November 6, 1998

Honorable Byron R. White, Chair
Commission on Structural Alternatives for
the Federal Courts of Appeals
Thurgood Marshall Federal Judiciary Building
One Columbus Circle, N.E.
Washington, DC 20544

Re: Bankruptcy Appeals and Fifth Circuit

Dear Justice White:

Many thanks for seeking comments on your draft report for the Commission on Structural Alternatives for the Federal Courts of Appeals. As a member of the National Bankruptcy Review Commission and my court of appeals, I respectfully offer the following observations in regard to the proposals concerning bankruptcy appeals and this court.

The Commission correctly observes that two serious, systemic problems related to bankruptcy appeals impelled the National Bankruptcy Review Commission (NBRC) to recommend that bankruptcy appeals be routed directly to the federal courts of appeals. These problems involve the lack of stare decisis in bankruptcy, which leads to confusing and chaotic interpretations of the relevant law, and the high cost and delay imposed by multiple layers of bankruptcy appeals. While the Commission recognizes these problems, it seems to me that the aversion expressed in the tentative draft report toward direct appeals is misplaced, and only one of the Commission's alternative suggestions for bankruptcy appeals helpfully addresses the problems. Let me explain.

You are probably aware that the NBRC report to Congress revealed deep differences of opinion among its nine members on most matters of important bankruptcy policy. On the issue of direct appeals, however, we were united in our recommendation. Not only that, but the NBRC's recommendation was strongly supported by every group in the bankruptcy community ­­ judges, lawyers, academics, creditor and consumer groups.⁽¹⁾ The ABA also supports direct appeals and lobbied for them in the just-ended congressional session. All of these parties recognize that bankruptcy law has no consistency, because neither the BAP decisions nor those of district courts sitting in appeals are regarded as binding precedent. Few parties have the time, resources, or determination to pursue important questions to the court of appeals level. Consequently, the interpretation of the Bankruptcy Code differs not only from circuit to circuit, but within districts and even in individual courtrooms. The constitutional command to enforce "uniform [l]aws on the subject of [b]ankruptcies" is thwarted.

As I understand it, this Commission's tentative report rejects direct appeals to the circuit courts largely because of the additional appellate workload they would impose. It is not clear to me that this is an accurate conclusion except, perhaps, in the Ninth Circuit, in which a disproportionately large number of the nation's bankruptcy cases are filed. Even if one assumes, as the tentative draft report does, that an addition of bankruptcy appeals to the court of appeals dockets would add "more than 50 appeals per panel each year," I question whether this is a significant caseload increase. First, because of AEDPA, our courts are experiencing a decline in the amount of prisoner § 1983 and habeas cases that we must decide. In my court, moreover, the number of civil appeals has been declining for several years. Second, it is not clear that parties would appeal as many cases to the courts of appeals as they presently lodge in the district courts. Bankruptcy appeals are often filed in the district courts for purposes of delay, based on the perception that district courts do not enjoy handling bankruptcy cases and do not dispose of them promptly. Third, many bankruptcy appeals turn on issues of procedure or state law (e.g., the interpretation of contracts or the extent of liens) and do not, for those reasons, raise complex appellate questions.

The Commission suggests that routing bankruptcy appeals to the "overburdened" courts of appeals will not decrease litigants' costs or significantly reduce the delay in resolving cases. I respectfully disagree. While I have not specifically compared disposition times in courts of appeals against those of bankruptcy appeals in the district courts (indeed, there are probably few statistics available on this issue), the practice in the Fifth Circuit leads me to believe that our disposition times would compare very favorably with those of the district courts. I have no reason to believe that BAP disposition times are significantly shorter than those in the appellate courts. As for the alleged higher costs of appealing to the circuit court, those consist largely of travel expenses if a case is scheduled for oral argument. In our circuit, however, parties are not required to present oral argument, and in bankruptcy cases, they sometimes elect not to do so. More to the point, parties will save the cost of pursuing two levels of appeals. The NBRC considered these objections to direct appeals, and I recall no one who was impressed with them.

