The Tenth Circuit recently had an unenviable job. They had to enter a decision that was clearly contrary to the plain language of the Bankruptcy Code — because the U.S. Supremes said to.

The case is Troff v. State of Utah (In re: Troff); Case No. 05-4244, (10th Cir. March 15, 2007). I think that I have successfully attached a copy of it to this post — we’ll see. ( In re: Troff) Troff dealt with some unusual facts, but in a world where the plain language of the Statute frequently makes no sense at all, how the Tenth is going to apply a conflict between plain language and established policy concerns should be of interest.

The actual issue in Troff was whether or not a Debtor could discharge a claim for criminal restitution that was actually paid for the benefit of the crime victim rather than for the benefit of a governmental unit — which is an express requirement of Section 523( a)(7).

The plain reading of the Statute appears to require discharge in this case. Unfortunately for the Debtor, that was also true in a U.S. Supreme Court case, Kelly v. Robinson, 479 U.S. 36 (1986). Basically, the U.S. Supreme Court has already interpreted Section 523(a)(7) away from the plain language of the Statute in the interests of Federalism. Basically, they found a way in 1986 to make all criminal restitution come within the scope of this imperfectly drafted exception to discharge.

The Tenth Circuit was bound to follow that authority. Two things make this opinion interesting. First, is the Tenth’s admission that they consider Supreme Court dicta binding, as well as the actual holding. Second, is the language of the opinion and the concurring opinion which seem to indicate a strong preference on the part of this panel of the Circuit to follow plain language wherever possible.

Given the litany of problems with the plain language of the new Code, the language of this opinion may well become widely cited.

Elaine