is no state little be bankruptcy law no i think there are so you're saying there are states bankruptcy laws i just don't think that congress is using this just the legislature came along so well we can't charge a penalty so we'll just change what we've been charging as a penalty and call it when it's in bankruptcy acid on its face pretext well and your honor i think that they're equal protection can prohibit that from happening as well as the state's usury rate the state constitution said to use rewrite fifty percent would be above that i think there are other protections to prevent it from being from being that high and certainly a rational basis under the equal protection as a way to for to attack that but as far as the interest rate itself i think that there's no identification purposes of any claim in bankruptcy assessment of penalties is constitutes the incessant of interest we declare it that way but your honor if tennessee's entitled to set an interest rate and they're entitled to set a penalty isn't that in authority inherent that they should be able to set an interest rate in certain circumstances at five eleven they says the rate of interest should be the rate determined under applicable bankruptcy law which is what you're charging regular people as opposed to minutes and then the other side should be forwarned to divided time accordingly good morning your honor gilbert on behalf of the state of tennessee and i'd like to address first of all the the question about tennessee conceding that that this interest rate does is more than what would be required under a present value analysis of the record if you look closely in the record i actually made that statement at oral argument before the bankruptcy court below and it was taken out of context i believe it was in a pure concession of present value the  tennessee legislature has said that the present value of unpaid tax claims in tennessee shall be eighteen percent in non bankruptcy cases not bankruptcy delinquent tax paid tax payers the interest rate is twelve percent and there is a penalty of six percent the next moment of section d was in response to an earlier decision of the bankruptcy court which said that penalties post petition penalties were not allowable on an over secured claim but if you're treating regular claims or regular situations as interest of twelve percent and penalties of six percent how can you go about declaring that in bankruptcy proceedings the six percent penalty constitutes interest the way the way that we that that first of all look at what the tennessee legislature is doing in this in this in next minute of this law they are in there get they're doing an end run around their decision they're they're complying with the decision and they're saying that we have tax authority and we have the ability to determine assessments on delinquent if they if the state of tennessee had done the same thing for all people and said we're going to call the whole eighteen percent interest now for everybody then you would have an interest rate under five eleven and determined under applicable non bankruptcy law because it's applying to everybody but but the state of tennessee didn't do that for whatever reason they didn't want in regular situations they didn't want regular people to think they were paying interest of eighteen percent from the record i assessed i assume that is correct and that is what the record reflects but what congress said  an attempt to regulate the debtor creditor creditor relationship it's not an attempt to set an interest rate on tax claims that do not belong to instruments of instrumentalities of the state of tennessee but it  legislature is doing it is determining its assessments on unpaid tax claims and that is within the inherent sovereign authority of the tennessee legislature to do that yet they can do whatever they want but that doesn't mean that for u bankruptcy cases that what tennessee label something determines whether it is little bankruptcy or non bankruptcy but then we're looking at what is the meaning of non bankruptcy right that is the key to the case right and i would i would submit that the bankruptcy appellate panel below simply did a simple analysis that said it includes the word bankruptcy therefore must be a bankruptcy law and the state's position is that applicable exclusively in the bankruptcy context and that's different from just including bankruptcy if they had had made the law all tennesseans pay eighteen percent including those in bankruptcy that's not a specific bankruptcy law because it is applicable across the board here what you have is the legislative history that we've spoken of which i think is more indicative of renaming a penalty and finding it remains of a punitive nature so that the state can continue to get the four mailed and we understand the logistics here in the purpose behind it but i'm not hearing what would prevent the us from rationally being a bankruptcy law except for  a source versus content or structure and which i don't think is a mandatory distinction that is required to be applied here again i i look to what the legislature is is is doing and under what authority is it traveling and its a traveling under its authority to determine assessments for its tax claims in a federal bankruptcy proceeding and i think it's within that inherent authority to say the legislature believes that yes in other cases this is susman is determined to be a penalty and it's determined to be an interest rate in other cases but we feel the tennessee legislature feels that in a bankruptcy case it's all interest and why why do you think the state of tennessee feels that way well i've looked at that question and it's an interesting