The Commission's final concern is that "direct review would sacrifice bankruptcy judge expertise" in handling bankruptcy appeals. Preliminarily, I doubt that circuit judges generally believe they lack the expertise to determine bankruptcy appeals. Similarly, I fail to understand why bankruptcy appeals require a unique expertise that dictates the involvement of specialist judges, whereas, in other technical areas, like copyright, federal tax, and ERISA law, the generalist expertise of circuit judges is considered a jurisprudential advantage. In bankruptcy, just as in these other specialized subjects, there is much reason to encourage the involvement of non-specialist judges and to resolve issues at the highest level of judicial authority. Only definitive decisions from the circuit courts offer the prospect of uniformity in bankruptcy law. Moreover, uniformity is important for business as well as legal reasons, as bankruptcy courts are now the principal source of commercial law rulings in the United States. Direct appeals to the courts of appeals best accomplish the twin goals of enhancing uniformity and reducing cost and delay.

The Commission recommends three possible alternatives for handling bankruptcy appeals. I generally endorse the second alternative with significant modifications, but I have strong objection to the first and third alternatives.

The second alternative, as I understand it, would accept the principle of direct appeals of bankruptcy decisions to the circuit courts or to BAPs, with discretionary review from BAP decisions by the circuit courts. First, if the point of this change is to allow BAPs to take the pressure off dockets like that of the Ninth Circuit, I see no reason why BAPs should become mandatory in circuits whose appellate courts are not so burdened. BAPs should continue to be voluntary.

Second, conferring discretionary review on the courts of appeals marks a conscious departure from the policy of appeals as of right to Article III tribunals (except the Supreme Court) and charts a path whose implications may be far-reaching. One must question why abolishing appeal as of right seems acceptable in bankruptcy -- alone -- among the subjects of federal appellate jurisdiction. Even more significantly, the recommendation for discretionary circuit review of BAP decisions changes present law -- which permits appeals as of right from BAPs -- with no showing why such a change is necessary or desirable. Indeed, the Commission's draft report comments on the paucity of appeals from BAPs to the circuit courts.

In the last legislative session, I supported a proposal that compromises between the Ninth Circuit's caseload problems and the need for stare decisis in bankruptcy. The proposal would authorize direct appeals either to the circuit courts or BAPs, while rendering BAPs voluntary among the circuits and maintaining the present structure of appeal as of right from BAPs to the circuit courts. If you do not have a copy of that proposal, please let me know. I continue to support that variation of your second proposal.

The first alternative discussed in the draft report would allow litigants to appeal to the court of appeals, which could then refer the appeal to a BAP as if to a magistrate judge for a report and recommendation. If this proposal permits voluntary institution of BAPs by each circuit court, a point not clearly expressed, it is to that extent unobjectionable. But I have serious objections to this proposal. By urging creation of BAPs as an appeals court adjunct, the proposal moves toward specialization and further bureaucratization of the federal appellate function. Whether these goals are desirable as a matter of Article III policy, and indeed, whether they are even consistent with the draft report's concerns about less involvement of appellate judges in cases on their dockets, is dubious.

Moreover, the efficiency gains sought by this proposal may well be illusory. I question whether non-Article III judges could review appeals from district courts sitting in bankruptcy matters or even from bankruptcy courts on "related-to" matters. Our court has held, for instance, that magistrate judges could not be assigned an analogous recommendatory role on appeal from bankruptcy to district courts.⁽²⁾ The existence of adjunct BAPs would thus create some jurisdictional questions and would not completely remove circuit courts from initial participation in bankruptcy appeals.

Perhaps the most troubling effect of this proposal is the assumption that bankruptcy appeals demand specialized appellate treatment that Article III judges are unequipped to provide. I reiterate my earlier comment that bankruptcy cases, particularly those which involve interpretation of the Bankruptcy Code and commercial law, need the perspective of a generalist judiciary as much as any other aspect of federal law. The institution of specialist adjuncts, on whom reliance is expected to be placed, competes with the value traditionally assigned to judging, in the federal system, by Article III generalists. Moreover, this proposal, if realized, would inevitably lead to calls for the creation of other specialized adjunct review panels; it appears to be the first step on the controversial road toward specialized judging. This proposal's broader ramifications ought to be explored.

