|Northern Pipeline Constr. Co. v. Marathon Pipe Line Co.
[ Brennan ]
[ Rehnquist ]
[ Burger ]
[ White ]
Northern Pipeline Constr. Co. v. Marathon Pipe Line Co.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MINNESOTA
JUSTICE BRENNAN announced the judgment of the Court and delivered an opinion, in which JUSTICE MARSHALL, JUSTICE BLACKMUN, and JUSTICE STEVENS joined.
The question presented is whether the assignment by Congress to bankruptcy judges of the jurisdiction granted in 28 U.S.C. § 1471 (1976 ed., Supp. IV) by § 241(a) of the Bankruptcy Act of 1978 violates Art. III of the Constitution.
In 1978, after almost 10 years of study and investigation, Congress enacted a comprehensive revision of the bankruptcy [p53] laws. The Bankruptcy Act of 1978 (Act) [n1] made significant changes in both the substantive and procedural law of bankruptcy. It is the changes in the latter that are at issue in this case.
Before the Act, federal district courts served as bankruptcy courts and employed a "referee" system. Bankruptcy proceedings were generally conducted before referees, [n2] except in those instances in which the district court elected to withdraw a case from a referee. See Bkrtcy.Rule 102. The referee's final order was appealable to the district court. Bkrtcy.Rule 801. The bankruptcy courts were vested with "summary jurisdiction" -- that is, with jurisdiction over controversies involving property in the actual or constructive possession of the court. And, with consent, the bankruptcy court also had jurisdiction over some "plenary" matters -- such as disputes involving property in the possession of a third person.
The Act eliminates the referee system and establishes
in each judicial district, as an adjunct to the district court for such district, a bankruptcy court which shall be a court of record known as the United States Bankruptcy Court for the district.
28 U.S.C. § 151(a) (1976 ed., Supp. IV). The judges of these courts are appointed to office for 14-year terms by the President, with the advice and consent of the Senate. §§ 152, 153(a) (1976 ed., Supp IV). They are subject to removal by the "judicial council of the circuit" on account of "incompetency, misconduct, neglect of duty or physical or mental disability." § 153(b) (1976 ed., Supp. IV). In addition, the salaries of the bankruptcy judges are set by statute, and are subject to adjustment under the Federal Salary Act, 2 U.S.C. §§ 351-361 (1976 ed. and Supp. IV). 28 U.S.C. § 154 (1976 ed., Supp. IV). [p54]
The jurisdiction of the bankruptcy courts created by the Act is much broader than that exercised under the former referee system. Eliminating the distinction between "summary" and "plenary" jurisdiction, the Act grants the new courts jurisdiction over all "civil proceedings arising under title 11 [the Bankruptcy title] or arising in or related to cases under title 11." 28 U.S.C. § 1471(b) (1976 ed., Supp. IV) (emphasis added). [n3] This jurisdictional grant empowers bankruptcy courts to entertain a wide variety of cases involving claims that may affect the property of the estate once a petition has been filed under Title 11. Included within the bankruptcy courts' jurisdiction are suits to recover accounts, controversies involving exempt property, actions to avoid transfers and payments as preferences or fraudulent conveyances, and causes of action owned by the debtor at the time of the petition for bankruptcy. The bankruptcy courts can hear claims based on state law as well as those based on federal law. See 1 W. Collier, Bankruptcy ¶ 3.01, pp. 3-47 to 3-48 (15th ed.1982). [n4] [p55]
The judges of the bankruptcy courts are vested with all of the "powers of a court of equity, law, and admiralty," except that they
may not enjoin another court or punish a criminal contempt not committed in the presence of the judge of the court or warranting a punishment of imprisonment.
28 U.S.C. § 1481 (1976 ed., Supp. IV). In addition to this broad grant of power, Congress has allowed bankruptcy judges the power to hold jury trials, § 1480; to issue declaratory judgments, § 2201; to issue writs of habeas corpus under certain circumstances, § 2256; to issue all writs necessary in aid of the bankruptcy court's expanded jurisdiction, § 451 (1976 ed. and Supp. IV); see 28 U.S.C. § 1651; and to issue any order, process or judgment that is necessary or appropriate to carry out the provisions of Title 11, 11 U.S.C. § 105(a) (1976 ed., Supp. IV).
The Act also establishes a special procedure for appeals from orders of bankruptcy courts. The circuit council is empowered to direct the chief judge of the circuit to designate panels of three bankruptcy judges to hear appeals. 28 U.S.C. § 160 (1976 ed., Supp. IV). These panels have jurisdiction of all appeals from final judgments, orders, and decrees of bankruptcy courts, and, with leave of the panel, of interlocutory appeals. § 1482. If no such appeals panel is designated, the district court is empowered to exercise appellate jurisdiction. § 1334. The court of appeals is given jurisdiction over appeals from the appellate panels or from the district court. § 1293. If the parties agree, a direct appeal to the court of appeals may be taken from a final judgment of a bankruptcy court. § 1293(b). [n5] [p56]
The Act provides for a transition period before the new provisions take full effect in April, 1984. §§ 401-411, 92 Stat. 2682-2688. During the transition period, previously existing bankruptcy courts continue in existence. § 404(a), 92 Stat. 2683. Incumbent bankruptcy referees, who served 6-year terms for compensation subject to adjustment by Congress, are to serve as bankruptcy judges until March 31, 1984, or until their successors take office. § 404(b), 92 Stat. 2683. [n6] During this period, they are empowered to exercise essentially all of the jurisdiction and powers discussed above. See §§ 404, 405, 92 Stat. 2683-2685. See generally 1 Collier, supra, ¶¶ 7.04-7.05, pp. 7-23 to 7-65. The procedure for taking appeals is similar to that provided after the transition period. See § 405(c)(1), 92 Stat. 2685. [n7]
This case arises out of proceedings initiated in the United States Bankruptcy Court for the District of Minnesota after appellant Northern Pipeline Construction Co. (Northern) filed a petition for reorganization in January, 1980. In March, 1980, Northern, pursuant to the Act, filed in that court a suit against appellee Marathon Pipe Line Co. (Marathon). Appellant sought damages for alleged breaches of contract and warranty, as well as for alleged misrepresentation, coercion, and duress. Marathon sought dismissal of the suit, on the ground that the Act unconstitutionally conferred Art. III judicial [p57] power upon judges who lacked life tenure and protection against salary diminution. The United States intervened to defend the validity of the statute.
The Bankruptcy Judge denied the motion to dismiss. 6 B.R. 928 (1980). But on appeal, the District Court entered an order granting the motion, on the ground that
the delegation of authority in 28 U.S.C. § 1471 to the Bankruptcy Judges to try cases which are otherwise relegated under the Constitution to Article III judges
Basic to the constitutional structure established by the Framers was their recognition that
[t]he accumulation of all powers, legislative, executive, and judiciary, in the same hands, whether of one, a few, or many, and whether hereditary, self-appointed, or elective, may justly be pronounced the very definition of tyranny.
The Federalist No. 47, p. 300 (H. Lodge ed. 1888) (J. Madison). To ensure against such tyranny, the Framers provided that the Federal Government would consist of three distinct Branches, each to exercise one of the governmental powers recognized by the Framers as inherently distinct.
The Framers regarded the checks and balances that they had built into the tripartite Federal Government as a self-executing safeguard against the encroachment or aggrandizement of one branch at the [p58] expense of the other.
Buckley v. Valeo, 424 U.S. 1, 122 (1976) (per curiam).
The Federal Judiciary was therefore designed by the Framers to stand independent of the Executive and Legislature -- to maintain the checks and balances of the constitutional structure and also to guarantee that the process of adjudication itself remained impartial. Hamilton explained the importance of an independent Judiciary:
Periodical appointments, however regulated or by whomsoever made, would, in some way or other, be fatal to [the courts'] necessary independence. If the power of making them was committed either to the Executive or legislature, there would be danger of an improper complaisance to the branch which possessed it; if to both, there would be an unwillingness to hazard the displeasure of either; if to the people, or to persons chosen by them for the special purpose, there would be too great a disposition to consult popularity, to justify a reliance that nothing would be consulted but the Constitution and the laws.
The Federalist No. 78, p. 489 (H. Lodge ed. 1888). The Court has only recently reaffirmed the significance of this feature of the Framers' design:
A Judiciary free from control by the Executive and Legislature is essential if there is a right to have claims decided by judges who are free from potential domination by other branches of government.
United States v. Will, 449 U.S. 200, 217-218 (1980).
As an inseparable element of the constitutional system of checks and balances, and as a guarantee of judicial impartiality, Art. III both defines the power and protects the independence of the Judicial Branch. It provides that
The judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish.
