Civilization, Congress, and punctuation
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Thanks to reader DS, following up on this morning's post on the Philadelphia Newspapers' bankruptcy case ("The indubitable equivalent of such claims"), I now know which commas were at stake, and why. The critical commas were these, in 1129(b)(2)(A)(ii) of Chapter 11, subchapter II, of U.S. Code Title 11:
(ii) for the sale, subject to section 363 (k) of this title, of any property that is subject to the liens securing such claims, …
As to why and how the commas allegedly matter, DS drew my attention to dueling footnotes in the briefs.
This starts with footnote 16 on p. 33 of the Philadelphia Newspapers' brief of one of the appellants, Citizens Bank of Pennsylvania:
Debtors’ construction of the statute also results in grammatical error. If, as Debtors contend, subdivision (ii) applies only to some sales of property subject to liens, why is the clause “subject to section 363(k) of this title” set off by commas? Under Debtors’ (and the District Court’s) reading, that clause would be what grammarians call a “defining” or “restrictive” relative clause: which is to say, the clause would serve to define a “sale subject to section 363(k)” and to distinguish such a sale from some other hypothetical sale (such as the sale they propose to conduct) that would not be subject to Section 363(k). But it would be a grammatical mistake to set off such a restrictive relative clause with commas and, if Debtors are right, the commas that appear in subdivision (ii) should not be there. On the other hand, if – as Lenders contend – all sales of property subject to the liens of secured creditors are also “subject to section 363(k),” then the clause “subject to section 363(k) of this title” is not a restrictive relative clause but is, instead, a “non-restrictive” relative clause merely descriptive of a “sale.” As such, it could have been put in parentheses or – as is the case in section 1129 – set off by commas.
The punctuation used in section 1129, in other words, unambiguously supports the Bankruptcy Court’s construction of the clause and is not in accord with the District Court’s construction of the clause. See, e.g., H.W. Fowler, MODERN ENGLISH USAGE 587 (2d ed. Oxford Univ. Press 1968); W. Strunk & E. B. White, THE ELEMENTS OF STYLE 4 (3d ed. MacMillan Publ’g Co. 1979). Whether the drafters of section 1129 were familiar with Fowler’s and Strunk & White’s instructions on this subject may, in fairness, be subject to some doubt. On the other hand, our civilization has yet to reach the point where it should be assumed that Congress does not know how to punctuate – and it is only by making such an assumption that one could find the meaning of Section 1129(b)(2)(A) “unambiguous” even though the punctuation used therein points to an entirely different meaning. Evidently thinking better of Congress, our courts continue to say that the punctuation of a statute, though “not controlling … can provide useful confirmation of conclusions drawn from the words ….” United States v. Ron Pair Enters., 489 U.S. 235, 251 (1989).
The Lenders The appellees, Philadelphia Newspapers, LLC (and others) responded with footnote 12 on p. 40 of their brief:
This Court need not entertain Citizens’ grammar lesson in footnote 16 of its Brief. It simply does not matter whether the commas set forth in “the sale, subject to section 363(k) of this title” in subsection (ii) are correct or incorrect. No amount of commas or deletion of commas transforms “sale” into “all sales” as Citizens urges. And, no amount of punctuation changes the facts: (1) that the plain language of Section 1129(b)(2)(A) sets forth three alternatives to be chosen by the proponent of the plan; and (2) subsections (i) and (iii) do not contain the words “subject to Section 363(k).” It does not dictate which particular subsection a debtor must use.
In any event, there is no basis to Citizens’ claim that the Debtors’ argument or the District Court’s analysis depends upon a grammatically incorrect meaning of subsection (ii). The language of subsection (ii) says “sale, subject to section 363(k) of this title, ….” The Debtors believe the plain meaning of this phrase is that “subject to section 363(k)” is intended to mean that, if a debtor determines to proceed under subsection (ii) and thereby avoid the requirement of establishing indubitable equivalence under subsection (iii), it must provide for a credit bid as described in Section 363(k). Thus, consistent with its punctuation, the phrase is a non-restrictive clause that merely provides clarifying information regarding the “sale.” If the commas were removed, the result would be a non sequitur. The only “sale” referred to under Section 363(k) is a sale under Section 363(b), which applies to sales outside the plan context. It would therefore make no sense for Congress to refer to Section 363(b) sales in a provision dealing with plan confirmation. Importantly, the grammatically correct interpretation of subsection (ii) does not require that all sales under a plan be subject to Section 363(k) just sales where the debtor determines to seek confirmation under subsection (ii).
I guess we can all now see why the news stories were less than completely specific on this point.
