CERTIFICATION OF THE POSSIBLE OCCURRENCE OF AN ACT OF CONTEMPT
WESLEY W. STEEN, Bankruptcy Judge.
I. Certification of Act
The Debtor filed a Rule to Show Cause why St. Helena Acceptance Corporation (the “Creditor”) should not be held in contempt of court. The Rule alleges that subsequent to the Debtors’ discharge, the Creditor persuaded the Debtor to execute a promissory note that obligated the Debtor to repay a discharged debt.
11 U.S.C. § 524 provides that a discharge in a bankruptcy case “operates as an injunction against ... any act to collect ... [any discharged debts] as a personal liability of the debtor.” If the Debtor’s allegations are true, then the Creditor’s action constituted a violation of the statutory injunction. Prior to the Bankruptcy Code, sanctions for such conduct constituted a contempt of court because the actions constituted violations of provisions of the court order of discharge required by § 14(f) of the Bankruptcy Act.
II. Doubt About Contempt Sanctions Imposed by Bankruptcy Judges
Doubt has arisen about the authority of bankruptcy judges to. impose contempt sanctions because the jurisdictional scheme of the Bankruptcy Amendments and Federal Judgeship Act of 1984 (“BAFJA”) continues bankruptcy judges as non-Article III judges. 28 U.S.C. § 1481 in the Bankruptcy Reform Act allowed bankruptcy judges limited contempt power; that part of the statute has apparently been repealed.
Thus, there appears to be no statutory contempt power for bankruptcy judges. Bankruptcy Judge Goetz has concluded that there is inherent authority in court
officers to exercise limited civil contempt powers. A significant number of cases hold, however, that bankruptcy judges may not impose contempt sanctions.
Proposed Bankruptcy Rule 9020 would formalize a denial of contempt power to bankruptcy judges by amending the rule to delete civil contempt power and to provide as follows:
“(b) CERTIFICATION TO DISTRICT COURT. If it appears to a bankruptcy judge that contempt has occurred, the judge may certify the facts to the district court.”
The comments to the proposed rules amplify the concepts behind this change. Those comments are as follows:
“COMMITTEE NOTE
“The United States Bankruptcy Courts, as constituted under the Bankruptcy Reform Act of 1978, were courts of law, equity and admiralty with an inherent contempt power, but former 28 U.S.C. § 1481 restricted the criminal contempt power of bankruptcy judges. Rule 9020 governed the procedure in criminal contempt matters. Bankruptcy judges are judicial officers of the district court, 28 U.S.C. § 151 and § 152(a)(1), and there is no statutory authority for them to exercise the contempt power.
“The rule has been amended to provide a procedure for initiating contempt proceedings in district court. The rule applies to civil and criminal contempt proceedings. Bankruptcy judges may, however, impose sanctions other than contempt, as provided by Rule 7007, 7016, 7037, and 9011 and grant relief as provided in § 363(h) of the Code.”
III. Consequences of Bankruptcy Judge’s Lack of Contempt Power
A rule that bankruptcy judges do not have civil contempt power has potentially substantial consequences. For example, sanctions for violation of the § 362 automatic stay or the § 524 post-discharge stay have traditionally been handled as sanctions for contempt of court.
If bankruptcy judges lack contempt power, and if these transgressions continue to be handled as contempts of court, substantial numbers of proceedings will necessarily be heard by district judges in order to carry out the mandates of title 11.
The drafters of the Proposed Bankruptcy Rules assume that bankruptcy judges have the authority to adjudicate damages for violation of a statutory prohibition; they specifically cite § 362(h) of the Code. That section provides that an individual injured by any willful violation of the § 362 stay may recover actual damages and, in appropriate circumstances, punitive damages. Unfortunately, the proposed rule will not cover typical fact patterns that arise frequently. First, there may be a violation of the § 362 stay that was not willful in the sense that there was a conscious violation of the stay, but nevertheless involved an intentional act that resulted in damages and potentially may have resulted in enrichment to the violator of that section. Second, § 362(h) apparently does not deal with any situation in which the injured party is a corporation, partnership, or other entity; although the injured party is usually the debtor, violation of the stay could damage a creditor that is not an individual
(e.g.,
a bank mortgagee,
etc.).
