In re Blackman

• Decision Date: 30 September 1985
• Docket Number: Bankruptcy No. 84-00357,Adv. P. No. 84-0205.
• Citation: 55 BR 437
• Parties: In re James B. BLACKMAN, Celia Ann Blackman, and J and B Construction, Debtors. James B. BLACKMAN, et al., Plaintiffs, v. Max SETON, et al., Defendants.
• Court: United States Bankruptcy Courts – District of Columbia Circuit

55 B.R. 437 (1985)

In re James B. BLACKMAN, Celia Ann Blackman, and J and B Construction, Debtors James B. BLACKMAN, et al., Plaintiffs, v. Max SETON, et al., Defendants.

Bankruptcy No. 84-00357, Adv. P. No. 84-0205.

United States Bankruptcy Court, District of Columbia.

September 30, 1985.

COPYRIGHT MATERIAL OMITTED

Lois F. Lapidus, Lapidus & Lapidus, Pikesville, Md., Alan C. Drew, Upper Marlboro, Md., for plaintiffs.

Douglas L. Lashley, Bethesda, Md., for defendants.

OPINION AND ORDER

GEORGE FRANCIS BASON, Jr., Bankruptcy Judge.

The plaintiffs in this adversary proceeding, who are debtors in the related bankruptcy case, seek to have this adversary proceeding, which they brought in Bankruptcy Court, heard in the United States District Court for this District. Unfortunately, their motion, though unopposed, must be denied because they have requested the wrong relief from the wrong judge for the wrong reason. The relevant statutory provisions under the Bankruptcy Amendments and Federal Judgeship Act of 1984 ("1984 Amendments"), P.L. 98-353, 98 Stat. 333, are new and are rather complex and obscure. Therefore, this Court will explain its reasoning in some detail.

Plaintiffs' motion is denominated a "Motion To Remand Adversary Proceeding To District Court For Order Directing Jury Trial" (filed September 13, 1984). However, this adversary proceeding cannot be "remanded" to the District Court because it was originally filed in this Court and has never at any time been pending before the District Court — except in the limited sense that all bankruptcy cases and proceedings that are before this Court are automatically pending in the District Court through legislative legerdemain, because, according to Congress, this Court is a Judge who constitutes a "unit" of the District Court "known as" the Bankruptcy Court. 28 U.S.C. § 151. All bankruptcy cases and proceedings have been "referred" to the undersigned "unit" by an order of the District Court pursuant to Title 28 U.S.C. § 157(a). In that limited sense this proceeding is already pending and has always been pending before the District Court and hence cannot be remanded there. In other words, either this adversary proceeding has never been pending before the District Court or else it is now and always has been pending before the District Court; in either event, a "remand" to the District Court is logically impossible.

Rather than seeking a "remand" the plaintiffs should ask that the reference of this adversary proceeding from the District Court to this Court be withdrawn, under Title 28 U.S.C. § 157(d). A motion to withdraw the reference should be filed in the Bankruptcy Court Clerk's Office, and it will then be referred by the Clerk of the Bankruptcy Court to the Civil Division of the District Court, for consideration by a United States District Judge, rather than by the undersigned Bankruptcy Judge.

I

The reason advanced by the plaintiffs for requesting that this adversary proceeding be heard in the District Court rather than this Court is that they have demanded a jury trial. However, the new statute contains no provision similar to that in the former District Court Local Interim Rule which prohibited bankruptcy judges from conducting jury trials. See ¶ d(1)(D), Local Interim Rule (adopted December 22, 1982); see also Smith-Douglass, Inc. v. Smith, 43 B.R. 616, 12 B.C.D. 426, 427 (Bankr.E.D.N. C.1984). Instead, the new statute specifically adverts to the right to trial by jury without in any way indicating that the bankruptcy court unit of the district court is prohibited from conducting jury trials. 28 U.S.C. § 1411.¹

Even while the Local Interim Rule was in effect, several courts held that its jury trial prohibition was invalid as contrary to the Bankruptcy Rules. See In re Martin Baker Well Drilling, Inc., 36 B.R. 154, 10 B.C.D. 375 (Bankr.D.Me.1984); In re O.P.M. Leasing Servs., Inc., 35 B.R. 854, 11 B.C.D. 821 (Bankr.S.D.N.Y.1983); In re River Transp. Co., 35 B.R. 556, 9 B.C.D. 986 (Bankr.M.D.Tenn.1983); but see In re Proehl, 36 B.R. 86, 12 B.C.D. 321 (W.D.Va. 1984); In re Hoffman, 33 B.R. 937 (Bankr. W.D.Okla.1983). Those Rules were proposed by the Supreme Court and adopted without relevant modification by Congress, subsequent to the District Court's original adoption of our Local Interim Rule. 103 S.Ct. No. 14 (May 15, 1983) (Bankruptcy Rules effective August 1, 1983). The Bankruptcy Rules expressly vest power to conduct jury trials in the bankruptcy court. See Bankruptcy Rule 9015 ("Jury Trial"); see also Bankruptcy Rules 9020(b) and 9027(i). The conflict between the Local Interim Rule, otherwise known as the "Emergency Rule," and the newly promulgated Bankruptcy Rules has been recognized and dealt with by the judiciary.

