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News Room

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Some district court judges have been referring bankruptcy appeals, withdrawn, and noncore proceedings to magistrate judges.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Bankruptcy appeals, proceedings that are withdrawn from the bankruptcy court and noncore proceedings first heard by a bankruptcy judge should not be referred to magistrate judges.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 Referral to a magistrate judge is also inconsistent with the concept of a withdrawn proceeding or entry of a final order in a noncore proceeding under section 157(c)(1).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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