MEMORANDUM OPINION
MAHON, District Judge.
A hearing was held on January 13, 1983, concerning a “Motion to Revoke Reference of Adversary Proceedings” filed on January 11, 1983, by American Airlines, Inc., a corporation and an intervenor in the above-captioned proceeding pending before the Fort Worth Bankruptcy Division of this Court. The Court entered an Order on
January 14, 1983, holding that the Local Rule of the Northern District of Texas Concerning Bankruptcy Cases and Proceedings adopted by the United States District Court for the Northern District of Texas on December 21,1982,
is constitutional and valid, and further holding that the Court has jurisdiction over bankruptcy cases and proceedings, including the one presently before it, pursuant to sections 1331,1332,1334, and 1471 of Title 28 of the United States Code. In support of that Order, the Court will now elaborate on its reasons by addressing: (1) The Court’s Jurisdiction, (2)
Marathon’s
Effect on the “Structure” of the Bankruptcy System, (3) The Court’s Statutory and Equitable Powers, and (4) The Referral of the Braniff Bankruptcy Proceeding to the Bankruptcy Judge.
I.
The Court’s Jurisdiction
A. 28 U.S.C. § 1471.
The United States Supreme Court invalidated at least a portion of 28 U.S.C. § 1471 in
Northern Pipeline Construction Co. v. Marathon Pipe Line Co.,
-.U.S. -, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982) (hereinafter called Marathon). In his plurality opinion, Justice Brennan states:
We conclude that § 241(a) of the Bankruptcy Act of 1978 has impermissibly removed most, if not all, of “the essential attributes of the judicial power” from the Art. Ill district court, and has vested those attributes in a non-Art. Ill adjunct. Such a grant of jurisdiction cannot be sustained as an exercise of Congress’ power to create adjuncts to Art. Ill courts.
Marathon
102 S.Ct. at 2879-80.
By stating that the power was “impermissibly removed” from the district court, the Supreme Court clearly indicates that jurisdiction was first vested in the Art. Ill district court pursuant to § 1471(a), and it expresses no disapproval of this grant of jurisdiction to the district court.
The next sentence and footnote of the plurality opinion, however, have led to some confusion over what parts of § 1471 were invalidated. Justice Brennan continues:
Having concluded that the broad grant of jurisdiction to the bankruptcy courts contained in § 241(a) is unconstitutional, we must now determine whether our holding should be applied retroactively to the effective date of the Act.
Marathon
102 S.Ct. at 2880.
In his use of the words “bankruptcy courts” in
Marathon,
Justice Brennan makes a distinction between bankruptcy courts and district courts. This should not be confused with the bankruptcy laws, which define “courts of bankruptcy” to include the district courts.
See
Bankruptcy Reform Act of 1978, Pub.L. No. 95-598, § 404(a), 92 Stat. 2549, 2683 (1978). Thus, the “broad grant of jurisdiction to the bankruptcy courts” does not refer to the grant of jurisdiction to the district courts. Furthermore, in footnote 40, he states:
It is clear that, at the least, the new bankruptcy judges cannot constitutionally be vested with jurisdiction to decide this state-law contract claim against Marathon. As part of a comprehensive restructuring of the bankruptcy laws, Congress has vested jurisdiction over this and all matters related to cases under title 11 in a single non-Art. Ill court, and has done so pursuant to a
single statutory grant of jurisdiction.
Marathon
102 S.Ct. at 2880 n. 40 (emphasis added). This Court interprets the phrase “single statutory grant of jurisdiction” as referring to the words “all of the jurisdiction” in § 1471(c). This grant of jurisdiction under § 1471(c) encompasses not only bankruptcy “eases”
(see
§ 1471(a)), but also
“all civil proceedings arising under title 11 or arising in or
related to
cases under title 11.” 28 U.S.C. § 1471(b) (emphasis added). The Supreme Court’s conclusion that at least some of the “related to” matters must be heard by an Art. Ill court meant that the words “all of the jurisdiction” contain both constitutional and unconstitutional grants of jurisdiction to the bankruptcy courts. Thus, an attempt to separate and remove the unconstitutional part of the bankruptcy court’s jurisdiction from the constitutional part of its jurisdiction would be no easy feat. Facing such a difficulty, and examining the intent of Congress in § 1471(c), Justice Brennan continues his footnote:
In these circumstances we cannot conclude that if Congress were aware that the grant of jurisdiction could not constitutionally encompass this and similar claims, it would simply remove the jurisdiction
of the bankruptcy court over these matters, leaving the jurisdictional provision
[in the bankruptcy court]
and adjudicatory structure intact with respect to other types of claims,
and thus subject to Art. Ill constitutional challenge on a claim-by-claim basis. Indeed, we note that one of the express purposes of the Act was to ensure adjudication of all claims in a single forum and to avoid the delay and expense of jurisdictional disputes.
