IMPROVING JURISDICTION AND PROCEDURE
PROPOSAL #7: REFERRAL TO MAGISTRATE JUDGES
Background
Some district court judges have been referring bankruptcy appeals, withdrawn, and noncore
proceedings to magistrate judges.
Former 28 U.S.C. § 1334(c) prohibited referrals of bankruptcy appeals by a district
judge to magistrate judges but the provision was not carried over in the Bankruptcy Amendments
and Federal Judgeship Act of 1984 ("BAFJA"). [ FN: Former section 1334(c) provided: (c) A district
court may not refer an appeal under that section [bankruptcy appeals] to a
magistrate or special master.] Prior to its elimination in 1984, very few
courts utilized section 1334(c). Those that applied section 1334(c) did so according to its terms,
prohibiting district court judges from referring bankruptcy appeals to magistrate judges. [ FN: The only circuit court to address referrals
prohibited under pre-BAFJA section 1334(c) was the 3rd
Circuit in Frank v. Arnold (In re Morrissey), 717 F.2d 100, 102 (3d
Cir.1983).] These courts reasoned that Congress recognized the tenuous
jurisdictional structure of the bankruptcy courts and enacted section 1334(c) to ensure that only
an Article III judge would hear bankruptcy appeals. [
FN: "In enacting this jurisdictional scheme, Congress was aware of the potential
constitutional problems it was creating. . . . Considering this, it would be wholly consistent and
logical for Congress to attempt to minimize the larger jurisdictional concerns regarding
bankruptcy courts by enacting section 1334(c) to insure that only article III judges would review
bankruptcy court decisions. Therefore, we read the unambiguous congressional command
contained in §1334(c) to mean exactly what it says, and we hold that Congress has thereby
prohibited a district court from referring a bankruptcy appeal to a magistrate. " Id. at
103.]
Proposal
Bankruptcy appeals, proceedings that are withdrawn from the bankruptcy court and
noncore proceedings first heard by a bankruptcy judge should not be referred to
magistrate judges. Any proposal to prohibit the referral of bankruptcy appeals to
magistrate judges would be an alternative proposal to the appellate process proposal
adopted by the Commission in July, which eliminates appeal to the district court. But such
referral is not limited to appeals. Referral to a magistrate judge is also inconsistent with
the concept of a withdrawn proceeding or entry of a final order in a noncore proceeding
under section 157(c)(1). If cause exists to withdraw a proceeding from the bankruptcy
judge, the same cause should exist to make subsequent referral to a magistrate judge
inappropriate. As to entry of a final order in a noncore proceeding, it is bad enough for
parties potentially to be subject to two trials, threeborders on the absurd.
Reasons for the Change
The Long Range Plan for the Federal Courts of the Judicial Conference of the United States
noted that "the practice of referring bankruptcy appeals to magistrate judges should be
discontinued. It is questionable both in terms of efficient resource allocation and in its impact on
expeditious resolution of appeals." [ FN:
Long Range Plan for the Federal Courts of the Judicial Conference of the United States 48, n.22
(December 1995).] The Proposal, however, takes this recommendation
further. Even under the appellate proposal adopted by the Commission, the district court may hear
noncore proceedings de novo. The referral bar should apply to such proceedings as well as to
proceedings withdrawn under section 157(d). It seems equally inconsistent with the jurisdictional
and procedural scheme enacted in 1984 to permit a referral of a noncore proceeding to a
magistrate judge. If permitted, the referral scenario would evolve as follows: trial before the
bankruptcy judge who submits proposed findings of fact and conclusions of law to the district
judge; [ FN: 28 U.S.C. §§157(a),
157(c)(1) (1994).] objection(s) to a finding or conclusion by a party;
[ FN: Fed. R. Bankr. P.
9033.] submission to the district judge (who should enter a final order after
reviewing the objection(s)); [ FN: 28 U.S.C.
§157(c)(1) (1994).] referral to a magistrate judge; [ FN: 28 U.S.C. §636
(1994).] if no consent, magistrate judge makes proposed findings and
conclusions for a second time; [ FN: 28 U.S.C.
§636(b)(1)(C) (1994).] entry of final order by district judge after,
presumably, another possibility of de novo review. [
FN: 28 U.S.C. §636(b)(1) (providing that upon submission by the magistrate judge,
"[a] judge of the court shall make a de novo determination of those portions
of the report or specified proposed findings or recommendations to which objection is made.
")]
Competing Considerations
It may be argued that magistrate judges play a critical role in alleviating the docket pressures
of district courts and that bankruptcy appeals and proceedings should not be exempt from that
pressure valve.
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