B. Toward the Future: Sketching Out the Contours of a Federal
2. A Robust Model
Amuchmorerobust—andmoreradical—approachwouldbetoeliminatethe currentbankruptcycourtsystemandtheBAandUSTProgramsentirely,thereby enablingthecreationofabrandnewfederalbankruptcyagencychargedwithboth adjudicatoryandrulemakingfunctions. Inotherwords,bankruptcyadministration wouldmovefromthecourtstoatraditionalregulatorymodel.
Intermsofhowthismightbedone,theBrookingsReportfrom1971provides perhapsthemostusefulroadmap. TheBrookingsReportdescribesindetailhowan
440. SeeSECv.CheneryCorp.,332U.S.194,202–03(1947)(holdingthatitisprimarilyinthediscretion ofagenciestodecidewhethertoproceedviarulemakingoradjudication).
441. Koch,supranote10,at114.
442. Shapiro&McGarity,supranote439,at62.
443. Theseriouspoliticalbattlesthatcaneruptoverthecreationofnewagenciesisnicelyillustratedbythe newConsumerFinancialProtectionBureau(CFPB). AfterCongresscreatedtheagencyin2010, PresidentObamawasunabletogettheSenatetoconsiderhisnominationtoheadtheCFPBdueto RepublicanSenators’displeasurewiththestructureandpowersoftheagency. SeeBinyamin Appelbaum,FormerOhioAttorneyGeneraltoHeadNewConsumerAgency,N.Y.TIMES,July18,2011, atB1. Specifically,theRepublicanSenatorsarguedthatthesingle-headedCFPBwastoopolitically insulated;theywantedtheagencytobemulti-memberedratherthansingle-headed;andtheywanted Congresstoexercisemorecontrolovertheagency’sbudget. Seeid. AfterPresidentObama’s nomi-nationtoheadtheCFPBstalledoutintheSenatebecauseoftheRepublicans’concernsaboutthe agency’sstructure,PresidentObama—inahighlycontroversialmove—ultimatelyresortedtoarecess appointment. SeeHeleneCooper&JenniferSteinhauer,BuckingSenate:ObamaAppointsConsumer Chief,N.Y.TIMES,Jan.4,2012,atA1.
agencycouldbecreatedtotakeovertheworkdonebycourts,trustees,andothers:444 Asingledirectorwouldheadtheagency,buttheagencywouldbe“highly decentral-ized,withallpossibledecisionsmadeatorneartheplacewherethebankruptcy pe-titionisfiled.”445 Giventheadministrative,non-judicialnatureofuncontested matters,agencypersonnelwouldhandlethemefficiently.446 Incontrast, contest-edmatterswouldbeheardandadjudicatedincompliancewiththeAdministrative ProcedureAct,447withadministrativelawjudgesmakinginitialdeterminationsand acentralagencyappealsboardandthecircuitcourtsdeterminingappeals.448
BecausetheBrookingsReportenvisionedan“operatingagency,nota regula-toryagency,”449itsrecommendationsdonotspeaktogivingtheagencysubstantive rulemakingpowers. Nonetheless,suchpowerscouldbeengraftedintothe adjudica-torypowersthattheBrookingsReportenvisioned,therebycreatingarobust regu-latoryagencywithbothadjudicatoryandrulemakingpowersinthemoldofmany traditionaladministrativeagencies,suchastheSEC.
Suchaboldmove—whichwouldnecessitatethecreationofanewagencyand rewritingmajorportionsoftheBankruptcyCode—wouldobviouslyfacesignificant politicalhurdles. Bankruptcyjudges,privatetrustees,andotherswhoseeconomic interestsalignthemwiththecurrentcourt-centeredsystemofbankruptcy admin-istrationwouldlikelyobject. Inaddition,thenewagency’sinstitutionaldesign wouldremainaquestion. Forexample,shoulditbestructuredasan independ-entagencyinsulatedfrompresidentialremovalpowers(asmanyfinancial regulato-ryagenciesare),450orasanexecutiveagencysubjecttodirectpresidentialcontrol?
Shoulditbesingle-headedormulti-membered?451 Shouldappealsfromtheagency besubjecttoreviewinanyofthecourtsofappealsorinasingleArticleIIIforumto
444. STANLEY&GIRTH,supranote282,at199.
445. Id.at201.
446. Id.at200.
447. 5U.S.C.§§500–596(2006).
448. STANLEY&GIRTH,supranote282,at215.
449. Id.at201.
450. SeeBressman&Thompson,supranote310,at607(“Financialagencies,whichexerciseexpansive in-fluenceoverthenation’sfinancialaffairs,areamongthemostprominentindependentagencies.”).
