Respondent, the bankruptcy trustee for a corporation undergoing
Chapter 11 reorganization, filed suit in the District Court against
petitioners, seeking to avoid allegedly fraudulent monetary
transfers to them by the bankrupt corporation's predecessor and to
recover damages, costs, expenses, and interest. The court referred
the proceedings to the Bankruptcy Court. Shortly after the
Colombian Government nationalized petitioner Granfinanciera, S. A.,
petitioners requested a jury trial. The Bankruptcy Judge denied the
request, deeming a suit to recover a fraudulent transfer a "core
action" which, under his understanding of English common law, "was
a nonjury issue." The District Court affirmed the Bankruptcy
Court's judgment for respondent, without discussing petitioners'
jury trial request. The Court of Appeals also affirmed, ruling,
inter alia, that the Seventh Amendment supplied no right
to a jury trial, because fraudulent conveyance actions are
equitable in nature, even when a plaintiff seeks only monetary
relief; because bankruptcy proceedings themselves are inherently
equitable in nature; and because Congress has displaced any right
to a jury trial by designating, in 28 U.S.C. § 157(b)(2)(H),
fraudulent conveyance actions as "core proceedings" triable by
bankruptcy judges sitting without juries.
Held:
1. This Court will not address respondent's contention that the
judgment below should be affirmed as to petitioner Granfinanciera
because it was a commercial instrumentality of the Colombian
Government when it made its request for a jury trial, and was
therefore not entitled to such a trial under the Seventh Amendment
or applicable statutory provisions. This difficult question was
neither raised below nor adequately briefed and argued here, and
this is not an "exceptional case" as to which the Court will
consider arguments not raised below. Moreover, petitioners' claim
is uncontradicted that an affirmance on the ground respondent now
urges would enlarge respondent's rights under the judgment below
and decrease those of Granfinanciera. Pp.
492 U. S.
38-40.
Page 492 U. S. 34
2. Provided that Congress has not permissibly assigned
resolution of the claim to a non-Article III adjudicative body that
does not use a jury as factfinder, the Seventh Amendment entitles a
person who has not submitted a claim against a bankruptcy estate to
a jury trial when sued by the bankruptcy trustee to recover an
allegedly fraudulent monetary transfer. Pp.
492 U. S.
40-49.
(a) Since this Court's decisions, early English cases, and
scholarly authority all demonstrate that respondent would have had
to bring his action at law in 18th-century England, and that a
court of equity would not have adjudicated it, it must be concluded
preliminarily that the action is a "Sui[t] at common law" for which
a jury trial is required by the Seventh Amendment. Pp.
492 U. S.
43-47.
(b) More importantly, the nature of the relief respondent seeks
-- the recovery of money payments of ascertained and definite
amounts -- conclusively demonstrates that his cause of action
should be characterized as legal, rather than equitable, such that
petitioners are
prima facie entitled to a jury trial under
the Amendment.
Schoenthal v. Irving Trust Co.,
287 U. S. 92. Pp.
492 U. S.
47-49.
3. The Seventh Amendment entitles petitioners to their requested
jury trial notwithstanding § 157(b)(2)(H)'s designation of
fraudulent conveyance actions as "core proceedings" which
non-Article III bankruptcy judges may adjudicate. Pp.
492 U. S.
49-65.
(a) Although the Seventh Amendment does not prohibit Congress
from assigning resolution of a statutory claim that is legal in
nature to a non-Article III tribunal that does not use a jury as a
factfinder so long as the claim asserts a "public right," Congress
lacks the power to strip parties who are contesting matters of
private right of their constitutional right to a jury trial.
See, e.g., Atlas Roofing Co. v. Occupational Safety and Health
Review Comm'n, 430 U. S. 442;
Northern Pipeline Construction Co. v. Marathon Pipe Line
Co., 458 U. S. 50. For
these purposes, a "public right" is not limited to a matter arising
between the Government and others, but extends to a seemingly
"private" right that is closely intertwined with a federal
regulatory program that Congress has power to enact.
Thomas v.
Union Carbide Agricultural Products Co., 473 U.
S. 568,
473 U. S. 586,
473 U. S.
593-594. Pp.
492 U. S.
51-55.
(b) A bankruptcy trustee's right to recover a fraudulent
conveyance is more accurately characterized as a private, rather
than a public, right. Although the plurality in
Northern
Pipeline Construction Co., supra, at
458 U. S. 71,
noted that the restructuring of debtor-creditor relations in
bankruptcy may well be a "public right," it also emphasized that
state law causes of action for breach of contract are paradigmatic
private rights, even when asserted by an insolvent corporation in
the midst of Chapter 11 reorganization proceedings. Trustees'
fraudulent conveyance actions
Page 492 U. S. 35
are quintessentially common law suits that more nearly resemble
state law contract claims by a bankrupt corporation to augment the
bankruptcy estate than they do creditors' claims to a
pro
rata share of the bankruptcy
res. This analysis is
confirmed by
Katchen v. Landy, 382 U.
S. 323,
382 U. S.
327-328, which must be read to hold that a creditor's
Seventh Amendment right to a jury trial on a bankruptcy trustee's
preference claim depends upon whether the creditor submitted a
claim against the estate. Since petitioners here have not filed
such claims, respondent's suit is neither part of the claims
adjudication process nor integral to the restructuring of
debtor-creditor relations. Congress therefore cannot divest
petitioners of their Seventh Amendment right merely by relabeling a
preexisting, common law cause of action to which that right
attaches and assigning it to a specialized court of equity,
particularly where there is no evidence that Congress considered
the constitutional implications of its designation of all
fraudulent conveyance actions as core proceedings. Pp.
492 U. S.
55-61.
(c) Permitting jury trials in fraudulent conveyance actions will
not significantly impair the functioning of the legislative scheme.
It cannot seriously be argued that allowing such actions in a
trustee's suit against a person who has not entered a claim against
the estate would "go far to dismantle the statutory scheme," as
that phrase was used in
Atlas Roofing, supra, at
430 U. S. 454,
n. 11, since
Atlas plainly assumed that such claims
carried with them a right to a jury trial. In addition, it cannot
easily be said that a jury would be incompatible with bankruptcy
proceedings, since Congress has expressly provided for jury trials
in certain other actions arising out of bankruptcy litigation. The
claim that juries may serve usefully as checks only on life-tenured
judges' decisions overlooks the potential for juries to exercise
beneficial restraint on the decisions of fixed-term judges, who may
be beholden to Congress or the Executive. Moreover, although
providing jury trials in some fraudulent conveyance actions might
impede swift resolution of bankruptcy proceedings and increase the
expense of Chapter 11 reorganizations, these considerations are
insufficient to overcome the Seventh Amendment's clear command. Pp.
492 U. S.
61-63.
835 F.2d 1341, reversed and remanded.
BRENNAN, J., delivered the opinion of the Court, in which
REHNQUIST, C.J., and MARSHALL, STEVENS, and KENNEDY, JJ., joined,
and in Parts I, II, III, and V, of which SCALIA, J., joined.
SCALIA, J., filed an opinion concurring in part and concurring in
the judgment,
post, p.
492 U. S. 65.
WHITE, J., filed a dissenting opinion,
post, p.
492 U. S. 71.
BLACKMUN, J., filed a dissenting opinion, in which O'CONNOR, J.,
joined,
post, p.
492 U. S.
91.
Page 492 U. S. 36
JUSTICE BRENNAN delivered the opinion of the Court.
The question presented is whether a person who has not submitted
a claim against a bankruptcy estate has a right to a jury trial
when sued by the trustee in bankruptcy to recover an allegedly
fraudulent monetary transfer. We hold that the Seventh Amendment
entitles such a person to a trial by jury, notwithstanding
Congress' designation of fraudulent conveyance actions as "core
proceedings" in 28 U.S.C. § 157(b)(2)(H) (1982 ed., Supp. V).
I
The Chase & Sanborn Corporation filed a petition for
reorganization under Chapter 11 of the Bankruptcy Code in 1983. A
plan of reorganization approved by the United States Bankruptcy
Court for the Southern District of Florida vested in respondent
Nordberg, the trustee in bankruptcy, causes of action for
fraudulent conveyances. App. to Pet. for Cert. 37. In 1985,
respondent filed suit against petitioners Granfinanciera, S. A.,
and Medex, Ltd., in the United States District Court for the
Southern District of Florida. The complaint alleged that
petitioners had received $1.7 million from Chase & Sanborn's
corporate predecessor within one year of the date its bankruptcy
petition was filed, without receiving consideration or reasonably
equivalent value in return.
Id. at 39-40. Respondent
sought to avoid what it alleged were constructively and actually
fraudulent transfers and to recover damages, costs, expenses, and
interest under 11 U.S.C. §§ 548(a)(1) and (a)(2), 550(a)(1) (1982
ed. and Supp. V). App. to Pet. for Cert. 41.
The District Court referred the proceedings to the Bankruptcy
Court. Over five months later, and shortly before the Colombian
Government nationalized Granfinanciera, respondent
Page 492 U. S. 37
served a summons on petitioners in Bogota, Colombia. In their
answer to the complaint following Granfinanciera's nationalization,
both petitioners requested a "trial by jury on all issues so
triable." App. 7. The Bankruptcy Judge denied petitioners' request
for a jury trial, deeming a suit to recover a fraudulent transfer
"a core action that originally, under the English common law, as I
understand it, was a nonjury issue." App. to Pet. for Cert. 34.
Following a bench trial, the court dismissed with prejudice
respondent's actual fraud claim, but entered judgment for
respondent on the constructive fraud claim in the amount of
$1,500,000 against Granfinanciera and $180,000 against Medex.
Id. at 24-30. The District Court affirmed without
discussing petitioners' claim that they were entitled to a jury
trial.
Id. at 18-23.
The Court of Appeals for the Eleventh Circuit also affirmed. 835
F.2d 1341 (1988). The court found that petitioners lacked a
statutory right to a jury trial, because the constructive fraud
provision under which suit was brought -- 11 U.S.C. § 548(a)(2)
(1982 ed., Supp. V) -- contains no mention of a right to a jury
trial, and 28 U.S.C. § 1411 (1982 ed., Supp. V) "affords jury
trials only in personal injury or wrongful death suits." 835 F.2d
at 1348. The Court of Appeals further ruled that the Seventh
Amendment supplied no right to a jury trial, because actions to
recover fraudulent conveyances are equitable in nature, even when a
plaintiff seeks only monetary relief,
id. at 1348-1349,
and because "bankruptcy itself is equitable in nature, and thus
bankruptcy proceedings are inherently equitable."
Id. at
1349. The court read our opinion in
Katchen v. Landy,
382 U. S. 323
(1966), to say that "Congress may convert a creditor's legal right
into an equitable claim and displace any seventh amendment right to
trial by jury," and held that Congress had done so by designating
fraudulent conveyance actions "core proceedings" triable by
bankruptcy judges sitting without juries. 835 F.2d at 1349.
Page 492 U. S. 38
We granted certiorari to decide whether petitioners were
entitled to a jury trial, 486 U.S. 1054 (1988), and now
reverse.
II
Before considering petitioners' claim to a jury trial, we must
confront a preliminary argument. Respondent contends that the
judgment below should be affirmed with respect to Granfinanciera --
though not Medex -- because Granfinanciera was a commercial
instrumentality of the Colombian Government when it made its
request for a jury trial. Respondent argues that the Seventh
Amendment preserves only those jury trial rights recognized in
England at common law in the late 18th century, and that foreign
sovereigns and their instrumentalities were immune from suit at
common law. Suits against foreign sovereigns are only possible,
respondent asserts, in accordance with the Foreign Sovereign
Immunities Act of 1976 (FSIA), 28 U.S.C. §§ 1330, 1602-1611, and
respondent reads § 1330(a) [
Footnote 1] to prohibit trial by jury of a case against a
foreign state. Respondent concludes that Granfinanciera has no
right to a jury trial, regardless of the merits of Medex' Seventh
Amendment claim.
We decline to address this argument, because respondent failed
to raise it below and because the question it poses has not been
adequately briefed and argued. Without cross-petitioning for
certiorari, a prevailing party may, of course,
"defend its judgment on any ground properly raised below,
whether or not that ground was relied upon, rejected, or even
considered by the District Court or the Court of Appeals,"
Washington v. Yakima Indian
Nation, 439 U. S. 463,
Page 492 U. S. 39
476, n. 20 (1979), provided that an affirmance on the
alternative ground would neither expand nor contract the rights of
either party established by the judgment below.
See, e.g., Blum
v. Bacon, 457 U. S. 132,
457 U. S. 137,
n. 5 (1982);
United States v. New York Telephone Co.,
434 U. S. 159,
434 U. S. 166,
n. 8 (1977). Respondent's present defense of the judgment, however,
is not one he advanced below. [
Footnote 2] Although "we could consider grounds supporting
[the] judgment different from those on which the Court of Appeals
rested its decision," "where the ground presented here has not been
raised below, we exercise this authority
only in exceptional
cases.'" Heckler v. Campbell, 461 U.
S. 458, 461 U. S.
468-469, n. 12 (1983), quoting McGoldrick v.
Compagnie Generale Transatlantique, 309 U.
S. 430, 309 U. S. 434
(1940).
This is not such an exceptional case. Not only do we lack
guidance from the District Court or the Court of Appeals on this
issue, but difficult questions remain whether a jury trial is
available to a foreign state upon request under 28 U.S.C. § 1330
and, if not, under what circumstances a business enterprise that
has since become an arm of a foreign state may be entitled to a
jury trial.
Compare Gould, Inc. v. Pechiney
Page 492 U. S. 40
Ugine Kuhlmann, 853 F.2d 445, 450 (CA6 1988)
(jurisdiction under 28 U.S.C. § 1330 determined by party's status
when act complained of occurred);
Morgan Guaranty Trust Co. of
N.Y. v. Republic of Palau, 639 F.
Supp. 706, 712-716 (SDNY 1986) (status at time complaint was
filed is decisive for § 1330 jurisdiction),
with Callejo v.
Bancomer, S. A., 764 F.2d 1101, 1106-1107 (CA5 1985) (FSIA
applies even though bank was nationalized after suit was filed);
Wolf v. Banco Nacional de Mexico, S. A., 739 F.2d 1458,
1460 (CA9 1984) (same),
cert. denied, 469 U.S. 1108
(1985). Moreover, petitioners alleged in their reply brief, without
contradiction by respondent at oral argument, that affirmance on
the ground that respondent now urges would "unquestionably enlarge
the respondent's rights under the circuit court's decision and
concomitantly decrease those of the petitioner" by "open[ing] up
new areas of discovery in aid of execution" and by allowing
respondent, for the first time, to recover any judgment he wins
against Granfinanciera from Colombia's central banking
institutions, and possibly those of other Colombian governmental
instrumentalities. Reply Brief for Petitioners 19. Whatever the
merits of these claims, their plausibility, coupled with
respondent's failure to offer rebuttal, furnishes an additional
reason not to consider respondent's novel argument in support of
the judgment at this late stage in the litigation. We therefore
leave for another day the questions respondent's argument raises
under the FSIA.
III
Petitioners rest their claim to a jury trial on the Seventh
Amendment alone. [
Footnote 3]
The Seventh Amendment provides: "In
Page 492 U. S. 41
Suits at common law, where the value in controversy shall exceed
twenty dollars, the right of trial by jury shall be preserved. . .
."
We have consistently interpreted the phrase "Suits at common
law" to refer to
"suits in which
legal rights were to be ascertained and
determined, in contradistinction to those where equitable rights
alone were recognized, and equitable remedies were
administered."
Parsons v.
Bedford, 3 Pet. 433,
28 U. S. 447
(1830). Although "the thrust of the
Page 492 U. S. 42
Amendment was to preserve the right to jury trial as it existed
in 1791," the Seventh Amendment also applies to actions brought to
enforce statutory rights that are analogous to common law causes of
action ordinarily decided in English law courts in the late 18th
century, as opposed to those customarily heard by courts of equity
or admiralty.
Curtis v. Loether, 415 U.
S. 189,
415 U. S. 193
(1974).
The form of our analysis is familiar.
"First, we compare the statutory action to 18th-century actions
brought in the courts of England prior to the merger of the courts
of law and equity. Second, we examine the remedy sought and
determine whether it is legal or equitable in nature."
Tull v. United States, 481 U.
S. 412,
481 U. S.
417-418 (1987) (citations omitted). The second stage of
this analysis is more important than the first.