question unfortunately the provision in this in the tax code dates back to about one nine hundred thirty three i believe and unfortunately the history is kind of thin but i know but why do you feel as just a few correct but do you have some meritorious reason well look at how the look at how the the assessment is is functioning if it's a time value it becomes part of the tax lien therefore when subsequent purchasers that attack sale come to buy the piece of property assuming the taxes haven't been paid they have to pay the penalty even though they have committed no wrong so if you look at the totality of this of the statute and the circumstances in which it was enacted it's clear to me that for whatever reason it was determined to be a penalty and interest rate outside of bankruptcy cases but the legislature is saying we feel that for purposes of our claims in bankruptcy cases this constitutes interest one quick question under your argument all states are now authorized to say to the bank or to the bankruptcy court we understand that you will not done i would look to the california case if our in which this was examined under the statutory guidelines and under the constitutional guidelines which i haven't been able to address but that's ok thank you but i would look to that for an explanation of why this is a non bankruptcy law in california the entire assessment is considered a penalty under state law  and therefore and they have the exact same provision that tennessee does thank you very much for your time and consideration and rely on your brief for the other issues in the case the language is very clear argument boils down to the basic rules of statutory interpretation the a pal inside the wrong poll supreme court opinion which sets out the foundations of statutory interpretation and rule number one is will it at the plain language of the statute and once again the language could not be more clear the under tennessee law property taxes are a lien on the real estate claims and we have to look at the two sections that are governed security claims in bankruptcy section five zero six number one section five zero six has enumerated items there's only four of them their interest fees costs and charges those are the only items that the creditor may be allowed to charge in a situation with a secure claim another section of the bankruptcy code is section thirteen twenty five  it authorizes interest to secure creditors it also addresses the lien issue if the lien is satisfied under applicable non bankruptcy law the state did bring up an argument about the lien remaining on the property but we believe that section thirt twenty five answers the question about the lien so this brings us to the second rule of section or interpretation if the item is not listed that item is excluded we cannot add it back to the statute the work penalty is used several other times in the bankruptcy code in fact only four times it is used and only one use applies to claims section seven twenty six claims so that would answer the state's concern about payment of interest payment of penalty rather once again both statutes are very clear under five eleven secured creditors can charge interest tennessee says that interest is twelve percent of the purpose when you talk about the purpose of the statute the record contains only one reference to the purpose of five eleven and that was to set the uniform standard for interest rates and property taxes it did not talk about ensuring that both bankruptcy and non bankruptcy individuals pay the same amount it while it was not the purpose it was simply to state and metro with respect to whether or not the amendment to tennessee code annotated is an applicable non bankruptcy law the first statement was that the trustees position brings back the problem that the statute was designed to solve and i would submit that that is simply not true the statute provides that taxpayers not in bankruptcy pay twelve percent and taxpayers in chapter thirteen would pay twelve percent so both are paying twelve percent the state metrobus position that applicable non bankruptcy law is anything outside the bankruptcy code is simply too broad and was rejected by bankruptcy appellate panel this court in richardson versus shaper clearly stated that state and federal legislatures have concurrent authority promulgated bankruptcy specific statute as we have here is in fact a bankruptcy law is is there a definition in the federal section five eleven uses the term  just laid of history to five eleven which would be the logical place if there are a bit like a committee report to say what they meant by none bankruptcy i don't believe that in the legislative history there either however congress did see fit to use terms and other places in the bankruptcy code such as in section five twenty two regarding exemptions allowing debtors to opt for federal exemptions or non title allotment nonfederal exemptions specifically weird for two state or local law section five eleven does not specifically direct want to state or local law it simply says non bankruptcy law in the trustees position would be that non bankruptcy law is just something outside of bankruptcy it is content specific not both of those categories have applicability problems don't you tell me how you would respond to the argument that a content restriction based on the language of the statute is exceedingly difficult to apply and will result in conflicting decisions based on this statute in this case i think the problem with that content is it goes beyond the scope of the bankruptcy code there is nothing in the bankruptcy code that in titles and over secured credit or to anything other than interest costs and