Bankruptcy courts are vested with authority under Article I to provide swift resolution of a debtor's insolvency, but under the current bankruptcy jurisdiction scheme, an Article III court which possesses the essential attributes of judicial power must ultimately adjudicate private rights. Nearly twenty years ago, the U.S. Supreme Court, in Granfinanciera, S.A. v. Nordberg, recognized that a party in bankruptcy litigation may demand a jury trial when asserting a private right. Following Granfinanciera, neither Congress nor the Court provided any guidance on how a case subject to a valid jury trial right is handled under Article III constraints, resulting in inconsistent court procedures.
Recently, in Sigma Micro Corp. v. Healthcentral.com, the Ninth Circuit invalidated a local rule of the U.S. Bankruptcy Court of the Northern District of California that mandated the immediate withdrawal of the jurisdictional reference once the bankruptcy court found that a party was entitled to a jury trial. Nevertheless, the Ninth Circuit upheld a bankruptcy court's own decision to retain pre-trial jurisdiction. This Note discusses the intersection of Article III limitations on bankruptcy courts and the Seventh Amendment right to a jury trial, an area of law fraught with overwhelming complexity and confusion. The Note then concludes that the Ninth Circuit did not properly consider Article III analysis in its decision and that courts which adopt a rule giving bankruptcy courts the sua sponte authority to retain pre-trial jurisdiction violate Article III.
Rethinking Granfinanciera: May the Bankruptcy Court Retain Pre-Trial Jurisdiction after Finding a Valid Jury Trial Right,
36 Hastings Const. L.Q. 131
Available at: https://repository.uchastings.edu/hastings_constitutional_law_quaterly/vol36/iss1/4