Marathon
102 S.Ct. at 2880 n. 40 (emphasis added).
Finally, Justice Brennan concludes the footnote:
Nor can we assume, as THE CHIEF JUSTICE suggests,
post,
at 2, that Congress’ choice would be to have
this case
“routed to the United States district court of which the bankruptcy court is an adjunct.” We think that it is for Congress to determine the proper manner of restructuring the Bankruptcy Act of 1978 to conform to the requirements of Art. Ill, in the way that will best effectuate the legislative purpose.
Marathon
102 S.Ct. at 2880 n. 40 (emphasis added). The difficulty was
not
in separating § 1471(c) from § 1471(a) and (b), but in separating jurisdiction over “this case,”
i.e.
a case like
Marathon,
requiring an Art. Ill court, from the other appropriate jurisdiction of the bankruptcy court over non-Art. Ill matters, all of which were combined in the words “all of the jurisdiction” in 28 U.S.C. § 1471(c). Therefore, this Court concludes that the Supreme Court never intended to invalidate, nor did it invalidate 28 U.S.C. § 1471(a) and (b), and that
Marathon
only held 28 U.S.C. § 1471(c) unconstitutional.
B. 28 U.S.C. § 1384, § 1331, and § 1332.
In light of the debate surrounding the continued validity of 28 U.S.C. § 1471(a) and (b), the Court will also address the question of its jurisdiction over bankruptcy cases and proceedings assuming
arguendo
that 28 U.S.C. § 1471 is no longer valid. During the transition period (from October 1, 1979, through March 31] 1984), Congress clearly intended for both the old and new versions of 28 U.S.C. § 1334 to exist simultaneously.
See
Bankruptcy Reform Act of 1978, Pub.L. No. 95-598, §§ 402, 403, 404, 92 Stat. 2549, 2682-83 (1978). The old § 1334 stated: “The district courts shall have original jurisdiction, exclusive of the courts of the States, of all matters and proceedings in bankruptcy.” 28 U.S.C. § 1334. It may be argued that Congress, in writing the new version of 28 U.S.C. § 1334 (making district courts the courts of appeals for final judgments, orders, and decrees of bankruptcy courts absent an appointed bankruptcy judge panel), intended that the old § 1334 would only apply to cases filed before October 1, 1979.
However, if the new grant of original and exclusive jurisdiction in 28 U.S.C. § 1471(a) —which was meant to repeal and replace the old § 1334 for cases filed after October 1, 1979 — is unconstitutional and no longer valid, the Court must now read the bank
ruptcy laws as if the new § 1471 had not been written.
See Frost v. Corporation Comm’n of Oklahoma,
278 U.S. 515, 526-27, 49 S.Ct. 235, 239, 73 L.Ed. 483 (1929);
Davis v. Wallace,
257 U.S. 478, 485, 42 S.Ct. 164, 166, 66 L.Ed. 325 (1922). In so doing, the Court finds that the old § 1334 places the original and exclusive jurisdiction over bankruptcy matters and proceedings in the district court.
This jurisdiction under the old § 1334 was “summary jurisdiction” only. The Court must now look to 28 U.S.C. § 1331 and § 1332 for those cases which would have originated in the federal district court because of either a federal question involved or the diversity of citizenship of the parties. Those cases, now properly in the district court’s jurisdiction, may be combined with the bankruptcy cases in which they arise or to which they are related for the purpose of referring both the bankruptcy “matters and proceedings” (in this court’s jurisdiction under the old § 1334) and the “arising in or related to” matters (in this court’s jurisdiction under 28 U.S.C. § 1331 or § 1332) to the bankruptcy judge.
