CITY OF CHICAGO, ILLINOIS, Petitioner, v. ROBBIN L. FULTON, ET AL., Respondents
Interviewer(s): Clarence Thomas, Samuel A. Alito, Jr., Stephen G. Breyer, Elena Kagan, John G. Roberts, Jr., Neil Gorsuch, Brett M. Kavanaugh, Sonia Sotomayor
Interviewee(s): Colleen E. Roh Sinzdak, Eugene R. Wedoff, Craig Goldblatt

John G. Roberts, Jr.: We'll hear argument next in Case 19-357, City of Chicago versus Fulton. Mr. Goldblatt.

Craig Goldblatt: Mr. Chief Justice, and may it please the Court: This case presents the question whether the Bankruptcy Code's automatic stay requires a creditor in lawful possession of estate property when a bankruptcy petition is filed to return that property to the debtor immediately or else pay damages. It does not.

The automatic stay freezes the state of affairs as of the bankruptcy filing by enjoining creditors from taking post-petition acts to improve their position vis-a-vis the debtor.

As this Court has repeatedly observed, the automatic stay's purpose is to preserve the status quo.

It does not require creditors to turn over property lawfully in their possession. An entirely separate provision of the code, the turnover provision, addresses that situation.

But, unlike the automatic stay, the turnover provision does not operate as an injunction or mandate the payment of damages if property is not immediately turned over. The turnover provision contains a number of statutory exceptions and defenses. For example, a creditor is not required to turn over an asset if the debtor cannot provide adequate protection for the creditor's interest in the asset. A creditor that contends in good faith that an asset is not subject to turnover is entitled to judicial process to resolve that dispute without owing damages if the debtor ultimately repairs. Respondents' contrary argument fails for multiple reasons. First, reading the automatic stay to require turnover contravenes the ordinary meaning of the term "stay," which is status quo preserving. Second, it would render the actual turnover provision superfluous and would nullify the statutory exceptions and defenses to turnover. Finally, no one contends that the automatic stay imposed a turnover duty before the 1984 amendment that added the words "exercise control." Reading that amendment to the automatic stay to effect a sea change in turnover practice violates this Court's repeated admonition that changes to the Bankruptcy Code should not be read to disrupt established practice absent an indication that Congress so intended.

John G. Roberts, Jr.: Counsel, you agree that you're exercising control over the car.

Your argument is simply that exercising control is not an action, right?

Craig Goldblatt: Mr. Chief Justice, we don't -- we don't intend to -- our position doesn't turn on a fine distinction between action and inaction.

Our fundamental position is that the entire statutory phrase "acts to exercise control" is a prohibition on actions that change the status quo.

And because what we did preserved the status quo, it is not inconsistent with the command of the automatic stay.

John G. Roberts, Jr.: So we should understand that -- I understood your brief to put a different emphasis on it.

We should understand that you're covered by subsection (3) because you're in -- are engaged in an action?

Craig Goldblatt: Your -- Your Honor, we think that the question here about whether or not this is or isn't an act recalls the discussion in Your Honor's opinion in NFIB, in which you correctly observe that drawing the distinction between action and inaction at the extremes devolves into the work of -- of metaphysical philosophy. And just like you observed the Commerce Clause does not require a court to engage in such an analysis, we think the same is true of the Bankruptcy Code. We think that -- that as long as nothing is happening --

John G. Roberts, Jr.: Well -- well, just --

Craig Goldblatt: -- that's altered --

John G. Roberts, Jr.: -- if I could -- could just interrupt.

Once the debtor asks you to give back the car, that resolves this metaphysical debate, right? You make the action at that point to decide either to return it or not, correct?

Craig Goldblatt: Your Honor, we -- we -- we -- our -- our fundamental position is that the work of the automatic stay, as long as we're preserving the status quo, is not violated. Now it is true that the debtor -- there is a mechanism in the Bankruptcy Code by which the debtor can get back the car.

That's the turnover provision.

And the debtor can immediately --

John G. Roberts, Jr.: Thank you, counsel. Justice Thomas.

Clarence Thomas: You do agree, though, counsel, that -- that the code would prevent you from -- even though you do have control, it would prevent you from, for example, disposing of the cars?

Craig Goldblatt: That -- that's -- that's correct, Justice Thomas.

Our disposal of the cars, our sale of the cars, anything that would alter the status quo as between the debtor and creditor would violate the automatic stay. That's the construction of the automatic stay that this Court has given in cases going back to Continental Illinois in 1935 and running through Ritzen and Taggart in the last few terms.

So that's --

Clarence Thomas: So --

Craig Goldblatt: -- that's entirely correct.

And that is the work of the automatic stay in bankruptcy.

Clarence Thomas: So, in his opinion in Whiting Pools, Justice Blackmun makes a -- a distinction between the possessory interest and other interests in the property. Do you think that Whiting Pool has an effect on this case, on your case?

Craig Goldblatt: Justice Thomas, yes, Whiting Pools is entirely correct and consistent with our view.

What Justice Blackmun said for this Court, what Judge Friendly said for the Second Circuit in the case that this Court affirmed said that, A, the entire asset becomes property of the estate, so it rejected the government's argument there that the possessory interest stayed out of the estate and was not subject to turnover; but, B, turnover could proceed subject to the creditor's ability to seek adequate protection. In -- in that regard, Whiting Pools simply set out what was the understanding of how turnover worked prior to the 1984 amendment to the automatic stay, and nothing in the amendment to the automatic stay changes the operation of turnover in that regard.

Clarence Thomas: Thank you.

John G. Roberts, Jr.: Justice Breyer.

Stephen G. Breyer: I just am having a hard time understanding the following: If I look at 542, it basically says that a creditor, like you, your client, who has some property belonging to the debtor -- that's a car -- shall deliver to the trustee the property. You're supposed to deliver it to the trustee, unless it falls within the exceptions. I don't think you're a life insurance company. I don't -- I don't know what the exception would be.

And now you said: Oh, that's right. So -- but then the question here is whether the section before that, which says it's a stay, without saying what you do with it, says that you -- you exercise control over the car, and stay means you ought to turn it over. What difference does it make?

Craig Goldblatt: Justice --

Stephen G. Breyer: In either case you have to turn it over.

Craig Goldblatt: Justice Breyer, if I may, two -- two responses, if I may. First, on the question what is the defense, Section 542 says expressly that the turnover power -- the turnover obligation applies to property that is -- it -- it says it is subject to Section 363(e), a section subject to Section 363, and subsection 363(e) provides that the -- the court -- that it is -- the property is not subject to the trustee's use if the credit -- if the debtor cannot provide adequate protection to the creditor. So, here, there was a good-faith dispute about whether this -- this was subject to turnover.

In this case, there was a -- there was a real dispute about the way in which the city's possessory liens operated. And the position that we took, which had prevailed in district court until the very decision below, said this property was not subject to turnover.

Stephen G. Breyer: Okay.

So your point is --

Craig Goldblatt: Now, Justice Breyer --

Stephen G. Breyer: -- your point is -- is this right, that -- that your -- your point is, if we have to use 542, we have a -- we have these people's cars, they never pay their parking tickets, we give it back to them, that's the last we'll see of them, we'll never get our parking ticket money, unless they put up a bond or something, which is a little complicated.

Craig Goldblatt: So, Justice Breyer --

Stephen G. Breyer: If 362 applies, hey, we just have to give them back the car and that's the last we'll ever see of them.

Craig Goldblatt: So, Justice Breyer, this -- this is -- the question of turnover is the sub --

Stephen G. Breyer: Am I wrong?

Craig Goldblatt: I -- I -- I think the answer to your question, Justice Breyer, with respect, is that the question of turnover is a subject of Section 542, and while that is a "shall" command, that provision doesn't contain injunctive language. And, Justice Breyer, as you wrote for a unanimous court just 16 months ago in the Taggart case, where there is a -- even -- even in the discharge injunction context, where the statute does use injunctive language, where there is fair ground of doubt, a -- a court will not resort to contempt to punish a party that exercises its rights in a position where -- where it's taking positions in good faith.

Stephen G. Breyer: And that's exactly --

John G. Roberts, Jr.: Thank you, counsel.

Stephen G. Breyer: -- what I'm trying to find out.

