Thehistoricalrecordrevealsthat,fromtheearliestdaysoftheRepublicand witheveryiterationofthebankruptcylaws,Congresstaskedthefederalcourtswith administrationofthebankruptcysystem—inalllikelihoodduetotheseemingly privatenatureofindividualdisputesbetweendebtorsandcreditorsandthemanner inwhichsuchdisputestranslateintocompetingclaimstopaymentfromadebtor’s estate. AsFrankKennedyhasobserved,“ItseemstohavebeenassumedbyCongress
Missouritornadoes,thelateApril2011tornadoesintheSouth,the2011MississippiRiverflood victims,the2010NashvilleFloodvictims,andallotherswhohavesufferedlossoftheirhomefrom massivedisasterstobedeniedatruefreshstartbecausetheirlenderscannotbeforcedtoforecloseor acceptadeedinlieuofforeclosure. Theperfectstormofthe‘GreatRecession’andtheseunspeakable naturaldisastersleavesdebtorssuchasMs.Piggandothervictimslikehertosufferunbearablelosses oftheirhomes,alltheirbelongings,andlovedones,andbedeniedthefreshstartpromisedby bank-ruptcy. Ms.Pigg,andotherlikevictims,sufferawrongwithoutaremedy.”(footnotesomitted)).
fromthebeginningthatbankruptcyshouldbeadministeredbycourts.”391 Moreover, in everyinstancein whichCongresscreated a bankruptcy regimeprior tothe BankruptcyCode’senactmentin1978,392it“authorize[d]courtsofbankruptcyto appointcommissioners,assignees,registers,trustees,receivers,andrefereestohandle theactualadministrationofbankruptcycases.”393 Thus,thecongressionalblueprint priortothecurrentbankruptcysystemhadalwaysbeen—asitremainstoday—a court-centeredmodelinwhichnon–ArticleIIIadjunctsassistedtheArticleIIIcourt inadministeringbankruptcyestates.394
Importantly,theBankruptcyActof1898markedasignificantshiftinthe orientationofthebankruptcysystemfromacreditorcollectiondevicetoaforum foreffectuatingsubstantiverelieffordebtors.395 Moreover,the1898Actmarked thestartofwhatwouldbecomeanincreasinglypowerfulroleforthenon–ArticleIII adjunctinbankruptcymatters.396 Withthesechanges,thereostensiblyexistedan opportunityforCongresstoreconceptualizebankruptcyadministration—specifically, bycharginganadministrativeagencywithresponsibilityforthesystem. Perhaps because of path dependencies, however, Congress chose to follow the court-centeredtradition. Withthisinstitutionalinertia,thebankruptcysystemcontinued itsinexorablemarchdownthepathofjudicialadministration,evenasthemodern administrativestateemergedandotherareasoflawturnedtowardagency admin-istration.397
Whatisperhapsmostinterestingaboutthisfocusoncourt-centered admin-istrationisthat,duringthetimeperiodspanningenactmentofthe1898Actand passageoftheBankruptcyCodein1978,reformersweredissatisfiedwiththe
391. Kennedy,supranote195,at3.
392. ThoseregimesweretheBankruptcyActsof1800,1841,1867,and1898. ActofApr.4,1800,ch.19, 2Stat.19(repealed1803);ActofAug.19,1841,ch.9,5Stat.440(repealed1843);ActofMar.2, 1867,ch.176,14Stat.517(repealed1878);ActofJuly1,1898,ch.541,30Stat.544(repealed1978).
393. RichardB.Levin,TowardsaModelofBankruptcyAdministration,44S.C.L.REV.963,965–66(1993) (footnotesomitted).
394. Id. ForadetailedaccountoftheroleofArticleIIIcourtsandnon–ArticleIIIadjunctsundereachof theseActs,seeKennedy,supranote195,at5–9.
395. SeeCharlesJordanTabb,TheHistoricalEvolutionoftheBankruptcyDischarge,65AM.BANKR.L.J.
325,364–65(1991).
396. See,e.g.,ADMINISTRATIONOFTHEBANKRUPTCYACT:REPORTOFTHEATTORNEY GENERAL’SCOMMITTEEONBANKRUPTCYADMINISTRATION4–6(1941);SKEEL,supra note279,at144.