II.
Marathon’s Effect on the “Structure” of the Bankruptcy System
Next, the Court turns to the question of what adjudicatory structure
remains intact after
Marathon.
During the transition period from October 1, 1979, through March 31, 1984, Congress intended the old structure (under the 1898 Bankruptcy Act) to exist concurrently with the new structure (under the 1978 Bankruptcy Reform Act).
Assuming
arguendo
that
Marathon
rendered the new bankruptcy structure unusable, the Court nevertheless has available an entire structure, left intact by Congress and
Marathon
and in existence through March 31,1984, which may be used for the adjudication of bankruptcy cases and proceedings.
Counsel for American Airlines suggest that the Court, in promulgating the “Local Rule of the Northern District of Texas Concerning Bankruptcy Cases and Proceedings” is creating a subsidiary court (“Memorandum of Points and Authorities in Support of Motion to Revoke Reference of Adversary Proceedings” page 14). On the contrary, the Court is not “creating” anything, but is instead relying on and making use of an entire structure created by Congress, which will remain in existence through March 31, 1984, and which is already being used for the adjudication of cases filed before October 1, 1979. Furthermore, the Court disagrees with the suggestion that such a local rule, by using the presently existing bankruptcy structure, is in any way an “innovation” beyond the Court’s local rule-making power.
See Miner v. Atlass,
363 U.S. 641, 80 S.Ct. 1300, 4 L.Ed.2d 1462 (1960).
III.
The Court’s Statutory and Equitable Powers
Having found an existing bankruptcy court structure,
the Court will now address its authority to use this existing structure to adjudicate bankruptcy cases and proceedings.
A. Statutory Authority.
Title 11 of the United States Code, as amended by the Bankruptcy Reform Act of 1978, provides that the “bankruptcy court may issue any order ... necessary or appropriate to carry out the provisions of this title.” 11 U.S.C. § 105(a), as
amended by
Bankruptcy Reform Act of 1978, Pub.L. No. 95-598, § 101, 92 Stat. 2549, 2555 (1978). As defined in section 404(a) of the same Act, federal district courts are included in the definition of bankruptcy courts.
Id.
§ 404(a), 92 Stat. at 2683.
The Local Rule, promulgated in an attempt to carry out congressional intent, would be clearly valid if based solely on this congressional grant of authority. The Order establishing the local rule was “necessary ... to carry out” the congressional intent expressed by the whole statutory scheme, and is an “appropriate” means of carrying out the expressed intent.
Bankruptcy Rule 927, continued at least for the “interim period,” October 1, 1979, through March 31, 1984,
see
Bankruptcy Reform Act of 1978, Pub.L. No. 95-598, §§ 402(b) & 404, 92 Stat. 2549, 2682-83 (1978), also authorizes adoption of local rules establishing court procedures.
See also
Ped.R.Civ.P. 83. The local rule adopted on December 21, 1982, would be, under this rule, a valid exercise of the Court’s power to control procedure in the trial court.
Finally, section 2071 of Title 28 of the United States Code allows courts the discretion to enact the rules under which they will conduct their business. As under the other statutory grants of authority mentioned above, this Court recognizes it is not legislating a solution to the bankruptcy problem, but merely implementing congressional intent under specific grants of authority.
B. Equitable Powers.
Since the murky beginnings of English jurisprudence, the common law courts have sought to provide justice. More recently, Roscoe Pound observed that our law has been guided by the principle that “all legal institutions and all legal rules [are] ... measured by reason and ... nothing could stand in law that could not maintain itself in reason.” R. Pound,
The Spirit of the Common Law
81. Pound concludes that the development of Law will be effected through a theory of “right and justice and [a] conscious attempt to make the law conform to ideals.”
Id.
at 84.
The practical application of this Court’s attempts at justice, however, must be guided by the equity
jurisprudence of the United States.
Early decisions of the United States Supreme Court determined that “[t]here are certain powers inherent in the judicial office.”
Nudd
v.