John G. Roberts, Jr.: Justice -- Justice Alito.

Samuel A. Alito, Jr.: What's the --

John G. Roberts, Jr.: Justice Alito.

Samuel A. Alito, Jr.: Yes.

You say that the key is whether the status quo is being preserved or altered.

So suppose that a city's general practice is keep a car's like the cars at issue here in a basically unguarded lot in a remote location so that there isn't very much preventing somebody who -- whose car is there from entering and driving off with it. But, when the City hears about a particular case and thinks that it's a -- let's say it's a particularly valuable car and thinks that there's a real danger that the owner is going to do just that, go -- go there and drive off with the car, the City relocates that car to a different location where it's subject to 24-hour guard. Would that be an alteration of the status quo?

Craig Goldblatt: Not the relevant status quo, Justice Alito.

In the bankruptcy context, the automatic stay does a particular thing.

It freezes the relationship between the debtor and its creditors as of the moment the petition was filed. At the moment the petition was filed, there are a set of assets and liabilities, a -- a -- a balance sheet, so to speak, and that balance sheet is frozen.

No one can engage in self-help during the bankruptcy case to change that. Instead, that's addressed through the bankruptcy process under the supervision of the bankruptcy judge.

And if anyone --

Samuel A. Alito, Jr.: Right.

Craig Goldblatt: -- takes any action to improve their position, that would violate the stay. Here, the -- the -- the act -- in your hypothetical, the -- the car was held by the City as of the time of the bankruptcy, and as long as that remained the case, what the City was doing to preserve the status quo does not violate the automatic stay.

Samuel A. Alito, Jr.: Well, what work did the addition of the "exercise control" language do with respect to tangible objects?

Craig Goldblatt: So, as I said in response to Justice Thomas's question, with respect to tangible property, if here the City had disposed of the car or had sold the car, those would be actions that would alter the status quo and violate the automatic stay.

Samuel A. Alito, Jr.: Okay.

What does that do --

Craig Goldblatt: We think that both --

Samuel A. Alito, Jr.: -- can you -- can you give me examples of what Congress might have had in mind with respect to intangible property when it added this language?

Craig Goldblatt: Sure.

The -- the -- the -- again, so the paradigmatic example, for example, would be a derivative action, if -- if a party wanted to take over an estate cause of action and go to state court and say the estate ought to be pursuing the cause of action that it's not, and try to take over that claim, bringing that derivative action would be an act to exercise control over intangible -- over estate property. There are cases involving the termination of a lease agreement, for example, another piece of property that arguably isn't subject to possession, but those actions would violate the automatic stay after the words "exercise control" were added in 1984.

Samuel A. Alito, Jr.: Thank you.

John G. Roberts, Jr.: Justice Sotomayor.

Sonia Sotomayor: Counsel, would permitting a car to sit out in weather, in bad weather, or to be broken into or bumped into while in the City's possession -- does that change the status quo?

Craig Goldblatt: So, Justice Sotomayor, I don't believe those actions or -- or what -- what -- or violations of duties or -- or -- or what have you violate the automatic stay. I do believe that non-bankruptcy law, and in this context, the UCC, imposes duties on secured creditors to exercise appropriate care over property that -- that they have repossessed, and so it --

Sonia Sotomayor: All right.

May I stop you a moment? Because I'm limited in time.

Craig Goldblatt: Certainly.

Sonia Sotomayor: By your theory right now, the plaintiff must start an adversary proceeding, which has a huge amount of costs associated with them. As I understand it, adversary proceedings take several months.

And to what end? Meaning you would go to court and say, I have a lien.

They should give me security. You could do that now even if you had to turn over the car immediately. How can we ensure that these processes would go fast enough to save the debtor from not being able to rehabilitate? Because, for many of these people, the cars are the only means they have to get to work.

Craig Goldblatt: So, Justice Sotomayor, bankruptcy judges have ample discretion and, in my experience, exercise it quite wisely to set schedules --

Sonia Sotomayor: Well, they didn't in -- counsel, I want to point out that it took weeks, if not -- weeks after bankruptcy orders in these cases to turn over the cars for the City to respond.

Craig Goldblatt: So, Justice Sotomayor, with respect, in this case, there was never even a turnover action brought, only an action for violation of the stay. In most cases, these -- these matters are worked out pretty simply and consensually. But, to respond to your sort of analytic question of does the system work, it's a fair question, but the answer is yes.

Bankruptcy courts have plenty of ability to move these things quickly, to set response dates promptly, and to ensure that, to the extent there's a dispute about adequate protection, that gets worked out and then the cars are turned over. But the City is entitled -- a secured creditor is entitled to, for example, make sure that there's insurance so that, if the car is destroyed while the debtor has possession of it, its security interest isn't lost.

That's how this normally works, and it normally works quite well.

John G. Roberts, Jr.: Thank you, counsel. Justice Kagan.

Elena Kagan: Mr. Goldblatt, it seems as though most of your argument this morning is about the function of the automatic stay and the fact that, in your view, what it's supposed to do is to keep the status quo in place, and that's what you think decides this case. But I'm really wondering about the premise here.

I mean, keeping the status quo in place, that's not in the statutory language.

It is something that the Court has said multiple times, and mostly it makes complete sense. But I -- I -- I wonder whether you're confusing a means and an end, that the real function of an automatic stay is to consolidate the estate so that it can be redistributed. Now, in most cases, consolidating of the estate is going to mean keeping the status quo in place.

But, in this unusual circumstance, consolidating the estate means changing the status quo, and -- and -- and we should understand the Bankruptcy Code to accept that where that change is necessary to consolidate the estate.

Craig Goldblatt: So, Justice Kagan, with respect, I think that analysis sort of jumbles different provisions of the Bankruptcy Code.

We think that the analysis is that what Section 362, the automatic stay, does is preserve the status quo. Now, to be sure, the consolidation or marshaling of assets of the estate is work to be done in a bankruptcy case.

We think that the -- that Section 542, the turnover provision, is where that work is done.

And Section 542 has specific exceptions and defenses, and there is an established way in which it works. After all, no one here contended that before 1984, when the words "exercise control" were added to the automatic stay, that the automatic stay did any of this work, but this was always, since the dawn of time, the work of a trustee in bankruptcy to marshal the assets of the estate for the benefit of its creditors. And the way it worked is that the turnover provision gives one the authority to come into court and say, you're holding my thing, may I have it, please? And if the answer is, I've got no defense, it should be turned over.

And if there are disputes to be worked out, those are addressed by the bankruptcy court.

The bankruptcy court resolves it and then issues an order directing turnover, which, if a creditor fails to comply, is punishable with contempt. And so that's how that work is done. But it's respectfully incorrect --

Elena Kagan: Thank you, Mr. Goldblatt.

Craig Goldblatt: Thank you.

Thank you, Justice Kagan.

John G. Roberts, Jr.: Justice Gorsuch.

Neil Gorsuch: Good morning, counsel.

I -- I -- I know your client's practice of holding onto cars is well established and highly controversial.

But looking to the Bankruptcy Code, I guess my question for you is, assume we agree with you about the scope of 362, is there anything that would prohibit a debtor from seeking exactly the same sort of relief under 542 and 105?

Craig Goldblatt: So, Justice Gorsuch, we think that the answer to that question is provided by the unanimous opinion of this Court in Taggart just -- just 16 months ago, where the Court said that the -- the -- the discharge injunction, which is a statutory provision of the Bankruptcy Code that has injunctive language, unlike 542, that where there is fair ground of doubt about whether the action was a violation, that contempt authority is not available. We think it follows a fortiori, if a statute that -- that has injunctive language can't be punished with contempt or damages where there's fair ground of doubt, then it must follow that 542 also isn't -- isn't punishable by contempt where there is fair ground of doubt. Now, if there's not fair ground of doubt, if there's just bad-faith conduct where someone says, I know 542 requires me to turn this over to you, I just don't feel like it, come and get me, whether sanctions could be awarded in that case raises a different and harder question not presented here. But there is no question that that is all about the scope of 542.

And the question presented by this case is whether Section 362, the automatic stay, essentially allows an end run around all of that, avoiding those questions, skipping over the defenses, and providing an automatic claim for damages, attorneys' fees, and, in some cases, punitive damages.