397. SeeBaird,supranote198,at12(“Atthesametimethatmodernbankruptcycameintobeingwithits systemofrefereesappointedbydistrictcourts,Congresscreatedadministrativeagencieslikethe InterstateCommerceCommission.”);seealsoid.at15(“Onecaneasilyimaginethatbankruptcylaw wouldhaveadifferentshapeifCongresshadwaitedtoputitintoplace....Congressmighthave createdanagencychargedwithadministeringthebankruptcylaws.”).
adjuncts’mannerofmanagingbankruptcycasesandrepeatedlysoughttocreatean agencywithinthebankruptcysystem.398 Thereformerswerenotconcernedwith whethertolocatebankruptcypolicymakinginthecourtsorinanagency;rather, theirproposals—whichultimatelywerequelledbybankruptcyprofessionalswhose economicself-interestmotivatedthemtostaveoffinstitutionalredesign399—were motivatedlargelybyaperceivedneedforindependentoversightthatwouldsafeguard againstabuses inthemanagerialandministerial administrationofbankruptcy cases.400 Inotherwords,structuralreformeffortsbetween1898and1978focused primarilyonthemanagement401andbusyworkinthesupervisionandprocessing ofbankruptcycasesandonconcernsaboutjudicialparticipationinnon-judicial administrativetasks.402
Severalreportspublishedbetween1931and1978embodythatfocus. The 1931DonovanReportproposedthecreationofafederalbankruptcycommissioner’s officeintheexecutivebranchtohelpseparatethejudicialfunctionsfromthe ad-ministrativefunctionsinbankruptcyproceedings.403 Theproposalenvisioneda commissionerwhowouldhelpcoordinateandeffectivelysupervise bankruptcy administration,investigateandcorrectabuses,andstudymajorproblemsin
bank-398. See,e.g.,SKEEL,supranote279,at77(“[T]hefindingsoftheDonovaninvestigationweredramaticand shockingandsuggestedawide-rangingconspiracytocontrolbankruptcyadministration....[T]he Thacherreportreachedessentiallythesameconclusions.”).
399. See,e.g.,id.at93(“IfCongressappointedadministrativeoverseerstoinvestigatedebtorsandmake formalrecommendationsastowhethereachdebtorshouldgetadischarge,bankruptcylawyersand judgeswouldfiguremuchlessprominentlyinbankruptcypractice.”);EricA.Posner,ThePolitical EconomyoftheBankruptcyReformActof1978,96MICH.L.REV.47,80(1997)(“Evidenceofthe bankruptcyjudges’practiceofappointingcroniestothepositionoftrusteesupportsthehypothesisthat thebankruptcyjudgesopposedthebankruptcyagencybecausetheyfearedlosingtheirpatronage power.”).
400. SeeSTANLEY&GIRTH,supranote282,at197(notingthat,initssummaryofdeficienciesregarding thebankruptcysystem,oneproposalforreformlisted“[m]anagementbyacoalitionofreferees, trustees,andthebankruptcybarwhichisoflittlebenefittodebtors,creditors,orthepublic”and
“[m]anagementcharacterizedbyloosesupervision,infrequentfieldexaminations,littleconcernfor qualificationsofpersonnel,archaicprocedures,highcosts,andunwarranteddelays”).
401. See,e.g.,id.at200(notingthat“problemsofguidanceandmanagement”inbankruptcycasesmight notneedtoberetainedinthecourts);HonorableEarlWarren,ChiefJusticeoftheUnitedStates, AddressattheAnnualDinneroftheThirty-SixthAnnualConferenceoftheNationalAssociationof RefereesinBankruptcy(Oct.23,1962),in37J.NAT’LASS’NREF.BANKR.3,4(1963)(discussing thehighcostsofbankruptcyadministration,suchasthesalariesandexpensesoftherefereesand trustees).
402. SeeH.R.REP.NO.95-595,at4(1977)(“Thebillremovesmanyofthesupervisoryfunctionsfromthe judgeinthefirstinstance,transfersmostofthemtothetrusteeandtotheUnitedStatestrustee,and involvesthejudgeonlywhenadisputearises.”),reprintedin1978U.S.C.C.A.N.5963,5966.
