In Re ARNOLD PRINT WORKS, INC., Debtor. ARNOLD PRINT WORKS, INC., Appellant, v. Joseph APKIN, Et Al., Appellees

815 F.2d 165, 16 Collier Bankr. Cas. 2d 944, 1987 U.S. App. LEXIS 4079, 15 Bankr. Ct. Dec. (CRR) 977
CourtCourt of Appeals for the First Circuit
DecidedMarch 30, 1987
Docket86-1626
StatusPublished
Cited by256 cases

This text of 815 F.2d 165 (In Re ARNOLD PRINT WORKS, INC., Debtor. ARNOLD PRINT WORKS, INC., Appellant, v. Joseph APKIN, Et Al., Appellees) is published on Counsel Stack Legal Research, covering Court of Appeals for the First Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re ARNOLD PRINT WORKS, INC., Debtor. ARNOLD PRINT WORKS, INC., Appellant, v. Joseph APKIN, Et Al., Appellees, 815 F.2d 165, 16 Collier Bankr. Cas. 2d 944, 1987 U.S. App. LEXIS 4079, 15 Bankr. Ct. Dec. (CRR) 977 (1st Cir. 1987).

Opinion

BREYER, Circuit Judge.

Assume that B, a bankrupt company in the midst of federal bankruptcy proceedings, brings an ordinary state law contract claim against D, a private party, seeking money that D allegedly owed B before B went bankrupt. In Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982), the Supreme Court held that federal bankruptcy judges lacked the constitutional power to adjudicate this controversy because they “do not enjoy the protections constitutionally afforded to Art. Ill judges.” Id. at 60, 102 S.Ct. at 2866. This appeal raises a related question under Article III. It asks whether a federal bankruptcy court that is statutorily authorized to hear and determine “core” bankruptcy proceedings, 28 U.S.C. § 157(b) (1982 ed., Supp. Ill), may adjudicate a state law claim arising from a contract that 1) was made after B went bankrupt and 2) was made as part of B’s efforts to liquidate estate assets. In our view, the matter of *166 timing and the relation to judicial administration of the bankrupt’s estate make a critical constitutional difference between Marathon and the present case. Marathon notwithstanding, the bankrupt company’s legal action to collect a “post-petition” debt, brought as part of efforts to liquidate the estate, is a “core” proceeding that the bankruptcy court has the constitutional power to decide.

I

Marathon. To understand the legal issue in this case, one must begin with Marathon, the case in which the Supreme Court held unconstitutional 28 U.S.C. § 1471 (1976 ed., Supp. IV), a key jurisdictional provision of the Bankruptcy Act of 1978. The specific issue in that case was whether the bankruptcy court possessed the constitutional power to adjudicate a bankrupt’s state law contract claim — a claim that arose before the filing of the bankruptcy petition. A plurality of four justices reasoned that bankruptcy courts are not Article III courts because their judges do not have life tenure or protection against salary diminution. It then reviewed the three “exception[s] from the general prescription of Art. Ill” — exceptions that, historically speaking, have been limited to congressional creation of “territorial courts,” “courts-martial,” and “legislative courts and administrative agencies” that “adjudicate cases involving ‘public rights.’ ” Marathon, 458 U.S. at 64-67, 102 S.Ct. at 2867-69. “Public rights” were characterized as those that “arise ‘between the government and others,’ ” as contrasted with private rights, which involve “ ‘the liability of one individual to another under the law as defined.’ ” Id. at 69-70, 102 S.Ct. at 2870-71 (quoting Ex parte Bakelite Corp., 279 U.S. 438, 451, 49 S.Ct. 411, 413, 73 L.Ed. 789 (1929) and Crowell v. Benson, 285 U.S. 22, 51, 52 S.Ct. 285, 292, 76 L.Ed. 598 (1932)). The plurality conceded that Congress might grant to non-Article III courts the power to find facts in cases involving certain private rights, namely congressionally created private rights. See id. at 80,102 S.Ct. at 2876 (“[W]hen Congress creates a substantive federal right, it possesses substantial discretion to prescribe the manner in which that right may be adjudicated — including the assignment to an adjunct of some functions historically performed by judges.”). But, the plurality said, the right contested in Marathon was neither a “public right” nor a “congressionally created right,” so Congress could not delegate the power to adjudicate that right to a bankruptcy court that lacked the attributes prescribed in Article III. Two justices agreed with the plurality’s result, but on the narrower ground that the issues in the lawsuit arose “entirely under state law,” and that no case had “gone so far” as to permit a non-Article III court to adjudicate a claim like Northern’s. Id. at 90-91, 102 S.Ct. at 2881-82, (Rehnquist, J., concurring in the judgment).

The Supreme Court has since adopted a view of Marathon that resembles that of the concurring justices. In Thomas v. Union Carbide Agricultural Products Co., 473 U.S. 568, 105 S.Ct. 3325, 3334, 87 L.Ed.2d 409 (1985), the Court characterized Marathon as a case in which it “was unable to agree on the precise scope and nature of Article Ill’s limitations.” It added:

The court’s holding in [Marathon ] establishes only that Congress may not vest in a non-Article III court the power to adjudicate, render final judgment, and issue binding orders in a traditional contract action arising under state law, without consent of the litigants, and subject only to ordinary appellate review.

Id. 105 S.Ct. at 3334-35. This narrow view of the decision was reaffirmed last year. See Commodity Futures Trading Commission v. Schor, — U.S.-, 106 S.Ct. 3245, 3251, 92 L.Ed.2d 675 (1986).

The Bankruptcy Amendments and Federal Judgeship Act of 1984. After the Marathon decision, Congress amended the Bankruptcy Act of 1978 in an effort to cure the constitutional defect in its jurisdictional provision. The new jurisdictional provisions distinguish between “core” bankruptcy proceedings and those that are merely “related to” title 11 cases. See Appendix. Upon referral from the district court, the *167 bankruptcy judge has full statutory authority to “hear and determine ... all core proceedings_” 28 U.S.C. § 157(b)(1). Representative Kastenmeier, one of the new law’s co-sponsors, explained that core proceedings are “integral to the core bankruptcy function of restructuring debtor-creditor rights,” 130 Cong. Rec. E1109 (daily ed. March 20, 1984), and that they include “all necessary aspects of a bankruptcy case,” id. at E1108. The new law sets forth a nonexhaustive list of “core proceedings,” including such obvious matters as “allowance[s] or disallowance[s] of claims,” 28 U.S.C. § 157(b)(2)(B), as well as matters more relevant to this case, namely: “matters concerning the administration of the estate” and “other proceedings affecting the liquidation of the assets of the estate,” 28 U.S.C. § 157(b)(2)(A), (0).

Non-core proceedings, those that the statute calls “related to” bankruptcy cases, concern aspects of the bankruptcy case that Marathon

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815 F.2d 165, 16 Collier Bankr. Cas. 2d 944, 1987 U.S. App. LEXIS 4079, 15 Bankr. Ct. Dec. (CRR) 977, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-arnold-print-works-inc-debtor-arnold-print-works-inc-ca1-1987.