Neil Gorsuch: Counsel, I'm sorry to interrupt.

Our time is very short, and I -- I would appreciate maybe a shorter -- maybe even possibly a yes-or-no answer. Is there anything that would prohibit a court, bankruptcy court, from ordering the turnover of a car from the City of Chicago -- I know it loves to hold onto these things -- but there's an order under 542 saying discharge it. Is there anything that would prohibit that?

Craig Goldblatt: No.

That's -- the answer --

Neil Gorsuch: Thank you.

Craig Goldblatt: -- the reliable answer is no.

Neil Gorsuch: Thank you.

Craig Goldblatt: I mean, the sideboard answer is --

Neil Gorsuch: Thank you, counsel.

Craig Goldblatt: -- that's exactly why 542 actions are brought.

John G. Roberts, Jr.: Justice Kavanaugh.

Brett M. Kavanaugh: Thank you. And good morning, Mr. Goldblatt.

Just to focus on the text, again, if you're holding property of the estate, aren't you acting to exercise control over the property?

Craig Goldblatt: Justice Kavanaugh, our view is consistent with this Court's long line of jurisprudence that that isn't the type of exercise control that is prohibited by the automatic stay.

The automatic stay is -- and one way of thinking about it --

Brett M. Kavanaugh: Just -- just in ordinary language, though, if you're holding the property, you're acting to exercise control. Just ordinary language.

Craig Goldblatt: You're exercising control, but it's -- but the stay -- the -- the -- the -- the language "stay," which stays acts to exercise control, isn't violated.

Brett M. Kavanaugh: Okay.

Second, you said, I think, that the system is working well here the way -- under your interpretation, but the ACLU brief and -- amicus brief and others suggest that at least what Chicago's doing is seizing cars, people have to declare bankruptcy to get their cars back, they can't get their cars back to get on their feet to get to work, which they need, to work, to enable their debt repayment. If the goal of bankruptcy is fresh start, according to this brief, Chicago's system is -- is thwarting that, making the Northern District of Illinois a leader in the country in non-business Chapter 13 bankruptcy filings because of what Chicago's doing. I just wanted to give you a chance to respond to that.

Craig Goldblatt: Sure.

So -- so two points if I may, Justice Kavanaugh. We understand that the ACLU disagrees with the City's policy judgments regarding how to enforce its parking laws.

For what it's worth, since the -- the time of the events at issue, there have been some changes to that -- those policies made by the City Council, which we respect as the proper body to make policy with respect to parking enforcement.

With respect -- and traffic enforcement. With respect to the way Chapter 13 works, what actually happens in many of these cases, Chapter 13 is designed to permit a debtor to maintain their property while coming up with a plan to repay their creditors.

In light of the June -- the Seventh Circuit's rulings here, the practice has grown up in Chicago where people file for bankruptcy not with any intent to complete a five-year plan to repay their creditors but simply as a device to get their car back, get sanctions against the City, and thereafter dismiss their cases. And so our --

John G. Roberts, Jr.: Thank you, counsel.

Counsel, you have about --

Craig Goldblatt: -- our position is that --

John G. Roberts, Jr.: -- you have about a minute to wrap up.

Craig Goldblatt: Thank you, Mr. Chief Justice. We think the clearest answer to the questions this Court has raised are likely set out in the D.C. Circuit's decision in Inslaw. The critical language is there on page 1473 of Volume 932 of F.2d.

There, Judge Stephen Williams made three points. First, the automatic stay operates to preserve the status quo "to make sure that creditors do not destroy the bankruptcy estate in their scram -- scramble for relief." Second, because willful violations of the stay subject creditors to compensatory damages, costs, and attorneys' fees, it is "difficult to believe that Congress intended a violation whenever someone already in possession of property mistakenly refuses to capitulate" to a debtor's contention that the property is subject to turnover. And, third, the statutory defenses to turnover "underscore the improbability" that Congress would have intended the automatic stay to impose its own turnover obligation since that would create a "kind of universal end run around the limits of turnover." He had that exactly right.

And for those reasons, the judgment below should be reversed.

John G. Roberts, Jr.: Thank you, counsel. Ms. Sinzdak.

Colleen E. Roh Sinzdak: Mr. Chief Justice, and may it please the Court: Section 362(a)(3) is most naturally read to preclude acts to gain possession or control over estate property.

Accordingly, a creditor may not repossess a debtor's vehicle herself, nor may she ask to exercise control over the vehicle by directing a tow company to take the vehicle to the company's lot. Respondents assert that Section 362(a)(3) should also be read to compel turnover, but that reading is foreclosed for at least two major reasons. First, Section 362 imposes a stay, and the term "stay" denotes a command to preserve the status quo.

Section 362(a)(3), therefore, cannot be read to compel a creditor to alter the status quo. Second, if Section 362(a)(3) is read to require a creditor to deliver property to the debtor, it will effectively override the exceptions to turnover in Section 542.

This Court rejected such a reading of the automatic stay provision in Strumpf, and it should do the same here.

John G. Roberts, Jr.: Counsel, I want to try to get a better handle at least for myself on what's at stake here.

The -- the creditor is not going to be liable for any sanctions if he doesn't know about the bankruptcy.

And if he does, at that point, he's under obligations to -- to turn over the property.

He's got protections, as you just said, under 542.

But the Respondent says that he can also get protections under -- I guess it's 363. So what difference does it make as a practical matter whether you proceed under the stay provision or under 542?

Colleen E. Roh Sinzdak: One difference is that Section 542 has exceptions to turnover.

For example, a creditor does not have to turn over property that is of inconsequential value or benefit to the estate.

So, if, for example, the IRS has repossessed property and its tax lien on the property greatly exceeds the value of the property itself, it may be permitted to keep that. But, under Section 362(a)(3), it refers only to property of the estate.

So the IRS would be required -- would be required to relinquish possession of that -- of that property.

John G. Roberts, Jr.: But aren't the --

Colleen E. Roh Sinzdak: And I'd note --

John G. Roberts, Jr.: Go ahead.

Colleen E. Roh Sinzdak: I would note that they -- Respondents say you can use the -- the -- the -- the specific trumps the general canon to -- to sort of import the exceptions from 542 into 362.

But that's not the way the canon works. In RadLAX, Justice Scalia explained that where you have a specific provision in a statutory scheme that governs a particular matter, the Court will not read another more general provision that could be read to cover something to cover the matter that is specifically controlled by the other provision. So Section 542 covers turnover, and, therefore, Section 362 does not.

John G. Roberts, Jr.: Thank you, counsel. Justice Thomas.

Clarence Thomas: Yes, thank you, Chief Justice. Counsel, I'm -- I know others have sort of dismissed this as somewhat metaphysical, but I'm not so sure that's right. Having control of something or having possession of the car sitting on a lot, how is that exercising control, as opposed to, I see if you disposed of it or you sold it, you auctioned it, that would be exercising control over it, but just having it sitting on your lot, how is that exercising control?

Colleen E. Roh Sinzdak: I think that's exactly right, Justice Thomas.

I think that when Congress used the term, the phrase "an act to exercise control," it was contemplating some affirmative act, I think most naturally an act to seize control of something.

It could also be an act such as selling the property or reallocating the property.

But I do think that merely passively retaining property doesn't -- doesn't quite fit as an act to exercise control. We've offered other arguments that -- such as the fact that this is a stay and the -- the fact that the -- reading it as Respondents would would override exceptions. Those reinforce, I think, what -- what you're getting at, which is the intuitive reaction that your simply leaving a car on a lot is not undertaking an act to exercise control.

Clarence Thomas: If we accepted that -- Petitioner's view under -- with respect to 362, what would be left of 541?

Colleen E. Roh Sinzdak: Of 541 or 542? I mean, I -- I --

Clarence Thomas: I'm sorry, 5 --

Colleen E. Roh Sinzdak: -- 541 establishes -- so I think very little would be left --

Clarence Thomas: I'm sorry, 542 turnover, yes, yes.

Colleen E. Roh Sinzdak: That's exact -- that's exactly right, Justice Thomas.

So very little would be left of Section 542. As noted, Petitioner's interpretation would essentially follow 542.

And that simply isn't permitted.

