Opposition — First National Bank of Tekamah v. Hansen

Office - Suprem

é Court, U.S.

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ED

No. 82-1802 JOM °2 1983

In The “EXANDER L. STEVas.

Supreme Court of the United States —

October Term, 1982

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IN THE MATTER OF ORVILLE E. HANSEN, |.

Debtor.

FIRST NATIONAL BANK OF TEKAMAH,

NEBRASKA,

Petitioner,

VS.

ORVILLE E. HANSEN and VIRGINIA HANSEN,

Respondents.

ra’

Vv

ON PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

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BRIEF FOR RESPONDENTS

ORVILLE E. HANSEN and VIRGINIA HANSEN

IN OPPOSITION

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Micwuaet G. Hetms

Kerra I. FReperIcK

(Counsel of Record)

Scumip, Forp, Moonry & F’ReperIck

1800 First National Center

Omaha, Nebraska 68102

Telephone (402) 341-7100

Attorneys for Respondents,

Orville E. Hansen and Virginia

Hansen

June 1983

COCKLE PRINTING CO., 2311 Douglas St.. Omaha 68102

QUESTIONS PRESENTED

1, Whether Northern Pipeline Construction Co. v.

Marathon Pipe Line Co., 102 S. Ct. 2858 (1982), held that

no federal court has jurisdiction to consider any bank-

ruptcy matter?

2. Whether district courts may adopt local rules or

make special references delegating certain authority to

bankruptcy judges to perform clearly defined and limited

tasks in bankruptcy cases?

if

TABLE OF CONTENTS

Pages

QUESTIONS PRESENTED i

TABLE OF CONTENTS ii

TABLE OF AUTHORITIES i

OPINIONS BELOW. 1

REASONS FOR DENYING THE WRIT .......... 1

I. THE COURTS OF APPEALS HAVE UNAN-

IMOUSLY UPHELD DISTRICT COURT

BANKRUPTCY JURISDICTION AND THE

LOCAL RULE DELEGATION. 3

Il. THE DECISION OF THE COURT OF AP-

PEALS IS CORRECT. .....

Ill. THE COURT OF APPEALS DECISION UP-

HOLDING THE LOCAL RULE IS CORRECT. 9

CeCe 11

or

TABLE OF AUTHORITIES

Cases CrTEep

American Airlines, Inc. v. Braniff Airways, Inc.,

et. al., Case No. 82-1623 : 2

‘Braniff Airways, Inc. v. CAB, 700 F.2d 214, 215

(Sth Cir. 1983) 3

Braniff Airways, Inc. v. CAB (In re Braniff),

10 B.C. D. 30 (N. D. Tex. 1983) ... << f

Chandler v. Judicial Council of the Tenth Circuit,

398 U.S. 74 (1970) 10

ili

TABLE OF AUTHORITIES—Continued

Pages

Conlon v. Adamski, 77 F. 2d 397, 399 (D.C. Cir. 1985) 9

First National Bank of Tekamah v. Hansen, 702

F. 2d 728 (8th Cir. 1983)

Hull v. Burr, 234 0.5. Viz, 720-22 (1914) —________.

In re International Harvester Company and 1H

Steel Corporation, Case No. 82-1385 ccc-csccmcceenseneee 2

In re Keene Corporation, GAF Corporation and

Pacor, Ine., Case No. 82-1242 ...... ULM Ve eee 2

Lovell v. Newman & Son, 227 U.S. 412, 423 (1913)...

National Mutual Insurance Co. v. Tidewater Trans-

fer Co., 337 U.S. 582, 611 (1949)

Northern Pipeline v. Marathon Oil, 102 S. Ct.

POOe ee

Weissinger v. Boswell, 330 F. Supp. 615, 625

(M.D. Ala. 1971) Mist OG eae OIE

White Motor Corp. v. Citibank, N. A., No. 82-3688

(6th Cir. April 1, 1983)

Statutes Crrep

11 U.S.C. §$105(a)

2 V.8.C. 42a) —...____

28 U.S.C. $1331 ..

28 U.S.C. $1332 ..

28 U.S.C. § 1334

iv

TABLE OF AUTHORITIES—Continued

2S tt 80) oo. 3, 4, 6,8

28 U.S.C. §1471(b) iv 3, 4,8

Parente Gok i. FF!

