Opinion ID: 416587
Heading Depth: 1
Heading Rank: 3

Heading: the jurisdiction of the district courts

Text: 26 In order to assess the validity of the interim rule by which the district courts have referred cases to the bankruptcy courts, we must first determine the jurisdiction of the district courts after Northern Pipeline. Some bankruptcy courts have held in the past few months that Northern Pipeline declared the district courts' jurisdiction over bankruptcy matters unconstitutional along with the grant of jurisdiction to the bankruptcy courts. See, e.g., In Re Conley, 26 B.R. 885 (Bkrtcy.M.D.Tenn.1983); In Re Motion to Dismiss: Constitutionality of Jurisdiction of the Bankruptcy Court, 23 B.R. 334 (Bkrtcy.N.D.Ga.1982); In Re Schear Realty & Investment Co., 25 B.R. 463, 1983 Bankr.L.Rep. (CCH) Sec. 68,949 (Bkrtcy.S.D.Ohio 1982). We do not agree with this view. 27 Basically these courts have taken the position that Congress intended that bankruptcy courts have exclusive original jurisdiction over bankruptcy matters. The 1978 Act reformed the then-existing system to eliminate the bifurcated jurisdiction of the bankruptcy and district courts. In their view, Congress envisioned the district courts as having only the appellate review granted in the new 28 U.S.C. Sec. 1334 as amended by the 1978 Act. Since the Supreme Court declared the grant of jurisdiction in Sec. 241(a) of the 1978 Act to be invalid and further found that this grant was non-severable, these courts have concluded that jurisdiction over bankruptcy proceedings remains in no court. We cannot accept this fatalistic analysis because we find that, in spite of Northern Pipeline, there remain at least two valid statutory grants of original jurisdiction over bankruptcy cases to the district courts. 28 First, the Northern Pipeline decision simply does not question the jurisdiction of the district courts. Northern Pipeline involved the adjudication by a non-Article III court of an action brought by the debtor against a third party who was not making a claim against the estate. The case was essentially peripheral to the bankruptcy proceeding. Had the debtor not been a bankrupt, the matter would have necessarily been adjudicated in state court. The plurality broadly concluded that the expansive delegation of power to non-Article III tribunals in the 1978 Act could not be sustained as an exercise of Congress' power to create adjuncts to Article III courts. Northern Pipeline, supra, at 102 S.Ct. 2880. The Court rejected the option of removing the bankruptcy courts' jurisdiction over this particular limited class of peripheral matters. The plurality found it necessary to declare the entire grant of jurisdiction to the bankruptcy courts under Sec. 241(a) of the 1978 Act unconstitutional. Id. 102 S.Ct. at 2880, n. 40. 29 The concurrence clarified this broad holding, however, by stating specifically that: 30 I would, therefore, hold so much of the Bankruptcy Act of 1978 as enables a Bankruptcy Court to entertain and decide Northern's lawsuit over Marathon's objection to be violative of Art. III of the United States Constitution. Because I agree with the plurality that this grant of authority is not readily severable from the remaining grant of authority to Bankruptcy Courts under Sec. 241(a), see ante, [102 S.Ct.] at 2880 n. 40, I concur in the judgment. (emphasis added). Id. 102 S.Ct. at 2882 31 Without a majority, the only clear holding in Northern Pipeline must be the more limited view expressed in the concurring opinion. In the passage quoted above, Justices Rehnquist and O'Connor specifically refer to the unconstitutional grant of jurisdiction only to the bankruptcy courts; the concurrence never even mentions the district courts. We do not believe that the concurring Justices intended to issue a broad declaration that the grant of jurisdiction in bankruptcy matters, which for two hundred years have been adjudicated under the auspices of the district courts, is unconstitutional, without ever referring directly to the district courts, to their historical role in the bankruptcy system, or to the various sources of their jurisdiction contained in the old and new Bankruptcy Acts. 32 In addition, Justices Rehnquist and O'Connor suggest that the plurality may be deciding much more than is called for under the facts of the case: 33 Particularly in an area of constitutional law such as that of Art. III Courts, with its frequently arcane distinctions and confusing precedents, rigorous adherence to the principle that this Court should decide no more of a constitutional question than is absolutely necessary accords with both our decided cases and with sound judicial policy. 