Again, the -- the canon of -- of specific trumps the general, which Petition -- which Respondents themselves try to cite, dictates that you should interpret Section 542 as a more specific provision to govern turnover.

Clarence Thomas: Thank you.

John G. Roberts, Jr.: Justice Breyer.

Stephen G. Breyer: No, go ahead.

I'll pass.

Thank you.

John G. Roberts, Jr.: Justice Alito.

Samuel A. Alito, Jr.: A big part of your argument and Petitioner's argument is based on 542.

Can we decide this case without saying anything about how 542 works? Would the decision amount to anything if we did that?

Colleen E. Roh Sinzdak: Yeah, because it would establish that Section 362(a)(3) cannot be read to broadly compel turnover of all property of the estate at the moment the bankruptcy petition is filed. And I think that the Court could reach that conclusion based on the text of Section 362(a)(3) alone by pointing to the fact that it imposes a stay, which commands the preservation of the status quo, by pointing to the fact that it uses the term "an act to exercise control," which suggests an affirmative act, and, frankly, by pointing to the fact that every other provision in Section 362(a)(3) is -- describes some act that, if the creditor took it, it would alter the status quo with respect to the debtor/creditor relationship.

Samuel A. Alito, Jr.: Well, a -- a potential difference that might matter between the two provisions is that 362 is automatic, and it's disputed whether 552 -- 542 is automatic. Is that an issue we can avoid discussing?

Colleen E. Roh Sinzdak: I -- I think so in -- insofar as you can say that the automatic sanctions provision of 362 does not attach to 542. I think Respondents seem to believe that 362 is the only way to get automatic sanctions, and that, presumably, is why they're advancing this case.

But -- but that's not a reason to sort of start distorting Section 362 to read it in different ways. And I think you can just say that: Respondents' belief that Section 362 is necessary to obtain sanctions is not an appropriate basis to distort the plain meaning of 362.

Samuel A. Alito, Jr.: Thank you.

John G. Roberts, Jr.: Justice Sotomayor.

Sonia Sotomayor: Counsel, there are some courts that require automatic turnover of a student's transcript if -- if a bankruptcy is filed by the student and the university refuses to release the transcript upon request.

Those courts come to the conclusion that the decision to retain control of the transcript and not release it when demanded is a -- is a violation of the code and of the automatic stay. It seems to me that your position would be that that's -- those cases are wrong. Am I right?

Colleen E. Roh Sinzdak: No, Justice Sotomayor.

Sonia Sotomayor: That there is no act -- that your refusal to do an act that the code requires to turn over property of the estate -- forget about the sanctions.

I'm talking about --

Colleen E. Roh Sinzdak: No.

Sonia Sotomayor: -- just the refusal to turn over something that's requested, without taking the act the code requires, for you to go to the bankruptcy court and ask for security or take some other action to protect yourself, you're taking the position that that's not exercising control sufficient to violate the automatic stay?

Colleen E. Roh Sinzdak: Justice Sotomayor, the transcript question -- the transcript cases are decided under Section 362(a)(6), not 362(a)(3). And in the transcript cases, some courts have decided that when a university refuses to turn over the transcript, they are essentially trying to collect on a debt. And Section 362(a)(6) --

Sonia Sotomayor: All right, counsel, I'm going to interrupt because there's one last question.

You note that some turnover provisions are done by way of motion and not adversary proceedings. Are you taking a position on whether that's permissible under the Bankruptcy Code, to go --

Colleen E. Roh Sinzdak: I think --

Sonia Sotomayor: -- by motion?

Colleen E. Roh Sinzdak: -- adversary proceedings are dictated actually by the rules of -- of -- of bankruptcy, and those could obviously be changed.

It's not in the code itself.

So we don't think that that's required by the code itself.

But it is in -- required under Section 7001, I believe, of the bankruptcy rules.

Sonia Sotomayor: So that would have to be changed to permit a more expedited proceeding?

Colleen E. Roh Sinzdak: That could be changed. I would also say that bankruptcy courts have the ability, so if they're getting -- somebody initiates an adversary proceeding and the creditor has only completely frivolous defenses to turnover, that adversary proceeding could be decided very, very quickly, and, in fact, the -- the creditor who has put forward frivolous defenses could be subject to sanctions, for example, fee-shifting. So I think that even the existing system is the petition to cope with -- with -- with the circumstances.

Sonia Sotomayor: Thank you.

John G. Roberts, Jr.: Justice Kagan.

Elena Kagan: Ms. Sinzdak, I'm wondering whether you would respond to a different set of intuitions about what this text means, so two of them. The first is that a stay just really means stop.

Stay your hand means stop doing something.

And the second, on the question of exercise and control, is that when I retain property that is the debtor's and that the debtor wants back, I am exercising control over that property. So why doesn't -- why doesn't the text, in fact, lean the other way?

Colleen E. Roh Sinzdak: I think there are -- are -- are -- those two questions are actually interrelated.

So the term "stay" is, of course, part of the operative text of 362, and I do think there's a meaningful distinction between Congress using the very specific language that filing a bankruptcy petition will operate as a stay and Congress merely barring a particular act. And I -- I think that's significant because, as this Court said in McCann, a stay is something that prevents the authority to alter the status quo.

So I do think stay has to be -- has to be doing some work there. As to exercise control, I think part of that answer goes back to my stay response because I think, even if you thought that exercising control might plausibly include merely passive retention, I don't think that that's consistent with the use of the word "stay." I would also say that I think what -- what -- what Respondents, I think, now are pointing to as the act is simply refusing to surrender when they make a request.

I think that's what -- the import of Footnote 3 of their brief. And I think that that really doesn't seem like an act to exercise control.

That seems like a refusal to undo a pre-bankruptcy act to exercise control.

They want to undo the pre-bankruptcy feature.

Elena Kagan: Well, look -- looking to sort of more underlying principles, why isn't holding onto a debtor's property until they pay you a debt from prior to the bankruptcy sound like just the kind of conduct that the automatic stay provision should police?

Colleen E. Roh Sinzdak: I think that if you are hanging onto the property to use it as leverage to encourage debt collection, then you might be violating Section 362(a)(6).

But I don't think that the automatic stay provision is designed in any way to increase -- to -- to improve the status of the debtor.

It's merely designed to preserve the status quo. Now there are other provisions that do improve the status of the debtor, like 542, like the avoidance provision.

And I think, in Whiting Pools, the Court sort of looked at all of those grouped together as things that do give the debtor -- give the debtor a slightly better -- put the debtor in a slightly better position post-bankruptcy.

But the --

Elena Kagan: Thank you, Ms. Sinzdak.

Colleen E. Roh Sinzdak: -- automatic stay preserves the status quo.

Thank you.

John G. Roberts, Jr.: Justice Gorsuch.

Neil Gorsuch: Good morning, counsel.

We discussed 542, and we danced a little bit around 362(a)(6), but I'd like to just -- if I could get an answer to this question, I'd be grateful. Why isn't Chicago's conduct a violation of 362(a)(6)? We don't need to engage in the metaphysics of (a)(3).

There's a -- estate means stop any act to collect a claim against the debtor that arose before the case, the -- the bankruptcy case. Why isn't holding onto someone's car at least that?

Colleen E. Roh Sinzdak: The -- the Seventh Circuit held that it didn't need to reach that question.

I would just -- and we, the government, isn't taking a position on the specific facts, but I would note that merely retaining property is not always an act taken to collect a debt. For example, in Whiting Pools, the IRS had seized property, and they weren't trying to get the debtor to pay them back.

They actually just wanted to sell the property and get whatever money they could. So I do not think that every time that a creditor retains property, they're going to necessarily be violating Section 362(a)(6).

Neil Gorsuch: Why -- why isn't what you just described an act to collect on a debt, to seize a car --

Colleen E. Roh Sinzdak: Merely --

Neil Gorsuch: -- to seize the property and either get the payment from the debtor or -- or to use the property to collect on the debt by selling it?

Colleen E. Roh Sinzdak: Well, so, in -- in -- in Whiting Pools, if you actually wanted to sell the property in order to get money, so in order to collect on the debt, you do have to make a motion to lift stay.