Id. at
481 U. S. 421.
If, on balance, these two factors indicate that a party is entitled
to a jury trial under the Seventh Amendment, we must decide whether
Congress may assign and has assigned resolution of the relevant
claim to a non-Article III adjudicative body that does not use a
jury as factfinder. [
Footnote
4]
Page 492 U. S. 43
A
There is no dispute that actions to recover preferential or
fraudulent transfers were often brought at law in late 18th-century
England. As we noted in
Schoenthal v. Irving Trust Co.,
287 U. S. 92,
287 U. S. 94
(1932) (footnote omitted):
"In England, long prior to the enactment of our first Judiciary
Act, common law actions of trover and money had and received were
resorted to for the recovery of preferential payments by
bankrupts."
See, e.g., Smith v. Payne, 6 T.R. 152, 101 Eng.Rep. 484
(K.B. 1795) (trover);
Barnes v. Freeland, 6 T.R. 80, 101
Eng.Rep. 447 (K.B. 1794) (trover);
Smith v. Hodson, 4 T.R.
211, 100 Eng.Rep. 979 (K.B. 1791) (assumpsit; goods sold and
delivered);
Vernon v. Hanson, 2 T.R. 287, 100 Eng.Rep. 156
(K.B. 1788) (assumpsit; money had and received);
Thompson v.
Freeman, 1 T.R. 155, 99 Eng.Rep. 1026 (K.B. 1786) (trover);
Rust v. Cooper, 2 Cowp. 629, 98 Eng.Rep. 1277 (K.B. 1777)
(trover);
Harman v. Fishar, 1 Cowp. 117, 98 Eng.Rep. 998
(K.B. 1774) (trover);
Martin v. Pewtress, 4 Burr. 2477, 98
Eng.Rep. 299 (K.B. 1769) (trover);
Alderson v. Temple, 4
Burr. 2235, 98 Eng.Rep. 165 (K.B. 1768) (trover). These actions,
like all suits at law, were conducted before juries.
Respondent does not challenge this proposition or even contend
that actions to recover fraudulent conveyances or preferential
transfers were more than occasionally tried in courts of equity. He
asserts only that courts of equity had concurrent jurisdiction with
courts of law over fraudulent conveyance actions. Brief for
Respondent 37-38. While respondent's assertion that courts of
equity sometimes provided relief in fraudulent conveyance actions
is true, however, it hardly suffices to undermine petitioners'
submission that the present action for
monetary relief
would not have sounded in equity 200 years ago in England. In
Parsons v. Bedford, supra, at
28 U. S. 447
(emphasis added), we contrasted suits at law with "those where
equitable rights
alone were recognized" in holding that
the Seventh Amendment right to a jury
Page 492 U. S. 44
trial applies to all but the latter actions. Respondent adduces
no authority to buttress the claim that suits to recover an
allegedly fraudulent transfer of money, of the sort that he has
brought, were typically, or indeed ever, entertained by English
courts of equity when the Seventh Amendment was adopted. In fact,
prior decisions of this Court,
see, e.g., Buzard v.
Houston, 119 U. S. 347,
119 U. S.
352-353 (1886), and scholarly authority compel the
contrary conclusion:
"[W]hether the trustee's suit should be at law or in equity is
to be judged by the same standards that are applied to any other
owner of property which is wrongfully withheld. If the subject
matter is a chattel, and is still in the grantee's possession, an
action in trover or replevin would be the trustee's remedy; and if
the fraudulent transfer was of cash, the trustee's action would be
for money had and received. Such actions at law are as available to
the trustee today as they were in the English courts of long ago.
If, on the other hand, the subject matter is land or an intangible,
or the trustee needs equitable aid for an accounting or the like,
he may invoke the equitable process, and that also is beyond
dispute."
1 G. Glenn, Fraudulent Conveyances and Preferences § 98, pp.
183-184 (rev. ed. 1940).
The two cases respondent discusses confirm this account of
English practice.
Ex parte Scudamore, 3 Ves. jun. 85, 30
Eng.Rep. 907 (Ch. 1796), involved the debtor's assignment of his
share of a law partnership's receivables to repay a debt shortly
before the debtor was declared bankrupt. Other creditors petitioned
chancery for an order directing the debtor's law partner to hand
over for general distribution among creditors the debtor's current
and future shares of the partnership's receivables, which he held
in trust for the assignee. The Chancellor refused to do so, finding
the proposal inequitable. Instead, he directed the creditors to
bring an action at law against the assignee if they thought
themselves entitled
Page 492 U. S. 45
to relief. Although this case demonstrates that fraudulent
conveyance actions could be brought in equity, it does not show
that suits to recover a definite sum of money would be decided by a
court of equity when a petitioner did not seek distinctively
equitable remedies. The creditors in
Ex parte Scudamore
asked the Chancellor to provide injunctive relief by ordering the
debtor's former law partner to convey to them the debtor's share of
the partnership's receivables that came into his possession in the
future, along with receivables he then held in trust for the
debtor. To the extent that they asked the court to order
relinquishment of a specific preferential transfer, rather than
ongoing equitable relief, the Chancellor dismissed their suit and
noted that the proper means of recovery would be an action at law
against the transferee. Respondent's own cause of action is of
precisely that sort.
Hobbs v. Hull, 1 Cox 445, 29 Eng.Rep. 1242 (Ch.1788),
also fails to advance respondent's case. The assignees in
bankruptcy there sued to set aside an alleged fraudulent conveyance
of real estate in trust by a husband to his wife, in return for her
relinquishment of a cause of action in divorce upon discovering his
adultery. The court dismissed the suit, finding that the transfer
was not fraudulent, and allowed the assignees to bring an ejectment
or other legal action in the law courts. The salient point is that
the bankruptcy assignees sought the traditional equitable remedy of
setting aside a conveyance of land in trust, rather than the
recovery of money or goods, and that the court refused to decide
their legal claim to ejectment once it had ruled that no equitable
remedy would lie. The court's sweeping statement that
"Courts of Equity have most certainly been in the habit of
exercising a concurrent jurisdiction with the Courts of Law on the
statutes of Elizabeth respecting fraudulent conveyances,"
id. at 445-446, 30 Eng.Rep., at 1242, is not supported
by reference to any cases that sought the recovery of a fixed sum
of money without the need for an accounting or
Page 492 U. S. 46
other equitable relief. Nor has respondent repaired this
deficit. [
Footnote 5] We
therefore conclude that respondent would have had to bring his
action to recover an alleged fraudulent conveyance
Page 492 U. S. 47
of a determinate sum of money at law in 18th-century England,
and that a court of equity would not have adjudicated it. [
Footnote 6]
B
The nature of the relief respondent seeks strongly supports our
preliminary finding that the right he invokes should be denominated
legal, rather than equitable. Our decisions establish beyond
peradventure that,
"[i]n cases of fraud or mistake, as under any other head of
chancery jurisdiction, a court of the United States will not
sustain a bill in equity to obtain only a decree for the payment of
money by way of
Page 492 U. S. 48
damages, when the like amount can be recovered at law in an
action sounding in tort or for money had and received."
Buzard v. Houston, 119 U.S. at
119 U. S. 352,
citing
Parkersburg v. Brown, 106 U.
S. 487,
106 U. S. 500
(1883);
Ambler v. Choteau, 107 U.
S. 586 (1883);
Litchfield v. Ballou,
114 U. S. 190
(1885).
See also Atlas Roofing Co. v. Occupational Safety and
Health Review Comm'n, 430 U. S. 442,
430 U. S. 454,
n. 11 (1977) ("the otherwise legal issues of voidable
preferences");
Pernell v. Southall Realty, 416 U.
S. 363,
416 U. S. 370
(1974) ("'[W]here an action is simply for the recovery . . . of a
money judgment, the action is one at law"'), quoting
Whitehead
v. Shattuck, 138 U. S. 146,
138 U. S. 151
(1891);
Dairy Queen, Inc. v. Wood, 369 U.
S. 469,
369 U. S. 476
(1962) ("Petitioner's contention . . . is that insofar as the
complaint requests a money judgment it presents a claim which is
unquestionably legal. We agree with that contention");
Gaines
v. Miller, 111 U. S. 395,
111 U. S.
397-398 (1884) ("Whenever one person has in his hands
money equitably belonging to another, that other person may recover
it by assumpsit for money had and received. The remedy at law is
adequate and complete") (citations omitted).
Indeed, in our view,
Schoenthal v. Irving Trust Co.,
287 U. S. 92
(1932), removes all doubt that respondent's cause of action should
be characterized as legal, rather than as equitable. In
Schoenthal, the trustee in bankruptcy sued in equity to
recover alleged preferential payments, claiming that it had no
adequate remedy at law. As in this case, the recipients of the
payments apparently did not file claims against the bankruptcy
estate. The Court held that the suit had to proceed at law instead,
because the long-settled rule that suits in equity will not be
sustained where a complete remedy exists at law, then codified at
28 U.S.C. § 384, "serves to guard the right of trial by jury
preserved by the Seventh Amendment, and to that end it should be
liberally construed." 287 U.S. at
287 U. S. 94.
The Court found that the trustee's suit -- indistinguishable from
respondent's suit in all relevant respects -- could not go forward
in equity because an adequate remedy
Page 492 U. S. 49
was available at law. There, as here, "[t]he preferences sued
for were money payments of ascertained and definite amounts," and
"[t]he bill discloses no facts that call for an accounting or other
equitable relief."
Id. at
287 U. S. 95.
Respondent's fraudulent conveyance action plainly seeks relief
traditionally provided by law courts or on the law side of courts
having both legal and equitable dockets. [
Footnote 7] Unless Congress may and has permissibly
withdrawn jurisdiction over that action by courts of law and
assigned it exclusively to non-Article III tribunals sitting
without juries, the Seventh Amendment guarantees petitioners a jury
trial upon request.
IV
Prior to passage of the Bankruptcy Reform Act of 1978, Pub.L.
95-598, 92 Stat. 2549 (1978 Act), "[s]uits to recover preferences
constitute[d] no part of the proceedings in bankruptcy."
Page 492 U. S. 50
Schoenthal v. Irving Trust Co., supra, at
287 U. S. 94-95.
Although related to bankruptcy proceedings, fraudulent conveyance
and preference actions brought by a trustee in bankruptcy were
deemed separate, plenary suits to which the Seventh Amendment
applied. While the 1978 Act brought those actions within the
jurisdiction of the bankruptcy courts, it preserved parties' rights
to trial by jury as they existed prior to the effective date of the
1978 Act. 28 U.S.C. § 1480(a) (repealed). The 1984 Amendments,
however, designated fraudulent conveyance actions "core
proceedings," 28 U.S.C. § 157(b)(2)(H) (1982 ed., Supp. V), which
bankruptcy judges may adjudicate and in which they may issue final
judgments,§ 157(b)(1), if a district court has referred the matter
to them, § 157(a). We are not obliged to decide today whether
bankruptcy courts may conduct jury trials in fraudulent conveyance
suits brought by a trustee against a person who has not entered a
claim against the estate, either in the rare procedural posture of
this case,
see supra at
492 U. S. 41, n.
3, or under the current statutory scheme,
see 28 U.S.C. §
1411 (1982 ed., Supp. V). Nor need we decide whether, if Congress
has authorized bankruptcy courts to hold jury trials in such
actions, that authorization comports with Article III when
non-Article III judges preside over the actions subject to review
in, or withdrawal by, the district courts. We also need not
consider whether jury trials conducted by a bankruptcy court would
satisfy the Seventh Amendment's command that
"no fact tried by a jury, shall be otherwise reexamined in any
Court of the United States, than according to the rules of the
common law,"
given that district courts may presently set aside clearly
erroneous factual findings by bankruptcy courts. Bkrtcy.Rule 8013.
The sole issue before us is whether the Seventh Amendment confers
on petitioners a right to a jury trial in the face of Congress'
decision to allow a non-Article III tribunal to adjudicate the
claims against them.
Page 492 U. S. 51
A
In
Atlas Roofing, we noted that,
"when Congress creates new statutory 'public rights,' it may
assign their adjudication to an administrative agency with which a
jury trial would be incompatible, without violating the Seventh
Amendment's injunction that jury trial is to be 'preserved' in
'suits at common law.'"
430 U.S. at
430 U. S. 455
(footnote omitted). We emphasized, however, that Congress' power to
block application of the Seventh Amendment to a cause of action has
limits. Congress may only deny trials by jury in actions at law, we
said, in cases where "public rights" are litigated:
"Our prior cases support administrative factfinding in only
those situations involving 'public rights,'
e.g., where
the Government is involved in its sovereign capacity under an
otherwise valid statute creating enforceable public rights. Wholly
private tort, contract, and property cases, as well as a vast range
of other cases, are not at all implicated."
Id. at
430 U. S. 458.
[
Footnote 8]
We adhere to that general teaching. As we said in
Atlas
Roofing:
"'On the common law side of the federal courts, the aid of
juries is not only deemed appropriate but is required by the
Constitution itself.'"
Id. at
430 U. S. 450,
n. 7, quoting
Crowell v. Benson, 285 U. S.
22,
285 U. S. 51
(1932). Congress may devise novel causes of action involving public
rights free from the strictures of the Seventh Amendment if it
assigns their adjudication to tribunals without statutory authority
to employ juries as factfinders. [
Footnote 9] But it lacks the power to strip parties
Page 492 U. S. 52
contesting matters of private right of their constitutional
right to a trial by jury. As we recognized in
Atlas
Roofing, to hold otherwise would be to permit Congress to
eviscerate the Seventh Amendment's guarantee by assigning to
administrative agencies or courts of equity all causes of action
not grounded in state law, whether they originate in a newly
fashioned regulatory scheme or possess a long line of common law
forebears. 430 U.S. at
430 U. S.
457-458. The Constitution nowhere grants Congress such
puissant authority. "[L]egal claims are not magically converted
into equitable issues by their presentation to a court of equity,"
Ross v. Bernhard, 396 U. S. 531,
396 U. S. 538
(1970), nor can Congress conjure away the Seventh Amendment by
mandating that traditional legal claims be brought there or taken
to an administrative tribunal.
In certain situations, of course, Congress may fashion causes of
action that are closely analogous to common law claims and place
them beyond the ambit of the Seventh Amendment by assigning their
resolution to a forum in which jury trials are unavailable.
See, e.g., Atlas Roofing, supra, at
430 U. S.
450-461 (workplace safety regulations);
Block v.
Hirsh, 256 U. S. 135,
256 U. S. 158
(1921) (temporary emergency regulation of rental real estate).
See also Pernell v. Southall Realty, 416 U.S. at
416 U. S.
382-383 (discussing cases);
Murray's
Lessee v. Hoboken Land and Improvement Co., 18 How.
272,
59 U. S. 284
(1856) (Congress "may or may not bring within the cognizance of the
courts of the United States, as it may deem proper," matters
involving public rights). Congress' power to do so is limited,
however, just as its power to place adjudicative authority in
non-Article III tribunals is circumscribed.
See Thomas
v.
Page 492 U. S. 53
Union Carbide Agricultural Products Co., 473 U.
S. 568,
473 U. S. 589,
473 U. S.
593-594 (1985);
id. at
473 U. S.
598-600 (BRENNAN, J., concurring in judgment);
Northern Pipeline Construction Co. v. Marathon Pipe Line
Co., 458 U. S. 50,
458 U. S. 73-76
(1982) (opinion of BRENNAN, J.);
id. at
458 U. S. 91
(REHNQUIST, J., concurring in judgment). Unless a legal cause of
action involves "public rights," Congress may not deprive parties
litigating over such a right of the Seventh Amendment's guarantee
to a jury trial.
In
Atlas Roofing, supra, at
430 U. S. 458,
we noted that Congress may effectively supplant a common law cause
of action carrying with it a right to a jury trial with a statutory
cause of action shorn of a jury trial right if that statutory cause
of action inheres, in or lies against, the Federal Government in
its sovereign capacity. Our case law makes plain, however, that the
class of "public rights" whose adjudication Congress may assign to
administrative agencies or courts of equity sitting without juries
is more expansive than Atlas Roofing's discussion suggests. Indeed,
our decisions point to the conclusion that, if a statutory cause of
action is legal in nature, the question whether the Seventh
Amendment permits Congress to assign its adjudication to a tribunal
that does not employ juries as factfinders requires the same answer
as the question whether Article III allows Congress to assign
adjudication of that cause of action to a non-Article III tribunal:
For if a statutory cause of action, such as respondent's right to
recover a fraudulent conveyance under 11 U.S.C. § 548(a)(2), is not
a "public right" for Article III purposes, then Congress may not
assign its adjudication to a specialized non-Article III court
lacking "the essential attributes of the judicial power."