And I continue to think that there's a job for some applied semanticists here…
[Update — my informant writes:]
I should have sent you the covers of the briefs and indicated which pages went with which cover. The footnote 16 I sent you is actually from the brief of one of the appellants, Citizens Bank of Pennsylvania, which appears to be one of the creditors. The answering footnote is from the brief of the appellees, Philadelphia Newspapers, LLC (and others whose identity I do not know) — as I understand it, the debtor is Philadelphia Newspapers. Not that it really matters to the point you made.
Now fixed in the body of the post …]
[Update #2 — Anne Sherry wrote to point out that (an excellent-quality recording of) the oral argument in the court of appeals is available here.
For more on legal commas, see here.]
matth said,
December 16, 2009 @ 12:47 pm
Okay; I see the newspapers' argument. If someone said:
"You can serve rice. Or, you can serve pasta, with tomato sauce. Or serve whatever else you want."
I'd conclude that the speaker only wants pasta if it has tomato sauce.
But if someone said:
"You can serve rice. Or, you can serve pasta with tomato sauce. Or serve whatever else you want."
I'd be less likely to think the speaker is implicitly ruling out other pasta sauces.
But the speaker could say:
"You can serve rice. Or, you can serve pasta, with tomato sauce, and chicken. Or serve whatever else you want, and fish."
It's plausible that non-tomato sauce pasta is okay if served with fish.
The third example is plausibly analogous to the statute, which imposes additional restrictions on the sales in (ii). So even if you agree with the newspapers that the comma structure describes a necessary characteristic of the sales, there's room to debate the scope of the characteristic's necessity (just (ii)? or all three sub-sections?).
Rob Malouf said,
December 16, 2009 @ 1:09 pm
This restrictive/non-restrictive thing come up a lot. It's a big part of the wrangling over the 2nd amendment. There's also a theory among some Native Americans that they're exempt from income tax — the 14th amement states "Representatives shall be apportioned among the several States according to their respective numbers, counting the whole number of persons in each State, excluding Indians not taxed." You'd think that the legal profession would have some kind of unified model for this ambiguity, rather than treating each one as some kind of linguistic fluke.
Richard said,
December 16, 2009 @ 4:38 pm
@matth: Now I just feel hungry: maybe rice and fish, with a side of tomato sauce would hit the spot.
Actually, come to think of it – forget XML – perhaps all laws should be drafted like menus …
Neal Goldfarb said,
December 16, 2009 @ 4:47 pm
Notice the authorities that Citizens Bank relies on for its discussion of punctuation: Fowler and Strunk & White. And that's not at all unusual among judges and lawyers.
A Westlaw search reveals that over the last three years, Strunk & White is cited in almost ten times as many cases as Huddleston & Pullum (although some of the cites to S&W are on points of style, not grammar). And the number of cases citing CGEL actually overstates the extent to which it is relied on, because four of them were decided by the same judge (Patrick Schiltz of the U.S. District Court in Minnesota).
Relying on usage manuals as a guide to interpretation has always struck me as bizarre, even apart from the question whether the author knows what he's talking about, because it assumes without any justification that there's a correlation between what the manuals recommend and how people actually write. The Citizens Bank brief is unusual in that it actually recognizes this issue and tries to deal with it.
AdamsDrafting » Blog Archive » More Mischief with Commas said,
December 16, 2009 @ 6:32 pm
[…] learned from this post on Language Log that use of commas in a provision of the Bankruptcy Code has become an issue in the […]
Bloix said,
December 16, 2009 @ 9:18 pm
But in response to Robert Malouf – the Constitution does not follow modern punctuation rules, particularly with respect to capitalization and the use of commas. The Second Amendment reads:
A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.
Modern usage would require:
A well-regulated militia being necessary to the security of a free state, the right of the people to keep and bear arms shall not be infringed.
Max Kennerly said,
December 17, 2009 @ 1:05 am
Speaking of semantics, the District Court's opinion on the issue contained a great, detailed statement on the "plain meaning" rule in the Third Circuit, which I posted on my blog back when it came out, linked here via my name.
I represent a number of individuals who have lawsuits against the Inquirer which were frozen by the bankruptcy. Though not a bankruptcy lawyer by trade, I have had the misfortune of learning a great deal about the bankruptcy code to protect my client's interests. FWIW, my clients have not filed arguments either way on this issue, as it is largely irrelevant to them.
