In re Benny
| Decision Date | 29 November 1984 |
| Docket Number | No. C-84-120 Misc. RHS.,C-84-120 Misc. RHS. |
| Parties | In re George I. BENNY, and Alexandra Benny, Debtors. |
| Court | U.S. District Court — Northern District of California |
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John T. Hansen, Lewis C. Maldonado, San Francisco, Cal., for Alexandra Benny, debtor.
Vernon D. Stokes, Stokes & Welsh, San Francisco, Cal., for Trustees.
Steven R. Ross, Gen. Counsel To Clerk of U.S. House of Representatives, Washington, D.C., for Intervenors House Speaker and Bipartisan Leadership Group.
Michael Davidson, U.S. Senate Legal Counsel, Washington, D.C., for Senate Intervenor-Applicant.
Lawrence J. Kaiser, Kronish, Lieb, Shainswit, Weiner & Hellman, New York, New York City, Jeffrey L. Schaffer, Howard, Rice, Nemerovski, Canady, Robertson & Falk, San Francisco, Cal., for Intervenor-Applicants Bankruptcy-Judges.
Sandra Willis, Ass't. U.S. Atty., Department of Justice, San Francisco, Cal., for Intervenor-U.S.A.
William Kelly, Miller, Starr & Regalia, San Francisco, Cal., for Unsecured Creditors' Committee.
Edward A. Weiner, Pillsbury, Madison & Sutro, San Francisco, Cal., for Chicago Title Insurance Co.
This bankruptcy case was commenced by the filing of a joint involuntary bankruptcy petition on May 19, 1982, against George I. Benny and Alexandra Benny, husband and wife. Thereafter, over their opposition, the Bankruptcy Court entered an order for relief. On July 23, 1984, Bankruptcy Judge Lloyd King held a hearing on Debtors' motions to dismiss the bankruptcy case and for a rehearing of the order. During that hearing, Debtor Alexandra Benny challenged Judge King's authority, ostensibly vested in him pursuant to the Bankruptcy Amendments and Federal Judgeship Act of 1984 (the "1984 Act"), to exercise jurisdiction over any bankruptcy matters. All motions were taken under submission. Debtor Alexandra Benny, thereafter, filed for partial withdrawal of the reference of this case and, on July 27, 1984, this Court granted said motion.
On November 2, 1984, this Court held a hearing on Debtor Alexandra Benny's motions to: (a) declare unconstitutional the 1984 Act, §§ 106 and 121, thereof; and (b) rescind the July 20, 1984 Order of the United States District Court for the Northern District of California, referring all bankruptcy proceedings to bankruptcy judges appointed pursuant to § 121 of the 1984 Act. The United States filed intervention papers and papers in support of Benny's motion.
The bankruptcy trustee opposed the Benny motion. The following parties moved this Court to intervene and submitted their respective papers in opposition to Benny's motion: (a) the United States Senate; (b) the Speaker and Bipartisan Leadership Group of the House of Representatives; (c) Bankruptcy Judges Lundin, McFeeley, Norton, Paine, Robinson and Votolato; and (d) the Unsecured Creditor's Committee.
With the exception of the Bankruptcy Judges, this Court permitted all applicant/intervenors to intervene. The Bankruptcy Judges' opposing papers were deemed to be those of amici curiae and counsel was permitted to appear as such.
Initially, the Trustee argues that the Debtors do not have standing to challenge the constitutionality of the 1984 Act. No persuasive reason for this view is advanced. It seems self-evident that one, involuntarily brought before a tribunal, has the right to challenge the authority of that tribunal to act.
The constitutionality of the 1984 Act P.L. 98-353, 98 Stat. 383, is challenged by the Debtors, whose sole ally is the Department of Justice of the United States (which purports to be appearing on behalf of the United States). They will both be included, hereinafter, in the term "Opponents".
Constitutionality is supported by the Trustee, the Official Unsecured Creditors Committee, the United States Senate, the Speaker and Bipartisan Leadership Group of the House of Representatives, and, as amici curiae, certain sitting Bankruptcy Judges. They will be termed "Proponents".
The basic simple question here, of course, is whether Judge King has any authority to act in this case; but the underlying question is whether any bankruptcy judge, now sitting, has authority to do so.
Opponents say "No", and base their view on three propositions: first, that the term of all bankruptcy judges expired on June 27, 1984; second, that their successors can be appointed only in consonance with the Appointments Clause of Article II of the United States Constitution; and, third, that any attempt by Congress to rectify the situation constitutes retroactive legislation which, they contend, is constitutionally forbidden.
We find no support for any of the three propositions.
We must begin our analysis by a review of where the bankruptcy laws were, what happened to them along the way, and where, in our view, they are now.
