Langenkamp v. Culp

Republic Trust & Savings Company and Republic Financial Corporation (collectively, Republic) (debtors) filed for chapter 11 bankruptcy. C. A. Culp and others (collectively, the holders) (defendants) held savings certificates issued by Republic. The holders redeemed some of their certificates in the 90 days immediately preceding Republic’s bankruptcy filing. Once the filing occurred, the holders became Republic’s creditors with respect to the unredeemed certificates, and some holders filed proofs of claim against the bankruptcy estate. R. Dobie Langenkamp, the bankruptcy trustee (plaintiff), instituted adversary proceedings against the holders under 11 U.S.C. § 547(b) to recover the payments that the holders had received immediately prior to Republic’s bankruptcy filing, asserting that those payments were avoidable preferences. After a bench trial, the bankruptcy court concluded that the payments were avoidable preferences. The federal district court affirmed. On appeal in federal appellate court, one issue was whether the holders were entitled to a jury trial on Langenkamp’s preference claims. The appellate court first held that any holders who had not filed claims against the bankruptcy estate were entitled to a jury trial on whether their payments from Republic were avoidable preferences. The appellate court further found that any holders who had filed claims against the estate were also entitled to a jury trial, based on United States Supreme Court precedent that creditors who filed claims against a bankruptcy estate had no Seventh Amendment right to a jury trial in an action that was a part of a bankruptcy court’s summary proceedings involving allowance and disallowance of claims. The appellate court reasoned that Langenkamp’s actions to avoid the payments were not part of such summary proceedings, and therefore, the holders who had filed claims had the right to a jury trial. Republic petitioned the Supreme Court for certiorari.