| Northern Pipeline Constr. Co. v. Marathon Pipe Line Co.
(No. 81-150)
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| Syllabus
| Opinion
[ Brennan ] | Concurrence
[ Rehnquist ] | Dissent
[ Burger ] | Opinion
[ White ] |
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Northern Pipeline Constr. Co. v. Marathon Pipe Line Co.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MINNESOTA
JUSTICE WHITE, with whom THE CHIEF JUSTICE and JUSTICE POWELL join, dissenting.
Article III, § 1, of the Constitution is straightforward and uncomplicated on its face: [p93]
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. 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.
Any reader could easily take this provision to mean that, although Congress was free to establish such lower courts as it saw fit, any court that it did establish would be an "inferior" court exercising "judicial Power of the United States," and so must be manned by judges possessing both life tenure and a guaranteed minimal income. This would be an eminently sensible reading, and one that, as the plurality shows, is well-founded in both the documentary sources and the political doctrine of separation of powers that stands behind much of our constitutional structure. Ante at 57-60.
If this simple reading were correct and we were free to disregard 150 years of history, these would be easy cases, and the plurality opinion could end with its observation that
[i]t 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.
Ante at 60. The fact that the plurality must go on to deal with what has been characterized as one of the most confusing and controversial areas of constitutional law [n1] itself indicates the gross oversimplification implicit in the plurality's claim that
our Constitution unambiguously enunciates a fundamental principle -- that the "judicial Power of the United States" must be reposed in an independent Judiciary, [and] provides clear institutional protections for that independence.
Ibid. While this is fine rhetoric, analytically it serves only to put a distracting and superficial gloss on a difficult question. [p94]
That question is what limits Art. III places on Congress' ability to create adjudicative institutions designed to carry out federal policy established pursuant to the substantive authority given Congress elsewhere in the Constitution. Whether fortunate or unfortunate, at this point in the history of constitutional law, that question can no longer be answered by looking only to the constitutional text. This Court's cases construing that text must also be considered. In its attempt to pigeonhole these cases, the plurality does violence to their meaning and creates an artificial structure that itself lacks coherence.
I
There are, I believe, two separate grounds for today's decision. First, non-Art. III judges, regardless of whether they are labeled "adjuncts" to Art. III courts or "Art. I judges," may consider only controversies arising out of federal law. Because the immediate controversy in these cases -- Northern Pipeline's claim against Marathon -- arises out of state law, it may only be adjudicated, within the federal system, by an Art. III court. [n2] Second, regardless of the source of law that governs the controversy, Congress is prohibited by Art. III from establishing Art. I courts, with three narrow exceptions. Adjudication of bankruptcy proceedings does not fall within any of these exceptions. I shall deal with the first of these contentions in this section.
The plurality concedes 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. Ante at 80. There is no apparent reason why this principle should not extend to matters arising in federal bankruptcy proceedings. The plurality attempts to escape the reach of prior decisions by contending that the bankrupt's claim against Marathon arose under state law. Non-Article III [p95] judges, in its view, cannot be vested with authority to adjudicate such issues. It then proceeds to strike down 28 U.S.C. § 1471 (1976 ed., Supp. IV) on this ground. For several reasons, the Court's judgment is unsupportable.
First, clearly this ground alone cannot support the Court's invalidation of § 1471 on its face. The plurality concedes that, in adjudications and discharges in bankruptcy, "the restructuring of debtor-creditor relations, which is at the core of the federal bankruptcy power," ante at 71, and "the manner in which the rights of debtors and creditors are adjusted," ante at 84, n. 36, are matters of federal law. Under the plurality's own interpretation of the cases, therefore, these matters could be heard and decided by Art. I judges. But because the bankruptcy judge is also given authority to hear a case like that of appellant Northern against Marathon, which the Court says is founded on state law, the Court holds that the section must be stricken down on its face. This is a grossly unwarranted emasculation of the scheme Congress has adopted. Even if the Court is correct that such a state law claim cannot be heard by a bankruptcy judge, there is no basis for doing more than declaring the section unconstitutional as applied to the claim against Marathon, leaving the section otherwise intact. In that event, cases such as these would have to be heard by Art. III judges or by state courts -- unless the defendant consents to suit before the bankruptcy judge -- just as they were before the 1978 Act was adopted. But this would remove from the jurisdiction of the bankruptcy judge only a tiny fraction of the cases he is now empowered to adjudicate, and would not otherwise limit his jurisdiction. [n3] [p96]
Second, the distinction between claims based on state law and those based on federal law disregards the real character of bankruptcy proceedings. The routine in ordinary bankruptcy cases now, as it was before 1978, is to stay actions against the bankrupt, collect the bankrupt's assets, require creditors to file claims or be forever barred, allow or disallow claims that are filed, adjudicate preferences and fraudulent transfers, and make pro rata distributions to creditors, who will be barred by the discharge from taking further actions against the bankrupt. The crucial point to be made is that, in the ordinary bankruptcy proceeding, the great bulk of creditor claims are claims that have accrued under state law prior to bankruptcy -- claims for goods sold, wages, rent, utilities, and the like.
[T]he word debt, as used by the Act, is not confined to its technical common law meaning but . . . extends to liabilities arising out of breach of contract . . . to torts . . . and to taxes owing to the United States or state or local governments.