Third, obviously § 362(h) has no applicability to the current circumstances in which the stay that was violated was § 524 and not § 362. More significant, the authority for bankruptcy judges to adjudicate damages, as
cited by the committee, do not deal with any number of substantial issues that frequently arise; examples of that type of problem are set out in section 41(a) of the Bankruptcy Act (set out in full in the margin in footnote 6.)
IY. Alternative Determinations
There is general precedent for authorizing civil contempt power to non-Article III judges.
There is specific precedent for authorizing non-Article III adjudicators to exercise civil contempt power in the bankruptcy context; bankruptcy referees had limited civil contempt power under the 1898 Act and under the 1973 Rules. A bankruptcy referee/judge could impose a fine of $250 or less for civil or criminal contempt but could not imprison.
In 1978 Congress apparently thought that non-Article III status did
not preclude the exercise of civil contempt powers since it provided for such powers in the Bankruptcy Reform Act.
In 1982 the District Courts of the United States apparently thought that there was no prohibition on the exercise of limited contempt power by non-Article III judges; the post-Afara-
thon
“Emergency Rule” adopted in this district and in virtually all other districts of the United States tracks the language of § 1481, at least implying that
Marathon
had not declared that portion of the statute unconstitutional.
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CERTIFICATION OF THE POSSIBLE OCCURRENCE OF AN ACT OF CONTEMPT
WESLEY W. STEEN, Bankruptcy Judge.
I. Certification of Act
The Debtor filed a Rule to Show Cause why St. Helena Acceptance Corporation (the “Creditor”) should not be held in contempt of court. The Rule alleges that subsequent to the Debtors’ discharge, the Creditor persuaded the Debtor to execute a promissory note that obligated the Debtor to repay a discharged debt.
11 U.S.C. § 524 provides that a discharge in a bankruptcy case “operates as an injunction against ... any act to collect ... [any discharged debts] as a personal liability of the debtor.” If the Debtor’s allegations are true, then the Creditor’s action constituted a violation of the statutory injunction. Prior to the Bankruptcy Code, sanctions for such conduct constituted a contempt of court because the actions constituted violations of provisions of the court order of discharge required by § 14(f) of the Bankruptcy Act.
II. Doubt About Contempt Sanctions Imposed by Bankruptcy Judges
Doubt has arisen about the authority of bankruptcy judges to. impose contempt sanctions because the jurisdictional scheme of the Bankruptcy Amendments and Federal Judgeship Act of 1984 (“BAFJA”) continues bankruptcy judges as non-Article III judges. 28 U.S.C. § 1481 in the Bankruptcy Reform Act allowed bankruptcy judges limited contempt power; that part of the statute has apparently been repealed.
Thus, there appears to be no statutory contempt power for bankruptcy judges. Bankruptcy Judge Goetz has concluded that there is inherent authority in court
officers to exercise limited civil contempt powers. A significant number of cases hold, however, that bankruptcy judges may not impose contempt sanctions.
Proposed Bankruptcy Rule 9020 would formalize a denial of contempt power to bankruptcy judges by amending the rule to delete civil contempt power and to provide as follows:
“(b) CERTIFICATION TO DISTRICT COURT. If it appears to a bankruptcy judge that contempt has occurred, the judge may certify the facts to the district court.”
The comments to the proposed rules amplify the concepts behind this change. Those comments are as follows:
“COMMITTEE NOTE
“The United States Bankruptcy Courts, as constituted under the Bankruptcy Reform Act of 1978, were courts of law, equity and admiralty with an inherent contempt power, but former 28 U.S.C. § 1481 restricted the criminal contempt power of bankruptcy judges. Rule 9020 governed the procedure in criminal contempt matters. Bankruptcy judges are judicial officers of the district court, 28 U.S.C. § 151 and § 152(a)(1), and there is no statutory authority for them to exercise the contempt power.
