Anarchy or Anglo-American jurisprudence? The doctrinal effect of stare decisis upon bankruptcy courts in the face of district court precedents.

JurisdictionUnited States
AuthorMuniz, H. Michael
Date01 December 2002

There presently exists a rather stunning split of authority among federal courts as to whether published district court decisions are binding on bankruptcy courts within their judicial district. (1) Not surprisingly, bankruptcy courts have rendered the overwhelming majority of those decisions. (2) If bankruptcy courts sit in pari materia with district courts, it would appear genuinely inarguable that district court decisions would be binding on bankruptcy courts. On the other hand, if bankruptcy courts are lower courts than district courts, their inferiority begs the question how is it conceivable that, in view of the long settled doctrine of hierarchical stare decisis, numerous bankruptcy courts have deemed themselves not bound by district court precedents? Before reaching the legal arguments, it is appropriate to first turn to the doctrine at issue.

Hierarchical Stare Decisis

Under the doctrine of stare decisis, a legal doctrine immersed in our jurisprudence since the late 18th century or over 200 years, In re Mays, 256 B.R. 555, 559 (Bankr. D.N.J. 2000), (3) a deliberate or solemn decision of court made after argument on question of law fairly arising in the case and necessary to its determination, is an authority or binding precedent in the same court or in lower courts in the judicial hierarchy in subsequent cases where the very point is again in controversy. (4) The doctrine is grounded on the theory that security and certainty require that accepted and established legal principle, under which rights may accrue, be recognized and followed. (5)

Two centuries ago the U.S. Supreme Court (6) enunciated "stare decisis et non quieta movere," the common law maxim meaning let stand what is decided and do not disturb what is settled and, as the Court itself further stated, "administer the law as I find it [or as found] and ..., follow in the path of authority, where it is clearly defined, even though the path may have been explored by guides in whose judgment the most implicit confidence might not have been originally reposed." (7)

"If a decision has been made upon solemn argument and mature deliberation, the presumption is in favor of its correctness; and the community have a right to regard it as a just declaration or exposition of the law, and to regulate their actions and contracts by it." (8)

"To avoid an arbitrary discretion in the courts, it is indispensable that they [lower courts] should be bound down by strict rules and precedents which serve to define and point out their duty in every particular case that comes before them." (9)

"Stare decisis ..., applies a fortiori to enjoin lower courts to follow the decision of a higher court." (10)

"This principle is so firmly established in our jurisprudence that no lower court would deliberately refuse to follow the decision of a higher court." (11)

Nearly 100 years after its declaration in Townsend the Supreme Court reiterated, "in its earliest days the Court consistently held that an inferior court has no power or authority to deviate from the mandate issued by an appellate [or higher] court." (12) That a lower federal court is "powerless," "foreclosed" and "bound to carry the mandate of the upper court into execution ..., is indisputable." (13) Moreover, "unless we wish anarchy to prevail within the federal judicial system, precedents of the [higher] court must be followed by the lower federal courts no matter how misguided the judges of the lower courts may think it to be." (14) Though the doctrine of stare decisis is a "principle of policy, and not an inexorable command," (15) it has been made very clear that a lower court s command is to abide by a higher court's decision. (16)

Furthermore, adherence to the doctrine of "stare decisis protects the legitimate expectations of those who live under the law, and ..., is one of the means by which exercise of an arbitrary discretion in courts is restrained." (17) It is designed to promote stability and certainty in the law and has special force in the area of statutory interpretation, particularly when persons have acted in reliance on a prior decision. (18) In fact, the doctrine of stare decisis is at its zenith where property and contract rights, reliance interests, and statutory interpretation converge. (19) Especially where the federal hierarchy of courts is concerned, "precedents [of a higher court] must be followed ... even though their reason be not obvious at first view, as we clearly owe such deference to former times as not to suppose that they acted without consideration." (20)

Thus, the Supreme Court's unquestionably binding precedents clearly establish that higher court decisions are stare decisis on lower courts. Therefore, published district court decisions constitute binding authority upon bankruptcy courts if bankruptcy courts are lower courts than district courts.

