492 U.S. 33 (1989), 87-1716, Granfinanciera, S.A. v. Nordberg

Docket Nº:No. 87-1716
Citation:492 U.S. 33, 109 S.Ct. 2782, 106 L.Ed.2d 26, 57 U.S.L.W. 4898
Party Name:Granfinanciera, S.A. v. Nordberg
Case Date:June 23, 1989
Court:United States Supreme Court

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492 U.S. 33 (1989)

109 S.Ct. 2782, 106 L.Ed.2d 26, 57 U.S.L.W. 4898

Granfinanciera, S.A.



No. 87-1716

United States Supreme Court

June 23, 1989

Argued January 9, 1989




Respondent, the bankruptcy trustee for a corporation undergoing Chapter 11 reorganization, filed suit in the District Court against petitioners, seeking to avoid allegedly fraudulent monetary transfers to them by the bankrupt corporation's predecessor and to recover damages, costs, expenses, and interest. The court referred the proceedings to the Bankruptcy Court. Shortly after the Colombian Government nationalized petitioner Granfinanciera, S. A., petitioners requested a jury trial. The Bankruptcy Judge denied the request, deeming a suit to recover a fraudulent transfer a "core action" which, under his understanding of English common law, "was a nonjury issue." The District Court affirmed the Bankruptcy Court's judgment for respondent, without discussing petitioners' jury trial request. The Court of Appeals also affirmed, ruling, inter alia, that the Seventh Amendment supplied no right to a jury trial, because fraudulent conveyance actions are equitable in nature, even when a plaintiff seeks only monetary relief; because bankruptcy proceedings themselves are inherently equitable in nature; and because Congress has displaced any right to a jury trial by designating, in 28 U.S.C. § 157(b)(2)(H), fraudulent conveyance actions as "core proceedings" triable by bankruptcy judges sitting without juries.


1. This Court will not address respondent's contention that the judgment below should be affirmed as to petitioner Granfinanciera because it was a commercial instrumentality of the Colombian Government when it made its request for a jury trial, and was therefore not entitled to such a trial under the Seventh Amendment or applicable statutory provisions. This difficult question was neither raised below nor adequately briefed and argued here, and this is not an "exceptional case" as to which the Court will consider arguments not raised below. Moreover, petitioners' claim is uncontradicted that an affirmance on the ground respondent now urges would enlarge respondent's rights under the judgment below and decrease those of Granfinanciera. Pp. 38-40.

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2. Provided that Congress has not permissibly assigned resolution of the claim to a non-Article III adjudicative body that does not use a jury as factfinder, the Seventh Amendment entitles a person who has not submitted a claim against a bankruptcy estate to a jury trial when sued by the bankruptcy trustee to recover an allegedly fraudulent monetary transfer. Pp. 40-49.

(a) Since this Court's decisions, early English cases, and scholarly authority all demonstrate that respondent would have had to bring his action at law in 18th-century England, and that a court of equity would not have adjudicated it, it must be concluded preliminarily that the action is a "Sui[t] at common law" for which a jury trial is required by the Seventh Amendment. Pp. 43-47.

[109 S.Ct. 2786] (b) More importantly, the nature of the relief respondent seeks -- the recovery of money payments of ascertained and definite amounts -- conclusively demonstrates that his cause of action should be characterized as legal, rather than equitable, such that petitioners are prima facie entitled to a jury trial under the Amendment. Schoenthal v. Irving Trust Co., 287 U.S. 92. Pp. 47-49.

3. The Seventh Amendment entitles petitioners to their requested jury trial notwithstanding § 157(b)(2)(H)'s designation of fraudulent conveyance actions as "core proceedings" which non-Article III bankruptcy judges may adjudicate. Pp. 49-65.

(a) Although the Seventh Amendment does not prohibit Congress from assigning resolution of a statutory claim that is legal in nature to a non-Article III tribunal that does not use a jury as a factfinder so long as the claim asserts a "public right," Congress lacks the power to strip parties who are contesting matters of private right of their constitutional right to a jury trial. See, e.g., Atlas Roofing Co. v. Occupational Safety and Health Review Comm'n, 430 U.S. 442; Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50. For these purposes, a "public right" is not limited to a matter arising between the Government and others, but extends to a seemingly "private" right that is closely intertwined with a federal regulatory program that Congress has power to enact. Thomas v. Union Carbide Agricultural Products Co., 473 U.S. 568, 586, 593-594. Pp. 51-55.

