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U.S. Supreme Court

Northern Pipeline v. Marathon Pipe Line, 458 U.S. 50 (1982)

Northern Pipeline Constr. Co. v. Marathon Pipe Line Co.

No. 81-150

Argued April 27, 1982

Decided June 28, 1982*

458 U.S. 50


The Bankruptcy Act of 1978 (Act) established a United States bankruptcy court in each judicial district as an adjunct to the district court for such district. The bankruptcy court judges are appointed for 14-year terms, subject to removal by the judicial council of the circuit in which they serve on grounds of incompetence, misconduct, neglect of duty, or disability. Their salaries are set by statute, and are subject to adjustment. The Act grants the bankruptcy courts jurisdiction over "all civil proceedings arising under title 11 [bankruptcy] [of the United States Code] or arising in or related to cases under title 11." See 28 U.S.C. § 1471(b) (1976 ed., Supp. IV). After it had filed a petition for reorganization in a Bankruptcy Court, appellant Northern Pipeline Construction Co. (Northern) filed in that court a suit against appellee Marathon Pipe Line Co. (Marathon) seeking damages for an alleged breach of contract and warranty, as well as for misrepresentation, coercion, and duress. Marathon sought dismissal of the suit on the ground that the Act unconstitutionally conferred Art. III judicial power upon judges who lacked life tenure and protection against salary diminution. The Bankruptcy Court denied the motion to dismiss, but on appeal the District Court granted the motion.

Held: The judgment is affirmed.

12 B.R. 946, affirmed.


1. Section 1471's broad grant of jurisdiction to bankruptcy judges violates Art. III. Pp. 458 U. S. 57-87.

(a) The judicial power of the United States must be exercised by judges who have the attributes of life tenure and protection against salary diminution specified by Art. III. These attributes were incorporated into the Constitution to ensure the independence of the Judiciary from the control of the Executive and Legislative Branches. There is

Page 458 U. S. 51

no doubt that bankruptcy judges created by the Act are not Art. III judges. Pp. 458 U. S. 57-62.

(b) Article III bars Congress from establishing under its Art. I powers legislative courts to exercise jurisdiction over all matters arising under the bankruptcy laws. The establishment of such courts does not fall within any of the historically recognized situations -- non-Art. III courts of the Territories or of the District of Columbia, courts-martial, and resolution of "public rights" issues -- in which the principle of independent adjudication commanded by Art. III does not apply. The bankruptcy courts do not lie exclusively outside the States, like the courts of the Territories or of the District of Columbia, or bear any resemblance to courts-martial, nor can the substantive legal rights at issue in the present action -- the right to recover contract damages to augment Northern's estate -- be deemed "public rights." There is no persuasive reason in logic, history, or the Constitution, why bankruptcy courts lie beyond the reach of Art. III. Pp. 458 U. S. 63-76.

(c) Section 1471 impermissibly removed most, if not all, of the essential attributes of the judicial power from the Art. III district court and vested those attributes in a non-Art. III adjunct. Crowell v. Benson, 285 U. S. 22, and United States v. Raddatz, 447 U. S. 667, distinguished. Congress does not have the same power to create adjuncts to adjudicate constitutionally recognized rights and state-created rights as it does to adjudicate rights that it creates. The grant of jurisdiction to bankruptcy courts cannot be sustained as an exercise of Congress' power to create adjuncts to Art. III courts. Pp. 458 U. S. 76-87.

2. The above holding that the broad grant of jurisdiction in § 1471 is unconstitutional shall not apply retroactively, but only prospectively. Such grant of jurisdiction presents an unprecedented question of interpretation of Art. III, and retroactive application would not further the operation of the holding, but would visit substantial injustice and hardship upon those litigants who relied upon the Act's vesting of jurisdiction in the bankruptcy courts. Pp. 458 U. S. 87-88.

JUSTICE REHNQUIST joined by JUSTICE O'CONNOR, concluded that, where appellee Marathon Pipe Line Co. has simply been named defendant in appellant Northern Pipeline Construction Co.'s suit on a contract claim arising under state law, the constitutionality of the Bankruptcy Court's exercise of jurisdiction over that kind of suit is all that need be decided in this case; that resolution of any objections Marathon might make to the exercise of authority conferred on bankruptcy courts by the Bankruptcy Act of 1978, on the ground that the suit must be decided by an Art. III court, should await the exercise of such authority; that so much of that Act as enables a Bankruptcy Court to entertain and decide

Page 458 U. S. 52

Northern's suit over Marathon's objection violates Art. III; and that the Court's judgment should not be applied retroactively. Pp. 458 U. S. 89-92.

BRENNAN, J., announced the judgment of the Court and delivered an opinion, in which MARSHALL, BLACKMUN, and STEVENS, JJ., joined. REHNQUIST, J., filed an opinion concurring in the judgment, in which O'CONNOR, J., joined, post, p. 458 U. S. 89. BURGER, C.J.,filed a dissenting opinion, post, p. 458 U. S. 92. WHITE, J., filed a dissenting opinion, in which BURGER, C.J.,and POWELL, J., joined, post, p. 458 U. S. 92.

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