1 W. Collier, Bankruptcy ¶ 1.14, p. 88 (14th ed.1976). Every such claim must be filed and its validity is subject [p97] to adjudication by the bankruptcy court. The existence and validity of such claims recurringly depend on state law. Hence, the bankruptcy judge is constantly enmeshed in state law issues.
The new aspect of the Bankruptcy Act of 1978, in this regard, therefore, is not the extension of federal jurisdiction to state law claims, but its extension to particular kinds of state law claims, such as contract cases against third parties or disputes involving property in the possession of a third person. [n4] Prior to 1978, a claim of a bankrupt against a third party, such as the claim against Marathon in this case, was no within the jurisdiction of the bankruptcy judge. The old limits were based, of course, on the restrictions implicit within the concept of in rem jurisdiction; the new extension is based on the concept of in personam jurisdiction.
The bankruptcy court is given in personam jurisdiction as well as in rem jurisdiction to handle everything that arises in a bankruptcy case.
H.R.Rep. No. 95-695, p. 445 (1977). The difference between the new and old Acts, therefore, is not to be found in a distinction between state law and federal law matters; rather, it is in a distinction between in rem and in personam jurisdiction. The majority at no place explains why this distinction should have constitutional implications.
Third, all that can be left of the majority's argument in this regard is that state law claims adjudicated within the federal system must be heard in the first instance by Art. III judges. I shall argue below that any such attempt to distinguish Art. I from Art. III courts by the character of the controversies they may adjudicate fundamentally misunderstands the historical [p98] and constitutional significance of Art. I courts. Initially, however, the majority's proposal seems to turn the separation of powers doctrine, upon which the majority relies, on its head: since state law claims would ordinarily not be heard by Art. III judges -- i.e., they would be heard by state judges -- one would think that there is little danger of a diminution of, or intrusion upon, the power of Art. III courts, when such claims are assigned to a non-Art. III court. The plurality misses this obvious point because it concentrates on explaining how it is that federally created rights can ever be adjudicated in Art. I courts -- a far more difficult problem under the separation of powers doctrine. The plurality fumbles when it assumes that the rationale it develops to deal with the latter problem must also govern the former problem. In fact, the two are simply unrelated, and the majority never really explains the separation of powers problem that would be created by assigning state law questions to legislative courts or to adjuncts of Art. III courts.
One need not contemplate the intricacies of the separation of powers doctrine, however, to realize that the majority's position on adjudication of state law claims is based on an abstract theory that has little to do with the reality of bankruptcy proceedings. Even prior to the present Act, bankruptcy cases were generally referred to bankruptcy judges, previously called referees. Bkrtcy.Rule 102(a). Title 11 U.S.C. § 66 described the jurisdiction of the referees. Their powers included the authority to
consider all petitions referred to them and make the adjudications or dismiss the petitions . . . grant, deny or revoke discharges, determine the dischargeability of debts, and render judgments thereon [and] perform such of the duties as are by this title conferred on courts of bankruptcy, including those incidental to ancillary jurisdiction, and as shall be prescribed by rules or orders of the courts of bankruptcy of their respective districts, except as herein otherwise provided. [p99]
The bankruptcy judge possessed "complete jurisdiction of the proceedings." 1 W. Collier, Bankruptcy ¶ 1.09, p. 65 (14th ed.1976). The referee would initially hear and decide practically all matters arising in the proceedings, including the allowance and disallowance of the claims of creditors. [n5] If a claim was disallowed by the bankruptcy judge and the decision was not reversed on appeal, the creditor was forever barred from further action against the bankrupt. As pointed out above, all of these matters could and usually did involve state law issues. Initial adjudication of state law issues by non-Art. III judges is, then, hardly a new aspect of the 1978 Act.
Furthermore, I take it that the Court does not condemn as inconsistent with Art. III the assignment of these functions -- i.e., those within the summary jurisdiction of the old bankruptcy courts -- to a non-Art. III judge, since, as the plurality says, they lie at the core of the federal bankruptcy power. Ante at 71. They also happen to be functions that have been performed by referees or bankruptcy judges for a very long time, and without constitutional objection. Indeed, we approved the authority of the referee to allow or disallow claims in Katchen v. Landy, 382 U.S. 323 (1966). There, the referee held that a creditor had received a preference, and that his claim could therefore not be allowed. We agreed that the referee had the authority not only to adjudicate the existence of the preference but also to order that the preference be disgorged. We also recognized that the referee could adjudicate counterclaims against a creditor who files his claim against the estate. The 1973 Bankruptcy Rules make similar provision. See Rule 306(c), Rule 701, and Advisory Committee Note to Rule 701, 11 U.S.C. p. 1340. Hence, if Marathon had filed a claim against the bankrupt in this case, the trustee could have filed and the bankruptcy judge [p100] could have adjudicated a counterclaim seeking the relief that is involved in these cases.
Of course, all such adjudications by a bankruptcy judge or referee were subject to review in the district court, on the record. See 11 U.S.C. § 67(c). Bankruptcy Rule 810, transmitted to Congress by this Court, provided that the district court "shall accept the referee's findings of fact unless they are clearly erroneous." As the plurality recognizes, ante at 55, the 1978 Act provides for appellate review in Art. III courts and presumably under the same "clearly erroneous standard." In other words, under both the old and new Acts, initial determinations of state law questions were to be made by non-Art. III judges, subject to review by Art. III judges. Why the differences in the provisions for appeal in the two Acts are of unconstitutional dimension remains entirely unclear.