Crowell v. Benson, supra, at
285 U. S. 51.
And if the action must be tried under the auspices of an Article
III court, then the Seventh Amendment affords the parties a right
to a jury trial whenever the cause of action is legal in nature.
Conversely, if Congress may assign the adjudication of a statutory
cause of action to a non-Article III tribunal, then the
Page 492 U. S. 54
Seventh Amendment poses no independent bar to the adjudication
of that action by a nonjury factfinder.
See, e.g., Atlas
Roofing, supra, at
458 U. S.
453-455,
458 U. S. 460;
Pernell v. Southall Realty, supra, at
416 U. S. 383;
Block v. Hirsh, supra, at
256 U. S. 158.
In addition to our Seventh Amendment precedents, we therefore rely
on our decisions exploring the restrictions Article III places on
Congress' choice of adjudicative bodies to resolve disputes over
statutory rights to determine whether petitioners are entitled to a
jury trial.
In our most recent discussion of the "public rights" doctrine as
it bears on Congress' power to commit adjudication of a statutory
cause of action to a non-Article III tribunal, we rejected the view
that "a matter of public rights must at a minimum arise
between
the government and others.'" Northern Pipeline Construction
Co., supra, at 458 U. S. 69
(opinion of BRENNAN, J.), quoting Ex parte Bakelite Corp.,
279 U. S. 438,
279 U. S. 451
(1929). We held, instead, that the Federal Government need not be a
party for a case to revolve around "public rights." Thomas v.
Union Carbide Agricultural Products Co., 473 U.S. at
473 U. S. 586;
id. at 473 U. S.
596-599 (BRENNAN, J., concurring in judgment). The
crucial question, in cases not involving the Federal Government, is
whether
"Congress, acting for a valid legislative purpose pursuant to
its constitutional powers under Article I, [has] create[d] a
seemingly 'private' right that is so closely integrated into a
public regulatory scheme as to be a matter appropriate for agency
resolution with limited involvement by the Article III
judiciary."
Id. at
473 U. S.
593-594.
See id. at
473 U. S. 600
(BRENNAN, J., concurring in judgment) (challenged provision
involves public rights because "the dispute arises in the context
of a federal regulatory scheme that virtually occupies the field").
If a statutory right is not closely intertwined with a federal
regulatory program Congress has power to enact, and if that right
neither belongs to nor exists against the Federal Government,
Page 492 U. S. 55
then it must be adjudicated by an Article III court. [
Footnote 10] If the right is legal
in nature, then it carries with it the Seventh Amendment's
guarantee of a jury trial.
B
Although the issue admits of some debate, a bankruptcy trustee's
right to recover a fraudulent conveyance under 11 U.S.C. §
548(a)(2) seems to us more accurately characterized as a private,
rather than a public, right as we have used those terms in our
Article III decisions. In
Northern Pipeline Construction
Co., 458 U.S. at
458 U. S. 71,
the plurality noted
Page 492 U. S. 56
that the restructuring of debtor-creditor relations in
bankruptcy "may well be a
public right.'" [Footnote 11] But the plurality also emphasized
that state law causes of action for breach of contract or warranty
are paradigmatic private rights, even when asserted by an insolvent
corporation in the midst of Chapter 11 reorganization proceedings.
The plurality further said that "matters from their nature subject
to `a suit at common law or in equity or admiralty'" lie at the
"protected core" of Article III judicial power, id. at
458 U. S. 71, n.
25; see id. at 458 U. S. 90
(REHNQUIST, J., concurring in judgment) -- a point we reaffirmed in
Thomas, supra, at
473 U. S. 587. There can be little doubt that fraudulent
conveyance actions by bankruptcy trustees -- suits which, we said
in Schoenthal v. Irving Trust Co., 287 U.S. at
287 U. S. 94-95
(citation omitted), "constitute no part of the proceedings in
bankruptcy, but concern controversies arising out of it" -- are
quintessentially suits at common law that more nearly resemble
state law contract claims brought by a bankrupt corporation to
augment the bankruptcy estate than they do creditors'
hierarchically ordered claims to a pro rata share of the
bankruptcy res. See Gibson 1022-1025. They
therefore appear matters of private, rather than public, right.
[Footnote 12]
Page 492 U. S. 57
Our decision in
Katchen v. Landy, 382 U.
S. 323 (1966), under the Seventh Amendment, rather than
Article III, confirms this analysis. Petitioner, an officer of a
bankrupt corporation, made payments from corporate funds within
four months of bankruptcy on corporate notes on which he was an
accommodation maker. When petitioner later filed claims against the
bankruptcy estate, the trustee counterclaimed, arguing that the
payments petitioner made constituted voidable preferences because
they reduced his potential personal liability on the notes. We held
that the bankruptcy court had jurisdiction to order petitioner to
surrender the preferences, and that it could rule on the trustee's
claim without according petitioner a jury trial. Our holding did
not depend, however, on the fact that "[bankruptcy] courts are
essentially courts of equity" because "they characteristically
proceed in summary fashion to deal with the assets of the bankrupt
they are administering."
Id. at
382 U. S. 327.
Notwithstanding the fact that bankruptcy courts
"characteristically" supervised summary proceedings, they were
statutorily invested with jurisdiction at law as well, and could
also oversee plenary proceedings.
See Atlas Roofing, 430
U.S. at
430 U. S. 454,
n. 11 (
Katchen rested "on the ground that a bankruptcy
court,
exercising its summary jurisdiction, was a
specialized court of equity") (emphasis added);
Pepper v.
Litton, 308 U. S. 295,
308 U. S. 304
(1939) ("
[F]or many purposes, courts of bankruptcy are
essentially courts of equity'") (emphasis added). Our decision
turned, rather, on the bankruptcy court's having "actual or
constructive possession" of the bankruptcy estate, 382 U.S. at
382 U. S. 327,
and its power and obligation to consider objections by the trustee
in deciding whether to allow claims against the estate.
Id. at 382 U. S.
329-331. Citing Schoenthal v. Irving Trust Co.,
supra, approvingly, we expressly stated that, if petitioner
had not submitted a claim to the bankruptcy court, the trustee
could have recovered the preference only by a plenary action, and
that petitioner would have
Page 492 U. S. 58
been entitled to a jury trial if the trustee had brought a
plenary action in federal court.
See 382 U.S. at
382 U. S.
327-328. We could not have made plainer that our holding
in
Schoenthal retained its vitality:
"[A]lthough petitioner might be entitled to a jury trial on the
issue of preference if he presented no claim in the bankruptcy
proceeding and awaited a federal plenary action by the trustee,
Schoenthal v. Irving Trust Co., 287 U. S.
92, when the same issue arises as part of the process of
allowance and disallowance of claims, it is triable in equity."
Id. at
382 U. S. 336.
[
Footnote 13]
Unlike JUSTICE WHITE,
see post at
492 U. S. 72-75,
492 U. S. 78, we
do not view the Court's conclusion in
Katchen as resting
on an accident of statutory history. We read
Schoenthal
and
Katchen as holding that, under the Seventh Amendment,
a creditor's right to a jury trial on a bankruptcy trustee's
preference claim depends upon whether the creditor has submitted a
claim against the estate, not upon Congress' precise definition of
the "bankruptcy estate" or upon whether Congress chanced to deny
jury trials to creditors who have not filed claims and who are sued
by a trustee to recover an alleged preference. Because petitioners
here, like the petitioner in
Schoenthal, have not filed
claims against the estate, respondent's fraudulent conveyance
action does not arise "as part of the process of allowance and
disallowance of claims." Nor is that action integral to the
restructuring of debtor-creditor relations. Congress therefore
cannot divest petitioners of
Page 492 U. S. 59
their Seventh Amendment right to a trial by jury.
Katchen thus supports the result we reach today; it
certainly does not compel its opposite. [
Footnote 14]
Page 492 U. S. 60
The 1978 Act abolished the statutory distinction between plenary
and summary bankruptcy proceedings, on which the Court relied in
Schoenthal and
Katchen. Although the 1978 Act
preserved parties' rights to jury trials as they existed prior to
the day it took effect, 28 U.S.C. § 1480(a) (repealed), in the 1984
Amendments, Congress drew a new distinction between "core" and
"non-core" proceedings, and classified fraudulent conveyance
actions as core proceedings triable by bankruptcy judges. 28 U.S.C.
§ 157(b)(2)(H) (1982 ed., Supp. V). Whether 28 U.S.C. § 1411 (1982
ed., Supp. V) purports to abolish jury trial rights in what were
formerly plenary actions is unclear, and at any rate is not a
question we need decide here.
See supra at
492 U. S. 40-41,
n. 3. The decisive point is that in neither the 1978 Act nor the
1984 Amendments did Congress "creat[e] a new cause of action, and
remedies therefor, unknown to the common law," because traditional
rights and remedies were inadequate to cope with a manifest public
problem.
Atlas Roofing, 430 U.S. at
430 U. S. 461.
Rather, Congress simply reclassified a preexisting, common law
cause of action that was not integrally related to the reformation
of debtor-creditor relations [
Footnote 15] and
Page 492 U. S. 61
that apparently did not suffer from any grave deficiencies. This
purely taxonomic change cannot alter our Seventh Amendment
analysis. Congress cannot eliminate a party's Seventh Amendment
right to a jury trial merely by relabeling the cause of action to
which it attaches and placing exclusive jurisdiction in an
administrative agency or a specialized court of equity.
See Gibson 1022-1025.
Nor can Congress' assignment be justified on the ground that
jury trials of fraudulent conveyance actions would "go far to
dismantle the statutory scheme,"
Atlas Roofing, 430 U.S.
at
430 U. S. 454,
n. 11, or that bankruptcy proceedings have been placed in "an
administrative forum with which the jury would be incompatible."
Id. at
430 U. S. 450.
To be sure, we owe some deference to Congress' judgment after it
has given careful consideration to the constitutionality of a
legislative provision.
See Northern Pipeline Construction
Co., 458 U.S. at
458 U. S. 61
(opinion of BRENNAN, J.). But respondent has adduced no evidence
that Congress considered the constitutional implications of its
designation of all fraudulent conveyance actions as core
proceedings. Nor can it seriously be argued that permitting jury
trials in fraudulent conveyance actions brought by a trustee
against a person who has not entered a claim against the estate
would "go far to dismantle the statutory scheme," as we used that
phrase in
Atlas Roofing, when our opinion in that case,
following
Schoenthal, plainly assumed that such claims
carried with them a right to a jury trial. [
Footnote 16] In addition, one cannot easily say
that "the
Page 492 U. S. 62
jury would be incompatible" with bankruptcy proceedings, in view
of Congress' express provision for jury trials in certain actions
arising out of bankruptcy litigation.
See 28 U.S.C. § 1411
(1982 ed., Supp. V); Gibson 1024-1025; Warner,
Katchen Up
in Bankruptcy: The New Jury Trial Right, 63 Am.Bankr.L.J. 1, 48
(1989) (hereinafter Warner). And JUSTICE WHITE'S claim that juries
may serve usefully as checks only on the decisions of judges who
enjoy life tenure,
see
Page 492 U. S. 63
post at
492 U. S. 82-83,
overlooks the extent to which judges who are appointed for fixed
terms may be beholden to Congress or Executive officials, and thus
ignores the potential for juries to exercise beneficial restraint
on their decisions.
It may be that providing jury trials in some fraudulent
conveyance actions -- if not in this particular case, because
respondent's suit was commenced after the Bankruptcy Court approved
the debtor's plan of reorganization -- would impede swift
resolution of bankruptcy proceedings and increase the expense of
Chapter 11 reorganizations. [
Footnote 17] But "these considerations are insufficient
to overcome the clear command of the Seventh Amendment."
Curtis
v. Loether, 415 U.S. at
415 U. S. 198.
See also Bowsher v. Synar, 478 U.
S. 714,
478 U. S. 736
(1986) ("
[T]he fact that a given law or procedure is efficient,
convenient, and useful in facilitating functions of government,
standing alone, will not save it if it is contrary to the
Constitution'"), quoting INS v. Chadha, 462 U.
S. 919, 462 U. S. 944
(1983); Pernell v. Southall Realty, 416 U.S. at
416 U. S.
383-384 (discounting arguments that jury trials would be
unduly burdensome, and rejecting "the notion that there is some
necessary
Page 492 U. S. 64
inconsistency between the desire for speedy justice and the
right to jury trial"). [
Footnote
18]
We do not decide today whether the current jury trial provision
-- 28 U.S.C. § 1411 (1982 ed., Supp. V) -- permits bankruptcy
courts to conduct jury trials in fraudulent conveyance actions like
the one respondent initiated. Nor do we express any view as to
whether the Seventh Amendment or Article III allows jury trials in
such actions to be held before non-Article III bankruptcy judges
subject to the oversight provided by the district courts pursuant
to the 1984 Amendments. We leave those issues for future decisions.
[
Footnote 19] We do hold,
however, that whatever the answers to these questions, the Seventh
Amendment entitles petitioners to the jury trial they requested.
Accordingly, the judgment of
Page 492 U. S. 65
the Court of Appeals is reversed, and the case is remanded for
further proceedings consistent with this opinion.
It is so ordered.
[
Footnote 1]
Section 1330(a) provides:
"The district courts shall have original jurisdiction without
regard to amount in controversy of any
nonjury civil
action against a foreign state as defined in section 1603(a)
of this title as to any claim for relief in personam with respect
to which the foreign state is not entitled to immunity either under
sections 1605-1607 of this title or under any applicable
international agreement."
(Emphasis added.)
[
Footnote 2]
Indeed, respondent strenuously supported the Court of Appeals'
conclusion, which echoed that of the District Court,
see
App. to Pet. for Cert. 22, that the "FSIA is inapplicable to the
case at bar," 835 F.2d 1341, 1347 (CA11 1988), not only on the
court's rationale that "the transfers in question and the suit to
recover those transfers occurred before Granfinanciera was
nationalized,"
ibid., but on the more sweeping rationale
that Granfinanciera never proved that it was an instrumentality of
a foreign state, because it had never really been nationalized.
See Brief for Appellee in No. 86-5738 (CA11), pp. 21-30;
Brief for Appellee in No. 86-1292 (SD Fla.), pp. 32-36. Admittedly,
respondent's present position that the FSIA does not confer
immunity on Granfinanciera because it was not an instrumentality of
a foreign state when the alleged wrongs occurred or when respondent
filed suit is not necessarily incompatible with its claim that
Granfinanciera cannot qualify for a jury trial under the FSIA
because it requested a jury trial after it was nationalized.
Respondent has not attempted, however, to reconcile these views,
and did not make the second claim until he filed his merits brief
in this Court.
[
Footnote 3]
The current statutory provision for jury trials in bankruptcy
proceedings -- 28 U.S.C. § 1411 (1982 ed., Supp. V), enacted as
part of the Bankruptcy Amendments and Federal Judgeship Act of 1984
(1984 Amendments), Pub. L. 98-353, 98 Stat. 333 -- is notoriously
ambiguous. Section 1411(a) provides:
"[T]his chapter and title 11 do not affect any right to trial by
jury that an individual has under applicable nonbankruptcy law with
regard to a personal injury or wrongful death tort claim."
Although this section might suggest that jury trials are
available only in personal injury and wrongful death actions, that
conclusion is debatable. Section 1411(b) provides that "[t]he
district court may order the issues arising [in connection with
involuntary bankruptcy petitions] to be tried without a jury,"
suggesting that the court lacks similar discretion to deny jury
trials on at least some issues presented in connection with
voluntary petitions. The confused legislative history of these
provisions has further puzzled commentators.
See, e.g.,
Gibson, Jury Trials in Bankruptcy: Obeying the Commands of Article
III and the Seventh Amendment, 72 Minn.L.Rev. 967, 989-996 (1988)
(hereinafter Gibson); Note, The Bankruptcy Amendments and Federal
Judgeship Act of 1984: The Impact on the Right of Jury Trial in
Bankruptcy Court, 16 Tex.Tech.L.Rev. 535, 543-546 (1985). Whatever
the proper construction of § 1411, petitioners concede that this
section does not entitle them to a jury trial. Section 122(b) of
the 1984 Amendments, 98 Stat. 346, bars application of § 1411
to
"cases under title 11 of the United States Code that are pending
on the date of enactment of this Act or to proceedings arising in
or related to such cases,"
and Chase & Sanborn's petition for reorganization was
pending on that date. Nor does § 1411's predecessor -- 28 U.S.C. §
1480(a), which stated that
"this chapter and title 11 do not affect any right to trial by
jury, in a case under title 11 or in a proceeding arising under
title 11 or arising in or related to a case under title 11, that is
provided by any statute in effect on September 30, 1979"
-- seem to afford petitioners a statutory basis for their claim.
