Omar Bennett
Bankruptcy courts are adjuncts to Article III courts. The authority to establish bankruptcy courts is found in Article I of the Constitution, which gives Congress the power to establish uniform laws on bankruptcy. The Constitution vests federal judicial power in Article III courts, and bankruptcy judges are not Article III judges. The test for whether a bankruptcy judge has constitutional authority is whether it is integral to the restructuring of the debtor-creditor relationship. Bankruptcy courts were given jurisdiction over civil proceedings arising under the bankruptcy code and other proceedings related to bankruptcy cases. However, this broad grant of jurisdiction brought into question the types of cases that could be heard by an Article I court.
| Characteristics | Values |
|---|---|
| Type of Courts | Bankruptcy Courts are adjuncts to Article III Courts |
| Constitutional Authority | Vested in Article III courts |
| Article III Judges | Distinguished by two characteristics: they hold office during good behavior and receive compensation that will not be diminished while in office |
| Bankruptcy Judges | Not Article III judges |
| Authority to Establish Bankruptcy Courts | Found in Article I of the Constitution, which gives Congress the power to establish uniform laws on the subject of bankruptcies |
| Bankruptcy Code | Found in Title 11 of the United States Code, containing nearly all applicable uniform federal bankruptcy law |
| Jurisdiction | District courts have original and exclusive jurisdiction of all cases under Title 11, but may refer cases to bankruptcy judges |
| Core Proceedings | Bankruptcy judges may hear and determine proceedings arising under Title 11 or arising in a case under Title 11 |
| Non-Core Proceedings | Bankruptcy judges are limited to hearing and submitting proposed findings to the district court for proceedings related to a case under Title 11 |
| Constitutionality | The Supreme Court has ruled that it is unconstitutional for Congress to grant bankruptcy courts jurisdiction over certain state law counterclaims as part of their "core" proceedings |
| Federal Courts | Each of the 94 federal judicial districts handles bankruptcy matters, and cases are filed in bankruptcy court |
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What You'll Learn
- Bankruptcy courts are adjuncts to Article III courts
- Article I gives Congress the power to establish bankruptcy laws
- District courts have original and exclusive jurisdiction over bankruptcy cases
- Bankruptcy judges may hear and determine core proceedings
- The Supreme Court has provided guidance on the constitutional authority of bankruptcy courts
Bankruptcy courts are adjuncts to Article III courts
The authority to establish bankruptcy courts is derived from Article I of the Constitution, which empowers Congress to "establish... uniform Laws on the subject of Bankruptcies throughout the United States." While bankruptcy cases are handled in federal courts, district courts have original and exclusive jurisdiction over all cases under Title 11 of the United States Code, also known as the Bankruptcy Code.
However, bankruptcy courts are adjuncts to Article III courts. This means they are created by and derive their powers from the district courts, which are Article III courts. In 1978, Congress revised the Bankruptcy Act and established bankruptcy courts as adjuncts of the district courts under 28 U.S.C. § 151(a). The bankruptcy courts were vested with extensive judicial power, comparable to that of the district courts. They were given jurisdiction over civil proceedings arising under the bankruptcy code and all other proceedings related to bankruptcy cases.
Despite the broad jurisdiction granted to bankruptcy courts, their decisions could be reviewed and reversed by Article III courts if they were found to be clearly erroneous. This raised questions about the types of cases that could be heard by an Article I court, such as bankruptcy courts. In Northern Pipeline Construction Co. v. Marathon Pipe Line Co., the Supreme Court held that it was unconstitutional for Article I judges to preside over state claims involving traditional common law actions. This decision highlighted the importance of maintaining the separation of powers and ensuring that judicial power is exercised by courts with the attributes prescribed in Article III.
To address the concerns raised in Northern Pipeline, Congress enacted the Bankruptcy Amendments and Federal Judgeship Act of 1984. This legislation maintained bankruptcy courts as Article I entities while establishing a distinction between core and non-core proceedings. Bankruptcy courts could handle core proceedings, subject to lenient review, while non-core proceedings could be reviewed de novo by district courts unless the parties consented to bankruptcy court jurisdiction.
