Opinion ID: 413419
Heading Depth: 1
Heading Rank: 4

Heading: when worlds collide

Text: 28 We have been presented with two inclusive, exclusive, sweeping schemes, both of which the Supreme Court has endorsed. The disputes clause is something that no court can disregard. Bankruptcy courts have jurisdiction exclusive of all other courts. Given such conflicting mandates, what is a poor circuit judge to do? 29 The standard statement of the rule regarding a bankruptcy court's summary jurisdiction to liquidate claims is that bankruptcy judges may, in their discretion, defer a claim to another tribunal for liquidation. See, e.g., 11 U.S.C. Sec. 93(d) (1976) (allowing bankruptcy court to specify manner of liquidation of unliquidated claims); 3 Collier on Bankruptcy p 57.15[3.2] (14th ed. 1977). In resolving whether the bankruptcy court below properly exercised its jurisdiction, we shall make a three-stage inquiry. First, we will consider what it means to say that the resolution of a question is discretionary. Second, we will examine the guidance given us by three Supreme Court decisions on exercise of bankruptcy jurisdiction. Third, we will mediate between the ASBCA and bankruptcy court.
30 The discretion of a judge is said by Lord Camden to be the law of tyrants; it is always unknown, it is different in different men; it is casual, and depends upon constitution, temper, and passion. In the best, it is oftentimes caprice; in the worst, it is every vice, folly, and passion to which human nature is liable. 31 1 J. Bouvier, Bouvier's Law Dictionary 885 (F. Rawle ed. 1914). 32 Fortunately, this rather bleak view is not the only insight we have into the nature of discretion. Chief Justice Marshall said on this subject: 33 Judicial power, as contradistinguished from the power of the laws, has no existence. Courts are the mere instruments of the law and will nothing. When they are said to exercise a discretion, it is a mere legal discretion, a discretion to be exercised in discerning the course prescribed by law; and, when that is discerned, it is the duty of the court to follow it. Judicial power is never exercised for the purpose of giving effect to the will of the judge; always for the purpose of giving effect to the will of the legislature; or, in other words, to the will of the law. 34 Osborn v. Bank of the United States, 22 U.S. (9 Wheat.) 740, 866, 6 L.Ed. 204 (1824). 35 Marshall's is a much more helpful concept of discretion. Discretion does not imply complete freedom to choose a decision, but rather an area of the law that has not matured enough to provide a rule of decision. Within an area of discretion, as yet uncluttered by particular rules, a judge is charged with determining what decision is dictated by more general rules of law. 36 Holding that a type of decision is subject to discretion is not necessarily an eternal statement of the law, but rather a comment on the state of the law at that time. What was once a virgin terrain of discretion may become spotted with landmarks of rules as decisions are made. The life of the law has not been logic; it has been experience. O. Holmes, The Common Law 5 (M. Howe ed. 1968). As experience with an area of the law develops, what was once discretionary may become restricted by a general rule, then qualified by exceptions, and then littered with exceptions to the exceptions. Discretion in areas of the law existing due to those areas' immaturity we shall call discretion by default. 37 This progress from discretion to rule is not inevitable, however. In some cases, as courts gain experience with an area of the law, they may decide it is inappropriate to govern that area by rules. It is the nature of a rule to prescribe a uniform treatment for a class of cases; for such a rule to be useful the class of cases must share enough salient characteristics to justify being treated as a group. 4 If an area of the law is too fact-specific, if the cases do not share enough important characteristics, it would be pointless to have a rule and the courts then may affirmatively decide to leave that area permanently to discretion. This kind of discretion we shall call discretion by choice. 38 Thus, in reviewing an exercise of discretion, we must always ask an antecedent question: Is this decision truly discretionary? In the particular field of the jurisdiction of a bankruptcy court to decide collateral questions, we find some narrowing of the area of discretion in three Supreme Court decisions.
