Opinion ID: 1428173
Heading Depth: 3
Heading Rank: 2

Heading: Seventh Amendment Jury Trial Right

Text: In addition to Local Rule 9015-2(b) Sigma also seeks support for its jurisdictional argument by pointing to its right to a Seventh Amendment jury trial in the district court. Sigma argues it is has been held that once a jury right is found, the bankruptcy court may no longer maintain jurisdiction and the action must be instantly transferred to an Article III court. Sigma specifically claims this was the holding of Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 109 S.Ct. 2782, 106 L.Ed.2d 26 (1989), one of the Court's preeminent bankruptcy cases. We agree with Sigma that it is entitled to a Seventh Amendment jury trial in the district court. Growe v. Bilodard Inc., 325 B.R. 490, 491-92 (D.Me.2005). We disagree, however, that Granfinanciera holds that in light of this jury trial right the bankruptcy court may no longer retain jurisdiction, and the action must be instantly transferred to an Article III court. See 492 U.S. at 50, 64, 109 S.Ct. 2782. Granfinanciera involved a debtor's action under § 548 of the Bankruptcy Code to recover certain allegedly fraudulent transfers made to two creditors. 492 U.S. at 36, 109 S.Ct. 2782. In response to the action the creditors requested a `trial by jury.' Id. at 37, 109 S.Ct. 2782. The bankruptcy court, however, denied the creditors' request and held a bench trial, which resulted in a judgment for the debtor. Id. The creditors filed an appeal and the Supreme Court granted certiorari sole[ly] to decide whether [the creditors had been] entitled to a jury trial under the Seventh Amendment. Id. at 38, 50, 109 S.Ct. 2782. After a lengthy discussion, the Court held, these creditors, who had filed no claim of their own, had been entitled to a Seventh Amendment jury trial. Id. at 64, 109 S.Ct. 2782 ([We hold] . . . the Seventh Amendment entitles petitioners to the jury trial they requested.). That the creditors had been entitl[ed] to a jury trial under the Seventh Amendment, however, was the exclusive holding of Granfinanciera. Id. at 64-65, 109 S.Ct. 2782. In fact, the Granfinanciera Court explicitly stated it would hold no more. Id. at 50, 109 S.Ct. 2782(We are not obliged to decide today [anything more than] . . . whether the Seventh Amendment confers on petitioners a right to a jury trial. . . .). Granfinanciera does not support Sigma's argument that once a jury right is found the bankruptcy court must instantly give up jurisdiction and the case must be transferred to an Article III court. See id. at 64, 109 S.Ct. 2782(stating no view as to whether action may remain in bankruptcy in light of Seventh Amendment right to a jury trial). Instead, we find Sigma's argument to this effect is an open issue, and one of novel impression in this circuit. E.g., City Fire Equip. Co., Inc. v. Ansul Fire Prot. Wormald U.S., Inc., 125 B.R. 645, 646-50 (N.D.Ala.1989) (en banc) (finding that Granfinanciera did not settle whether a bankruptcy court could retain jurisdiction if there was a jury right and thus it was a novel issue). For guidance on how to address Sigma's argument we have canvassed the numerous courts outside this circuit who have already addressed the issue. See, e.g., In re Stansbury Poplar Place, Inc., 13 F.3d 122, 128 (4th Cir.1993); Orion Pictures Corp. v. Showtime Networks ( In re Orion Pictures Corp. ), 4 F.3d 1095, 1101-02 (2nd Cir.1993); King v. Fidelity Nat'l Bank, 712 F.2d 188, 192 (5th Cir.1983); Growe v. Bilodard Inc., 325 B.R. 490, 492 (D.Me. 2005); Plan Adm'r v. Lone Star RV Sales, Inc. ( In re Conseco Fin. Corp. ), 324 B.R. 50, 55-56 (N.D.Ill.2005); Travelers Cas. & Sur. Co. v. Skinner Engine Co. ( In re Am. Capital Equip., LLC ), 325 B.R. 372, 375 (W.D.Pa.2005); Hayes v. Royala, Inc., 180 B.R. 476, 477 (E.D.Tex.1995); Wittes v. Interco Inc., 137 B.R. 328, 329 n. 2 (E.D.Mo.1992); In re Douglas, 170 B.R. 169, 170 (D.Colo.1994). Universally these courts have all reached the same holding, that is, a Seventh Amendment jury trial right does not mean the bankruptcy court must instantly give up jurisdiction