In theory and fact, therefore, I can find no basis for that part of the majority's argument that rests on the state law character of the claim involved here. Even if, prior to 1978, the referee could not generally participate in cases aimed at collecting the assets of a bankrupt estate, he nevertheless repeatedly adjudicated issues controlled by state law. There is very little reason to strike down § 1471 on its face on the ground that it extends, in a comparatively minimal way, the referees' authority to deal with state law questions. To do so is to lose all sense of proportion.
II
The plurality unpersuasively attempts to bolster its case for facial invalidity by asserting that the bankruptcy courts are now "exercising powers far greater than those lodged in the adjuncts approved in either Crowell or Raddatz." Ante at 86. In support of this proposition, it makes five arguments in addition to the "state law" issue. Preliminarily, I see no basis for according standing to Marathon to raise any of these additional points. The state law objection applies to [p101] the Marathon case. Only that objection should now be adjudicated. [n6]
I also believe that the major premise of the plurality's argument is wholly unsupported: there is no explanation of why Crowell v. Benson, 285 U.S. 22 (1932), and United States v. Raddatz, 447 U.S. 667 (1980), define the outer limits of constitutional authority. Much more relevant to today's decision are, first, the practice in bankruptcy prior to 1978, which neither the majority nor any authoritative case has questioned, and, second, the practice of today's administrative agencies. Considered from this perspective, all of the plurality's arguments are unsupportable abstractions, divorced from the realities of modern practice.
The first three arguments offered by the plurality, ante at 85, focus on the narrowly defined task and authority of the agency considered in Crowell: the agency made only "specialized, narrowly confined factual determinations," and could issue only a narrow class of orders. Regardless of whether this was true of the Compensation Board at issue in Crowell, it certainly was not true of the old bankruptcy courts, nor does it even vaguely resemble current administrative practice. As I have already said, general references to bankruptcy judges, which was the usual practice prior to 1978, permitted bankruptcy judges to perform almost all of the functions of a bankruptcy court. Referees or bankruptcy judges not only exercised summary jurisdiction, but could also conduct adversary proceedings to
(1) recover money or property. . . . (2) determine the validity, priority, or extent of a lien or other interest in property, (3) sell property free of a lien or other interest for which the holder can be compelled to make a money satisfaction, (4) object to or revoke a discharge, (5) obtain an injunction, (6) obtain relief from a stay . . . (7) determine the dischargeability of a debt.
Bkrtcy.Rule 701. [p102] Although there were some exceptions to the referees' authority, which have been removed by the 1978 Act, the additions to the jurisdiction of the bankruptcy judges were of marginal significance when examined in the light of the overall functions of those judges before and after 1978. In my view, those changes are not sufficient to work a qualitative change in the character of the bankruptcy judge.
The plurality's fourth argument fails to point to any difference between the new and old Bankruptcy Acts. While the administrative orders in Crowell may have been set aside by a court if "not supported by the evidence," under both the new and old Acts at issue here, orders of the bankruptcy judge are reviewed under the "clearly erroneous standard." See Bkrtcy.Rule 810. Indeed, judicial review of the orders of bankruptcy judges is more stringent than that of many modern administrative agencies. Generally, courts are not free to set aside the findings of administrative agencies if supported by substantial evidence. But more importantly, courts are also admonished to give substantial deference to the agency's interpretation of the statute it is enforcing. No such deference is required with respect to decisions on the law made by bankruptcy judges.
Finally, the plurality suggests that, unlike the agency considered in Crowell, the orders of a post-1978 bankruptcy judge are final and binding even though not appealed. Ante at 85-86. To attribute any constitutional significance to this, unless the plurality intends to throw into question a large body of administrative law, is strange. More directly, this simply does not represent any change in bankruptcy practice. It was hornbook law prior to 1978 that the authorized judgments and orders of referees, including turnover orders, were final and binding and res judicata unless appealed and overturned:
The practice before the referee should not differ from that before the judge of the court of bankruptcy and, apart from direct review within the limitation of § 39(c), [p103] the orders of the referee are entitled to the same presumption of validity, conclusiveness and recognition in the court of bankruptcy or other courts.
1 W. Collier, Bankruptcy ¶ 1.09, pp. 65-66 (14th ed.1976).
Even if there are specific powers now vested in bankruptcy judges that should be performed by Art. III judges, the great bulk of their functions are unexceptionable, and should be left intact. Whatever is invalid should be declared to be such; the rest of the 1978 Act should be left alone. I can account for the majority's inexplicably heavy hand in this case only by assuming that the Court has once again lost its conceptual bearings when confronted with the difficult problem of the nature and role of Art. I courts. To that question I now turn.
III
A
The plurality contends that the precedents upholding Art. I courts can be reduced to three categories. First, there are territorial courts, which need not satisfy Art. III constraints because "the Framers intended that as to certain geographical areas . . . Congress was to exercise the general powers of government." [n7] Ante at 64. Second, there are courts-martial, which are exempt from Art. III limits because of 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." Ante at 66. Finally, there are those legislative courts and administrative agencies that adjudicate cases involving public rights -- controversies between the Government and private parties -- which are not covered by Art. III because the controversy could have been resolved by the executive [p104] alone without judicial review. See ante at 68. Despite the plurality's attempt to cabin the domain of Art. I courts, it is quite unrealistic to consider these to be only three "narrow," ante at 64, limitations on or exceptions to the reach of Art. III. In fact, the plurality itself breaks the mold in its discussion of "adjuncts" in Part IV, when it announces that,
when Congress creates a substantive federal right, it possesses substantial discretion to prescribe the manner in which that right may be adjudicated.