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Article I gives Congress the power to establish bankruptcy laws
Article I of the United States Constitution gives Congress the power to establish bankruptcy laws. Specifically, Article I, Section 8, Clause 4 of the Constitution states that Congress has the power " [t]o establish... uniform Laws on the subject of Bankruptcies throughout the United States." This clause, known as the Bankruptcy Clause, grants Congress the authority to enact uniform, national laws governing bankruptcies across the country.
The inclusion of this clause in the Constitution was significant because, during the colonial period and after the ratification of the Constitution, bankruptcy and insolvency matters were typically governed by state law or the laws of each individual colony. The first federal bankruptcy law was passed by Congress in 1800, marking a departure from English practices that had previously influenced American bankruptcy laws.
Despite the power granted to Congress by Article I, the Supreme Court has held that this power is subject to certain constitutional limitations. For example, Congress may not supersede the power of a state to determine how a corporation is formed, supervised, or dissolved. Additionally, Congress's bankruptcy laws must be uniform, and Congress cannot subject the fiscal affairs of a political subdivision of a state to the control of a federal bankruptcy court without the state's consent.
The authority of bankruptcy courts has also been a subject of debate. Bankruptcy courts are considered Article I courts, and their decisions can be reviewed by Article III courts, which are the federal judicial powers vested by the Constitution. The Supreme Court has provided guidance on the constitutional authority of bankruptcy courts in several cases, including Katchen, Marathon, Granfinanciera, Langenkamp, Stern, and Wellness. The test for whether a bankruptcy judge has constitutional authority to hear and determine a proceeding is whether it is integral to restructuring the debtor-creditor relationship.
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District courts have original and exclusive jurisdiction over bankruptcy cases
The authority to establish bankruptcy courts is derived from Article I of the US Constitution, which empowers Congress to "establish... uniform Laws on the subject of Bankruptcies throughout the United States." While bankruptcy courts were initially granted broad jurisdiction over civil proceedings arising under the bankruptcy code, as well as all other proceedings related to bankruptcy cases, their powers have since been curtailed. This was due to concerns regarding the constitutionality of granting such extensive authority to non-Article III judges.
Article III judges are distinguished by two characteristics: they hold office during good behavior and receive compensation that cannot be diminished while in office. In contrast, bankruptcy judges are not Article III judges. As such, the constitutional authority to hear and determine bankruptcy proceedings rests with Article III courts, specifically the district courts.
District courts have original and exclusive jurisdiction over all cases under Title 11 of the United States Code, also known as the Bankruptcy Code. This means that bankruptcy cases are typically initiated in district courts, which have the primary authority to hear and decide these matters. However, district courts have the option to refer these cases to bankruptcy judges within their districts.
There are 90 US bankruptcy courts, which are legally considered units of the US district courts. Bankruptcy judges may hear and determine "core" proceedings, which include matters arising under Title 11 or arising in a case under Title 11. However, for proceedings that are only related to a case under Title 11, bankruptcy judges are limited to submitting proposed findings of fact and conclusions of law to the district court for review.
The distinction between "core" and "non-core" proceedings is crucial. In Agency v. Arkison, the Supreme Court held that when a bankruptcy court cannot enter a final judgment on a bankruptcy-related claim due to constitutional restrictions, the bankruptcy court can treat the matter as a non-core claim. This involves issuing proposed findings and conclusions to the district court for de novo review, thereby satisfying both statutory and constitutional requirements.
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Bankruptcy judges may hear and determine core proceedings
The authority to establish bankruptcy courts is derived from Article I of the US Constitution, which empowers Congress to "establish... uniform Laws on the subject of Bankruptcies throughout the United States." While bankruptcy courts are Article I entities, district courts retain original and exclusive jurisdiction over all cases under Title 11 of the US Bankruptcy Code.