39 On three occasions the Supreme Court has held that bankruptcy jurisdiction should yield to the expertise of an administrative tribunal. In Order of Railway Conductors v. Pitney, 326 U.S. 561, 66 S.Ct. 322, 90 L.Ed. 318 (1946), the Court held that a railroad reorganization court should not have decided a dispute between two rival unions regarding which union had the right to conduct trains of the bankrupt inside and outside railroad yards. The Court in part relied on the Railway Labor Act, 45 U.S.C. Secs. 151-188, which gave the Railway Labor Adjustment Board jurisdiction over such controversies. 40 Smith v. Hoboken Railroad Co., 328 U.S. 123, 66 S.Ct. 947, 90 L.Ed. 1123 (1946), held that the reorganization court should have deferred to the Interstate Commerce Commission for it to decide whether a bankrupt railroad had forfeited its right to leased tracks. Again, the Court relied on statutory enactments. Section 1(18) of the Interstate Commerce Act, 49 U.S.C. Sec. 1(18) provided that no railroad shall abandon its track without first obtaining a certificate of public convenience and necessity from the Commission. Furthermore, section 77 of the Bankruptcy Act, 11 U.S.C. Sec. 205, leaves no doubt that Congress did not mean to grant to the district courts [in bankruptcy] the same scope as to bankrupt roads that they may have in dealing with other bankrupt estates. Smith, supra, 328 U.S. at 133 n. 5, 66 S.Ct. at 953 n. 5 (quoting Palmer v. Massachusetts, 308 U.S. 79, 87, 60 S.Ct. 34, 38, 84 L.Ed. 93 (1939)). 41 Most recently, though not very recently, in Nathanson v. NLRB, 344 U.S. 25, 73 S.Ct. 80, 97 L.Ed. 23 (1952), the Court held that the bankruptcy court must defer to the NLRB for liquidation of unfair labor practice claims. The NLRB had found the employer guilty of unfair labor practices and ordered payment of back wages. While an action to enforce the order was pending in the court of appeals, an involuntary bankruptcy petition was filed against the employer. The court of appeals subsequently enforced the NLRB order and the NLRB filed a claim in bankruptcy. The bankruptcy court denied the claim and the Supreme Court reversed on the following rationale: 42 The bankruptcy court normally supervises the liquidation of claims. But the rule is not inexorable. A sound discretion may indicate that a particular controversy should be remitted to another tribunal for litigation. And where the matter in controversy has been entrusted by Congress to an administrative agency, the bankruptcy court normally should stay its hand pending an administrative decision.... It is the Board, not the referee in bankruptcy nor the court, that has been entrusted by Congress with authority to determine what measures will remedy unfair labor practices. 43 Id. at 30, 73 S.Ct. at 83 (citations omitted). Now we must decide how these three decisions suggest that we mediate the conflict between the ASBCA and bankruptcy court.
44 Finally we have the necessary predicate to mediate between the bankruptcy court and the ASBCA. We have some basic understanding of the nature of the two institutions, we know a little better what it means to say that a bankruptcy court may, in its discretion, allow another court to liquidate claims, and we know of three occasions where the Supreme Court has held that a bankruptcy court should have deferred. 45 The bankruptcy court below made detailed findings to support its determination that it should not defer. If the question facing us today were simply whether the bankruptcy court abused its discretion in making that determination, we would clearly have to hold that it did not; the bankruptcy court's decision was neither arbitrary nor capricious, but rather deliberate and reasoned. We do, however, have an antecedent question: Was this decision a truly discretionary decision? Was this discretion by choice? 46 1. The Supreme Court Trilogy.--The first inquiry in determining whether the decision was truly discretionary is to determine whether the trilogy of Supreme Court cases discussed above has enunciated a rule of decision controlling the present case. The parties to the present case viewed these three Supreme Court cases as holding essentially that when Congress has committed a type of decision to a specialized tribunal, a bankruptcy court should defer. This view of the three cases explains why the parties disagreed so sharply over the characterization of the ASPRs, the disputes clause, and the ASBCA as being creatures of Congress or the product of a private law contractual agreement. If the mechanisms of government dispute resolution are congressionally created, the case lies within the rule of the trilogy of Supreme Court cases, and not within the bankruptcy judge's discretion. 47 In discussing the mechanisms of governmental contract dispute resolution, supra Part II, we found that they were not congressionally mandated. Thus, we do not view this case as being within the rule of the trilogy of Supreme Court cases. 48 2. Time for a Rule.