Pursuant to Section 34(a) of the old Bankruptcy Act, 11 U.S.C. § 62(a) (repealed), Congress vested the power to appoint bankruptcy judges (then called "referees") in the district courts and fixed their terms of office at six years plus a "holdover" period—until a successor was appointed. Bankruptcy Judge Lloyd King was originally appointed to office by the district court in accordance with this statute on December 1, 1975. He has remained in office continuously since that date.
In 1978, after years of review and consideration, Congress enacted a comprehensive revision of the substantive law of bankruptcy and the structure of the bankruptcy court. The 1978 Act replaced the referee system with a bankruptcy court of substantially expanded jurisdiction. After a transition period, bankruptcy judges were to be appointed to 14-year terms by the nomination of the President and the advice and consent of the Senate, subject to removal from office by the Judicial Council of the Circuit for incompetence, misconduct, neglect of duty or physical or mental disability 28 U.S.C. §§ 151(a), 152, 153(a), 153(b), 1471(b) (1978) (repealed).
The bankruptcy court structure enacted in 1978 did not take full effect immediately. The 1978 Act established a four-and-one-half year transition period during which the existing courts of bankruptcy were continued. Bankruptcy judges were granted expanded jurisdiction and authority and, of special relevance here, the terms of office of bankruptcy judges were extended to March 31, 1984 or "when their successors took office." P.L. No. 95-598, §§ 401-411, 92 Stat. 2682-88.
On June 28, 1982, the Supreme Court upset the comprehensive revisions in the 1978 Act, declaring unconstitutional the broad grant of jurisdiction under 28 U.S.C. § 1471 of Article III authority to non-Article III judges Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982). The Supreme Court applied its holding prospectively and twice stayed its judgment to reduce disruption to the system while expecting Congressional enactment of remedial legislation Id at 88, 102 S.Ct. at 2880; Northern Pipeline Construction Co. v. Marathon Pipeline Co., 459 U.S. 813, 103 S.Ct. 200, 74 L.Ed.2d 160 (1982).
When the second stay expired on December 24, 1982, the Judicial Conference of the United States recommended, and district courts promulgated, temporary emergency rules, authorizing continued reference of bankruptcy proceedings to the bankruptcy judges.1
As the bankruptcy system continued under the patch-work repair of the local emergency rules, Congress continued to consider the appropriate legislative restructuring of the bankruptcy courts system. There was initial disagreement on the status of bankruptcy judges and their correlative authority to act.2
Resolution of these differences was complicated by differences over proposed changes in the substantive law governing consumer bankruptcy and rejection of labor contracts.3
Shortly before the scheduled termination of the transition period under the 1978 Act, the House agreed with the Senate's position making bankruptcy judges adjuncts of the district courts and adopted provisions on consumer bankruptcy close to the position the Senate had already adopted Compare H.R. 5174, 98th Cong., 2nd Sess. with S. 1013, 98th Cong., 2nd Sess. See 130 Cong.Rec.H. 1854 (daily ed. March 21, 1984). The House bill sought to eliminate chaos and disruption of the bankruptcy system by extending the terms of incumbent judges for eight years from the date of either their last appointment by the district court, or their continuation in office by the circuit court as authorized by the 1978 Act H.R. 5174 at H. 1844-45, § 106(a) of reprinted text of bill). Thereafter, new appointments of bankruptcy judges to new 14-year terms would be vested in the courts of appeals See id. at H. 1843 (§ 104(a)). However, despite basic agreement on the composition of the courts and on consumer bankruptcy issues, Congress had not by that time reached agreement on the issue of rejection of collective bargaining agreements.
Unable to resolve fully their differences by March 31, 1984, Congress enacted an interim measure amending the 1978 Act to extend the transition period to April 30, 1984 P.L. No. 98-249, 98 Stat. 116 (March 31, 1984).
On April 30, 1984, when Congress had still not reached agreement on the substantive policy issues primarily with respect to labor contracts, Congress enacted another extension of the transition period to May 25, 1984 P.L. No. 98-271, 98 Stat. 163 (April 30, 1984).
The transition period was extended two more times before enactment of the 1984 Act. As the Senate began floor action on H. 5174 in May, treatment of collective bargaining agreements remained the primary issue of controversy. With respect to the composition of the bankruptcy court, the Senate offered an amendment to the House bill, including a provision to shorten the transition provisions by authorizing the courts of appeals to make new appointments immediately but permitting the incumbent bankruptcy judges to...
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Benny, In re, s. 84-2805
...Before: FERGUSON, NORRIS and WIGGINS, Circuit Judges. WIGGINS, Circuit Judge: These cases involve appeals from a district court's order, 44 BR 581, upholding the constitutionality of sections 106 and 121 of the Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub.L. No. 98-353, 98 S......