District courts have the option to refer cases to bankruptcy judges for their districts if the proceedings fall into one of three categories:
- Arising under Title 11
- Arising in a case under Title 11
- Related to a case under Title 11
Core proceedings are those that fall into the first two categories, and bankruptcy judges have the authority to hear and determine these matters. Core proceedings directly relate to issues arising under the Bankruptcy Code. Examples of core proceedings include:
- Matters concerning the administration of the bankrupt estate
- Allowance or disallowance of claims against the estate
- Estimating claims or interests for the purposes of confirming a plan under Chapters 11, 12, or 13 of Title 11
In contrast, non-core proceedings are those that are only related to a case under Title 11. In such cases, bankruptcy judges are limited to hearing them and submitting proposed findings and conclusions to the district court for review. Non-core proceedings address issues that do not directly relate to Bankruptcy Code matters but positively or negatively affect the debtor's rights, liabilities, or estate administration.
It is important to note that personal injury and wrongful death claims are non-core proceedings that must be tried in federal district court. Additionally, some matters, such as divorce, child custody, and probate, are so remotely related to bankruptcy cases that bankruptcy judges will not hear them.
The distinction between core and non-core proceedings is crucial in determining the extent of a bankruptcy judge's authority. While bankruptcy judges always have jurisdiction over core proceedings, their involvement in non-core proceedings depends on the consent of the parties involved.
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The Supreme Court has provided guidance on the constitutional authority of bankruptcy courts
The Supreme Court has addressed the application of the public rights doctrine in the bankruptcy context, but it has not held that this provides bankruptcy courts with constitutional authority to hear and determine proceedings. In Stern v. Marshall, the Supreme Court ruled that it was unconstitutional for Congress to grant bankruptcy courts jurisdiction over certain state law counterclaims as part of their "core" proceedings, as bankruptcy judges lacked Article III protections.
The Court held that a counterclaim of tortious interference, although made during a bankruptcy proceeding and deemed a core proceeding, was a state common law claim that did not fall under any public rights exceptions. The Supreme Court found that the bankruptcy court had statutory authority to hear and determine the claim, but that it had no constitutional authority to do so. This constitutional authority belonged to Article III courts.
The Supreme Court has also provided guidance on the constitutional authority of bankruptcy courts in Katchen, Marathon, Granfinanciera, Langenkamp, and Wellness. In these cases, the Court addressed the test for whether a bankruptcy judge has constitutional authority to hear and determine a proceeding, which is whether it is integral to the restructuring of the debtor-creditor relationship.
Bankruptcy courts were given jurisdiction over civil proceedings arising under the bankruptcy code and all other proceedings related to bankruptcy cases. This broad grant of jurisdiction brought into question what kinds of cases could be heard by an Article I court. In Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., the Supreme Court held that the conferral of jurisdiction upon Article I judges to hear state claims regarding traditional common law actions was unconstitutional.
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Frequently asked questions
The authority to establish bankruptcy courts is found in Article I of the Constitution, which gives Congress the power to establish "uniform laws on the subject of bankruptcies throughout the United States". Therefore, bankruptcy courts are legislative.
The test for whether a bankruptcy judge has constitutional authority is whether it is integral to the restructuring of the debtor-creditor relationship.
Core proceedings are those that arise under Title 11 of the Bankruptcy Code or arise in a case under Title 11. Bankruptcy judges may hear and determine these proceedings. Non-core proceedings are those that are related to a case under Title 11. Bankruptcy judges are limited to hearing these and submitting proposed findings to the district court.
District courts have original and exclusive jurisdiction over all cases under Title 11. They have the option to refer cases to bankruptcy judges for their districts.
The Supreme Court has provided guidance on the constitutional authority of bankruptcy courts in cases such as Katchen, Marathon, Granfinanciera, Langenkamp, Stern, and Wellness. It has also ruled on the constitutionality of certain bankruptcy court jurisdiction, such as in Stern v. Marshall, where it held that it was unconstitutional for Congress to grant bankruptcy courts jurisdiction over certain state law counterclaims.