Art. III, § 1. The inexorable command of this provision is clear and definite: [p59] The judicial power of the United States must be exercised by courts having the attributes prescribed in Art. III. Those attributes are also clearly set forth:
The Judges, both of the supreme and inferior Courts, shall hold their Offices during good Behaviour, and shall, at stated Times, receive for their Services, a Compensation, which shall not be diminished during their Continuance in Office.
Art. III, § 1.
The "good Behaviour" Clause guarantees that Art. III judges shall enjoy life tenure, subject only to removal by impeachment. United States ex rel. Toth v. Quarles, 350 U.S. 11, 16 (1955). The Compensation Clause guarantees Art. III judges a fixed and irreducible compensation for their services. United States v. Will, supra, at 218-221. Both of these provisions were incorporated into the Constitution to ensure the independence of the Judiciary from the control of the Executive and Legislative Branches of government. [n10] As we have only recently emphasized, "[t]he Compensation Clause has its roots in the longstanding Anglo-American tradition of an independent Judiciary," 449 U.S. at 217, while the principle of life tenure can be traced back at least as far as the Act of Settlement in 1701, id. at 218. To be sure, both principles were eroded during the late colonial period, but that departure did not escape notice and indignant rejection by the Revolutionary generation. Indeed, the guarantees eventually included [p60] in Art. III were clearly foreshadowed in the Declaration of Independence,
which, among the injuries and usurpations recited against the King of Great Britain, declared that he had "made judges dependent on his will alone, for the tenure of their offices, and the amount and payment of their salaries."
O'Donoghue v. United States, 289 U.S. 516, 531 (1933). The Framers thus recognized:
Next to permanency in office, nothing can contribute more to the independence of the judges than a fixed provision for their support. . . . In the general course of human nature, a power over a man's subsistence amounts to a power over his will.
The Federalist No. 79, p. 491 (H. Lodge ed. 1888) (A. Hamilton) (emphasis in original). [n11] In sum, our Constitution unambiguously enunciates a fundamental principle -- that the "judicial Power of the United States" must be reposed in an independent Judiciary. It commands that the independence of the Judiciary be jealously guarded, and it provides clear institutional protections for that independence.
It is undisputed that the bankruptcy judges whose offices were created by the Bankruptcy Act of 1978 do not enjoy the protections constitutionally afforded to Art. III judges. The bankruptcy judges do not serve for life subject to their continued "good Behaviour." Rather, they are appointed for [p61] 14-year terms, and can be removed by the judicial council of the circuit in which they serve on grounds of "incompetency, misconduct, neglect of duty, or physical or mental disability." Second, the salaries of the bankruptcy judges are not immune from diminution by Congress. See supra at 53. In short, there is no doubt that the bankruptcy judges created by the Act are not Art. III judges.
That Congress chose to vest such broad jurisdiction in non-Art. III bankruptcy courts, after giving substantial consideration to the constitutionality of the Act, is of course reason to respect the congressional conclusion. See Fullilove v. Klutznick, 448 U.S. 448, 472-473 (1980) (opinion of BURGER, C.J.); Palmore v. United States, 411 U.S. 389, 409 (1973). See also National Ins. Co. v. Tidewater Co., 337 U.S. 582, 655 (1949) (Frankfurter, J., dissenting). [n12] But at the same time, [p62]
[d]eciding whether a matter has in any measure been committed by the Constitution to another branch of government, or whether the action of that branch exceeds whatever authority has been committed is itself a delicate exercise in constitutional interpretation, and is a responsibility of this Court as ultimate interpreter of the Constitution.
Baker v. Carr, 369 U.S. 186, 211 (1962). With these principles in mind, we turn to the question presented for decision; whether the Bankruptcy Act of 1978 violates the command of Art. III that the judicial power of the United States must be vested in courts whose judges enjoy the protections and safeguards specified in that Article.
Appellants suggest two grounds for upholding the Act's conferral of broad adjudicative powers upon judges unprotected by Art. III. First, it is urged that
pursuant to its enumerated Article I powers, Congress may establish legislative courts that have jurisdiction to decide cases to which the Article III judicial power of the United States extends.
Brief for United States 9. Referring to our precedents upholding the validity of "legislative courts," appellants suggest that
the plenary grants of power in Article I permit Congress to establish non-Article III tribunals in "specialized areas having particularized needs and warranting distinctive treatment,"
such as the area of bankruptcy law. Ibid., quoting Palmore v. United States, supra, at 408. Second, appellants contend that even if the Constitution does require that this bankruptcy-related action be adjudicated in an Art. III court, the Act in fact satisfies that requirement. "Bankruptcy [p63] jurisdiction was vested in the district court" of the judicial district in which the bankruptcy court is located, "and the exercise of that jurisdiction by the adjunct bankruptcy court was made subject to appeal as of right to an Article III court." Brief for United States 12. Analogizing the role of the bankruptcy court to that of a special master, appellants urge us to conclude that this "adjunct" system established by Congress satisfies the requirements of Art. III. We consider these arguments in turn.
Congress did not constitute the bankruptcy courts as legislative courts. [n13] Appellants contend, however, that the bankruptcy courts could have been so constituted, and that, as a result, the "adjunct" system in fact chosen by Congress does not impermissibly encroach upon the judicial power. In advancing this argument, appellants rely upon cases in which we have identified certain matters that "congress may or may not bring within the cognizance of [Art. III courts], as it may deem proper." Murray' Lessee v. Hoboken Land & Improvement Co., 18 How. 272, 284 (1856). [n14] But when properly understood, these precedents represent no broad departure from the constitutional command that the judicial power of the United States must be vested in Art. III [p64] courts. [n15] Rather, they reduce to three narrow situations not subject to that command, each recognizing a circumstance in which the grant of power to the Legislative and Executive Branches was historically and constitutionally so exceptional that the congressional assertion of a power to create legislative courts was consistent with, rather than threatening to, the constitutional mandate of separation of powers. These precedents simply acknowledge that the literal command of Art. III, assigning the judicial power of the United States to courts insulated from Legislative or Executive interference, must be interpreted in light of the historical context in which the Constitution was written, and of the structural imperatives of the Constitution as a whole.
Appellants first rely upon a series of cases in which this Court has upheld the creation by Congress of non-Art. III "territorial courts." This exception from the general prescription of Art. III dates from the earliest days of the Republic, when it was perceived that the Framers intended that, as to certain geographical areas in which no State operated as sovereign, Congress was to exercise the general powers of government. For example, in American Ins. Co. v. Canter, 1 Pet. 511 (1828), the Court observed that Art. IV bestowed upon Congress alone a complete power of government over [p65] territories not within the States that constituted the United States. The Court then acknowledged Congress' authority to create courts for those territories that were not in conformity with Art. III. Such courts were
created in virtue of the general right of sovereignty which exists in the government, or in virtue of that clause which enables Congress to make all needful rules and regulations, respecting the territory belonging to the United States. The jurisdiction with which they are invested . . . is conferred by Congress, in the execution of those general powers which that body possesses over the territories of the United States. Although admiralty jurisdiction can be exercised in the states in those Courts, only, which are established in pursuance of the third article of the Constitution; the same limitation does not extend to the territories. In legislating for them, Congress exercises the combined powers of the general, and of a state government.
1 Pet. at 546. The Court followed the same reasoning when it reviewed Congress' creation of non-Art. III courts in the District of Columbia. It noted that there was in the District
no division of powers between the general and state governments. Congress has the entire control over the district for every purpose of government; and it is reasonable to suppose, that in organizing a judicial department here, all judicial power necessary for the purposes of government would be vested in the courts of justice.
Appellants next advert to a second class of cases -- those in which this Court has sustained the exercise by Congress and the Executive of the power to establish and administer courts-martial. The situation in these cases strongly resembles the situation with respect to territorial courts: it too involves a constitutional grant of power that has been historically understood as giving the political Branches of Government extraordinary control over the precise subject matter at issue. Article I, § 8, cls. 13, 14, confer upon Congress the power "[t]o provide and maintain a Navy," and "[t]o make Rules for the Government and Regulation of the land and naval Forces." The Fifth Amendment, which requires a presentment or indictment of a grand jury before a person may be held to answer for a capital or otherwise infamous crime, contains an express exception for "cases arising in the land or naval forces." And Art. II, § 2, cl. 1, provides that
The President shall be Commander in Chief of the Army and Navy of the United States, and of the Militia of the several States, when called into the actual Service of the United States.