--Gary would have us read these three Supreme Court cases as also standing for their negative pregnant--if Congress has not specifically committed a particular class of disputes exclusively to a specialized agency, then those disputes are within the free discretion of the bankruptcy court to adjudicate. As we discussed earlier, a decision may be discretionary for two reasons. It may be discretionary because the field has not matured enough for there to be rules governing everything--discretion by default--or it may be discretionary because of an affirmative judgment that it is not amenable to a rule--discretion by choice. It is our view that the three Supreme Court cases do not represent an affirmative judgment that cases are permanently committed to discretion by choice unless they are committed by Congress exclusively to a specialized tribunal. And so we must now decide whether liquidation of a government contract claim should be given over to discretion by choice. 49 Congress initially gave over to discretion the question of whether a bankruptcy judge should defer to another tribunal for resolution of a particular issue. This discretion is not unguided, however; it has both latitudinal and longitudinal dimension. It is neither cosmic nor omniscient, but rather discretion guided by the will of the law. In determining the will of the law, we are guided by the broad principles of bankruptcy. The three Supreme Court cases represent a judgment that in a particular class of disputes, judgments committed by Congress to the exclusive expertise of an administrative body, the broad principles of bankruptcy would consistently lead to one particular decision, i.e., the bankruptcy court should defer. Thus that formerly discretionary question was an appropriate subject for a rule of decision. We are now faced with a similar question: Should there be a jurisdictional rule regarding government contract disputes before the ASBCA? 50 To determine whether a rule is appropriate, we must look to the nature of the two processes involved. The primary purpose of a proceeding in bankruptcy is to ensure that all creditors are treated fairly. 5 This primary purpose makes it absolutely essential that all claims be satisfied in one forum. The ancillary jurisdiction of a bankruptcy court to liquidate claims, however, involves more nearly the administrative convenience of settling all disputes in a single forum; it just is not as vital to the purpose of bankruptcy. So, for example, we are told that in proper circumstances bankruptcy courts should defer unsettled questions of state law to state courts. Thompson v. Magnolia Petroleum Co., 309 U.S. 478, 483, 60 S.Ct. 628, 630, 84 L.Ed. 876 (1940). See also First State Bank and Trust Co. v. Sand Springs State Bank, 528 F.2d 350, 354 (10th Cir.1976) (Bankruptcy courts should be reluctant to entertain questions which may be equally well resolved elsewhere.). Furthermore, though Smith, Order of Railway Conductors, and Nathanson do not specifically control this case, they at least can stand for the general proposition that a bankruptcy court should defer a complicated, technical dispute to a specialized forum. 51 Given these generalized ideas about a bankruptcy court's ancillary jurisdiction, we must now investigate whether they justify articulating a general rule for resolution of government contract disputes pending before a Board of Contract Appeals. First, allowing a Board of Contract Appeals to liquidate claims arising out of a government contract would not impair the primary goal of bankruptcy--requiring satisfaction of all claims against the bankrupt's estate proceed in a central forum; once the Board of Contract Appeals liquidated the claim, the government would look to the bankruptcy court for satisfaction. Second, government contracting law tends to be technical and esoteric. For example, the trial below took eight months and generated a 17,000 page transcript. The findings of fact constitute a moderate-sized book in themselves. Third, there are specialized fora designed specifically to resolve government contract disputes. Boards of Contract Appeals were created precisely because of the needs for expertise, speed, and uniformity in resolving government contract disputes. One cannot help but think that the ASBCA might have been better qualified by its experience and expertise to resolve the present case than was a bankruptcy judge who was at one stroke forced to master government contracting law. Fourth, government contract disputes may often have claims running against the government in addition to claims against the contractor. Resolution of the claims against the government is in the exclusive jurisdiction of the Court of Claims; thus, if a bankruptcy court did not defer to the Board of Contract Appeals, the same basic contract dispute might have to be tried twice. 6 Finally, though the Board of Contract Appeals were not specifically created by Congress, Congress certainly was aware of them and has endorsed them in the Wunderlich Act and the newly enacted Contract Disputes Act of 1978. 52 In summary, this does seem to be an area where a rule of decision would be proper. The various factors we have just discussed seem common to most, if not all, government contract disputes normally heard before Boards of Contract Appeals. This common nature is the key indicator for whether a rule or discretion by choice is appropriate; given these common factors, a rule for deferral is appropriate. We hold that a bankruptcy court should defer liquidation of a government contracting dispute to the Board of Contract Appeals. 7