Ante at 80. Adjudications of federal rights may, according to the plurality, be committed to administrative agencies, as long as provision is made for judicial review.
The first principle introduced by the plurality is geographical: Art. I courts presumably are not permitted within the States. [n8] The problem, of course, is that both of the other exceptions recognize that Art. I courts can indeed operate within the States. The second category relies upon a new principle: Art. I courts are permissible in areas in which the Constitution grants Congress "extraordinary control over the precise subject matter." Ante at 66. Preliminarily, I do not know how we are to distinguish those areas in which Congress' control is "extraordinary" from those in which it is not. Congress' power over the Armed Forces is established in Art. I, § 8, cls. 13, 14. There is nothing in those Clauses that creates congressional authority different in kind from the authority granted to legislate with respect to bankruptcy. But more importantly, in its third category, and in its treatment of "adjuncts," the plurality itself recognizes that Congress can create Art. I courts in virtually all the areas in which Congress is authorized to act, regardless of the quality of the constitutional grant of authority. At the same time, [p105] territorial courts or the courts of the District of Columbia, which are Art. I courts, adjudicate private, just as much as public or federal, rights.
Instead of telling us what it is Art. I courts can and cannot do, the plurality presents us with a list of Art. I courts. When we try to distinguish those courts from their Art. III counterparts, we find -- apart from the obvious lack of Art. III judges -- a series of nondistinctions. By the plurality's own admission, Art. I courts can operate throughout the country, they can adjudicate both private and public rights, and they can adjudicate matters arising from congressional actions in those areas in which congressional control is "extraordinary." I cannot distinguish this last category from the general "arising under" jurisdiction of Art. III courts.
The plurality opinion has the appearance of limiting Art. I courts only because it fails to add together the sum of its parts. Rather than limiting each other, the principles relied upon complement each other; together, they cover virtually the whole domain of possible areas of adjudication. Without a unifying principle, the plurality's argument reduces to the proposition that, because bankruptcy courts are not sufficiently like any of these three exceptions, they may not be either Art. I courts or adjuncts to Art. III courts. But we need to know why bankruptcy courts cannot qualify as Art. I courts in their own right.
B
The plurality opinion is not the first unsuccessful attempt to articulate a principled ground by which to distinguish Art. I from Art. III courts. The concept of a legislative, or Art. I, court was introduced by an opinion authored by Chief Justice Marshall. Not only did he create the concept, but at the same time he started the theoretical controversy that has ever since surrounded the concept:
The Judges of the Superior Courts of Florida hold their offices for four years. These Courts, then, are not constitutional Courts, in which the judicial power conferred [p106] by the Constitution on the general government, can be deposited. They are incapable of receiving it. They are legislative Courts, 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 not a part of that judicial power which is defined in the 3d article of the Constitution, but is conferred by Congress in the execution of those general powers which that body possesses over the territories of the United States.
American Insurance Co. v. Canter, 1 Pet. 511, 546 (1828). The proposition was simple enough: constitutional courts exercise the judicial power described in Art. III of the Constitution; legislative courts do not and cannot.
There were only two problems with this proposition. First, Canter itself involved a case in admiralty jurisdiction, which is specifically included within the "judicial power of the United States" delineated in Art. III. How, then, could the territorial court not be exercising Art. III judicial power? Second, and no less troubling, if the territorial courts could not exercise Art. III power, how could their decisions be subject to appellate review in Art. III courts, including this one, that can exercise only Art. III "judicial" power? Yet from early on, this Court has exercised such appellate jurisdiction. Benner v. Porter, 9 How. 235, 243 (1850); Clinton v. Englebrecht, 13 Wall. 434 (1872); Reynolds v. United States, 98 U.S. 145, 154 (1879); United States v. Coe, 155 U.S. 76, 86 (1894); Balzac v. Porto Rico, 258 U.S. 298, 312-313 (1922). The attempt to understand the seemingly unexplainable was bound to generate "confusion and controversy." This analytic framework, however -- the search for a principled distinction -- has continued to burden the Court.
The first major elaboration on the Canter principle was in Murray's Lessee v. Hoboken Land & Improvement Co., 18 [p107] How. 272 (1856). The plaintiff in that case argued that a proceeding against a customs collector for the collection of moneys claimed to be due to the United States was an exercise of "judicial power," and therefore had to be carried out by Art. III judges. The Court accepted this premise:
It must be admitted that, if the auditing of this account, and the ascertainment of its balance, and the issuing of this process was an exercise of the judicial power of the United States, the proceeding was void; for the officers who performed these acts could exercise no part of that judicial power.
Id. at 275. Having accepted this premise, the Court went on to delineate those matters which could be determined only by an Art. III court, i.e., those matters that fall within the nondelegable "judicial power" of the United States. The Court's response to this was twofold. First, it suggested that there are certain matters which are inherently "judicial":
[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.
Id. at 284. Second, it suggested that there is another class of issues that, depending upon the form in which Congress structures the decisionmaking process, may or may not fall within "the cognizance of the courts of the United States." Ibid. This latter category consisted of the so-called "public rights." Apparently, the idea was that Congress was free to structure the adjudication of "public rights" without regard to Art. III.