403. SeeH.COMM.ONTHEJUDICIARY,71STCONG.,ADMINISTRATIONOFBANKRUPTCYESTATES 26–33(Comm.Print1931)(ColonelWilliamDonovan).
ruptcyadministration.404 TheThacherReport,publishedin1932,similarly pro-posedthecreationoften full-time,salariedadministrators undertheAttorney Generalwhowouldstudyproblemsofbankruptcyadministration,reportonthe qualificationsofapplicantsfortrusteeships,andmonitortheworkoftrustees.405
TheReportoftheAttorneyGeneral’sCommitteeonBankruptcyAdministration, whichwaspublishedin1941duringtheformativeeraofthemodern administra-tivestate,likewisefocusedonrelievingthejudiciaryofnon-judicialtasks.406
Decadeslater,twoothernotablereformproposals—theBrookingsReportof 1971andtheReportoftheCommissionontheBankruptcyLawsof1973(the CommissionReport)—similarlyfocusedonthesystem’sinefficienciesandthe prob-lemofhaving“ajudicialsystemtotrytosolveproblemsthatarebynature adminitra-tive.”407 YetboththeBrookingsandCommissionReportsproposedanevenmore radicalrestructuringofthebankruptcysystemthantheirpredecessors,suggesting thatbankruptcymovefromitsjudicialmodeltoanadministrativemodel.
Specifically,theBrookingsReportsuggestedeliminatingthecourtsfromthe bankruptcysystembycreatinganagencythatwouldprocessbothuncontestedand contestedmatters,withexaminersadjudicatingcontestedmattersincompliance withtheAdministrativeProcedureAct;408and,“[i]ntheeventthatcontestedissues werenotsatisfactorilyresolvedbyexaminers,appealswouldgofirsttoacentral ap-pealsboardintheagencyandthen,ifnecessary,tothecourtsofappeals.”409
IncontrasttotheBrookingsReport’sproposaltoeliminatethecourts alto-gether,theCommissionReportproposeddivorcingthecourtsfrommanagerial andministerialadministrationbyshiftingnon-judicialadministrativetaskstoa newlycreatedUnitedStatesBankruptcyAdministration.410 Thenewagencywould havebeenempoweredto,amongotherthings,handlevoluntarypetitionsandgrant dischargeswhennoobjectionswerefiled;411thebankruptcycourtswouldreceive
404. Seeid.
405. SeeSTRENGTHENINGOFPROCEDUREINTHEJUDICIALSYSTEM,S.DOC.NO.72-65,at93–94 (1932)(SolicitorGeneralThomasThacher).
406. SeeADMINISTRATIONOFTHEBANKRUPTCYACT,supranote396,at122,127–32(suggesting thecreationofaDivisionofBankruptcyintheAdministrativeOfficeoftheU.S.Courts,whichwould examineandauditreferees,collectbankruptcystatistics,makerecommendationstoCongress,and investigatecomplaintsregardingbankruptcyofficials).
407. SeeREPORTOFTHECOMMISSIONONTHEBANKRUPTCYLAWSOFTHEUNITEDSTATES, H.R.DOC.NO.93-137,pt.1,at117(1973)(quotingtheBrookingsReport).
408. STANLEY&GIRTH,supranote282,at215.
409. Id.
410. SeeH.R.DOC.NO.93-137,pt.1,at103.
411. Id.at51–65,121–25.
matterswheredisputesarose.412 TheCommissionReport’srecommendationsalso differedfromtheBrookingsReport’srecommendationsinthattheCommission Reportexpresslycontemplatedgivingthenewagency’sadministratorthepower
“toadopt,amend,andrepealsuchrulesandregulationsnotinconflictwiththe provisionsofthisActashefindsnecessarytodischargehisauthority,duties,and functions.”413 GiventhattheCommissionReportfocusedprimarilyondivorcing thecourtsfrommanagerialandministerialadministration,however,itisunclear whetherornottheCommissionReportcontemplatedthatthisrulemakinggrant wouldvesttheproposednewagencywithbroadsubstantiverulemakingpowers.414 Regardless,hadtheCommissionReport’sproposalnot“diedanearlydeath”because ofvigorousoppositionbyjudgesandlawyers,415itwouldhavecometheclosestof anyproposaltowardcreatinganagencyvestedwiththepowertosetuniform bank-ruptcypolicyviaregulation.
