WHEN IS A COURT NOT A COURT?

The answer to the question would seem self-evident: Surely any “court” is always a “court.”

It's not. As Oliver Wendell Holmes, Jr. put it: “A word is not a crystal, transparent and unchanged, it is the skin of a living thought and may vary greatly in color and content according to the circumstances and the time in which it is used.” Towne v. Eisner, 245 U.S. 418, 425 (1918).

Sure enough, in In re Ozenne, 819 F.3d 514 (9th Cir. 2016), the Ninth Circuit Court of Appeals, over a vigorous dissent, has held that, for certain purposes, a bankruptcy appellate panel is not a court. This is true even though a bankruptcy appellate panel is composed of bankruptcy judges who are courts for the same purposes.

To understand how the Ninth Circuit came to this unintuitive conclusion requires a brief foray into American legal history and the sources of federal judicial power.

Article III, Section 1 of the United States Constitution provides that the “judicial Power of the United States, shall be vested in one supreme Court, and such inferior Courts as the Congress may from time to time ordain and establish.” As soon as the Constitution was ratified, Congress created inferior courts, including district (trial) courts and circuit (appellate) courts. And, to empower these courts to carry out their orders, Congress adopted the All Writs Act, which authorizes “the Supreme Court and all courts established by Act of Congress to issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law.” (28. U.S.C. § 1651, italics added.) The key words to judicial power of courts under the All Writs Act are “courts established by Act of Congress.”

Article I, section 8, of the United States Constitution grants Congress the power to establish “uniform Laws on the subject of Bankruptcies throughout the United States.” Pursuant to this power, Congress has authorized bankruptcy judges to serve as a “unit of the district court” (28 U.S.C. § 151) and hear bankruptcy matters referred to it by the district court (28 U.S.C. § 157).

Finally, to appeal a bankruptcy judge’s decision, the appellant may appeal either to the district court, or to a bankruptcy appellate panel composed of other bankruptcy judges. There may or may not be a bankruptcy appellate panel in a particular circuit because the decision to create a panel rests in the discretion of the circuit court, acting through its judicial council. (28 U.S.C. § 158.) Whether the appellant proceeds through the district court or the bankruptcy appellate panel, the decision may be further appealed to the circuit court.

With this background, we can try to understand the majority’s strange outcome of “a court is not a court” in the Ozenne case.

Mr. Ozenne appealed to the Ninth Circuit from a bankruptcy appellate panel decision that considered the merits of his petition for a writ of mandamus but denied relief. The Ninth Circuit never got to the merits of his appeal, however. A two-judge majority ruled that the bankruptcy appellate panel had no business even considering Mr. Ozenne’s request for a writ. The majority reasoned that under the All Writs Act, the bankruptcy appellate panel is not a court “established by Act of Congress” because the panel is established by an administrative arm of the circuit court, not by “by Act of Congress.” So, if Mr. Ozenne had wanted a writ, he should have appealed initially to the district court, a court that is established by an act of Congress. In other words, the bankruptcy appellate panel reviews decisions of bankruptcy judges who have the authority to issue writs, and the bankruptcy appellate panel’s decisions are reviewed by the circuit court that has the authority to issue writs, but the bankruptcy appellate panel, sandwiched between the two authorized courts, has no authority to issue writs.

The third Ninth Circuit judge dissented on the question of whether a bankruptcy appellate panel is a “court established by an Act of Congress.” In the dissenter's view, the majority inserts a word into the All Writs Act that isn’t there: That a court must be established “directly” by an act of Congress. The dissenter argues that a bankruptcy appellate panel is established by act of Congress because it is by the authority of Congress that circuit courts can create bankruptcy appellate panels. Indeed, the panel must have been established by act of Congress since circuit courts have no independent authority to establish additional courts.

The dissenter also chastises the majority for consistently referring to the bankruptcy appellate panel as a “tribunal” or “panel” rather than as a “court.” Changing the name of a court, the dissenter points out, doesn’t change its character as a court. The bankruptcy appellate panel functions exactly as a court; it reviews decisions of bankruptcy judges who are established by act of Congress; and, like any other court, its judgments are binding if not overturned on appeal. Eschewing Justice Holmes’ chameleonic view of words, the dissenter would hold that if it functions as a court, as a bankruptcy appellate panel does, then it should be a court for purposes of the All Writs Act.