Academic journal article The University of Memphis Law Review

Coming and Going: The Revolving Jurisdictional Door of the Bankruptcy Court

Academic journal article The University of Memphis Law Review

Coming and Going: The Revolving Jurisdictional Door of the Bankruptcy Court

Article excerpt

I. INTRODUCTION

Federal subject matter jurisdiction. The inclusion of this topic in law school curricula is thought by many first-year civil procedure students to be a violation of the Eighth Amendment's prohibition against cruel and unusual punishment. Although both the United States Constitution and various federal statutes set out fairly bold lines of jurisdictional demarcation, the borders between what a particular court can and cannot hear are anything but rigid. The federal doctrine of supplemental jurisdiction is a perfect example of this fluidity. A matter that does not have independent grounds for federal jurisdiction, but that is so related to a case or controversy that qualifies for either federal question jurisdiction under 28 U.S.C.

Sec. 1331 or diversity jurisdiction under 28 U.S.C. Sec. 1332, may indeed come within the jurisdictional parameters of the district court by virtue of 28 U.S.C. Sec. 1367.

In addition to the allowance of these supplemental claims, the federal system is expanding the boundaries of Secs. 1331 and 1332 via another avenue: the United States bankruptcy courts. The breadth of bankruptcy court jurisdiction has long been a topic of constitutional debate. In fact, the entire system was overhauled in 1982 as a result of the United States Supreme Court's finding that the jurisdictional grant of the Bankruptcy Reform Act of 1978 (1978 Act) was an unconstitutional usurpation of Congress's law-making powers.1 Congress responded to this finding by drafting and implementing the Bankruptcy Amendments and Federal Judgeship Act of 1984 (BAFJA).2 With this Act's core/non-core dichotomy,3 the current bankruptcy laws allow many cases to be heard and decided in a federal forum when there is no basis for federal jurisdiction, save the bankruptcy case itself.

As this Article will show, once a bankruptcy case is filed, many issues arise that must be decided before the bankruptcy case may be resolved. In many instances, both the bankruptcy court and a state court may have jurisdiction to hear the various proceedings. Several doctrines will affect an attorney's decision of where to bring the action. Mandatory and permissive abstention, the automatic stay and its exceptions, and the enforceability of state court judgments are all factors that may influence an attorney to take advantage of a bankruptcy court's broad jurisdictional grant.

In response to the many doctrines that are allowing more and more cases and proceedings to be brought in bankruptcy court, federal judges are deciding numerous questions of state law without diversity or federal question jurisdiction. Contracts, domestic relations, real property, and personal property are only a few of the state law topics crossing the judicial benches of bankruptcy courts with increasing frequency. Additionally, with the binding effect default judgments now have in bankruptcy, as well as the ever-increasing number of debts that are being excepted from debtors' discharges, the interplay between state law and bankruptcy courts continues to grow.

State law is becoming a driving force in bankruptcy courtrooms across the country. Now, more than ever, the jurisdictional limits of Secs. 1331 and 1332 are being stretched to their outer regions. When a bankruptcy court decision is appealed to either a district court or a bankruptcy appellate panel, state law begins to play an even larger role in the federal system. What one discovers upon becoming aware of this recent trend is that bankruptcy courts are becoming the revolving jurisdictional back door to the federal court system.

II. OVERVIEW OF BANKRUPTCY COURT JURISDICTION

Article I, Section 8 of the United States Constitution authorizes Congress "to establish . uniform Laws on the subject of Bankruptcies throughout the United States."4 As a result of this grant, bankruptcy is exclusively an area of federal law. States may not create any bankruptcy laws, nor may they exercise control over the field. …

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