Muchlikebankruptcyreformers,bankruptcyscholarswhohaveconsidered theoptimaldesignofbankruptcyadministrationhavefocusedontheextentofcourt involvement innon-judicial, administrativetasks. Alsolikethebankruptcy re-formersofthepast,thesescholarshavegenerallyfailedtoappreciatethedistinct policymakingaspectofbankruptcyadministrationandhencehavenotconsidered whetheranagencymightbewell-suitedforsettingbankruptcypolicy.416 For
exam-412. See,e.g.,id.at121(“Anyinvoluntarypetitionwillbereferredimmediatelytothebankruptcycourt fortheterritoryinwhichtheadministrator’sofficeislocated.”);id.at122(“Whentheadministrator disallowsaclaimorallowsaclaimoveranobjectionmadethereto,heisrequiredtonotifytheclaimant andtheobjector,whomaytakethemattertothebankruptcycourtbycomplaint.”).
413. H.R.DOC.NO.93-137,pt.2.,at55.
414. Ontheonehand,theCommissionReportdidspeakoftheneedforanationalorganizationcapableof developing“procedures,practices,andguidelinesappropriatefornationaluniformapplication.” H.R.
DOC.NO.93-137,pt.1,at126. Yetontheotherhand,theReportseemedtosuggestthatthe rulemakinggrantwouldsimplytransfertothenewagencythoserulemakingpowersthatwereat thetimealreadyvestedintheJudicialConferenceandtheSupremeCourt. Seeid. Inaddition,the proposedrulemakinggrantwouldhavemerelygiventheagency’sadministratorthepowertomake rulesandregulations“necessarytodischargehisauthority,dutiesandfunctions.” H.R.DOC.NO.93-137, pt.2,at55(emphasisadded). Incontrasttoagrantthatcouldhavebroadlygiventheadministrator thepowertopromulgateanysuchrulesasmayhavebeennecessarytoadministertheCommission’s modelact,thisproposedlanguagemayhavebeenpurposefullynarrow. SeeMerrill&Watts,supra note368,at482–83(notingthatdifferentverbalformulationsinrulemakinggrantscouldbemeantto conveybroaderornarrowerrulemakingpowers,butnotingthatthecourtshaverarely“suggestedthat differentverbalformulationssignifytheconveyanceofdifferenttypesofpowers”).
415. SKEEL,supranote279,at143–46;Posner,supranote399,at80,84.
416. JonathanLipsonisonescholarwhohasfailedtoappreciatethedistinctionbetweenbankruptcy administrationinvolvingpolicymakingandmereministerialadministration. SeeLipson,supranote 3,at654–57. Specifically,afternotingthatbankruptcyis“amatterofadjudicationratherthanagency administration,”id.at654,Lipsonobservesthat“muchoftheworkofbankruptcycourtsis adminis-trative,oratleastsodifferentinkindfromtheworkofArticleIIIdistrictcourtjudgesastobe
ple,RichardLevinhasarguedthat“authoritativedecisionsaboutdisputedforensic mattersinbankruptcycasesshouldbemadeinthejudicialsystem.”417 Ontheother hand,henotesthat“[t]heallocationofnonforensicdecision-makingresponsibility involvesselectinganofficerorinstitutiontoperformthatmanagerialjob,”418andhe proposesthatagovernmentalsupervisoryofficialdoso.419 Inamoreparticularized context,Angela Littwinhas explored theimplicationsof proposalsto convert Chapter7consumerbankruptcyintoanadministrativeprogram.420 Shefocuseson theactualprocessingofbankruptcycases,arguingthatthecourt-centeredmodel offersmoremanageableproceduralhurdles,morewidespreadlegalrepresentation, andhigher-qualitydecisionmakersthandoadministrativeprogramsinvolving wel-fare,socialsecuritydisability,andveterans’benefits.421
Todate,theonescholartoexpressconcernoverthejudicialmodelhasbeenR.
WilsonFreyermuth. InbrieflydiscussingtheBrookingsReport’sproposaltocreate abankruptcyagency,422henotes:
WhiletheBrookingsReportenvisionedabankruptcyagencythatwould havebeenprimarilyoperationalandnotregulatoryinnature,an adminis-trativemodelcouldhavecreatedasysteminwhichdisputesover inter-pretationalquestionswereresolvedinamuchmorestreamlinedmanner.
unrecognizableasadjudication.” Id.at654–55. Yetinlistingexamplesofwhatheviewsasthe admin-istrativeworkconductedbybankruptcycourts,Lipsonnotesthat“bankruptcyjudges...manage thefiling,andallowanceordisallowance,ofclaims.” Id.at655. Hence,Lipsonfailstodistinguish between(1)administrativetasksand(2)thepolicymakingthatcanresultfromadministrationofa statutoryscheme. Lipsoniscorrectthattheclaim-filingprocessentailsministerialadministration (althoughthebankruptcycourtclerk,see28U.S.C.§156(b)(2006),ratherthanthebankruptcy judge,managessuchfilings). SeeFED.R.BANKR.P.5005(a)(1). Ontheotherhand,the claim-allowanceprocessisonethatpotentiallypresentsanopportunityforjudicialpolicymaking. TheCode providesthatafiledclaim“isdeemedallowed,unlessapartyininterest...objects.” 11U.S.C.
