Opinion ID: 602805
Heading Depth: 3
Heading Rank: 2

Heading: Public Rights Theory

Text: 30 The Granfinanciera Court wrote that, notwithstanding the Seventh Amendment, Congress may decline to provide jury trials for cases involving statutory rights that are integral parts of a public regulatory scheme and whose adjudication Congress has assigned to ... a specialized court of equity, because such rights are public. 492 U.S. at 55 n. 10, 109 S.Ct. at 2797 n. 10. We have already explained why the Trustee's action is not statutory; he is suing in contract and tort. On its face, then, the Trustee's action cannot invoke the public rights doctrine. However, the Bank argues that the public rights doctrine is not restricted to controversies over public rights, but may be applied more loosely to controversies involving  public rights. To a limited extent we agree. Our difference with the Bank's position is that we believe that if a party is going to be deprived of as fundamental a constitutional right as a jury trial, the controversy must be inextricably intertwined with a public right; the involvement may not be casual or vague. 31 The Supreme Court has not spoken extensively on the scope of the public rights doctrine. However, in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982), the Court allowed that if Congress possessed the power to create a statutory right, it also had the discretion to create presumptions, or assign burdens of proof, or prescribe remedies. Id. at 83, 102 S.Ct. at 2877. These innocuous procedural matters, which are the only matters mentioned by the Court, are obviously necessary to the resolution of a dispute over the statutory public right and are certainly inextricably intertwined with it. Indeed, when Congress tried to go further and assign all contract and tort claims arising under Chapter 11 of the Bankruptcy Act of 1978 (the Act) or related to cases under Chapter 11 of the Act, the Court held that this assignment violated Article III of the Constitution. 10 Id. at 87, 102 S.Ct. at 2880. 32 Justice Brennan in Granfinanciera did not expound on how involved with public rights a controversy must be to be triable without a jury. Indeed, he consistently spoke in terms of statutory rights and was careful not to expand the scope beyond congressionally created, novel rights. However, he did find that actions such as fraudulent conveyance suits which arise out of bankruptcy proceedings were nonetheless private rights and beyond the scope of the public rights exception. 492 U.S. at 56, 109 S.Ct. at 2797. Thus, a more formal, necessary relationship to a public right is required. 33 We do not believe that the Trustee's action here bears a close nexus to any statutory public right. Indeed, his state law causes of action are paradigmatic private rights, even when asserted by an insolvent corporation in the midst of Chapter 11 reorganization proceedings. 492 U.S. at 56, 109 S.Ct. at 2797. His suit is aimed at enhancing the bankruptcy estate and does not involve any other creditor's rights or the relationship among the creditors as a group or between the debtor and another creditor. The suit seeks compensation for damage done. It has nothing to do with the essence of the bankruptcy regulatory scheme of allowing or reordering claims. 34 CNB contends, however, that because these  'seemingly private right[s]'  arose post-petition, they bear on the administration of the estate and are  'so closely integrated into a public regulatory scheme as to be a matter appropriate for agency resolution with limited involvement by the Article III judiciary.'  492 U.S. at 54, 109 S.Ct. at 2796 (quoting Thomas v. Union Carbide Agricultural Products Co., 473 U.S. 568, 593-94, 105 S.Ct. 3325, 3339, 87 L.Ed.2d 409 (1985)). We have recently held, however, that  'in an ordinary tort action ... the right of trial by jury is guaranteed by the Constitution'  even when the cause of action arises entirely while the bankruptcy proceedings are in progress. In re Ben Cooper, Inc., 896 F.2d 1394, 1402 (2d Cir.1990) (quoting United States v. Fotopulos, 180 F.2d 631, 634 (9th Cir.1950)), vacated on other grounds, 498 U.S. 964, 111 S.Ct. 425, 112 L.Ed.2d 408 (1990), reinstated, 924 F.2d 36 (2d Cir.), cert. denied, --- U.S. ----, 111 S.Ct. 2041, 114 L.Ed.2d 126 (1991). Although the tort action in Cooper was litigated between the debtor and a non-creditor insurance company, it arose out of negotiations over a policy that was required by the plan of reorganization. The administration of the estate was implicated in that case to the same degree and in the same vague and unconvincing way as it is in this case. 35 The Trustee's action is simply not integrally related to any substantive bankruptcy provisions and the public regulatory scheme here will not be hampered by a jury trial. The power of the bankruptcy court to readjust debtor-creditor relations and reorder creditor claims equitably and completely will not be diminished if this action is tried before a jury. Although it may be more expeditious to eschew a separate jury trial, such concerns have little weight when balanced against a constitutional guarantee. For these reasons we conclude that the Trustee's action involves private rights and should be tried before a jury, if that is the Trustee's choice.