Raw Materials Corp., et al. v. Sonya Salkin Slott

Substantive consolidation is a judge-made enhancement to powers granted Bankruptcy Courts in Title 11 of the United States Code, done without due process, establishment of in personam jurisdiction, or any harm done by the targets to a debtor or its estate. This Court has limited powers of Bankruptcy Courts to those specifically delineated in the Bankruptcy Reform Act of 1978 (Pub. L. 95–598, 92 Stat. 2549, November 6, 1978), as amended (hereinafter the “Bankruptcy Code”). Law v. Siegel, 571 U.S. 415, 134 S. Ct. 1188, 188 L. Ed. 2d 146 (2014); Harrington v. Purdue Pharma L. P., 603 U.S. 204, 144 S. Ct. 2071, 219 L. Ed. 2d 721 (2024); Czyzewski v. Jevic Holding Corp., 580 U.S. 451, 137 S. Ct. 973, 197 L. Ed. 2d 398 (2017). The Bankruptcy Court below stated, “Although the Code itself does not expressly allow for substantive consolidation, a bankruptcy court has the power to substantively consolidate various estates under its general equitable powers contained in § 105(a).” In re No Rust Rebar, Inc., No. 21-12188-PDR, 2023 WL 4497328, at *5 (Bankr. S.D. Fla. July 12, 2023). This extra-judicial power is based upon a fictitious reading of this Court’s decision In re Sampsell v. Imperial Paper Corp., 313 U.S. 215 (1941). The question presented on which Courts of Appeals are only divided on how a target of substantive consolidation should be evaluated for eligibility to be a debtor: Whether Bankruptcy Courts’ powers are only those expressed in the Bankruptcy Code?