The initial post was indeed correct that the focus is on 1129(b)(2)(A), specifically 1129(b)(2)(A)(ii) and 1129(b)(2)(A)(iii). Those sections establish guidelines for the bankruptcy court to determine if the proposed bankruptcy "plan" is "fair and equitable" to those holding secured claims (i.e., claims tied to specific property, like the Inquirer's building). Section 363(k) makes an appearance within 1129(b)(2)(A)(ii); Section 363(k)'s primary use is to ensure that if, say, a debtor wants to sell off an asset with a secured claim on it, they have to let the holder of that secured claim "credit bit" their debt in the sale. That is to say, if the Inquirer wanted to sell off just its building, it would have to let the banks "credit bid" their debt on it — in essence, the banks don't have to put up a dime to keep control of the asset until someone else puts up more than the value of the banks' secured claim.
In the bigger picture of the Inquirer's bankruptcy, the Debtors (i.e., the current management of the Inquirer and its related entitles) want to conduct an auction to sell all of the assets of the Inquirer (not just a single asset, as presumed by Section 363(k)), cancel all their debt not paid off by the proceeds of that auction, and then re-emerge from bankruptcy debt-free.
The big question being litigated now is if, at that auction, the Secured Creditors (i.e., the banks) can use their existing $300m debt to "credit bid" at the auction, or if they have to raise new cash for their bid. If the Secured Creditors can indeed "credit bid" their existing debt, then they are effectively guaranteed to win the auction, since the Inquirer is not worth anywhere near the amount of its debt, and so there's no chance a new bidder will come in with that amount. The Debtors say the Secured Creditors can't bid that existing debt, but instead have to raise new cash.
Now let's get to the statutory construction.
There's, initially, a pragmatic issue, an interpretive issue, and then two linguistic arguments at issue, the "or" issue and the "comma" issue:
THE PRAGMATIC ISSUE
It seems highly unlikely the auction actually will raise enough money to pay off the "indubitable equivalent" of the debt; the Bankruptcy Court held that the unlikelihood of this (and the apparent bad faith in attempting it) was enough to reject the attempt outright, whereas the District Court held that the likelihood of it is irrelevant, and the Debtors are entitled to give it a shot under the Bankruptcy Code. Keep this elephant in the room in mind.
THE INTERPRETIVE ISSUE
As I linked above, a basic principle of statutory interpretation is that the "plain meaning" of a statute is the "polestar" of its interpretation. I don't know if you linguists laugh about the idea of "plain meaning" like lawyers do, but consider this fact: both the Debtor and the Secured Creditors claim the "plain meaning" supports their position. So much for "plain."
THE "OR" ISSUE
As the Inquirer article said, "Lawrence G. McMichael, the lawyer who represented Philadelphia Newspapers, countered that the issue turned on three words within the code. The first was the word or, which was used to introduce the last of three provisions in a section that spells out how to ensure that a disputed bankruptcy plan is fair to lenders."
He is referring to how 1129(b)(2)(A)(i), 1129(b)(2)(A)(ii) and 1129(b)(2)(A)(iii) are all separated by the word "or," implying they are disjunctive, and that a plan need only meet either (i), (ii) or (iii) to be "fair and equitable." The Debtors say that "or" means "or," and that they can choose from any of those three options.
Notably, the Bankruptcy Court disagreed, and held that a Debtor couldn't just "choose" between 1129(b)(2)(A)(ii) and 1129(b)(2)(A)(iii) by claiming it was doing one or the other, regardless of the "or." If, for example, a Debtor was indeed intending the "sale" of property with secured claims on it, then it was subject to 1129(b)(2)(A)(ii), because (ii) applies to such a "sale."
If the Court agrees with this "or" argument, then, according to the Debtors, they are electing solely to satisfy 1129(b)(2)(A)(iii), and so need only raise enough money to pay off the "indubitable equivalent" of the debt, and so don't need to allow a "credit bid."
If the Court disagrees and says that the Debtors can't just elect to satisfy (iii) based on the word "or," but needs to deal with (ii) in some fashion, then the Court will consider the comma issue.
THE COMMA ISSUE
As the Inquirer article said, "Abid Qureshi, who represented the senior lenders, argued that Robreno, in his ruling, focused too narrowly on language within a subsection of the bankruptcy code. Qureshi urged the three-judge panel of the U.S. Court of Appeals for the Third Circuit to take a 'holistic' view of the code."
In short, the Secured Creditors argue that the "or" issue is a red herring: the bankruptcy code indisputably includes multiple protections for secured creditors, and Congress did not intend a sub-sub-sub-section (as 1129(b)(2)(A) is) to create a de facto loophole for Debtors to use the evade protections like Section 363(k). Section 363(k), according to the Secured Creditors, applies on its face to sale of the property of the estate, whether part of an auction, a plan, or otherwise. Period. You can't duck it by giving the magical incantation "indubitable equivalent."
