In re Jaritz Industries, Ltd., Civ. No. 96-3

CourtUnited States District Courts. 3th Circuit. District of the Virgin Islands
Citation207 BR 451
Docket NumberCiv. No. 96-3,96-28,Adv. No. 395-0005.
PartiesIn re JARITZ INDUSTRIES, LTD. d/b/a Pennysaver Printing, Debtor/Appellee. VICKERS ASSOCIATES, LTD., Plaintiff/Appellant, v. Joel URICE, Defendant/Appellee.
Decision Date17 March 1997

A. Jeffrey Weiss, St. Thomas, V.I., for Appellant.

Carol Ann Rich, St. Thomas, V.I., for Appellee Jaritz.

David Bornn, St. Thomas, V.I., for Appellee Joel Urice.

MEMORANDUM OPINION

MOORE, Chief Judge.

Vickers Associates, Ltd. "Vickers" appealed several orders issued by Judge Joseph L. Cosetti, a senior judge of the United States Bankruptcy Court for the Western District of Pennsylvania, who was assigned to sit in the Virgin Islands pursuant to 28 U.S.C. § 155(a). Vickers was a secured creditor in the Chapter 11 bankruptcy proceeding of the debtor, Jaritz Industries, Ltd. d/b/a Pennysaver Printing "Jaritz". The above-captioned appeals actually duplicate an earlier appeal which Vickers pursued in attempt to relieve itself of the bankruptcy judge's confirmation of the reorganization plan. Because Vickers filed duplicitous motions and grounds for relief in both the bankruptcy proceeding and the appeal, this Court remanded Vicker's first appeal on November 13, 1995, finding

that the appeal was "wholly inappropriate" and counsel for Vickers was "warned that such duplicitous filings are disfavored, and could be considered unreasonable and vexatious multiplication of the proceedings in this case. In the future, the Court would not hesitate to require counsel, or a party, `to satisfy personally any excess costs, expenses and attorneys\' fees reasonably incurred because of such conduct.\'"

In re Jaritz Industries, Ltd., Civ. Nos. 96-3 & 96-28, slip op. at 3 (D.V.I. June 26, 1996) (citations omitted).

Shortly thereafter, Vickers filed these two appeals, which contained the essence and purpose of the first appeal, along with several other challenges, including an appeal of the bankruptcy judge's sanctions order. Among the alleged errors, Vickers challenged the removal of the Territorial Court action, Vickers Associates, Ltd. v. Joel Urice; the confirmation order precluding Vickers from pursuing remand of the adversary proceeding; the imposition of sanctions against Vickers based on its unreasonable and vexatious multiplication of proceedings; and the award of fees and costs. This Court reviewed and rejected all of Vickers' substantive grounds for appeal on June 24, 1996. After independently assessing Victors' and its counsel's conduct, this Court determined that Victors "had made the resolution of this appeal very difficult and unnecessarily time consuming. Having examined the record and in light of the Court's warning of November 13, 1995," the Court ordered Victors and its counsel to "show cause why sanctions should not be imposed separately against Vickers and against its counsel in his personal capacity."

In the course of determining the remaining issue of sanctions raised in this matter, the very significant question of this Court's jurisdiction to hear appeals from orders entered by a bankruptcy judge has surfaced. Ever vigilant to the requirement that this Court must dismiss an action "whenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter,"1 we gave the parties and other interested persons and entities an opportunity to brief the issue. The parties have submitted briefs, and the United States has intervened and filed an amicus curie brief. Jaritz and the United States assert that there is jurisdiction while Vickers contends that the Court does not have jurisdiction over this appeal. Underlying the issue is the fundamental structure of governance the Congress has established for the Territory under The Revised Organic Act of the Virgin Islands "Revised Organic Act".2 The particular question arises from the restriction in the United States Code that only `district courts of the United States' have jurisdiction to hear appeals from decisions of bankruptcy judges and the peculiar source of this Court's judicial power as it relates to the statutory scheme for the temporary assignment of a bankruptcy judge to another "judicial district".

