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Rodriguez v. Federal Deposit Insurance Corporation

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Supreme Court of the United States
Rodriguez v. Federal Deposit Insurance Corp.
Term: 2019
Important Dates
Argument: December 3, 2019
Decided: February 25, 2020
Outcome
Vacated and remanded
Vote
9-0
Majority
Chief Justice John G. Roberts • Clarence Thomas • Ruth Bader Ginsburg • Stephen Breyer • Samuel Alito • Sonia Sotomayor • Elena Kagan • Neil Gorsuch • Brett Kavanaugh


Rodriguez v. Federal Deposit Insurance Corp. is a case argued before the Supreme Court of the United States on December 3, 2019, during the court's October 2019-2020 term. The case came on a writ of certiorari to the United States Court of Appeals for the 10th Circuit.

The court vacated and remanded the 10th Circuit's decision in a 9-0 ruling, holding the Bob Richards rule "is not a legitimate exercise of federal common lawmaking," in which federal judges—instead of Congress, agencies, or states—make laws.[1][2] Click here for more information.

HIGHLIGHTS
  • The case: In 2011, United Western Bank, a subsidiary of Colorado corporation United Western Bancorp, Inc. (UWBI), closed after suffering $35.4 million in losses. The Federal Deposit Insurance Corporation (FDIC) was appointed as United Western Bank's receiver. Also in 2011, the parent company, UWBI, filed a tax refund request of $4.8 million to recover a portion of United Western Bank's 2008 taxes. In 2012, UWBI filed for bankruptcy. Both the FDIC and UWBI argued in bankruptcy court that the tax refund belonged to them. The bankruptcy court ruled the refund belonged to UWBI. On appeal, the District of Colorado reversed the bankruptcy court's decision. Simon Rodriguez, the Chapter 7 Trustee for UWBI's bankruptcy estate, appealed to the 10th Circuit Court of Appeals, which affirmed the district court's ruling and remanded the case to the bankruptcy court.[3] Rodriguez petitioned the U.S. Supreme Court to review the 10th Circuit's decision, arguing circuit courts were divided on the question of tax refund ownership.[4]
  • The issue: Whether courts should determine ownership of a tax refund paid to an affiliated group based on the federal common law "Bob Richards rule," as three Circuits hold, or based on the law of the relevant State, as four Circuits hold.[5]
  • The outcome: The court vacated and remanded the 10th Circuit's decision in a 9-0 ruling, holding the Bob Richards rule "is not a legitimate exercise of federal common lawmaking," in which federal judges—instead of Congress, agencies, or states—make laws.[1][2]


    • You can review the lower court's opinion here.

    Timeline

    The following timeline details key events in this case:

    • February 25, 2020: The U.S. Supreme Court vacated and remanded the 10th Circuit's ruling.
    • December 3, 2019: Oral argument
    • June 28, 2019: The U.S. Supreme Court agreed to hear the case.
    • April 1, 2019: Simon Rodriguez, the petitioner, filed a petition with the U.S. Supreme Court.
    • January 29, 2019: The 10th Circuit affirmed the district court's ruling and remanded the case to the bankruptcy court.

    Background

    United Western Bancorp, Inc. (UWBI), a Colorado corporation, had several subsidiaries, including United Western Bank. In 2010, United Western Bank had approximately $35.4 million in losses. In 2011, UWBI filed a tax refund request of $4.8 million to recover a portion of United Western Bank's 2008 taxes. Also in 2011, the Office of Thrift Supervision closed United Western Bank and appointed the Federal Deposit Insurance Corporation (FDIC) as the bank's receiver. As the 10th Circuit Court explained in its decision, "Because [United Western Bank] was UWBI’s principal, if not sole, source of income, the Bank’s receivership resulted in UWBI becoming insolvent." In 2012, UWBI filed for Chapter 11 bankruptcy. The FDIC filed a motion in UWBI's bankruptcy case arguing the FDIC owned the $4.8 million federal tax refund.[3]

    In 2013, Simon Rodriguez was appointed as the Chapter 7 Trustee for UWBI's bankruptcy estate. In 2014, Rodriguez began a bankruptcy adversary proceeding against the FDIC, alleging the tax refund belonged to UWBI's bankruptcy estate. The bankruptcy court agreed, entering summary judgment for Rodriguez.[3]