Noting these constitutional directives, the Court, in Dynes v. Hoover, 20 How. 65 (1857), explained:
These provisions show that Congress has the power to provide for the trial and punishment of military and naval offences in the manner then and now practiced by civilized nations; and that the power to do so is given without any connection between it and the 3d article of the Constitution defining the judicial power of the United States; indeed, that the two powers are entirely independent of each other.
Finally, appellants rely on a third group of cases, in which this Court has upheld the constitutionality of legislative courts and administrative agencies created by Congress to adjudicate cases involving "public rights." [n18] The "public rights" doctrine was first set forth in Murray's Lessee v. Hoboken Land & Improvement Co., 18 How. 272 (1856):
[W]e do not consider congress can either withdraw from judicial cognizance any matter which, from its nature, is the subject of a suit at the common law, or in equity, or admiralty; nor, on the other hand, can it bring under the judicial power a matter which, from its nature, is not a subject for judicial determination. At the same time, there are matters, involving public rights, which may be presented in such form that the judicial power is capable of acting on them, and which are susceptible of judicial determination, but which congress may or may not bring within the cognizance of the courts of the United States, as it may deem proper.
Id. at 284 (emphasis added).
This doctrine may be explained in part by reference to the traditional principle of sovereign immunity, which recognizes that the Government may attach conditions to its consent to be sued. See id. at 283-285; see also Ex parte Bakelite Corp., 279 U.S. 438, 452 (1929) . But the public rights doctrine also draws upon the principle of separation of powers, and a historical understanding that certain prerogatives were reserved to the political Branches of Government. The doctrine extends only to matters arising "between the Government [p68] and persons subject to its authority in connection with the performance of the constitutional functions of the executive or legislative departments," Crowell v. Benson, 285 U.S. 22, 50 (1932), and only to matters that historically could have been determined exclusively by those departments, see Ex parte Bakelite Corp., supra, at 458. The understanding of these cases is that the Framers expected that Congress would be free to commit such matters completely to nonjudicial executive determination, and that, as a result, there can be no constitutional objection to Congress' employing the less drastic expedient of committing their determination to a legislative court or an administrative agency. Crowell v. Benson, supra, at 50. [n19]
The public rights doctrine is grounded in a historically recognized distinction between matters that could be conclusively determined by the Executive and Legislative Branches and matters that are "inherently . . . judicial." Ex parte Bakelite Corp., supra, at 458. See Murray's Lessee v. Hoboken Land & Improvement Co., 18 How. at 280-282. For example, the Court in Murray's Lessee looked to the law of England and the States at the time the Constitution was adopted in order to determine whether the issue presented was customarily cognizable in the courts. Ibid. Concluding that the matter had not traditionally been one for judicial determination, the Court perceived no bar to Congress' establishment of summary procedures, outside of Art. III courts, to collect a debt due to the Government from one of its customs agents. [n20] On the same premise, the Court in Ex [p69] parte Bakelite Corp., supra, held that the Court of Customs Appeals had been properly constituted by Congress as a legislative court:
The full province of the court under the act creating it is that of determining matters arising between the Government and others in the executive administration and application of the customs laws. . . . The appeals include nothing which inherently or necessarily requires judicial determination, but only matters the determination of which may be, and at times has been, committed exclusively to executive officers.
279 U.S. at 458 (emphasis added). [n21]
The distinction between public rights and private rights has not been definitively explained in our precedents. [n22] Nor is it necessary to do so in the present cases, for it suffices to observe that a matter of public rights must, at a minimum, arise "between the government and others." Ex parte Bakelite Corp., supra, at 451. [n23] In contrast, "the liability of [p70] one individual to another under the law as defined," Crowell v. Benson, supra, at 51, is a matter of private rights. Our precedents clearly establish that only controversies in the former category may be removed from Art. III courts and delegated to legislative courts or administrative agencies for their determination. See Atlas Roofing Co. v. Occupational Safety and Health Review Comm'n, 430 U.S. 442, 450, n. 7 (1977); Crowell v. Benson, supra, at 501. See also Katz, Federal Legislative Courts, 43 Harv.L.Rev. 894, 917-918 (1930). [n24] Private rights disputes, on the other hand, lie at the core of the historically recognized judicial power.
In sum, this Court has identified three situations in which Art. III does not bar the creation of legislative courts. In each of these situations, the Court has recognized certain exceptional powers bestowed upon Congress by the Constitution or by historical consensus. Only in the face of such an exceptional grant of power has the Court declined to hold the authority of Congress subject to the general prescriptions of Art. III. [n25] [p71]
We discern no such exceptional grant of power applicable in the cases before us. The courts created by the Bankruptcy Act of 1978 do not lie exclusively outside the States of the Federal Union, like those in the District of Columbia and the Territories. Nor do the bankruptcy courts bear any resemblance to courts-martial, which are founded upon the Constitution's grant of plenary authority over the Nation's military forces to the Legislative and Executive Branches. Finally, the substantive legal rights at issue in the present action cannot be deemed "public rights." Appellants argue that a discharge in bankruptcy is indeed a "public right," similar to such congressionally created benefits as "radio station licenses, pilot licenses, or certificates for common carriers" granted by administrative agencies. See Brief for United States 34. But the restructuring of debtor-creditor relations, which is at the core of the federal bankruptcy power, must be distinguished from the adjudication of state-created private rights, such as the right to recover contract damages that is at issue in this case. The former may well be a "public right," but the latter obviously is not. Appellant Northern's right to recover contract damages to augment its estate is "one of private right, that is, of the liability of one [p72] individual to another under the law as defined." Crowell v. Benson, 285 U.S. at 51. [n26]
Recognizing that the present cases may not fall within the scope of any of our prior cases permitting the establishment of legislative courts, appellants argue that we should recognize an additional situation beyond the command of Art. III, sufficiently broad to sustain the Act. Appellants contend that Congress' constitutional authority to establish "uniform Laws on the subject of Bankruptcies throughout the United States," Art. I, § 8, cl. 4, carries with it an inherent power to establish legislative courts capable of adjudicating "bankruptcy-related controversies." Brief for United States 14. In support of this argument, appellants rely primarily upon a quotation from the opinion in Palmore v. United States, 411 U.S. 389 (1973), in which we stated that
both Congress and this Court have recognized that . . . the requirements of Art. III, which are applicable where laws of national applicability and affairs of national concern are at stake, must, in proper circumstances, give way to accommodate plenary grants of power to Congress to legislate with respect to specialized areas having particularized needs and warranting distinctive treatment.
Id. 407-408. Appellants cite this language to support their proposition that a bankruptcy court created by Congress under its Art. I [p73] powers is constitutional, because the law of bankruptcy is a "specialized area," and Congress has found a "particularized need" that warrants "distinctive treatment." Brief for United States 20-33.
Appellants' contention, in essence, is that, pursuant to any of its Art. I powers, Congress may create courts free of Art. III's requirements whenever it finds that course expedient. This contention has been rejected in previous cases. See, e.g., Atlas Roofing Co. v. Occupational Safety and Health Review Comm'n, 430 U.S. at 450, n. 7; United States ex rel. Toth v. Quarles, 350 U.S. 11 (1955). Although the cases relied upon by appellants demonstrate that independent courts are not required for all federal adjudications, those cases also make it clear that where Art. III does apply, all of the legislative powers specified in Art. I and elsewhere are subject to it. See, e.g., Ex parte Bakelite Corp., 279 U.S. at 449; United States ex rel. Toth v. Quarles, supra; American Ins. Co. v. Canter, 1 Pet. at 546; Murray's Lessee, 18 How. at 284. Cf. Crowell v. Benson, supra, at 51.
