Raymond and Scott Clay want a jury trial, but not in bankruptcy court. The Clays seek a writ of mandamus to prevent the bankruptcy court from conducting a jury trial in various core proceedings. The argument is that Congress cannot constitutionally empower non-Article III bankruptcy judges to hold jury trials without the parties’ consent. Because the applicable statute may fairly be read as not granting such authority, we say only that such a congressional effort would be dubious at best.
The trustee for the bankruptcy estate of Heeleo Corporation filed a complaint in the U.S. Bankruptcy Court for the Western District of Texas. The complaint sought turnover and avoidance of preferential and fraudulent transfers and post-petition transactions with petitioners, the Clays. The Clays filed jury demands in the bankruptcy court. In the district court, the Clays filed a motion to withdraw the reference of the case from the bankruptcy court.
The bankruptcy court found that the Clays had a Seventh Amendment right to a jury trial and that the claims involved were core proceedings. The court also held that it had the authority to conduct a jury trial and had no authority to decline a reference from the district court.
On June 28, 1994, the district court entered an order denying the Clays’ motion to withdraw the reference from the bankruptcy court. It concluded that bankruptcy judges have the power to preside over jury trials in core proceedings. The Clays then filed this petition for writ of mandamus.
The parties do not dispute the core nature of the proceedings or the Clays’ right to a jury trial. Nor do they contest the propriety of review via petition for writ of mandamus.
Cf. La Buy v. Howes Leather Co.,
I.
A.
The American colonists suffered greatly under judges controlled by King George III. They listed this grievance in the Declaration of Independence: “He has made Judges dependent on his Will alone, for the Tenure of their Offices, and the Amount and Payment of their Salaries.” Declaration of Independence para. 11 (U.S.1776). The Framers made judicial independence a cornerstone of our judicial system. The Federalist Papers stressed the need for lifetime tenure and salary protection for judges. “Periodical appointments, however regulated, or by whomsoever made, would, in some way or other, be fatal to [the courts’] necessary independence.” The Federalist No. 78, at 471 (Alexander Hamilton) (Clinton Rossiter ed., 1961). “Next to permanency in office, nothing can contribute more to the independence of the judges than a fixed provision for their support. ... In the general course of human nature, a power over a man’s subsistence amounts to a power over his will.” The Federalist No. 79, at 472 (Alexander Hamilton).
The Framers guarded against this danger in Article III of the Constitution:
The judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish. The Judges, both of the supreme and inferior Courts, shall hold their Offices during good Behaviour, and shall, at stated Times, receive for their Services, a Compensation, which shall not be diminished during their Continuance in Office.
U.S. Const, art. Ill, § 1. In other words, only judges who enjoy life tenure and protection against salary cuts can exercise “[t]he judicial Power of the United States.”
Northern Pipeline Constr. Co. v. Marathon Pipe Line Co.,
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These guarantees insure independence from legislative and executive influence, promote public confidence in judicial integrity, attract well qualified jurists to the bench, and insulate judges from pressure by other judges.
Id.
at 57-60 & n. 10,
Despite the absolute language of Article III, the Supreme Court has carved out three exceptions for so-called Article I legislative courts, whose judges need not enjoy life tenure or salary protection. First, Congress may create legislative courts for U.S. territories and the District of Columbia, because Articles I and IV of the Constitution give Congress plenary power over these geographic enclaves.
Marathon,
Regardless of whether a case involves territories, the military, or public rights, an Article III court may employ non-Article III adjuncts, such as special masters and magistrates. The only limitation is that the Article III court must retain “ ‘the essential attributes of the judicial power.’ ”
Marathon,
In
Marathon,
the Supreme Court struck down the scheme of bankruptcy courts set up by the Bankruptcy Act of 1978. Bankruptcy courts had the power to preside over jury trials, issue declaratory judgments, issue writs of habeas corpus, and issue orders, process, and judgments. Their judgments were reviewable under the clearly erroneous standard. The plurality relied upon these facts in concluding that district courts had not retained “the essential attributes of the judicial power.”
Id.
at 87,
In the wake of
Marathon,
Congress passed the Bankruptcy Amendments and Federal Judgeship Act of 1984 (BAFJA). Pub.L. No. 98-358, 98 Stat. 383 (codified as amended in scattered sections of U.S.C. titles 5, 11, and 28). Even after BAFJA, bankruptcy judges do not enjoy the protections of Article III: they serve fourteen-year terms, are removable for cause, and enjoy no protection from salary cuts.
See
28 U.S.C. § 152(a)(1), (e).
Marathon
suggested that core proceedings “may well be” cases involving public rights, and BAFJA responded to Article III concerns by restricting bankruptcy courts to core proceedings. 28 U.S.C. § 157(b);
Marathon,
B.
