In re Grabill Corp.
| Decision Date | 27 August 1991 |
| Docket Number | No. 91 C 02662.,91 C 02662. |
| Citation | 132 BR 725 |
| Parties | In re GRABILL CORP., Camdon Companies, Inc., Foxxford Group, Ltd., the Techna Group, Ltd., Windsor-Hamilton, Ltd., Debtors. Jay A. STEINBERG, Plan Trustee for Grabill Corp., and the Techna Group, Ltd., Plaintiffs, v. MELLON BANK, Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
Glen H. Kanwit, Lela Darlene Johnson, Matthew J. Botica, Hopkins & Sutter, P.C., Chicago, Ill., for plaintiffs, debtors.
James A. White, Joseph L. McEntee, Jr., David S. Kurtz, Catherine D. McBride, Jones, Day, Reavis & Pogue, Chicago, Ill., for defendant Mellon Bank.
The defendant in this adversary suit, Mellon Bank, moves for an order withdrawing reference of the suit from the United States Bankruptcy Court. Claiming entitlement to a jury trial of the claim against it, see Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 109 S.Ct. 2782, 106 L.Ed.2d 26 (1989), Mellon Bank contests both the statutory and constitutional authority of the bankruptcy court to conduct such a proceeding, a matter left open for consideration by the Supreme Court in Granfinanciera.
The parties agree that the matter to be decided is a core proceeding arising under the preference and fraudulent transfer provisions of the bankruptcy code and therefore susceptible to trial by jury. The question as to whether bankruptcy courts are empowered to conduct jury trials in core matters that are legal in nature has yet to be addressed by the Seventh Circuit.1 The issue has, however, engendered a split among other Circuits. The Second Circuit was the first to consider the question, and held that bankruptcy courts have implied statutory authority to conduct jury trials in core matters, so as to conform, post Granfinanciera, to Congress' desire that legal questions be heard by bankruptcy courts. In re Ben Cooper, Inc., 896 F.2d 1394 (2d Cir.), vacated, ___ U.S. ___, 111 S.Ct. 425, 112 L.Ed.2d 408 (1990), opinion reinstated, 924 F.2d 36 (2d Cir.). The Second Circuit additionally found no violation of Article III or the Seventh Amendment in such a practice. The Eighth and Tenth Circuits, however, have disagreed, finding neither explicit nor implicit statutory authority for bankruptcy courts to conduct jury trials in core proceedings. In re United Missouri Bank of Kansas City, 901 F.2d 1449 (8th Cir.1990); In re Kaiser Steel Corp., 911 F.2d 380 (10th Cir.1990). The two decisions that have been rendered to date by district courts in this district have both found implied statutory authority and no constitutional impediment to bankruptcy courts conducting jury trials in core proceedings absent the consent of both sides. Citibank v. Park-Kenilworth, 109 B.R. 321 (N.D.Ill. 1989) (Marovich, J.); In re Stoecker, 117 B.R. 342 (N.D.Ill.1990) (Leinenweber, J.).
The history and pertinent legal arguments underlying this issue have already been discussed and analyzed in the conflicting opinions of the courts of appeals, with added embellishments in decisions of the lower courts. Our opinion assumes familiarity with those decisions. See also, Symposium on Jury Trials in Bankruptcy Court, 65 Am.Bankr.L.J. 1 (Dedication Issue 1991); Gibson, Jury Trials and Core Proceedings: The Bankruptcy Judge's Uncertain Authority, 65 Am.Bankr.L.J. 143 (Winter 1991). Having canvassed these authorities, there would appear to be little room to add to the debate. Thus, for all practical purposes, our essential task would appear simply to be a matter of choosing sides. Given the variety of supporting rationales that have been bandied about in the debate thus far and the addition of a few of our own, however, we find it necessary to articulate the specific reasons upon which we ultimately conclude that implied statutory authorization for bankruptcy courts to conduct jury trials is lacking.
First, we substantially agree with the court's apt assessment in In re Jackson, 118 B.R. 243 (E.D.Pa.1990), which criticizes attempts by courts to discern implied Congressional authorization from an essentially nonexistent legislative history: 118 B.R. at 243; see also, United Missouri Bank, 901 F.2d at 1456 (). That being the case, we are not persuaded by the further attempt to piece together supposed Congressional intent based on the content, structure and history of related provisions. See, e.g., Stoecker, 117 B.R. at 346-47; Citibank, 109 B.R. at 328. Since it is apparent that Congress did not consider the issue at all, we find it inappropriate to base a finding of implied authority upon what essentially may only be regarded as an accident of design (which itself has been proven by the caselaw to be entirely ambiguous with respect to the issue at hand).
Absent a reliable indication of Congress' actual intent either in the legislative history or the design of the statute, the next analytical step followed by the courts has been to discern whether the power to be implied is "practically indispensable and essential in order to execute the power actually conferred"—in this case, the power of bankruptcy courts under § 157(b) to conduct trials and issue final orders in core proceedings. See United Missouri Bank, 901 F.2d at 1456. We do not share the Second Circuit's view that the bankruptcy code must be construed to allow bankruptcy courts to conduct jury trials as the only way to reconcile Section 157(b)'s grant of authority with Granfinanciera's teaching that proceedings that are legal in nature must be tried to a jury if demanded. Ben Cooper, 896 F.2d at 1402. As the court in Jackson observed: "There is, of course no question that the constitutional mandate can be vindicated by conducting jury trials in the district court." Jackson, 118 B.R. at 251. Indeed, what is purportedly a broad grant of authority under Section 157(b) has several expressly defined limits under the code. For example, Section 157(d) specifically permits a district court to withdraw any case for good cause shown and contains an additional mandatory withdrawal provision for certain matters that might otherwise be deemed to be core. If the broad power to hear and enter judgments in core proceedings is not disturbed by the discretionary or mandatory removal of certain core matters to the district court, then the removal of matters that require a jury trial likewise cannot be deemed to be so consequential as to render the general grant of authority meaningless.
Each of these considerations—the paucity of legislative history demonstrating Congressional intent, the ambiguity of the legislative scheme, and the lack of a need to imply jury trial authority for bankruptcy courts in order to sustain the legislative scheme as it presently exists—factor against a finding that authority for jury trials in core proceedings is statutorily implicit. In ultimate support of our decision, however, we do not rely on the canon of statutory construction, relied upon by the Eighth Circuit, by which a court should "avoid an interpretation of a federal statute that engenders constitutional issues if a reasonable alternative poses no constitutional question." 901 F.2d at 1456 (quoting Gomez v. United States, 490 U.S. 858, 109 S.Ct. 2237, 2241, 104 L.Ed.2d 923 (1989)). We agree with the Jackson court that the constitutional concerns raised in opposition to bankruptcy court jury trials are of no consequence.2 See, e.g., Jackson, 118 B.R. at 252-53.
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