Burrows,
91 U.S. (1 Otto) 426, 442, 23 L.Ed. 286 (1875). There is yet some doubt as to Congress’ power to “trench upon the common-law powers” with which the judge is clothed.
Indianapolis & St. Louis R.R. v. Horst,
93 U.S. (3 Otto) 291, 300, 23 L.Ed. 898 (1876).
See also Grimes Dry Goods Co. v. Malcolm,
164 U.S. 483, 490, 17 S.Ct. 158, 160, 41 L.Ed. 524 (1896);
Mutual Accident Assoc. v. Barry,
131 U.S. 100, 120, 9 S.Ct. 755, 761, 33 L.Ed. 60 (1889). In dispensing justice, this Court must be limited to its constitutional role — reaching neither into the legislative nor executive branches in its exercise of power. Nevertheless, the Court cannot shrink from its constitutional duty because of a lack of precise guidelines.
See Landwehr v. United States (In re Miller),
485 F.2d 74 (5th Cir.1973), ce
rt. denied,
415 U.S. 990, 94 S.Ct. 1588, 39 L.Ed.2d 886 (1974).
Congress has provided an intricate scheme within which bankruptcy disputes can be brought to just conclusions.
Congress has authorized the courts to make provisions for procedural matters. The inherent equitable power of the courts is in itself a demand that substantial justice be done. Therefore, pursuant to its equitable powers the United States District Court for the Northern District of Texas adopted the Local Rule Concerning Bankruptcy Cases and Proceedings to achieve substantial justice. Pursuant to this Local Rule and, alternatively, pursuant to its inherent equitable powers, this Court referred
In re Braniff
to the bankruptcy judge.
In the courtroom of the United States Court of Appeals for the Fifth Circuit in Fort Worth, where this Court makes its attempt at dispensing substantial justice, one quote is inscribed in gold behind the bench of the Court:
REASON IS THE LIFE OF THE LAW NAY, THE COMMON LAW ITSELF IS NOTHING ELSE BUT REASON
If ever a case came before this Court commanding that Reason be sought — and that Reason be applied to the ends of Justice— this is that case.
IV.
Referral of the Braniff Bankruptcy Proceeding to the Bankruptcy Judge
The referral of the case involved in this dispute occurred immediately upon expiration of the Supreme Court’s stay of
Marathon.
Having determined the validity of the Local Rule adopted by the judges of the Northern District of Texas, it was not necessary to take any further action to have this case referred to the bankruptcy judge. Counsel for American Airlines, however, questioned the validity of the manner by which the judges adopted the Rule and the validity of the Rule’s all-encompassing effect. In light of this challenge to the Rule, the Court chose to take additional action to protect the
Braniff
proceedings.
In re Braniff
is an exceptional case,
and this Court determined that no effort should be spared in providing for a speedy and valid conclusion. Therefore, the Court withdrew the case, pursuant to the Local Rule,
found exceptional circumstances in this case, then referred the case to the Honorable E. John Flowers, Bankruptcy Judge for the Northern District of Texas, both under the provisions of the Local Rule and in the alternative, under the Court’s equitable powers.
Judge Flowers is limited in his conduct of the case by provisions identical to those set forth in the Local Rule. Thus, any matter which could not
constitutionally be decided by a non-Art. Ill judge, see
Marathon,
will not be decided by Judge Flowers.
Continued validity of section 1471(a) and (b) would grant broad jurisdiction to the federal district court. Only matters that may be decided by a non-Art. Ill judge, however, were referred by the Court to the bankruptcy judge for final determination. This Court will make the final determination in all other matters. This action corrects the constitutional problem encountered in
Marathon.
If jurisdiction is based solely on sections 1331, 1332 and 1334,
the jurisdiction of this Court would not be as broad as under section 1471. The reference to the bankruptcy judge would include at least “all matters and proceedings in bankruptcy.” Any case “related to” the bankruptcy proceeding, although referred to the bankruptcy judge, will receive final determination in this Court, as clearly set forth in the limits on Judge Flowers’ authority.
See In re Braniff,
Misc. No. 4-221-E, at 3 (N.D.Tex. Jan. 14, 1983); Local Rule, sec. (d)(3)(B).