As they recognize, § 1480 was apparently repealed by the 1984
Amendments.
See Gibson 989, and n. 96; King, Jurisdiction
and Procedure Under the Bankruptcy Amendments of 1984, 38
Vand.L.Rev. 675, 703, and n. 79 (1985); Brief for Respondent 5, n.
11. Petitioners therefore appear correct in concluding that,
"absent any specific legislation in force providing jury trials
for cases filed before July 10, 1984, but tried afterwards, [their]
right to jury trial in this proceeding must necessarily be
predicated entirely on the Seventh Amendment."
Brief for Petitioners 33, n. 7.
See also Brief for
Respondent 10, and n. 15.
[
Footnote 4]
This quite distinct inquiry into whether Congress has
permissibly entrusted the resolution of certain disputes to an
administrative agency or specialized court of equity, and whether
jury trials would impair the functioning of the legislative scheme,
appears to be what the Court contemplated when, in
Ross v.
Bernhard, 396 U. S. 531,
396 U. S. 538,
n. 10 (1970), it identified "the practical abilities and
limitations of juries" as an additional factor to be consulted in
determining whether the Seventh Amendment confers a jury trial
right.
See Tull v. United States, 481 U.S. at
481 U. S. 418,
n. 4;
Atlas Roofing Co. v. Occupational Safety and Health
Review Comm'n, 430 U. S. 442,
430 U. S.
454-455 (1977). We consider this issue in
484 U.
S. infra. Contrary to JUSTICE WHITE's
contention,
see post at
484 U. S. 79-80,
we do not declare that the Seventh Amendment provides a right to a
jury trial on all legal, rather than equitable, claims. If a claim
that is legal in nature asserts a "public right," as we define that
term in
484 U. S. then the
Seventh Amendment does not entitle the parties to a jury trial if
Congress assigns its adjudication to an administrative agency or
specialized court of equity.
See infra at
484 U. S. 51-53.
The Seventh Amendment protects a litigant's right to a jury trial
only if a cause of action is legal in nature and it involves a
matter of "private right."
[
Footnote 5]
Rather than list 18th-century English cases to support the
contention that fraudulent monetary transfers were traditionally
cognizable in equity, respondent cites three recent cases from the
Courts of Appeals. These cases, however, weaken, rather than
bolster, respondent's argument.
In re Graham, 747 F.2d
1383 (CA11 1984), held that there was no Seventh Amendment jury
trial right in a suit for the
equitable remedy of setting
aside an alleged fraudulent conveyance of
real estate by a
bankrupt. With respect to suits like respondent's, the court
expressly noted that "an action by a creditor or
trustee-in-bankruptcy seeking money damages is an action at law."
Id. at 1387 (citations omitted).
Damsky v.
Zavatt, 289 F.2d 46 (CA2 1961), also involved a conveyance of
real estate. And there, too, the court acknowledged that jury
trials are ordinarily available with respect to monetary claims.
See id. at 54.
Both of these holdings are questionable, moreover, to the extent
that they are in tension with our decision in
Whitehead v.
Shattuck, 138 U. S. 146
(1891). Although there is scholarly support for the claim that
actions to recover real property are quintessentially equitable
actions,
see 1 G. Glenn, Fraudulent Conveyances and
Preferences § 98, pp. 183-184 (rev. ed. 1940), in
Whitehead we stated:
"[W]here an action is simply for the recovery and possession of
specific real or personal property, or for the recovery of a money
judgment, the action is one at law. An action for the recovery of
real property, including damages for withholding it, has always
been of that class. The right which in this case the plaintiff
wishes to assert is his title to certain real property; the remedy
which he wishes to obtain is its possession and enjoyment; and in a
contest over the title, both parties have a constitutional right to
call for a jury."
138 U.S. at
138 U. S. 151.
See also Pernell v. Southall Realty, 416 U.
S. 363,
416 U. S.
370-374 (1974).
Finally, respondent misreads
In re Harbour, 840 F.2d
1165, 1172-1173 (CA4 1988). The Fourth Circuit relied in that case
on the same authorities to which we have referred, distinguishing
between suits to recover fraudulent transfers and other bankruptcy
proceedings. The court's holding that the Seventh Amendment right
to a jury trial no longer extends to such actions was based not on
its historical analysis, which accords with our own, but on its
erroneous belief that Congress possesses the power to assign
jurisdiction over all fraudulent conveyance actions to bankruptcy
courts sitting without juries. The case therefore lends no support
to respondent's historical argument.
[
Footnote 6]
Citing several authorities, JUSTICE WHITE contends that "[o]ther
scholars have looked at the same history and come to a different
conclusion."
Post at
484 U. S. 85,
and n. 7. This assertion, however, lacks the support it claims.
With the exception of Justice Gray's opinion in
Drake v.
Rice, 130 Mass. 410, 412 (1881), and Roberts' treatise, none
of the authorities cited so much as mentions 18th-century English
practice. Although Collier offers as its opinion that actions to
set aside fraudulent transfers are equitable in nature, 4 Collier
on Bankruptcy � 548.10, p. 548-125 (15th ed. 1989), it refers only
to recent cases in defending its opinion, while acknowledging that
some courts have disagreed. Bump and Wait both limit their
citations to state court decisions, refusing to analyze earlier
English cases.
See O. Bump, Conveyances Made by Debtors to
Defraud Creditors § 532 (4th ed. 1896); F. Wait, Fraudulent
Conveyances and Creditors' Bills §§ 56-60 (1884). To be sure, in
Drake v. Rice, 130 Mass., at 412, Justice Gray says
that,
"[b]y the law of England before the American Revolution, . . .
fraudulent conveyances of choses in action, though not specified in
the statute [of Elizabeth], were equally void, but from the nature
of the subject the remedy of the creditor must be sought in
equity."
But the reason why suits to recover fraudulent transfers of
choses in action had to be brought in equity, Justice Gray points
out, is that they could not be attached or levied upon.
Id. at 413.
See also O. Bump,
supra, §
531 ("[T]here is no remedy at law when the property can not be
taken on execution or by attachment"). Justice Gray's summary of
18th-century English practice does not extend to cases, such as
those involving monetary transfers, where an adequate remedy
existed at law. The passage JUSTICE WHITE cites from Roberts'
treatise is obscure, and does not speak squarely to the question
whether 18th-century English courts of equity would hear cases
where legal remedies were sufficient.
See W. Roberts,
Voluntary and Fraudulent Conveyances 526-527 (3d Am. ed. 1845).
[
Footnote 7]
Respondent claims to seek "avoidance" of the allegedly
fraudulent transfers and restitution of the funds that were
actually transferred, but maintains that petitioners have made
restitution impossible because the transferred funds cannot be
distinguished from the other dollars in petitioners' bank accounts.
See Brief for Respondent 39-44. Because avoidance and
restitution are classical equitable remedies, he says, petitioners
are not entitled to a trial by jury. We find this strained attempt
to circumvent precedent unpersuasive. Because dollars are fungible,
and respondent has not requested an accounting or other
specifically equitable form of relief, a complete remedy is
available at law, and equity will not countenance an action when
complete relief may be obtained at law.
See, e.g., Schoenthal
v. Irving Trust Co., 287 U.S. at
287 U. S. 94-95.
Moreover, because a plaintiff is entitled to return of any funds
transferred in violation of 11 U.S.C. § 548 (1982 ed., Supp.V), and
because a judge lacks equitable discretion to refuse to enter an
award for less than the amount of the transfer, any distinction
that might exist between "damages" and monetary relief under a
different label is purely semantic, with no relevance to the
adjudication of petitioners' Seventh Amendment claim.
Cf.
Albemarle Paper Co. v. Moody, 422 U.
S. 405,
422 U. S.
442-443 (1975) (REHNQUIST, J., concurring). Indeed, even
if the checks respondent seeks to recover lay untouched in
petitioners' offices, legal remedies would apparently have
sufficed.
See, e.g., Adams v. Champion, 294 U.
S. 231,
293 U. S. 234
(1935);
Whitehead v. Shattuck, 138 U.S. at
138 U. S.
151.
[
Footnote 8]
Although we left the term "public rights" undefined in
Atlas
Roofing Co. v. Occupational Safety and Health Review Comm'n,
430 U.S. at
430 U. S. 450,
430 U. S. 458,
we cited
Crowell v. Benson, 285 U. S.
22 (1932), approvingly. In
Crowell, we defined
"private right" as "the liability of one individual to another
under the law as defined,"
id. at
285 U. S. 51, in
contrast to cases that
"arise between the Government and persons subject to its
authority in connection with the performance of the constitutional
functions of the executive or legislative departments."
Id. at
285 U. S.
50.
[
Footnote 9]
This proposition was firmly established in
Atlas Roofing,
supra, at
430 U. S. 455
(footnote omitted):
"Congress is not required by the Seventh Amendment to choke the
already crowded federal courts with new types of litigation or
prevented from committing some new types of litigation to
administrative agencies with special competence in the relevant
field. This is the case even if the Seventh Amendment would have
required a jury where the adjudication of those rights is assigned
to a federal court of law instead of an administrative agency."
[
Footnote 10]
In
Atlas Roofing, 430 U.S. at
430 U. S. 442,
430 U. S. 450,
n. 7, we stated that,
"[i]n cases which do involve only 'private rights,' this Court
has accepted factfinding by an administrative agency, without
intervention by a jury, only as an adjunct to an 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."
That statement, however, must be read in context. First, we
referred explicitly only to Congress' power, where disputes concern
private rights, to provide administrative factfinding instead of
jury trials in
admiralty cases. Civil causes of action in
admiralty, however, are not suits at common law for Seventh
Amendment purposes, and thus no constitutional right to a jury
trial attaches.
Waring v.
Clarke, 5 How. 441,
46 U. S. 460
(1847). Second, our statement should not be taken to mean that
Congress may assign at least the initial factfinding in all cases
involving controversies entirely between private parties to
administrative agencies or other tribunals not involving juries, so
long as they are established as adjuncts to Article III courts. If
that were so, Congress could render the Seventh Amendment a
nullity. Rather, that statement, citing
Crowell v. Benson,
285 U.S. at
285 U. S. 51-65,
means only that in
some cases involving "private rights"
as that term was defined in Crowell
and used in
Atlas Roofing -- namely, as encompassing all disputes to which the
Federal Government is not a party in its sovereign capacity -- may
Congress dispense with juries as factfinders through its choice of
an adjudicative forum. Those cases in which Congress may decline to
provide jury trials are ones involving statutory rights that are
integral parts of a public regulatory scheme and whose adjudication
Congress has assigned to an administrative agency or specialized
court of equity. Whatever terminological distinctions
Atlas
Roofing may have suggested, we now refer to those rights as
"public," rather than "private."
[
Footnote 11]
We do not suggest that the restructuring of debtor-creditor
relations is in fact a public right. This thesis has met with
substantial scholarly criticism,
see, e.g., Gibson 1041,
n. 347; Currie, Bankruptcy Judges and the Independent Judiciary, 16
Creighton L.Rev. 441, 452 (1983); Baird, Bankruptcy Procedure and
State-Created Rights: The Lessons of Gibbons and Marathon, 1982
Sup.Ct.Rev. 25, 44, and we need not and do not seek to defend it
here. Our point is that, even if one accepts this thesis, the
Seventh Amendment entitles petitioners to a jury trial.
[
Footnote 12]
See Northern Pipeline Construction Co. v. Marathon Pipe Line
Co., 458 U. S. 50,
458 U. S. 71
(1982) (opinion of BRENNAN, J.):
"[T]he 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."
[
Footnote 13]
Although we said in
Katchen v. Landy, 382 U.S. at
382 U. S. 336,
that the petitioner
might have been entitled to a jury
trial had he presented no claim against the bankruptcy estate, our
approving references not only to
Schoenthal but also to
Adams v. Champion, 294 U. S. 231,
294 U. S. 234
(1935), and
Buffum v. Barceloux Co., 289 U.
S. 227,
289 U. S.
235-236 (1933),
see 382 U.S. at
382 U. S.
327-328, demonstrate that we did not intend to cast
doubt on the proposition that the petitioner in
Katchen
would have been entitled to a jury trial had he not entered a claim
against the estate and had the bankruptcy trustee requested solely
legal relief. We merely left open the possibility that a jury trial
might not be required, because in some cases preference avoidance
actions are equitable in character.
[
Footnote 14]
In
Katchen, supra, at
382 U. S. 335,
we adopted a rationale articulated in
Alexander v.
Hillman, 296 U. S. 222,
296 U. S.
241-242 (1935) (citations omitted):
"By presenting their claims, respondents subjected themselves to
all the consequences that attach to an appearance . . . ."
"
* * * *"
"Respondents' contention means that, while invoking the court's
jurisdiction to establish their right to participate in the
distribution, they may deny its power to require them to account
for what they misappropriated. In behalf of creditors and
stockholders, the receivers reasonably may insist that, before
taking aught, respondents may, by the receivership court, be
required to make restitution. That requirement is in harmony with
the rule generally followed by courts of equity that, having
jurisdiction of the parties to controversies brought before them,
they will decide all matters in dispute and decree complete
relief."
It warrants emphasis that this rationale differs from the notion
of waiver on which the Court relied in
Commodity Futures
Trading Comm'n v. Schor, 478 U. S. 833
(1986). The Court ruled in
Schor -- where no Seventh
Amendment claims were presented -- that the Commodities Futures
Trading Commission could adjudicate state law counterclaims to a
federal action by investors against their broker consistent with
Article III. The Court reached this conclusion, however, not on the
ground that the Commission had possession of a disputed
res, to which the investors laid claim, but on the ground
that Congress did not require investors to avail themselves of the
remedial scheme over which the Commission presided. The investors
could have pursued their claims, albeit less expeditiously, in
federal court. By electing to use the speedier, alternative
procedures Congress had created, the Court said, the investors
waived their right to have the state law counterclaims against them
adjudicated by an Article III court.
See id. at
478 U. S.
847-850. Parallel reasoning is unavailable in the
context of bankruptcy proceedings, because creditors lack an
alternative forum to the bankruptcy court in which to pursue their
claims. As
Katchen makes clear, however, by submitting a
claim against the bankruptcy estate, creditors subject themselves
to the court's equitable power to disallow those claims, even
though the debtor's opposing counterclaims are legal in nature and
the Seventh Amendment would have entitled creditors to a jury trial
had they not tendered claims against the estate.
It hardly needs pointing out that JUSTICE WHITE'S assertion,
see post at
492 U. S. 71-72,
that this case is controlled by the Court's statement in
Katchen that
"it makes no difference, so far as petitioner's Seventh
Amendment claim is concerned, whether the bankruptcy trustee urges
only a § 57g objection or also seeks affirmative relief,"
382 U.S. at
382 U. S.
337-338, is entirely unfounded. Read in context, the
Court's statement merely means that, once a creditor has filed a
claim against the estate, the bankruptcy trustee may recover the
full amount of any preference received by the creditor-claimant,
even if that amount exceeds the amount of the creditor's claim. The
Court's statement says nothing about a creditor's Seventh Amendment
right to a jury trial on a trustee's preference action when the
creditor has
not entered a claim against the estate.
[
Footnote 15]
The adventitious relation of a trustee's fraudulent conveyance
actions to the reorganization proceedings themselves -- which we
recognized in
Schoenthal and
Katchen, which
federal bankruptcy legislation acknowledged until 1978 by treating
them as plenary actions when the defendant had not made a claim
against the estate, and for which Congress expressly provided jury
trial rights until 1984 -- is further evidenced by the events in
this case. Respondent's fraudulent conveyance action was not filed
until well
after the Bankruptcy Court had approved the
plan of reorganization and Chase & Sanborn's tangible assets
and business had been liquidated. Reply Brief for Petitioner 9.
[
Footnote 16]
Of course, the 1984 Amendments altered the statutory scheme that
formed the backdrop to our discussion in
Atlas Roofing.
