Committee of Unsecured Creditors of F S Communications Corp. v. Hyatt Greenville Corp.

760 F.2d 1194, 1985 U.S. App. LEXIS 30005
CourtCourt of Appeals for the Eleventh Circuit
DecidedMay 20, 1985
DocketNo. 84-8607
StatusPublished
Cited by2 cases

This text of 760 F.2d 1194 (Committee of Unsecured Creditors of F S Communications Corp. v. Hyatt Greenville Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eleventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Committee of Unsecured Creditors of F S Communications Corp. v. Hyatt Greenville Corp., 760 F.2d 1194, 1985 U.S. App. LEXIS 30005 (11th Cir. 1985).

Opinion

HATCHETT, Circuit Judge:

This appeal challenges the bankruptcy subject matter jurisdiction of the district courts and the power of district courts to refer bankruptcy matters to bankruptcy courts in the aftermath of Northern Pipeline Construction Co. v. Marathon Pipeline Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982). The district court concluded that it retained bankruptcy subject matter jurisdiction after Northern Pipeline, and that its emergency local rule was a constitutional means of delegating that authority to the bankruptcy court. We affirm.

FACTS AND PROCEDURAL HISTORY

On August 9, 1983, appellee, the Committee of Unsecured Creditors of F S Communications Corporation (Committee), filed a complaint in the Bankruptcy Court for the Northern District of Georgia seeking to avoid and recover a preferential transfer which the debtor, F S Communications Corporation, allegedly made to appellant, Hyatt Greenville Corporation (Hyatt). On September 9, 1983, Hyatt moved the bankruptcy court to dismiss the action for lack of subject matter jurisdiction.

In its opinion and order dated December 14, 1983, the bankruptcy court concluded that under Northern Pipeline, it lacked jurisdiction to hear the action, and that the emergency local rule conferring jurisdiction upon it was unconstitutional. In reaching this conclusion, the bankruptcy court interpreted Northern Pipeline as holding 28 U.S.C.A. § 1471 (West Supp.1984) unconstitutional in its entirety.1

On appeal to the district court, the Committee raised three issues: (1) whether the bankruptcy court had subject matter jurisdiction over the action; (2) whether the district court had subject matter jurisdiction over the action pursuant to 28 U.S.C.A. §§ 1331, 1334 (West Supp.1984), and/or 1471(a) and (b); and (3) whether the emergency local rule authorizing the district court’s referral of the action to the bankruptcy court was constitutional.

[1196]*1196Relying primarily upon In re Seven Springs Apartments, Phase II, 34 B.R. 987 (Bankr.N.D.Ga.1983), the district court concluded that district courts retained subject matter jurisdiction over bankruptcy cases after Northern Pipeline and that the emergency local rule was a constitutionally permissible means of delegating bankruptcy cases to the bankruptcy courts.

Hyatt appeals seeking reversal of the district court’s remand of the action to the bankruptcy court.

DISCUSSION

A. Bankruptcy Subject Matter Jurisdiction

Hyatt argues that Northern Pipeline struck down 28 U.S.C.A. § 1471 in its entirety.2

In 1978, Congress enacted a comprehensive revision of the bankruptcy laws, the Bankruptcy Reform Act of 1978 (the Act).3 The jurisdictional provision of the Act is found at section 241(a), 28 U.S.C.A. § 1471. Section 1471(b) vests in the district courts “original but not exclusive” jurisdiction over “all civil proceedings arising under title 11 [the bankruptcy title] or arising in or related to cases under title 11.” 28 U.S.C.A. § 1471(b). The “ultimate repositories]” of the Act’s broad jurisdictional grant, however, were the bankruptcy courts, Northern Pipeline, 458 U.S. at 54 n. 3, 102 S.Ct. at 2862 n. 3:

The bankruptcy court for the district in which a case under title 11 is commenced shall exercise all of the jurisdiction conferred by this section on the district courts.

28 U.S.C.A. § 1471(c).

In Northern Pipeline the Supreme Court was presented with the question of “whether the assignment by Congress to bankruptcy judges of the jurisdiction granted in 28 U.S.C. § 1471” violated article III of the Constitution. 458 U.S. at 53, 102 S.Ct. at 2862 (emphasis added). Specifically, the Court was concerned that section 1471 conferred upon bankruptcy courts jurisdiction over “all” civil proceedings arising under the bankruptcy code and jurisdiction over issues merely “related to” bankruptcy proceedings.4

The Court concluded that this all-encompassing grant of jurisdiction to bankruptcy courts, coupled with the broad supervisory powers conferred upon bankruptcy courts by the Act, provided no protection against the “broad legislative discretion that could effectively eviscerate [article Ill’s] constitutional guarantee of an independent” judiciary. 458 U.S. at 74, 102 S.Ct. at 2873.

[1197]*1197Article III operates to preserve the independence of the judiciary by requiring that the judicial power of the United States be exercised by judges having certain clearly prescribed attributes. See 458 U.S. at 59, 102 S.Ct. at 2865. Article III provides:

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.

The Bankruptcy Reform Act of 1978 conferred upon bankruptcy courts all the “essential attributes” of article III courts and thereby conferred upon bankruptcy judges the judicial power of the United States. Bankruptcy judges, however, are not article III judges. 458 U.S. at 61, 102 S.Ct. at 2866. Northern Pipeline concluded, therefore, that the grant of jurisdiction to bankruptcy courts found in section 1471 was unconstitutional.

In concurring, Justice Rehnquist emphasized that only so much of the Act as enabled a bankruptcy court to entertain and decide the state law claims at issue violated article III. The dissenting opinions of both Chief Justice Burger and Justice White agreed that the “effective basis,” 458 U.S. at 94 n. 2, 102 S.Ct. at 2883 n. 2 (White, J., dissenting), of the plurality’s decision was “limited,” 458 U.S. at 92, 102 S.Ct. at 2882 (Burger, C.J., dissenting), to the proposition that, absent the consent of the parties, a “traditional” state common-law action cannot be heard by a non-article III court, 458 U.S. at 92, 102 S.Ct. at 2882 (Burger, C.J., dissenting).

As the Chief Justice acknowledged:

This limited holding, of course, does not suggest that there is something inherently unconstitutional about the new bankruptcy courts; nor does it preclude such courts from adjudicating all but a relatively narrow category of claims ‘arising under’ or ‘arising in or related to cases under’ the Bankruptcy Act.

458 U.S. at 92, 102 S.Ct. at 2882 (Burger, C.J., dissenting).

The grant of authority to bankruptcy courts to adjudicate state law claims could not be severed from the remaining grant of authority to the bankruptcy courts. The plurality concluded, therefore, that the entire jurisdictional grant to the bankruptcy courts was unconstitutional. 458 U.S. at 91-92, 102 S.Ct. at 2881-2882 (Rehnquist, J., concurring).

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760 F.2d 1194, 1985 U.S. App. LEXIS 30005, Counsel Stack Legal Research, https://law.counselstack.com/opinion/committee-of-unsecured-creditors-of-f-s-communications-corp-v-hyatt-ca11-1985.