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In law school, students cope with concepts of subject
matter jurisdiction, personal jurisdiction and stating a cause of action in
civil procedure class. When they move on to bankruptcy class, they must try to
make sense of the constitutionality of delegating jurisdiction to an Article I
court when considering the Marathon Pipeline case. These are not easy
issues to get your head around. Judge Craig Gargotta must have felt like he was
writing a law school exam when faced with motions to dismiss in an adversary
proceeding. Roberts, Trustee v. J. Howard
Bass & Associates, Inc., et al, Adv. No. 10-1101 (Bankr. W.D. Tex.
2/15/11). You can find the opinion here.
James H. Bass filed chapter 7 bankruptcy on June 3, 2009.
The creditors included two judgment creditors holding claims of $5.5 million
(including one that had been found to be non-dischargeable in a prior filing).
Filing bankruptcy proved to be a mistake, since the court denied the debtor's
discharge and the trustee launched an adversary proceeding against nine
Bass-related defendants seeking to recover assets. The defendants sought to make
the adversary proceeding go away with motions to dismiss for failure to state a
cause of action and for lack of jurisdiction. Among their more creative
arguments was that the bankruptcy court lacked jurisdiction to hear the case
because the bankruptcy jurisdiction scheme was unconstitutional.
We Been Working Under a Constitutionally Defective System?
In 1982, the Supreme Court found that Congress had
"impermissibly removed most, if not all, of the 'essential attributes of the
judicial power' from the Article III district court, and has vested those
attributes in a non-Art. III adjunct."
Northern Pipeline Construction Co. v. Marathon Pipeline Co., 458 U.S. 50,
87 (1982) [enhanced version available to lexis.com subscribers / unenhanced version available from lexisONE Free Case Law]. However, the defendants cited other language not actually found in
the opinion for the proposition that "Congress could not vest in a non-Article
III court the power to adjudicate, render final judgment, and issue binding
orders in a traditional contract action arising under state law, without
consent of the litigants, and subject only to ordinary appellate review."
Citing non-existent quotes from the Supreme Court is not a good way to impress
the Bankruptcy Court. The defendants also argued that 28 U.S. C. §157, which
referred bankruptcy matters to the bankruptcy courts was unconstitutional for
the reason that it was an impermissible delegation of power to an Article I
The Court noted that the argument would have had some
merit-if it had been made in 1982.
entire article at A Texas Bankruptcy Lawyer's Blog
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