Having accepted the plaintiff's premise, it is hard to see how the Court could have taken too seriously its first contention. The Court presented no examples of such issues that are judicial "by nature," and simply failed to acknowledge that Art. I courts already sanctioned by the Court -- e.g., territorial courts -- were deciding such issues all the time. The second point, however, contains implicitly a critical insight; one that, if openly acknowledged would have undermined the entire structure. That insight follows from the Court's earlier [p108] recognition that the term "judicial act" is broad enough to encompass all administrative action involving inquiry into facts and the application of law to those facts. Id. at 280. If administrative action can be characterized as "judicial" in nature, then obviously the Court's subsequent attempt to distinguish administrative from judicial action on the basis of the manner in which Congress structures the decision cannot succeed. There need be no Art. III court involvement in any adjudication of a "public right," which the majority now interprets as any civil matter arising between the Federal Government and a citizen. In that area, whether an issue is to be decided by an Art. III court depends, finally, on congressional intent.
Although Murray's Lessee implicitly undermined Chief Justice Marshall's suggestion that there is a difference in kind between the work of Art. I and that of Art. III courts, it did not contend that the Court must always defer to congressional desire in this regard. The Court considered the plaintiff's contention that removal of the issue from an Art. III court must be justified by "necessity." Although not entirely clear, the Court seems to have accepted this proposition: "[I]t seems to us that the just inference from the entire law is that there was such a necessity for the warrant." Id. at 285. [n9]
The Court in Murray's Lessee was precisely right: whether an issue can be decided by a non-Art. III court does not depend upon the judicial or nonjudicial character of the issue, but on the will of Congress and the reasons Congress offers for not using an Art. III court. This insight, however, was completely disavowed in the next major case to consider [p109] the distinction between Art. I and Art. III courts, Ex parte Bakelite Corp., 279 U.S. 438 (1929), in which the Court concluded that the Court of Customs Appeals was a legislative court. The Court there directly embraced the principle also articulated in Murray's Lessee that Art. I courts may not consider any matter "which inherently or necessarily requires judicial determination," but only such matters as are "susceptible of legislative or executive determination." 279 U.S. at 453. It then went on effectively to bury the critical insight of Murray's Lessee, labeling as "fallacious" any argument that
assumes that whether a court is of one class or the other depends on the intention of Congress, whereas the true test lies in the power under which the court was created and in the jurisdiction conferred.
279 U.S. at 459. [n10]
The distinction between public and private rights as the principle delineating the proper domains of legislative and constitutional courts respectively received its death blow, I had believed, in Crowell v. Benson, 285 U.S. 22 (1932). In that case, the Court approved an administrative scheme for the determination, in the first instance, of maritime employee compensation claims. Although acknowledging the framework set out in Murray's Lessee and Ex parte Bakelite Corp., the Court specifically distinguished the case before it:
The present case does not fall within the categories just described, but is one of private right, that is, of the liability of one individual to another under the law as defined. [n11]
285 U.S. at 51. Nevertheless, the Court approved of the use of an Art. I adjudication mechanism on the new theory that
there is no requirement that, in order to maintain the essential [p110] attributes of the judicial power, all determinations of fact in constitutional courts shall be made by judges.
Ibid. Article I courts could deal not only with public rights, but also, to an extent, with private rights. The Court now established a distinction between questions of fact and law:
[T]he 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. [n12]
Id. at 545.
Whatever sense Crowell may have seemed to give to this subject was exceedingly short-lived. One year later, the Court returned to this subject, abandoning both the public/private and the fact/law distinction and replacing both with a simple literalism. In O'Donoghue v. United States, 289 U.S. 516 (1933), considering the courts of the District of Columbia, and in Williams v. United States, 289 U.S. 553 (1933), considering the Court of Claims, the Court adopted the principle that, if a federal court exercises jurisdiction over cases of the type listed in Art. III, § 2, as falling within the "judicial power of the United States," then that court must be an Art. III court:
The provision of this section of the article is that the "judicial power shall extend" to the cases enumerated, and it logically follows that, where jurisdiction over these cases is conferred upon the courts of the District, the judicial power, since they are capable of receiving it, is ipso facto, vested in such courts as inferior courts of the United States.
O'Donoghue, supra, at 545. [n13] [p111] In order to apply this same principle and yet hold the Court of Claims to be a legislative court, the Court found it necessary in Williams, supra, to conclude that the phrase "Controversies to which the United States shall be a party" in Art. III must be read as if it said "Controversies to which the United States shall be a party plaintiff or petitioner." [n14]
By the time of the Williams decision, this area of the law was mystifying, to say the least. What followed helped very little, if at all. In the next two major cases, the Court could not agree internally on a majority position. In National Insurance Co. v. Tidewater Co., 337 U.S. 582 (1949), the Court upheld a statute giving federal district courts jurisdiction over suits between citizens of the District of Columbia and citizens of a State. A majority of the Court, however, rejected the plurality position that Congress had the authority to assign Art. I powers to Art. III courts, at least outside of the District of Columbia. Only Chief Justice Vinson, in dissent, reflected on the other side of this problem: whether Art. I courts could be assigned Art. III powers. He entirely disagreed with the conceptual basis for Williams and O'Donoghue, noting that, to the extent that Art. I courts consider non-Art. III matters, appellate review by an Art. III court would be precluded. Or conversely, since appellate review is exercised by this Court over Art. I courts, Art. I courts must "exercise federal question jurisdiction." 337 U.S. at 643. Having gone this far, the Chief Justice was confronted with the obvious question of whether, in fact, "the distinction between constitutional and legislative courts is meaningless." Id. at 644. Although suggesting that outside [p112] of the Territories or the District of Columbia, there may be some limits on assignment to Art. I courts of matters that fall within Art. III jurisdiction -- apart from federal question jurisdiction -- for the most part, the Chief Justice ended up relying on the good will of Congress:
[W]e cannot impute to Congress an intent now or in the future to transfer jurisdiction from constitutional to legislative courts for the purpose of emasculating the former.