The Commission's third proposed alternative appears to substitute BAP review for district court appellate review in certain types of bankruptcy proceedings, while maintaining district court review in other bankruptcy matters. Bifurcating bankruptcy appellate jurisdiction seems to me the worst of all possible worlds. No one really knows where, at the fringes, the distinction between core and non-core bankruptcy matters lies. Remember, too, that some bankruptcy appeals may raise both core and non-core issues. This system would lend itself to serious jurisdictional disputes over the competing appellate responsibilities of BAPs and district courts. Further, I completely concur in the Commission's observations that as to BAP appeals, this proposal may raise constitutional problems and could "defeat the goals of increased convenience and decreased expense." It is unwise.

I hope you will consider these remarks as constructive criticism of the tentative draft report. I do believe that the second recommended alternative, with the modifications I have earlier mentioned, is as consistent with the NBRC's recommendation for direct bankruptcy appeals as may be practicable. I urge this Commission to recommend either direct bankruptcy appeals to the courts of appeals or the Commission's second alternative, as modified. I urge it to reject the first and third alternative proposals it has described.

Whatever the recommendation of this Commission concerning the need for a divisional arrangement for the Ninth Circuit Court of Appeals, I see no reason why such an arrangement should be authorized or required for courts of eighteen judges or more, as the Commission has recommended. To me, this is a dagger pointed at the heart of the Fifth Circuit, with our currently authorized seventeen judgeships.⁽³⁾

The Commission appears to make a recommendation for mandatory divisional arrangements triggered by eighteen judgeships, even while proposing that as to the Ninth Circuit itself, the divisional arrangement should last for only seven years and, to that extent, must be regarded as a test program. No showing has been made that the Fifth Circuit suffers from inefficiency, lack of coherency in its caselaw, problematic en banc procedures, or any of the other complaints that spawned the recommendation concerning the much larger Ninth Circuit. I have previously testified to Congress concerning the status of our appellate caseload, and I attach those remarks here. There has been no material change in my evaluation since I testified last year. Our court is one of the most productive and timely in the nation. Even more significantly, it is incorrect to gauge our workload according to the case filing statistics. Our civil case appeals have been falling for over six years! This dramatic decrease is masked by a nominal increase in prisoner appeals. Viewed from the standpoint of difficulty, our caseload has not created a crisis for which such a seminal change as the divisional arrangement is warranted.

The Commission's report and recommendations are thought-provoking. With due respect, I would urge the changes noted in the foregoing bankruptcy appeals discussion and the deletion of any recommendation that would now or in the foreseeable future, without further study and evaluation, apply to the structure of the Fifth Circuit.

Very truly yours,

Edith H. Jones

EHJ/rh
Attachment

cc: Members of National Bankruptcy Review Commission
Hon Richard S. Arnold

Summary of Testimony Edith H. Jones

My thesis is simple: the judges of the Fifth Circuit are busy but not overburdened. We handle our caseload, the second largest in the nation per judge, more efficiently than most federal appellate courts. The nominal increase in our caseload is largely attributable to prisoner civil rights and habeas appeals and direct criminal appeals, which are disposed of fairly and timely with the assistance of judicial staff. We need no new appellate judges on the Fifth Circuit.

1. Then-Chief Judge Richard Arnold, who was also the Chair of the Executive Committee of the Judicial Conference of the United States, was present at the NBRC meeting when we voted to recommend direct appeals, and he supported the concept.

2. Minerex Erdoel, Inc. v. Sina, Inc., 838 F.2d 781, 786 (5th Cir. 1988) ("[T]he reference by the District Court to a United States magistrate of an appeal from a bankruptcy court decision was not proper.").

3. Chief Judge Politz has written a letter to the Commission for our court, which I endorse. These are my additional views.