But in this connection they did so only by depriving persons who
have not filed claims against the estate of a statutory right to a
jury trial when the trustee sues them to recover an alleged
fraudulent conveyance or preferential transfer. The 1984 Amendments
did not alter the nature of the trustee's claim or the relief to
which he was entitled. To say that our failure to respect Congress'
reclassification of these causes of action would "go far to
dismantle the statutory scheme" simply because they partly define
the new statutory scheme would be to render this test an empty
tautology.
This is not to say, of course, contrary to JUSTICE WHITE'S
assertion,
see post at
492 U. S. 75, n.
4, that we regard Congress' amendments to the bankruptcy statutes
as an "act of whimsy." The sweeping changes Congress instituted in
1978 were clearly intended to make the reorganization process more
efficient, as JUSTICE WHITE'S quotation from a Senate Report
indicates. But the radical reforms of 1978, on whose legislative
history his dissent relies, did not work the slightest alteration
in the right to a jury trial of alleged recipients of fraudulent
conveyances. That change came in 1984. Although enhanced efficiency
was likely Congress' aim once again, neither JUSTICE WHITE nor
JUSTICE BLACKMUN points to any statement from the legislative
history of the 1984 Amendments confirming this supposition with
respect to preference actions in particular. More important, they
offer no evidence that Congress considered the propriety of its
action under the Seventh Amendment. The House Report cited by
JUSTICE BLACKMUN,
see post at
492 U. S. 93,
advocated conferring Article III status on bankruptcy judges. Its
favored approach would therefore have eliminated the problem before
us by clearly
entitling petitioners to a jury trial under
the Seventh Amendment.
See H.R.Rep. No. 98-9, pt. 1, pp.
7, 9, 16 (1983). This approach was rejected by the Senate. In
defending an alternative proposal that ultimately prevailed,
however, the Senate Report to which JUSTICE BLACKMUN refers
neglects to discuss specifically the inclusion of preference
actions in the class of core proceedings or potential difficulties
under the Seventh Amendment to which that assignment might give
rise.
See S.Rep. No. 98-55, pp. 32-4p (1983). Apparently,
the Senate Judiciary Committee overlooked this problem entirely.
Thus, the 1984 Amendments' denial of the right to a jury trial in
preference and fraudulent conveyance actions can hardly be said to
represent Congress' considered judgment of the constitutionality of
this change.
[
Footnote 17]
Respondent argues, for example, that the prompt resolution of
fraudulent transfer claims brought by bankruptcy trustees is often
crucial to the reorganization process, and that if, by demanding a
jury trial, a party could delay those proceedings, it could alter
the negotiating framework and unfairly extract more favorable terms
for itself. Brief for Respondent 35. It warrants notice, however,
that the provision of jury trials in fraudulent conveyance actions
has apparently not been attended by substantial difficulties under
previous bankruptcy statutes; that respondent has not pointed to
any discussion of this allegedly serious problem in the legislative
history of the 1978 Act or the 1984 Amendments; that, in many
cases, defendants would likely not request jury trials; that causes
of action to recover preferences may be assigned pursuant to the
plan of reorganization, rather than pursued prior to the plan's
approval, as was done in this very case; and that Congress itself,
in enacting 28 U.S.C. § 1411 (1982 ed., Supp. V), explicitly
provided for jury trials of personal injury and wrongful death
claims, which would likely take much longer to try than most
preference actions and which often involve large sums of money.
[
Footnote 18]
One commentator has noted:
"[T]he interpretation of
Katchen as a 'delay and
expense' exception to the seventh amendment is negated by the
Court's rejection of the argument that delay, or even the more
significant problem of jury prejudice, can override the seventh
amendment.
Katchen's reference to 'delay and expense'
must, therefore, be read as part of the Court's consideration of
whether the legal remedy had become sufficiently adequate to result
in a shifting of the boundaries of law and equity. At a minimum,
the delay and expense language of
Katchen must be read in
light of the petitioner's demand for a stay of the bankruptcy
action and the institution of a separate suit in a different court.
That is a qualitatively different type of delay and expense from
the delay and expense of providing a jury trial in the same action.
The latter could never override
Beacon [Theatres, Inc. v.
Westover, 359 U. S. 500 (1959),] and
Dairy Queen[, Inc. v. Wood, 369 U. S.
469 (1962)]."
Warner 39 (footnotes omitted);
see id. at 42, 48.
[
Footnote 19]
JUSTICE WHITE accuses us of being "rather coy" about which
statute we are invalidating,
post at
492 U. S. 71, n.
2, and of "preferring to be obtuse" about which court must preside
over the jury trial to which petitioners are entitled.
Post at
492 U.S.
81. But however helpful it might be for us to adjudge every
pertinent statutory and constitutional issue presented by the 1978
Act and the 1984 Amendments, we cannot properly reach out and
decide matters not before us. The only question we have been called
upon to answer in this case is whether the Seventh Amendment grants
petitioners a right to a jury trial. We hold unequivocally that it
does.
JUSTICE SCALIA, concurring in part and concurring in the
judgment.
I join all but Part IV of the Court's opinion. I make that
exception because I do not agree with the premise of its
discussion: that "the Federal Government need not be a party for a
case to revolve around
public rights.'" Ante at
492 U. S. 54,
quoting Thomas v. Union Carbide Agricultural Products Co.,
473 U. S. 568,
473 U. S. 586
(1985). In my view, a matter of "public rights," whose adjudication
Congress may assign to tribunals lacking the essential
characteristics of Article III courts, "must, at a minimum, arise
`between the government and others.'" Northern Pipeline
Construction Co. v. Marathon Pipe Line Co., 458 U. S.
50, 458 U. S. 69
(1982) (plurality opinion), quoting Ex parte Bakelite
Corp., 279 U. S. 438,
279 U. S. 451
(1929). Until quite recently, this has also been the consistent
view of the Court. See id. at 458 U. S. 69, n.
23 ("[T]he presence of the United States as a proper party . . . is
a necessary but not sufficient means of distinguishing `private
rights' from `public rights'"); Atlas Roofing Co. v.
Occupational Safety and Health Review Comm'n, 430 U.
S. 442, 430 U. S. 450
(1977) (public rights cases are "cases in which the Government sues
in its sovereign capacity to enforce public rights created by
statutes"); id. at 430 U. S. 457
(noting "distinction between cases of private right and those which
arise between the Government and persons subject to its
authority"); id. at 430 U. S. 458
(situations involving "public rights" are those "where the
Government is involved in its sovereign capacity under an otherwise
valid statute creating enforceable public rights"); Crowell v.
Benson, 285 U. S. 22,
285 U. S. 50-51
(1932) (public rights are "those which arise between the Government
and persons subject to its authority in connection with the
performance of the constitutional functions of the executive or
legislative departments");
Page 492 U. S. 66
Ex parte Bakelite Corp., 279 U.S. at
279 U. S. 451
(public rights are those "arising between the government and
others, which from their nature do not require judicial
determination and yet are susceptible of it");
Murray's
Lessee v. Hoboken Land & Improvement Co., 18
How. 272,
59 U. S. 283
(1856) (plaintiff's argument that a controversy susceptible of
judicial determination must be a "judicial controversy" heard in an
Article III court "leaves out of view the fact that the United
States is a party").
The notion that the power to adjudicate a legal controversy
between two private parties may be assigned to a non-Article III,
yet federal, tribunal is entirely inconsistent with the origins of
the public rights doctrine. The language of Article III itself, of
course, admits of no exceptions; it directs unambiguously 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."
In
Murray's Lessee, supra, however, we recognized a
category of "public rights" whose adjudication, though a judicial
act, Congress may assign to tribunals lacking the essential
characteristics of Article III courts. That case involved the Act
of May 15, 1820, 3 Stat. 592, which established a summary procedure
for obtaining from collectors of federal revenue funds that they
owed to the Treasury. Under that procedure, after a federal auditor
made the determination that the funds were due, a "distress
warrant" would be issued by the Solicitor of the Treasury,
authorizing a United States marshal to seize and sell the personal
property of the collector, and to convey his real property, in
satisfaction of the debt. The United States' lien upon the real
property would be effective upon the marshal's filing of the
distress warrant in the district court of the district where the
property was located. The debtor could, however, bring a challenge
to the distress warrant in any United States district court, in
which judicial challenge "every fact upon which the legality of the
extra-judicial remedy depends may be drawn in[to] question,"
Page 492 U. S. 67
18 How. at
59 U. S. 284.
Murray's Lessee involved a dispute over title to lands
that had been owned by a former collector of customs whom the
Treasury auditor had adjudged to be deficient in his remittances.
The defendant had purchased the land in the marshal's sale pursuant
to a duly issued distress warrant (which had apparently not been
contested by the collector in any district court proceeding). The
plaintiff, who had acquired the same land pursuant to the execution
of a judgment against the collector, which execution occurred
before the marshal's sale, but
after the
marshal's filing of the distress warrant to establish the lien,
brought an action for ejectment to try title. He argued,
inter
alia, that the process by which the defendant had obtained
title violated Article III because adjudication of the collector's
indebtedness to the United States was inherently a judicial act,
and could not lawfully have been performed by a Treasury auditor,
but only by an Article III court. We rejected this contention by
observing that although "the auditing of the accounts of a receiver
of public moneys may be, in an enlarged sense, a judicial act,"
id. at
59 U. S. 280,
the English and American traditions established that it did not,
without consent of Congress, give rise to a judicial "controversy"
within the meaning of Article III.
It was in the course of answering the plaintiff's rejoinder to
this holding that we uttered the words giving birth to the public
rights doctrine. The plaintiff argued that, if we were correct that
the matter was "not in its nature a judicial controversy, congress
could not make it such, nor give jurisdiction over it to the
district courts" in the bills permitted to be filed by collectors
challenging distress warrants -- so that "the fact that congress
has enabled the district court to pass upon it is conclusive
evidence that it is a judicial controversy."
Id. at
59 U. S. 282.
That argument, we said, "leaves out of view the fact that the
United States is a party."
Id. at
59 U. S. 283.
Unlike a private party who acts extrajudicially to recapture his
property, the marshal who executes a distress warrant
"cannot
Page 492 U. S. 68
be made responsible in a judicial tribunal for obeying the
lawful command of the government; and the government itself, which
gave the command, cannot be sued without its own consent,"
even though the issue in question is an appropriate matter for a
judicial controversy.
Ibid. Congress could, however, waive
this immunity, so as to permit challenges to the factual bases of
officers' actions in Article III courts; and this waiver did not
have to place the proceeding in the courts unconditionally or
ab initio, for the "United States may consent to be sued,
and may yield this consent upon such terms and under such
restrictions as it may think just."
Ibid. Thus, we summed
up, in the oft-quoted passage establishing the doctrine at issue
here:
"[T]here 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
59 U. S. 284
(emphasis added).
It is clear that what we meant by public rights were not rights
important to the public, or rights created by the public, but
rights
of the public -- that is, rights pertaining to
claims brought by or against the United States. For central to our
reasoning was the device of waiver of sovereign immunity, as a
means of converting a subject which, though its resolution involved
a "judicial act," could not be brought before the courts, into the
stuff of an Article III "judicial controversy." Waiver of sovereign
immunity can only be implicated, of course, in suits where the
Government is a party. We understood this from the time the
doctrine of public rights was born, in 1856, until two Terms ago,
saying as recently as 1982 that the suits to which it applies "must
at a minimum arise
between the government and others,'"
Northern Pipeline Construction Co. v. Marathon Pipe Line
Co., 458 U.S. at 458 U. S. 69,
quoting Ex parte Bakelite Corp., 279
Page 492 U. S. 69
U.S. at
279 U. S. 451.
See also, in addition to the cases cited
supra at
492 U. S. 65-66,
Williams v. United States, 289 U.
S. 553,
289 U. S. 581
(1933) (noting sovereign immunity origins of legislative courts);
Ex parte Bakelite, supra, at
279 U. S.
453-454 (same).
Cf. McElrath v. United States,
102 U. S. 426,
102 U. S. 440
(1880).
In
Thomas v. Union Carbide Agricultural Products Co.,
473 U. S. 568
(1985), however, we decided to interpret the phrase "public rights"
as though it had not been developed in the context just discussed,
and did not bear the meaning just described. We pronounced, as far
as I can tell by sheer force of our office, that it applies to a
right
"so closely
integrated into a public regulatory scheme
as to be a matter appropriate for agency resolution with limited
involvement by the Article III judiciary."
Id. at
473 U. S.
593-594 (emphasis added). The doctrine reflects, we
announced,
"simply a pragmatic understanding that, when Congress selects a
quasi-judicial method of resolving matters that 'could be
conclusively determined by the Executive and Legislative Branches,'
the danger of encroaching on the judicial powers is reduced,"
id. at
473 U. S. 589,
quoting
Northern Pipeline, supra, at
458 U. S. 68 --
without pointing out, as had
Murray's Lessee, that the
only adjudications of private rights that "could be conclusively
determined by the Executive and Legislative Branches" were a select
category of private rights
vis-a-vis the Government
itself. We thus held in
Thomas, for the first time, that a
purely private federally created action did not require Article III
courts.
There was, in my view, no constitutional basis for that
decision. It did not purport to be faithful to the origins of the
public rights doctrine in
Murray's Lessee, nor did it
replace the careful analysis of that case with some other reasoning
that identifies a discrete category of "judicial acts" which, at
the time the Constitution was adopted, were not thought to
implicate a "judicial controversy." The lines sought to be
established by the Constitution did not matter. "Pragmatic
understanding" was all that counted -- in a case-by-case evaluation
of whether the danger of "encroaching" on the "judicial
Page 492 U. S. 70
powers" (a phrase now drained of constant content) is too much.
The Term after
Thomas, in
Commodity Futures Trading
Comm'n v. Schor, 478 U. S. 833
(1986), we reconfirmed our error, embracing the analysis of
Thomas and describing at greater length the new Article
III standard it established, which seems to me no standard at
all:
"[I]n reviewing Article III challenges, we have weighed a number
of factors, none of which has been deemed determinative, with an
eye to the practical effect that the congressional action will have
on the constitutionally assigned role of the federal judiciary. . .
. Among the factors upon which we have focused are the extent to
which the 'essential attributes of judicial power' are reserved to
Article III courts, and, conversely, the extent to which the
non-Article III forum exercises the range of jurisdiction and
powers normally vested only in Article III courts, the origins and
importance of the right to be adjudicated, and the concerns that
drove Congress to depart from the requirements of Article III."
478 U.S. at
478 U. S. 851,
citing
Thomas, supra, at
478 U. S. 587,
478 U. S.
589-593.
I do not think one can preserve a system of separation of powers
on the basis of such intuitive judgments regarding "practical
effects," no more with regard to the assigned functions of the
courts,
see Mistretta v. United States, 488 U.
S. 361,
488 U. S.
426-427 (1989) (SCALIA, J., dissenting), than with
regard to the assigned functions of the Executive,
see Morrison
v. Olson, 487 U. S. 654,
487 U. S.
708-712 (1988) (SCALIA, J., dissenting). This central
feature of the Constitution must be anchored in rules, not set
adrift in some multifactored "balancing test" -- and especially not
in a test that contains as its last and most revealing factor "the
concerns that drove Congress to depart from the requirements of
Article III."
Schor, supra, at
478 U. S.
851.
I would return to the longstanding principle that the public
rights doctrine requires, at a minimum, that the United States be a
party to the adjudication. On that basis, I concur in the Court's
conclusion in Part IV of its opinion that
Page 492 U. S. 71
the Article III concomitant of a jury trial could not be
eliminated here. Since I join the remainder of the Court's opinion,
I concur in its judgment as well.
JUSTICE WHITE, dissenting.
The Court's decision today calls into question several of our
previous decisions, [
Footnote 2/1]
strikes down at least one federal statute, [
Footnote 2/2] and potentially concludes for the first
time that the Seventh Amendment [
Footnote 2/3] guarantees litigants in a specialized
non-Article III forum the right to a jury trial. Because I cannot
accept these departures from established law, I respectfully
dissent.
Before I explore the Court's approach to analyzing the issues
presented in this case, I first take up the question of the
Page 492 U. S. 72
precedent that the Court most directly disregards today,
Katchen v. Landy, 382 U. S. 323
(1966). Though the Court professes not to overrule this decision,
and curiously, to be acting in reliance on it,
see ante at
492 U. S. 57-59,
there is simply no way to reconcile our decision in
Katchen with what the Court holds today.