The flaw in appellants' analysis is that it provides no limiting principle. It thus threatens to supplant completely our system of adjudication in independent Art. III tribunals and replace it with a system of "specialized" legislative courts. True, appellants argue that, under their analysis, Congress could create legislative courts pursuant only to some "specific" Art. I power, and "only when there is a particularized need for distinctive treatment." Brief for United States 22-23. They therefore assert that their analysis would not permit Congress to replace the independent Art. III Judiciary through a "wholesale assignment of federal judicial business to legislative courts." Ibid. But these "limitations" are wholly illusory. For example, Art. I, § 8, empowers Congress to enact laws, inter alia, regulating interstate commerce and punishing certain crimes. Art. I, § 8, cls. 3, 6. On appellants' reasoning Congress could provide for the adjudication of these and "related" matters by judges and [p74] courts within Congress' exclusive control. [n27] The potential for encroachment upon powers reserved to the Judicial Branch through the device of "specialized" legislative courts is dramatically evidenced in the jurisdiction granted to the courts created by the Act before us. The broad range of questions that can be brought into a bankruptcy court because they are "related to cases under title 11," 28 U.S.C. § 1471(b) (1976 ed., Supp. IV), see supra at 54, is the clearest proof that, even when Congress acts through a "specialized" court, and pursuant to only one of its many Art. I powers, appellants' analysis fails to provide any real protection against the erosion of Art. III jurisdiction by the unilateral action of the political Branches. In short, to accept appellants' reasoning, would require that we replace the principles delineated in our precedents, rooted in history and the Constitution, with a rule of broad legislative discretion that could effectively eviscerate the constitutional guarantee of an independent Judicial Branch of the Federal Government. [n28] [p75]
Appellants' reliance upon Palmore for such broad legislative discretion is misplaced. In the context of the issue decided in that case, the language quoted from the Palmore opinion, supra, at 72, offers no substantial support for appellants' argument. Palmore was concerned with the courts of the District of Columbia, a unique federal enclave over which "Congress has . . . entire control . . . for every purpose of government." Kendall v. United States, 12 Pet. at 619. [p76] The "plenary authority" under the District of Columbia Clause, Art. I, § 8, cl. 17, was the subject of the quoted passage, and the powers granted under that Clause are obviously different in kind from the other broad powers conferred on Congress: Congress' power over the District of Columbia encompasses the full authority of government, and thus, necessarily, the Executive and Judicial powers as well as the Legislative. This is a power that is clearly possessed by Congress only in limited geographic areas. Palmore itself makes this limitation clear. The quoted passage distinguishes the congressional powers at issue in Palmore from those in which the Art. III command of an independent Judiciary must be honored: where "laws of national applicability and affairs of national concern are at stake." 411 U.S. at 408. Laws respecting bankruptcy, like most laws enacted pursuant to the national powers cataloged in Art. I, § 8, are clearly laws of national applicability and affairs of national concern. Thus our reference in Palmore to "specialized areas having particularized needs" referred only to geographic areas, such as the District of Columbia or territories outside the States of the Federal Union. In light of the clear commands of Art. III, nothing held or said in Palmore can be taken to mean that, in every area in which Congress may legislate, it may also create non-Art. III courts with Art. III powers.
In sum, Art. III bars Congress from establishing legislative courts to exercise jurisdiction over all matters related to those arising under the bankruptcy laws. The establishment of such courts does not fall within any of the historically recognized situations in which the general principle of independent adjudication commanded by Art. III does not apply. Nor can we discern any persuasive reason, in logic, history, or the Constitution, why the bankruptcy courts here established lie beyond the reach of Art. III.
Appellants advance a second argument for upholding the constitutionality of the Act: that "viewed within the entire judicial [p77] framework set up by Congress," the bankruptcy court is merely an "adjunct" to the district court, and that the delegation of certain adjudicative functions to the bankruptcy court is accordingly consistent with the principle that the judicial power of the United States must be vested in Art. III courts. See Brief for United States 11-13, 375. As support for their argument, appellants rely principally upon Crowell v. Benson, 285 U.S. 22 (1932), and United States v. Raddatz, 447 U.S. 667 (1980), cases in which we approved the use of administrative agencies and magistrates as adjuncts to Art. III courts. Brief for United States 402. The question to which we turn, therefore, is whether the Act has retained "the essential attributes of the judicial power," Crowell v. Benson, supra, at 51, in Art. III tribunals. [n29]
The essential premise underlying appellants' argument is that, even where the Constitution denies Congress the power to establish legislative courts, Congress possesses the authority to assign certain factfinding functions to adjunct tribunals. It is, of course, true that, while the power to adjudicate "private rights" must be vested in an Art. III court, see Part III, supra,
this Court has accepted factfinding by an administrative agency, . . . as an adjunct to the Art. III court, analogizing the agency to a jury or a special master and permitting it in admiralty cases to perform the function of the special master. Crowell v. Benson, 285 U.S. 22, 51-65 [p78] (1932).
Atlas Roofing Co. v. Occupational Safety and Health Review Comm'n, 430 U.S. at 450, n. 7.
The use of administrative agencies as adjuncts was first upheld in Crowell v. Benson, supra. The congressional scheme challenged in Crowell empowered an administrative agency, the United States Employees' Compensation Commission, to make initial factual determinations pursuant to a federal statute requiring employers to compensate their employees for work-related injuries occurring upon the navigable waters of the United States. The Court began its analysis by noting that the federal statute administered by the Compensation Commission provided for compensation of injured employees "irrespective of fault," and that the statute also prescribed a fixed and mandatory schedule of compensation. Id. at 38. The agency was thus left with the limited role of determining
questions of fact as to the circumstances, nature, extent and consequences of the injuries sustained by the employee for which compensation is to be made.
Id. at 54. The agency did not possess the power to enforce any of its compensation orders: on the contrary, every compensation order was appealable to the appropriate federal district court, which had the sole power to enforce it or set it aside, depending upon whether the court determined it to be "in accordance with law" and supported by evidence in the record. Id. at 44-45, 48. The Court found that, in view of these limitations upon the Compensation Commission's functions and powers, its determinations were "closely analogous to findings of the amount of damages that are made, according to familiar practice, by commissioners or assessors." Id. at 54. Observing that
there is no requirement that, in order to maintain the essential attributes of the judicial power, all determinations of fact in constitutional courts shall be made by judges,
id. at 51, the Court held that Art. III imposed no bar to the scheme enacted by Congress, id. at 54.
Crowell involved the adjudication of congressionally created rights. But this Court has sustained the use of adjunct factfinders even in the adjudication of constitutional rights -- [p79] so long as those adjuncts were subject to sufficient control by an Art. III district court. In United States v. Raddatz, supra, the Court upheld the 1978 Federal Magistrates Act, which permitted district court judges to refer certain pretrial motions, including suppression motions based on alleged violations of constitutional rights, to a magistrate for initial determination. The Court observed that the magistrate's proposed findings and recommendations were subject to de novo review by the district court, which was free to rehear the evidence or to call for additional evidence. Id. at 676-677, 681-683. Moreover, it was noted that the magistrate considered motions only upon reference from the district court, and that the magistrates were appointed, and subject to removal, by the district court. Id. at 685 (BLACKMUN, J., concurring). [n30] In short, the ultimate decisionmaking authority respecting all pretrial motions clearly remained with the district court. Id. at 682. Under these circumstances, the Court held that the Act did not violate the constraints of Art. III. Id. at 683-684. [n31] [p80]
Together, these cases establish two principles that aid us in determining the extent to which Congress may constitutionally vest traditionally judicial functions in non-Art. III officers. First, it is clear that, when Congress creates a substantive federal right, it possesses substantial discretion to prescribe the manner in which that right may be adjudicated -- including the assignment to an adjunct of some functions historically performed by judges. [n32] Thus, Crowell recognized [p81] that Art. III does not require "all determinations of fact [to] be made by judges," 285 U.S. at 51; with respect to congressionally created rights, some factual determinations may be made by a specialized factfinding tribunal designed by Congress, without constitutional bar, id. at 54. Second, the functions of the adjunct must be limited in such a way that "the essential attributes" of judicial power are retained in the Art. III court. Thus, in upholding the adjunct scheme challenged in Crowell, the Court emphasized that
the reservation of full authority to the court to deal with matters of law provides for the appropriate exercise of the judicial function in this class of cases.
Ibid. And in refusing to invalidate the Magistrates Act at issue in Raddatz, the Court stressed that under the congressional scheme "‘[t]he authority -- and the responsibility -- to make an informed, final determination . . . remains with the judge,'" 447 U.S. at 682, quoting Mathews v. Weber, 423 U.S. 261, 271 (1976); the statute's delegation of power was therefore permissible, since "the ultimate decision is made by the district court," 447 U.S. at 683.
These two principles assist us in evaluating the "adjunct" scheme presented in these cases. Appellants assume that Congress' power to create "adjuncts" to consider all cases related to those arising under Title 11 is as great as it was in the circumstances of Crowell. But while Crowell certainly endorsed the proposition that Congress possesses broad discretion to assign factfinding functions to an adjunct created to aid in the adjudication of congressionally created statutory rights, Crowell does not support the further proposition necessary to appellants' argument -- that Congress possesses the same degree of discretion in assigning traditionally judicial power to adjuncts engaged in the adjudication of rights not [p82] created by Congress. Indeed, the validity of this proposition was expressly denied in Crowell when the Court rejected
the untenable assumption that the constitutional courts may be deprived in all cases of the determination of facts upon evidence, even though a constitutional right may be involved,
285 U.S. at 6041 (emphasis added), [n33] and stated that
the essential independence of the exercise of the judicial power of the United States in the enforcement of constitutional rights requires that the Federal court should determine . . . an issue [of agency jurisdiction] upon its own record and the facts elicited before it.
