In re Clay ( 1994 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 94-50507
In re Raymond Clay and Scott Clay, d/b/a The Emporium,
Petitioners.
On Petition for Writ of Mandamus to the
United States District Court for the Western District of Texas
(October 3, 1994)
Before HIGGINBOTHAM, SMITH, and STEWART, Circuit Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
Raymond and Scott Clay want a jury trial, but not in
bankruptcy court. The Clays seek a writ of mandamus to prevent the
bankruptcy court from conducting a jury trial in various core
proceedings. The argument is that Congress cannot constitutionally
empower non-Article III bankruptcy judges to hold jury trials
without the parties' consent. Because the applicable statute may
fairly be read as not granting such authority, we say only that
such a congressional effort would be dubious at best.
The trustee for the bankruptcy estate of Heelco Corporation
filed a complaint in the U.S. Bankruptcy Court for the Western
District of Texas. The complaint sought turnover and avoidance of
preferential and fraudulent transfers and post-petition
transactions with petitioners, the Clays. The Clays filed jury
demands in the bankruptcy court. In the district court, the Clays
filed a motion to withdraw the reference of the case from the
bankruptcy court.
The bankruptcy court found that the Clays had a Seventh
Amendment right to a jury trial and that the claims involved were
core proceedings. The court also held that it had the authority to
conduct a jury trial and had no authority to decline a reference
from the district court.
On June 28, 1994, the district court entered an order denying
the Clays' motion to withdraw the reference from the bankruptcy
court. It concluded that bankruptcy judges have the power to
preside over jury trials in core proceedings. The Clays then filed
this petition for writ of mandamus.
The parties do not dispute the core nature of the proceedings
or the Clays' right to a jury trial. Nor do they contest the
propriety of review via petition for writ of mandamus. Cf. La Buy
v. Howes Leather Co., 352 U.S. 249 (1957) (upholding use of
mandamus to vacate referral of cases to special master). The sole
issue presented is whether the bankruptcy judge has the
constitutional and statutory authority to conduct the jury trial
without the consent of the parties. Because the constitutional
question influences the interpretation of the statute, we first
address the Constitution.
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I.
A.
The American colonists suffered greatly under judges
controlled by King George III. They listed this grievance in the
Declaration of Independence: "He has made Judges dependent on his
Will alone, for the Tenure of their Offices, and the Amount and
Payment of their Salaries." Declaration of Independence para. 11
(U.S. 1776). The Framers made judicial independence a cornerstone
of our judicial system. The Federalist Papers stressed the need
for lifetime tenure and salary protection for judges. "Periodical
appointments, however regulated, or by whomsoever made, would, in
some way or other, be fatal to [the courts'] necessary
independence." The Federalist No. 78, at 471 (Alexander Hamilton)
(Clinton Rossiter ed., 1961). "Next to permanency in office,
nothing can contribute more to the independence of the judges than
a fixed provision for their support. . . . In the general course
of human nature, a power over a man's subsistence amounts to a
power over his will." The Federalist No. 79, at 472 (Alexander
Hamilton).
The Framers guarded against this danger in Article III of the
Constitution:
The judicial Power of the United States, shall be
vested in one supreme Court, and in such inferior Courts
as the Congress may from time to time ordain and
establish. The Judges, both of the supreme and inferior
Courts, shall hold their Offices during good Behaviour,
and shall, at stated Times, receive for their Services,
a Compensation, which shall not be diminished during
their Continuance in Office.
U.S. Const. art. III, § 1. In other words, only judges who enjoy
3
life tenure and protection against salary cuts can exercise "[t]he
judicial Power of the United States." Northern Pipeline Constr.
Co. v. Marathon Pipe Line Co., 458 U.S. 50, 59 (1982) (Brennan, J.,
plurality opinion).
These guarantees insure independence from legislative and
executive influence, promote public confidence in judicial
integrity, attract well qualified jurists to the bench, and
insulate judges from pressure by other judges. Id. at 57-60 & n.
