Can litigants request a jury trial in federal bankruptcy court? | Schiffer Hicks Johnson

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Litigants often seek to transfer cases to federal bankruptcy court when one of the parties is or enters bankruptcy. When the claims at issue are not directly related to the bankruptcy, the ultimate destination of the case (i.e., whether the case is remanded to state court, withdrawn to federal district court, or upheld in bankruptcy court) may depend on several factors, including whether a party has requested a jury. This factor recognizes the friction between a party’s right to a jury and the default inability of federal bankruptcy courts to preside over jury trials.

What the parties may not realize is that a federal bankruptcy court can to preside over a trial by jury and to render judgment on the verdict provided that he has the consent of the parties. Just like the federal magistrates,[1] although federal bankruptcy judges generally do not have the power to finally decide certain cases, they can do so with the consent of all parties. According to the statute, “If the right to a jury trial applies in a proceeding that may be heard under this section by a bankruptcy judge, the bankruptcy judge may conduct the jury trial if he is specially appointed to exercise such jurisdiction by the district court and with the express consent of all parties.”[2]

This raises three questions:

  1. What Proceedings Can Be Heard by a Federal Bankruptcy Judge?
  2. What does “specially designated” mean in this context?
  3. How should the parties express their consent?

First, the federal bankruptcy courts “may hear and decide all Title 11 matters and all main proceedings arising out of Title 11 or arising out of a Title 11 matter.[.]”[3] Bankruptcy courts can also hear non-essential proceedings that are “otherwise related to a Title 11 matter.”[4] Of these two types of bankruptcy cases, bankruptcy courts can conduct jury trials involving main proceedings assuming all prerequisites are met.[5]

Second, many federal bankruptcy courts are already “specially designated.” Some district courts have blanket orders designating the respective district bankruptcy judges to conduct jury trials. For example, General Order 1995-05 for the Southern District of Texas “designates bankruptcy judges in this district to conduct jury trials.” In the absence of such a general order, the parties must file a request for special designation with the appropriate federal district court.

Third, like consent to trial before a federal magistrate, parties in federal bankruptcy court can simply file a written consent signed by all parties or their attorneys.

Why is a jury trial in bankruptcy court desirable? One of the main advantages is certainty as to which court will take the case to trial. Another important advantage is that a party can use the ability to consent as a bargaining chip in pretrial detention negotiations. And, contrary to what some might think, consent can lead to a streamlined decision-making process that could lead to a resolution of the case much sooner. Under the right circumstances, consent to a jury trial in federal bankruptcy court is a viable option worth considering.

[1] 28 USC § 636(b)(1).

[2] 28 USC § 157(e).

[3] 28 USC§ 157(b)(1).

[4] 28 USC§ 157(c)(1).

[5] Some cases have determined that bankruptcy courts cannot conduct a jury trial involving non-essential procedure because it would violate the Seventh Amendment. See, for example, Regarding Daewoo Motor Am. Inc.302 BR 308, 314 (CD Cal. 2003) (bankruptcy court may conduct jury trial on primary but not non-essential proceeding); In re Lawrence Grp., Inc.285 BR 784, 788 n.2 (NDNY 2002) (“Bankruptcy courts are constitutionally prohibited from holding jury trials in non-essential matters.”) (citing In re Orion Pictures Corp.4 F.3d 1095, 1101 (2d Cir. 1993)).



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