It would be grossly unfair to all parties involved in bankruptcy matters if no Court exercised jurisdiction over these cases. Billions of dollars, as well as thousands of potential jobs may be lost, and the congressional intent to provide bankruptcy protection would be subverted, if all bankruptcies were abruptly halted. Clearly, Congress has not only shown its intent to create a two-tiered bankruptcy system, but also has provided the legislation by which this Court can allow the bankruptcy judge to exercise some of this Court’s jurisdiction. In addition, equity demands, and makes provision for reference of cases in a posture similar to
Braniff.
Judge Flowers has invested innumerable hours in reviewing the facts, circumstances and arguments in this case. To bring the case into the District Court now would mean the Court would start in the middle of the case without the benefit of Judge Flowers’ admittedly unique expertise, obtained in the past eight months of
In re Braniff
proceedings. Although this Court could reserve the entire
In re Braniff
bankruptcy for its own determination, to do so would inevitably lead to some delay while the Court reviews the case merely to obtain the knowledge that Judge Flowers already possesses.
Therefore, in order to protect the rights of creditors, stockholders, and all other parties who have depended on the bankruptcy laws’ protection, and in order to provide speedy resolution of bankruptcy disputes, the Court has exercised its powers under congressional authority and under its inherent equitable power so that congressional intent may be implemented. This provision for bankruptcy cases (under the Local Rule) and for
Braniff
in particular (under the Local Rule and the inherent equitable powers of this Court) will allow orderly and final conclusion of all bankruptcy cases and proceedings.
ORDER
This case came before the Court on a motion to revoke the reference to United
States Bankruptcy Judge John Flowers of
In re Braniff Airways, Inc., et al.,
Fort Worth Bankruptcy Division Case No. 4-82-00369. After considering the motion, brief and oral arguments of counsel, the Court makes the following rulings:
1. The Local Rule of the Northern District of Texas Concerning Bankruptcy Cases and Proceedings adopted by the United States District Court for the Northern District of Texas on December 21, 1982, is constitutional and valid.
2. The Court has jurisdiction over bankruptcy matters and proceedings, including this case, pursuant to sections 1331, 1332, 1334 and 1471 of Title 28 of the United States Code.
3. To avoid any possible jurisdictional attack based on the adoption and promulgation of the Local Rule, and in order to provide certainty in the resolution of this exceptional and complicated case, the reference of this case to Bankruptcy Judge Flowers is hereby withdrawn.
4. The Court finds that there are exceptional conditions and circumstances in
In re Braniff Airways, Inc.,
including, but not limited to the following:
The case was filed on May 13,1982, and has been through eight (8) months of proceedings before the Honorable John Flowers.
Braniff is the only major airline to go into Chapter 11 bankruptcy reorganization.
The debtor, Braniff, has approximately $460 million in assets and $1.2 billion in debts.
Some of this debt is publicly-held. Braniff is a publicly-held corporation. In fact, Braniff has more than 75,000 creditors and shareholders.
More than 100 lawyers are already involved in these proceedings.
There is much equipment, formerly used by the debtor, now sitting idle.
The most exceptional circumstance is that Judge Flowers has dedicated eight months of work to this case. Thus, he has singular knowledge and expertise as to the facts and law in this most complicated case.
Although each of these facts was not specifically presented in the motions, briefs and arguments before this Court, the Court has taken judicial knowledge of these and other matters on file in the Bankruptcy Clerk’s Office.
5. It would be a travesty of justice for this Court to leave unprotected the rights of creditors, shareholders and interested parties. Justice demands that this ease quickly proceed to an orderly and final conclusion.
6. Therefore, pursuant to this Court’s statutory and general
equitable
powers, and the Federal Rules of Civil Procedure, and due to the exceptional circumstances in this case, the Court hereby ORDERS that the entire matter of
In re Braniff Airways, Inc., et al.,
to the extent this Court has jurisdiction, is referred to the Honorable John Flowers Bankruptcy Judge for the Northern District of Texas, Fort Worth Division. The powers and functions to be exercised by Judge Flowers under this reference are identical to those delineated in the Local Rule of the Northern District of Texas Concerning Bankruptcy Cases and Proceeding adopted on December 21, 1982.
The Court reserves the right to enter further findings on this matter.