34 Id. 102 S.Ct. at 2881. We do not interpret the concurrence as going beyond the invalidation of Sec. 1471(c) to a holding that the entire bankruptcy system is unconstitutional. The statement that the unconstitutional grant of authority is not readily severable from the remainder of the jurisdiction refers only to the relatively new expansive grant of jurisdiction to the bankruptcy courts. Thus, we hold that Secs. 1471(a) and (b) giving the district courts original jurisdiction in all cases under Title 11 were not affected by the Supreme Court's decision in Northern Pipeline. 35 Even assuming, arguendo, that the Supreme Court invalidated all of Sec. 1471, the district courts retain original jurisdiction over bankruptcy matters under 28 U.S.C. Sec. 1334 which provides as follows: 36 The district courts shall have original jurisdiction, exclusive of the states, of all matters and proceedings in bankruptcy. 37 Congress established a new system under Sec. 1471 but did not repeal the jurisdictional grant in Sec. 1334 until April 1, 1984. See Sec. 402(b) of the 1978 Act. At that time, Sec. 1334 is to be amended to give the district courts only appellate jurisdiction over bankruptcy matters. See Sec. 238 of the 1978 Act. 38 Several bankruptcy courts and some commentators have maintained that Congress inadvertently left the old Sec. 1334 intact until 1984. They stress that the grant of original and exclusive jurisdiction to the district courts in the old Sec. 1334 conflicts with the more elaborate split jurisdictional grant in Sec. 1471 and has, therefore, effectively been repealed. Thus, they conclude that Sec. 1334 cannot be utilized as an alternative to Sec. 1471 during the period from December 24, 1982, until the new Sec. 1334 becomes effective on April 1, 1984. See, e.g., In Re Conley, 26 B.R. 885 (Bkrtcy.M.D.Tenn.1983); Letter from Commercial Law League of America to Hon. Peter W. Rodino, Jr., reprinted in H.R.Rep. No. 807, 97th Cong., 2d Sess. 44 (1982); Vihon, Delegation of Authority and the Model Rule: The Continuing Saga of Northern Pipeline, 1983 COM.L.J. 64, 67-68. 39 We do not interpret Congress' failure to repeal the old Sec. 1334 as an oversight. Several members of Congress expressed concern during the hearings on the 1978 Act that the Act conferred unconstitutionally broad powers on the non-Article III bankruptcy judges. See Hearings on H.R. 31 and H.R. 32 before the Subcommittee on Civil and Constitutional Rights of the House Committee on the Judiciary, 94th Cong., 2d Sess. 2081, 2084 and 2682-2706 (1976); H.R.Rep. No. 595, 95th Cong., 1st Sess. 23-39, reprinted in 1978 U.S.Code Cong. & Ad.News 5787, 5984-6000. See also Northern Pipeline, supra, 102 S.Ct. at 2866 n. 12. Rather than endow the bankruptcy judges with the protections of Article III, Congress delayed the repeal of Sec. 1334 until the constitutional question could be settled. See 1 Collier on Bankruptcy, Sec. 301 at 3-37 (15th ed. 1982). While the transitional sections of the 1978 Act provide for a new and enlarged role for the bankruptcy courts under Sec. 1471(c), Congress purposefully chose not to eradicate the original jurisdiction historically residing in the district courts. Intending to avoid precisely the situation created by Northern Pipeline, Congress left the district courts' jurisdiction over bankruptcy matters intact. 40 Even if we were to accept the view that Congress did not intend that Sec. 1334 continue in force simultaneously with Sec. 1471, under long-standing principles of statutory construction, Sec. 1334 is revived by the invalidation of the new Sec. 1471. It has long been held that a statute which is unconstitutional does not repeal a prior statute on the subject when a contrary construction would create a void in the law which the legislative body did not intend. The prior statute is revived to avoid a chaotic hiatus in the law. See 1A Sutherland Statutory Construction Sec. 23.24 (4th ed. 1973); 73 Am Jur 2d Sec. 382; Frost v. Corporation Comm'n of Oklahoma, 278 U.S. 515, 526-27, 49 S.Ct. 235, 239, 73 L.Ed. 483 (1929); Truax v. Corrigan, 257 U.S. 312, 342, 42 S.Ct. 124, 133, 66 L.Ed. 254 (1921) (original jurisdictional statute revived when amendment granting additional jurisdiction to issue writs declared unconstitutional as violation of equal protection of the laws). Therefore, even if we assume that Sec. 1471 operated as an implied repeal of the old Sec. 1334, the repeal becomes a nullity with the invalidation of Sec. 1471. 41 We, therefore, conclude that under Secs. 1471(a) and (b) and the old Sec. 1334, the district courts may adjudicate bankruptcy proceedings filed after December 24, 1982.