It's a Thursday in June, which means it's a SCOTUS hand-down day. Given that there were 35 decisions left going into the day, and only three were handed down Thursday morning, one assumes that additional decision days will be added to the calendar beyond June 13 and June 20, the only two remaining decision days announced at present.
None of the three decisions handed down Thursday were of the blockbuster variety (though certainly, they're significant to the parties and those directly affected by them). Two of the three were unanimous, although Justice Samuel Alito did not participate in one of those. The other was a 5-4 split, not along party lines. Let's get to it:
June 6, 2024 Decisions
Becerra v. San Carlos Apache Tribe
Date: June 6, 2024
Author: Roberts
Split: 5-4
Dissent: Kavanaugh, Thomas, Alito, Barrett
Appeal From: 10th Circuit
Basic Facts:
The Indian Self-Determination and Education Assistance Act, 25 U. S. C. §5301 et seq., enables an Indian tribe to enter into a “self-determination contract” with the Indian Health Service to assume responsibility for administering the healthcare programs that IHS would otherwise operate for the tribe. §5321(a)(1). When IHS administers such programs itself, it funds its operations through congressional appropriations and third-party insurance payments. Healthcare programs administered by a tribe under a self-determination contract have a parallel funding structure. First, IHS must provide to the tribe the Secretarial amount, which “shall not be less” than the congressionally appropriated amount that IHS would have used to operate such programs absent the self-determination contract. §5325(a)(1). Second, like IHS when it runs the healthcare programs, a contracting tribe can collect revenue from third-party payers like Medicare, Medicaid, and private insurers. See 42 U. S. C. §§1395qq(a), 1396j(a); 25 U. S. C. §1621e(a). These third-party funds are called “program income” and must be used by the tribe “to further the general purposes of the contract” with IHS. §5325(m)(1).
The Secretarial amount and program income, however, do not place a contracting tribe on equal footing with IHS. That is because the tribe must incur certain overhead and administrative expenses that IHS does not incur when it runs the healthcare programs. To remedy this funding shortfall, Congress amended ISDA to require IHS to pay the tribe “contract support costs” to cover such “reasonable costs for activities which must be carried on by a [tribe] as a contractor to ensure compliance with the terms of the [self-determination] contract.”§5325(a)(2). Contract support costs eligible for repayment include “direct program expenses for the operation of the Federal program” and “any additional administrative or . . . overhead expense incurred by the [tribe] in connection with the operation of the Federal program, function, service, or activity pursuant to the contract.” §5325(a)(3)(A). Such costs are limited, however, to those “directly attributable to” self-determination contracts. §5326. And no funds are available for “costs associated with any contract . . . entered into between [a tribe] and any entity other than [IHS].” Ibid.
These cases involve self-determination contracts between IHS and two tribes—the San Carlos Apache Tribe and the Northern Arapaho Tribe. Both Tribes sued the Government for breach of contract, contending that although they used the Secretarial amount and program income to operate the healthcare programs they assumed from IHS under their self-determination contracts, IHS failed to pay the contract support costs they incurred by providing healthcare services using program income. The Ninth and Tenth Circuits concluded that each Tribe was entitled to reimbursement for such costs.
Whether IHS must pay "contract support costs" not only to support IHS-funded activities, but also to support the tribe's expenditure of income collected from third parties.
Holding: Affirmed.
ISDA requires IHS to pay the contract support costs that a tribe incurs when it collects and spends program income to further the functions, services, activities, and programs transferred to it from IHS in a self-determination contract.
Skinny: This one's pretty in the weeds. Basically, the court held that under the act that allows Indian tribes to assume responsibility for administering health care programs that the Indian Health Service would otherwise handle, the IHS must also cover the costs incurred by the tribes in collecting and spending revenue from third-party payors like Medicare, Medicaid, and private insurers (or, as I read it, the "cost of doing business" with those third parties).
In his dissent, Kavanaugh wrote that the majority decision is not supported by the statutory language and that the sorting out of difficult appropriations decisions like this should be left to Congress and the president.