In In re Morrissey, 717 F.2d 100 (3d Cir.1983), a provision of the local model rule regarding the standard of review of bankruptcy decisions on appeal conflicted with the standard set forth by the new Bankruptcy Rules. The Court of Appeals for the Third Circuit held that, for two reasons, the Bankruptcy Rules must prevail over the local rule:

First, a statute vests the exclusive power for promulgating rules of bankruptcy in the Supreme Court and the Congress of the United States, 28 U.S.C. § 2075, and not in the United States district courts.... Further, although the new rules quite properly allow each local court to adopt any local rules of practice and procedure it desires, such local rules are clearly subordinate to, and may not be inconsistent with, the national rules. Bankruptcy Rule 9020. Thus, neither the Judicial Conference nor the several district courts of the United States have the authority to propose and enact local bankruptcy rules that conflict with the new bankruptcy rules.

717 F.2d at 104. Accord In re AOV Industries, Inc., 43 B.R. 468, 472 (D.D.C.1984) ("Bankruptcy Rule 8013 ... prevails over Interim Rule (e)" as to the appropriate standard of appellate review of bankruptcy decisions). The court concluded that "any local rule governing procedure, as distinguished from jurisdiction, in bankruptcy cases must yield to the bankruptcy rules duly promulgated under the Supreme Court's statutory authority." 717 F.2d at 105 (emphasis in original). Hence, one must conclude that, absent any jurisdictional impediment, current Bankruptcy Rule 9015, which was promulgated by the Supreme Court and which permits jury trials in bankruptcy court, superceded our district's Local Interim Rule ¶ d(1)(D) that prohibited jury trials in bankruptcy court. See also Macon Prestressed Concrete Co. v. Duke, 46 B.R. 727, 12 B.C.D. 1284, 1286 (M.D.Ga.1985).

Those courts that have directly and in detail addressed the constitutionality of the bankruptcy court's power to conduct a jury trial generally have concluded that such power is neither contrary to the Supreme Court's Northern Pipeline ("Marathon") decision² which struck down the broad grant of jurisdiction to the bankruptcy courts contained in the Bankruptcy Reform Act of 1978, nor contrary to the provisions of Article III of the Constitution. Nothing in the Constitution forbids an Article I federal judicial officer, 28 U.S.C. § 151, otherwise constitutionally empowered to act, from conducting a jury trial. See Pernell v. Southall Realty Co., 416 U.S. 363, 94 S.Ct. 1723, 40 L.Ed.2d 198 (1974); Fields v. W.M.A.T.A., 743 F.2d 890 (D.C.Cir.1984).

In Lombard-Wall, Inc. v. N.Y. City Housing Development Corp., 44 B.R. 928 (S.D.N.Y.1984), the District Court stated:

We note first that the parties have proceeded to this point under the mistaken assumption that a jury trial is unavailable in the bankruptcy court. They have apparently overlooked Rule 9015 of the Rules of Bankruptcy Procedure ... which permits the bankruptcy courts to hold jury trials. The advisory committee notes to Rule 9015 confirm this interpretation. The notes speak of `the procedures for requesting trial by jury in a matter before the ... bankruptcy court.\'

In In re River Transportation Company, Bankruptcy Judge Paine notes that Bankruptcy Rule 9015, which allows a bankruptcy court to hold a jury trial, does not "offend the principles set forth in Northern Pipeline," and nowhere in that decision "does the Supreme Court state that allowing an Article I court to conduct a jury trial is violative of the provisions of Article III of the Constitution." 35 B.R. at 560; but see Proehl, 36 B.R. at 87-88, 12 B.C.D. at 322; Hoffman, 33 B.R. at 941-42.

If, because the Bankruptcy Rules contemplate it, bankruptcy courts could conduct jury trials even in the face of a local Emergency Rule prohibiting it, a fortiori they can conduct jury trials after the contrary local rule no longer exists and is superseded by a statute which, unlike the local rule, also may contemplate that bankruptcy courts can conduct jury trials. Lombard-Wall, Inc. v. N.Y. City Housing Development Corp., 44 B.R. 928 (S.D.N.Y. 1984). In addition, the court in Baldwin-United notes:

Significantly, that Emergency Rule prohibition on jury trials was one of the few provisions of the Emergency Rule which Congress did not see fit to enact.

48 B.R. 49, 12 B.C.D. 913, 917 (Bankr.S.D. Ohio 1985); accord In re Rodgers & Sons, Inc., 48 B.R. 683, 12 B.C.D. 1255, 1257 (Bankr.E.D.Okla.1985). Therefore, this Court concludes that the fact that a demand for a jury trial has been made is not, standing alone, a proper basis for withdrawal of the reference. Accord Gibbons Construction, Inc., 46 B.R. 193, 12 B.C.D. 463 (E.D.Ky.1984). However, that decision will be one to be made not by this Court but by the District Court, if the plaintiffs or the defendants timely file a motion to withdraw the reference.

II

The conclusion that this Court can conduct jury trials does not end this Court's inquiry. If this adversary proceeding is a "core proceeding," then I as a Bankruptcy Judge may "hear and determine" it. 28 U.S.C. § 157(b)(1). If the proceeding is not a core proceeding but "is...