Submission by the
Bankruptcy Appellate Panel of
the Ninth Circuit to the Commission
on Structural Alternatives for the
Federal Courts of Appeals

May 29, 1998
San Francisco, California

This submission is primarily directed at the Commission's question dealing with what is working well in the federal appellate courts. Specifically, we refer to the establishment and support of the Bankruptcy Appellate Panel in the Ninth Circuit. As part of this discussion we will touch upon the issue of the advantages or disadvantages that may be found in proposals to change the current organization of the Ninth Circuit Court of Appeals.

A. The Ninth Circuit Establishes the Bankruptcy Appellate Panel

When the Bankruptcy Code was enacted in 1978, it contained authority for the circuit courts to create bankruptcy appellate panels ("BAP"), to hear the initial appeals from bankruptcy courts. In 1979, the First and Ninth Circuits established BAPs. However, in the wake of the Supreme Court decision in Northern Pipeline Const. Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982), only the Ninth Circuit reestablished a Panel. New statutory authority added the requirement that the parties consent to the appeal being heard by a bankruptcy appellate panel.

In the Ninth Circuit the BAP was initially established as a demonstration project. The goals established for the BAP were: to provide some relief for the district courts in regard to bankruptcy appeals, maintain a uniform body of bankruptcy law in the nine western states and to provide a challenge for the bankruptcy judges in the Ninth Circuit.⁽¹⁾

Since 1984, approximately 60% of all appeals from bankruptcy courts in the Ninth Circuit have consented to the Panel, relieving the district courts of the considerable burden of handling thousands of appeals.

B. Resources Required for the Bankruptcy Appellate Panel

Currently, the Panel consists of seven regular judges who devote approximately 30-35% of their time to their appellate duties. While several members of the Panel receive small reductions in their trial court work, for all members of the Panel it means taking on an increased workload and responsibility.

Given these additional demands on the judges involved, it is essential to have available judges with the requisite background, experience and inclination for service on the BAP. The Ninth Circuit, with 68 bankruptcy judges, has a sufficient pool of talent to provide the necessary judges to serve in this capacity.

As the basis for the BAP's appellate jurisdiction is dependant on the consent of the parties, the Panel has a commitment to hold hearings in the locality of the parties, whenever that is possible. Scheduling of the members of the Panel is complicated by a statute that directs that bankruptcy judges cannot sit on cases which originate in the district for which the judge is appointed or designated.

At this time, the regularly assigned Panel judges, with the assistance of judges appointed to specifically serve on particular calendars as pro tem members, can have three-judge panels holding calendars in three separate cities on any one day. This availability of Panels provides the litigants with expeditious hearings in the local community. The resources within the Ninth Circuit make it possible to provide this level of service.

When the caseload requires, the Chief Judge of the Circuit can draw on the large pool of bankruptcy judges in the Ninth Circuit for temporary pro tem assignment to the BAP. This provides the Panel with a great deal of flexibility to handle or manage the demands of appeals filed in various districts and with the fluctuating filings among the districts. These resources also ensure that there are replacement jurists for assignment when Panel members are unavailable due to illness or any other reason.

In addition, the allocation of law clerks to permanent members of the Panel, and the staffing of a clerk's office, were authorized at the circuit level. The development of the BAP has been facilitated by the essential support of the Office of the Circuit Executive of the Ninth Circuit and the Clerk of the Ninth Circuit . The support provided by these offices ensured that the BAP would be able to institute the necessary procedures to conduct business. They further enabled the Panel to gain access to the courthouse space and equipment needed.

It is doubtful that this program could have been instituted and developed in a circuit without the substantial resources available to a large circuit court, such as the Ninth Circuit.

That this successful program was initiated and maintained in the Ninth Circuit reflects the culture in this circuit, which has placed a premium on innovation. It attempts to find new methods of dealing with the continuing increase in case filings facing all courts in the federal system. It is projected that the case load of all federal courts will continue to increase well into the 21st Century. With this trend continuing, it is essential that the federal courts make every effort to find ways to deploy the resources available as efficiently as possible.

C. Benefits From the Current Appellate System

In an effort to test whether the BAP was a worthwhile effort, the Federal Judicial Center commissioned a survey of the work of the Ninth Circuit BAP, which revealed that:

1) two thirds of attorneys responding to the survey stated that the BAP gave bankruptcy appeals closer scrutiny than the district courts;

2) a similar proportion stated that BAP decisions were more likely to be correct than district court decisions; and

3) sixty percent of attorneys stated that BAP decisions were "better products" than district court decisions in bankruptcy appeals.

