Source: https://case-law.vlex.com/vid/458-u-s-50-604865690
Timestamp: 2019-04-19 21:00:04+00:00

Document:
458 U.S. 50 (1982), 81-150, Northern Pipeline Constr. Co. v. Marathon Pipe Line Co.
Party Name: Northern Pipeline Constr. Co. v. Marathon Pipe Line Co.
The Bankruptcy Act of 1978 (Act) established a United States bankruptcy court in each judicial district as an adjunct to the district court for such district. The bankruptcy court judges are appointed for 14-year terms, subject to removal by the judicial council of the circuit in which they serve on grounds of incompetence, misconduct, neglect of duty, or disability. Their salaries are set by statute, and are subject to adjustment. The Act grants the bankruptcy courts jurisdiction over "all civil proceedings arising under title 11 [bankruptcy] [of the United States Code] or arising in or related to cases under title 11." See 28 U.S.C. § 1471(b) (1976 ed., Supp. IV). After it had filed a petition for reorganization in a Bankruptcy Court, appellant Northern Pipeline Construction Co. (Northern) filed in that court a suit against appellee Marathon Pipe Line Co. (Marathon) seeking damages for an alleged breach of contract and warranty, as well as for misrepresentation, coercion, and duress. Marathon sought dismissal of the suit on the ground that the Act unconstitutionally conferred Art. III judicial power upon judges who lacked life tenure and protection against salary diminution. The Bankruptcy Court denied the motion to dismiss, but [102 S.Ct. 2861] on appeal the District Court granted the motion.
1. Section 1471's broad grant of jurisdiction to bankruptcy judges violates Art. III. Pp. 57-87.
no doubt that bankruptcy judges created by the Act are not Art. III judges. Pp. 57-62.
(b) Article III bars Congress from establishing under its Art. I powers legislative courts to exercise jurisdiction over all matters arising under the bankruptcy laws. The establishment of such courts does not fall within any of the historically recognized situations -- non-Art. III courts of the Territories or of the District of Columbia, courts-martial, and resolution of "public rights" issues -- in which the principle of independent adjudication commanded by Art. III does not apply. The bankruptcy courts do not lie exclusively outside the States, like the courts of the Territories or of the District of Columbia, or bear any resemblance to courts-martial, nor can the substantive legal rights at issue in the present action -- the right to recover contract damages to augment Northern's estate -- be deemed "public rights." There is no persuasive reason in logic, history, or the Constitution, why bankruptcy courts lie beyond the reach of Art. III. Pp. 63-76.
(c) Section 1471 impermissibly removed most, if not all, of the essential attributes of the judicial power from the Art. III district court and vested those attributes in a non-Art. III adjunct. Crowell v. Benson, 285 U.S. 22, and United States v. Raddatz, 447 U.S. 667, distinguished. Congress does not have the same power to create adjuncts to adjudicate constitutionally recognized rights and state-created rights as it does to adjudicate rights that it creates. The grant of jurisdiction to bankruptcy courts cannot be sustained as an exercise of Congress' power to create adjuncts to Art. III courts. Pp. 76-87.
2. The above holding that the broad grant of jurisdiction in § 1471 is unconstitutional shall not apply retroactively, but only prospectively. Such grant of jurisdiction presents an unprecedented question of interpretation of Art. III, and retroactive application would not further the operation of the holding, but would visit substantial injustice and hardship upon those litigants who relied upon the Act's vesting of jurisdiction in the bankruptcy courts. Pp. 87-88.
Northern's suit over Marathon's objection violates Art. III; and that the Court's judgment should not be applied retroactively. Pp. 89-92.
BRENNAN, J., announced the judgment of the Court and delivered an opinion, in which MARSHALL, BLACKMUN, and STEVENS, JJ., joined. REHNQUIST, J., filed an opinion concurring in the judgment, in which O'CONNOR, J., joined, post, p. 89. BURGER, C.J., filed a dissenting opinion, post, p. 92. WHITE, J., filed a dissenting opinion, in which BURGER, C.J., and POWELL, J., joined, post, p. 92.
laws. The Bankruptcy Act of 1978 (Act)1 made significant changes in both the substantive and procedural law of bankruptcy. It is the changes in the latter that are at issue in this case.
Before the Act, federal district courts served as bankruptcy courts and employed a "referee" system. Bankruptcy proceedings were generally conducted before referees,2 except in those instances in which the district court elected to withdraw a case from a referee. See Bkrtcy.Rule 102. The referee's final order was appealable to the district court. Bkrtcy.Rule 801. The bankruptcy courts were vested with "summary jurisdiction" -- that is, with jurisdiction over controversies involving property in the actual or constructive possession of the court. And, with consent, the bankruptcy court also had jurisdiction over some "plenary" matters -- such as disputes involving property in the possession of a third person.
in each judicial district, as an adjunct to the district court for such district, a bankruptcy court which shall be a court of record known as the United States Bankruptcy Court for the district.
may not enjoin another court or punish a criminal contempt not committed in the presence of the judge of the court or warranting a punishment of imprisonment.

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