Grabill Corp., Matter of

• Decision Date: 13 July 1992
• Docket Number: No. 91-3381,91-3381
• Citation: 967 F.2d 1152
• Parties: , 27 Collier Bankr.Cas.2d 743, 23 Bankr.Ct.Dec. 297, Bankr. L. Rep. P 74,752 In the Matter of GRABILL CORPORATION, Camdon Companies, Incorporated, Foxxford Group Limited, et al., Debtors. Appeal of NCNB NATIONAL BANK OF NORTH CAROLINA.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1152

967 F.2d 1152

61 USLW 2050, 27 Collier Bankr.Cas.2d 743,

23 Bankr.Ct.Dec. 297,

Bankr. L. Rep. P 74,752

In the Matter of GRABILL CORPORATION, Camdon Companies Incorporated, Foxxford Group Limited, et al., Debtors Appeal of NCNB NATIONAL BANK OF NORTH CAROLINA.

No. 91-3381.

United States Court of Appeals Seventh Circuit.

Argued Dec. 9, 1991.

Decided July 13, 1992.

Glen H. Kanwit (argued) and Matthew J. Botica, Hopkins & Sutter, Chicago, Ill., for plaintiff-appellee.

Edward T. Joyce, Raymond A. Fylstra, Joyce & Kubasiak, Chicago, Ill., and Robert D. Dearborn (argued) and Hayden J. Silver, III, Moore & Van Allen, Charlotte, N.C., for defendant-appellant.

Before POSNER, COFFEY, and FLAUM, Circuit Judges.

FLAUM, Circuit Judge.

This appeal presents an issue the Supreme Court has twice saved for another day: ¹ whether bankruptcy courts possess the statutory (and if so, the constitutional) authority to conduct jury trials in core proceedings.

The defendant in this action, NCNB National Bank of North Carolina (NCNB), petitioned the district court to withdraw the reference to the bankruptcy court. Although the claims involved are "core" proceedings, see 28 U.S.C. § 157(b)(2)(F), (H), which normally fall within the bankruptcy court's jurisdiction, NCNB demanded a jury trial, to which the parties agree it is entitled under the Seventh Amendment, see Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 58-59, 64, 109 S.Ct. 2782, 2799, 2802, 106 L.Ed.2d 26 (1989) (defendant in preference and fraudulent transfer action brought by trustee who has not entered a claim against estate entitled to jury trial), and the parties dispute whether the bankruptcy court has the statutory and constitutional authority to conduct such a proceeding. After the district court denied NCNB's petition, based upon its conclusion that bankruptcy courts may conduct jury trials, In re Grabill Corp., 133 B.R. 621 (N.D.Ill.1991), NCNB brought this interlocutory appeal under 28 U.S.C. § 1292(b). In re Jartran, Inc., 886 F.2d 859, 865 (7th Cir.1989); In re Moens, 800 F.2d 173, 177 (7th Cir.1986). The sole issue before us is whether the bankruptcy court has authority to conduct a jury trial in this core proceeding.

The history and legal arguments relevant to this issue have been discussed extensively in numerous judicial opinions on the matter. We assume familiarity with those decisions, as well as the pertinent commentary, see, e.g., S. Elizabeth Gibson, Jury Trials and Court Proceedings: The Bankruptcy Judge's Uncertain Authority, 65 Am.Bankr.L.J. 143 (Winter 1991); Anthony Michael Sabino, Jury Trials, Bankruptcy Judges, and Article III: A Constitutional Crisis of the Bankruptcy Court, 21 Seton Hall L.Rev. 258 (1991); Symposium on Jury Trials in Bankruptcy Court, 65 Am.Bankr.L.J. 1 (Dedication Issue 1991), and limit our discussion primarily to the rationales upon which we ground our decision.

At the outset, we note that the circuits are divided three to one on the issue. The Second Circuit (the first to address the issue) held that bankruptcy courts may conduct jury trials. See In re Ben Cooper, Inc., 896 F.2d 1394 (2d Cir.), cert. granted, --- U.S. ----, 110 S.Ct. 3269, 111 L.Ed.2d 779, vacated and remanded, 111 S.Ct. 425, 112 L.Ed.2d 408 (1990), reinstated, 924 F.2d 36 (2d Cir.), cert. denied, --- U.S. ----, 111 S.Ct. 2041, 114 L.Ed.2d 126 (1991). The Sixth, Eighth, and Tenth Circuits held otherwise. See In re Baker & Getty Fin. Servs., Inc., 954 F.2d 1169 (6th Cir.1992); In re United Missouri Bank, N.A., 901 F.2d 1449 (8th Cir.1990); In re Kaiser Steel Corp., 911 F.2d 380 (10th Cir.1990). This divergence is not surprising given the ambiguous statute and legislative history. There is no express statutory authority in the Bankruptcy Amendments and Federal Judgeship Act of 1984 (BAFJA) granting bankruptcy courts the power to conduct jury trials; even the Second Circuit recognizes this. See Ben Cooper, 896 F.2d at 1402. The issue, then, is whether such power may be implied. Discerning any intent here is no easy task.