The Secured Creditors' comma argument is that the interjection — ", subject to section 363 (k) of this title," — clarifies that any sale of property with a secured claim on it (which the proposed auction would be) is inherently "subject to section 363 (k)." The Debtors' comma argument is that the commas don't really mean much, and that the use of that interjection is to clarify that only 1129(b)(2)(A)(ii) requires following Section 363(k)'s requirement for a "credit bid," and that neither 1129(b)(2)(A)(i) or 1129(b)(2)(A)(iii) requires such a "credit bid."
* * *
In short, both sides have good and bad arguments. In one sense, "or" means "or." In another sense, it seems odd that Congress would use the word "or" and some commas to wholly override the basic "credit bid" protection of section 363(k). Much will likely depend on how realistic the Third Circuit believes it is that the auction will provide the "indubitable equivalent" of the Secured Creditor's debt. The bankruptcy code vests considerable discretion in the presiding judge; it doesn't entitle every debtor to attempt every theoretical strategy.
joanne salton said,
December 17, 2009 @ 5:03 am
Huddlestone/Pullum is certainly becoming the alternative bible.
Graeme said,
December 17, 2009 @ 5:06 am
Punctuation say in the 14th ad hardly matters. You have contemporary sources and the good ole purposive rule to trump blind literalist and slavish and arid grammatical arguments. The Australian Constitution had a similar provision, borrowed from the US. Its manifest purpose was not to favour (or ignore) Indigenous peoples per se. But to ensure that states which had large indigenous populations that were not integrated economically (and which typically discriminated against and even treated such populations as savages or outlaws and certainly did not extend them the franchise) did not benefit from receiving extra members of the House of Reps based purely on a population headcount.
Actually, the traditional statutory interpretation rule was to ignore punctuation altogether. Which seems ludicrous, but early printing was such that punctuation was at the whim of typesetters, and Parliaments did not pay heed to punctuation.
Michael W said,
December 17, 2009 @ 5:13 am
I'm no lawyer and only vaguely understand the details of this statute, but isn't it simply the language of 363(k) and 363(b) that matter? 363(k) would appear to apply to any sale meeting the requirements it sets forth:
It would seem that this then would apply to all sales, as long as they meet the three requirements there. So if the 'indubitable equivalent' is a sale that meets those requirements, it should apply. Although the court clearly has the ability to 'order otherwise'.
I admit the 'or' threw me, but I imagine that's not uncommon in laws. The sentence appears to be "With respect to a class of secured claims, the plan provides — (i); (ii); or (iii)," which makes sense to me as separate options.
Bob Lieblich said,
December 17, 2009 @ 9:00 am
In statutory construction, every word is presumed to add something to the substance of the statute. Commas notwithstanding, "subject to section 363 (k) of this title" adds nothing if it doesn't modify "sale." It's certainly true that Congress is capable of inserting meaningless text into a statute. But courts can't read minds (even if some of them sometimes seem to be trying), so, to repeat, every word is presumed to add some meaning. The newspapers' brief doesn't make this argument in so many words, but the gist of it appears when they get into "plain meaning."
Legislative drafting is indeed an art.
Alan Gunn said,
December 17, 2009 @ 10:08 am
I recall from law school that at least one state (perhaps Pennsylvania) enacts (or enacted) legislation with no punctuation except periods, lest the punctuation create ambiguity. This practice generated statutes that were not easy reading; whether it really did anything to avoid ambiguity I don't know.
Eli said,
December 17, 2009 @ 1:54 pm
@Bliox:
Actually, the phrasing in the second amendment seems to reflect many people's use of commas, perceived-correct or not. The usage to which I refer is that of placing a comma after a longer or more complex subject, such as: "The application everyone must fill out that I mentioned above, is posted on the wiki."
So, why is it that no lawyer ever thinks to ask a linguist about these things? Or to make sure that their references are at least written by people with training in linguistics? (This may be another symptom of linguists' ongoing PR problem.)
Beth said,
December 18, 2009 @ 5:14 pm
Commas also feature in a debate about the U.S. Pledge of Allegiance. The 1892 version of the pledge said, "I pledge allegiance to my Flag and the Republic for which it stands, one nation, indivisible, with liberty and justice for all." i.e., the post-Civil War nation is indivisible. The latest 1954 version says, "I pledge allegiance to the flag of the United States of America and to the republic for which it stands, one nation under God, indivisible, with liberty and justice for all." i.e., (according to some Christians) the nation is indivisible from God. You may remember recent news stories about a Home Depot employee fired for (in part) wearing a button that said, "One nation under God, indivisible" on it. The debate: what does "indivisible" modify? "nation"? or "one nation under God"?
Graeme said,
December 20, 2009 @ 9:07 am
Indivisible from the invisible?