458 U.S. 50, 102 S.Ct. 2858 (1982)
In 1978 Congress enacted the Bankruptcy Reform Act after nearly ten years of study.1 The statute established a United States bankruptcy court in each judicial district as an adjunct to the district court.2 It granted those courts jurisdiction over all civil proceedings arising under title 11 or arising in or related to cases under title 11.3
Bankruptcy judges appointed under the Act served fourteen-year terms.4 They were subject to removal by the judicial council of the circuit for incompetence, misconduct, neglect of duty, or disability.5 They received salaries subject to congressional adjustment.6
In January 1980 Northern Pipeline Construction Co. filed a petition for reorganization under the Act in the United States Bankruptcy Court for the District of Minnesota.7 In March 1980 Northern filed a separate suit in the same court against Marathon Pipe Line Co. seeking damages for alleged breaches of contract and warranty as well as for misrepresentation, coercion, and duress.8 Marathon moved to dismiss the suit on the ground that the Act unconstitutionally conferred Article III judicial power on bankruptcy judges who lacked life tenure and salary protection.9 The United States intervened to defend the statute.10 The Bankruptcy Court denied the motion to dismiss.11 On appeal the District Court reversed and dismissed the suit.12 Northern and the United States filed notices of appeal, and the Supreme Court noted probable jurisdiction.13
Whether the assignment by Congress to bankruptcy judges of the jurisdiction to hear and determine all civil proceedings arising under or related to cases under title 11 of the United States Code violates Article III of the Constitution?14
Article III vests the judicial power of the United States in courts whose judges enjoy life tenure and salary protection that may not be diminished.15 Congress may create non-Article III courts only in three narrow exceptions consisting of territorial courts, courts-martial, and adjudication of public rights.16
Yes. The Bankruptcy Reform Act of 1978 grants the bankruptcy courts jurisdiction over all civil proceedings arising under title 11 or arising in or related to cases under title 11, including Northern Pipeline Construction Co.'s state-law contract and tort claims against Marathon Pipe Line Co.17 Bankruptcy judges appointed under the Act serve fourteen-year terms, are removable by the judicial council of the circuit for incompetence, misconduct, neglect of duty, or disability, and receive salaries subject to congressional adjustment.1819 None of the three recognized exceptions applies because the claims involve private rights between individuals rather than public rights between the government and others, and the courts are neither territorial nor military.20
The broad jurisdictional grant to non-Article III bankruptcy courts violates Article III.21
Related opinions on this issue
Joined by Justice O’connor
Justice Rehnquist, joined by Justice O’Connor, concurs in the judgment on narrower grounds.22 He agrees that the bankruptcy court lacked jurisdiction to adjudicate Northern's state-law contract claims against Marathon because those claims are only tangentially related to the bankruptcy proceeding.23 Article III prohibits a non-Article III court from adjudicating such a claim.24
He would not reach the broader question whether the Act unconstitutionally vests Article III judicial power in the bankruptcy courts in all cases.25
Joined by Chief Justice Burger And Justice Powell
Justice White, joined by Chief Justice Burger and Justice Powell in part, dissents.26 He would uphold the constitutionality of the bankruptcy courts created by the 1978 Act because the bankruptcy courts do not exercise the full judicial power of the United States.27 Their jurisdiction is limited to matters arising out of or related to bankruptcy proceedings.28
Congress has broad power under the Bankruptcy Clause to establish a system for the orderly adjudication of bankruptcy claims.29 Historical practice supports the constitutionality of specialized bankruptcy courts, and the majority's decision will have a disruptive effect on the bankruptcy system.30
Chief Justice Burger dissents separately to emphasize that the Court's holding is limited to the proposition that a traditional state common-law action, not made subject to a federal rule of decision and related only peripherally to an adjudication of bankruptcy under federal law, must be heard by an Article III court if heard by any court or agency of the United States.31
The limited holding does not suggest that there is something inherently unconstitutional about the new bankruptcy courts.32 Nor does it preclude such courts from adjudicating all but a relatively narrow category of claims.33
Whether the unconstitutional provisions of the Bankruptcy Reform Act of 1978 are severable from the remainder of the Act?34
When a statute contains a severability clause, unconstitutional provisions are severable from the remainder if the remaining provisions are fully operative as law and Congress would have enacted them independently.35
Yes. The Bankruptcy Reform Act of 1978 contains a severability clause.36 Applying the standard set forth in Buckley v. Valeo, the plurality concludes that the unconstitutional provisions of the Act are severable from the remainder because the remaining provisions are fully operative as law and Congress would have enacted them independently of the broad grant of jurisdiction to non-Article III judges.
The unconstitutional provisions of the Bankruptcy Reform Act of 1978 are severable from the remainder of the Act.37
Whether the holding that the jurisdictional grant is unconstitutional should be applied retroactively to the effective date of the Act?38
Under Chevron Oil Co. v. Huson, a holding is applied only prospectively when it decides an issue of first impression not clearly foreshadowed, retrospective operation would not further the holding, and retroactive application would produce substantial inequitable results.39
No. The decision that the broad grant of jurisdiction to non-Article III bankruptcy courts is unconstitutional decides an issue of first impression whose resolution was not clearly foreshadowed.40 Retrospective operation would not further the holding.41 Retroactive application would visit substantial injustice and hardship upon litigants who relied upon the Act's vesting of jurisdiction in the bankruptcy courts.42
The holding that the jurisdictional grant is unconstitutional applies only prospectively.43