Burnett v. Stewart Title, Inc. (In Re Burnett)

Case: 10-20250 Document: 00511402151 Page: 1 Date Filed: 03/04/2011

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit

FILED
March 4, 2011

No. 10-20250 Lyle W. Cayce
Clerk

In the Matter of: SHANI BURNETT, Debtor

SHANI BURNETT,

Appellant,
v.

STEWART TITLE, INC.,

Appellee

Appeal from the United States District Court
for the Southern District of Texas

Before KING, DeMOSS, and PRADO, Circuit Judges.
KING, Circuit Judge:
Appellant Shani Burnett filed a complaint against Appellee Stewart Title,
Inc., alleging that Stewart violated 11 U.S.C. § 525(b) when it refused to hire
Burnett on the basis of her earlier bankruptcy filing. The bankruptcy court
granted Stewart’s motion to dismiss for failure to state a claim, holding that
§ 525(b) does not create a cause of action against private employers who
discriminate in hiring on the basis of an applicant’s bankruptcy status. The
district court affirmed, and so do we.
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No. 10-20250

BACKGROUND
The facts of this case are straightforward. In September 2006, Shani
Burnett filed a voluntary petition under Chapter 13 of the Bankruptcy Code, 11
U.S.C. § 1301 et seq. In July 2007, Burnett interviewed for prospective
employment with Stewart Title, Inc. (“Stewart”), which made her an offer of
employment contingent upon the results of a drug screening and background
check. During the background check, Stewart discovered Burnett’s bankruptcy
and rescinded its offer on that basis.
Burnett filed suit against Stewart under 11 U.S.C. § 525(b), asserting that
Stewart unlawfully discriminated against her due to her bankruptcy status.
Stewart filed a motion to dismiss under Rule 12(b)(6) for failure to state a claim.
The bankruptcy court decided that 11 U.S.C. § 525(b) does not prohibit private
employers from engaging in discriminatory hiring on the basis of an applicant’s
bankruptcy status, and granted Stewart’s motion to dismiss. The district court
affirmed, and this appeal followed.
STANDARD OF REVIEW
“We review a district court’s affirmance of a bankruptcy court decision by
applying the same standard of review to the bankruptcy court decision that the
district court applied.” Barner v. Saxon Mortg. Servs., Inc. (In re Barner), 597
F.3d 651, 653 (5th Cir. 2010) (per curiam) (citation and internal quotation marks
omitted). We therefore review findings of fact for clear error, and conclusions of
law de novo. Id.
ANALYSIS
The single issue on appeal is whether a claim for discrimination is legally
cognizable against a private employer that denies employment to an applicant
solely on the basis of that person’s status as a debtor in a bankruptcy proceeding.
The governing statute is 11 U.S.C. § 525, which provides two standards: one for

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government employers in § 525(a) and one for private employers in § 525(b).
Subsection (a) provides:
(a) . . . [A] governmental unit may not deny, revoke, suspend, or
refuse to renew a license, permit, charter, franchise, or other similar
grant to, condition such a grant to, discriminate with respect to such
a grant against, deny employment to, terminate the employment of,
or discriminate with respect to employment against, a person that
is or has been a debtor under this title or a bankrupt or a debtor
under the Bankruptcy Act, or another person with whom such
bankrupt or debtor has been associated, solely because such
bankrupt or debtor is or has been a debtor under this title or a
bankrupt or debtor under the Bankruptcy Act, has been insolvent
before the commencement of the case under this title, or during the
case but before the debtor is granted or denied a discharge, or has
not paid a debt that is dischargeable in the case under this title or
that was discharged under the Bankruptcy Act.
11 U.S.C. § 525(a) (emphases added).
Subsection (b) has language that is somewhat different from subsection
(a):
(b) No private employer may terminate the employment of, or
discriminate with respect to employment against, an individual who
is or has been a debtor under this title, a debtor or bankrupt under
the Bankruptcy Act, or an individual associated with such debtor or
bankrupt, solely because such debtor or bankrupt—
(1) is or has been a debtor under this title or a debtor or
bankrupt under the Bankruptcy Act;
(2) has been insolvent before the commencement of a case
under this title or during the case but before the grant or
denial of a discharge; or
(3) has not paid a debt that is dischargeable in a case under
this title or that was discharged under the Bankrupty Act.
Id. § 525(b) (emphasis added).
Burnett and amicus curiae contend that the act of denying employment to
a person is to “discriminate with respect to employment against” that person,
such that it is barred by the plain language of § 525(b). If § 525(b) were