The jurisdictional issues which the Court is required to address in this bankruptcy appeal stem from the fact that Congress has yet to apply Article III of the Constitution to the Territory of the Virgin Islands. Thus, a resident of the Virgin Islands does not have the right to have a federal question or constitutional issue determined in a United States district court constituted under Article III. A citizen of the United States who sues in the District Court of the Virgin Islands, whether or not she resides in the Virgin Islands, loses the right to have her case decided by federal judges whose independence is guaranteed by life-time appointments and protections against reduction in salary.

After more particularly defining the problem presented by this case, this opinion explains how the problem came to exist. This history evidences a schizophrenia in the Supreme Court's dealing with the courts created by Congress in the territories and in the treatment of the District Court of the Virgin Islands by the United States Court of Appeals for the Third Circuit. The problem is then analyzed in light of these precedents. The decision rendered in the instant case reflects this historical inconsistency.

This Court is compelled to conclude from recently reaffirmed rulings by the United States Court of Appeals for the Third Circuit that the District Court of the Virgin Islands is a `territorial' court and not a federal court. There is no statutory authority to assign a United States bankruptcy judge to be a judicial officer of such a `territorial' court. Succinctly stated, there is no `judicial district' of the United States in the Virgin Islands containing a district court of the United States to which a bankruptcy judge appointed in a judicial district in the United States can be assigned. This Court accordingly rules that the bankruptcy judge had no authority or jurisdiction to enter the order being appealed in this case. The order from which this appeal has been taken is therefore a nullity. Although the Court finds that it has jurisdiction to review the order of a bankruptcy judge who would be properly authorized by statute to act as a judicial officer of the District Court of the Virgin Islands, there simply is no such valid order to review in this case.

I. THE PROBLEM DEFINED

Appellate jurisdiction over orders of a bankruptcy judge is set forth in the United States Code: "District courts of the United States shall have jurisdiction to hear appeals . . . from decisions of bankruptcy judges. . . . An appeal under this subsection shall be taken only to the district court for the judicial district in which the bankruptcy judge is serving." 28 U.S.C. § 158(a) (1995). As used in this section of Title 28 of the United States Code, "the terms `district court' and `district court of the United States' includes . . . district courts constituted by chapter 5 of Title 28 . . . The terms `district' and `judicial district' mean the districts enumerated in Chapter 5 of Title 28." 28 U.S.C. § 451. These `district courts of the United States' are constituted by Congress under Article III of the United States Constitution through 28 U.S.C. § 132 in each of the `judicial districts' Congress has listed in 28 U.S.C. §§ 81-131. The Virgin Islands has not been established as such a judicial district and the District Court of the Virgin Islands is not a district court of the United States. There is thus no such court as the `United States District Court for the District of the Virgin Islands.'

The provision governing the appointment of bankruptcy judges in States of the Union differs from the provision for such appointment in Territories of the United States. Section 152(a)(1) of Title 28 authorizes the United States court of appeals for a circuit to appoint bankruptcy judges for the judicial districts in States within its circuit, who "shall serve as judicial officers of the United States district court established under Article III of the Constitution." Those judicial districts are listed in section 152(a)(2). Section 152(a)(4) recognizes that the Virgin islands is not one of these judicial districts and therefore provides separate authority for the Third Circuit to "appoint bankruptcy judges under this chapter for such district if authorized to do so by the Congress of the United States under this section."

No bankruptcy judge has been appointed to serve as a judicial officer of this Court under section 152(a)(4), simply because none has ever been authorized by Congress. Thus, the bankruptcy judge whose order is the subject of this appeal is not serving as a judicial officer of the District Court of the Virgin Islands by appointment under section 152(a)(4). Rather, the order which is the subject of this appeal was entered by a bankruptcy judge temporarily designated to serve this Court pursuant to 28 U.S.C. § 155(a). Section 155(a) provides that, for judicial districts of the United States listed in section 152(a)(2), a "bankruptcy judge may be transferred to serve temporarily as a bankruptcy judge in any judicial district other than the judicial district of the United States for which such bankruptcy judge was appointed. . . ." Again, the Virgin Islands is not listed in section 152(a)(2) as a judicial district of the United States to which a bankruptcy judge may be transferred to serve temporarily.

By the express terms of the applicable statutory provisions, then, the District Court of the Virgin Islands is not included as a tribunal which has jurisdiction to hear appeals from decisions of bankruptcy judges — it is not defined as a district court of the United States. Moreover, the statutory authorization for temporary transfer of...

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