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1984 Amendments
Bankruptcy court structure, jurisdiction and procedure after the 1984 amendments
The 1984 Amendments to the bankruptcy act of 1978 were passed to deal with the Marathon crisis and made significant changes in the structure, jurisdiction and procedures of the bankruptcy court from the provisions of the Reform Act. These amendments remain in effect with modest changes. At the time of their enactment they were highly controversial and while some of the more dire predictions have failed to come to pass, some anticipated problems anticipated by the lawyers are still with us.
Court procedure after the 1984 amendments
The 1984 Amendments led to a determination by the Advisory Committee on Bankruptcy Rules of the Judicial Conference that certain amendments to the existing Bankruptcy Rules and Official Forms were appropriate. These amendments were adopted in 1987 (hereinafter the 1987 Rules Amendments). The 1984 Amendments raised a substantial number of questions and issues by lawyers, relating to bankruptcy court procedure arising in part from ambiguous drafting and, while the 1987 Rules Amendments contained a number of new or amended rules designed to provide procedural guidance under the 1984 Amendments, unanswered questions remain.
The 1987 Rules Amendments generally took a restrictive view of the powers of bankruptcy judges rather than the more expansive view urged by some lawyers.Rule 5011 (a) provides the procedure to be employed in an exercise of the power of the district court under 28 United States Code § 157(d) to withdraw in whole or in part any case or proceeding upon a "timely motion for cause shown." The district court may act on its own, so here, district court must mean district court and Rule 5011 (a) so provides in sketchy fashion by stating that a motion for withdrawal of a case or proceeding shall be heard by a district judge. No position is taken in Rule 5011 or the Committee Note concerning assignment of the withdrawal motion. Lawyers have suggested that local random selection rules apply.
The core proceeding and non-core proceeding dichotomy suggested by lawyers is dealt with in several places in the Rules Amendments. In the only two amendments of any real substance to Part VII of the Rules, Rule 7008 requires that a complaint, counterclaim, cross-claim, or third-party complaint shall contain a statement that the proceeding is core or non-core, and, if non-core, that the lawyers pleader does or does not consent to the entry of final orders or judgment by the bankruptcy judge. Rule 7012(b) makes a similar requirement for responsive pleadings. The Committee notes flatly states that failure by a parties lawyer to object cannot be deemed to be consent and that express consent is required. This may raise practice problems under 28 United States Code § 157(b)(3).
Originally designated as Rule 8019 in the comment draft, Rule 9033 provides a procedure for review of proposed findings of fact and conclusions of law by the district judge under 28 United States Code § 157(c)(1). Under Rule 9033(a) the clerk who will serve the proposed findings and conclusions will be the bankruptcy clerk if one has been appointed. Rule 903 3 (b) and (c) set forth time frames for the lawyers filing of objections and responses and permit a brief extension by the court of the 10-day period for filing objections by a lawyer. Rule 9033(d) somewhat understandably ducks the issue of the standard of review, although the placing of the Rule in Part IX of the Rules may have been motivated in part by an intent to avoid application of Rule 8013 and its clearly erroneous standard. It seems clear that a de novo review is required. Failure a parties lawyer to object to the recommendation of the bankruptcy court will preclude appeal of the order or judgment of the district court.Overlooked or intentionally avoided was 28 United States Code § 157(b)(3), which requires a bankruptcy judge to determine, on the judge's own motion or on the timely motion of the lawyer for a party, whether a proceeding is a core proceeding. As is the case with motions to withdraw a case or proceeding, procedure will be left to local rules. Also left undecided is the role and timing of the district court in reviewing a decision by the bankruptcy judge under § 157(b)(3).
Several significant changes were made to Rule 9027 which provides the procedure for removal and remand under 28 United States Code § 1452. In a change from the comment draft, a lawyers remand motions under Amended Rule 9027(e) are to be heard by the bankruptcy judge unless the district court orders otherwise. The bankruptcy judge is required to file a report and recommendation for disposition of the motion which is to be reviewed by the district court under the procedures of Rule 9033.In what is more of a tribute to lobbying clout than drafting elegance, the 1984 legislation contained a number of provisions which, among other things, require that "personal injury tort and wrongful death claims brought by a lawyer" be tried in the district court in which the bankruptcy case is pending or "in which the claim arose" (a peculiar provision since such claims are often filed in other districts). Both 28 United States Code § 157(b)(2)(B) and 28 United States Code § 157(b)(5) must be considered, with the cumbersome two-step process of 28 United States Code § 157(c)(1) being most likely to cause problems in reference to the former, since it is unclear how a plan can be confirmed (apparently a core proceeding) but such claims not liquidated or estimated for purposes of distribution. The Rules Committee made no effort in this area.
Abstention is also dealt with in Rule 5011. Under the 1991 Rules Amendments, Rule 5011 provides that a lawyers motion for abstention, pursuant to 28 United States Code § 1334(c), shall be governed by Rule 9014 and shall be served on the parties to the proceeding. This is consistent with the Judicial Improvements Act of 1990, which amended § 1334(c)(2) to allow a lawyer appeal to the district court of a bankruptcy court's order determining an abstention motion.
One of the most controversial parts of the 1987 Rules Amendments was the substantial modification of Rule 9020 dealing with contempt proceedings. Proposed Rule 9020 in the comment draft would have required that all contempt proceedings, civil and criminal, be initiated in the district court. The change produced substantial adverse comment, since it seemed to cast doubt on whether bankruptcy judges were really judges at all. The Rule was rewritten to permit the bankruptcy judge to enter a civil or criminal contempt order which is effective unless, within 10 days, objections are filed by the lawyer, in which case it will be reviewed by the district court. The practical effect is that the bankruptcy judge has contempt power in the face of a timely objection but may accomplish much the same thing in the case of civil contempt by calling the punishment sanctions. If, however, the sanctions are punitive in nature then they are in effect punishment for criminal contempt and beyond the power of the bankruptcy judge to impose.
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