We start, as we must, with the language of the statute. BAFJA's only provision related to jury trials, 28 U.S.C. § 1411, preserves this right for personal injury and wrongful death actions. ² Section 157(b)(5) requires that such actions be tried in the district court. Under one view, the express preservation of the right to jury trial for a specific class of cases suggests that Congress intended no such right in all other bankruptcy matters, and that the bankruptcy court lacks authority to conduct jury trials. See Sabino, Constitutional Crisis, supra, at 300-01. Under the competing view, these provisions do not preclude but rather, support jury trials in bankruptcy court, because the statute specifies that only personal injury and wrongful death jury trials must be held in nonbankruptcy courts. ³ See Gibson, Uncertain Authority, supra, at 157-58; see, e.g., In re Cohen, 107 B.R. 453 (Bankr.S.D.N.Y.1989); cf. Granfinanciera, 492 U.S. at 40-41 n. 3, 109 S.Ct. at 2789 n. 3 ("Although [§ 1411(a) ] might suggest that jury trials are available only in personal injury and wrongful death actions, that conclusion is debatable. Section 1411(b) ... suggest[s] that the court lacks similar discretion to deny jury trials on at least some issues presented in connection with voluntary petitions."). In In re Hallahan, 936 F.2d 1496 (7th Cir.1991), we indicated our preference for the former interpretation. The predecessor statute to § 1411, 28 U.S.C § 1480(a), conferred broader jury trial rights than § 1411 and "was apparently repealed by the 1984 Amendments." Granfinanciera, 492 U.S. at 40-41 n. 3, 109 S.Ct. at 2789-90 n. 3. In Hallahan, we stated that, if § 1411 is read on the assumption that § 1480 was repealed by BAFJA, "we would prefer the [narrow] interpretation giving effect to the clear language of Subsection (a)"--i.e., "the view that the statute intends to grant jury trials in bankruptcy court only in personal injury and wrongful death actions"--rather than the interpretation that some broader jury trial right is implied that would enforce the negative implication arising out of subsection (b). Hallahan, 936 F.2d at 1507.

Other provisions are no more revealing. The provision granting bankruptcy judges the authority to "hear and determine" all core proceedings, 28 U.S.C. § 157(b)(1), likewise is readily susceptible to differing interpretations. It might be construed that bankruptcy judges may hear and determine all core proceedings. See Kaiser, 911 F.2d at 391 (plain language of § 157(b)(1) that "[b]ankruptcy judges hear and determine" indicates Congress granted "the bankruptcy judges the personal power to hear and determine cases") (emphasis in original). On the other hand, it could be interpreted that bankruptcy judges may hear and determine all core proceedings. See Gibson, Uncertain Authority, supra, at 157 & n. 113 (broad grant of authority over "all core proceedings" "is unqualified, and draws no distinction between jury and bench trials.") (emphasis in original).

Nor is the legislative history enlightening. To take one example, although the 1978 Act granted bankruptcy judges the authority to conduct jury trials, the Emergency Rules adopted in response to Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982), prohibited bankruptcy judges from doing so. See Emergency Rule (d)(1)(D), reprinted in 1 Collier on Bankruptcy p 3.01(1)(b)(vi), at 3-17 (15th ed. 1992). BAFJA, in turn, did not incorporate the Emergency Rules' explicit prohibition. Under one view, since the 1984 Act essentially endorsed the Emergency Rules and was promulgated in response to Northern Pipeline, "if anything can be gleaned ... it is that Congress intended to continue the Emergency Rule's prohibition against bankruptcy judges conducting jury trials." United Missouri, 901 F.2d at 1455 n. 16. Another view holds that although the Emergency Rules "apparently served as the model for the 1984 amendments," the fact that Congress chose not to enact their prohibition against jury trials in the bankruptcy courts "suggests that Congress did not intend to restrict bankruptcy judges' authority in this manner." Gibson, Uncertain Authority, supra, at 158; see also In re Stoecker, 117 B.R. 342, 346 (Bankr.N.D.Ill.1990); Citibank, N.A. v. Park-Kenilworth Indus., Inc., 109 B.R. 321 (Bankr.N.D.Ill.1989). This illustration is, unfortunately, representative of BAFJA as a whole. Hence, we agree with the view that any attempt to glean implied congressional authorization from the scant legislative history amounts to "an illusory search." In re Jackson, 118 B.R. 243, 243 (Bankr.E.D.Pa.1990); see also United Missouri, 901 F.2d at 1456; In re Grabill, 132 B.R. 725 (N.D.Ill.1991).

Absent any discernible intent from either statutory language or legislative history, we are reluctant to infer in BAFJA authority that Congress has not in any clear manner conferred. It is well established that "Congress vests Bankruptcy Courts with their jurisdiction and their authority has no 'inherent' source." In re Sequoia Auto Brokers, Ltd., 827 F.2d 1281, 1284 (9th Cir.1987); see Ex Parte Bakelite Corp., 279 U.S. 438, 449, 49 S.Ct. 411, 412-13, 73 L.Ed. 789 (1929). In determining whether Congress vested in bankruptcy courts the power to conduct jury trials, we are admonished that "[j]urisdictional statutes are to be construed 'with precision and with fidelity to the terms by which Congress has expressed its wishes.' " Palmore v. United States, 411 U.S. 389, 396, 93 S.Ct. 1670, 1675, 36 L.Ed.2d 342 (1973) (quoting Cheng Fan Kwok v. INS, 392 U.S. 206, 212, 88 S.Ct. 1970, 1974, 20 L.Ed.2d 1037 (1968)). To that end, we note that congressional response to Northern Pipeline greatly reduced the independent authority of bankruptcy judges. Significant, for example, is the repeal of the provision that had clothed bankruptcy judges with the ...