Clay, In re

Decision Date03 October 1994
Docket NumberNo. 94-50507,94-50507
Citation35 F.3d 190
Parties, 26 Bankr.Ct.Dec. 127, Bankr. L. Rep. P 76,122 In re Raymond CLAY and Scott Clay, d/b/a The Emporium, Petitioners.
CourtU.S. Court of Appeals — Fifth Circuit

Harrel L. Davis, III, Mounce & Galatzan, El Paso, TX, for petitioners.

H. Christopher Mott, Krafsur, Gordon, Mott, Sanders & Miranda, El Paso, TX, for appellee.

On Petition for Writ of Mandamus to the United States District Court for the Western District of Texas.

Before HIGGINBOTHAM, SMITH and STEWART, Circuit Judges.


Raymond and Scott Clay want a jury trial, but not in bankruptcy court. The Clays seek a writ of mandamus to prevent the bankruptcy court from conducting a jury trial in various core proceedings. The argument is that Congress cannot constitutionally empower non-Article III bankruptcy judges to hold jury trials without the parties' consent. Because the applicable statute may fairly be read as not granting such authority, we say only that such a congressional effort would be dubious at best.

The trustee for the bankruptcy estate of Heelco Corporation filed a complaint in the U.S. Bankruptcy Court for the Western District of Texas. The complaint sought turnover and avoidance of preferential and fraudulent transfers and post-petition transactions with petitioners, the Clays. The Clays filed jury demands in the bankruptcy court. In the district court, the Clays filed a motion to withdraw the reference of the case from the bankruptcy court.

The bankruptcy court found that the Clays had a Seventh Amendment right to a jury trial and that the claims involved were core proceedings. The court also held that it had the authority to conduct a jury trial and had no authority to decline a reference from the district court.

On June 28, 1994, the district court entered an order denying the Clays' motion to withdraw the reference from the bankruptcy court. It concluded that bankruptcy judges have the power to preside over jury trials in core proceedings. The Clays then filed this petition for writ of mandamus.

The parties do not dispute the core nature of the proceedings or the Clays' right to a jury trial. Nor do they contest the propriety of review via petition for writ of mandamus. Cf. La Buy v. Howes Leather Co., 352 U.S. 249, 77 S.Ct. 309, 1 L.Ed.2d 290 (1957) (upholding use of mandamus to vacate referral of cases to special master). The sole issue presented is whether the bankruptcy judge has the constitutional and statutory authority to conduct the jury trial without the consent of the parties. Because the constitutional question influences the interpretation of the statute, we first address the Constitution.


The American colonists suffered greatly under judges controlled by King George III. They listed this grievance in the Declaration of Independence: "He has made Judges dependent on his Will alone, for the Tenure of their Offices, and the Amount and Payment of their Salaries." Declaration of Independence para. 11 (U.S.1776). The Framers made judicial independence a cornerstone of our judicial system. The Federalist Papers stressed the need for lifetime tenure and salary protection for judges. "Periodical appointments, however regulated, or by whomsoever made, would, in some way or other, be fatal to [the courts'] necessary independence." The Federalist No. 78, at 471 (Alexander Hamilton) (Clinton Rossiter ed., 1961). "Next to permanency in office, nothing can contribute more to the independence of the judges than a fixed provision for their support.... In the general course of human nature, a power over a man's subsistence amounts to a power over his will." The Federalist No. 79, at 472 (Alexander Hamilton).

The Framers guarded against this danger in Article III of the Constitution:

The judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish. The Judges, both of the supreme and inferior Courts, shall hold their Offices during good Behaviour, and shall, at stated Times, receive for their Services, a Compensation, which shall not be diminished during their Continuance in Office.

U.S. Const. art. III, Sec. 1. In other words, only judges who enjoy life tenure and protection against salary cuts can exercise "[t]he judicial Power of the United States." Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 59, 102 S.Ct. 2858, 2865, 73 L.Ed.2d 598 (1982) (Brennan, J., plurality opinion).

These guarantees insure independence from legislative and executive influence, promote public confidence in judicial integrity, attract well qualified jurists to the bench, and insulate judges from pressure by other judges. Id. at 57-60 & n. 10, 102 S.Ct. at 2864-65 & n. 10; The Federalist No. 78 (Alexander Hamilton). Courts and commentators focus on the importance of insulating judges from Congress and the Executive Branch. But as Chief Judge Kaufman noted, "it is equally essential to protect the independence of the individual judge, even from incursions by other judges. The heart of judicial independence, it must be understood, is judicial individualism," and giving one judge power over another chills judicial individualism. Irving R. Kaufman, Chilling Judicial Independence, 88 Yale L.J. 681, 713 (1979). A judge must be free to decide a case according to the law as he sees it, without fear of personal repercussion or retaliation from any source.