451. SeeRachelE.Barkow,InsulatingAgencies:AvoidingCaptureThroughInstitutionalDesign,89TEX.L.
REV.15,37(2010)(“Itisoftenremarkedthatindependentagenciesarecharacterizednotonlyby theirstatutoryfor-causeremovalprotectionsbutalsobythefactthattheyaretypicallymultimember bodies.”);Bressman&Thompson,supranote310,at610(notingthatindependentagencies“are gen-erallyrunbymulti-membercommissionsorboards,whosemembersservefixed,staggeredterms, ratherthanacabinetsecretaryorsingleadministratorwhoservesatthepleasureofthePresidentand thuswilllikelydepartwithachangeofadministration,ifnotbefore”).
trytomaximizeuniformity?452 Shouldtheagencybesubjecttonormal congression-alappropriationsprocesses,orshouldtheagencybeself-fundedthrough,for exam-ple,bankruptcyfilingfees?453 Shouldthereberestrictionsontheagency’spersonnel intermsofinitialhiringrequirementsdesignedtoreducepartisandecisionmaking?454 Carefulconsiderationoftheseandotherquestionswouldbecrucialbecause theinstitutionaldesignofagenciescanbe“criticallyimportantforinsulationagainst one-sidedinterestgroupdominance,”knownasagencycapture.455 Ofparticular concernwouldbetheinfluenceoflawyers,whohistoricallyhavebeenthemost dominantinterestgrouptoaffecttheshapeofourbankruptcysystem.456 In addi-tion,itshouldbenotedthatcaptureisnotaproblemuniquetoagencies. Tothe con-trary,LynnLoPuckihasnotedthatbankruptcycourtsaresusceptibletocapture—
includingcapturebylawyers.457 Thus,itisnotclearthatrelocatingbankruptcy
452. SeeMcKenna&Wiggins,supranote122,at683–84(exploringthepossibilityofcreatingaFederal CourtofBankruptcyAppealsstaffedbyArticleIIIjudgestoengageincentralizedreviewandtohelp bringuniformitytobankruptcy). SeegenerallyRevesz,supranote259,at1153(discussingtheissueof reviewbygeneralistArticleIIIcourtsversusspecializedreviewingcourtsandultimatelyconcluding that“specializedjudgesarelikelytoexhibitstructuralbiases,andthereforethattheyarelikelyto de-creasetheeffectivenessofcongressionaldelegationtoadministrativeagencies”).
453. SeeREPORTOFTHECOMMISSIONONTHEBANKRUPTCYLAWSOFTHEUNITEDSTATES, H.R.DOC.NO.93-137,pt.1,at119(1973)(recommendingthattheproposedbankruptcyagencybe fundedthroughfeesandchargesaswellasanyfundsCongresschoosestoappropriatebecause “[e]ffec-tiveCongressionaloversightisbestassuredbycontroloverthefinancingoftheAdministration”);cf.
Barkow,supranote451,at43–44(notingthatthestructureofanagency’sfundingcanbecriticalin termsofprotectingagainstcaptureanddiscussingtherelevanceofanagency’sfundingsource).
454. SeeBarkow,supranote451,at48(“Requiringappointeestopossesscertainqualificationscanhelp limitpartisandecisionmaking,anditalsofacilitatesexpertdecisionmakingbecauseindividualsare hirednotwithaneyetowardhavingthembecomeexpertsonthejobbutwiththeideathattheywill jointheagencywiththerelevantskillset.”).
455. Id.at15.
456. SeeDavidA.Skeel,Jr.,BankruptcyLawyersandtheShapeofAmericanBankruptcyLaw,67FORDHAM L.REV.497,498(1998)(“ThebankruptcybarnotonlyhelpedtoassurethepermanenceofAmerican bankruptcylaw;thebaralsohashadanenormousinfluenceonthe[1898]Act’ssubsequent develop-ment. Otherinterestgroups,fromlendersandothercreditorstodebtorsandpotentialdebtors,have alwayshadabigstake,too. Collectiveactionproblemsandrelatedconsiderations,however,have lim-itedtheinfluenceofunsecuredcreditorsanddebtors. Althoughbanksandotherlendersarenot si-milarlyconstrained,theirprioritystatusandabilitytoadjusttheirinterestratesinresponseto debtor-friendlybankruptcylawslimittherangeofissuestheyareconcernedwith. Asaresult,noother grouphashadnearlysopervasiveanimpactonbankruptcylawasthebankruptcybar. Bankruptcy lawyers’influenceontheevolutionofbankruptcylawis,inasense,therestofthestoryof bankrupt-cyintheUnitedStates.”). Forarecentexampleoflobbyingbybankruptcylawyers,seeEditorial,The TroubleWithBankruptcyLawyers,N.Y.TIMES,June10,2012,atSR10(“[A]tacontentiousmeeting attheJusticeDepartmentlastweek,lawfirmswithbigbankruptcypracticesmadeclearthattheywere notabouttoaccept[newChapter11fee]guidelineswillingly.”).
