By: J. Ellsworth Summers, Jr. & Scott St. Amand
It was only a matter of time before judges in the lower courts of the Eleventh Circuit began to accept the appellate court’s decision in McNeal . Two such opinions have recently been published in the Middle Districts of Florida and Georgia, and they address McNeal with as much contempt as many commentators have previously expressed.
In the Georgia case of In re Williams , the court stated brashly that it would “follow McNeal, even though the Court is persuaded McNeal was wrongly decided.” In her opinion in the case of In re Bustamante , Judge Jennemann of the Middle District of Florida was a bit more diplomatic when she approved the avoidance of a wholly unsecured junior lien – “provided [that] the Eleventh Circuit or the Supreme Court has not, at the time of discharge, vacated the opinion or otherwise overruled or limited the holding of McNeal .”
Judge Jennemann’s qualification in Bustamante is indicative of bankruptcy courts’ hesitation to grant McNeal motions to strip wholly unsecured junior liens. Their hesitation is understandable, given the criticism over McNeal and the status of the appeal in the Eleventh Circuit.
Presently the appellate court is faced with an additional wrinkle which is delaying any hope of “vacating, overruling or limiting” the McNeal holding. Soon after McNeal was decided, GMAC, an appellee in the Eleventh Circuit case, filed for bankruptcy in New York. Because of the automatic stay in GMAC’s bankruptcy proceeding, the Eleventh Circuit issued an order in February, stating in part that “[ McNeal ] must stand still for a while,” until the New York bankruptcy court lifted this automatic stay. Within a week of the order, attorneys for Ms. McNeal filed a response, informing the court that the stay was no longer in place. Despite the procedural “go ahead,” the Eleventh Circuit has not moved forward on any of the pending motions.