In
Katchen, the petitioner filed a claim in the
bankruptcy proceeding to recover funds that he alleged were due to
him from a bankrupt estate; respondent, the trustee, resisted
paying the claims based on § 57g of the old Bankruptcy Act, which
forbade payments to creditors holding "void or voidable"
preferences. Petitioner claimed, much as petitioners here do, that
the question whether prior payments to him were preferences was a
matter that could not be adjudicated without the benefit of a jury
trial. We rejected this claim, holding that "there is no Seventh
Amendment right to a jury trial" on claims such as Katchen's.
Katchen, 382 U.S. at
382 U. S. 337.
Not only could the issue of preference be tried without a jury for
the purpose of denying the filed claim pursuant to § 57g, but a
money judgment for the amount of the preference could be entered
without a jury trial:
"[I]t makes no difference, so far as petitioner's Seventh
Amendment claim is concerned, whether the bankruptcy trustee urges
only a § 57g objection or also seeks affirmative relief."
Id. at
382 U. S.
337-338. This holding dispositively settles the question
before us today: like the petitioner in
Katchen,
petitioners in this case have no Seventh Amendment right to a jury
trial when respondent trustee seeks to avoid the allegedly
fraudulent transfers they received.
In order to escape the force of
Katchen's holding, the
Court exploits the circumstances under which that decision was
made. Most notably, at the time
Katchen was decided, the
Bankruptcy Act then in force (the 1898 Act) did not include actions
to set aside voidable preferences among those proceedings covered
by the Act. Thus, the clause of our opinion in
Katchen,
supra, at
382 U. S. 336,
on which the Court today puts so
Page 492 U. S. 73
much weight --
"petitioner might be entitled to a jury trial on the issue of
preference if he presented no claim in the bankruptcy proceeding
and awaited a federal plenary action by the trustee,"
see ante at
492 U. S. 58 --
simply stated the truism that, under the 1898 Act in force at that
time, if petitioner had not presented his claim to the bankruptcy
court, that court would have had no jurisdiction to perform a
summary adjudication of the preference.
That entitlement, however, on which the Court so heavily relies,
was solely the product of the statutory scheme in existence at the
time. If it were not, the next phrase appearing in the
Katchen decision would make little sense:
"[W]hen the same issue [
i.e., validity of a preference]
arises as part of the process of allowance and disallowance of
claims, it is triable in equity."
Katchen, supra, at
382 U. S. 336.
Katchen makes it clear that when Congress does commit the
issue and recovery of a preference to adjudication in a bankruptcy
proceeding, the Seventh Amendment is inapplicable. Only the limits
of the 1898 Act prevented this from being the case in all
instances, and thereby, left
Katchen with the possibility
of a jury trial right.
Today's Bankruptcy Code is markedly different. Specifically,
under the Bankruptcy Amendments and Federal Judgeship Act of 1984
(1984 Amendments), an action to recover fraudulently transferred
property has been classified as a "core" bankruptcy proceeding.
See 28 U.S.C. § 157(b)(2)(H) (1982 ed., Supp. V). While in
Katchen's day, it was only in special circumstances that
adjudicating a preference was committed to bankruptcy proceedings,
today, Congress has expressly designated adjudication of a
preference or a fraudulent transfer a "core" bankruptcy proceeding.
The portion of
Katchen on which the Court relies --
"petitioner might be entitled to a jury trial on the issue of
preference if he presented no claim in the bankruptcy proceeding
and awaited a federal plenary action by the trustee,"
see ante at
492 U. S. 58 --
is therefore a relic of history. The same is true of the decision
in
Schoenthal
Page 492 U. S. 74
v. Irving Trust Co., 287 U. S. 92,
287 U. S. 94-95
(1932), which, in holding that "[s]uits to recover preferences
constitute no part of the proceedings in bankruptcy," merely
reflected the then-existing statutory scheme.
The Court recognizes the distinction between the earlier law and
the present Code, but calls the change a "purely taxonomic" one
that "cannot alter our Seventh Amendment analysis."
Ante
at
492 U. S. 61. I
disagree for two reasons. First, the change is significant because
it illustrates the state of the law at the time of
Katchen, and explains why that case came out as it did. It
is hypocritical for the Court to rely on
Katchen's
statement as to the existence of a jury trial entitlement for the
petitioner's claim there, but then dismiss as "taxonomic" the
change that wiped out that jury entitlement -- or, at the very
least, profoundly shifted the basis for it.
More fundamentally, the inclusion of actions to recover
fraudulently conveyed property among core bankruptcy proceedings
has meaning beyond the taxonomic. As I explain in more detail
below,
see 492 U. S.
infra, we have long recognized that the forum in which a
claim is to be heard plays a substantial role in determining the
extent to which a Seventh Amendment jury trial right exists. As we
put it in
Katchen:
"'[I]n cases of bankruptcy, many incidental questions arise in
the course of administering the bankrupt estate, which would
ordinarily be pure cases at law, and in respect of their facts
triable by jury, but, as belonging to bankruptcy proceedings, they
become cases over which the bankruptcy court, which acts as a court
of equity, exercises exclusive control. Thus, a claim of debt or
damages against the bankrupt is investigated by chancery
methods.'"
Katchen, 382 U.S. at
382 U. S. 337
(quoting
Barton v. Barbour, 104 U.
S. 126,
104 U. S.
133-134 (1881)). The same is true here, and it counsels
affirmance under our holding in
Katchen.
Page 492 U. S. 75
In essence, the Court's rejection of
Katchen -- and its
classification of the change effected by the 1984 Act as
"taxonomic" -- comes from its conclusion that the fraudulent
conveyance action at issue here is not "
part of the process of
allowance and disallowance of claims.'" Ante at
492 U. S. 58
(quoting Katchen, supra, at 382 U. S.
336). The Court misses Katchen's point,
however: it was the fact that Congress had committed the
determination and recovery of preferences to bankruptcy proceedings
that was determinative in that case, not just the bare fact that
the action "happened" to take place in the process of adjudicating
claims. And the same determinative element is present here, for
under the 1984 Amendments, Congress unmistakably intended to have
fraudulent conveyances adjudicated and recovered in the bankruptcy
court in accordance with that court's usual procedures.
Perhaps in this respect the Court means something more akin to
its later restatement of its position; namely, that the 1984
Amendments simply "reclassified a preexisting, common law cause of
action that was not integrally related to the reformation of
debtor-creditor relations."
Ante at
492 U. S. 60.
The Court further indicates that it will pay little heed to the
congressional inclusion of avoidance and recovery proceedings in
core bankruptcy jurisdiction, since that choice was not made
"because [Congress found that] traditional rights and remedies were
inadequate to cope with a manifest public problem." [
Footnote 2/4]
Ante at
492 U. S. 60.
This misguided view of the congressional
Page 492 U. S. 76
enactment is the crux of the problem with the Court's
approach.
How does the Court determine that an action to recover
fraudulently conveyed property is not "integrally related" to the
essence of bankruptcy proceedings? Certainly not by reference to a
current statutory definition of the core of bankruptcy
Page 492 U. S. 77
proceedings -- enacted by Congress under its plenary
constitutional power,
see U.S. Const., Art. I, § 8, cl. 4,
to establish bankruptcy laws. As discussed in the preceding
paragraph, this vision of what is "integrally related" to the
resolution of creditor-debtor conflicts includes the sort of action
before us today.
See 28 U.S.C. § 157(b)(2)(H) (1982 ed.,
Supp. V). Nor does the Court find support for its contrary
understanding in petitioners' submission, which concedes that the
action in question here is brought to "recover monies that are
properly part of the debtor's estate and should be ratably
distributed among creditors," and that fraudulent transfers put at
risk "the basic policy of nondiscriminatory distribution that
underlies the bankruptcy law." Brief for Petitioners 12. This, too,
seems to belie the Court's view that actions to set aside
fraudulent conveyances are not "integrally related" to reforming
creditor-debtor relations.
Nor is the Court's conclusion about the nature of actions to
recover fraudulently transferred property supportable either by
reference to the state of American bankruptcy law prior to adoption
of the 1978 Code or by reference to the pre-1791 practice in the
English courts. If the Court draws its conclusions based on the
fact that these actions were not considered to be part of
bankruptcy proceedings under the 1800 or 1898 Bankruptcy Acts (or,
more generally, under federal bankruptcy statutes predating the
1978 Code), it has treated the power given Congress in Art. I, § 8,
cl. 4, as if it were a disposable battery, good for a limited
period only -- once the power in it has been consumed by use, it is
to be discarded and considered to have no future value. The power
of Congress under this Clause is plainly not so limited: merely
because Congress
once had a scheme where actions such as
this one were solely heard in plenary proceedings in Article III
courts -- where the Seventh Amendment attached -- does not impugn
the legality of every other possible arrangement.
See also
492 U. S.
infra.
Page 492 U. S. 78
Perhaps instead the Court rests its conclusion on the practice
of the 18th-century English courts. I take issue with this view of
the old English law, below. But even if this were correct, I do not
see why the Article I, § 8, power should be so restricted.
See
ibid.
One final observation with respect to
Katchen. The
Court attempts to distinguish
Katchen by saying that a
jury trial was not needed there because the funds in dispute were
part of the "bankruptcy estate."
Ante at
492 U. S. 57.
"Our decision [in
Katchen] turned . . . on the bankruptcy
court's having
actual or constructive possession' of the
bankruptcy estate," the Court writes. Ibid. But obviously
in this case, the Bankruptcy Court similarly had "`actual or
constructive possession' of the bankruptcy estate;" certainly it
had as much constructive possession of the property sought as it
had of the preference recovered in Katchen. Thus, it is as
true here as it was in Katchen that the funds in dispute
are part of the "bankruptcy estate." The Bankruptcy Code defines
that estate to be comprised of "all the following property,
wherever located and by whomever held," including "[a]ny interest
in property that the trustee recovers under" the provision
authorizing actions to recover fraudulently transferred property.
11 U.S.C. §§ 541(a)(3), 550 (1982 ed., Supp. V). Consequently, even
if the Court is accurate in pinpointing the dispositive fact in the
Katchen decision, that fact equally points towards a
ruling for the trustee here.
In sum, I find that our holding in
Katchen, and its
underlying logic, dictate affirmance. The Court's decision today
amounts to nothing less than a
sub silentio overruling of
that precedent.
II
Even if the question before us were one of first impression,
however, and we did not have the decision in
Katchen to
guide us, I would dissent from the Court's decision. Under our
cases, the determination whether the Seventh Amendment guarantees a
jury trial on petitioners' claims must turn
Page 492 U. S. 79
on two questions: first, in what forum will those claims be
heard; and second, what is the nature of those claims. A weighing
of both of these factors must point toward application of the
Seventh Amendment before that guarantee will attach. [
Footnote 2/5]
A
To read the Court's opinion, one might think that the Seventh
Amendment is concerned only with the nature of a claim. If a claim
is legal, the Court announces, then the Seventh Amendment
guarantees a jury trial on that claim.
Ante at
492 U. S. 42, n.
4. This is wrong.
"[H]istory and our cases support the proposition that the right
to a jury trial turns not solely on the nature of the issue to be
resolved, but also on the forum in which it is to be resolved,"
Atlas Roofing Co. v. Occupational Safety and Health Review
Comm'n, 430 U. S. 442,
430 U. S.
460-461 (1977). Perhaps like
Katchen, Atlas
Roofing is no longer good law after today's decision. A
further examination of the issue before us reveals, though, that it
is the
Page 492 U. S. 80
Court's decision today, and not our prior rulings, that is in
error.
In the most obvious case, it has been held that the Seventh
Amendment does not apply when a "suit at common law" is heard in a
state court.
Minneapolis & St. L. R. Co. v. Bombolis,
241 U. S. 211,
241 U. S. 217
(1916);
Woods v. Holy Cross Hospital, 591 F.2d 1164, 1171,
n. 12 (CA5 1979). Even with its exclusive focus on the claim at
issue here, the Court does not purport to hold that a fraudulent
conveyance action brought in state court would be covered by the
Seventh Amendment, because that action was one at "common law" in
the Court's view.
Nor does the Seventh Amendment apply in all federal forums.
"[T]he Seventh Amendment is not applicable to administrative
proceedings," for example.
Tull v. United States,
481 U. S. 412,
481 U. S. 418,
n. 4 (1987). In these forums "
where jury trials would be
incompatible with the whole concept of administrative
adjudication,'" the Seventh Amendment has no application. Atlas
Roofing Co., supra, at 430 U. S. 454
(emphasis deleted) (quoting Pernell v. Southall Realty,
416 U. S. 363,
416 U. S. 383
(1974)). Thus, we have often looked at the character of the federal
forum in which the claim will be heard, asking if a jury has a
place in that forum, when determining if the Seventh Amendment's
guarantee of a jury trial will apply there.
Most specifically relevant for this case, we have indicated on
several previous occasions that bankruptcy courts -- by their very
nature, courts of equity -- are forums in which a jury would be out
of place. "[A] bankruptcy court . . . [is] a specialized court of
equity . . . a forum before which a jury would be out of place,"
Atlas Roofing, supra, at
430 U. S. 454,
n. 11; consequently, the Seventh Amendment has no application to
these courts.
"[T]he Court [has] recognized that a bankruptcy court has been
traditionally viewed as a court of equity, and that jury trials
would 'dismember' the statutory scheme of the Bankruptcy Act."
Curtis v.
Loether, 415
Page 492 U. S. 81
U.S. 189,
415 U. S. 195
(1974).
Atlas Roofing, Curtis, and countless other cases
have recognized that Congress has the power to "entrust enforcement
of statutory rights to [a] . . . specialized court of equity free
from the strictures of the Seventh Amendment."
Curtis,
supra, at
415 U. S. 195.
Prior cases emphatically hold that bankruptcy courts are such
specialized courts of equity. Indeed, we have stated that
"bankruptcy courts are inherently proceedings in equity."
Katchen v. Landy, 382 U.S. at
382 U. S. 336;
see also Local Loan Co. v. Hunt, 292 U.
S. 234,
292 U. S. 240
(1934).
Before today, this Court has never held that a party in a
bankruptcy court has a Seventh Amendment right to a jury trial on
its claims. Of course, the Court does not actually so hold today,
preferring to be obtuse about just where petitioners are going to
obtain the jury trial to which the Court deems them entitled.
See ante, at
492 U. S. 64.
But in blithely ignoring the relevance of the forum Congress has
designated to hear this action -- focusing instead exclusively on
the "legal" nature of petitioner's claim -- the Court turns its
back on a long line of cases that have rested, in varying degrees,
on that point. The Court's decision today ignores our statement in
Atlas Roofing that
"even if the Seventh Amendment would have required a jury where
the adjudication of [some types of] rights is assigned to a federal
court of law instead of an administrative agency,"
this constitutional provision does not apply when Congress
assigns the adjudication of these rights to specialized tribunals
where juries have no place.
Atlas Roofing, 430 U.S. at
430 U. S. 455.
Indeed, we observed in
Atlas Roofing that it was even true
in
"English or American legal systems at the time of the adoption
of the Seventh Amendment [that] the question whether a fact would
be found by a jury turned to a considerable degree on the nature of
the forum in which a litigant found himself."
Id. at
430 U. S.
458.
The Court's decision also substantially cuts back on Congress'
power to assign selected causes of action to specialized forums and
tribunals (such as bankruptcy courts), by holding
Page 492 U. S. 82
that these forums will have to employ juries when hearing claims
like the one before us today -- a requirement that subverts in
large part Congress' decision to create such forums in the first
place. Past decisions have accorded Congress far more discretion in
making these assignments. Thus,
Block v. Hirsh,
256 U. S. 135,
256 U. S. 158
(1921), found that a Seventh Amendment "objection amount[ed] to
little" when Congress assigned what was, in essence, a common law
action for ejectment to a specialized administrative tribunal. We
reiterated the vitality of
Block v. Hirsh as recently as
our decision in
Pernell v. Southall Realty, supra, at
416 U. S. 383,
and the principle was reaffirmed in several cases between these two
decisions.
See 492 U.S.
33fn2/10|>n. 10,
infra. In
Pernell,
referring to
Block v. Hirsh, we stated that
"the Seventh Amendment would not be a bar to a congressional
effort to entrust landlord-tenant disputes, including those over
the right to possession, to an administrative agency."