And in Whiting Pools, that's what the IRS was in the process of doing. They knew that merely possessing the property didn't put them in violation of the automatic stay, but then they wanted to actually sell it, and they worried that would, in fact, you know, collect on a debt or perhaps realize a lien, and so they -- they were making the motion to lift stay.

And it's at that point that all of the questions kicked in about whether actually they were compelled to turn it over.

Neil Gorsuch: Why isn't just possessing it -- I guess we're still dancing around it -- but why isn't merely possessing it with the intent to do one of those two things that we just talked about, any act to collect the debt, that is, any act?

Colleen E. Roh Sinzdak: I think reading it that broadly, again, would -- would -- would come in conflict with the meaning of "stay," which is a term that connect -- that denotes the command to preserve the status quo. Reading it that broadly would also fall afoul of the -- of what this Court said in Strumpf, which is that it will not read the automatic stay to override the exceptions in 542(a).

So even if you thought --

Neil Gorsuch: Thank you, counsel.

John G. Roberts, Jr.: Justice Kavanaugh.

Brett M. Kavanaugh: Thank you. And good morning, Ms. Sinzdak.

In isolation, as I understand your position, but correct me if I'm wrong, you're saying, in isolation, holding property might be exercising control over the property, perhaps, but -- for purposes of 362, but, when you look at 362 together with 542, the turnover provision, then you realize that holding property cannot be exercising control over the property. Is that -- or at least an act to exercise control.

Is that an accurate summary of your position, or what nuance would you add?

Colleen E. Roh Sinzdak: I think that's a fair description.

I would say that I think you can get our understanding from Section 362(a)(3) alone because of the use of the term "stay," because of the general statutory interpretive principle that says to read acts in a list in the same way, all of the other acts are clearly those that would alter the status quo.

And an act to exercise control should be interpreted the same way. But, otherwise, yes.

We're sort of saying, as this Court said in Timbers of Inwood Forest, maybe you could look at that provision in isolation, but you can't look at the Bankruptcy Code, snippets of Bankruptcy Code text, and just ask what they mean in isolation. You have to look at the context of the statute as a whole.

Brett M. Kavanaugh: If your position were to lose here, how would that affect day-to-day bankruptcy practice?

Colleen E. Roh Sinzdak: It would put a lot more pressure on creditors to surrender property where they believe that they have fair defenses to turnover under Section 542. So, again, the IRS, if it has to fear automatic sanctions under Section 362(a)(3), might feel more pressure to surrender property even when it believes that it is clearly covered by the exception for in -- property of inconsequential value or benefit. So I think it essentially gives debtors a sort of cudgel to -- to -- to force creditors to surrender property they might be very well entitled to hold onto.

Brett M. Kavanaugh: Thank you.

John G. Roberts, Jr.: A minute to wrap up, counsel.

Colleen E. Roh Sinzdak: Thank you, Mr. Chief Justice. I would just reiterate that read in full, Section 362(a)(3) is best interpreted to prevent acts that would alter the status quo with respect to the possession or control of estate property. Reading the automatic stay as Respondents propose would ignore the plain meaning of the term "stay," it would override the express exceptions to turnover in Section 542(a), and it would be at odds with the well-established role of the automatic stay provision in the bankruptcy scene.

Thank you.

John G. Roberts, Jr.: Thank you, counsel. Mr. Wedoff.

Eugene R. Wedoff: Thank you, Mr. Chief Justice, and may it please the Court: These cases present a single question: May a creditor stop a Chapter 13 debtor from recovering property that the creditor seized before the bankruptcy filing if the debtor does not have a court order directing the return? For three reasons, reflected in the Court's questions today, the creditor may not prevent recovery of the property. First, the automatic stay in Section 362(a)(3) of the Bankruptcy Code provides that a creditor may not act to exercise control over a debtor's property.

The critical language is "exercise control." Unlike action to obtain possession of property, a future event that the stay also prohibits, exercising control over property is ongoing action, and the stay expressly stops it. Second, the automatic stay works together with the turnover provision in Section 542(a) of the code, which commands that any party holding estate property shall deliver it to the trustee or debtor.

This provision operates automatically, with no requirement that the debtor obtain a court order mandating compliance. Third, the automatic stay and the turnover provision support a major purpose of the Bankruptcy Code: to place all estate property under the court's jurisdiction and allow the trustee or debtor to control the property from the outset of the case. This Court recognized in Whiting Pools that an effective reorganization of a business or individual will not likely succeed if creditors can withhold estate property to get better treatment for themselves. The automatic stay protects reorganization.

It allows greater payments to all creditors by preventing any one creditor from withholding the debtor's property. Until 2016, the City of Chicago complied with the code, returning seized cars when debtors requested.

When the City changed its policy and refused to return my clients' cars, it acted to exercise control over them, a direct violation of the automatic stay, as the Seventh Circuit correctly held.

John G. Roberts, Jr.: Counsel, the basic question here is when an entity exercising control over the property of a debtor has to turn over the property to the estate.

Now why wouldn't we look to the section of the code entitled "turnover of property to the estate" to figure out the answer to that question?

Eugene R. Wedoff: I think that that section, Section 542(a), works hand in hand with the automatic stay in Section 362(a)(3).

So, yes, we do look at 542(a), which tells us that, as of the outset of the case, there's a duty to turn over, but 362(a)(3) enforces that obligation.

And what we have argued is that it arises when the debtor requests the return of the property.

John G. Roberts, Jr.: Well, but they lose the protections under 542(a) unless you incorporate them by reference under 363(a).

And I'm just wondering, well, why don't you assume those protections apply directly under 542 rather than indirectly under 363?

Eugene R. Wedoff: The important thing about Section 363(e) is that it arises on request of the creditor.

If a creditor has not requested adequate protection, there is no automatic allowance and no obligation on the debtor's part to provide it.

John G. Roberts, Jr.: Well, what if -- if you get the protections under 363(a) that you would get under 542, and, presumably, a creditor would not be subject to any kind of sanctions before it learns of the bankruptcy, what -- what is the -- the practical difference between the two provisions?

Eugene R. Wedoff: The practical difference is one of timing, and I think that's been reflected in some of the questions that the Court has asked.

If the debtor has to wait for what could be several weeks before the Court rules on the return of seized property, the debtor's ability to fore -- to reorganize is likely to be lost.

John G. Roberts, Jr.: By a -- by a period of a couple weeks?

Eugene R. Wedoff: Yes, because the debtor needs the car to get to work, it needs the car to have the income to support a family, and if that is lost, the debtor is going to be unable to make the payments that would be required to keep the case going.

John G. Roberts, Jr.: Your friend on the other side, Mr. Goldblatt, says on page 15 of his brief that the parties agree that long-settled bankruptcy law permitted a creditor to retain possession of repossessed or impounded property pending the outcome of a turnover proceeding. Is -- is he right that you agree with that?

Eugene R. Wedoff: No, he -- he is not correct about that.

We cited the Larimer case, a bankruptcy case from Idaho, for the proposition that Section 542(a) applies when the case is filed.

And if there's a request to have the property turned over, 542(a) itself requires that that be done and without a court order. But the important thing is that when the automatic stay was amended in 1984, it provided a more effective enforcement mechanism than what existed before in 1984.

John G. Roberts, Jr.: Thank you, counsel. Justice Thomas.

Clarence Thomas: Counsel, if -- if the two provisions work together, wouldn't you expect that -- that there'd be a cross-reference?

Eugene R. Wedoff: It's really not necessary, Justice Thomas, because they so clearly deal with precisely the same issue, control and possession of estate property. So they treat the same issue.

And when we have two provisions of the code that treat the same issue, we read them as harmonious if that's possible.

And it's certainly possible here.

Clarence Thomas: And on that score, it -- it would seem to me that you would actually make 542 somewhat superfluous.

Eugene R. Wedoff: No, they are -- there's an overlap, as frequently happens in the Bankruptcy Code, but 542(a) does considerably more than 362 does. 542(a) directs the party to whom property of the estate ought to be delivered, and it imposes a requirement of accounting for any loss in the value of the property. So 542(a), even with the enforcement mechanism of 362, is entirely viable.

Clarence Thomas: So you said that or at least that's -- I think I heard that you say that the -- the -- the difference between proceeding under 542 versus 362 is a matter of a couple of weeks.

Eugene R. Wedoff: Well, it could be more than that.