457. See,e.g.,LYNNM.LOPUCKI,COURTINGFAILURE:HOWCOMPETITIONFORBIGCASESIS CORRUPTINGTHEBANKRUPTCYCOURTS243(2005)(“Thecourts’incentivesweretoserve man-agersandthosemanagers’lawyersandcontractallies. Whenanyofthoseinterestscomeintoconflict
administrationtoanagency-centeredmodelwouldexacerbatethecapture prob-lemsthatalreadyinhereinthecourt-centeredmodel,especiallyifcarefulattention isgiventoquestionsofinstitutionaldesignthatcanhelptominimizethenew bankruptcyagency’sriskofcapture.
Inlightofthemanyunansweredquestionsofinstitutionaldesign,anyattempt tocreatearobustbankruptcyagencyvestedwithbothrulemakingandadjudicatory powerswouldlikelyengenderheatedpoliticaldebatesaboutthevirtuesandvicesof differentagencystructures. Indeed,recentcontroversiesthathaveengulfedthe ConsumerFinancialProtectionBureau(CFPB),anagencycreatedin2010with thepassageoftheDodd-FrankAct,havefocusedheavilyonRepublicans’ unhappi-nesswiththeCFPB’sstructuralaspects,suchastheDirector’stenureprotections.458 Nonetheless,despitetheseveryrealpoliticalhurdles,therobustapproach de-scribedheremeritscarefulconsiderationanddiscussionforseveralreasons. First,a robustmodelwouldalignbankruptcyadministrationwithinthetraditionalagency model,therebyfurtheringnotionsofexpertise,accountability,uniformity, acces-sibility,transparency,prospectiveclarity,andflexibilityinthesettingofbankruptcy policy. Second,itwouldavoidconcernsthathaveplaguedothersplit-function agencies,459anditwouldleavetheagencywiththeoptionofsettingpolicyvia case-by-caseadjudicationratherthanrulemakingwhereappropriate.460
Furthermore,thecreationofarobustbankruptcyagencyarmedwithboth ad-judicatoryandrulemakingpowersmightwellresolvesomeoftheStern-likeArticle IIIissuesthathavecastashadowoverthebankruptcycourts.461 Inthetraditional administrativelawcontext,incaseslikeCommodityFuturesTradingCommissionv.
Schor,462theCourthasbeenquiteliberalinallowingagencyadjudicatorsto adjudi-cateeventraditionalstatelawclaimswhenCongressintendedtocreateinexpensive andexpeditiousspecializedadministrativeforumstoadministerregulatory re-gimes.463 Indeed,asDouglasBairdhasnoted,“[t]hekindofcounterclaimthatwas
withtheinterestsofprepetitionunsecuredcreditors,employees,taxingauthorities,regulatory author-ities,pensioners,andothercorporateconstituencies,competitionforcesthecourtstosqueezethelatter groups. Thebankruptcycourtcompetitionisnotamarketbutamarketfailure.”).
458. Seesupranote443;seealsoLetterFromSenatorMitchMcConnelltoPresidentBarackObama(May 2,2011),availableat http://www.blunt.senate.gov/public/_cache/files/b78a4ff6-58c9-48d8-a708-9e62ee360cc3/5-5-11LettertoPresidentObamaregardingconfirmationofCFPBnominee.pdf (“Noagencyorinstitution,includingCongress,canreviewtheCFPBbudget,andnomechanisms wereputinplacetoensurethatthedirectoriseffectivelymanagingpublicmoney.”).
459. Seesupranotes439–442andaccompanyingtext.
460. Seesupranote440andaccompanyingtext.
461. SeesupraPartII.A.1.
462. 478U.S.833(1986).