Id. at 64 (emphasis added). [n34] Appellants' proposition was also implicitly rejected in Raddatz. Congress' assignment of adjunct functions under the Federal Magistrates Act was substantially narrower than under the statute challenged in Crowell. Yet the Court's scrutiny of the adjunct scheme in Raddatz -- which played a [p83] role in the adjudication of constitutional rights -- was far stricter than it had been in Crowell. Critical to the Court's decision to uphold the Magistrates Act was the fact that the ultimate decision was made by the district court. 447 U.S. at 683.
Although Crowell and Raddatz do not explicitly distinguish between rights created by Congress and other rights, such a distinction underlies in part Crowell's and Raddatz' recognition of a critical difference between rights created by federal statute and rights recognized by the Constitution. Moreover, such a distinction seems to us to be necessary in light of the delicate accommodations required by the principle of separation of powers reflected in Art. III. The constitutional system of checks and balances is designed to guard against "encroachment or aggrandizement" by Congress at the expense of the other branches of government. Buckley v. Valeo, 424 U.S. at 122. But when Congress creates a statutory right, it clearly has the discretion, in defining that right, to create presumptions, or assign burdens of proof, or prescribe remedies; it may also provide that persons seeking to vindicate that right must do so before particularized tribunals created to perform the specialized adjudicative tasks related to that right. [n35] Such provisions do, in a sense, affect the exercise of judicial power, but they are also incidental to Congress' power to define the right that it has created. No [p84] comparable justification exists, however, when the right being adjudicated is not of congressional creation. In such a situation, substantial inroads into functions that have traditionally been performed by the Judiciary cannot be characterized merely as incidental extensions of Congress' power to define rights that it has created. Rather, such inroads suggest unwarranted encroachments upon the judicial power of the United States, which our Constitution reserves for Art. III courts.
We hold that the Bankruptcy Act of 1978 carries the possibility of such an unwarranted encroachment. Many of the rights subject to adjudication by the Act's bankruptcy courts, like the rights implicated in Raddatz, are not of Congress' creation. Indeed, the cases before us, which center upon appellant Northern's claim for damages for breach of contract and misrepresentation, involve a right created by state law, a right independent of and antecedent to the reorganization petition that conferred jurisdiction upon the Bankruptcy Court. [n36] Accordingly, Congress' authority to control the manner in which that right is adjudicated, through assignment of historically judicial functions to a non-Art. III "adjunct," plainly must be deemed at a minimum. Yet it is equally plain that Congress has vested the "adjunct" bankruptcy judges with powers over Northern's state-created right that far exceed the powers that it has vested in administrative agencies that adjudicate only rights of Congress' own creation.
Unlike the administrative scheme that we reviewed in Crowell, the Act vests all "essential attributes" of the judicial [p85] power of the United States in the "adjunct" bankruptcy court. First, the agency in Crowell made only specialized, narrowly confined factual determinations regarding a particularized area of law. In contrast, the subject matter jurisdiction of the bankruptcy courts encompasses not only traditional matters of bankruptcy, but also "all civil proceedings arising under title 11 or arising in or related to cases under title 11." 28 U.S.C. § 1471(b) (1976 ed., Supp. IV) (emphasis added). Second, while the agency in Crowell engaged in statutorily channeled factfinding functions, the bankruptcy courts exercise "all of the jurisdiction" conferred by the Act on the district courts, § 1471(c) (emphasis added). Third, the agency in Crowell possessed only a limited power to issue compensation orders pursuant to specialized procedures, and its orders could be enforced only by order of the district court. By contrast, the bankruptcy courts exercise all ordinary powers of district courts, including the power to preside over jury trials, 28 U.S.C. § 1480 (1976 ed., Supp. IV), the power to issue declaratory judgments, § 2201, the power to issue writs of habeas corpus, § 2256, and the power to issue any order, process, or judgment appropriate for the enforcement of the provisions of Title 11, 11 U.S.C. § 105(a) (1976 ed., Supp. IV). [n37] Fourth, while orders issued by the agency in Crowell were to be set aside if "not supported by the evidence," the judgments of the bankruptcy courts are apparently subject to review only under the more deferential "clearly erroneous" standard. See n. 5, supra. Finally, the agency in Crowell was required by law to seek enforcement of its compensation orders in the district court. In contrast, the bankruptcy courts issue final judgments, which are binding [p86] and enforceable even in the absence of an appeal. [n38] In short, the "adjunct" bankruptcy courts created by the Act exercise jurisdiction behind the facade of a grant to the district courts, and are exercising powers far greater than those lodged in the adjuncts approved in either Crowell or Raddatz. [n39] [p87]
We conclude that 28 U.S.C. § 1471 (1976 ed., Supp. IV), as added by § 241(a) of the Bankruptcy Act of 1978, has impermissibly removed most, if not all, of "the essential attributes of the judicial power" from the Art. III district court, and has vested those attributes in a non-Art. III adjunct. Such a grant of jurisdiction cannot be sustained as an exercise of Congress' power to create adjuncts to Art. III courts.
Having concluded that the broad grant of jurisdiction to the bankruptcy courts contained in 28 U.S.C. § 1471 (1976 ed., Supp. IV) is unconstitutional, we must now determine whether our holding should be applied retroactively to the effective date of the Act. [n40] Our decision in Chevron [p88] Oil Co. v. Huson, 404 U.S. 97 (1971), sets forth the three considerations recognized by our precedents as properly bearing upon the issue of retroactivity. They are, first, whether the holding in question "decid[ed] an issue of first impression whose resolution was not clearly foreshadowed" by earlier cases, id. at 106; second, "whether retrospective operation will further or retard [the] operation" of the holding in question, id. at 107; and third, whether retroactive application "could produce substantial inequitable results" in individual cases, ibid. In the present cases, all of these considerations militate against the retroactive application of our holding today. It is plain that Congress' broad grant of judicial power to non-Art. III bankruptcy judges presents an unprecedented question of interpretation of Art. III. It is equally plain that retroactive application would not further the operation of our holding, and would surely visit substantial injustice and hardship upon those litigants who relied upon the Act's vesting of jurisdiction in the bankruptcy courts. We hold, therefore, that our decision today shall apply only prospectively. [n41]
The judgment of the District Court is affirmed. However, we stay our judgment until October 4, 1982. This limited stay will afford Congress an opportunity to reconstitute the bankruptcy courts or to adopt other valid means of adjudication, without impairing the interim administration of the bankruptcy laws. See Buckley v. Valeo, 424 U.S. at 143; [p89] cf. Georgia v. United States, 411 U.S. 526, 541 (1973); Fortson v. Morris, 385 U.S. 231, 235 (1966); Maryland Committee for Fair Representation v. Tawes, 377 U.S. 656, 675-676 (1964).
It is so ordered.
* Together with No. 81-546, United State v. Marathon Pipe Line Co. et al., also on appeal from the same court.
1. Pub.L. 95 598, 92 Stat. 2549. The Act became effective October 1, 1979.
2. Bankruptcy referees were redesignated as "judges" in 1973. Bkrtcy.Rule 901(7). For purposes of clarity, however, we refer to all judges under the old Act as "referees."
3. Although the Act initially vests this jurisdiction in district courts, 28 U.S.C. § 1471(a) (1976 ed., Supp. IV), it subsequently provides that
[t]he bankruptcy court for the district in which a case under title 11 is commenced shall exercise all of the jurisdiction conferred by this section on the district courts,
§ 1471(c) (1976 ed., Supp. IV) (emphasis added). Thus, the ultimate repository of the Act's broad jurisdictional grant is the bankruptcy courts. See 1 W. Collier, Bankruptcy ¶ 3.01, pp. 3-37, 34 to 3-49 (15th ed.1982).
4. With respect to both personal jurisdiction and venue, the scope of the Act is also expansive. Although the Act does not, in terms, indicate the extent to which bankruptcy judges may exercise personal jurisdiction, it has been construed to allow the constitutional maximum. See, e.g., In re Whippany Paper Board Co., 15 B.R. 312, 314-315 (Bkrtcy. NJ 1981). With two exceptions not relevant here, the venue of "a proceeding arising in or related to a case under title 11 [is] in the bankruptcy court in which such case is pending." 28 U.S.C. § 1473(a) (1976 ed., Supp. IV). Furthermore, the Act permits parties to remove many kinds of actions to the bankruptcy court. Parties
may remove any claim or cause of action in a civil action, other than a proceeding before the United States Tax Court or a civil action by a Government unit to enforce such governmental unit's police or regulatory power.