It could be much more than that.

If the creditor said you have to demonstrate adequate protection, and there was a question about whether the value of the property was sufficient to provide adequate protection to a creditor, it could involve expert witnesses, discovery, and a proceeding that went on for many weeks.

Clarence Thomas: The -- I'm still interested, and I know this is -- as I've said before, this is deemed to be somewhat metaphysical, but I'm still having a problem seeing that merely having a car on an impoundment lot is exercising control over it. I understand if the City wanted to dispose of it, to auction it off, that would be exercising control over it.

But merely passively holding it, would you explain to me again why that is exercising control?

Eugene R. Wedoff: Yes, Your Honor.

The question arises when the debtor asks for return of the property.

At that moment, the creditor has a choice: either the creditor turns the property over or the creditor continues to hold that property against the ability of the debtor to obtain it.

And that holding of the property against the debtor's wish to have it turned over is an exercise of control in the ordinary meaning of the words.

Clarence Thomas: I see that it would be exercising control if the debtor -- I mean if the creditor or the City actually delivered the property.

But, if the City passively said, look, no, it's -- we have it, we're not going to go to the effort of delivering it to you, I don't see how that is anything more than passively holding property rather than acting to exercise control.

Eugene R. Wedoff: Your Honor, if you imagine the debtor with a key to the car coming to the gate of the impound lot and trying to get in so that the debtor can drive the car away, I think it would be clearer that there's plainly an act to exercise control as the debtor is prevented from gaining access.

Clarence Thomas: Thank you.

John G. Roberts, Jr.: Justice Breyer.

Stephen G. Breyer: Thank you. I'm trying -- I think it would be -- to see my questions as trying to clarify what the Chief Justice asked, where I tended to have the same questions. I'm having a hard time figuring out what the difference is between the two sections. If you're right and a creditor has some property like a car, you say 362 says turn it over immediately, and if you don't, you're going to be in trouble. And 542 says just the same thing.

542 says shall turn it over.

And then there's some exceptions in 542. But, for the most part, you -- you -- you read those into 363, except I don't know what happens to life insurance, but -- and in both cases, I guess, if -- if -- if you're right and the City needs protection, it can say: Judge, we're ready to give him the car, but please give us protection.

And he could do that whether you're right or wrong. So I can't get the difference in my mind.

Eugene R. Wedoff: Your Honor, the difference, again, is a question of timing.

If the debtor needs to seek an order from the court to have the property turned over, there could be a very long delay between the time that the car is seized and the bankruptcy's filed and the time that the debtor ultimately gets that court order. On the other hand, if there's a violation of the automatic stay, if the automatic stay applies, there's an immediate obligation --

Stephen G. Breyer: All right, I see that.

I see that.

But I also say, isn't that counterbalanced in the fact that there's no other security? If a debtor -- if the creditor has to turn it over immediately, he may lose the car because of time, when he shouldn't.

Eugene R. Wedoff: The creditor --

Stephen G. Breyer: And -- and so I --

Eugene R. Wedoff: Excuse me.

Stephen G. Breyer: -- I find that a kind of balance --

Eugene R. Wedoff: Excuse me.

Stephen G. Breyer: -- six of one, half a dozen of the other.

Eugene R. Wedoff: The difference is in the speed with which the creditor can get relief from the automatic stay.

Section 363(e) allows even ex parte relief from the automatic stay on an immediate basis.

So, if the creditor turned over the car and immediately sought relief from the stay, within a matter of hours, the court could order that return. But -- and -- and I -- let me go even further.

The automatic stay can be annulled if the ruling were --

Stephen G. Breyer: Yeah, but he still has to deal with 542.

On your theory, he has to deal with both.

Eugene R. Wedoff: That's -- that's completely true, but the point is that if there is any redundancy between the two statutes, the redundancy should be resolved, as the Busic case said, by harmonizing them.

And, here, there's no difficulty in harmonizing. But, to get back to your point, the difference in the balance of harms is extraordinary.

The debtor can get relief under Section 542 only after a proceeding that could take a very long time to result in help for the debtor.

The creditor, on the other hand, can get relief from the automatic stay almost immediately and, in the case of annulment, immediately. So that really looking at that just gives another reason why the congressional approach to bankruptcy put all of the property in the hands of the debtor or the trustee at the outset of the case is appropriate to enforce.

Stephen G. Breyer: Thank you.

John G. Roberts, Jr.: Justice Alito.

Samuel A. Alito, Jr.: Well, to follow up on Justice Breyer's question, if you are correct that 542 is self-executing, then I don't really understand your answers to his questions.

Could you just take a minute to clarify that?

Eugene R. Wedoff: When we say self-executing, I think there's a -- a need to look at that a little bit more.

It's certainly true, as we understand it, Section 542 requires the turnover of property to a debtor at the outset of the debtor's request for that property. But it's not self-enforcing in the sense that the debtor would not have to take action to enforce the -- the claim if it's being violated.

If the creditor does not turn over property under 542, the debtor would have to go into court with the creditor still holding the property, and the creditor would quite possibly argue there's no adequate protection for our claim, and the matter could drag on for a considerable length of time, whereas, with the automatic stay, the property must be turned over and then the creditor seeks relief, and, again, that can be done quickly. But the long and -- the short answer to your question is --

Samuel A. Alito, Jr.: Well, the creditor seeks relief after the car is turned over, the -- the -- the City would have to turn over the car and then ask for adequate -- adequate protection?

Eugene R. Wedoff: Correct.

Samuel A. Alito, Jr.: It could not condition the turning over of the car on the provision of adequate protection?

Eugene R. Wedoff: No, because that, again, invites long negotiation, with the creditor having all of the leverage to achieve more than it would get otherwise.

Samuel A. Alito, Jr.: All right.

Let me ask you -- let me ask you a different question. Before 1984, would a creditor's refusal to turn over property have violated 362(a)(3)?

Eugene R. Wedoff: No.

Samuel A. Alito, Jr.: So your argument has to be that Congress made this very substantial change in the way the situation is to be treated under the Bankruptcy Act simply by adding, without any cross-reference or other clarification, the word "exercise control," the phrase "exercise control"?

Eugene R. Wedoff: It certainly made a change, but it was not a particularly significant change.

542(a) already required the property to be turned over.

All that 362(a)(3) added was a more efficient enforcement mechanism, and one --

Samuel A. Alito, Jr.: Well, I thought you just told me that -- I thought you just told me that it makes a big difference --

Eugene R. Wedoff: It makes a difference --

Samuel A. Alito, Jr.: -- whether Congress --

Eugene R. Wedoff: -- in the -- excuse me.

Samuel A. Alito, Jr.: I thought you just said it makes a big difference whether it's under 362 or 542.

And then you told me, well, Congress didn't need to do more than just add the words "exercise control" because it was no big deal.

Eugene R. Wedoff: It makes a big difference in the effectiveness of the enforcement mechanism, but it doesn't make a big difference in the substantive obligation to turn over the seized property.

The enforcement --

Samuel A. Alito, Jr.: It makes a difference -- according to your argument, it makes a difference in the relative rights of creditors and debtors, and I don't know which is better as a policy argument, but your -- I don't see how you can have it both ways. Either it's important or it's not important, and, if it's important, then you have to explain why Congress would have chosen to do it in this very oblique fashion.

Eugene R. Wedoff: The difference in the enforcement mechanism is important, but the underlying substantive obligation was not changed.

And the language in 362(a)(3), as we argued from the beginning, could not be clearer. There is an obligation to cease exercising control over the estate property, and that requirement to cease exercising control necessarily means turning over the property to the party entitled to possess it.

Samuel A. Alito, Jr.: Thank you.

John G. Roberts, Jr.: Justice Sotomayor.

Sonia Sotomayor: Counsel, where in 362(a)(3) do you see a requirement that the debtor has to turn it over only upon request? I thought, under the terms of the automatic stay, the minute the Bankruptcy Code is filed -- the bankruptcy proceeding is filed, the automatic stay requires immediate turnover in other situations without demand. Where do you get demand?

Eugene R. Wedoff: Your Honor, this is a necessity of interpreting a particular provision of the code in context.