10; The Federalist No. 78 (Alexander Hamilton). Courts and
commentators focus on the importance of insulating judges from
Congress and the Executive Branch. But as Chief Judge Kaufman
noted, "it is equally essential to protect the independence of the
individual judge, even from incursions by other judges. The heart
of judicial independence, it must be understood, is judicial
individualism," and giving one judge power over another chills
judicial individualism. Irving R. Kaufman, Chilling Judicial
Independence, 88 Yale L.J. 681, 713 (1979). A judge must be free
to decide a case according to the law as he sees it, without fear
of personal repercussion or retaliation from any source.
Despite the absolute language of Article III, the Supreme
Court has carved out three exceptions for so-called Article I
legislative courts, which need not enjoy life tenure or salary
protection. First, Congress may create legislative courts for U.S.
territories and the District of Columbia, because Articles I and IV
of the Constitution give Congress plenary power over these
geographic enclaves. Marathon, 458 U.S. at 64-65 (Brennan, J.,
4
plurality opinion); Palmore v. United States, 411 U.S. 389, 407
(1973) (District of Columbia); American Ins. Co. v. Canter, 26 U.S.
(1 Pet.) 511, 546 (1828) (territories). Second, courts-martial
need not conform to Article III's requirements, because Congress
and the Commander-in-Chief have extraordinary leeway in military
affairs. Marathon, 458 U.S. at 66 (Brennan, J., plurality
opinion); Dynes v. Hoover, 61 U.S. (20 How.) 65, 79 (1857). Third,
Article I courts may hear cases involving "public rights," which
are rights against the government or closely intertwined with a
regulatory scheme. Thomas v. Union Carbide Agric. Prods., 473 U.S.
568, 593-94 (1985); Marathon, 458 U.S. at 67-70 (Brennan, J.,
plurality opinion). The rationale underlying the public rights
exception is that because "Congress [was] free to commit such
matters completely to nonjudicial executive determination, . . .
there can be no constitutional objection to Congress' employing the
less drastic expedient of committing their determination to a
legislative court or an administrative agency." Marathon, 458 U.S.
at 68 (Brennan, J., plurality opinion) (citing Crowell v. Benson,
285 U.S. 22, 50 (1932)); see also Murray's Lessee v. Hoboken Land
& Improvement Co., 59 U.S. (18 How.) 272, 284 (1855).
Regardless of whether a case involves territories, the
military, or public rights, an Article III court may employ non-
Article III adjuncts, such as special masters and magistrates. The
only limitation is that the Article III court must retain "'the
essential attributes of the judicial power.'" Marathon, 458 U.S.
at 77-81 (Brennan, J., plurality opinion) (quoting Crowell, 285
5
U.S. at 51).
In Marathon, the Supreme Court struck down the scheme of
bankruptcy courts set up by the Bankruptcy Act of 1978. Bankruptcy
courts had the power to preside over jury trials, issue declaratory
judgments, issue writs of habeas corpus, and issue orders, process,
and judgments. Their judgments were reviewable under the clearly
erroneous standard. The plurality relied upon these facts in
concluding that district courts had not retained "the essential
attributes of the judicial power." Id. at 87 (internal quotation
marks omitted). The plurality also concluded that the courts were
not public rights courts because they handled noncore proceedings
between private parties. Id. at 71. The concurring Justices
agreed that the bankruptcy courts were not adjuncts because of the
deferential standard of review. Id. at 91 (Rehnquist, J.,
concurring in the judgment). They noted that the exercise of
jurisdiction did not involve public rights, because English common-
law courts heard such claims in the eighteenth century. "No method
of adjudication is hinted, other than the traditional common-law
mode of judge and jury." Id. at 90.
In the wake of Marathon, Congress passed the Bankruptcy
Amendments and Federal Judgeship Act of 1984 (BAFJA). Pub. L. No.
98-353, 98 Stat. 333 (codified as amended in scattered sections of
U.S.C. titles 5, 11, and 28). Even after BAFJA, bankruptcy courts
do not satisfy the requirements of Article III: they serve
fourteen-year terms, are removable for cause, and enjoy no
protection from salary cuts. See 28 U.S.C. § 152(a)(1), (e).
