479 U. S. 36
November 12, 1986
In a 7-2 decision, Justice Powell held that restitution orders imposed by state courts cannot be discharged under federal bankruptcy law. For years, Carolyn Robinson defrauded Connecticut of welfare money. When caught, she was ordered to pay restitution over a five year period. Shortly afterward, she tried to get this restitution order discharged under US bankruptcy law. At the time, Connecticut offered no objection, and the discharge was granted. Years later, Connecticut contacted Robinson, and told her that the restitution order was non-dischargeable.
For decades, courts had almost uniformly held that penalties imposed by state courts were not dischargeable in bankruptcy. Robinson turned on the effect that a new bankruptcy law passed in 1978 had on that settled judicial rule. The 1978 act said that an obligation could not be discharged if it was “a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss.” Robinson argued that a restitution order was clearly “compensation for actual pecuniary loss.” Powell disagreed, noting that restitution imposed as a criminal penalty is primarily meant not to compensate a victim, but punish and rehabilitate the perpetrator. He also argued that it would be unwise to subject state punishments to review in bankruptcy courts.
Justice Marshall dissented, and Justice Stevens joined him. His basic contention was that the very essence of restitution is “compensation for actual pecuniary loss,” and that the restitution was thus not automatically non-dischargeable. Frankly, I think Marshall makes a darn good argument. Looking at the relevant texts, and taking them at face value, the judgment levied on Robinson sure looks like a dischargeable debt. It’s odd to see Marshall, the Court’s most liberal Justice, making such a textualist argument, ignoring longstanding precedent, and passing over the probable real world outcomes of the ruling. Powell had the better policy argument, but Marshall had the better legal argument. Sometimes you never know what decision-making methods a Justice will use.