It may very well be that a trustee or a debtor-in-possession does not want to have possession of the property. Trustees and debtors-in-possession are given the option of abandoning property that is burdensome to them.

And, of course, the provisions of 542(a) are consistent with not turning over property of inconsequential value. Moreover, a debtor in Chapter 13 has the ability to allow the creditor to keep the property as satisfaction of the creditor's claim under Section 1325 --

Sonia Sotomayor: Counsel --

Eugene R. Wedoff: -- (a)(5).

Sonia Sotomayor: -- counsel, if I might interrupt, you're reading something into the provision.

Why isn't it more natural to read 542 as controlling when there's been no active exercise of control and that makes a debtor's request the acting principle? Under 542(a), the trustee has to ask for the property.

We don't have to make anything up.

It's right there.

Eugene R. Wedoff: There's -- there's nothing in Section 542(a) that requires any action by the debtor or trustee in order for that provision to go into effect. The question is what is the mechanism for enforcing it, and that, of course, would require some action by the trustee or debtor.

Sonia Sotomayor: Counsel, getting outside the legal arguments, on a practical level, what would have to be done -- and I know we wouldn't do it, Congress would or whatever appropriate bankruptcy committee would -- what would have to be done to expedite this proceeding for things like cars in a way that doesn't give you everything you want but provides a reasonable opportunity for a debtor -- for a creditor like the City to come in and ask for adequate assurances of protection?

Eugene R. Wedoff: Well, Your Honor, of course, I believe that they have that right now and that there's no need for the --

Sonia Sotomayor: Counsel, I just asked you to go outside this.

Assume I ruled against you.

Eugene R. Wedoff: Okay.

Well, but --

Sonia Sotomayor: All right.

Not me, but the Court.

But you've lost your legal argument.

Eugene R. Wedoff: All right.

Sonia Sotomayor: What would be your then next step in Congress or wherever is appropriate and what kind of legislation to ensure the purpose I spoke about?

Eugene R. Wedoff: Well, there could be language added to Section 542 or there could be language added to Section 362(a)(3) that made it abundantly clear that the interpretation that we're proposing right now is the correct one.

Sonia Sotomayor: All right.

You're not helping.

Okay.

Thank you, counsel.

John G. Roberts, Jr.: Justice Kagan.

Elena Kagan: Mr. Wedoff, the City of Chicago here and the SG, too, argues that the only thing that the automatic stay provision is about is maintaining the status quo. So I just thought I'd ask, is there -- is there any other circumstance in which the automatic stay provision compels an action that alters the status quo, or is -- is -- is -- is this one the only one in your view?

Eugene R. Wedoff: No, to some extent, Justice Kagan, that's already been discussed. The Solicitor General acknowledged that, under Section 362(a)(6), a creditor may very well need to turn over to the debtor a transcript of their grades, that requires action to prevent the ongoing collection effort that was maintaining that transcript. But, similarly, in Section 362(a)(1), a creditor is required to stop any collection action in a judicial or administrative proceeding from going forward, and that requires that creditor to take action to stop things like garnishments. It's not enough for them to say: We don't need to do anything for the garnishment to go forward.

We just allow that to take place, maintaining the status quo. No.

They have to take action to stop the garnishment.

And I think the underlying issue here is that the automatic stay is intended to prevent collection activity from going forward.

Most of the time, that can be done by stopping any new action from taking place.

But sometimes, as in this case, it -- it requires the stopping of continuing action.

Elena Kagan: And -- and how about this? I -- I take it that your argument is essentially that 362(a)(3) becomes the enforcement mechanism for the 542 provisions. But is there another example like that where the automatic stay enforces an obligation that's imposed by another different provision of the Bankruptcy Code?

Eugene R. Wedoff: Yes, there is.

Section 521 imposes many obligations on the debtor, including the obligation to turn over property to the trustee.

But the automatic stay enforces that obligation, and so it puts teeth into the 521 obligation.

Elena Kagan: And if it -- if -- if -- if you are right that the automatic stay is an enforcement mechanism, wouldn't we expect the two provisions, 362 and 542, to be completely the same in scope? But, as Ms. Sinzdak pointed out, they're -- they're really not.

There's the exception for things of minimal value in 542. There are some other exceptions.

So they're not coterminous.

If one were really enforcing the other, shouldn't they be?

Eugene R. Wedoff: The general rule that was announced by this Court in Germaine is one that requires consideration of both statutes and harmonizing them to the extent possible.

And, here, the differences between the two are almost insignificant. A debtor is not going to be asking for the return of property of in -- inconsequential value to the debtor.

There's not an insurance issue here.

And there's not a situation where the property has already been transferred by the creditor.

And those are the only exceptions in 542(a).

So 362(a)(3) and 542(a) line up almost perfectly.

Elena Kagan: My -- my final question is, you know, there's a lot of difference between you and your friends on the other side about how 542 operates and what it requires.

And Justice Alito, I think, asked before, you know, do we have to decide those questions? So a similar question to you: Does your argument really depend on a particular view of what 542 says and how it operates, or could we, for example, take Chicago's view and you would still win?

Eugene R. Wedoff: 542(a) is not essential to our argument.

362(a)(3) on its own clearly says that the creditor may not continue to exercise control over the property. 542(a) is helpful, though, as I indicated before, in indicating who should get possession of the property and what should be done if there's a decline in the value of the property while it's being held by the creditor.

Elena Kagan: Thank you, Mr. Wedoff.

John G. Roberts, Jr.: Justice Gorsuch.

Neil Gorsuch: Good morning.

I'd like to start with the 1984 amendments.

Before 1984, the statute prohibited obtaining possession.

Eugene R. Wedoff: Yes.

Neil Gorsuch: In '84, they added the "or exercise control" provision.

And isn't there some linguistic gap in there? For better or worse, Congress never talked about just retaining possession, it didn't speak about keeping possession, it didn't speak about anything else about possession.

It went on to add new and different language about exercising control.

What do we do about that?

Eugene R. Wedoff: Well, I think the -- the best thing to do is to look at what would have happened if the interpretation posed by the City were put into effect really, and that is it would have used the same language that was already in Section 362(a), prohibiting any action to obtain control of property of the estate by talking about --

Neil Gorsuch: Isn't the simplest thing in the world and the most natural, though, if Congress wanted to get at retaining possession, just to say obtain or -- obtain or retain possession, something like that?

Eugene R. Wedoff: That certainly would have been another way to do it, but I think that exercising control is that same kind of continuous action.

Neil Gorsuch: Okay.

I'd also like you to address the point that nobody seems to think that it -- it would be acceptable for the City to just simply abandon these cars and that, in fact, as I understand it, your position is that on request or at least on request, maybe automatically, the City must hand over the car to the trustee. But where do we get that in 362? Nothing speaks to handing anything over.

It just is a stay, as -- as Judge McKay put it on the Tenth Circuit.

It's a stay, not a go provision.

What do we do about that -- with that?

Eugene R. Wedoff: Well, I -- I -- I'm not sure that I understand the question entirely, but, certainly, the --

Neil Gorsuch: Well, I -- I -- I think you -- I -- I'm -- I'm sure you do, friend.

The point is you want to use this as -- as a self-executing requirement to hand things over, not merely abandon the property.

And there's nothing in the -- in -- in -- in this provision, unlike 542, that speaks to that.

Eugene R. Wedoff: That's correct.

And so it would not be a violation of the automatic stay if the City were to leave the car unlocked in front of its impound lot and invite the debtor, or anyone else who had a key, to drive it away.

That would not be a violation of Section 362(a)(3). However, it would subject the creditor to violation of 541 or at least an obligation to have to account for any loss of value.

So they really do work together.

Neil Gorsuch: What -- what do we do about the fact that (a)(6) seems to be the much more natural provision for your argument than (a)(3)?

Eugene R. Wedoff: That's to reflect the reality of the automatic stay, which has any number of overlapping provisions.

543 -- 362(a)(6), for example, talks about any action to collect.

Well, that would include putting liens on the property, enforcing an obligation by sale, all sorts of things that are separately prohibited by the automatic stay would be incorporated under 362(a)(6), but that doesn't prevent each of them from being applied.

The --

Neil Gorsuch: Let -- let's -- let's say that we thought your argument under (a)(3) was unsuccessful.