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Marathon suggested that core proceedings "may well be" cases
involving public rights, and BAFJA responded to Article III
concerns by restricting bankruptcy courts to core proceedings. 28
U.S.C. § 157(b); Marathon, 458 U.S. at 71 (Brennan, J., plurality
opinion). Congress also styled bankruptcy courts as adjuncts,
labeling them "a unit of the district court." 28 U.S.C. § 151.
B.
An Article III court may not delegate "'the essential
attributes of the judicial power'" to an adjunct. Marathon, 458
U.S. at 77 (Brennan, J., plurality opinion) (quoting Crowell, 285
U.S. at 51). The authority to conduct a jury trial is an essential
attribute. In noting that bankruptcy courts have all of the usual
powers of district courts, the very first power listed by the
Marathon plurality was the authority to conduct jury trials. Id.
at 85. In Schor, the Court distinguished Marathon on this ground,
upholding the CFTC's authority because the CFTC cannot hold jury
trials or issue writs of habeas corpus. CFTC v. Schor, 478 U.S.
833, 853 (1986). Cf. Gomez v. United States, 490 U.S. 858 (1989)
(construing statute as forbidding magistrates to conduct
nonconsensual voir dire, to avoid serious constitutional questions
under Article III); United States v. Ford, 824 F.2d 1430, 1435 (5th
Cir. 1987) (en banc) (same), cert. denied, 484 U.S. 1034 (1988).
Jury trials are at the heart of "the judicial Power," as shown
by the Framers' focus on juries. Article III itself guarantees
criminal jury trials. Because colonial Americans considered this
7
protection inadequate, they insisted on a Bill of Rights to cure
the deficiency. As a result, the Fifth, Sixth, and Seventh
Amendments enshrine the right to criminal grand juries and criminal
and civil petit juries. Americans considered juries vital to the
judiciary because juries check government overreaching, educate the
citizens who serve on them, keep justice local, and permit popular
participation in the administration of justice. Akhil R. Amar, The
Bill of Rights as a Constitution, 100 Yale L.J. 1131, 1183-89
(1991) (collecting historical sources); Richard S. Arnold, Trial by
Jury: The Constitutional Right to a Jury of Twelve in Civil Trials,
22 Hofstra L. Rev. 1, 15-17 (1993). For example, one colonial
theorist endorsed juries as "the 'lower judicial bench' in a
bicameral judiciary"; another described them as "'the democratic
branch of the judiciary power.'" Amar, supra, at 1189 (quoting
John Taylor of Caroline and the "Maryland Farmer") (emphasis
omitted). In short, the Framers viewed jury trials as an essential
part of judicial power.
The inadequacy of district court review of jury trials is
fatal to delegation to adjuncts. In upholding a magistrate's power
to rule on a pretrial motion, the Court stressed the importance of
de novo review in maintaining sufficient Article III control over
an adjunct. United States v. Raddatz, 447 U.S. 667, 681-82 (1980);
see also Gomez, 490 U.S. at 875 n.29 (suggesting that Raddatz
requires that district court be able to rehear witnesses and decide
for itself de novo). Marathon likewise emphasized the need for
ample review of an adjunct by an Article III court. 458 U.S. at 85
8
(Brennan, J., plurality opinion) (disapproving of clearly erroneous
standard of review of bankruptcy court judgments); id. at 91
(Rehnquist, J., concurring in the judgment) (holding that
bankruptcy courts were not adjuncts because they were subject "only
[to] traditional appellate review").
De novo review is inconsistent with the Seventh Amendment,
which states: "[N]o fact tried by a jury, shall be otherwise
reexamined in any Court of the United States, than according to the
rules of the common law." In other words, the Seventh Amendment
permits only ordinary appellate review; but Marathon held that
ordinary appellate review did not satisfy Article III. This court
has recognized the clash between Article III review of adjunct
proceedings and Seventh Amendment sanctity of jury verdicts: "The
reference [to a magistrate for jury trial] either effectively
denies the right to trial by jury, or impermissibly abrogates the
decisive role of the district judge, or both." Ford v. Estelle,
740 F.2d 374, 380 (5th Cir. 1984).
De novo review by a district court is also impossible in
practice, because a cold record cannot capture the atmosphere, the
expressions, the attitudes that are the marrow of a jury trial.
