Dissent from Recommendation to Make Bankruptcy Judges Article III Judges

By Commissioner Babette Ceccotti

Honorable Edith H. Jones

Commissioner James I. Shepard

This Commission has recommended that bankruptcy judges be appointed as Article III federal judges. Principal reasons for the recommendation include enhancing the prestige of the office, improving the quality of judges, streamlining bankruptcy procedure and reducing delay and expense. The Commission's recommendation implies that the 350-plus new Article III trial judges created by their proposal would exercise only bankruptcy jurisdiction.

Congress has historically increased the size of the Article III judiciary only reluctantly, given the politics involved in affording one political party or the other an opportunity to increase the size of the judiciary, and the acute sensibility of the Judicial Conference on the subject. Congress' failure to confer Article III status on the bankruptcy judges in 1978 has been attributed to forces such as these.⁽²⁵⁷⁹⁾ In revisiting the issue after the Supreme Court's decision in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982), Congress again declined to grant the bankruptcy courts Article III status and wrangled over the addition of dozens of other federal judgeships. There is little reason to expect that the proposal supported by a majority of our colleagues will not suffer the same fate as these earlier efforts.

But if there were a chance that this proposal would be considered legislatively, it should be rejected as unnecessary for several reasons.

First, none of the supporters of this proposal believe that there is a constitutional imperative to afford bankruptcy relief only through Article III courts. The system has not functioned that way for 100 years; no Supreme Court decision has suggested or intimated such a necessity. The question has always been that of properly and constitutionally allocating administrative and litigation responsibilities among trustees, bankruptcy judges, state courts, or Article III federal courts. To insist upon Article III status for bankruptcy judges applies a remedy much broader than the perceived problem.

If, as the Report suggests, the bankruptcy courts may be criticized as "insular and self-referential," or even "pro-debtor," it is not as a result of the judges' lack of Article III status. Whether or not the bankruptcy judges are Article III judges, they will still hear only bankruptcy cases and the operative law to be applied will be the same. The Bankruptcy Code is designed to advance bankruptcy outcomes, such as reorganization and the discharge of claims, in a manner that intentionally disrupts non-bankruptcy obligations and relationships. It is the law itself that is insular in this regard. Transforming the bankruptcy judges into an Article III judiciary will not introduce a more "generalist" perspective into the system. If that is the goal, then it is the Bankruptcy Code that would have to change, not the judiciary.

Second, consistent with at least one study made available to the Commission, the number of bankruptcy decisions raising any jurisdictional issues has been declining steadily since the 1984 BAFJA amendments.⁽²⁵⁸⁰⁾ Only a handful of reported opinions on jurisdictional issues were identified in 1995.⁽²⁵⁸¹⁾ Thus, to the extent that there remain uncertainties at the margins of bankruptcy court jurisdiction, the courts and parties seem to be functioning without the necessity of dispositive litigation or legislation. While bankruptcy jurisdictional problems are vexing in the few cases that pose them, there is no reason to conclude that they are more common than those of Article III courts, whose jurisdiction is limited by statute and which co-exist in a federal system of dual sovereignty. The bankruptcy community may lack perspective on the magnitude of the alleged problem.

With respect to the charge that uncertainty over the extent of bankruptcy court jurisdiction leads to litigation delay, the occasional, convoluted case history does not argue persuasively for this remedy, particularly given the recognized breadth of the court's jurisdiction. Litigation over the court's jurisdiction is generally a dispute over the proper forum for a particular action; the underlying dispute still must be resolved, whether in the bankruptcy court or elsewhere. The Commission's recommendation to streamline the appeals process should produce far more tangible results in terms of reducing delay.

Third, contrary to the implication of the proposal, the prestige of bankruptcy courts has increased considerably since passage of the Bankruptcy Code. The quality of candidates applying for and being selected to bankruptcy judgeships has been very high. Further, the physical facilities used by the judges, their salaries and retirement plans, and their courts' staffing have all been upgraded to levels fully appropriate to the volume and stature of their work. Given the current perquisites of office and the level of respect for bankruptcy judges within the profession, it is difficult to see how transforming the bankruptcy courts into Article III courts would materially improve the quality of this specialized judiciary.⁽²⁵⁸²⁾

What the proposal ultimately fails to recognize is that the sweeping changes in bankruptcy case administration and bankruptcy court jurisdiction beginning with the 1978 revision has achieved the principal objectives identified by the 1973 Commission: it divorced the judges from purely administrative tasks, removed the historical taint of too-close association with trustees, and set the bankruptcy courts on a path, now completed, of elevating their status and recognition within the federal courts. The problems the Proposal addresses are old problems, long since solved.

Nevertheless, in the most unlikely event that Congress acts on legislation to make bankruptcy judges Article III judges, a serious flaw in the proposal should be pointed out. There is no practical way to bifurcate Article III trial responsibility. It will be difficult to run federal courthouses across the country in which Article III judges bear the same responsibility to try cases and administer their dockets and confront identical or overlapping issues of law -- but some of them are confined to bankruptcy cases and others are exposed to the entire range of civil and criminal matters. The workloads are bound to be uneven at times, leading to calls to share resources. Culturally and practically, the Article III judiciary will have difficulty accommodating such an ungainly mixture of jurisdiction and judges and fulfilling its obligation to administer the judicial system efficiently. Of equal significance, this bifurcation would mark a historical first-step toward the creation of specialist Article III courts. This has been done only once in our history, with the creation of the Claims Court, which has a narrowly circumscribed docket and sits in Washington, D.C. Any decision to create "specialist" Article III bankruptcy judges must be made carefully and with full exploration of its consequences.

In sum, this Proposal is constitutionally unnecessary; it addresses jurisdictional problems that are rare in comparison to the large volume of cases the courts are handling without controversies; it attempts to cure a perceived lack of stature that has long since been overcome and, if history is any guide, it will go unheeded. The Commission should have rejected it. I [we] dissent.

Notes:

²⁵⁷⁹  For a lively account of the politics at work, see Countryman, "Scrambling to Define Bankruptcy Court Jurisdiction: The Chief Justice, The Judicial Conference and the Legislative Process," 22 Harvard J. on Legis. 1, 7-12 (1985). Return to text

²⁵⁸⁰  See study prepared by Professor Susan Block-Lieb and submitted to the Working Group on Jurisdiction and Procedure at its October 19, 1996 meeting. Return to text

²⁵⁸¹  See supra n.2, reporting that approximately 1.5% of reported 1995 decisions involved a jurisdictional question. Return to text

²⁵⁸²  In fact, there is no evidence that it is likely that most sitting bankruptcy judges aspire to Article III status. Return to text