“The rule has been amended to provide a procedure for initiating contempt proceedings in district court. The rule applies to civil and criminal contempt proceedings. Bankruptcy judges may, however, impose sanctions other than contempt, as provided by Rule 7007, 7016, 7037, and 9011 and grant relief as provided in § 363(h) of the Code.”
III. Consequences of Bankruptcy Judge’s Lack of Contempt Power
A rule that bankruptcy judges do not have civil contempt power has potentially substantial consequences. For example, sanctions for violation of the § 362 automatic stay or the § 524 post-discharge stay have traditionally been handled as sanctions for contempt of court.
If bankruptcy judges lack contempt power, and if these transgressions continue to be handled as contempts of court, substantial numbers of proceedings will necessarily be heard by district judges in order to carry out the mandates of title 11.
The drafters of the Proposed Bankruptcy Rules assume that bankruptcy judges have the authority to adjudicate damages for violation of a statutory prohibition; they specifically cite § 362(h) of the Code. That section provides that an individual injured by any willful violation of the § 362 stay may recover actual damages and, in appropriate circumstances, punitive damages. Unfortunately, the proposed rule will not cover typical fact patterns that arise frequently. First, there may be a violation of the § 362 stay that was not willful in the sense that there was a conscious violation of the stay, but nevertheless involved an intentional act that resulted in damages and potentially may have resulted in enrichment to the violator of that section. Second, § 362(h) apparently does not deal with any situation in which the injured party is a corporation, partnership, or other entity; although the injured party is usually the debtor, violation of the stay could damage a creditor that is not an individual
(e.g.,
a bank mortgagee,
etc.).
Third, obviously § 362(h) has no applicability to the current circumstances in which the stay that was violated was § 524 and not § 362. More significant, the authority for bankruptcy judges to adjudicate damages, as
cited by the committee, do not deal with any number of substantial issues that frequently arise; examples of that type of problem are set out in section 41(a) of the Bankruptcy Act (set out in full in the margin in footnote 6.)
IY. Alternative Determinations
There is general precedent for authorizing civil contempt power to non-Article III judges.
There is specific precedent for authorizing non-Article III adjudicators to exercise civil contempt power in the bankruptcy context; bankruptcy referees had limited civil contempt power under the 1898 Act and under the 1973 Rules. A bankruptcy referee/judge could impose a fine of $250 or less for civil or criminal contempt but could not imprison.
In 1978 Congress apparently thought that non-Article III status did
not preclude the exercise of civil contempt powers since it provided for such powers in the Bankruptcy Reform Act.
In 1982 the District Courts of the United States apparently thought that there was no prohibition on the exercise of limited contempt power by non-Article III judges; the post-Afara-
thon
“Emergency Rule” adopted in this district and in virtually all other districts of the United States tracks the language of § 1481, at least implying that
Marathon
had not declared that portion of the statute unconstitutional.
Finally, there are post-
Marathon
cases that have upheld or assumed the right of bankruptcy courts to issue civil contempt sanctions.
With this authority that recognizes the exercise of civil contempt powers by non-Article III judges, the current decisions rejecting such authority are puzzling. More important, the consequences of such decisions on the workload of the U.S. District Court and the litigation delays necessarily involved mean that the result will be more serious than merely puzzling. Such a result seems unnecessary in light of the longstanding recognition of civil contempt power in non-Article III judges.
Y. Reason for This Certification
Because there is such substantial doubt about the contempt authority of bankruptcy judges, because the instant proceeding was framed as a contempt proceeding by the movant, and because there appears insufficient statutory authority to imply a statutory claim on which relief can be granted, the undersigned bankruptcy judge follows the lead of the Honorable Clive Bare:
“In view of the current lack of statutory clarity respecting the contempt pow
er of the Bankruptcy Judge, this court therefore certifies the above facts to the United States District Court ... for appropriate action.”