Gomez, 490 U.S. at 874-75; United States v. Ford, 824 F.2d at 1435-
36; see also Geras v. Lafayette Display Fixtures, Inc., 742 F.2d
1037, 1049 (7th Cir. 1984) (Posner, J., dissenting) (noting that
appellate review leaves trial judge wide latitude in evidentiary
rulings, instructions, and comments). Only verbal acrobatics could
label the autonomous conduct of a trial as adjunct to anything.
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C.
There is an argument that while Congress treated bankruptcy
courts as adjuncts of district courts, they are defensible as
legislative courts hearing public rights cases, based on Marathon's
statement that core proceedings in bankruptcy "may well be a
'public right,' but [a noncore proceeding] obviously is not." 458
U.S. at 71 (Brennan, J., plurality opinion). There is a related
argument that core bankruptcy proceedings are closely linked to the
bankruptcy regulatory scheme and qualify as public rights cases for
that reason. See Union Carbide, 473 U.S. at 594. We do not see
bankruptcy law as a "public regulatory scheme" akin to the Federal
Insecticide, Fungicide, and Rodenticide Act discussed in Union
Carbide. It provides process, procedures, and a forum, but does
not (as would a public regulatory scheme) implement policy choices
beyond the confines of cases brought to it. Resolving disputes
over compensation was part of the comprehensive administrative
regime of FIFRA.
The public rights/private rights dichotomy of Crowell and
Murray's Lessee is a deceptively weak decisional tool. Regardless,
it is unpersuasive here. The plurality in Marathon spoke
tentatively because its remarks were dicta; the facts in Marathon
involved a noncore proceeding based on a state-law contract claim.
Moreover, the reasoning of the concurring Justices in Marathon
applies to any case involving a right to a jury trial. They held
that Marathon was not a public rights case because it was "the
stuff of the traditional actions at common law tried by the courts
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at Westminster in 1789. . . . No method of adjudication is hinted,
other than the traditional common-law mode of judge and jury." 458
U.S. at 90 (Rehnquist, J., concurring in the judgment). Regardless
of whether one characterizes a proceeding as core or noncore, a
case is not a public rights case if a litigant has a Seventh
Amendment right to trial by jury.
The Court's readings of the Seventh Amendment confirm this
reasoning. The test for whether an Article III court is necessary
for an action at law is the same as the test for whether a party
has a Seventh Amendment right to a jury trial. Granfinanciera,
S.A. v. Nordberg, 492 U.S. 33, 53 (1989). Thus, in a suit that
would have been tried at common law in England in 1789, a litigant
has both a Seventh Amendment right to a jury and an Article III
right to an Article III court.
We may sometimes fail to acknowledge the equitable roots of
certain bankruptcy cases and hence find a right to a jury trial
when we should not. Bankruptcy jurisdiction, which is largely
equitable, is nigh mutually exclusive of cases or controversies at
law in which there is a right to trial by jury. Congress, the
Executive Branch, and the courts may choose to resolve legislative,
executive, or equitable judicial disputes by using a "jury" even
though the Seventh Amendment does not require it. When a non-
Article III court uses such an optional "jury," not only does the
Seventh Amendment not forbid de novo review of the "jury's"
findings, see Capital Traction Co. v. Hof, 174 U.S. 1, 38-39
(1899), but the need for supervision by an Article III court may
11
necessitate de novo review. But cf. Peretz v. United States, 501
U.S. 923, 939 (1991) (treating Article III right to de novo review
as waivable). Optional "juries" in non-Article III courts are in
effect advisory juries for Article III courts. But where a case or
controversy gives rise to a Seventh Amendment right to a jury
trial, Congress may not give jurisdiction to a non-Article III
court.
