Opinion ID: 550367
Heading Depth: 1
Heading Rank: 3

Heading: Constitutional Authority to Exercise Civil Contempt

Text: Power 19 Although appellant's challenge to the bankruptcy court's exercise of civil contempt power concerned only the statutory authority for such exercise, having determined that statutory authority does exist, we must now consider whether the grant of such authority by Congress is constitutional. 20 Under the Bankruptcy Act of November 6, 1978, Pub.L. No. 95-598, 92 Stat. 2549 (codified as amended at 11 U.S.C. and scattered sections of 28 U.S.C.) (1978 Act), Congress granted the bankruptcy courts sweeping powers, including civil and criminal contempt powers. These powers emanated largely from 28 U.S.C. Sec. 451, which added bankruptcy courts to the definition of courts of the United States, and 28 U.S.C. Sec. 1481, which provided: 21 A bankruptcy court shall have the powers of a court of equity, law, and admiralty, but 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. 22 As a court of the United States, bankruptcy courts exercised the same civil and criminal contempt powers as an Article III court, with the additional limitation on criminal contempt set forth in section 1481. 23 In 1982, the United States Supreme Court held that the grant of jurisdiction to bankruptcy courts in the 1978 Act was unconstitutional because it impermissibly encroached on the powers of Article III courts by permitting bankruptcy courts to adjudicate private, state-created rights of parties brought before the court involuntarily. Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 83-84, 90-91, 102 S.Ct. 2858, 2877-78, 2881-82, 73 L.Ed.2d 598 (1982). 6 Marathon involved a debtor seeking reorganization under Chapter 11 who brought a suit against a creditor for breach of contract, breach of warranty, misrepresentation, coercion, and duress. Id. at 56, 102 S.Ct. at 2864. The creditor sought to dismiss the suit on the ground that the 1978 Act unconstitutionally conferred Article III power upon nonArticle III judges. Id. at 56-57, 102 S.Ct. at 2864. 24 The Supreme Court held that bankruptcy courts under the 1978 Act were not constitutional if viewed as Article I courts because Article III barred Congress from creating Article I courts to exercise jurisdiction over all matters related to those arising under the bankruptcy laws. Id. at 76, 102 S.Ct. at 2874. The Court also held that the bankruptcy courts were not constitutional if viewed as adjuncts to Article III courts because the 1978 Act did not retain  'the essential attributes of the judicial power'  in the Article III district courts, but rather vested most, if not all, of those attributes in the adjunct bankruptcy courts. Id. at 87, 102 S.Ct. at 2880. 25 In discussing permissible adjuncts to Article III courts, the Court said one must distinguish between rights created by federal statute and rights recognized by the Constitution, in order to make the delicate accommodations required by the principle of separation of powers reflected in Article III. Id. at 83, 102 S.Ct. at 2877-78. The Court continued: 26 But when Congress creates a statutory right, it clearly has the discretion, in defining that right, to create presumptions, or assign burdens of proof, or prescribe remedies; it may also provide that persons seeking to vindicate that right must do so before the particularized tribunals created to perform the specialized adjudicative tasks related to that right. Such provisions do, in a sense, affect the exercise of judicial power, but they are also incidental to Congress' power to define the right that it has created. 27 Id. at 83, 102 S.Ct. 2878 (Footnote omitted.) 28 [T]he right of a bankrupt or a debtor to have his affairs wound up in a court of bankruptcy is a federal right explicitly recognized by the Constitution (Art. I, sec. 8, cl. 4) as well as by Congress. In re Walters, 868 F.2d at 670. The imposition of an automatic stay by the bankruptcy court is central to the exercise of that right. See Better Homes of Va., Inc., 52 B.R. at 429 (automatic stay provision of Sec. 362 plays a central role in the administration of the Bankruptcy Code). 29 Therefore, we are concerned here with the adjudication of a right created by federal statute, rather than a private, state-created right, like that of concern in Marathon. See In re Walters, 868 F.2d at 670 (Determining if a party has committed civil contempt involves essentially only consideration of whether the party knew about a lawful order and whether he complied with it. Such a determination does not involve private rights under non-bankruptcy laws and does not offend the Constitution....); see also Better Homes of Va., Inc., 804 F.2d at 292; In re Haddad, 68 B.R. at 951; Kellogg v. Chester, 71 B.R. at 38. [W]hen a bankruptcy court uses civil contempt to enforce a proper order ... such power under [Marathon ] is also 'incidental to Congress' power to define the right that it has created.'  In re Walters, 868 F.2d at 670. 30 Furthermore, the delegation of civil contempt power to bankruptcy courts does not impermissibly remove[ ] ... 'the essential attributes of the judicial power' from the Article III district courts and ... vest[ ] those attributes in a non-Article III adjunct, Marathon, 458 U.S. at 87, 102 S.Ct. at 2880, since the district courts retain the power of de novo review of the bankruptcy courts' findings of fact and conclusions of law in civil contempt proceedings. 7 See In re Stephen P. Grosse, P.C., 84 B.R. at 387-88. 31 Therefore, we, like the Fourth Circuit, conclude that the delegation of civil contempt power to the bankruptcy courts by 11 U.S.C. Sec. 105(a) does not offend the Constitution as in violation of the separation of powers. In re Walters, 868 F.2d at 670.