§ 1478(a) (1976 ed., Supp. IV). The bankruptcy court may, however, remand such actions "on any equitable ground"; the decision to remand or retain an action is unreviewable. § 1478(b).
5. Although no particular standard of review is specified in the Act, the parties in the present cases seem to agree that the appropriate one is the clearly erroneous standard, employed in old Bankruptcy Rule 810 for review of findings of fact made by a referee. See Brief for United States 41; Tr. of Oral Arg. 27. See also In re Rivers, 19 B.R. 438 (Bkrtcy. ED Tenn.1982); 1 Collier, supra, n. 3, ¶ 3.03, p. 3-316.
6. Under the old Bankruptcy Act, referees could be removed by the district court for "incompetency, misconduct, or neglect of duty," 11 U.S.C. § 62(b) (repealed); the same grounds for removal apply during the transition period, see § 404(d), 92 Stat. 2684.
7. It appears, however, that during the transition period, an appeal of a bankruptcy judge's decision may be taken to the district court even if an appellate panel of bankruptcy judges has been established.
8. After Northern docketed an appeal in this Court, the District Court supplemented its order with an opinion. 12 B.R. 946, 947 (1981).
9. Two other Bankruptcy Courts have considered the constitutionality of § 1471: the Bankruptcy Court for the District of Puerto Rico determined it to be constitutional, In re Segarra, 14 B.R. 870 (1981), while the Bankruptcy Court for the Eastern District of Tennessee reached the opposite conclusion, In re Rivers, supra.
10. These provisions serve other institutional values as well. The independence from political forces that they guarantee helps to promote public confidence in judicial determinations. See The Federalist No. 78 (A. Hamilton). The security that they provide to members of the Judicial Branch helps to attract well-qualified persons to the federal bench. Ibid. The guarantee of life tenure insulates the individual judge from improper influences not only by other branches but by colleagues as well, and thus promotes judicial individualism. See Kaufman, Chilling Judicial Independence, 88 Yale L.J. 681, 713 (1979). See generally Note, Article III Limits on Article I Courts: The Constitutionality of the Bankruptcy Court and the 1979 Magistrate Act, 80 Colum.L.Rev. 560, 583-585 (1980).
11. Further evidence of the Framers' concern for assuring the independence of the Judicial Branch may be found in the fact that the Constitutional Convention soundly defeated a proposal to allow the removal of judges by the Executive and Legislative Branches. See 2 M. Farrand, Records of the Federal Convention of 1787, pp. 428-429 (1911); P. Bator, P. Mishkin, D. Shapiro, & H. Wechsler, Hart and Wechsler's The Federal Courts and the Federal System 7 (2d ed.1973). Mr. Wilson, of Pennsylvania, commented that "[t]he Judges would be in a bad situation if made to depend on every gust of faction which might prevail in the two branches of our Govt." 2 Farrand, supra, at 429.
12. It should be noted, however, that the House of Representatives expressed substantial doubts respecting the constitutionality of the provisions eventually included in the Act. The House Judiciary Committee and its Subcommittee on Civil and Constitutional Rights gave lengthy consideration to the constitutional issues surrounding the conferral of broad powers upon the new bankruptcy courts. The Committee, the Subcommittee, and the House as a whole initially concluded that Art. III courts were constitutionally required for bankruptcy adjudications. See H.R. 8200, 95th Cong., 1st Sess. (1977); Hearings on H.R. 31 and H.R. 32 before the Subcommittee on Civil and Constitutional Rights of the House Committee on the Judiciary, 94th Cong., 2d Sess., 2081-2084 (1976); id. at 2682-2706; H.R.Rep. No. 95-595, p. 39 (1977) ("Article III is the constitutional norm, and the limited circumstances in which the courts have permitted departure from the requirements of Article III are not present in the bankruptcy context"); id. at 21-38; Subcommittee on Civil and Constitutional Rights of the House Committee on the Judiciary, Constitutional Bankruptcy Courts, 95th Cong., 1st Sess., 33 (Comm. Print No. 3, 1977) (concluding that the proposed bankruptcy courts should be established "under Article III, with all of the protection that the Framers intended for an independent judiciary"); Subcommittee on Civil and Constitutional Rights of the House Committee on the Judiciary, Report on Hearings on the Court Administrative Structure for Bankruptcy Cases, 95th Cong., 2d Sess., 5 (Comm. Print No. 13, 1978) (same); see generally Klee, Legislative History of the New Bankruptcy Law, 28 De Paul L.Rev. 941, 945-949, 951 (1979). The Senate bankruptcy bill did not provide for life tenure or a guaranteed salary, instead adopting the concept of a bankruptcy court with similarly broad powers but as an "adjunct" to an Art. III court. S. 2266, 95th Cong., 2d Sess. (1978). The bill that was finally enacted, denying bankruptcy judges the tenure and compensation protections of Art. III, was the result of a series of last-minute conferences and compromises between the managers of both Houses. See Klee, supra, at 952-956.
13. The Act designates the bankruptcy court in each district as an "adjunct" to the district court. 28 U.S.C. § 151(a) (1976 ed., Supp. IV). Neither House of Congress concluded that the bankruptcy courts should be established as independent legislative courts. See n. 12, supra.
14. At one time, this Court suggested a rigid distinction between those subjects that could be considered only in Art. III courts and those that could be considered only in legislative courts. See Williams v. United States, 289 U.S. 553 (1933). But this suggested dichotomy has not withstood analysis. See C. Wright, Law of the Federal Courts 335 (3d ed.1976). Our more recent cases clearly recognize that legislative courts may be granted jurisdiction over some cases and controversies to which the Art. III judicial power might also be extended. E.g., Palmore v. United States, 411 U.S. 389 (1973). See Glidden Co. v. Zdanok, 370 U.S. 530, 549-551 (1962) (opinion of Harlan, J.).
15. JUSTICE WHITE's dissent finds particular significance in the fact that Congress could have assigned all bankruptcy matters to the state courts. Post at 116. But, of course, virtually all matters that might be heard in Art. III courts could also be left by Congress to state courts. This fact is simply irrelevant to the question before us. Congress has no control over state court judges; accordingly the principle of separation of powers is not threatened by leaving the adjudication of federal disputes to such judges. See Krattenmaker, Article III and Judicial Independence: Why the New Bankruptcy Courts are Unconstitutional, 70 Geo.L.J. 297, 304-305 (1981). The Framers chose to leave to Congress the precise role to be played by the lower federal courts in the administration of justice. See Hart and Wechsler's The Federal Courts and the Federal System, supra, n. 11, at 11. But the Framers did not leave it to Congress to define the character of those courts -- they were to be independent of the political branches and presided over by judges with guaranteed salary and life tenure.
16. We recently reaffirmed the principle, expressed in these early cases, that Art. I, § 8, cl. 17, provides that Congress shall have power "[t]o exercise exclusive Legislation in all Cases whatsoever, over" the District of Columbia. Palmore v. United States, 411 U.S. at 397. See also Wallace v. Adams, 204 U.S. 415, 423 (1907) (recognizing Congress' authority to establish legislative courts to determine questions of tribal membership relevant to property claims within Indian territory); In re Ross, 140 U.S. 453 (1891) (same, respecting consular courts established by concession from foreign countries). See generally 1 J. Moore, J. Lucas, H. Fink, D. Weckstein, & J. Wicker, Moore's Federal Practice 46-49, 53-54 (1982). But see Reid v. Covert, 354 U.S. 1 (1957).
17. See also Burns v. Wilson, 346 U.S. 137, 139-140 (1953). But this Court has been alert to ensure that Congress does not exceed the constitutional bounds and bring within the jurisdiction of the military courts matters beyond that jurisdiction, and properly within the realm of "judicial power." See, e.g., Reid v. Covert, supra; United States ex rel. Toth v. Quarles, 350 U.S. 11 (1955).
18. Congress' power to create legislative courts to adjudicate public rights carries with it the lesser power to create administrative agencies for the same purpose, and to provide for review of those agency decisions in Art. III courts. See, e.g., Atlas Roofing Co. v. Occupational Safety and Health Review Comm'n, 430 U.S. 442, 450 (1977).
19. See Oceanic Steam Navigation Co. v. Stranahan, 214 U.S. 320, 339 (1909); Katz, Federal Legislative Courts, 43 Harv.L.Rev. 894, 915 (1930).
20. Doubtless it could be argued that the need for independent judicial determination is greatest in cases arising between the Government and an individual. But the rationale for the public rights line of cases lies not in political theory, but rather in Congress' and this Court's understanding of what power was reserved to the Judiciary by the Constitution as a matter of historical fact.
21. See also Williams v. United States, 289 U.S. 553 (1933) (holding that Court of Claims was a legislative court, and that salary of a judge of that court could therefore be reduced by Congress).