fees they're not entitled to pending penalties penalties or punitive interest is not designed to be punitive interest is designed to compensate a creditor it's compensation for the time value of money so that they are paid their present value which is provided for in the bankruptcy with a distinction that your opposing counsel were both raising is that sore space restrictions it's a clean decision either it's outside the micro everything outside the bankruptcy code is good your position is content restriction would work functions better and i'm just asking you are there inherent problems since since there's nothing that requires us to choose one or the others or the other are there inherent problems with applying a content restriction in this instance i believe there are i believe a court should actually be more concerned with the state in metro's position before the court today i believe it is simple there's so under under five eleven as long as the state is charging a consistent rate of interest in all situations but a little bankruptcy law or non bankruptcy law or whatever it as long as there's a consistent rate of interest it doesn't really matter whether it reflects present value the state can do nominate this as interest and can that can be utilized is that right yes your honor so there's a sort of is a tension in that gives the state the power to call things that are not really present value which is most people's definition of what interests  they can call something they could have a rate of eighteen percent across the board what are you know when you the interest you get on the savings account is less than one percent i think they can do that i actually believe that they couldn't believe that if they had said that rather than thanks for purposes of bankruptcy the penalty which shall be called interest they probably wouldn't so they could have when this earlier case arose from the bankruptcy court they could have amended their to say for all people the interest rate is eighteen percent i do believe they could have yes and to address the question that was previously asked i am not aware and i do not believe that any of my colleagues  aware of whether or not the attorney general was consulted or before they act none of this so your opponents argue for a source based rule why is that not an equally acceptable interpretation and why shouldn't we adopt that because store space means that it's anything outside the bankruptcy code section eleven doesn't say non title eleven security over secured property tax crimes in bankruptcy so what would your definition of little bankruptcy law be that the states do anything that they say is pertaining to bankruptcy situations or can they have their own law bankruptcy or what they cannot have a bankruptcy law that conflicts with what congress has enacted in title eleven but they can make laws that would impact or involved bankruptcy they just can't be in direct conflict with this law is because this is imposing a penalty which is punitive going beyond the fees cost and interest that a secured creditors entitle to do you have any examples of little the bankruptcy laws that states have enacted that are appropriate in particular in tennessee since that's where you are i think exemptions so that would illustrate that the source based rule is not in fact followed in that context because the state source is the state l made of law is a state legislator but the bankruptcy code permits to mit's it so it's an explicit permission so is it part of the capital b bankruptcy code i don't believe it's necessarily a part of the capital  normally a state common law and statutory definition that is and the bankruptcy law simply operates on those property creating property rights it's dependent on the secret in property rights but back to a comment that my that the state metro made that this is not regulating debt or creditor relationships that's exactly what this was stating that a taxpayer who is in chapter thirteen the debtor it is dictating what the debtor will pay with respect to their property tax in their bankruptcy the creditor so it is in fact obtaining a debtor credit in impacts the way the bankruptcy flows from they are because that enables them to take money out of the bankrupt a state that would have otherwise gone to for example yes or no that's exactly what it does and it theoretically could go a step further and while it's taking money from other allowed claim holders principally general and secure creditors it has the potential to perhaps just briefly are are are do want to point out that the court has pointed to a couple different ways that the statue could have been the tennessee said you could be written differently and i just like to point out that just because the tennessee statute could've been written differently doesn't necessarily mean that it's unconstitutional as written or that it's an applicable i think the purpose of father levin tells us a lot here and it was the the poll point of it was to get the bankruptcy courts out of the business of having to look into the statutes and determine the propriety of interest rates and by having the courts just go back and determine whether or not it's a bankruptcy law or not bankruptcy law i believe puts the bankruptcy courts right back in that position i don't think there's anything in five eleven that demonstrates that congress cared about a distinction between bankruptcy or not bankruptcy debtors or that they were concerned about anything like that and i just want to point out that your honor asked judge moore you asked about the legislative history there is a little bit of information there there's a parent that ago talked about federal state and local