Pou. &. of Cas. Pre. 3 ........... oo oS

Rian ANCES) CO

No. 82-1802

fy

Vv

In The

Supreme Court of the United States

October Term, 1982

fy

Vv

IN THE MATTER OF ORVILLE E. HANSEN,

Debtor.

FIRST NATIONAL BANK OF TEKAMAH,

NEBRASKA,

Petitioner,

Vs.

ORVILLE E. HANSEN and VIRGINIA HANSEN,

Respondents.

fy

VW

ON PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

ray

VW

BRIEF FOR RESPONDENTS

ORVILLE E. HANSEN and VIRGINIA HANSEN

IN OPPOSITION

fy.

Vv

OPINIONS BELOW

The decision of the Court of Appeals below has now

been reported. In re Orville HE. Hansen, 702 F.2d 728

(8th Cir. 1983) (per curiam).

REASONS FOR DENYING THE WRIT

The decision of the Court of Appeals is correct. It

conflicts with no decision of this Court or any other Court

of Appeals. Further, respondents respectfully state that

each of the material issues presented by petitioner herein

was presented to this Court on three prior occasions. The

identical issues sought to be raised herein were the subject

of a petition for writs of prohibition and mandamus filed

in this Court on January 24, 1983, in In re Keene Corpora-

tion, GAF Corporation and Pacor, Inc., Case No. 82-1242.

On February 22, 1983, this Court in Case No. 82-1242, de-

nied the petition for writs of prohibition and mandamus.

Identical issues were again presented to this Court in an-

other petition for writs of prohibition and mandamus in

In re International Harvester Company and IH Steel

Corporation, Case No. 82-1385, filed on February 16, 1983.

On April 18, 1983, this Court in Case No. 82-1385 again

denied the petition for writs of prohibition and mandamus.

Again, the identical issues sought to be raised herein were

presented to this Court in the petition for writ of certior-

ari filed in this Court on April 4, 1983 in American Atr-

lines, Inc. v. Braniff Airways, Inc., et al., Case No. 82-1623.

In that case, petitioner also sought to raise the identical

issues presented by petitioner herein. On May 23, 1983,

this Court in Case No. 82-1623 denied the petition for writ

of certiorari.

Respondents respectfully submit that the foregoing

orders entered by this Court in Case Nos. 82-1242, 82-1385,

and 82-1623 are dispositive of all issues and matters raised

by the petitioner herein.

I.

The Courts of Appeals have unanimously up-

held District Court bankruptcy jurisdiction and

the local rule delegation.

The petitioner states that there is “much dispute and

disagreement between the lower courts” as to whether

there is continuing jurisdiction over bankruptcy matters,

with the result of “leaving both litigants and the courts

in a state of confusion”. (Pet. at 21,22). This statement

is entirely wrong. The fact of the matter is that the body

of district court and appellate court decisions upon the

issnes presented by petitioner has consistently rejected

petitioner’s arguments.

Since the enactment of the interim rules, the Fifth,

Sixth and Eighth Cireuit Courts of Appeals have all con-

cluded that district courts do continue to have jurisdiction

over bankruptcy matters under 28 U.S.C. $$ 1334 and

1471(a) and (b), and that the interim rules are constitu-

tional and valid.

The Fifth Circuit’s per curiam opinion affirmed the

decision of the district court therein uph~lding jurisdiction

“essentially for the reasons stated in its memorandum

opinion”. Braniff Airways, Inc. v. CAB, 700 F.2d 214,

215 (5th Cir. 1983) (per curiam). The district court there-

in, in turn, had fully responded to the issues the petitioner

now seeks to raise in its petition herein. Braniff Airways,

Inc. v. CAB (In re Braniff), 10 B.C. D. 30 (N.D. Tex.

1983). The district court therein stated that “the difficulty

fin Northern Pipeline] was not in separating § 1471(c)

from §1471(a) and (b), but in separating jurisdiction

over ...a case like Marathon, requiring an Art. IIT court,

4

from the other appropriate jurisdiction of the Bankruptcy

Court”. Jd. at 31 (emphasis in original). The district

court determined that this Court “never intended to in-

validate, nor did it invalidate 28 U.S.C. $1471(a) and

(b)”. Id. The opinion further stated that even if North-

ern Pipeline had invalidated 28 U.S.C. § 1471(a) and (b),

the district court nonetheless retained bankruptcy court

jurisdiction under 28 U.S.C. §§ 1331, 1332, 1334. Id. at

31-32.