Date: June 6, 2024
Author: Thomas
Split: 9-0
Dissent: N/A
Appeal From: Eighth Circuit
Basic Facts:
Michael and Thomas Connelly were the sole shareholders in Crown C Supply, a small building supply corporation. The brothers entered into an agreement to ensure that Crown would stay in the family if either brother died. Under that agreement, the surviving brother would have the option to purchase the deceased brother’s shares. If he declined, Crown itself would be required to redeem (i.e., purchase) the shares. To ensure that Crown would have enough money to redeem the shares if required, it obtained $3.5 million in life insurance on each brother. After Michael died, Thomas elected not to purchase Michael’s shares, thus triggering Crown’s obligation to do so. Michael’s son and Thomas agreed that the value of Michael’s shares was $3 million, and Crown paid the same amount to Michael’s estate. As the executor of Michael’s estate, Thomas then filed a federal tax return for the estate, which reported the value of Michael’s shares as $3 million. The Internal Revenue Service (IRS) audited the return. During the audit, Thomas obtained a valuation from an outside accounting firm. That firm determined that Crown’s fair market value at Michael’s death was $ 3.86 million, an amount that excluded the $3 million in insurance proceeds used to redeem Michael’s shares on the theory that their value was offset by the redemption obligation. Because Michael had held a 77.18% ownership interest in Crown, the analyst calculated the valueof Michael’s shares as approximately $3 million ($3.86 million x 0.7718). The IRS disagreed. It insisted that Crown’s redemption obligation did not offset the life-insurance proceeds, and accordingly, assessed Crown’s total value as $6.86 million ($3.86 million + $3 million). The IRS then calculated the value of Michael’s shares as $5.3 million ($6.86 million x 0.7718). Based on this higher valuation, the IRS determined that the estate owed an additional $889,914 in taxes. The estate paid the deficiency and Thomas, acting as executor, sued the United States for a refund. The District Court granted summary judgment to the Government. The court held that, to accurately value Michael’s shares, the $3 million in life-insurance proceeds must be counted in Crown’s valuation. The Eighth Circuit affirmed.
Whether the proceeds of a life-insurance policy taken out by a closely held corporation on a shareholder in order to facilitate the redemption of the shareholder's stock should be considered a corporate asset when calculating the value of the shareholder's shares for purposes of the federal estate tax.
Holding: Affirmed.
A corporation’s contractual obligation to redeem shares is not necessarily a liability that reduces a corporation’s value for purposes of the federal estate tax
Skinny: Another weeds-y one and I'm afraid I can't do it better justice than the succinct summary of the Court's holding above. The government gets the dough.
Truck Insurance Exchange v. Kaiser Gypsum Co.
Date: June 6, 2024
Author: Sotomayor
Split: 8-0 (Alito did not participate)
Dissent: N/A
Appeal From: Fourth Circuit
Basic Facts:
Petitioner Truck Insurance Exchange is the primary insurer for companies that manufactured and sold products containing asbestos. Two of those companies, Kaiser Gypsum Co. and Hanson Permanente Cement (Debtors), filed for Chapter 11 bankruptcy after facing thousands of asbestos-related lawsuits. As part of the bankruptcy process, the Debtors filed a proposed reorganization plan (Plan). That Plan creates an Asbestos Personal Injury Trust (Trust) under 11 U. S. C. §524(g), a provision that allows Chapter 11 debtors with substantial asbestos-related liability to fund a trust and channel all present and future asbestos-related claims into that trust. Truck is contractually obligated to defend each covered asbestos personal injury claim and to indemnify the Debtors for up to $500,000 per claim. For their part, the Debtors must pay a $5,000 deductible per claim, and assist and cooperate with Truck in defending the claims. The Plan treats insured and uninsured claims differently, requiring insured claims to be filed in the tort system for the benefit of the insurance coverage, while uninsured claims are submitted directly to the Trust for resolution.
Truck sought to oppose the Plan under §1109(b) of the Bankruptcy Code, which permits any “party in interest” to “raise” and “be heard on any issue” in a Chapter 11 bankruptcy. Among other things, Truck argues that the Plan exposes it to millions of dollars in fraudulent claims because the Plan does not require the same disclosures and authorizations for insured and uninsured claims. Truck also asserts that the Plan impermissibly alters its rights under its insurance policies. The District Court confirmed the Plan. It concluded, among other things, that Truck had limited standing to object to the Plan because the Plan was “insurance neutral,” i.e., it did not increase Truck’s prepetition obligations or impair its contractual rights under its insurance policies. The Fourth Circuit affirmed, agreeing that Truck was not a “party in interest” under §1109(b) because the plan was “insurance neutral.”
Whether an insurer with financial responsibility for a bankruptcy claim is a "party in interest" that may object to a Chapter 11 plan of reorganization.
Holding: Reversed and remanded.
An insurer with financial responsibility for bankruptcy claims is a “party in interest” under §1109(b) that “may raise and may appear and be heard on any issue” in a Chapter 11 case.
Skinny: As with Connelly above, I can't really skinny this one any further than the Court's summary — the insurer gets to have a say.
READ MORE:
The Skinny on SCOTUS - 5/30/24 Edition: 1A Saves the NRA?
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