Constitutional Distinctions

As created under the Bankruptcy Act of 1978 and left undisturbed by the U.S. Congress in the Bankruptcy Amendments and Federal Judgeship Act of 1984, bankruptcy courts were endowed with the attributes that underlie inferior tribunals, U.S. Const. art. I, [section]8, (21) as opposed to the constitutional attributes that underlie district courts; significantly, life tenure and protection from salary diminution, U.S. Const. art. III, [section]1, (22) thereby protected, unlike bankruptcy courts, from executive or legislative fiat. (23) These traits of the district court alone are sufficient to establish that the bankruptcy court is not, and cannot be, the equal of the district court In fact, federal courts may be classified, according to the rights of the judges appointed to staff the court, as Article I or Article III courts. In re Abernathy, 150 B.R. 688,693 (Bankr. N.D. Ill. 1993). The 11th Circuit Court of Appeals has consistently adhered to the position that the phrase "Court of the United States" be interpreted to mean an Article III court (24) Additionally, 28 U.S.C. [section]151 establishes in whom the judicial power of the United States is reposed: the Article III district court. (25) Further, Title 28 of the U.S. Code provides only a very limited grant of subject matter jurisdiction to the Article I bankruptcy courts; namely, to hear and determine cases and core proceedings only as arising under Title 11. 28 U.S.C. [section]151, 157. "As a non-Article III court, the bankruptcy court can only exercise such judicial power under the supervision and control of the district court." In re Shattuc Cable Corp., 138 B.R. 557, 565 (Bankr. N.D. Ill. 1992). Therefore, not having the constitutionally prescribed protections of Article III courts or the full judicial power of the United States like a district court, and having only the authority that is delegated by the district court, 28 U.S.C. [section]157(a),26 should make it self-evident that a bankruptcy court is inferior to a district court.

The materially significant constitutional distinctions between Article III, district courts, and Article I, bankruptcy courts, the federal statutory scheme that provides that bankruptcy courts derive their authority to operate from the district court, (27) the fact that bankruptcy courts are subject to withdrawal of a case by the district court, (28) and the appellate authority district courts possess over bankruptcy courts, 28 U.S.C. [section]158(a), combined, these attributes make clear the superiority of the district courts and inferiority of the bankruptcy courts. Solidifying this conclusion, the Supreme Court unambiguously stated, "[t]he judicial power of the United States must be exercised by courts having the attributes prescribed in Article III." (29) "It is undisputed that the bankruptcy judges whose offices were created by the Bankruptcy Act of 1978 do not enjoy the protections constitutionally afforded to Article III judges." (30) "[T]here is no doubt that the bankruptcy judges created by the Act are not Article III judges." (31) Besides owing its allegiance to the district court, for it is from the district court that the bankruptcy court derives its authority to operate, (32) the bankruptcy court is clearly not the equal of the district court, but rather, is an inferior court. (33)

Though the 11th Circuit Court of Appeals has declined to address the issue, Stroock, Stroock & Lavan v. Hillsborough Holdings Corp., 127 F. 3d 1398, 1403 n.3 (11th Cir. 1997), the Second Circuit summarily declared, even though the bankruptcy judge "seemingly disagreed" with the district court decision, "the bankruptcy judge was precluded from granting relief ..., by the decision of [the] District Judge." United States v. Whiting Pools, Inc., 674 F.2d 144, 146-47 (2d. Cir. 1982). The District Court for the Middle District of Florida in Health Services Credit Union v. Shunnarah, 273 B.R. 671, 672 (M.D. Fla. 2001) elaborated further and stated:

this Court ... finds that the Bankruptcy Court improperly believes that it is not bound by stare decisis to follow the decision of a single district judge in a multi-judge district. Because a bankruptcy court is an Article I court, and appeals from such court are taken to the Article III courts, which have reversal power over the bankruptcy courts, this court agrees with the reasoning in IRR Supply Centers, Inc. v. Phipps, 217 B.R. 427 (Bankr. W.D.N.Y. 1998), that bankruptcy courts are "inferior" courts for purposes of stare decisis. Therefore, the bankruptcy court in this case is bound by a rendered published district court opinion, (34) unless an opinion that contains a different holding is published.

Likewise, the District Court for the Western District of Virginia in Bryant v. Smith, 165 B.R. 176, 180 (W.D. Va. 1994), stated:

the bankruptcy court is not an Article III court. The bankruptcy court functions as an adjunct of the district court. A bankruptcy judge is no more free to ignore the clear precedent of the district court, than is a United States magistrate judge...

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