This conclusion jibes with the reasons underlying the public
rights exception. Marathon explained the rationale: because
"Congress [is] free to commit [public rights cases] completely to
nonjudicial executive determination, [it can] employ[] the less
drastic expedient of committing their determination to a
legislative court or an administrative agency." 458 U.S. at 68
(Brennan, J., plurality opinion) (citing Crowell, 285 U.S. at 50);
accord Ex parte Bakelite Corp., 279 U.S. 438, 458 (1929); Murray's
Lessee, 59 U.S. at 284; see Union Carbide, 473 U.S. at 589. But
where the Seventh Amendment applies, Congress is not free to commit
the case "completely to nonjudicial executive determination."
Because the litigant has a right to a judicial proceeding including
a jury trial, the public rights doctrine cannot apply.
D.
The trustee makes two counterarguments. First, he claims that
policy considerations such as efficiency support the authority of
bankruptcy courts to hold jury trials. Shifting jury trials to
district courts, he reasons, would interrupt ongoing proceedings
12
and split proceedings between bankruptcy and district courts. The
trustee argues that moving jury trials to district courts would
inundate district courts with core matters in which they lack
expertise. Furthermore, he says, giving litigants the power to
switch courts by demanding jury trials would produce forum-shopping
and delay, as defendants would take advantage of district courts'
crowded dockets to slow cases down. See In re Grabill, 967 F.2d
1152, 1159-60 (7th Cir. 1992) (Posner, J., dissenting); Smith v.
Lynco-Elec. Co. (In re El Paso Refinery, L.P.), 165 B.R. 826, 831
& n.6 (W.D. Tex. 1994). The district court in this case endorsed
El Paso's "practical opinion," suggesting that it too relied on
these policy arguments.
The trustee would trumpet efficiency, but we hear a kazoo, at
best. Reports of strategic manipulation of jury trials have been
greatly exaggerated. In practice, litigants have not begun
demanding more jury trials since 1989, when Granfinanciera
established a right to jury trial in certain bankruptcy
proceedings. Grabill, 967 F.2d at 1157-58; Steinberg v. Mellon
Bank (In re Grabill Corp.), 132 B.R. 725, 727 n.3 (N.D. Ill. 1991);
cf. Granfinanciera, 492 U.S. at 63 n.17 (finding that similar
concerns with jury trials in fraudulent conveyance actions had been
overstated). A district court could avert split proceedings by
withdrawing the reference to the bankruptcy court.
If anything, jury trials in bankruptcy courts would impede
efficiency. These speedy courts were not designed to conduct long
jury trials, and most bankruptcy judges and lawyers are unused to
13
jury procedures. Grabill, 967 F.2d at 1158; Ellenberg v. Bouldin,
125 B.R. 851, 854 (N.D. Ga. 1991); Weeks v. Kramer (In re G. Weeks
Securities, Inc.), 89 B.R. 697, 710 (Bankr. W.D. Tenn. 1988). In
this respect, district courts have far more expertise than
bankruptcy courts do.
Regardless, "the fact that a given law or procedure is
efficient, convenient, and useful in facilitating functions of
government, standing alone, will not save it if it is contrary to
the Constitution." INS v. Chadha, 462 U.S. 919, 944 (1983). The
Framers separated power as a prophylaxis against its abuse. They
chose to sacrifice a measure of efficiency and expediency to insure
that judges would be independent of the President, Congress, and
other judges. See The Federalist No. 79, at 474 (Alexander
Hamilton) (rejecting provision for removal of mentally disabled
judges because that power might be abused). We are not free to
tinker with this carefully crafted choice.
The trustee's second argument is that other non-Article III
federal courts have the authority to conduct jury trials. For
example, local District of Columbia courts can conduct jury trials.
Pernell v. Southall Realty, 416 U.S. 363 (1974) (not discussing
Article III issue). In addition, federal magistrates can conduct
jury trials with the parties' consent. 28 U.S.C. § 636(c)(1);
Collins v. Foreman, 729 F.2d 108 (2d Cir.), cert. denied, 469 U.S.
870 (1984).
This is true, but consent matters. Because one function of
Article III is to protect litigants, courts have accorded
14
significant if not dispositive weight to consent and waiver. In
doing so, these courts may have undervalued the structural
component of Article III--the idea that the location of dispute
resolution is not solely the concern of the litigants in given
cases. Schor, 478 U.S. at 848-51 (upholding CFTC's jurisdiction
and distinguishing Marathon because Schor consented while Marathon
had not); Pacemaker Diagnostic Clinic of America, Inc. v.