As concerns the interim rules permitting reference

of bankruptcy matters from the district court to the bank-

ruptey court, the district judge therein determined that

the local rule was constitutional and was an authorized ex-

ercise of rule-making authority under 11 U.S.C. $ 105(a),

28 U.S. C. § 2071, Fed. R. of Civ. Pro. 83, Bankruptcy Rule

927, and the court’s inherent equitable powers. Jd. at 32-

34.

Likewise, the Sixth Circuit in White Motor Corp. v.

Citibank, N.A., No. 82-3638 (6th Cir. April 1, 1983), also

held that district court jurisdiction exists over bankruptcy

matters on 28 U.S.C. §1471(a) and (b) as well as under

98 U.S.C. $1334. Id. at 13-15. The Sixth Circuit went

on to state that the district courts “have both the authority

to adopt the interim rule and the obligation to provide for

the continuing orderly conduct of bankruptcy proceed-

ings”. Id. at 15. Authority for adoption of the interim

rules was found under the congressional mandate to the

Judicial Conference of the United States, 28 U.S. C. § 1331,

et seq., and under the general rule making authority of

the district courts.

On March 23, 1983, the Eighth Circuit issued its unan-

imous per curiam opinion to the same effect in this case.

First National Bank of Tekamah v. Hansen, 702 F.2d 728

(8th Cir. 1983).

Thus, all three of the Circuit Courts of Appeals that

have reviewed the matter have unanimously rejected the

arguments asserted herein by First National Bank of Te-

kamah. It should be noted that the district courts have

also consistently taken the same position.’ There is no

division or confusion in the federal judiciary with respect

to the issues raised in First National’s petition. Further,

as previously noted, this Court has on three separate oc-

easions disposed of the questions presented by First Na-

tional. Accordingly, there is no need for this Court to

review the Eighth Circuit decision to provide consistency

on these questions.

II.

The decision of the Court of Appeals is correct.

First National’s suggestion that there is a conflict be-

tween the Court of Appeal’s decision and this Court’s

1In re Q1 Corporation v. Victor Reichenstein, Cv. No. 83-

0525 (E. D. N. Y. March 22, 1983); In re Matlock Trailer Corp.,

Walter E. Heller & Company Southeast, Inc. v. Matlock Trailer

Corp., Gen. Dkt. No. 3:83-X-5 (M.D. Tenn. Feb. 23, 1983);

In re Color Craft Press, Ltd.: Color Craft Press Ltd. v. Nation-

wide Shopper Systems, Inc. and In re Kent D. Richardson and

F. Nadine Richardson: Gillman, et al. v. Preston Family Invest.

Co., et al., 10 B.C.D. 182 (D. Utah Feb. 22, 1983) rev’ing 10

B.C.D. 53 and Bk. No. 82C-0736, supra; In re Braniff Airways,

Inc.: Braniff Airways, Inc. v. Civil Aeronautics Bd., Misc. No.

4-221-E (N. D. Tex. 1983); In re Northland Point Partners, 26

B. R. 860 (E.D. Mich. Jan. 7, 1983), order adhered to 26 B. R.

1019 (E.D. Mich. Feb. 8, 1983) [certified to 6th Circuit under

28 U.S.C. § 1292(b) by Order entered Feb. 8, 1983]; Moody

v. Martin, 27 B. R. 991 (W. D. Wis. 1983); Otero Mills, Inc. v.

Security Bank & Trust, No. 82-373-M, slip op. (D.N.M. Feb. 28,

1983); Prudential Ins. Co. v. Stouffer Corp.

6

ruling in Northern Pipeline appears to be an overly broad

and incorrect reading of Northern Pipeline. While North-

ern Pipeline invalidated the jurisdiction of the bankruptcy

courts under the Bankruptcy Reform Act on the basis that

the bankruptcy courts could not exercise the same juris-

diction conferred on Art. III courts, the Court of Appeals

correctly held that Northern Pipeline did not invalidate

the District Court’s bankruptcy jurisdiction. The sole is-

sue presented in Northern Pipeline, as noted in the four-

Justice plurality opinion was “whether the assignment by

Congress to bankruptcy judges of the jurisdiction granted

in §241(a) of the [Reform Act] violates Art. III of the

Constitution”. 102 S. Ct. at 2862 (emphasis added). The

plurality opinion did not extend any further than to hold

that “the broad grant of jurisdiction to the bankruptcy

courts contained in § 241(a) (at 28 U.S.C. §1471(a)) is

unconstitutional”. 102 S.Ct. at 2880 (emphasis added).

