NPL’s Brush with the Supreme Court

In 1980, a series of unfortunate circumstances drove NPL to petition for reorganization through a Chapter 11 bankruptcy proceeding. A $1M job in Kentucky went bad during the late 1970s when the job site was severely flooded by uncharacteristically high rainfall. The customer accepted NPL’s appeal on account of “force majeure” for delay and complication, but they asked NPL to finish the job anyway. By completion, NPL had spent $3M, only a fraction of which the customer was willing to pay.

A few months later, NPL filed an adversary proceeding against the customer in the underlying bankruptcy case. The customer moved to dismiss the proceeding on grounds that certain provisions under the Bankruptcy Act of 1978 were unconstitutional. At the time, bankruptcy court judges were not protected by tenure or fixed salaries, but under the Act they were granted the same authority to adjudicate the same matters and rights as other judges who benefited from these protections. The customer sought dismissal of the suit on the ground that the Act unconstitutionally conferred authority on bankruptcy judges who did not have those protections. The bankruptcy court denied the customer’s motion to dismiss, but on appeal the federal district court reversed the bankruptcy court and granted the motion, after which the issue was appealed to the United States Supreme Court for review.

Although the Supreme Court ultimately affirmed the district court’s dismissal, it stayed its judgment to give Congress time to correct the statutes’ flaws, throwing bankruptcy law into a temporary state of uncertainty. NPL founder and president at the time, Noel Coon, remembers introducing himself to a woman who happened to be a lawyer during that time. She said, “Oh! You’re the son-of-a—– who screwed up bankruptcy laws.” Years later in 1984, Congress finally passed the Bankruptcy Amendments and Federal Judgeship Act to address the concerns voiced by the Supreme Court.

Though NPL never got all of its money back, the ordeal led to positive social change. And though the climb out of bankruptcy was difficult, it turned out to be one of NPL’s definitive achievements. By 1985, just five years later, NPL had repaid its bankruptcy debt and was rock solid once again.