See J.Sloan & G.Bermant, Bankruptcy Appellate Panels: The Ninth Circuit Experience, 21 Ariz.St.L.J. 181, 212-216 (1989). This sentiment is reflected in statistics which reveal that parties have consented to have more than 60% of all first level appeals in the Ninth Circuit go to the BAP and the rate of further appeal from BAP decisions is half the rate of appeals from district court decisions.

Given the high level of acceptance by litigants and counsel in the Ninth Circuit, the BAP system has become an established institution and has been expanded to the First, Second, Sixth, Eighth and Tenth Circuits.

In recognition of the complexity of modern commercial activities, especially on the Pacific Rim which involves much international commerce, it is essential to have a large, coherent body of established precedent available for planning purposes. Under the U.S. Constitution the Congress is granted the power to establish "uniform Laws on the subject of Bankruptcies throughout the United States." U.S. CONST. Art.I, § 8, cl.4. This goal of uniformity can be undermined by differences of interpretation of the Bankruptcy Code by the various circuit courts of appeals.

Bankruptcy is one area where there are already many differences of interpretation among the circuits. This is cause for concern as bankruptcies often involve interstate matters. Since the U.S. Supreme Court can only consider a handful of bankruptcy cases each year, it is helpful to have a circuit court which covers the entire Pacific Coast. Under the present system, parties need only look to a single authoritative source of federal law. A large circuit can provide a significant number of case authorities to provide useful precedent for planning purposes. Therefore, any split of the Ninth Circuit may be disruptive to commercial transactions along the Pacific Coast. In particular, multi-state businesses could be subject to conflicting rulings, as would federal agencies.

Taking the binding authority of the large number of Ninth Circuit precedents as the starting point of its efforts, the BAP contributes to the uniformity of decisions regarding bankruptcy law throughout the entire region.

D. Possible Disadvantages with a Less Inclusive Ninth Circuit

If the Ninth Circuit were split into several constituencies, it is likely that attempts would be made to continue the Ninth Circuit's tradition of innovation and experiment. However, it is doubtful that new start up programs, such as the BAP service, could be commenced with the projected reduced personnel, facilities and equipment available to the smaller circuit courts.

Congress has apparently recognized the difficulty of maintaining a BAP in a small circuit by providing that two or more circuits are authorized to form a joint BAP. 28 U.S.C. § 158(b)(4). However, no circuit court has established a joint panel. One of the obvious difficulties of such a panel is the conflicting binding authority it would be required to follow. The panel would have to maintain different lines of authority, depending on the circuit in which the various districts are located. This would tend to create confusion among litigants and would do little to promote consistent "law declaring" in bankruptcy cases or respect for the decisions of a panel.

Litigants and their legal advisors would be faced with a new landscape with the potential for conflicting legal authorities that could not be resolved without Supreme Court intervention. In particular, the bankruptcy system would have fewer binding precedents being declared in any one circuit to guide in the construction and implementation of the Bankruptcy Code. The reduction of the circuit courts to less inclusive institutions might put us further from our goal of uniform application of the bankruptcy laws. In addition, inconsistent interpretations may encourage forum-shopping in bankruptcy cases.

Dividing the circuit would also limit the options for shifting judicial resources to handle vacancies, illnesses or temporary workload increases. This could have significant ramifications in the bankruptcy world as there are sharp fluctuations in bankruptcy filings. This is so because the number of bankruptcy filings is affected not only by those factors that influence the amount of litigation generally, but also by the state of the economy in the various districts. Bankruptcy filings rise sharply in the aftermath of economic downturns; furthermore, changes in filings differ widely from one district to another, because not all districts suffer each downturn to the same extent or at the same time.

Some proposals for splitting the Ninth Circuit has suggested dividing the State of California. Obviously, if interpretations of the bankruptcy laws differ within the state, business transactions would be significantly impaired and forum-shopping encouraged.

Retaining a large circuit which includes the entire West Coast will ensure that the circuit continues to have the judges and other personnel and resources available for the most efficient deployment.

1. Under this program a number of bankruptcy judges in the Ninth Circuit have had the opportunity to sit as appellate judges. This has resulted in Ninth Circuit bankruptcy judges being more sensitive to the need to make an adequate record of trial court proceedings in order to expedite proper appellate review. Recently, as part of the Ninth Circuit BAP program, newly appointed bankruptcy judges have been given the opportunity to sit on the Panel, on a pro tem basis, shortly after appointment.