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considered in isolation, Burnett’s position may have merit. However, when
interpreting the meaning of a phrase in a statute, the statute must be read as
a whole because “ ‘Act[s] of Congress . . . should not be read as a series of
unrelated and isolated provisions.’ ” Soliman v. Gonzales, 419 F.3d 276, 282 (5th
Cir. 2005) (quoting Gustafson v. Alloyd Corp., 513 U.S. 561, 570 (1995)). In
keeping with this rule, two basic canons of statutory construction guide our
decision here.
First, “[w]here Congress includes particular language in one section of a
statute but omits it in another section of the same Act, it is generally presumed
that Congress acts intentionally and purposefully in the disparate inclusion or
exclusion.” Russello v. United States, 464 U.S. 16, 23 (1983) (citation and
internal quotation marks omitted). Here, § 525(a) specifically states that a
governmental unit may not “deny employment to, terminate the employment of,
or discriminate with respect to employment against” a person on the basis of his
or her bankruptcy status. 11 U.S.C. § 525(a) (emphasis added). Subsection (b),
however, omits the prohibition against denying employment, stating only that
a private employer may not “terminate the employment of, or discriminate with
respect to employment against” such persons. 11 U.S.C. § 525(b). Applying the
Russello presumption, Congress’s exclusion of the words “deny employment to”
in subsection (b) was intentional and purposeful.
Second, when interpreting a statute, “it is a ‘cardinal rule that a statute
is to be read as a whole,’ in order not to render portions of it inconsistent or
devoid of meaning.” Zayler v. Dep’t of Agric. (In re Supreme Beef Processors,
Inc.), 468 F.3d 248, 253 (5th Cir. 2006) (quoting Wash. State Dep’t of Soc. &
Health Servs. v. Guardianship Estate of Keffeler, 537 U.S. 371, 385 n.7 (2003));
see also United States v. $92,203.00 in U.S. Currency, 537 F.3d 504, 509–10 (5th
Cir. 2008) (“We are to read a statute as a whole, so as to give effect to each of its
provisions without rendering any language superfluous.” (citation and internal

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quotation marks omitted)). To interpret the phrase “discriminate with respect
to employment” to include the act of hiring would violate this canon by rendering
superfluous the phrase “deny employment to” in § 525(a). Furthermore, if
“discriminate with respect to employment” encompasses all employment-related
actions, it would also render superfluous the phrase “terminate the employment
of” in both § 525(a) and (b).
Applying these two canons of statutory construction to § 525(b), we
conclude that Congress did not prohibit private employers from denying
employment to persons based on their bankruptcy status. Our decision is in
accord with the recent decision of our sister circuit in Rea v. Federated Investors,
627 F.3d 937 (3d. Cir. 2010), in which the Third Circuit held that Ҥ 525(b) does
not create a cause of action against private employers who engage in
discriminatory hiring.” Id. at 938. We therefore reject the solitary view
advanced in Leary v. Warnaco, Inc., 251 B.R. 656 (S.D.N.Y. 2000), that
Congress’s omission of a specific reference to hiring in § 525(b), after expressly
including it in § 525(a), was “simply because the scrivener was more verbose in
writing § 525(a),” id. at 658. See Russello, 464 U.S. at 23 (“We refrain from
concluding here that the differing language in the two subsections has the same
meaning in each. We would not presume to ascribe this difference to a simple
mistake in draftsmanship.”). The view in Leary is contrary to overwhelming
authority otherwise, and Burnett’s reliance on it is misplaced. See Rea, 627 F.3d
at 940 (collecting cases).
Nor are Burnett’s other arguments convincing. Although § 525(b) was
enacted six years after § 525(a), its language regarding employment
discrimination is nearly identical to that used in § 525(a), implying that
Congress modeled subsection (b) on subsection (a). Furthermore, Congress chose
to place the two subsections directly adjacent to each other in the Bankruptcy
Code, an unsurprising choice given that both subsections deal with the same

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subject: discrimination against debtors on the basis of their bankruptcy status.
Finally, Congress is “presumed to have knowledge of its previous legislation
when making new laws.” United States v. Zavala–Sustaita, 214 F.3d 601, 606 n.8
(5th Cir. 2000) (citation and internal quotation marks omitted). Had Congress
wished to bar private employers from discriminating against debtors in their
hiring decisions, it could have done so by adding the phrase “deny employment”
to subsection (b) when it amended § 525 in 1994 and again in 2005. See
Bankruptcy Reform Act of 1994, secs. 313, 501(d)(15), § 525(a), (c), Pub. L. No.
103–394, 108 Stat. 4106, 4140–41, 4146 (1994); Bankruptcy Abuse Prevention
and Consumer Protection Act of 2005, sec. 1211, § 525(c), Pub. L. No. 109–8, 119
Stat. 23, 194 (2005).
Burnett and amicus curiae also argue that application of the Russello
presumption to this statute would “create an incoherent and inconsistent
statutory scheme that would produce an untenable distinction between federal
and private employers that would lead to the unreasonable result of allowing
private employers to discriminate in an area that public employers could not.”
This is a policy argument best made to Congress, which intentionally and
purposefully drew a line prohibiting governmental units, but not private
employers, from denying employment to persons based on their status as debtors
in bankruptcy proceedings.
CONCLUSION
The bankruptcy court and district court below properly held that 11 U.S.C.
§ 525(b) does not prohibit private employers from denying employment to
applicants based on their bankruptcy status. We therefore AFFIRM the
judgment of the district court.

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