Prudential Insurance Co. of America v. Stouffer Corp. (In Re Northland Point Partners)

26 B.R. 1019, 8 Collier Bankr. Cas. 2d 206, 10 Bankr. Ct. Dec. (CRR) 95, 1983 U.S. Dist. LEXIS 19420
District Court, E.D. Michigan·Decided February 8, 1983·No. 82-05387-W, Adv. No. 82-2277-W·Published·Cited by 17 cases

Opinion

MEMORANDUM OPINION

DeMASCIO, District Judge.

In August 1981, Stouffer Corporation (Stouffer) decided that it could no longer profitably operate Northland Inn as a hotel. Northland Point Partners (Northland Point), the landlord under a lease that expires in 1987, filed an action against Stouf-fer in the Oakland County Circuit Court *1020 seeking damages and specific performance of the lease to require Stouffer to continue to operate the hotel. Since the parties were of diverse citizenship, Stouffer removed the action to the United States District Court. The Prudential Insurance Company of America (Prudential) declared its mortgage in default and took an assignment of the lease as the mortgagee of the property. Prudential filed a separate action against Stouffer in this court seeking an injunctive order requiring Stouffer to continue to manage and operate the property as a hotel. We denied Prudential’s request for a preliminary injunction in September 1981. Several days thereafter, Northland Point filed a Chapter 11 petition for reorganization in the bankruptcy court. Both actions against Stouffer were promptly removed to the bankruptcy court and consolidated for trial.

Stouffer has now moved pursuant to Federal Rules of Civil Procedure 12(h)(3) for dismissal of the bankruptcy proceedings contending that the bankruptcy court lacks subject matter jurisdiction under the interim rule adopted by the United States District Court or, in the alternative, for a withdrawal of the automatic reference to the bankruptcy court pursuant to that rule. Stouffer contends that the interim rule we adopted at the direction of the Judicial Council for the Sixth Circuit cannot confer jurisdiction upon the bankruptcy court to resolve its state-law dispute with Northland Point and Prudential. Specifically, Stouf-fer argues that neither the district court nor the judicial council has the power to promulgate a rule to fill the jurisdictional lapse created by congressional inaction after the Supreme Court's decision in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., - U.S. -, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982). We disagree. We find that Congress and the United States Supreme Court have long recognized the power of Article III courts, in the absence of legislation to the contrary, to administer the business properly brought before them. The United States District Court for the Eastern District of Michigan had the power to adopt the interim rule pursuant to a resolution of the Sixth Circuit Judicial Council.

In 1939, Congress, by legislation, created the Judicial Councils of the Circuits. 53 Stat. 1223. The power of these councils has continued, with minimum modifications, up through the recent amendments to that statute. The pertinent grant of power to these councils, which are mainly composed of circuit judges, now reads as follows:

§ 332 Judicial Councils—
(d)(1) Each judicial council shall make all necessary and appropriate orders for the effective and expeditious administration of justice within its circuit .. .
(2) All judicial officers and employees of the circuit shall promptly carry into effect all orders of the judicial council.
(3) Unless an impediment to the administration of justice is involved, regular business of the courts need not be referred to the council.

The Supreme Court has determined that this grant of power to the councils is constitutional, and that the statute did confer management powers on the council. Chandler v. Judicial Council of the Tenth Circuit, 398 U.S. 74, 90 S.Ct. 1648, 26 L.Ed.2d 100 (1970). In his concurring opinion, Justice Harlan clarified the scope of § 332 when he stated that:

Within the framework of the statutes establishing the inferior courts and defining their jurisdiction, the Judicial Councils are charged with the duty to take such actions as are necessary for the expedition of the business of the courts in each circuit. Id., at 108, 90 S.Ct. at 1665.

Two present Justices of the Supreme Court have informally noted on separate occasions the need for the judicial councils to assert the management power bestowed upon them by 28 U.S. § 332. Chief Justice Burger, then a Judge of the District of Columbia Circuit, stated that:

The Judicial Councils of the Circuits must assume and discharge the statutory duties, which Congress gave them at their own insistence in 1939. Under section 332 the Circuit Councils must operate as the active managing directors and give *1021 full effect to the policies and programs agreed upon in the expanded Judicial Conference of the United States. They must be managers, not just spectators, of how the courts are run.

The Courts on Trial, 22 F.R.D. 71, 82 (1958). Later, Justice Brennan also commented on the need for the judicial councils to exercise the powers statutorily bestowed upon them. The Continuing Education of the Judiciary in Improved Procedures, 28 F.R.D. 42, 44 (1960). Justice Brennan noted that the failure of the councils to act would generate the mistaken belief that the councils did not have the statutory power to act. Id., at 44.

These two Justices acknowledge, therefore, that Congress has statutorily affirmed the broad power of the judicial councils to manage the judicial business of the circuit. See, In Re Imperial “400” National, Inc., 481 F.2d 41 (3d Cir.1973). The Sixth Circuit Judicial Council acted pursuant to this grant of power when it promulgated its resolution directing the district courts of this circuit to adopt the interim rule. In turn, the United States District Court for the Eastern District of Michigan complied with the statute when it adopted the interim rule. 28 U.S.C. § 332(d)(2). It is clear that the council’s obligation to assure the “effective and expeditious administration of justice within this circuit” would have been ill-served if there had been no response to the Supreme Court’s refusal to extend the stay in Marathon. Aside from this clear statutory grant of power to the judicial councils, there has long been recognized an inherent power of Article III courts “to provide themselves with appropriate instruments required for the performance of their duties.” Ex Parte Peterson, 253 U.S. 300, 312, 40 S.Ct. 543, 547, 64 L.Ed. 919 (1920). See Power Commission v. Interstate Gas Co., 336 U.S. 577, 588-89, 69 S.Ct. 775, 781, 93 L.Ed. 895 (1949) (Frankfurter, J., concurring); Reed v. Cleveland Board of Education, 607 F.2d 737, 746 (6th Cir.1979).

Free access — add to your briefcase to read the full text and ask questions with AI

Prudential Insurance Co. of America v. Stouffer Corp. (In Re Northland Point Partners), 26 B.R. 1019, 8 Collier Bankr. Cas. 2d 206, 10 Bankr. Ct. Dec. (CRR) 95, 1983 U.S. Dist. LEXIS 19420 (E.D. Mich. 1983).

26 B.R. 1019 (Prudential Insurance Co. of America v. Stouffer Corp. (In Re Northland Point Partners)) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

Related

Ellenberg v. Henry (In Re Henry)
38 B.R. 24 (N.D. Georgia, 1983)
Esposito v. Connecticut (In Re Esposito)
31 B.R. 872 (D. Connecticut, 1983)
Matter of Seven Springs Apartments, Phase II
33 B.R. 458 (N.D. Georgia, 1983)
Matter of Wildman
30 B.R. 133 (N.D. Illinois, 1983)
Turner v. Erminger (In Re Turner)
29 B.R. 419 (N.D. New York, 1983)
Earl Realty, Inc. v. Leonetti (In Re Leonetti)
28 B.R. 1003 (E.D. Pennsylvania, 1983)
Q1 Corp. v. Reichenstein (In Re Q1 Corp.)
28 B.R. 647 (E.D. New York, 1983)
Pettigrew v. Kutak, Rock & Huie
30 B.R. 989 (N.D. Georgia, 1983)