Split Widened: Does Bankruptcy Stay a Tax Court Appeal?

Per Schoppe v. Comm'r (10th Cir. Mar. 28, 2013)

Never has my textualism been more difficult to follow.  I am 100% sure that Congress meant to accomplish what its words seemingly (but not too surely) preclude.  I strongly recommend that any legislation/statutory construction professors use excerpts of some of the historical (not necessarily current) cases on both sides of this split.  For example, the Ninth Circuit has a good discussion about when not to apply the canon against superfluity.

Even better, the issue is relatively simple to explain.  A bankruptcy filing automatically stays most proceedings against the debtor.  Courts have interpreted this stay to apply to cases where the debtor is the appellant, provided that he was the defendant in the underlying proceedings.

The split concerns whether the stay applies to debtor appeals of tax court proceedings, where the debtor must initiate the tax court proceedings against the Commissioner, but will never actually receive any affirmative relief, but only a potential reduction/elimination of a deficiency.  Are such proceedings "against" the debtor, so that they can be stayed?

Here, the CA10 joins the CA11 in saying no, the stay does not apply.  The CA9 said yes.  As indicated above, I have a really hard time figuring out where I would come out.

On one hand, it is entirely clear that Congress intended the stay to apply.  Indeed, the statute explicitly covers proceedings in the tax court, see 11 USC 362(a)(8), and there is no logical reason why lower court but not appellate proceedings should be covered.

On the other hand, it also fairly clear that the relevant statutory text does not cover tax court appeals.   The stay covers:

 the commencement or continuation . . . of a judicial, administrative, or other action or proceeding against the debtor . . ., or to recover a claim against the debtor that arose before the commencement of the case under this title.

Id. 362(a)(1).  For three reasons, this does not apply.  First, the tax court proceeding is initiated by the debtor, against the commissioner.  Second, the tax court proceeding is not a continuation of the administrative process against the debtor, because the Supreme Court has said that tax court proceedings are judicial proceedings not subject to deferential review.  Third, tax court proceedings are not to recover a claim against the debtor, because the court cannot afford the Commissioner affirmative relief (that's for the administrative mechanisms), just uphold or reject the deficiency calculation.

In the end, I believe I would concur dubitante (background) in whatever path my hypothetical panel chose.  Certainly, my textualism points me toward thinking (like the CA10 here) that the stay doesn't apply.  At the same time, the CA9 opinion on the other side is quite strong, and purposivism suggests that the stay should apply.  I could textually justify applying the stay in two ways:

1. Treating a tax court proceeding as a declaratory judgment action, with the debtor as the declaratory judgment plaintiff seeking to avoid potential liability.  Then, hypothetically realigning the parties (as permitted by the Supreme Court) to treat the tax court proceeding as against the debtor.  See Pub. Serv. Comm'n of Utah v. Wycoff Co., Inc., 344 U.S. 237, 248 (1952)
2. Treating the tax court appeal as the "continuation of a proceeding before the United States Tax Court," even though the appellate proceedings are no longer before the Tax Court.