Ibid.
Another chapter in this somewhat dense history of a constitutional quandary was provided by Justice Harlan's plurality opinion in Glidden Co. v. Zdanok, 370 U.S. 530 (1962), in which the Court, despite Bakelite and Williams -- and relying on an Act of Congress enacted since those decisions -- held the Court of Claims and the Court of Customs and Patent Appeals to be Art. III courts. Justice Harlan continued the process of intellectual repudiation begun by Chief Justice Vinson in Tidewater. First, it was clear to him that Chief Justice Marshall could not have meant what he said in Canter on the inability of Art. I courts to consider issues within the jurisdiction of Art. III courts:
Far from being "incapable of receiving" federal question jurisdiction, the territorial courts have long exercised a jurisdiction commensurate in this regard with that of the regular federal courts, and have been subjected to the appellate jurisdiction of this Court precisely because they do so.
370 U.S. at 546, n. 13. Second, exceptions to the requirements of Art. III, he thought, have not been founded on any principled distinction between Art. I issues and Art. III issues; rather, a "confluence of practical considerations," id. at 547, accounts for this Court's sanctioning of Art. I courts:
The touchstone of decision in all these cases has been the need to exercise the jurisdiction then and there and for a transitory period. Whether constitutional limitations on the exercise of judicial power have been held inapplicable has depended on the particular local setting, the practical necessities, and the possible alternatives.
Id. at 547-548. [p113] Finally, recognizing that there is frequently no way to distinguish between Art. I and Art. III courts on the basis of the work they do, Justice Harlan suggested that the only way to tell them apart is to examine the "establishing legislation" to see if it complies with the requirements of Art. III. This, however, comes dangerously close to saying that Art. III courts are those with Art. III judges; Art. I courts are those without such judges. One hundred and fifty years of constitutional history, in other words, had led to a simple tautology.
IV
The complicated and contradictory history of the issue before us leads me to conclude that Chief Justice Vinson and Justice Harlan reached the correct conclusion: there is no difference in principle between the work that Congress may assign to an Art. I court and that which the Constitution assigns to Art. III courts. Unless we want to overrule a large number of our precedents upholding a variety of Art. I courts -- not to speak of those Art. I courts that go by the contemporary name of "administrative agencies" -- this conclusion is inevitable. It is too late to go back that far; too late to return to the simplicity of the principle pronounced in Art. III and defended so vigorously and persuasively by Hamilton in The Federalist Nos. 78 82.
To say that the Court has failed to articulate a principle by which we can test the constitutionality of a putative Art. I court, or that there is no such abstract principle, is not to say that this Court must always defer to the legislative decision to create Art. I, rather than Art. III, courts. Article III is not to be read out of the Constitution; rather, it should be read as expressing one value that must be balanced against competing constitutional values and legislative responsibilities. This Court retains the final word on how that balance is to be struck.
Despite the principled, although largely mistaken, rhetoric expanded by the Court in this area over the years, such a balancing approach stands behind many of the decisions upholding [p114] Art. I courts. Justice Harlan suggested as much in Glidden, although he needlessly limited his consideration to the "temporary" courts that Congress has had to set up on a variety of occasions. In each of these instances, this Court has implicitly concluded that the legislative interest in creating an adjudicative institution of temporary duration outweighed the values furthered by a strict adherence to Art. III. Besides the territorial courts approved in American Insurance Co. v. Canter, 1 Pet. 511 (1828), these courts have included the Court of Private Land Claims, United States v. Coe, 155 U.S. 76 (1894), the Choctaw and Chickasaw Citizenship Court, Stephens v. Cherokee Nation, 174 U.S. 445 (1899), and consular courts established in foreign countries, In re Ross, 140 U.S. 453 (1891). This same sort of "practical" judgment was voiced, even if not relied upon, in Crowell with respect to the Employees' Compensation Claims Commission, which was not meant to be of limited duration:
[W]e are unable to find any constitutional obstacle to the action of the Congress in availing itself of a method shown by experience to be essential in order to apply its standards to the thousands of cases involved.
285 U.S. at 54. And even in Murray's Lessee, there was a discussion of the "necessity" of Congress' adopting an approach that avoided adjudication in an Art. III court. 18 How. at 285.
This was precisely the approach taken to this problem in Palmore v. United States, 411 U.S. 389 (1973), which, contrary to the suggestion of the plurality, did not rest on any theory of territorial or geographical control. Ante at 75-76. Rather, it rested on an evaluation of the strength of the legislative interest in pursuing in this manner one of its constitutionally assigned responsibilities -- a responsibility not different in kind from numerous other legislative responsibilities. Thus, Palmore referred to the wide variety of Art. I courts, not just territorial courts. It is in this light that the critical statement of the case must be understood: [p115]
[T]he 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.