(b) A bankruptcy trustee's right to recover a fraudulent conveyance is more accurately characterized as a private, rather than a public, right. Although the plurality in Northern Pipeline Construction Co., supra, at 71, noted that the restructuring of debtor-creditor relations in bankruptcy may well be a "public right," it also emphasized that state law causes of action for breach of contract are paradigmatic private rights, even when asserted by an insolvent corporation in the midst of Chapter 11 reorganization proceedings. Trustees' fraudulent conveyance actions

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are quintessentially common law suits that more nearly resemble state law contract claims by a bankrupt corporation to augment the bankruptcy estate than they do creditors' claims to a pro rata share of the bankruptcy res. This analysis is confirmed by Katchen v. Landy, 382 U.S. 323, 327-328, which must be read to hold that a creditor's Seventh Amendment right to a jury trial on a bankruptcy trustee's preference claim depends upon whether the creditor submitted a claim against the estate. Since petitioners here have not filed such claims, respondent's suit is neither part of the claims adjudication process nor integral to the restructuring of debtor-creditor relations. Congress therefore cannot divest petitioners of their Seventh Amendment right merely by relabeling a preexisting, common law cause of action to which that right attaches and assigning it to a specialized court of equity, particularly where there is no evidence that Congress considered the constitutional implications of its designation of all fraudulent conveyance actions as core proceedings. Pp. 55-61.

(c) Permitting jury trials in fraudulent conveyance actions will not significantly impair the functioning of the legislative scheme. It cannot seriously be argued that allowing such actions in a trustee's suit against a person who has not entered a claim against the estate would "go far to dismantle the statutory scheme," as that phrase was used in Atlas Roofing, supra, at 454, n. 11, since Atlas plainly assumed that such claims carried with them a right to a jury trial. In addition, it cannot easily be said that a jury would be incompatible with bankruptcy proceedings, since Congress has expressly provided for jury trials in [109 S.Ct. 2787] certain other actions arising out of bankruptcy litigation. The claim that juries may serve usefully as checks only on life-tenured judges' decisions overlooks the potential for juries to exercise beneficial restraint on the decisions of fixed-term judges, who may be beholden to Congress or the Executive. Moreover, although providing jury trials in some fraudulent conveyance actions might impede swift resolution of bankruptcy proceedings and increase the expense of Chapter 11 reorganizations, these considerations are insufficient to overcome the Seventh Amendment's clear command. Pp. 61-63.

835 F.2d 1341, reversed and remanded.

BRENNAN, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and MARSHALL, STEVENS, and KENNEDY, JJ., joined, and in Parts I, II, III, and V, of which SCALIA, J., joined. SCALIA, J., filed an opinion concurring in part and concurring in the judgment, post, p. 65. WHITE, J., filed a dissenting opinion, post, p. 71. BLACKMUN, J., filed a dissenting opinion, in which O'CONNOR, J., joined, post, p. 91.

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BRENNAN, J., lead opinion

JUSTICE BRENNAN delivered the opinion of the Court.

The question presented is whether a person who has not submitted a claim against a bankruptcy estate has a right to a jury trial when sued by the trustee in bankruptcy to recover an allegedly fraudulent monetary transfer. We hold that the Seventh Amendment entitles such a person to a trial by jury, notwithstanding Congress' designation of fraudulent conveyance actions as "core proceedings" in 28 U.S.C. § 157(b)(2)(H) (1982 ed., Supp. V).


The Chase & Sanborn Corporation filed a petition for reorganization under Chapter 11 of the Bankruptcy Code in 1983. A plan of reorganization approved by the United States Bankruptcy Court for the Southern District of Florida vested in respondent Nordberg, the trustee in bankruptcy, causes of action for fraudulent conveyances. App. to Pet. for Cert. 37. In 1985, respondent filed suit against petitioners Granfinanciera, S. A., and Medex, Ltd., in the United States District Court for the Southern District of Florida. The complaint alleged that petitioners had received $1.7 million from Chase & Sanborn's corporate predecessor within one year of the date its bankruptcy petition was filed, without receiving consideration or reasonably equivalent value in return. Id. at 39-40. Respondent sought to avoid what it alleged were constructively and actually fraudulent transfers and to recover damages, costs, expenses, and interest under 11 U.S.C. §§ 548(a)(1) and (a)(2), 550(a)(1) (1982 ed. and Supp. V). App. to Pet. for Cert. 41.

The District Court referred the proceedings to the Bankruptcy Court. Over five months later, and shortly before the Colombian Government nationalized Granfinanciera, respondent

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served a summons on petitioners in Bogota, Colombia. In their answer to the complaint following Granfinanciera's nationalization, both petitioners...

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