Despite the absolute language of Article III, the Supreme Court has carved out three exceptions for so-called Article I legislative courts, whose judges need not enjoy life tenure or salary protection. First, Congress may create legislative courts for U.S. territories and the District of Columbia, because Articles I and IV of the Constitution give Congress plenary power over these geographic enclaves. Marathon, 458 U.S. at 64-65, 102 S.Ct. at 2868 (Brennan, J., plurality opinion); Palmore v. United States, 411 U.S. 389, 407, 93 S.Ct. 1670, 1681, 36 L.Ed.2d 342 (1973) (District of Columbia); American Ins. Co. v. Canter, 26 U.S. (1 Pet.) 511, 546, 7 L.Ed. 242 (1828) (territories). Second, courts-martial need not conform to Article III's requirements, because Congress and the Commander-in-Chief have extraordinary leeway in military affairs. Marathon, 458 U.S. at 66, 102 S.Ct. at 2869 (Brennan, J., plurality opinion); Dynes v. Hoover, 61 U.S. (20 How.) 65, 79, 15 L.Ed. 838 (1857). Third, Article I courts may hear cases involving "public rights," which are rights against the government or closely intertwined with a regulatory scheme. Thomas v. Union Carbide Agric. Prods., 473 U.S. 568, 593-94, 105 S.Ct. 3325, 3339-40, 87 L.Ed.2d 409 (1985); Marathon, 458 U.S. at 67-70, 102 S.Ct. at 2869-71 (Brennan, J., plurality opinion). The rationale underlying the public rights exception is that because "Congress [was] free to commit such matters completely to nonjudicial executive determination, ... there can be no constitutional objection to Congress' employing the less drastic expedient of committing their determination to a legislative court or an administrative agency." Marathon, 458 U.S. at 68, 102 S.Ct. at 2870 (Brennan, J., plurality opinion) (citing Crowell v. Benson, 285 U.S. 22, 50, 52 S.Ct. 285, 292, 76 L.Ed. 598 (1932)); see also Murray's Lessee v. Hoboken Land & Improvement Co., 59 U.S. (18 How.) 272, 284, 15 L.Ed. 372 (1855).

Regardless of whether a case involves territories, the military, or public rights, an Article III court may employ non-Article III adjuncts, such as special masters and magistrates. The only limitation is that the Article III court must retain " 'the essential attributes of the judicial power.' " Marathon, 458 U.S. at 77-81, 102 S.Ct. at 2874-75 (Brennan, J., plurality opinion) (quoting Crowell, 285 U.S. at 51, 52 S.Ct. at 292).

In Marathon, the Supreme Court struck down the scheme of bankruptcy courts set up by the Bankruptcy Act of 1978. Bankruptcy courts had the power to preside over jury trials, issue declaratory judgments, issue writs of habeas corpus, and issue orders, process, and judgments. Their judgments were reviewable under the clearly erroneous standard. The plurality relied upon these facts in concluding that district courts had not retained "the essential attributes of the judicial power." Id. at 87, 102 S.Ct. at 2880 (internal quotation marks omitted). The plurality also concluded that the courts were not public rights courts because they handled noncore proceedings between private parties. Id. at 71, 102 S.Ct. at 2871. The concurring Justices agreed that the bankruptcy courts were not adjuncts because of the deferential standard of review. Id. at 91, 102 S.Ct. at 2882 (Rehnquist, J., concurring in the judgment). They noted that the exercise of jurisdiction did not involve public rights, because English common-law courts heard such claims in the eighteenth century. "No method of adjudication is hinted, other than the traditional common-law mode of judge and jury." Id. at 90, 102 S.Ct. at 2881.

In the wake of Marathon, Congress passed the Bankruptcy Amendments and Federal Judgeship Act of 1984 (BAFJA). Pub.L. No. 98-353, 98 Stat. 333 (codified as amended in scattered sections of U.S.C. titles 5, 11, and 28). Even after BAFJA, bankruptcy judges do not enjoy the protections of Article III: they serve fourteen-year terms, are removable for cause, and enjoy no protection from salary cuts. See 28 U.S.C. Sec. 152(a)(1), (e). Marathon suggested that core proceedings "may well be" cases involving public rights, and BAFJA responded to Article III concerns by restricting bankruptcy courts to core proceedings. 28 U.S.C. Sec. 157(b); Marathon, 458 U.S. at 71, 102 S.Ct. at 2871-72 (Brennan, J., plurality opinion). Congress also styled bankruptcy courts as adjuncts, labeling them "a unit of the district court." 28 U.S.C. Sec. 151.


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