Creditors Are the First to Feel the Effect of an Equally Divided Supreme Court
With the passing of Supreme Court Justice Antonin Scalia, the news media
has been speculating about the effect it could have on closely-divided
cases, mostly cases involving sensational social issues. But the first
case to be affirmed by an equally divided court was a creditors’
Hawkins v. Community Bank of Raymore, 761 F.3d 937, 939 (8th Cir. 2014), the U.S. Court of Appeals for the
Eighth Circuit, which has jurisdiction over Arkansas, Missouri, Iowa,
Nebraska, Minnesota, and the Dakotas, held that a person required by a
lender to guarantee his or her spouse’s business debt could not
raise a claim or defense under the Equal Credit Opportunity Act (“ECOA”),
which prohibits discrimination against “applicants” for credit
on the basis of marital status and other classifications.
The Eighth Circuit said the Act did not apply, because someone who is involved
in a loan only as an added guarantor is not an “applicant”
for credit within the meaning of the Act. This created what the legal
world knows as a “circuit-split,” because the Sixth Circuit,
covering Tennessee, Kentucky, Ohio, and Michigan, had reached the opposite
conclusion. The Supreme Court granted review in 2015. If the Supreme Court
had issued a majority opinion affirming the decision of the Eight Circuit,
creditors across the nation would have been relieved of what has in recent
years become a common defense in collection matters concerning commercial
loans. In some jurisdictions, alleged ECOA violations have even been asserted
as affirmative claims against lenders.
Unfortunately, the Supreme Court could not reach a majority decision, and
on March 22, 2016, issued its first opinion since Justice Scalia’s
death affirming “by an equally divided Court.” Apparently,
four justices wanted to affirm, and four justices wanted to reverse, and
without a ninth justice, no majority could be reached. The tie vote leaves
the Eighth Circuit’s decision in place, but limits it to states
within the Eighth Circuit. Therefore, the law will continue to be different
in states within the Sixth Circuit, and the law will be unsettled in other
states, including North Carolina, which is within the Fourth Circuit.
Dozens of ECOA claims and defenses currently being raised in North Carolina
courts might have been dispensed with in a single decision from the Supreme
Court; instead, creditors in those cases will have to argue to their particular
court whether the Eight Circuit or the Sixth Circuit got it right.
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