§502(a)(2006);seealsoFED.R.BANKR.P.3007(a). Ifsuchanobjectionismade,thecourtisto determinethevalidityandamountoftheclaim,see11U.S.C.§502(b),withthepossibilitythatthe claimwillbedisallowedtotheextentrequiredbycertainstatutorylimitations,seeid.§502(b)(1)–(9).
Residualpolicymakinginheresinsuchadetermination. See,e.g.,TravelersCas.&Sur.Co.ofAm.
v.Pac.Gas&Elec.Co.,549U.S.443,449(2006)(“Thiscaserequiresustoconsiderwhetherthe BankruptcyCodedisallowscontract-basedclaimsforattorney’sfeesbasedsolelyonthefactthat thefeesatissuewereincurredlitigatingissuesofbankruptcylaw. Weconcludethatitdoesnot.”).
Hence,itisdescriptivelyincorrecttocategorizetheclaim-allowanceprocess,withitspotentialtogive risetoacontestedmatter,asanadministrativetask.
417. Levin,supranote393,at978.
418. Id.
419. Id.at983. Notably,Levinwouldnotfitdecisionmakingbythisofficialwithinanagencyadjudicatory structure. Seeid.at990.
420. SeeAngelaLittwin,TheAffordabilityParadox:HowConsumerBankruptcy’sGreatestWeaknessMay AccountforItsSurprisingSuccess,52WM.&MARYL.REV.1933,1980–2022(2011).
421. Id.
422. Seesupranote408andaccompanyingtext.
Forexample,Congressmighthavecreatedbroadstatutorystandards regardingcertainpolicyissues—e.g.,the“substantialabuse”screenfor Chapter7relief,asintheold§707(b)—andanadministrative mecha-nismforimplementingthosestandardsthroughrulemaking. Thismodel mighthaveprovidedformoreconsistentapplicationoftheCode’s standardstosimilarly-situateddebtorsthroughoutthesystem, particu-larlybycomparisontoanadversarialmodelthatproducesclarity—when itproducesclarity—onlythroughpercolation. Further,suchasystem wouldhavepermittedmorefrequentandeffectiverefinementofthe applicableregulationsovertime,aswarrantedbyempiricalevaluationof thesystem’soperationanditsexternaleffectsonthebehaviorof com-mercialactors. Last,butnotleast,judicialreviewinsuchamodelwould presumablycomewithappropriatedeferencefortheadministrator’s in-terpretationofthestatute,aconceptthatimplicitlydiscourages disap-pointed litigantsfrom aggressively seeking judicialreview ofmerely debatablequestionsofstatutoryinterpretation.423
Freyermuth’scommentaryhighlightsthefactthatCongress’sdecisionto lo-cateregulationofastatutoryschemeinthejudiciary,ratherthaninanagency,raises consequentialistconcernsgiventheinstitutionaldifferencesbetweenthetwomodels.
Inmakingthesecursoryobservations,however,Freyermuthdoesnotattemptto makethecaseforrelocatingadministrationoftheBankruptcyCodeinanagency.
Rather,hismainpointseemstobethat,despiteotherpotentialoptions,wenow
“havethesystemwehave”forbetterorforworse.424
Insum,bothbankruptcyreformersandscholarshavefixatedonhowto sepa-ratejudicialtasksfrommanagerialormereministerialtasksinbankruptcy,andboth haverepeatedlyfailedtofocusonwhetherthecourtsoranadministrativeagency wouldbebetterequippedtosetbankruptcypolicy. Nonetheless,theBrookingsand CommissionReportsdoprovideusefulblueprintsforashifttoward anagency model. Hence,evenifthereportsdonotfocusdirectlyonthesettingofbankruptcy policyviarulemaking,theyarehelpfulinthinkingabouttheidealstructureofsuch anagency.
423. Freyermuth,supranote364,at1077–78(footnotesomitted).
424. Id.at1078.
B. TowardtheFuture:SketchingOuttheContoursofaFederal