411 U.S. at 407-408.
I do not suggest that the Court should simply look to the strength of the legislative interest and ask itself if that interest is more compelling than the values furthered by Art. III. The inquiry should, rather, focus equally on those Art. III values and ask whether and to what extent the legislative scheme accommodates them or, conversely, substantially undermines them. The burden on Art. III values should then be measured against the values Congress hopes to serve through the use of Art. I courts.
To be more concrete: Crowell, supra, suggests that the presence of appellate review by an Art. III court will go a long way toward insuring a proper separation of powers. Appellate review of the decisions of legislative courts, like appellate review of state court decisions, provides a firm check on the ability of the political institutions of government to ignore or transgress constitutional limits on their own authority. Obviously, therefore, a scheme of Art. I courts that provides for appellate review by Art. III courts should be substantially less controversial than a legislative attempt entirely to avoid judicial review in a constitutional court.
Similarly, as long as the proposed Art. I courts are designed to deal with issues likely to be of little interest to the political branches, there is less reason to fear that such courts represent a dangerous accumulation of power in one of the political branches of government. Chief Justice Vinson suggested as much when he stated that the Court should guard against any congressional attempt "to transfer jurisdiction [p116] . . . for the purpose of emasculating" constitutional courts. National Insurance Co. v. Tidewater Co., 337 U.S. at 644.
V
I believe that the new bankruptcy courts established by the Bankruptcy Act of 1978, 28 U.S.C. § 1471 (1976 ed., Supp. IV), satisfy this standard.
First, ample provision is made for appellate review by Art. III courts. Appeals may in some circumstances be brought directly to the district courts. 28 U.S.C. § 1334 (1976 ed., Supp. IV). Decisions of the district courts are further appealable to the court of appeals. § 1293. In other circumstances, appeals go first to a panel of bankruptcy judges, § 1482, and then to the court of appeals. § 1293. In still other circumstances -- when the parties agree -- appeals may go directly to the court of appeals. In sum, there is in every instance a right of appeal to at least one Art. III court. Had Congress decided to assign all bankruptcy matters to the state courts, a power it clearly possesses, no greater review in an Art. III court would exist. Although I do not suggest that this analogy means that Congress may establish an Art. I court wherever it could have chosen to rely upon the state courts, it does suggest that the critical function of judicial review is being met in a manner that the Constitution suggests is sufficient.
Second, no one seriously argues that the Bankruptcy Act of 1978 represents an attempt by the political branches of government to aggrandize themselves at the expense of the third branch or an attempt to undermine the authority of constitutional courts in general. Indeed, the congressional perception of a lack of judicial interest in bankruptcy matters was one of the factors that led to the establishment of the bankruptcy courts: Congress feared that this lack of interest would lead to a failure by federal district courts to deal with bankruptcy matters in an expeditious manner. H.R.Rep. No. 95-595, p. 14 (1977). Bankruptcy matters are, for the most part, private adjudications of little political significance. [p117] Although some bankruptcies may indeed present politically controversial circumstances or issues, Congress has far more direct ways to involve itself in such matters than through some sort of subtle, or not so subtle, influence on bankruptcy judges. Furthermore, were such circumstances to arise, the Due Process Clause might very well require that the matter be considered by an Art. III judge: bankruptcy proceedings remain, after all, subject to all of the strictures of that constitutional provision. [n15]
Finally, I have no doubt that the ends that Congress sought to accomplish by creating a system of non-Art. III bankruptcy courts were at least as compelling as the ends found to be satisfactory in Palmore v. United States, 411 U.S. 389 (1973), or the ends that have traditionally justified the creation of legislative courts. The stresses placed upon the old bankruptcy system by the tremendous increase in bankruptcy cases were well documented, and were clearly a matter to which Congress could respond. [n16] I do not believe it is possible to challenge Congress' further determination that it was necessary to create a specialized court to deal with bankruptcy matters. This was the nearly uniform conclusion of all those that testified before Congress on the question of reform of the bankruptcy system, as well as the conclusion of the Commission on Bankruptcy Laws established by Congress in 1970 to explore possible improvements in the system. [n17]
The real question is not whether Congress was justified [p118] in establishing a specialized bankruptcy court, but rather whether it was justified in failing to create a specialized, Art. III bankruptcy court. My own view is that the very fact of extreme specialization may be enough, and certainly has been enough in the past, [n18] to justify the creation of a legislative court. Congress may legitimately consider the effect on the federal judiciary of the addition of several hundred specialized judges: we are, on the whole, a body of generalists. [n19] The addition of several hundred specialists may substantially change, whether for good or bad, the character of the federal bench. Moreover, Congress may have desired to maintain some flexibility in its possible future responses to the general problem of bankruptcy. There is no question that the existence of several hundred bankruptcy judges with life tenure would have severely limited Congress' future options. Furthermore, the number of bankruptcies may fluctuate, producing a substantially reduced need for bankruptcy judges. Congress may have thought that, in that event, a bankruptcy specialist should not, as a general matter, serve as a judge in the countless nonspecialized cases that come before the federal district courts. It would then face the prospect of large numbers of idle federal judges. Finally, Congress may have believed that the change from bankruptcy referees to Art. I judges was far less dramatic, and so less disruptive of the existing bankruptcy and constitutional court systems, than would be a change to Art. III judges.
For all of these reasons, I would defer to the congressional judgment. Accordingly, I dissent.
1. Glidden Co. v. Zdanok, 370 U.S. 530, 534 (1962) (plurality opinion of Harlan, J.).
2. Because this is the sole ground relied upon by the Justices concurring in the judgment, this is the effective basis for today's decision.