and that the case must be transferred to the district court. E.g., City Fire Equip. Co., 125 B.R. at 646-50. Instead, the bankruptcy court is permitted to retain jurisdiction over the action for pre-trial matters. E.g., In re Stansbury Place, 13 F.3d at 128. As these courts have explained, two rationales justify this holding. First, allowing the bankruptcy court to retain jurisdiction over pre-trial matters, does not abridge a party's Seventh Amendment right to a jury trial. See City Fire Equip. Co., 125 B.R. at 649; accord Jobin v. Kloepfer ( In re M & L Bus. Mach. Co. ), 159 B.R. 932, 934-35 (D.Colo. 1993); Stein v. Miller, 158 B.R. 876, 879-80 (S.D.Fla.1993). A bankruptcy court's pre-trial management will likely include matters of discovery, pre-trial conferences, and routine motions, which obviously do not diminish a party's right to a jury trial. See In re M & L Bus. Mach. Co., 159 B.R. at 934. Moreover, even if a bankruptcy court were to rule on a dispositive motion, it would not affect a party's Seventh Amendment right to a jury trial, as these motions merely address whether trial is necessary at all. See Diamond Door Co. v. Lane-Stanton Lumber Co., 505 F.2d 1199, 1203 & n. 6 (9th Cir.1974) ([S]ummary judgment is granted as a matter of law where there is no genuine issue of material fact, and, therefore, the province of the jury, fact finding, is not invaded.) (emphasis in original); City Fire. Equip. Co., 125 B.R. at 649 (While motions to dismiss and motions for summary judgment may be dispositive, they do not impact on the right to a jury trial. They merely involve legal issues as to whether any trial is necessary. . . . The granting of such motions does not deprive a party of a right to a jury trial. ) (last emphasis added). Second, requiring that an action be immediately transferred to district court simply because of a jury trial right would run counter to our bankruptcy system. See In re Conseco Finance Corp., 324 B.R. at 55; ERC Indus., Inc. v. Nat. Union Fire Insr. Co. ( In re Kenai Corp. ) 136 B.R. 59, 61(S.D.N.Y.1992). Under our current system Congress has empowered the bankruptcy courts to hear Title 11 actions, and in most cases enter relevant orders. § 157(b)(1), (c)(1); see also In re W. Asbestos Co., 313 B.R. 859, 862 (N.D.Cal.2004) (§ 157(b)(1)); Hassett v. BancOhio Nat'l Bank ( In re CIS Corp. ), 172 B.R. 748, 763-64 (S.D.N.Y.1994) (§ 157(c)(1)). As has been explained before, this system promotes judicial economy and efficiency by making use of the bankruptcy court's unique knowledge of Title 11 and familiarity with the actions before them. See, e.g., City Fire Equip. Co., 125 B.R. at 649; Douglas, Inc., 170 B.R. at 170; Barlow & Peek, Inc. v. Manke Truck Lines, Inc., 163 B.R. 177, 179(D.Nev.1993). Accordingly, if we were to require an action's immediate transfer to district court simply because there is a jury trial right we would effectively subvert this system. In re Kenai Corp., 136 B.R. at 61(A rule that would require a district court to withdraw a reference simply because a party is entitled to a jury trial, regardless of how far along toward trial a case may be, runs counter to the policy favoring judicial economy that underlies the statutory scheme. . . .). Only by allowing the bankruptcy court to retain jurisdiction over the action until trial is actually ready do we ensure that our bankruptcy system is carried out. E.g., Disbursing Agent of Murray F. Hardesty Estate v. Severson ( In re Hardesty ), 190 B.R. 653, 657 (D.Kan.1995). We find the holding reached by the great majority of courts to have addressed this issue convincing and adopt it here. A valid right to a Seventh Amendment jury trial in the district court does not mean the bankruptcy court must instantly give up jurisdiction and that the action must be transferred to the district court. Instead, we hold, the bankruptcy court may retain jurisdiction over the action for pre-trial matters. The bankruptcy court here then did not err in retaining jurisdiction over pre-trial matters, despite Sigma's valid claim for a Seventh Amendment jury trial in the district court.