Have you preserved an (a)(6) argument? Is it something that could be remanded for consideration?

Eugene R. Wedoff: Absolutely.

In fact, one of the cases that was decided, the Shannon decision, has express findings by the bankruptcy court that (a)(6) was violated by the City. So, in the event that the (a)(3) ground of violation of the stay were not accepted by the Court, (a)(6) would certainly have to be something considered.

Neil Gorsuch: Thank you.

John G. Roberts, Jr.: Justice Kavanaugh.

Brett M. Kavanaugh: Thank you, Chief Justice. And good afternoon, Mr. Wedoff.

Just to follow up on Justice Gorsuch's questions at the beginning of the colloquy with him, the 1984 amendment, he made the point, and I think you agree, that, obviously, would have been simple enough to put "retain possession" in there or "keep possession," as Justice Gorsuch said. Is your point that "exercise control" covers that and covers other things? Is that the nature of your response to him? I just want to make sure I have that nailed down textually.

Eugene R. Wedoff: Exactly.

That is precisely our position.

Brett M. Kavanaugh: And what -- what does -- can you give the universe of things or at least a sample of things that are encompassed within "exercise control"?

Eugene R. Wedoff: Well, among the things that would be encompassed is the exercise of control over intangible property, which is one of the things that the City has argued.

And that's one of the things that's covered, but also the exercise of control over tangible property.

Brett M. Kavanaugh: And I'm going to ask you the same question I asked the Assistant to the Solicitor General in thinking about debtors and creditors and also the dedicated bankruptcy judges around the United States. If you were to lose this case, what would be the effect in your view on day-to-day bankruptcy practice in bankruptcy courts?

Eugene R. Wedoff: It would make Chapter 13 much less effective potentially because it would put debtors in the position of not being able to recover property that's essential to their livelihood.

And so Chapter 13 filings would decrease. But also, interestingly enough, I believe payments to creditors would decrease, payments to the other creditors who would be benefitted by a Chapter 13, and even payments to the City of Chicago itself, because, in Chapter 13, they would probably get more money in payment of their claim than they would get by having that car liquidated in their impound lot.

Brett M. Kavanaugh: Thank you very much.

John G. Roberts, Jr.: Thank you. Mr. Wedoff, you can take up to 10 additional minutes. And during that time, if any of my colleagues have questions they did not have an opportunity to ask, they can ask them during that time.

Eugene R. Wedoff: Thank you, Mr. Chief Justice. I believe that the questions from the Court today have spotlighted the underlying basic bankruptcy policy, which is that bankruptcy trustees and debtors-in-possession must be given prompt access to estate property. The automatic stay advances this policy by preventing creditors from acting against property of the estate.

It prevents creditors who hold the debtor's property before the bankruptcy filing from acting to control that property while the case is pending. If the creditor were able to continue to exercise control over the property, the creditor would have leverage over the debtor. The debtor, who needs the seized property, would be willing to give the creditor better treatment in a Chapter 13 plan or make additional payments at the outset to avoid the delay that otherwise would occur. That kind of leverage in support of one creditor over the body of creditors as a whole is something that the automatic stay is directed to preventing.

Sonia Sotomayor: Counsel, I'm sorry, this is Justice Sotomayor.

I don't understand that last point.

If a turnover provision under 542 is -- would result in the debtor coming in and saying, I need the property to earn a living, under 542, you can come in and say: I need security or raise any other sorts of defenses that would delay the proceedings. You get to keep the property and deprive the other creditors of any possibility of recovery.

So isn't the gamesmanship the problem here? Who's going to suffer the loss?

Eugene R. Wedoff: To some extent, but I think the statute --

Sonia Sotomayor: But it's always the estate who suffers the loss under your theory, because the estate is not getting back an instrument for the livelihood of the debtor.

Eugene R. Wedoff: Well, the estate is getting that back under the interpretation we've given, but, again, the question really is what does the statute say. And I -- I want to raise the approach that was taken by Whiting Pools again, and Whiting Pools said -- and I'm quoting now -- "Section 542(a) simply requires the creditor to seek protection of its interests according to the congressionally established bankruptcy procedures rather than by withholding seized property of the debtor's efforts to reorganize." So Whiting Pools itself recognizes that this balance between the debtor's need to reorganize and the -- and the creditor's need to have the property is balanced in favor of the debtor while the matter is being resolved by the bankruptcy court. And, again, the creditor can get very prompt relief from the bankruptcy court upon an appropriate --

Sonia Sotomayor: And you believe a motion for the -- a motion instead of an adversary -- adversarial proceeding would be adequate to get the property back by the debtor?

Eugene R. Wedoff: To get -- no, I -- I -- I -- well, yes, because the -- the motion can be brought to enforce the automatic stay.

So, absolutely.

Sonia Sotomayor: No, I'm not -- I'm not talking about the automatic stay.

I'm talking about under 542.

Eugene R. Wedoff: Oh, under 542.

Sonia Sotomayor: Could the debtor make a motion?

Eugene R. Wedoff: The debtor could make a motion under 105(a) to enforce Section 362(a)(3) and Section 542(a), yes.

Sonia Sotomayor: And 542(a), okay. Thank you, counsel.

Eugene R. Wedoff: What I wanted to conclude then is by saying that the rights of the creditor holding the property are protected by the automatic stay, but the creditor has to take the action to enforce those rights, and it can do it very quickly.

The delay that the City would impose on the debtors and trustees would be fatal to accomplish the reorganizational purposes of the Bankruptcy Code. The Seventh Circuit's interpretation of the statutory language is not only correct according to its plain meaning but correct according to that underlying Bankruptcy Code policy of encouraging reorganization. And so, for all of those reasons, we believe the Seventh Circuit's interpretation is correct and that the judgment ought to be affirmed. Thank you.

John G. Roberts, Jr.: Mr. Goldblatt, three minutes for rebuttal.

Craig Goldblatt: Thank you, Mr. Chief Justice.

Just a few quick points. First, Justice Gorsuch asked both of my friends about the role of 362(a)(6) and whether any of these actions are prohibited as prohibited debt collection activity. I think it's important to bear in mind, as this Court's opinion in Whiting Pools explains, that the Bankruptcy Code strikes a careful balance between the rights of secured creditors on the one hand and the rights of debtors to marshal the assets of the estate on the other and provides specific rights and protections to secured creditors. And where a secured creditor is seeking to vindicate those rights by holding the property in order to maximize its recovery as a secured creditor, whether that's through adequate protection or the treatment of its claim under a plan, while, in ordinary English, one might call that debt collection activity, that isn't prohibited by (a)(6).

That's simply acting to vindicate the rights that the code provides. The Chief Justice asked my friend about whether we agreed about the pre-1984 conduct.

I'd refer there to my friend's 2018 article in which he says that before the 1984 expansion of Section 362(a)(3), if a creditor was unwilling to return collateral, the debtor would have to seek an order for turnover under Section 542. I'd also like to address the various textual indications that the other side's reading of this statute can't be correct.

It requires a host of sort of atextual turn -- work-arounds. For example, Footnote 3 of the red brief says that although the text says that the automatic stay goes into effect upon the filing of the case, the obligation to turn over estate property is not triggered until the debtor calls you up and asks you for it. They have similar trouble with the exceptions to turnover.

On page 47, they say that no one is likely to seek turnover of property of inconsequential value, but then, on page 48, they acknowledge that if someone were to do that, the court could invent an exception to 362(a) that mirrors the exceptions set out in Section 542(a). None of that has any home in the actual text of the statute and makes clear that their reading of Section 362 can't be correct. Finally, in response to -- to Justice Sotomayor's question about the requirement of an adversary proceeding as opposed to a motion, the principal difference is that an adversary proceeding provides more elaborate notice.

And this is just a practical point about what bankruptcy judges do in actual bankruptcy courts.

In most bankruptcy courts, if a creditor responds to a motion by saying, I should have gotten an adversary, a bankruptcy judge will say, did you get actual notice? And if you did, why do you care that much about the caption on the paper? So, while it is true that Rule 7001 says what it does and that the Rules Committee could address that if it thinks appropriate, in the real world, this isn't a problem that is plaguing bankruptcy courts in actual practice.

John G. Roberts, Jr.: Thank you, counsel.

The case is submitted.