Instromedix, Inc., 725 F.2d 537, 541-44 (9th Cir.) (en banc)
(Kennedy, J.) (upholding magistrate's power to hold bench trial
because litigants consented), cert. denied, 469 U.S. 824 (1984).
However, a litigant may waive his Seventh Amendment right to jury
trial. Bank of Columbia v. Okely, 17 U.S. (4 Wheat.) 235, 244
(1819). Likewise, a litigant may choose to submit his case to a
magistrate, arbitrator, or other non-Article III tribunal. A
litigant may even choose to settle or not to bring suit at all.
Consent is a key factor empowering magistrates to conduct jury
proceedings. Compare Gomez, 490 U.S. at 870 (construing statute as
not permitting federal magistrate to conduct nonconsensual voir
dire, to avoid serious constitutional question, and noting that
"[a] critical limitation on [magistrates'] expanded jurisdiction is
consent") with Peretz, 501 U.S. at 932 (allowing consensual voir
dire by magistrate and distinguishing Gomez because "the
defendant's consent significantly changes the constitutional
analysis"). Thus, the magistrate analogy is weak.
The comparison to territorial courts is stronger but still
inapposite. In Marathon, the Supreme Court distinguished
15
territorial courts from bankruptcy courts. The plurality reasoned
that the District of Columbia is "a unique federal enclave over
which Congress has . . . entire control"; it can exercise such
power "only in limited geographic areas." 458 U.S. at 75-76
(Brennan, J., plurality opinion) (internal quotation marks
omitted). The Court refused to expand this narrow, historic
category to authorize similar powers for bankruptcy courts. So do
we.
II.
We need not and should not rest on these constitutional
grounds. A court must not interpret a statute in a way that raises
constitutional questions if a reasonable alternative construction
poses no such problems. Gomez, 490 U.S. at 864; Crowell, 285 U.S.
at 62; NLRB v. Catholic Bishop, 440 U.S. 490, 507 (1979) (declining
to reach constitutional question in absence of clear statement of
congressional intent). Unless BAFJA contains a clear statement
empowering bankruptcy judges to conduct jury trials, we must
construe the statute as not granting that power. This
interpretative principle of restraint is important, but can
perversely expand the bite of constitutional rules so carefully not
invoked. We are careful to take a hard look at the constitutional
issues avoided--to insure that we not flee rabbits. This said, the
constitutional concerns here are concrete and large.
Six circuits have considered this issue, and five have decided
that bankruptcy courts lack the statutory authority to conduct jury
16
trials. Official Committee v. Schwartzman (In re Stansbury Poplar
Place, Inc.), 13 F.3d 122, 127-28 (4th Cir. 1993) (construing BAFJA
as not empowering bankruptcy judges to hold jury trials, to avoid
constitutional issue); In re United Missouri Bank, N.A., 901 F.2d
1449, 1456-57 (8th Cir. 1990) (same); Grabill, 967 F.2d at 1153-55
(same); Rafoth v. National Union Fire Ins. Co. (In re Baker & Getty
Financial Servs., Inc.), 954 F.2d 1169, 1173 (6th Cir. 1992)
(resting only on statutory argument); Kaiser Steel Corp. v. Frates
(In re Kaiser Steel Corp.), 911 F.2d 380, 391-92 (10th Cir. 1990)
(same). Contra Ben Cooper, Inc. v. Insurance Co. (In re Ben
Cooper, Inc.), 896 F.2d 1394 (2d Cir.), cert. granted, 497 U.S.
1023, vacated and remanded, 498 U.S. 964 (1990), previous op.
reinstated, 924 F.2d 36 (2d Cir.), and cert. denied, 500 U.S. 928
(1991).
We agree with the Fourth, Sixth, Seventh, Eighth, and Tenth
Circuits. The statute need not be read as attempting a run at this
mountain. Indeed, BAFJA is silent on the subject. Only one
section mentions juries, stating: "[T]his chapter and title 11 do
not affect any right to trial by jury . . . [for] a personal injury
or wrongful death tort claim," except that a district court may
order a bench trial for issues under 11 U.S.C. § 303. 28 U.S.C.
