Local Governments Respond to Car Impounding SCOTUS Case

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The State and Local Legal Center (SLLC) has filed an amicus brief in City of Chicago, Illinois v. Fulton, an important case for local governments.

The City of Chicago impounds vehicles when debtors have three or more unpaid fines. When Robbin Fulton’s vehicle was impounded for this reason, she filed for bankruptcy and asked the city to turn over her vehicle. It refused.

In the amicus brief, SLLC argues that the Supreme Court should rule that a local government need not immediately return a vehicle impounded because of code violations upon a debtor filing for bankruptcy.

Fulton claims the Bankruptcy Code’s “automatic stay” provision requires the city to immediately return her vehicles even though she didn’t pay her outstanding tickets. The Seventh Circuit agreed.

The “automatic stay” provision of the Bankruptcy Code provides that a bankruptcy petition “operates as a stay, applicable to all entities, of … any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate.”

In a previous case decided in 2009, Thompson v. General Motors Acceptance Corp., the Seventh Circuit concluded that “exercise control” includes holding onto an asset and that “exercise control” isn’t limited to “selling or otherwise destroying the asset.” So, the court reasoned in this case, the city of Chicago “exercised control” over Fulton’s car in violation of the automatic stay by not returning it after she filed the bankruptcy petition.

The SLLC amicus brief argues that the Supreme Court should overturn the Seventh Circuit’s immediate-release rule and require a bankruptcy petitioner to file an adversary proceeding to obtain the release of a vehicle. According to the brief, “[t]his rule protects the efficacy of traffic and parking regulations, as well as avoiding perverse incentives for owners of impounded vehicles to file bankruptcy petitions.”

The SLLC brief also points out that “construing the automatic stay as requiring the immediate release of assets would undermine the government’s ability to enforce tax, licensing, and regulatory laws.”

Scott Burnett Smith, Alexandra E. Dugan, and Stephen C. Parsley Bradley of Arant Boult Cummings LLP wrote the SLLC amicus brief, which the following organizations joined:

  • National Association of Counties
  • National League of Cities
  • U.S. Conference of Mayors
  • International City/County Management Association
  • International Municipal Lawyers Association, and
  • Government Finance Officers Association.

To read more about City of Chicago, Illinois v. Fulton, read our January 15th blog.

lisa_soronen_new_125x150About the author: Lisa Soronen is the executive director of the State and Local Legal Center, which files Supreme Court amicus curiae briefs on behalf of the Big Seven national organizations, including the National League of Cities, representing state and local governments. She is a regular contributor to CitiesSpeak.