Pernell, supra, at
416 U. S. 383.
Yet to the extent that such disputes involve matters that are
"legal" in nature -- as they clearly do -- the Court's decision
today means that Congress cannot do what we said in
Block
and
Pernell that it could. [
Footnote 2/6]
Finally, the Court's ruling today ignores several additional
reasons why juries have no place in bankruptcy courts and other
"specialized courts of equity" like them. First, two of the
principal rationales for the existence of the Seventh Amendment
guarantee -- the notions of "jury equity" and of juries serving as
popular checks on life-tenured judges -- are inapt in bankruptcy
courts. As one scholar noted:
"We have kept the
civil jury . . . as a check on the
federal judge whose life tenure makes [him] suspect [under]
Page 492 U. S. 83
. . . the Populist traditions of this country. The function of
the civil jury is to diffuse the otherwise autocratic power and
authority of the judge."
"This . . . function . . . has little application to
nontraditional civil proceedings such as those which occur in
bankruptcy. . . . The condition of autocracy which would bring the
underlying values of the Seventh Amendment [into force] is not
present, the right to jury trial therefore has no application."
Hearings on S. 558 before the Subcommittee on the Constitution
of the Senate Committee on the Judiciary, the 100th Cong., 1st.
Sess., 572-573 (1987) (Statement of Paul Carrington).
Others have made this same observation.
See, e.g., id.
at 684-685 (statement of Prof. Rowe).
Cf., e.g., In re Japanese
Electronic Products Antitrust Litigation, 631 F.2d 1069, 1085
(CA3 1980). As respondent put it: "A jury in an equitable tribunal
such as a bankruptcy court would in a sense be redundant." Brief
for Respondent 22.
Beyond its redundancy, a requirement that juries be used in
bankruptcy courts would be disruptive, and would unravel the
statutory scheme that Congress has created. The Court dismisses
this prospect, and scoffs that it "can[not] seriously be argued
that permitting jury trials" on this sort of claim would undermine
the statutory bankruptcy scheme.
Ante at
492 U. S. 61.
Yet this argument has not only been "seriously" made, it was
actually accepted by this Court in
Curtis v. Loether,
415 U. S. 189
(1974). In
Curtis, we observed that
Katchen had
rejected a Seventh Amendment claim (similar to the one before us
today), due to our
"recogni[tion] that a bankruptcy court has been traditionally
viewed as a court of equity, and that jury trials would 'dismember'
the statutory scheme of the Bankruptcy Act."
Curtis, supra, at
415 U. S. 195;
see also Atlas Roofing Co. v. Occupational Safety and Health
Review Comm'n, 430 U.S. at
430 U. S. 454,
n. 11. I fear that the Court's decision today will have the
desultory effect we feared when
Curtis was decided.
Page 492 U. S. 84
B
The above is not to say that Congress can vitiate the Seventh
Amendment by assigning any claim that it wishes to a specialized
tribunal in which juries are not employed.
Cf. Atlas Roofing,
supra, at
430 U. S. 461,
n. 16. Our cases require a second inquiry -- the one that the Court
focuses exclusively upon -- concerning the nature of the claim so
assigned.
To resolve this query, the Court properly begins its analysis
with a look at English practice of the 18th century.
See
ante at
492 U. S. 43-47.
After conducting this review, the Court states with confidence
that, "in 18th-century England, . . . a court of equity would not
have adjudicated" respondent's suit.
Ante at
492 U. S. 47.
While I agree that this action could have been brought at law --
and perhaps even that it might have been so litigated in the most
common case -- my review of the English cases from the relevant
period leaves me unconvinced that the chancery court would have
refused to hear this action -- the Court's conclusion
today.
The Court itself confesses that "courts of equity sometimes
provided relief in fraudulent conveyance actions."
Ante at
492 U. S. 43.
The Chancery Court put it stronger, though:
"Courts of Equity have most certainly been in the habit of
exercising a concurrent jurisdiction with the Courts of Law on the
statutes of Elizabeth respecting fraudulent conveyances."
Hobbs v. Hull, 1 Cox 445, 445-446, 29 Eng.Rep. 1242
(1788). Rarely has a more plain statement of the prevailing English
practice at the time of ratification of the Seventh Amendment been
discovered than this one; this alone should be enough to make
respondent's case. Yet instead of accepting the pronouncement of
the equity court about its own jurisdiction, this Court assumes the
role of High Court of Historical Review, questioning the soundness
of
Hobbs' decision because it was issued without adequate
supporting citations.
Ante at
492 U. S. 45-46.
A similar criticism is levied against another case from the same
period,
Ex parte Scudamore, 3 Ves. jun. 85,
Page 492 U. S. 85
30 Eng.Rep. 907 (Ch.1796), which, as even the Court concedes,
"demonstrates that fraudulent conveyance actions could be brought
in equity."
Ante at
492 U. S.
45.
In addition to nitpicking respondent's supporting case law into
oblivion, the Court's more general rejection of respondent's claim
rests on two sources: a passing citation to a wholly inapposite
case,
Buzard v. Houston, 119 U. S. 347
(1886); and a more lengthy quotation from Professor Glenn's
treatise on fraudulent conveyances.
See ante at
492 U. S. 44. I
will not deny that Professor Glenn's work supports the historical
view that the Court adopts today. But notwithstanding his scholarly
eminence, Professor Glenn's view of what the 18th-century English
equity courts would have done with an action such as this one is
not dispositive. Other scholars have looked at the same history and
come to a different conclusion. [
Footnote 2/7] Still others have questioned the soundness
of the distinction that Professor Glenn drew -- between suits to
set aside monetary conveyances and suits to avoid the conveyances
of land -- as unwise or unsupported.
See, e.g., In re
Wencl, 71 B.R. 879, 883, n. 2 (Bkrtcy.Ct., DC Minn.1987).
Indeed, just a few pages after it rests its analysis of the
18th-century case law on Professor Glenn's writing, the Court
itself dismisses this aspect of Professor Glenn's historical
conclusions.
See ante at
492 U. S. 46, n.
5. The Court embraces Professor Glenn's treatise where it agrees
with it and calls it authoritative, while rejecting the portions it
finds troublesome.
Trying to read the ambiguous history concerning fraudulent
conveyance actions in equity -- a task which the Court finds simple
today -- has perplexed jurists in each era, who have come to
conflicting decisions each time that the question has found
relevance. Even in
Schoenthal's time, and under
Page 492 U. S. 86
the statutory regime applicable when that case was decided, many
courts reviewing the same historical sources considered by us today
had concluded that actions such as this one sounded in equity.
See Schoenthal v. Irving Trust Co., 287 U.S. at
287 U. S. 96, n.
3; Note, 42 Yale L.J. 450, 450-452 (1933). In more recent times, an
impressive collection of courts have come to a similar conclusion,
finding that actions to avoid fraudulent conveyances were
historically considered equitable in nature. [
Footnote 2/8]
In sum, I do not think that a fair reading of the history -- our
understanding of which is inevitably obscured by the passage of
time and the irretrievable loss of subtleties in interpretation --
clearly proves or disproves that respondent's action would have
sounded in equity in England in 1791. [
Footnote 2/9]
Page 492 U. S. 87
With the historical evidence thus in equipoise -- and with the
nature of the relief sought here not dispositive either,
see 492 U.S.
33fn2/8|>n. 8,
supra -- we should not hesitate to
defer to Congress' exercise of its power under the express
constitutional grant found in Art. I, § 8, cl. 4, authorizing
Congress "[t]o establish . . . uniform Laws on the subject of
Bankruptcies." Congress has exercised that power, defining actions
such as the one before us to be among the "core" of bankruptcy
proceedings, triable in a bankruptcy court before a bankruptcy
judge and without a jury. I would defer to these decisions.
The Court, however, finds that some (if not all) of these
congressional judgments are constitutionally suspect. While
acknowledging that "[t]o be sure, we owe some deference to
Congress' judgment after it has given careful consideration to"
such a legislative enactment, the Court declines to defer here
because
"respondent has adduced no evidence that Congress considered the
constitutional implications of its designation of all fraudulent
conveyance actions as core proceedings."
Ante at
492 U. S. 61.
See also ante at
492 U. S. 61-62,
n. 16. This statement is remarkable, for it should not be assumed
that Congress, in enacting 28 U.S.C. § 157(b)(2)(H) (1982 ed.,
Supp. V), ignored its constitutional implications. [
Footnote 2/10] The Court
Page 492 U. S. 88
does not say from where it draws its requirement that the
Congress must provide us with some indication that it considered
the constitutional dimensions of its decision before acting, as a
prerequisite for obtaining our deference to those enactments.
[
Footnote 2/11]
Moreover, the Court's cramped view of Congress' power under the
Bankruptcy Clause to enlarge the scope of bankruptcy proceedings,
ignoring that changing times dictate changes in these proceedings,
stands in sharp contrast to a more generous view expressed some
years ago:
"The fundamental and radically progressive nature of
[congressional] extensions [in the scope of bankruptcy laws]
becomes apparent upon their mere statement. . . . Taken altogether,
they demonstrate in a very striking way the capacity of the
bankruptcy clause to meet new conditions as they have been
disclosed as a result of the tremendous growth of business and
development of
Page 492 U. S. 89
human activities from 1800 to the present day. And these acts,
far-reaching though they may be, have not gone beyond the limit of
congressional power, but rather have constituted extensions into a
field whose boundaries may not yet be fully revealed."
"
Continental Illinois National Bank v. Chicago, R. I. &
P. R. Co., 294 U. S. 648,
294 U. S.
671 (1935).
See also Katchen v. Landy, 382 U.S.
at
382 U. S. 328-329."
One of that period's leading constitutional historians expressed
the same view, saying that the Framers of the Bankruptcy Clause
"clearly understood that they were not building a
straight-jacket to restrain the growth and shackle the spirits of
their descendents for all time to come,"
but rather, were attempting to devise a scheme "which, while
firm, was nevertheless to be flexible enough to serve the varying
social needs of changing generations." C. Warren, Bankruptcy in
United States History 4 (1935). Today, the Court ignores these
lessons and places a straitjacket on Congress' power under the
Bankruptcy Clause: a straitjacket designed in an era, as any reader
of Dickens is aware, that was not known for its enlightened
thinking on debtor-creditor relations.
Indeed, the Court calls into question the longstanding
assumption of our cases and the bankruptcy courts that the
equitable proceedings of those courts, adjudicating creditor-debtor
disputes, are adjudications concerning "public rights."
See
Northern Pipeline Construction Co. v. Marathon Pipe Line Co.,
458 U. S. 50,
458 U. S. 71
(1982);
id. at
458 U. S. 91
(REHNQUIST, J., concurring in judgment);
id. at
458 U. S. 92
(Burger, C.J., dissenting);
id. at
458 U. S.
108-118 (WHITE, J., dissenting). The list of lower court
opinions that have reasoned from this assumption is so lengthy that
I cannot reasonably include it in the text; a mere sampling fills
the margin. [
Footnote 2/12] Yet
today the Court calls
Page 492 U. S. 90
all of this into doubt merely because these cases have been
subjected to "substantial scholarly criticism."
Ante at
492 U. S. 56, n.
11. [
Footnote 2/13] If no part of
bankruptcy proceedings involve the adjudication of public rights,
as the Court implies today, then
all bankruptcy
proceedings are saved from the strictures of the Seventh Amendment
only to the extent that such proceedings are the descendents of
earlier analogues heard in equity in 18th-century England. Because,
as almost every historian has observed, this period was marked by a
far more restrictive notion of equitable jurisdiction in
bankruptcies,
see, e.g., Warren,
supra, at 3-5,
the Court's decision today may threaten the efficacy of bankruptcy
courts as they are now constituted. I see no reason to use the
Seventh Amendment as a tool to achieve this dubious result.
Because I find the Court's decision at odds with our precedent,
and peculiarly eager to embark on an unclear
Page 492 U. S. 91
course in Seventh Amendment jurisprudence, I respectfully
dissent. [
Footnote 2/14]
[
Footnote 2/1]
As I will discuss more fully below, the Court's opinion can be
read as overruling or severely limiting the relevant portions of
the following cases:
Atlas Roofing Co. v. Occupational Safety
and Health Review Comm'n, 430 U. S. 442
(1977);
Katchen v. Landy, 382 U.
S. 323 (1966);
Block v. Hirsh, 256 U.
S. 135 (1921); and
Barton v. Barbour,
104 U. S. 126
(1881), plus perhaps some others as well.
[
Footnote 2/2]
Like much else about its opinion, the Court is rather coy about
disclosing which federal statute it is invalidating today. Perhaps
it is 28 U.S.C. § 157(b)(2)(H) (1982 ed., Supp. V), the statute
which includes actions to avoid or recover fraudulent conveyances
among core bankruptcy proceedings; or § 157(b)(1), which permits
bankruptcy judges to enter final judgments in core proceedings
(given the inclusion of fraudulent conveyance actions among these
proceedings); or perhaps it is 28 U.S.C. § 1411(b) (1982 ed., Supp.
V), limiting jury trial rights in bankruptcy; or perhaps some part
of Title 11 itself -- or some combination of the above.
There is no way for Congress, or the lower Article III courts,
or the bankruptcy courts -- or creditors or debtors for that matter
-- to know how they are expected to respond to the Court's
decision, even if they wish to be diligent in conforming their
behavior to today's mandate.
See especially Part V,
ante at
492 U. S. 64.
Though the Court denies that it is being "coy" or "obtuse," it
steadfastly refuses to the end to disclose which statute it finds
unconstitutional today.
See ante at
492 U. S. 64, n.
19.
[
Footnote 2/3]
The Seventh Amendment provides that, "[i]n Suits at common law,
where the value in controversy shall exceed twenty dollars, the
right of trial by jury shall be preserved."
[
Footnote 2/4]
In addition to the points I make below, I disagree with the
Court's portrayal of Congress' expansion of bankruptcy jurisdiction
to include actions such as this one as an act of whimsy. In fact,
when (in 1978) Congress first swept proceedings like the fraudulent
conveyance suit before us into the jurisdiction of the bankruptcy
courts, it was legislating out of a sense that "traditional rights
and remedies were ill-adequate to cope with a manifest public
problem:"
"A major impetus underlying this reform legislation has been the
need to enlarge the jurisdiction of the bankruptcy court in order
to eliminate the serious delays, expense and duplications
associated with the current dichotomy between summary and plenary
jurisdiction. . . . [T]he jurisdictional limitations presently
imposed on the bankruptcy courts have embroiled the court and the
parties in voluminous litigation . . . ."
S.Rep. No. 95-989, p. 17 (1978). This rather plain statement by
Congress makes it clear that it found the system in place at the
time grossly inadequate, and perceived a "manifest public" need for
change.
See also H.R.Rep. No. 95-595, p. 445 (1977).
In response to this legislative history, the Court makes two
points. First, the Court observes that these reports concerned the
1978 Code, and not the 1984 Amendments; it was the latter, the
Court notes, that stripped petitioners of their jury trial right.
Ante at
492 U. S. 61-62,
n. 16. While the Court's analysis is technically correct, it
ignores the fact that the 1978 Code undertook -- to use the Court's
own description -- a "radical refor[m]" of bankruptcy law,
ibid., including the absorption of fraudulent preference
actions into what used to be the plenary jurisdiction of bankruptcy
courts. It was this change which laid the groundwork for the
post-
Northern Pipeline Act at issue here.
Second, and more importantly, the Court acknowledges that, when
Congress adopted the 1984 Amendments, it was motivated by the same
"efficiency" concerns that were the basis for the 1978 legislation.
Ante at
492 U. S. 61-62,
n. 16. Thus, the Court concedes the fundamental point that Congress
modified the traditional jurisdictional scheme concerning
fraudulent conveyance actions because Congress found that this
traditional approach was "inadequate to cope with a manifest public
problem"; under
Atlas Roofing Co. v. Occupational Safety and
Health Review Comm'n, 430 U. S. 442
(1977) -- even under the Court's own description of that case,
ante at
492 U. S. 60 --
this should suffice to permit Congress to limit jury trial rights
on such claims.
Instead of so concluding, however, the Court retreats from
Atlas Roofing and its earlier analysis, and holds that
Congress' enactments do not control here because, in adopting them,
Congress failed to make a "considered judgment of the
constitutionality of [these] change[s]."
Ante at
492 U. S. 62, n.
16. As I observe below,
infra, at
492 U. S. 87-88,
elevating this inquiry to bellwether status is unprecedented in our
Seventh Amendment cases -- and unwise.