§ 1411. As the Second Circuit has noted, § 1411 "offers almost no
guidance." Ben Cooper, 896 F.2d at 1402; accord Granfinanciera,
492 U.S. at 40 n.3 (finding § 1411 to be "notoriously ambiguous").
Section 157(b) offers little light. It requires that either
the district court in the district where the claim arose or the
17
district court in which the bankruptcy case is pending try personal
injury and wrongful death claims. 28 U.S.C. § 157(b)(5). Some
courts reason that because sections 157(b) and 1411 single out
personal injury and wrongful death cases for jury trials in
district courts, bankruptcy courts may hold all other jury trials.
Perino v. Cohen (In re Cohen), 107 B.R. 453, 455 (S.D.N.Y. 1989);
Wolfe v. First Fed. Sav. & Loan Ass'n (In re Wolfe), 68 B.R. 80,
87-88 (Bankr. N.D. Tex.), appeal denied sub nom. M & E Contractors,
Inc. v. Kugler-Morris Gen. Contractors, Inc., 67 B.R. 260 (N.D.
Tex. 1986). Others read § 1411's express preservation of a right
to jury trial in personal injury cases as implying that Congress
did not foresee jury trials in other types of cases. E.g.,
Grabill, 967 F.2d at 1153. Both readings are reasonable; neither
is compelling. In short, sections 157(b) and 1411 are ambiguous.
The same is true of the more general provisions of BAFJA.
Section 151 provides: "Each bankruptcy judge, as a judicial officer
of the district court, may exercise the authority conferred under
this chapter with respect to any action, suit, or proceeding and
may preside alone and hold a regular or special session of the
court . . . ." 28 U.S.C. § 151. Section 157(b)(1) states:
"Bankruptcy judges may hear and determine all cases under title 11
and all core proceedings arising under title 11 . . . and may enter
appropriate orders and judgments . . . ." 28 U.S.C. § 157(b)(1).
The trustee argues that this language empowers bankruptcy judges in
strong and unqualified terms, drawing no distinction between bench
and jury trials. Other courts, however, have read these sections
18
as personally empowering bankruptcy judges to "hear and determine
all cases," rather than empowering them to delegate fact-finding to
juries. Grabill, 967 F.2d at 1155; Kaiser, 911 F.2d at 391.
Kaiser also noted that Congress repealed § 1481, which had given
bankruptcy judges "'the powers of a court of equity, law and
admiralty.'" Id. (quoting 28 U.S.C. § 1481 (repealed)). Neither
§ 151 nor § 157(b)(1) says anything about juries and procedures.
The trustee's final argument notes that the Emergency Rules
adopted in the wake of Marathon prohibited bankruptcy judges from
holding jury trials, but BAFJA was silent on the issue. One could
read this silence as either perpetuating or repudiating the ban on
jury trials in bankruptcy court. Grabill, 967 F.2d at 1154. This
argument is too weak to be of much help.
Congress passed BAFJA in 1984, before Granfinanciera
recognized the Seventh Amendment rights of litigants in bankruptcy
cases. As the Supreme Court has noted, BAFJA's "denial of the
right to a jury trial in preference and fraudulent conveyance
actions can hardly be said to represent Congress' considered
judgment of the constitutionality of this change." Granfinanciera,
492 U.S. at 61 n.16. Since Congress did not consider whether it
could deny jury trials, it would be difficult to conclude that it
considered a bankruptcy court's power to preside over jury trials.
United Missouri Bank, 901 F.2d at 1456; see Kaiser Steel, 911 F.2d
at 392.
The statute contains no clear statement proscribing or
prescribing jury trials in bankruptcy court. We are not persuaded
19
that Congress would have challenged such formidable constitutional
principles by innuendo. We GRANT the writ of mandamus and instruct
the district court to withdraw the reference to the bankruptcy
court and honor the Clays' demand for trial by jury before an
appropriate United States District Court.
WRIT GRANTED.
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