22. Crowell v. Benson, 285 U.S. 22 (1932), attempted to catalog some of the matters that fall within the public rights doctrine:
Familiar illustrations of administrative agencies created for the determination of such matters are found in connection with the exercise of the congressional power as to interstate and foreign commerce, taxation, immigration, the public lands, public health, the facilities of the post office, pensions and payments to veterans.
Id. at 51 (footnote omitted).
23. Congress cannot
withdraw from [Art. III] judicial cognizance any matter which, from it nature, is the subject of a suit at the common law, or in equity, or admiralty.
Murray's Lessee v. Hoboken Land & Improvement Co., 18 How. 272, 284 (1856) (emphasis added). It is thus clear that the presence of the United States as a proper party to the proceeding is a necessary, but not sufficient, means of distinguishing "private rights" from "public rights." And it is also clear that, even with respect to matters that arguably fall within the scope of the "public rights" doctrine, the presumption is in favor of Art. III courts. See Glidden Co. v. Zdanok, 370 U.S. at 548-549, and n. 21 (opinion of Harlan, J.). See also Currie, The Federal Courts and the American Law Institute, Part 1, 36 U.Chi.L.Rev. 1, 13-14, n. 67 (1968). Moreover, when Congress assigns these matters to administrative agencies, or to legislative courts, it has generally provided, and we have suggested that it may be required to provide, for Art. III judicial review. See Atlas Roofing Co. v. Occupational Safety and Health Review Comm'n, 430 U.S. at 455, n. 13.
24. Of course, the public rights doctrine does not extend to any criminal matters, although the Government is a proper party. See, e.g., United States ex rel. Toth v. Quarles, 350 U.S. 11 (1955).
25. The "unifying principle" that JUSTICE WHITE's dissent finds lacking in al of these cases, see post at 105, is to be found in the exceptional constitutional grants of power to Congress with respect to certain matters. Although the dissent is correct that these grants are not explicit in the language of the Constitution, they are nonetheless firmly established in our historical understanding of the constitutional structure. When these three exceptional grants are properly constrained, they do not threaten the Framers' vision of an independent Federal Judiciary. What clearly remains subject to Art. III are all private adjudications in federal courts within the States -- matters from their nature subject to "a suit at common law or in equity or admiralty" -- and all criminal matters, with the narrow exception of military crimes. There is no doubt that, when the Framers assigned the "judicial Power" to an independent Art. III Branch, these matters lay at what they perceived to be the protected core of that power.
Although the dissent recognizes that the Framers had something important in mind when they assigned the judicial power of the United States to Art. III courts, it concludes that our cases and subsequent practice have eroded this conception. Unable to find a satisfactory theme in our precedents for analyzing these cases, the dissent rejects all of them, as well as the historical understanding upon which they were based, in favor of an ad hoc balancing approach in which Congress can essentially determine for itself whether Art. III courts are required. See post at 105-116. But even the dissent recognizes that the notion that Congress, rather than the Constitution, should determine whether there is a need for independent federal courts cannot be what the Framers had in mind. See post at 113.
26. This claim may be adjudicated in federal court on the basis of its relationship to the petition for reorganization. See Williams v. Austrian, 331 U.S. 642 (1947); Schumacher v. Beeler, 293 U.S. 367 (1934). See also National Ins. Co. v. Tidewater Co., 337 U.S. 582, 611-613 (1949) (Rutledge, J., concurring); Textile Workers v. Lincoln Mills, 353 U.S. 448, 472 (1957) (Frankfurter, J., dissenting). Cf. Osborn v. Bank of the United States, 9 Wheat. 738 (1824). But this relationship does not transform the state-created right into a matter between the Government and the petitioner for reorganization. Even in the absence of the federal scheme, the plaintiff would be able to proceed against the defendant on the state law contractual claims.
27. Nor can appellants' analysis logically be limited to Congress' Art. I powers. For example, appellants' reasoning relies in part upon analogy to our approval of territorial courts in American Ins. Co. v. Canter, 1 Pet. 511 (1828), and of the use of an administrative agency in Crowell v. Benson, 285 U.S. 22 (1932). Brief for United States 15; Brief for Northern Pipeline Construction Co. 10. In those cases, the Court recognized the right of Congress to create territorial courts pursuant to the authority granted under Art. IV, § 3, cl. 2, and to create administrative tribunals to adjudicate rights in admiralty pursuant to the federal authority in Art. III, § 2, over admiralty jurisdiction. See American Ins. Co. v. Canter, supra, at 546; Crowell v. Benson, supra, at 39. This reliance underscores the fact that appellants offer no principled means of distinguishing between Congress' Art. I powers and any of Congress' other powers -- including, for example, those conferred by the various amendments to the Constitution, e.g., U.S.Const., Amdts. 13-16, 19, 23, 24, 26.
28. JUSTICE WHITE's suggested "limitations" on Congress' power to create Art. I courts are even more transparent. JUSTICE WHITE's dissent suggests that Art. III "should be read as expressing one value that must be balanced against competing constitutional values and legislative responsibilities," and that the Court retains the final word on how the balance is to be struck. Post at 113-114. The dissent would find the Art. III "value" accommodated where appellate review by Art. III courts is provided and where the Art. I courts are "designed to deal with issues likely to be of little interest to the political branches." Post at 115. But the dissent's view that appellate review is sufficient to satisfy either the command or the purpose of Art. III is incorrect. See n. 39, infra. And the suggestion that we should consider whether the Art. I courts are designed to deal with issues likely to be of interest to the political Branches would undermine the validity of the adjudications performed by most of the administrative agencies, on which validity the dissent so heavily relies.
In applying its ad hoc balancing approach to the facts of this case, the dissent rests on the justification that these courts differ from standard Art. III courts because of their "extreme specialization." As noted above, "extreme specialization" is hardly an accurate description of bankruptcy courts designed to adjudicate the entire range of federal and state controversies. See infra at 84-85. Moreover, the special nature of bankruptcy adjudications is in no sense incompatible with performance of such functions in a tribunal afforded the protection of Art. III. As one witness pointed out to Congress:
Relevant to that question of need, it seems worth noting that Article III itself permits much flexibility; so long as tenure during good behavior is granted, much room exists as regards other conditions. Thus it would certainly be possible to create a special bankruptcy court under Article III, and there is no reason why the judges of that court would have to be paid the same salary as district judges or any other existing judges. It would also be permissible to provide that, when a judge of that court retired pursuant to statute, a vacancy for a new appointment would not automatically be created. And it would be entirely valid to specify that the judges of that court could not be assigned to sit, even temporarily, on the general district courts or courts of appeals.
Hearings on H.R. 31 and H.R. 32 before the Subcommittee on Civil and Constitutional Rights of the House Committee on the Judiciary, 94th Cong., 2d Sess., 2697 (1976) (letter of Paul Mishkin).
29. JUSTICE WHITE's dissent fails to distinguish between Congress' power to create adjuncts to Art. III courts, and Congress' power to create Art. I courts in limited circumstances. See post at 103-104. Congress' power to create adjuncts and assign them limited adjudicatory functions is in no sense an "exception" to Art. III. Rather, such an assignment is consistent with Art. III, so long as "the essential attributes of the judicial power" are retained in the Art. III court, Crowell v. Benson, 285 U.S. at 51, and so long as Congress' adjustment of the traditional manner of adjudication can be sufficiently linked to its legislative power to define substantive rights, see infra at 83-84. Cf. Atlas Roofing Co. v. Occupational Safety and Health Review Comm'n, 430 U.S. at 450, n. 7.
30. Thus, in Raddatz, there was no serious threat that the exercise of the judicial power would be subject to incursion by other branches.
[T]he only conceivable danger of a "threat" to the "independence" of the magistrate comes from within, rather than without the judicial department.
447 U.S. at 685 (BLACKMUN, J., concurring).
31. Appellants and JUSTICE WHITE's dissent also rely on the broad powers exercised by the bankruptcy referees immediately before the Bankruptcy Act of 1978. See post at 98-103. But those particular adjunct functions, which represent the culmination of years of gradual expansion of the power and authority of the bankruptcy referee, see 1 Collier, supra, n. 3, ¶ 1.02, have never been explicitly endorsed by this Court. In Katchen v. Landy, 382 U.S. 323 (1966), on which the dissent relies, there was no discussion of the Art. III issue. Moreover, when Katchen was decided, the 1973 Bankruptcy Rules had not yet been adopted, and the district judge, after hearing the report of the referee, was free to "modify it or . . . reject it in whole or in part or . . . receive further evidence or . . . recommit it with instructions." General Order in Bankruptcy No. 47, 305 U.S. 702 (1939).