[
Footnote 2/5]
Since both of the relevant factors point against application of
the Seventh Amendment here, resolving this case does not require
offering some comprehensive view of how these factors are to be
balanced. The ambiguity, however, is not of my creation, but
rather, comes from the apparent inconsistency of our case law. For
example, cases brought in state courts are
never subject
to the Seventh Amendment, no matter the nature of the claim;
conversely, under the Court's decision in
Northern Pipeline
Construction Co. v. Marathon Pipe Line Co., 458 U. S.
50 (1982), the sort of state law contract claim at issue
there could
never be assigned by Congress to anything
other than an Article III tribunal, in which the Seventh Amendment
would apply.
See also post at
492 U. S. 93
(BLACKMUN, J., dissenting). Other cases look at both factors,
without being altogether clear on their relative import.
Whatever the shortcomings of this opinion for failing to resolve
the difficult balancing question, it remains superior to the
Court's method of "balancing" these concerns, which amounts to no
balancing at all -- and instead focuses solely on the nature of
claim (
i.e., whether it is legal, and whether it concerns
a public right,
see ante at
492 U. S. 42, n.
4) in determining if the Seventh Amendment applies.
[
Footnote 2/6]
Our decision in
Katchen, 382 U.S. at
382 U. S. 336
-- which described the 1898 Act as "convert[ing] [a] legal claim
into an equitable claim" -- is often cited for the same principle;
i.e., as upholding
"the power of Congress to take some causes of action outside the
scope of the Seventh Amendment by providing for their enforcement .
. . in a specialized court."
See J. Friedenthal, M. Kane, & A. Miller, Civil
Procedure 498 (1985).
[
Footnote 2/7]
See, e.g., 4 Collier on Bankruptcy � 548.10, p. 548-125
(15th ed. 1989); O. Bump, Conveyances Made by Debtors to Defraud
Creditors § 532 (4th ed. 1896); F. Wait, Fraudulent Conveyances and
Creditors' Bills §§ 56-60 (1884);
Drake v. Rice, 130 Mass.
410, 412 (1881) (Gray, C.J.); W. Roberts, Voluntary and Fraudulent
Conveyances 525-526 (3d Am. ed. 1845).
[
Footnote 2/8]
See, e.g., In re Graham, 747 F.2d 1383, 1387 (CA7
1984);
Damsky v. Zavatt, 289 F.2d 46, 53 (CA2 1961)
(Friendly, J.) (an action by a bankruptcy trustee to "set aside a
fraudulent conveyance has long been cognizable in equity");
Johnson v. Gardner, 179 F.2d 114, 116-117 (CA9 1949).
See also In re Harbour, 840 F.2d 1165, 1172-1178 (CA4
1988);
In re I. A. Durbin, Inc., 62 B.R.
139, 145 (SD Fla. 1986);
In re Hendon Pools of Michigan,
Inc., 57 B.R.
801, 802-803 (ED Mich. 1986);
In re Southern Industrial
Banking Corp., 66 B.R. 370, 372-375 (Bkrtcy Ct., ED
Tenn.1986).
[
Footnote 2/9]
Nor do I think it clear, as the Court seems to, that simply
because the remedy sought by respondent can be expressed in
monetary terms, the relief he seeks is therefore "legal" in nature,
and not equitable.
Ante at
492 U. S.
47-49.
This Court has not accepted the view that "any award of monetary
relief must necessarily be
legal' relief." Curtis v.
Loether, 415 U. S. 189,
415 U. S. 196
(1974). We have previously recognized that actions to disgorge
improperly gained profits, Tull v. United States,
481 U. S. 412,
481 U. S. 424
(1987), to return funds rightfully belonging to another,
Curtis, supra, at
415 U. S. 197, or to submit specific funds wrongfully
withheld, Bowen v. Massachusetts, 487 U.
S. 879, 487 U. S.
893-896 (1988), are all equitable actions even though
the relief they seek is monetary -- because they are restitutionary
in nature. Respondent's action against petitioners is of the same
class, seeking a similar remedy.
Here the trustee is simply "ask[ing] the court to act in the
public interest by restoring the
status quo and ordering
the return of that which rightfully belongs" to the estate; "[s]uch
action is within . . . the highest tradition of a court of equity."
Porter v. Warner Co., 328 U. S. 395,
328 U. S. 402
(1946). It should not matter whether respondent is seeking to have
returned the precise cashier's checks that petitioner Medex had in
its possession at one time, or the funds yielded to Medex by
cashing those checks. To turn the case on this distinction would
only give entities in Medex's position an incentive to consummate
fraudulent transfers as quickly as possible: hardly a desirable
one. A host of Bankruptcy Courts have recognized as much.
See,
e.g., In re Wencl, 71 B.R. 879, 883-884, and n. 2 (DC
Minn.1987);
In re Reda, Inc., 60 B.R. 178, 181 (ND
Ill.1986).
[
Footnote 2/10]
An irony of the Court's rebuke of Congress is that Congress'
decision to include actions to avoid or recover fraudulent
conveyances among "core" bankruptcy proceedings found its
inspiration in the "Emergency Rule" drafted and issued by the
Administrative Office of the United States Courts on December 3,
1982, to govern practice in the bankruptcy courts following our
decision in
Northern Pipeline. See Emergency Rule
§ d(3)(A) ("Related proceedings do not include . . . proceedings to
set aside preferences and fraudulent conveyances");
see also
Addison v. O'Leary, 68 B.R.
487, 491 (ED Va. 1986) ("[T]he jurisdictional provisions of the
1984 Bankruptcy Amendments closely parallel the Emergency Reference
Rule"); G. Treister, J. Trost, L. Forman, K. Klee, & R. Levin,
Fundamentals of Bankruptcy Law § 2.01(a), p. 31 (2d ed. 1988)
(describing this portion of the Emergency Rule as the "forerunner"
of the 1984 Amendments).
We learn today that, in retrospect, the Emergency Rule, too, was
unconstitutional in its failure to include a jury trial right for
actions to avoid fraudulent conveyances. It appears that it was not
only Congress that failed in its duty to give adequate
"consider[ation] [to] the constitutional implications of its"
actions.
Cf. ante at
492 U. S.
61.
[
Footnote 2/11]
This is particularly unfortunate because today's ruling may be
the first time ever that the Court has struck down a congressional
designation of a particular cause of action as "equitable" in
nature.
See Note, Congressional Provision for Nonjury
Trials, 83 Yale L.J. 401, 414-415 (1973) ("[T]he Court has never
rejected a congressional indication that an action is equitable in
nature");
but cf. Curtis v. Loether, supra,
("reinterpreting" congressional enactment to respond to Seventh
Amendment "concerns").
In the past, we have been far more deferential to Congress'
designations in this regard.
See, e.g., Mitchell v. Robert
DeMario Jewelry, Inc., 361 U. S. 288,
361 U. S.
290-295 (1960);
Porter v. Warner, supra, at
328 U. S.
397-402.
[
Footnote 2/12]
Such cases decided since
Northern Pipeline, from the
Court of Appeals alone, include
In re Harbour, 840 F.2d at
1177-1178;
In re Wood, 825 F.2d 90, 95-98 (CA5 1987);
In re Mankin, 823 F.2d 1296, 1307-1308 (CA9 1987),
cert. denied sub nom. Munn v. Duck, 485 U.S. 1006 (1988);
In re Arnold Print Works, 815 F.2d 165, 168-170 (CA1
1987);
Briden v. Foley, 776 F.2d 379, 381 (CA1 1985); and
In re Kaiser, 722 F.2d 1574, 1580, and n. 2 (CA2 1983).
Many more such cases are found in the reports of the decisions of
the district courts and the bankruptcy courts.
[
Footnote 2/13]
This is indicative of the Court's approach throughout its
opinion: virtually every key holding announced today rests on a
citation to scholarly authority, and not to any precedent of the
Court. This includes the Court's holdings that the action at issue
here was cognizable only at law in 18th-century England,
ante at
492 U. S. 44;
that fraudulent conveyance actions
"more nearly resemble state law contract claims . . . than they
do creditors' hierarchically ordered claims to a
pro rata
share of the bankruptcy
res,"
ante at
492 U. S. 56;
and that Congress could not eliminate a jury trial right in this
sort of action by placing it in "a specialized court of equity,"
ante at
492 U. S. 61 --
in short, the three critical holdings issued by the Court in its
opinion.
Like the Court, I think the analysis of learned commentators is
a useful tool to enhance our understanding of the law in a field
such as bankruptcy. Unlike the Court, however, I would not use the
views of these scholars as the basis for disposing of the case
before us -- particularly where those views counsel rejection of
otherwise viable strains in our case law.
See, e.g.,
Gibson, Jury Trials in Bankruptcy, 72 Minn.L.Rev. 967, 1040-1041,
n. 347 (1988) (cited
ante at
492 U. S. 56, n.
11).
[
Footnote 2/14]
Because I do not believe that either petitioner is entitled to a
jury trial under the Seventh Amendment, I do not reach the question
whether petitioner Granfinanciera is deprived of any Seventh
Amendment rights it might otherwise have due to its status as an
instrument of a foreign sovereign. Like the Court, I would "leave
for another day" the resolution of this difficult question.
Ante at
492 U. S.
40.
JUSTICE BLACKMUN, with whom JUSTICE O'CONNOR joins,
dissenting.
I agree generally with what JUSTICE WHITE has said, but write
separately to clarify, particularly in my own mind, the nature of
the relevant inquiry.
Once we determine that petitioners have no statutory right to a
jury trial, we must embark on the Seventh Amendment inquiry set
forth in
Atlas Roofing Co. v. Occupational Safety and Health
Review Comm'n, 430 U. S. 442
(1977). First, we must determine whether the matter to be
adjudicated is "legal" rather than "equitable" in nature, a
determination which turns on the nature of the claim and of the
relief sought. If the claim and the relief are deemed equitable, we
need go no further: the Seventh Amendment's jury-trial right
applies only to actions at law.
In this case, the historical inquiry is made difficult by the
fact that, before the Federal Rules of Civil Procedure unified law
and equity, parties might have been drawn to the equity side of the
court because they needed its procedural tools and interim
remedies: discovery, accounting, the power to clear title, and the
like. In light of the frequency with which these tools were likely
needed in fraud cases of any kind, it is no surprise that, as
JUSTICE WHITE points out, fraudulent conveyance actions, even if
cognizable at law, often would be found on the equity docket.
See generally O. Bump, Conveyances Made by Debtors to
Defraud Creditors § 532 (4th ed. 1896); F. Wait, Fraudulent
Conveyances and Creditors' Bills §§ 59-60 (1884); W. Roberts,
Voluntary and Fraudulent
Page 492 U. S. 92
Conveyances 525-526 (3d Am. ed. 1845). This procedural dimension
of the choice between law and equity lends a tentative quality to
any lessons we may draw from history.
The uncertainty in the historical record should lead us, for
purposes of the present inquiry, to give the constitutional right
to a jury trial the benefit of the doubt. Indeed, it is difficult
to do otherwise after the Court's decision in
Schoenthal v.
Irving Trust Co., 287 U. S. 92
(1932).
Schoenthal turned on the legal nature of the
preference claim and of the relief sought,
id. at
287 U. S. 94-95,
rather than upon the legal nature of the tribunal to which "plenary
proceedings" were assigned under the 1898 Bankruptcy Act.
"With the historical evidence thus in equipoise,"
ante
at
492 U. S. 87
(WHITE, J., dissenting), but with
Schoenthal weighing on
the "legal" side of the scale, I then would turn to the second
stage of the
Atlas Roofing inquiry: I would ask whether,
assuming the claim here is of a "legal" nature, Congress has
assigned it to be adjudicated in a special tribunal "with which the
jury would be incompatible."
Atlas Roofing, 430 U.S. at
430 U. S. 450;
see also Tull v. United States, 481 U.
S. 412,
481 U. S. 418,
n. 4 (1987). Here, I agree with JUSTICE WHITE that
Katchen v.
Landy, 382 U. S. 323
(1966), as interpreted in
Atlas Roofing, requires the
conclusion that courts exercising core bankruptcy functions are
equitable tribunals, in which "a jury would be out of place and
would go far to dismantle the statutory scheme."
Atlas
Roofing, 430 U.S. at
430 U. S. 454,
n. 11.
Having identified the tribunal to which Congress has assigned
respondent's fraudulent conveyance claim as equitable in nature,
the question remains whether the assignment is one Congress may
constitutionally make. Under
Atlas Roofing, that question
turns on whether the claim involves a "public right."
Id.
at
430 U. S. 455.
When Congress was faced with the task of divining the import of our
fragmented decision in
Northern Pipeline Construction Co. v.
Marathon Pipe Line Co., 458 U. S. 50
(1982), it gambled and predicted that a statutory right which is an
integral part of a pervasive regulatory
Page 492 U. S. 93
scheme may qualify as a "public right."
Compare
H.R.Rep. No. 98-9, pt. 1, pp. 6, 13 (1983) (House Report),
with S.Rep. No. 98-55, pp. 32-40 (1983) (Senate Report);
see Thomas v. Union Carbide Agricultural Products Co.,
473 U. S. 568,
473 U. S. 586,
473 U. S. 594
(1985);
see also id. at
473 U. S. 599
(BRENNAN, J., concurring in judgment) ("[A] bankruptcy
adjudication, though technically a dispute among private parties,
may well be properly characterized as a matter of public rights").
Doing its best to observe the constraints of
Northern
Pipeline while at the same time preserving as much as it could
of the policy goals of the major program of bankruptcy reform the
decision in
Northern Pipeline dismantled,
see
House Report, at 7, Senate Report, at 6-7, Congress struck a
compromise. It identified those proceedings which it viewed as
integral to the bankruptcy scheme as "core" (doing its best to
exclude "
Marathon-type State law cases"), and assigned
them to a specialized equitable tribunal.
Id. at 2.
I agree with JUSTICE WHITE,
ante at
492 U. S. 88-89,
that it would be improper for this Court to employ, in its Seventh
Amendment analysis, a century-old conception of what is and is not
central to the bankruptcy process, a conception that Congress has
expressly rejected. To do so would, among other vices, trivialize
the efforts Congress has engaged in for more than a decade to bring
the bankruptcy system into the modern era.
There are, nonetheless, some limits to what Congress
constitutionally may designate as a "core proceeding," if the
designation has an impact on constitutional rights. Congress, for
example, could not designate as "core bankruptcy proceedings" state
law contract actions brought by debtors against third parties.
Otherwise,
Northern Pipeline would be rendered a nullity.
In this case, however, Congress has not exceeded these limits.
Although causes of action to recover fraudulent conveyances
exist outside the federal bankruptcy laws, the problems created by
fraudulent conveyances are of particular significance
Page 492 U. S. 94
to the bankruptcy process. Indeed, for this reason, the
Bankruptcy Code long has included substantive legislation regarding
fraudulent conveyances and preferences. And the cause of action
respondent brought in this case arises under federal law.
See 11 U.S.C. §§ 548(a)(2) and 550(a). This substantive
legislation is not a jurisdictional artifice. It reflects, instead,
Congress' longstanding view that fraudulent conveyances and
preferences on the eve of bankruptcy are common methods through
which debtors and creditors act to undermine one of the central
goals of the bankruptcy process: the fair distribution of assets
among creditors. Congress' conclusion that the proper functioning
of the bankruptcy system requires that expert judges handle these
claims, and that the claims be given higher priority than they
would receive on a crowded district court's civil jury docket
(
see Senate Report, at 3; House Report, at 7-8), is
entitled to our respect.
The fact that the reorganization plan in this case provided that
the creditor's representatives would bring fraudulent conveyance
actions only after the plan was approved does not render the
relationship between fraudulent conveyance actions and the
bankruptcy process "adventitious."
Ante at
492 U. S. 60, n.
15 (majority opinion). Creditors would be less likely to approve a
plan which forced them to undertake the burden of collecting
fraudulently transferred assets if they were not assured that their
claims would receive expert and expedited treatment.
In sum, it must be acknowledged that Congress has legislated
treacherously close to the constitutional line by denying a jury
trial in a fraudulent conveyance action in which the defendant has
no claim against the estate. Nonetheless, given the significant
federal interests involved, and the importance of permitting
Congress at long last to fashion a modern bankruptcy system which
places the basic rudiments of the bankruptcy process in the hands
of an expert equitable tribunal, I cannot say that Congress has
crossed the constitutional line on the facts of this case. By
holding otherwise, the Court
Page 492 U. S. 95
today throws Congress into still another round of bankruptcy
court reform, without compelling reason. There was no need for us
to rock the boat in this case. Accordingly, I dissent.