Opinion ID: 59533
Heading Depth: 2
Heading Rank: 3

Heading: Is Till Binding Precedent?

Text: Having held that BAPCPA has not superceded Till, we must now examine whether Till mandates that the prime-plus approach be used to determine the interest rate to be paid on Drive Financial's secured claim. The facts of Till are indistinguishable from the facts of this case, but Till was a plurality decision in which no opinion was joined by five justices. Consequently, we must determine which of these opinions, if any, controls. The Supreme Court has stated that [w]hen a fragmented Court decides a case and no single rationale explaining the result enjoys the assent of five Justices, the holding of the Court may be viewed as that position taken by those Members who concurred in the judgments on the narrowest grounds.' Marks v. United States, 430 U.S. 188, 97 S.Ct. 990, 993, 51 L.Ed.2d 260 (1977) (quoting Gregg v. Georgia, 428 U.S. 153, 96 S.Ct. 2909, 2923 n. 15, 49 L.Ed.2d 859 (1976) (opinion of Stewart, Powell, and Stevens, JJ.)). In Till, the debtors filed for relief under Chapter 13 of the Bankruptcy Code and proposed a plan in which they retained possession of their truck and repaid the creditor's secured claim in installments. Till, 124 S.Ct. at 1956 (Stevens, J., plurality). The original contract rate of interest on the truck loan was twenty-one percent, but the Tills' plan proposed paying interest on the creditor's secured claim at a primeplus rate of 9.5%. Id. at 1956-57. The creditor holding the secured claim on the Tills' truck objected, claiming that it was entitled to have interest paid on its claim at the contract rate. Id, at 1957. The bankruptcy court overruled the creditor's objection and approved the Tills' use of the prime-plus rate. Id. The district court overturned the bankruptcy court and held that Seventh Circuit precedent required that the coerced loan approach [13] be used to determine the appropriate interest rate. Id. The Seventh Circuit approved a slightly modified version of the district court's approach, but it noted that the contract rate was presumptively the rate to be used. Id. at 1957-58. A plurality of four justices, joined by Justice Thomas who concurred in judgment, reversed the Seventh Circuit and held that the prime-plus rate was the appropriate risk-adjusted interest rate to use for installment payments to creditors holding a crammed-down secured claim in a Chapter 13 plan. Id. at 1962. In reaching this decision, the plurality stated that, in order to receive value, creditors should receive an interest rate higher than the prime rate to reflect the risk associated with lending to borrowers who had filed for bankruptcy. Id. at 1961-62. The plurality explicitly rejected the presumptive contract rate approach because it reasoned that that approach would reward inefficient lenders and had the potential to treat similarly situated debtors differently. Id. at 1960. Ultimately, the plurality held that the Seventh Circuit should be reversed and remanded the case to the bankruptcy court for further proceedings to determine the proper prime-plus interest rate. In his concurrence, Justice Thomas reasoned that it would be sufficient to pay secured creditors a risk-free interest rate, here the prime rate, because the statutory language of the Bankruptcy Code did not require secured creditors to receive a risk premium in order to receive value under section 1325(a)(5)(B). Id. at 1966-67 (Thomas, J., concurring in judgment). He concurred in judgment because the plurality's prime-plus approach, namely the debtor's proposed 9.5% rate, was greater than the risk free or prime rate, and hence will sufficiently compensate respondent [creditor] for the fact that instead of receiving . . . [the principal] today, it will receive . . . [the principal] plus 9.5% interest over a period of up to 36 months. Id. at 1968. The dissent would have affirmed the Seventh Circuit's presumptive contract rate approach because it determined that the contract rate more closely approximated the true risk of default, whereas the prime-plus approach would systematically undercompensate secured creditors. Id. at 1968, 1970 (Scalia, J., dissenting). Drive Financial argues that this court is not bound by either the plurality or the concurrence because there is no common denominator on which the five justices agreed, so there is no narrowest grounds under the standard established in Marks. It supports this argument by pointing out that while the plurality states that creditors are entitled to a risk premium above the prime rate, Justice Thomas's concurrence reasons that a risk premium is not required by the Bankruptcy Code. [14] Drive financial believes that this difference in approach makes the two opinions irreconcilable and, therefore, not binding in future cases. [15] Drive Financial's reliance on Marks is misplaced in this case because we are presented with essentially the same facts that the Supreme Court was presented with in Till. [16] The purpose of Marks' narrowest grounds test is to allow a lower court to derive a rationale from multiple opinions when none of them are joined by a majority of the justices so that the lower court can apply that rationale in future cases with different facts to ensure outcomes that are faithful to past precedent. Deriving a holding is unnecessary, however, when a future case presents the same facts as a past case decided by a higher court because stare decisis requires that we decide those cases in a similar manner. See United States v. Eckford, 910 F.2d 216, 220 (5th Cir.1990) (holding that even when the Supreme Court issues an opinion in which there is no common rational, the holding of that case is still binding with regard to future cases presenting the same factual scenario). This case presents such a situation. Since we are presented with facts indistinguishable from Till, we need not attempt to divine a narrowest grounds under Marks. We are bound by stare decisis to apply the holding of Till by rejecting the creditor's challenge to the bankruptcy court's use of the prime-plus interest rate. This result is also supported by an analysis of what the outcome would be if this court were to hold that Till is not binding precedent because there was no narrowest ground under the Marks test. If Till were not binding, we would remand this case to the bankruptcy court with instructions that it recalculate the interest rate on Drive Financial's secured claim using the presumptive contract rate approach, which was the approach previously adopted by this court. See Smithwick, 121 F.3d at 214-15 (holding that the presumptive contract rate approach should be used to determine interest rates on Chapter 13 plan installment payments on secured claims). [17] Such a holding would be essentially identical to the holding of the Seventh Circuit in Till, which was reversed by five currently active justices on the Supreme Court. Such a result would be untenable at best. [18] Furthermore, while the plurality opinion and Justice Thomas's concurrence offered different reasons for rejecting the Seventh Circuit's application of they presumptive contract rate approach, they both rejected the presumptive contract rate approach as being too generous to creditors. Therefore, if we were to apply the Marks test, the narrowest grounds would be that the coerced loan or presumptive contract rate approach cannot be used if they would yield an interest rate higher than the prime-plus approach.