463. Seesupranotes213–216andaccompanyingtext.
foundsuspectinSternissubstantivelynodifferentfromtortclaimsthatareroutinely foldedintoadministrativeproceedingsinwhichtheadjudicatorsdonothave life-timetenure.”464 Hence,amovetowardatraditionaladministrativemodelin bankruptcy—pursuanttowhichanagency,ratherthanthecourts,wouldadjudicate inthefirstinstancemattersarisinginorrelatedtobankruptcy—mightgoalong wayinhelpingtoalleviatesomeoftheArticleIIIissueshighlightedbyStern.465
Bysuggestingthatanagencymodelmighthelptoalleviatesomeofthese ArticleIIIissues,wemeanjustthat. WedonotmeantoimplythattheArticleIII concernswouldcompletelydisappear. Issueswouldstilllikelyberaisedabout whetherallofthenewagency’sorderscouldbeenforceablewithoutresorttothe federalcourtsorwhethersomeofthenewbankruptcyagency’sorders,suchasthose involvingonlyso-calledrelated-toclaims,wouldbeenforceableonlybyorderofan ArticleIIIcourt.466 Insortingthisout,itwouldbenecessarytodevelopabetter understandingofwhataspectsofbankruptcyadjudicationcouldfitsquarelywithin the“publicrights”model,whichallowsadjudicationbyanon–ArticleIIIagencyof publicrights,aswellasthose“seemingly‘private’right[s]that[are]soclosely integratedintoapublicregulatoryschemeastobeamatterappropriateforagency resolutionwithlimitedinvolvementbytheArticleIIIjudiciary.”467
Scholarshavegiventhisissuesomeattentioninthepast,althoughnotnearly enough. AlecP.Ostrow,forexample,hasarguedthatthedischargeinbankruptcy easilyfitswithinthepublicrightsmodel.468 Analogizingtootherdistributive schemesinwhichthegovernmentdolesoutbenefits,hearguesthatthedischarge canbeseenfromthedebtor’sperspectiveasagovernmentbenefitthatentitlesthe debtortothereleasefromtheburdenofpreexistingdebt.469 Ostrowalsosees por-tionsofthedistributionofadebtor’sassetstocreditorsasfallingwithinthepublic rightsschemegiventhat,whetheranunsecuredclaimisentitledtobepaidahead ofothersoutofacommonpool,“isamatterdeterminedbythefederalregulatory scheme,ratherthanstatelaw.”470 Nonetheless,broadconsensushasnotyetbeen
464. Baird,supranote198,at15.
465. Cf.id.(notingthattheArticleIIIissuesinvolvedinSternlikelywouldhavetakenadifferentcourseif Congresshadcreatedanagencychargedwithadministeringthebankruptcylawsinsteadofcreating acourt-centeredmodel).
466. SeeSternv.Marshall,131S.Ct.2594,2610–11(2011)(discussingwhetherabankruptcycourt’sorder isenforceablewithoutresorttoanArticleIIIcourtunderthecurrentscheme).
467. Thomasv.UnionCarbideAgric.Prods.Co.,473U.S.568,594(1985).
468. AlecP.Ostrow,ConstitutionalityofCoreJurisdiction,68AM.BANKR.L.J.91(1994).
469. Id.at101–02.
470. Id.at106.
reachedontheseissues,471andifthemovetoatraditionalagencymodelweretobe made,wewouldneedtoknowhowbankruptcycouldfitwithinthepublicrights modelandwhatkindofArticleIIIreviewwouldberequiredoftheagency’sorders soastoavoidtheArticleIIIissuesthathaveplaguedbankruptcycourts.
CONCLUSION
Ourcurrentcourt-centeredsystemofbankruptcyadministrationistruly ex-ceptionalinmanyways. Twofederaladministrativeagencies,whichsplittheir au-thorityalonggeographiclines,operatewithinthebankruptcyspherebutlackthe authoritytosetpolicyattheheartoftheBankruptcyCode. Moreover,Congresshas delegatedtothecourts,ratherthaneitheradministrativeagency,thepowertofill gapsintheCodeandthustosetbankruptcypolicy. Additionally,thepolyphonic natureofthecurrentcourt-centeredmodeloftenfailstoyielduniformanswers, causingconfusionforlitigantsandcourtsalike.
OurgoalinthisArticlehasbeentoquestionwhetherbankruptcy admin-istrationshouldcontinuetobeexceptional. Wehavemadethecase—groundedin bothconstitutionalandpolicy-drivenrationales—formovingbankruptcy admin-istrationtowardamoretraditionalagencymodel. Werecognizethatsuchamove wouldbeparadigmshiftingforthebankruptcyfieldandmightwellfacesignificant politicalhurdles,butwebelievesuchamoveisnonethelessadvisabletobringgreater expertise,accountability,uniformity,accessibility,transparency,prospectiveclarity, andflexibilitytopolicymakinginthebankruptcyarena.
471. CompareBrieffortheUnitedStates,N.PipelineConstr.Co.v.MarathonPipelineCo.,458U.S.
50(1982)(Nos.81-150&81-546),1982WL607231,at*34(“Justasnon–ArticleIII adminis-trativeagenciesconstitutionallymaygrantgovernmentbenefitssuchasradiostationlicenses, pilotlicenses,orcertificatesforcommoncarriers,anadministrativeagencycouldbeestablished toadjudicatebankruptcypetitionsandgrantdischarges.”),withDouglasBaird,BankruptcyProcedure andState-CreatedRights:TheLessonsofGibbonsandMarathon,1982SUP.CT.REV.25,38–39, 44–45(arguingthatitisdifficulttofitbankruptcyintothepublicrightsmodel),andDavidP.
Currie,BankruptcyJudgesandtheIndependentJudiciary,16CREIGHTONL.REV.441(1983).