We note, moreover, that the 1978 Act made at least three significant changes from the bankruptcy practice that immediately preceded it. First, of course, the jurisdiction of the bankruptcy courts was "substantially expanded" by the Act. H.R.Rep. No. 95-595, p. 13 (1977). Before the Act, the referee had no jurisdiction, except with consent, over controversies beyond those involving property in the actual or constructive possession of the court. 11 U.S.C. § 46(b) (repealed). See MacDonald v. Plymouth Trust Co., 286 U.S. 263, 266 (1932). It cannot be doubted that the new bankruptcy judges, unlike the referees, have jurisdiction far beyond that which can be even arguably characterized as merely incidental to the discharge in bankruptcy or a plan for reorganization. Second, the bankruptcy judges have broader powers than those exercised by the referees. See infra at 84-86; H.R.Rep. No. 95-595, supra, at 12, and nn. 63-68. Finally, and perhaps most significantly, the relationship between the district court and the bankruptcy court was changed under the 1978 Act. Before the Act, bankruptcy referees were "subordinate adjuncts of the district courts." Id. at 7. In contrast, the new bankruptcy courts are "independent of the United States district courts." Ibid.; 1 Collier supra, n. 3, ¶ 1.03, p. 1-9. Before the Act, bankruptcy referees were appointed and removable only by the district court. 11 U.S.C. § 62 (repealed). And the district court retained control over the reference by his power to withdraw the case from the referee. Bkrtcy.Rule 102. Thus, even at the trial stage, the parties had access to an independent judicial officer. Although Congress could still lower the salary of referees, they were not dependent on the political Branches of Government for their appointment. To paraphrase JUSTICE BLACKMUN's observation in Raddatz, supra, the primary "danger of a ‘threat' to the ‘independence' of the [adjunct came] from within, rather than without, the judicial department." 447 U.S. at 685 (concurring opinion).
32. Contrary to JUSTICE WHITE's suggestion, we do not concede that
Congress may provide for initial adjudications by Art. I courts or administrative judges of all rights and duties arising under otherwise valid federal laws.
See post at 94. Rather, we simply reaffirm the holding of Crowell that Congress may assign to non-Art. III bodies some adjudicatory functions. Crowell itself spoke of "specialized" functions. These cases do not require us to specify further any limitations that may exist with respect to Congress' power to create adjuncts to assist in the adjudication of federal statutory rights.
33. The Court in Crowell found that the requirement of de novo review as to certain facts was not "simply the question of due process in relation to notice and hearing," but was "rather a question of the appropriate maintenance of the Federal judicial power." 285 U.S. at 56. The dissent agreed that some factual findings cannot be made by adjuncts, on the ground that, "under certain circumstances, the constitutional requirement of due process is a requirement of [Art. III] judicial process." Id. at 87 (Brandeis, J., dissenting).
34. Crowell's precise holding, with respect to the review of "jurisdictional" and "constitutional" facts that arise within ordinary administrative proceedings has been undermined by later cases. See St. Joseph Stock Yards Co. v. United States, 298 U.S. 38, 53 (1936). See generally 4 K. Davis, Administrative Law Treatise §§ 29.08, 29.09 (1st ed.1958). But the general principle of Crowell -- distinguishing between congressionally created rights and constitutionally recognized rights -- remains valid, as evidenced by the Court's recent approval of Ng Fung Ho v. White, 259 U.S. 276 (1922), on which Crowell relied. See Agosto v. INS, 436 U.S. 748, 753 (1978) (de novo judicial determination required for claims of American citizenship in deportation proceedings). See also United States v. Raddatz, 447 U.S. at 682-684; id. at 707-712 (MARSHALL, J., dissenting).
35. Drawing the line between permissible extensions of legislative power and impermissible incursions into judicial power is a delicate undertaking, for the powers of the Judicial and Legislative Branches are often overlapping. As Justice Frankfurter noted in a similar context:
To be sure, the content of the three authorities of government is not to be derived from an abstract analysis. The areas are partly interacting, not wholly disjointed.
Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 610 (1952) (concurring opinion). The interaction between the Legislative and Judicial Branches is at its height where courts are adjudicating rights wholly of Congress' creation. Thus, where Congress creates a substantive right, pursuant to one of its broad powers to make laws, Congress may have something to say about the proper manner of adjudicating that right.
36. Of course, bankruptcy adjudications themselves, as well as the manner in which the rights of debtors and creditors are adjusted, are matters of federal law. Appellant Northern's state law contract claim is now in federal court because of its relationship to Northern's reorganization petition. See n. 26, supra. But Congress has not purported to prescribe a rule of decision for the resolution of Northern's contractual claims.
37. The limitations that the judges
may not enjoin another court or punish a criminal contempt not committed in the presence of the judge of the court or warranting a punishment of imprisonment,
38. Although the entry of an enforcement order is in some respects merely formal, it has long been recognized that
"[t]he award of execution . . . is a part, and an essential part of every judgment passed by a court exercising judicial power. It is no judgment in the legal sense of the term, without it."
39. Appellants suggest that Crowell and Raddatz stand for the proposition that Art. III is satisfied so long as some degree of appellate review is provided. But that suggestion is directly contrary to the text of our Constitution:
The Judges, both of the supreme and inferior Courts, shall hold their Offices during good Behaviour, and shall . . . receive [undiminished] Compensation.
Art. III, § 1 (emphasis added). Our precedents make it clear that the constitutional requirements for the exercise of the judicial power must be met at all stages of adjudication, and not only on appeal, where the court is restricted to considerations of law, as well as the nature of the case as it has been shaped at the trial level. The Court responded to a similar suggestion in Crowell by stating that to accept such a regime,
would be to sap the judicial power as it exists under the Federal Constitution, and to establish a government of bureaucratic character alien to our system, wherever fundamental rights depend, as not infrequently they do depend, upon the facts, and finality as to facts becomes in effect finality in law.
285 U.S. at 57. Cf. Ward v. Village of Monroeville, 409 U.S. 57, 61-62 (1972); Osborn v. Bank of the United States, 9 Wheat. 738, 883 (1824).
JUSTICE WHITE's dissent views the function of the Third Branch as interpreting the Constitution in order to keep the other two Branches in check, and would accordingly find the purpose, if not the language, of Art. III satisfied where there is an appeal to an Art. III court. See post at 115. But in the Framers' view, Art. III courts would do a great deal more than, in an abstract way, announce guidelines for the other two Branches. While "expounding" the Constitution was surely one vital function of the Art. III courts in the Framers' view, the tasks of those courts, for which independence was an important safeguard, included the mundane as well as the glamorous, matters of common law and statute as well as constitutional law, issues of fact as well as issues of law. As Hamilton noted,
it is not with a view to infractions of the Constitution only, that the independence of the judges may be an essential safeguard against the effects of occasional ill humors in the society.
The Federalist No. 78, p. 488 (H. Lodge ed. 1888). In order to promote the independence and improve the quality of federal judicial decisionmaking in all of these areas, the Framers created a system of independent federal courts. See The Federalist Nos. 78-82.
40. It is clear that, at the least, the new bankruptcy judges cannot constitutionally be vested with jurisdiction to decide this state law contract claim against Marathon. As part of a comprehensive restructuring of the bankruptcy laws, Congress has vested jurisdiction over this and all matters related to cases under Title 11 in a single non-Art. III court, and has done so pursuant to a single statutory grant of jurisdiction. In these circumstances we cannot conclude that, if Congress were aware that the grant of jurisdiction could not constitutionally encompass this and similar claims, it would simply remove the jurisdiction of the bankruptcy court over these matters, leaving the jurisdictional provision and adjudicatory structure intact with respect to other types of claims, and thus subject to Art. III constitutional challenge on a claim-by-claim basis. Indeed, we note that one of the express purposes of the Act was to ensure adjudication of all claims in a single forum and to avoid the delay and expense of jurisdictional disputes. See H.R.Rep. No. 95-595, pp. 448 (1977); S.Rep. No. 95-989, p. 17 (1978). Nor can we assume, as THE CHIEF JUSTICE suggests,post, at 92, that Congress' choice would be to have these cases "routed to the United States district court of which the bankruptcy court is an adjunct." We think that it is for Congress to determine the proper manner of restructuring the Bankruptcy Act of 1978 to conform to the requirements of Art. III in the way that will best effectuate the legislative purpose.
41. See also Buckley v. Valeo, 424 U.S. 1, 142 (1976); Chicot County Drainage Dist. v. Baxter State Bank, 308 U.S. 371, 376-377 (1940); Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702, n. 9 (1982).