As have previous petitioners to this Court, First Na-

tional suggests that Footnote 40 of the plurality opinion

provides a basis for the position that no jurisdiction con-

tinues to exist in the district court over bankruptcy mat-

ters. Such interpretation of footnote 40 is erroneous.

Footnote 40 to the plurality opinion replied to a sugges-

tion by Chief Justice Burger, in dissent, that Congress

could remedy the Art. III problem by referring to the dis-

trict courts the kind of state law claims at issue in North-

ern Pipeline and by leaving intact the remaining jurisdic-

tion of the bankruptcy courts. 102 S. Ct. at 2882. The

plurality responded in footnote 40 to the Chief Justice by

saying that it was not for the Court to anticipate how

Congress would redefine or reallocate bankruptcy court

jurisdiction after the Northern Pipeline holding. The

~]

plurality’s reference in the footnote was exclusively to the

jurisdiction of the bankruptcy courts.’

The two-Justice concurring opinion written by Jus-

tice Rehnquist agreed that the Bankruptcy Court could

not exercise jurisdiction of Northern Pipeline’s common

law action against Marathon. Justice Rehnquist and

Justice O’Connor, however, were unwilling to decide any

other constitutional question on the jurisdiction of the

bankruptey courts, and did not even address the issue of

the jurisdiction of the district courts. 102 S. Ct. 2881. In

seeking to limit the Order to be entered by this Court,

Justice Rehnquist stated:

?Footnote 40 states in full:

“It is clear that, at the least, the new bankruptcy judges

cannot constitutionally be vested with jurisdiction to decide

this state-law contract claim against Marathon. As part of a

comprehensive restructuring of the bankruptcy laws, Congress

has vested jurisdiction over this and all matters related to cases

under Title 11 in a single non-Art. lil court, and has done so

pursuant to a single statutory grant of pf eamaeigs in these

circumstances, we cannot conclude that if Congress were aware

that the grant of jurisdiction could not constitutionally encom-

pass this and similar claims, it would simply remove the juris-

diction of the bankruptcy court over these matters, leaving the

jurisdictional provision and adjudicatory structure intact with

respect to other types of claims, and thus subject to Art. Ill con-

stitutional ae on a claim-by-claim basis. Indeed, we

note that one of the express purposes of the Act was to ensure

adjudication of all claims in a single forum and to avoid the de-

lay and expense of jurisdictional disputes. See H.R. Rep. No.

95-595, supra, pp. 43-48; S. Rep. No. 95-989, p. 17 (1978). Nor

can we assume, as THE CHIEF JUSTICE suggests, post, p. 2, that

Congress’ choice would be to have this case ‘routed to the

United States district court of which the bankruptcy court is an

adjunct’. We think that it is for Congress to determine the

proper manner of restructuring the Bankruptcy Act of 1978 to

conform to the requirements of Art. Ill, in the way that will best

effectuate the legislative purpose”. 102 S. Ct. at 2880 n. 40°

(emphasis added).

8

“T would, therefore, hold so much of the Bankruptcy

Act of 1978 as enables a Bankruptcy Court to entertain

and decide Northern’s lawsuit over Marathon’s objec-

tion to be violative of Art. III of the United States

Constitution. Because I agree with the plurality that

this grant of authority is not readily severable from

the remaining grant of authority to Bankruptcy

Courts under § 241(a), see (Footnote 40), I concur

in the judgment”. 102 S. Ct. at 2882 emphasis added).

Northern Pipeiine did not divest the district courts

of bankruptcy jurisdiction that Congress set forth in 28

U.S.C. § 1471(a) and (b).

Furthermore, district court bankruptey jurisdiction

continues under 28 U.S.C. $1334 and 28 U.S.C. § 1381.

