Opinion ID: 669071
Heading Depth: 1
Heading Rank: 3

Heading: bankruptcy jurisdiction since marin

Text: 16 Marin was decided under the jurisdictional scheme put in place as part of the Bankruptcy Reform Act of 1978 (1978 Act), which revamped traditional bankruptcy jurisdiction. Until 1978, the federal district courts served as bankruptcy courts. For many years, however, the district courts had automatically referred bankruptcy cases to referees who issued final orders appealable to the district court. Under this system, bankruptcy referees played a dual role: deciding disputes and administering bankruptcies. There was dissatisfaction with this system and, in the 1978 Act, Congress eliminated the referee system and established a bankruptcy court as an adjunct to each district court. The Article I bankruptcy courts were given jurisdiction to hear and issue final decisions in proceedings arising under title 11 or arising in or related to cases under title 11. 28 U.S.C. Secs. 1471(b), (c) (repealed 1984). These courts thus had the power to hear claims based on federal and state law. 17 In 1982, however, the Supreme Court declared the 1978 Act's grant of jurisdiction to the bankruptcy courts unconstitutional. Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982). In Marathon, the Court held that the grant of jurisdiction in Sec. 1471, including the power to decide proceedings related to those arising under the bankruptcy laws, violated Article III of the Constitution. Id. at 85, 87, 102 S.Ct. at 2878, 2880. Congress, it reasoned, did not have the authority to grant jurisdiction to the Article I bankruptcy courts over proceedings related to a bankruptcy case involving rights created by state law which were independent or antecedent to the reorganization petition. Id. at 84, 102 S.Ct. at 2878. Fearing that its decision might spark the collapse of the bankruptcy system (because the decision effectively eliminated the existing bankruptcy apparatus), the Court declined to apply its holding retroactively; instead, it stayed the judgment for fourteen weeks to give Congress an opportunity to reconstitute the bankruptcy courts or to adopt other valid means of adjudication, without impairing the interim administration of the bankruptcy laws. Id. at 89, 102 S.Ct. at 2880. 18 Congress, however, failed to act by the time the stay expired. In order to avoid the total collapse of the bankruptcy system, the federal district courts adopted a model Emergency Rule as a local rule which went into effect on December 25, 1982. 1 Collier p 3.01[b]. 8 Under the Emergency Rule, Article III district judges exercised the entire scope of bankruptcy jurisdiction. The Emergency Rule allowed the district courts to refer bankruptcy cases to bankruptcy judges for final decision, subject to appeal to the district court. The bankruptcy judges could not, however, make final decisions on matters that were merely related to bankruptcy cases (unless the parties consented). Related to cases included traditional state law causes of action like those involved in the Marathon decision. 19 In July 1984 Congress enacted the Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub.L. No. 98-353, 98 Stat. 333 (BAFJA), which in many respects codified the Emergency Rule. The BAFJA provided that jurisdiction would be exercised in the first instance by the district court. The district courts could then refer bankruptcy cases to the bankruptcy courts. As before, the referral generally would occur automatically as provided by either local rule or a general order of reference. See 28 U.S.C. Sec. 157. 9 20 In order to satisfy the concerns of Marathon, the BAFJA introduced a new distinction into the jurisdictional scheme: core and non-core proceedings. See 28 U.S.C. Sec. 157(b). Today, proceedings arising under title 11 or arising in title 11 cases are core. See, e.g., Barnett v. Stern, 909 F.2d 973, 981 (7th Cir.1990) ([A] proceeding is core under section 157 if it invokes a substantive right provided by title 11 or if it is a proceeding that, by its nature, could arise only in the context of a bankruptcy case.). By contrast, proceedings which are related to a bankruptcy case are non-core. See In Re Meyertech Corp., 831 F.2d 410, 416 (3d Cir.1987); In re Wood, 825 F.2d 90, 96-97 (5th Cir.1987) (If the proceeding does not invoke a substantive right created by the federal bankruptcy law and is one that could exist outside of bankruptcy it is not a core proceeding; it may be related to the bankruptcy because of its potential effect, but under section 157(c)(1) it is an 'otherwise related' or non-core proceeding.); In re Yobe, 75 B.R. 873, 875 (Bankr.W.D.Pa.1987) (drawing a distinction between core and related proceedings). Although the district court can refer both core and non-core proceedings to the bankruptcy judge pursuant to Sec. 157(a) and the general order of reference, the bankruptcy court can only issue a final decision in core proceedings. See 28 U.S.C. Sec. 157(b). In non-core proceedings, unless the parties consent, the bankruptcy judge can only issue recommendations to the district judge which are subject to de novo review. See 28 U.S.C. Sec. 157(c). 21 Against this background, we now address the two bases on which Phar-Mor and Coopers ask us to distinguish Marin. We turn first to the contention that Marin does not reach the Phar-Mor/Coopers lawsuit because the lawsuit is not an adversary proceeding. 22