3. The plurality attempts to justify its sweeping invalidation of § 1471, because of its inclusion of state law claims, by suggesting that this statutory provision is nonseverable. Ante at 87-88, n. 40. The Justices concurring in the judgment specifically adopt this argument as the reason for their decision to join the judgment of the Court. The basis for the conclusion of nonseverability, however, is nothing more than a presumption:
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.
Ante at 458 U.S. 87"]87, n. 40. Although it is possible, as a historical matter, to find cases of this Court supporting this presumption, see, e.g., William v. Standard Oil Co., 278 U.S. 235, 242 (1929), I had not thought this to be the contemporary approach to the problem of severability, particularly when dealing with federal statutes. I would follow the approach taken by the Court in 87, n. 40. Although it is possible, as a historical matter, to find cases of this Court supporting this presumption, see, e.g., William v. Standard Oil Co., 278 U.S. 235, 242 (1929), I had not thought this to be the contemporary approach to the problem of severability, particularly when dealing with federal statutes. I would follow the approach taken by the Court in Buckley v. Valeo, 424 U.S. 1, 108 (1976):
"Unless it is evident that the Legislature would not have enacted those provisions which are within its power, independently of that which is not, the invalid part may be dropped if what is left is fully operative as a law."
Quoting Champlin Refining Co. v. Corporation Comm'n, 286 U.S. 210, 234 (1932). This presumption seems particularly strong when Congress has already "enacted those provisions which are within its power, independently of that which is not" -- i.e., in the old Bankruptcy Act.
4. Even this is not entirely new. Under the old Act, in certain circumstances, the referee could actually adjudicate and order the payment of a claim of the bankrupt estate against another. In Katchen v. Land, 382 U.S. 323 (1966), for example, we recognized that, when a creditor files a claim, the referee is empowered to hear and decide a counterclaim against that creditor arising out of the same transaction. A similar situation could arise in adjudicating setoffs under former § 68 of the Bankruptcy Act.
The judicial act of allowance or disallowance is one, of course, that is performed by the referee where the proceedings have been generally referred.
3 W. Collier, Bankruptcy ¶ 57.14, p. 229, n. 3 (14th ed.1977).
6. On this point I am in agreement with the Justices concurring in the judgment.
7. The majority does not explain why the constitutional grant of power over the Territories to Congress is sufficient to overcome the strictures of Art. III, but presumably not sufficient to overcome the strictures of the Presentment Clause or other executive limits on congressional authority.
8. Had the plurality cited only the territorial courts, the principle relied on perhaps could have been the fact that power over the Territories is provided Congress in Art. IV. However, Congress' power over the District of Columbia is an Art. I power. As such, it does not seem to have any greater status than any of the other powers enumerated in Art. I, § 8.
9. By stating that "of this necessity congress alone is the judge," 18 How. at 285, the Court added some serious ambiguity to the standard it applied. Because this statement ends the Court's analysis of the merits of the claim, it does not seem to mean that the Court will simply defer to congressional judgment. Rather, it appears to mean that the Court will review the legislative record to determine whether there appeared to Congress to be compelling reasons for not establishing an Art. III court.
10. The Court did not, however, entirely follow this principle, for it stated elsewhere that "there is propriety in mentioning the fact that Congress always has treated [the Court of Claims as an Art. I court]. 279 U.S. at 454.
11. The plurality is clearly wrong in citing Crowell in support of the proposition that matters involving private, as opposed to public, rights may not be considered in a non-Art. III court. Ante at 70.
12. Crowell also suggests that certain facts -- constitutional or jurisdictional -- must also be subject to de novo review in an Art. III court. I agree with the plurality that this aspect of Crowell has been "undermined by later cases," ante at 82, n. 34. As a matter of historical interest, however, I would contend that Crowell's holding with respect to these "facts" turned more on the questions of law that were inseparably tied to them than on some notion of the inadequacy of a non-Art. III factfinder.
13. O'Donoghue does not apply this principle wholly consistently: it still recognizes a territorial court exception to Art. III's requirements. It now bases this exception, however, not on any theoretical difference in principle, but simply on the "transitory character of the territorial governments." 289 U.S. at 536.
14. See P. Bator, P. Mishkin, D. Shapiro, & H. Wechsler, Hart and Wechsler's The Federal Courts and The Federal System 399 (2d ed.1973) (reviewing the problems of the Williams case and characterizing it as an "intellectual disaster").
15. See Crowell v. Benson, 285 U.S. 22, 87 (1932) (Brandeis, J., dissenting) ("If there be any controversy to which the judicial power extends that may not be subjected to the conclusive determination of administrative bodies or federal legislative courts, it is not because of any prohibition against the diminution of the jurisdiction of the federal district courts as such, but because, under the circumstances, the constitutional requirement of due process is a requirement of judicial process").
16. "During the past 30 years, the number of bankruptcy cases filed annually has increased steadily from 10,000 to over 254,000." H.R.Rep. No. 95-595, P. 21 (1977).
17. See H.R. Doc. No. 93-137, pt. 1, pp. 85-96 (1973).
18. Consider, for example, the Court of Customs Appeals involved in Ex parte Bakelite Corp., 279 U.S. 438 (1929), or the variety of specialized administrative agencies that engage in some form of adjudication.
19. In 1977, there were approximately 190 full-time and 30 part-time bankruptcy judges throughout the country. H.R.Rep. No. 95-595, at 9.