An Article III court may not delegate “ ‘the essential attributes of the judicial power’ ” to an adjunct.
Marathon,
Jury trials are at the heart of “the judicial Power,” as shown by the Framers’ focus on juries. Article III itself guarantees criminal jury trials. Because Americans considered this protection inadequate, they insisted on a Bill of Rights to cure the deficiency. As a result, the Fifth, Sixth, and Seventh Amendments enshrine the right to criminal grand juries and criminal and civil petit juries. Americans considered juries vital to the judiciary because juries check government overreaching, educate the citizens who serve on them, keep justice local, and permit popular participation in the administration of justice. Akhil R. Amar, The Bill of Rights as a Constitution, 100 Yale L.J. 1131, 1183-89 (1991) (collecting historical sources); Richard S. Arnold, Trial by Jury: The Constitutional Right to a Jury of Twelve in Civil Trials, 22 Hofstra L.Rev. 1, 15-17 (1993). For example, one colonial theorist endorsed juries as “the ‘lower judicial bench’ in a bicameral judiciary”; another described them as “ ‘the democratic branch of the judiciary power.’ ” Amar, supra, at 1189 (quoting John Taylor of Caroline and the “Maryland Farmer”) (emphasis omitted). In short, the Framers viewed jury trials as an essential part of judicial power.
The inadequacy of district court review of jury trials is fatal to delegation to adjuncts. In upholding a magistrate’s power to rule on a pretrial motion, the Court stressed the importance of de novo review in maintaining sufficient Article III control over an adjunct.
United States v. Raddatz,
De novo review is inconsistent with the Seventh Amendment, which states:
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“[N]o fact tried by a jury, shall be otherwise reexamined in any Court of the United States, than according to the rules of the common law.” In other words, the Seventh Amendment permits only ordinary appellate review; but
Marathon
held that ordinary appellate review did not satisfy Article III. This court has recognized the clash between Article III review of adjunct proceedings and Seventh Amendment sanctity of jury verdicts: “The reference [to a magistrate for jury trial] either effectively denies the right to trial by jury, or impermissibly abrogates the decisive role of the district judge, or both.”
Ford v. Estelle,
De novo review by a district court is also impossible in practice, because a cold record cannot capture the atmosphere, the expressions, the attitudes that are the marrow of a jury trial.
Gomez,
C.
There is an argument that while Congress treated bankruptcy courts as adjuncts of district courts, they are defensible as legislative courts hearing public rights eases, based on Marathon’s statement that core proceedings in bankruptcy “may well be a ‘public right,’ but [a noncore proceeding] obviously is not.”
The public rights/private rights dichotomy of
Crowell
and
Murray’s Lessee
is a deceptively weak decisional tool. Regardless, it is unpersuasive here. The plurality in
Marathon
spoke tentatively because its remarks were dicta; the facts in
Marathon
involved a noncore proceeding based on a state-law contract claim. Moreover, the reasoning of the concurring Justices in
Marathon
applies to any case involving a right to a jury trial. They held that
Marathon
was not a public rights case because it was “the stuff of the traditional actions at common law tried by the courts at Westminster in 1789.... No method of adjudication is hinted, other than the traditional common-law mode of judge and jury.”
The Court’s reading of the Seventh Amendment confirms this reasoning. The test for whether an Article III court is necessary for an action at law is the same as the test for whether a party has a Seventh Amendment right to a jury trial.
Granfinanciera, S.A. v. Nordberg,
We may sometimes fail to acknowledge the equitable roots of certain bankruptcy cases and hence find a right to a jury trial when we should not. Bankruptcy jurisdiction, which is largely equitable, is nigh mutually exclusive of cases or controversies at law in which there is a right to trial by jury. Congress, the Executive Branch, and the courts may choose to resolve legislative, executive, or equitable judicial disputes by using a “jury” even though the Seventh Amendment does not require it. When a non-Article III court uses such an optional
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“jury,” not only does the Seventh Amendment not forbid de novo review of the “jury’s” findings,
see Capital Traction Co. v. Hof,
This conclusion jibes with the reasons underlying the public rights exception.
Marathon
explained the rationale: because “Congress [is] free to commit [public rights cases] completely to nonjudicial executive determination, [it can] employ[ ] the less drastic expedient of committing their determination to a legislative court or an administrative agen.cy.”
D.
The trustee makes two counterarguments. First, he claims that' policy considerations such as efficiency support the authority of bankruptcy courts to hold jury trials. Shifting jury trials to district courts, he reasons, would interrupt ongoing proceedings and split proceedings between bankruptcy and district courts. The trustee argues that moving jury trials to district courts would inundate district courts with core matters in which they lack expertise. Furthermore, he says, giving litigants the power to switch courts by demanding jury trials would produce forum-shopping and delay, as defendants would take advantage of district courts’ crowded dockets to slow cases down.