Whatever the effect of Northern Pipeline on the Bank-

ruptey Reform Act jurisdiction, these jurisdictional pro-

visions certainly authorize the district courts to hear and

decide bankruptcy related matters. Section 1334 grants

the district courts “original jurisdiction, exclusive of the

courts of the States, of all matters and proceedings in

bankruptcy”. 28 U.S.C. § 1334. Even though the Reform

Act makes amendments to $1334, the jurisdictional grant

of the original § 1334 remains in full force and effect until

April 1, 1984. Reform Act § 402(b).

First National suggests that Northern Pipeline in-

validated §1471(a) and (b). On the other hand, First

National thereafter argues that 28 U.S.C. §1471(a) and

(b) served to cause the expiration of old 41334. These

positions are inconsistent. If 4 1471(a) and (b) repealed

§ 1334 as of October 1, 1979 (as asserted by First Nation-

al), then the invalidation of those sections by Northern

Pipeline would automatically revive 41334. <A void act

cannot operate to repeal a valid existing statute, and the

9

existing statute would remain in full force and operation

as if the repeal had never been attempted. Weissinger v.

Boswell, 330 F. Supp. 615, 625 (M.D. Ala. 1971); Conlon

v. Adamski, 77 F.2d 397, 399 (D.C. Cir. 1935).

Additionally, this Court has historically recognized

that federal question jurisdiction under 28 U.S. C. § 1331

includes the exercise of jurisdiction under federal bank-

ruptcy laws. $1331 grants district courts original juris-

diction of all civil actions arising under the laws of the

United States. Hull v. Burr, 234 U.S. 712, 720-22 (1914);

Lovell v. Newman ¢ Son, 227 U.S. 412, 423 (1913); Na-

tional Mutual Insurance Co. v. Tidewater Transfer Co.,

337 U.S. 582, 611 (1949).

III.

The Court of Appeals decision upholding the

local rule is correct.

The plurality opinion in Northern Pipeline acknowl-

edged that district court “adjuncts” are not violative of

Art. III requirements “so long as those adjuncts (are)

subject to sufficient control by an Art. III district court”.

102 S. Ct. at 2875. The local rule in question here com-

plies with the constitutional standards referred to in

Northern Pipeline because it does retain the ultimate de-

cision-making authority in the district court, not the ad-

junct. 102 S.Ct. at 2874-76. Under the local rule, bank-

ruptcy courts operate under the control of the district

courts. Bankruptcy judges derive authority solely by ref-

erence from a District Court and have no independent

jurisdiction. The District Court may withdraw or limit

the reference at any time. Only the District Court may

conduct jury trials, and in all matters try to the Bank-

10

ruptey Court there is a right to a de novo district court

review. Ultimately, the District Court makes the final

decisions under the local rule.

All nine justices in Northern Pipeline recognized that

Congress may create legislative courts or adjuncts to ad-

judicate congressionally created rights. 102 S.Ct. at

2869-71, 2874-78, 2882, and 2883. The plurality also rec-

ognized the use of legislative courts to adjudicate “the

restructuring of debtor-creditor relations, which is at

the core of the federal bankruptcy power”. 102 S. Ct. at

2871. Clearly, the scope of the local rule is consistent with

the concerns expressed by this Court in Northern Pipeline.

Further, the local rule was properly enacted for the

purpose of the administration of court business. The ju-

diciai counsels of the circuit courts have been granted

statutory authority to “make all necessary and appropri-

ate orders for the effective and expeditious administration

of justice within (the) circuits”. 28 U.S.C. §332(d)(1).

This Court has determined that this grant of power to

the judicial counsel is constitutional. Chandler v. Judicial

Council of the Tenth Circuit, 398 U.S. 74 (1970). The

various judicial counsels of the circuits acted pursuant to

this grant of power when they promulgated their resolu-

tions directing the district courts te adopt the local rule.

The Court of Appeals correctly ruled that the local rule

was a constitutional exercise of judicial authority.

11

CONCLUSION

For the foregoing reasons, this Court should deny

the petition for writ of certiorari submitted by First Na-

tional Bank of Tekamah.

Respectfully submitted,

MicuaeL G. Hetms

Kerra I. Freperick

(Counsel of Record)

Scumip, Forp, Moonry & FREDERICK

1800 First National Center

Omaha, Nebraska 68102

Telephone (402) 341-7100

Attorneys for Respondents, Orville E.

Hansen and Virginia Hansen

Dated: June 1983