Gray v. Solvay Polymers, Inc. (In Re Dooley Plastic Co.)

182 B.R. 73, 1994 U.S. Dist. LEXIS 20537, 1994 WL 803192
CourtDistrict Court, D. Massachusetts
DecidedDecember 21, 1994
DocketCiv. A. 94-11533-RCL
StatusPublished
Cited by13 cases

This text of 182 B.R. 73 (Gray v. Solvay Polymers, Inc. (In Re Dooley Plastic Co.)) is published on Counsel Stack Legal Research, covering District Court, D. Massachusetts primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gray v. Solvay Polymers, Inc. (In Re Dooley Plastic Co.), 182 B.R. 73, 1994 U.S. Dist. LEXIS 20537, 1994 WL 803192 (D. Mass. 1994).

Opinion

OPINION

LINDSAY, District Judge.

This case is before the Court on a motion by Solvay Polymers, Inc. (“Solvay”) to withdraw the reference to a bankruptcy judge of an adversary proceeding. The case squarely raises the question of whether *74 bankruptcy judges have statutory authority to conduct jury trials. The First Circuit has not yet been faced with the issue. Nevertheless, after careful consideration, this Court concludes that insofar as this case is concerned, Congress has not authorized the bankruptcy judge to conduct a jury trials. 1 Accordingly, this Court will withdraw the reference to the Bankruptcy Court with respect to the adversary proceeding at issue in this case.

I. Procedural History.

This ease arises out of a Chapter 7 proceeding involving the debtor, Dooley Plastics Co., Inc. (“the debtor”). The debtor filed a voluntary petition under Chapter 7 of the Bankruptcy Code on July 1, 1993.

On April 5, 1994, the debtor’s Trustee, Stephen Gray (“the Trustee”), filed an adversary action against Solvay. The adversary proceeding seeks to set aside certain alleged preferential transfers made by the debtor prior to the Chapter 7 petition. The parties agree that the action constitutes a “core proceeding” pursuant to 28 U.S.C. § 157.

Solvay demanded a jury trial in its answer, filed on May 16, 1994. On July 5, 1994, Solvay moved for a withdrawal of the reference to the Bankruptcy Court as to all claims involving the adversary proceeding. This Court heard argument on the motion on August 15, 1994.

II. Authority of Bankruptcy Court to Hold Jury Trial.

A. Background: Marathon, “BAFJA” and Granfinanciera.

To frame discussion of the case at hand, one must start with the Supreme Court’s decision in Northern Pipeline Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982).

In Marathon, the Supreme Court ruled that Congress had overstepped Article III in its enactment of the Bankruptcy Act of 1978. The 1978 Act had made significant changes in the substantive and procedural law of bankruptcy. It vested the judges of the bankruptcy courts with all of the “powers of a court of equity, law and admiralty.” Marathon, 458 U.S. at 55, 102 S.Ct. at 2863 (opinion of Brennan, J.), quoting 28 U.S.C. § 1481 (1976 ed., Supp. IV). In addition to this “broad grant of power,” the Act granted bankruptcy judges the power to hold jury trials; to issue declaratory judgments; to issue writs of habeas corpus under certain circumstances; to issue all writs necessary in aid of the bankruptcy court’s expanded jurisdiction; and to issue any order, process or judgment necessary or appropriate to carry out the provisions of Title 11. Marathon, 458 U.S. at 55, 102 S.Ct. at 2863 (opinion of Brennan, J.).

The plurality opinion, authored by Justice Brennan, discussed the important distinctions between Article III judgeships and the bankruptcy judgeships established by the 1978 statute. It noted that Article III judges hold their ofSce during “good behavior” and that their compensation may not be diminished during their time in office. On the other hand, bankruptcy judges have time restrictions on their term in office, do not have protection from diminution of salary and may be removed for reasons other than a lack of “good behavior.” Id. at 57-63, 102 S.Ct. at 2864-67.

The plurality noted that “Congress possesses broad discretion to assign factfinding functions to an adjunct created to aid in the adjudication of congressionally created statutory rights,” but that according non-Article III tribunals with “functions that have been traditionally performed” by Article III courts leads to “unwarranted encroachments upon *75 the judicial power of the United States.” Marathon, 458 U.S. at 81, 84, 102 S.Ct. at 2877, 2878. The plurality went on to state that the Bankruptcy Act of 1978 “carries the possibility of such an unwarranted encroachment.” Id. at 84, 102 S.Ct. at 2878.

Many of the rights subject to adjudication by the Acts’ bankruptcy courts ... are not of Congress’ creation. Indeed, the cases before us, which center upon appellant Northern’s claim for damages for breach of contract and misrepresentation, involve a right created by state law, a right independent of and antecedent to the reorganization petition that conferred jurisdiction upon the Bankruptcy Court. [Footnote omitted] Accordingly, Congress’ authority to control the manner in which that right is adjudicated, through assignment of historically judicial functions to a non-Art. Ill ‘adjunct, plainly must be deemed at a minimum. Yet it is equally plain that Congress has vested the ‘adjunct’ bankruptcy judges with powers over Northern’s state-created right that far exceed the powers that it has vested in administrative agencies that adjudicate only rights of Congress’ own creation.

Id. (emphasis added).

The plurality concluded that the jurisdictional grant of the Bankruptcy Act of 1978, 28 U.S.C. § 1471, 2 “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.” Marathon, 458 U.S. at 87, 102 S.Ct. at 2880. 3

Congress responded to the Marathon decision by enacting the Bankruptcy Amendments and Federal Judgeship Act of 1984 (“BAFJA” or “the 1984 Amendments”). The 1984 Amendments retailored the jurisdictional structure of the bankruptcy courts, repealing sections 1471 and 1481. 4

The 1984 Amendments established a bifurcated method of adjudicating claims in bankruptcy court. If a claim is a “core” proceeding, the bankruptcy judge may “hear and determine” the claim and “enter appropriate orders and judgments,” subject to review by the district court. 5 If a claim is *76 “noncore,” the bankruptcy judge may only “hear” the case, and submit the proposed findings of fact and conclusions of law to the district court, which retains the authority to enter a final judgment. 6 See In re United Missouri Bank of Kansas City, N.A,

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Bluebook (online)
182 B.R. 73, 1994 U.S. Dist. LEXIS 20537, 1994 WL 803192, Counsel Stack Legal Research, https://law.counselstack.com/opinion/gray-v-solvay-polymers-inc-in-re-dooley-plastic-co-mad-1994.