In his Law360 article, “9th Circuit Rejects Textualist Approach to Bankruptcy Code,” Steve Werth discusses the Ninth Circuit May 2018 decision in Lee v. Field, which eliminated what otherwise would be a trap for the unwary trustee or creditor who commences litigation to eliminate the basis for a debtor to assert an exemption: the risk that such litigation will be mooted because the party failed to satisfy Federal Rule of Bankruptcy Procedure 4003(b)(1) which requires an objection to the exemption be filed.
In Lee v. Field, the Ninth Circuit held that filing a complaint against the debtor to eliminate the basis for an exemption satisfies the requirements of Rule 4003(b)(1) even though the complaint does not specifically object to the exemption. The Ninth Circuit rejected the debtor’s argument that Rule 4003(b)(1) is a bright-line rule.
Werth concludes that it is no slight to the Ninth Circuit to say that this common-sense decision could easily be overturned on appeal. The best practice is to follow the strict text of Rule 4003(b)(1) and insert the words “objection to appeal” in any complaint attacking the basis for an exemption. To do otherwise is to invite an attack that Lee v. Field is distinguishable on its facts. Nevertheless, the Ninth Circuit’s decision indicates a trend in bankruptcy jurisprudence, including at the Supreme Court level, of moving away from a strict textual interpretation of the Bankruptcy Code and Rules.
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