See In re Grabill,
The trustee would trumpet efficiency, but we hear a kazoo, at best. Reports of strategic manipulation of jury trials have been greatly exaggerated. In practice, litigants have not begun demanding more jury trials since 1989, when
Granfinanciera
established a right to jury trial in certain bankruptcy proceedings.
Grabill,
If anything, jury trials in bankruptcy courts would impede efficiency. These speedy courts were not designed to conduct long jury trials, and most bankruptcy judges and lawyers are unused to jury procedures.
Grabill,
Regardless, “the fact that a given law or procedure is efficient, convenient, and useful in facilitating functions of government, standing alone, will not save it if it is contrary to the Constitution.”
INS v. Chadha,
The trustee’s second argument is that other non-Article III federal courts have the authority to conduct jury trials. For example, local District of Columbia courts can conduct jury trials.
Pernell v. Southall Realty,
This is true, but consent matters. Because one function of Article III is to protect litigants, courts have accorded significant if not dispositive weight to consent and waiver. In doing so, these courts may have undervalued the structural component of Article III — the idea that the location of dispute resolution is not solely the concern of the litigants in given cases.
Schor,
The comparison to territorial courts is stronger but still inapposite. In
Marathon,
the Supreme Court distinguished territorial courts from bankruptcy courts. The plurality reasoned that the District of Columbia is “a unique federal enclave over which Congress has ... entire control”; it can exercise such power “only in limited geographic areas.”
II.
We need not and should not.rest on these constitutional grounds. A court must not interpret a statute in a way that raises constitutional questions if a- reasonable alternative construction poses no such problems.
Gomez,
Six circuits have considered this issue, and five have decided that bankruptcy courts lack the statutory authority to conduct jury trials.
Official Committee v. Schwartzman (In re Stansbury Poplar Place, Inc.),
We agree with the Fourth, Sixth, Seventh, Eighth, and Tenth Circuits. The statute need not be read as attempting a run at this mountain. Indeed, BAFJA is silent on the subject. Only one section mentions juries, stating: “[Tjhis chapter and title 11 do not affect any right to trial by jury ... [for] a personal injury or wrongful death tort claim,” except that a district court may order a bench trial for issues under 11 U.S.C. § 303. 28 U.S.C. § 1411. As the Second Circuit has noted, § 1411 “offers almost no guidance.”
Ben Cooper,
Section 157(b) offers little light. It requires that either the district court in the district where the claim arose or the district court in which the bankruptcy case is pending try personal injury and wrongful death claims. 28 U.S.C. § 157(b)(5). Some courts reason that because sections 157(b) and 1411 single out personal injury and wrongful death cases for jury trials in district courts, bankruptcy courts may hold all other jury trials.
Perino v. Cohen (In re Cohen),
The same is true of the more general provisions of BAFJA. Section 151 provides: “Each bankruptcy judge, as a judicial officer of the district court, may exercise the authority conferred under this chapter with respect to any action, suit, or proceeding and may preside alone and hold a regular or special session of the court....” 28 U.S.C. § 151. Section 157(b)(1) states: “Bankruptcy judges may hear and determine all cases under title 11 and all core proceedings arising under title 11 ... and may enter appropriate orders and judgments_” 28 U.S.C. § 157(b)(1). The trustee argues that this language empowers bankruptcy judges in strong and unqualified terms, drawing no distinction between bench and jury trials. Other courts, however, have read these sections as personally empowering bankruptcy
judges
to “hear and determine all cases,” rather than empowering them to delegate fact-finding to juries.
Grabill,
The trustee’s final argument notes that the Emergency Rules adopted in the wake of
Marathon
prohibited bankruptcy judges from holding jury trials, but BAFJA was silent on the issue. One could read this silence as either perpetuating or repudiating the ban on jury trials in bankruptcy court.
Grabill,
Congress passed BAFJA in 1984, before
Granfinanciera
recognized the Seventh Amendment rights of litigants in bankruptcy eases. As the Supreme Court has noted, BAFJA’s “denial of the right to a jury trial in preference and fraudulent conveyance actions can hardly be said to represent Congress’ considered judgment of the constitutionality of this change.”
Granfinanciera,
The statute contains no clear statement proscribing or prescribing jury trials in bankruptcy court. We are not persuaded that Congress would have challenged such formidable constitutional principles by innuendo. We GRANT the writ of mandamus and instruct the district court to withdraw the reference to the bankruptcy court and honor the Clays’ demand for trial by jury before an appropriate United States District Court.
WRIT GRANTED.