    The FDIC appealed to the U.S. District Court for the District of Colorado, which reversed the bankruptcy court's decision. Rodriguez appealed the district court's ruling to the 10th Circuit Court of Appeals. The circuit court applied a common law rule called the Bob Richards rule, arguing the tax refund belonged to United Western Bank, and thus the FDIC, unless an agreement unambiguously stated the tax refund belonged to the parent company, UWBI. The 10th Circuit found UWBI's tax allocation agreement did not meet the standards under the Bob Richards rule. It affirmed the district court's ruling and remanded the case to the bankruptcy court.[3]

    Rodriguez, in his capacity as UWBI's Chapter 7 Trustee, petitioned the U.S. Supreme Court to review the 10th Circuit's decision. Rodriguez argued that circuit courts were divided on the question of tax refund ownership and the Bob Richards rule. In the petition, Rodriguez wrote,[4]

    “ When the IRS pays a tax refund to the corporate group, it always issues that refund to the corporate parent—even if some or all of the losses are attributable to one of its subsidiaries. That raises an oft-litigated and highly significant question: Who owns the refund? Is it the parent who holds it, or the subsidiary that gave rise (in whole or in part) to the underlying tax losses? Circuits are intractably divided on the answer to that question.[6] ”

    The Bob Richards rule

    The Bob Richards rule came from a 9th Circuit decision in In re Bob Richards Chrysler-Plymouth Corp., Inc. in 1973. The rule "presumes that a tax refund belongs to the subsidiary that caused the underlying loss unless the parties have entered into a tax agreement clearly assigning the refund to the parent."[4]

    Questions presented

    The petitioner presented the following questions to the court:

    Questions presented:

    Whether courts should determine ownership of a tax refund paid to an affiliated group based on the federal common law "Bob Richards rule," as three Circuits hold, or based on the law of the relevant State, as four Circuits hold.[5]

    Outcome

    In a unanimous opinion, the court vacated and remanded the judgment of the 10th Circuit Court of Appeals, holding the Bob Richards rule "is not a legitimate exercise of federal common lawmaking," in which federal judges—instead of Congress, agencies, or states—make laws.[1][2] SCOTUS held federal judges "may appropriately craft the rule of decision in only limited areas."[7]

    Justice Neil Gorsuch delivered the opinion of the court.[7]

    Opinion

    In his opinion, Justice Gorsuch wrote:[7]

    “ Federal common lawmaking must be ' "necessary to protect uniquely federal interests." ' Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U. S. 630, 640. The Bob Richards rule has not satisfied this condition. The federal courts applying and extending Bob Richards have not pointed to any significant federal interest sufficient to support the Bob Richards rule. Nor have the parties in this case. State law is well-equipped to handle disputes involving corporate property rights, even in cases, like this one, that involve federal bankruptcy and a tax dispute. Whether this case might yield the same or a different result without Bob Richards is a matter the court of appeals may take up on remand. [6] ”

    Text of the opinion

    Read the full opinion here.

    Audio

    Audio of oral argument:[8]



    Transcript

    See also

    External links

    Footnotes

    1. ↑ 1.0 1.1 1.2 SCOTUSblog, "Rodriguez v. Federal Deposit Insurance Corp." accessed February 25, 2020 Cite error: Invalid <ref> tag; name "sb1" defined multiple times with different content Cite error: Invalid <ref> tag; name "sb1" defined multiple times with different content
    2. ↑ 2.0 2.1 2.2 SCOTUSblog, "Argument analysis: Going the way of the phlogiston," December 4, 2019
    3. ↑ 3.0 3.1 3.2 3.3 United States Court of Appeals for the 10th Circuit, United Western Bancorp, Inc., v. Federal Deposit Insurance Corporation, decided January 29, 2019
    4. ↑ 4.0 4.1 4.2 Supreme Court of the United States, Rodriguez v. Federal Deposit Insurance Corporation: "Petition for a writ of certiorari," accessed July 1, 2019
    5. ↑ 5.0 5.1 Supreme Court of the United States, Rodriguez v. Federal Deposit Insurance Corp.: "Questions presented," accessed July 1, 2019 Cite error: Invalid <ref> tag; name "question" defined multiple times with different content
    6. ↑ 6.0 6.1 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
    7. ↑ 7.0 7.1 7.2 Supreme Court of the United States, Rodriguez v. Federal Deposit Insurance Corporation, decided February 25, 2020
    8. ↑ Supreme Court of the United States, "Oral Argument - Audio," accessed December 9, 2019
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