Opinion
No. 82-237CC.
January 18, 1982.
Jurisdiction — Trustee
A bankruptcy court was not barred from adjudicating whether a trustee committed unfair labor practices because such controversy falls within the exception of the public rights doctrine expressed by the Supreme Court in the Northern Pipeline case. See 28 U.S.C. § 1471 at ¶ 4501.
[Opinion of the Court]
A review of the documents filed before the Bankruptcy Court in case number B-80-00259 by the trustee of debtor San Juan Hotel Corporation against the National Labor Relations Board and the Union de Empleados de Casinos de Puerto Rico which were admitted as exhibits in the Order to Show Cause hearing held in this Court on October 4, 1982 reveals that on May 20, 1980 the debtor filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code and that subsequently plaintiff filed an application for the rejection of debtor's collective bargaining agreement with the Federacion General de Trabajadores de Puerto Rico which was to expire on April 30, 1983. After a hearing on said application, the Bankruptcy Court entered judgment granting plaintiff leave to reject the collective bargaining agreement between San Juan Hotel and the Federacion General de Trabajadores de Puerto Rico as burdensome to the trustee. The complaint filed before the Bankruptcy Court alleges that on June 17, 1982 former casino employees of debtor went on a strike which was not authorized by the Federacion General de Trabajadores de Puerto Rico with the intention of intimidating and forcing plaintiff to reinstate the economic provisions of the collective bargaining agreement which that Court had previously determined to be onerous and burdensome to the trustee. It is stated therein that the casino employees continued on strike and have represented that the same is undertaken by Union de Empleados de Casinos de Puerto Rico, an entity having no relationship to either the trustee or the debtor, and that after repeated requests by the trustee and the Federacion General de Trabajadores de Puerto Rico for them to return to work their resignations were accepted on June 20, 1982 through debtor's Personnel Director and they were substituted by new employees. Asserting that plaintiff had been informed by representatives of the National Labor Relations Board that an action for a Section 10(j) injunction was to filed in this Court against the trustee and/or the debtor seeking injunctive relief and that said remedy would cause irreparable injury to debtor's estate, the trustee requested an order permanently enjoining defendant from filing a Section 10(j) injunction in federal court for the purpose of obtaining reinstatement of the employees on strike. On September 28, 1982 Bankruptcy Judge W. H. Beckerleg issued an order in which he found that the Bankruptcy Court had jurisdiction to stay the Board under 11 U.S.C. § 105. In support thereof he cited Matter of Shippers Interstate Service, Inc., 618 F.2d 9 (7th Cir. 1980), In Re Bildisco, 682 F.2d 72 (3rd Cir. 1982) and other cases set forth at page 2 of the September 28, 1982 Order. This notwithstanding, the Bankruptcy Court denied the request for injunctive relief on the grounds that it was asked to stay something that at that moment was but a threat since the Board had not even considered filing such an action in federal court. Two days later the trustee filed a Motion for Leave to Amend Complaint and Temporary Restraining Order requesting that the original complaint be amended to allege that an administrative hearing had been scheduled for October 4, 1982 before the Board on the merits of unfair labor practices charges allegedly committed by the trustee in violation of Section 8(a)(1) and 8(a)(5) of the National Labor Relations Act by refusing to negotiate in good faith with the union representing the casino employees at the hotel. The amended pleading also alleges that the proceedings before the Board result not only in a threat to the assets of the debtor's estate but impede debtor's reorganization efforts and could well force a liquidation under Chapter 7 of the Bankruptcy Code. In its additional request for a temporary restraining order enjoining the National Labor Relations Board from holding the October 4, 1982 hearing, the trustee repeated the allegation that the Board proceedings would virtually paralyze all reorganization efforts on debtor's behalf and could result in the liquidation of the estate to the detriment of debtor, its employees and unsecured creditors. This motion was received by the National Labor Relations Board, Regional Office 24, the day after its filing at 2:25 PM. The attorney for the trustee certified to the Bankruptcy Court that on that date, approximately at 11:00 AM, co-counsel William Lespier had informed the Regional Director of the Board that a temporary restraining order would be sought pursuant to its motion filed on September 29, 1982. On September 30, 1982 Judge Beckerleg issued an ex-parte order finding that there was good cause for the verified motion for leave to amend the complaint and for a temporary restraining order, enjoined the Board from commencing the hearing scheduled for October 4, 1982 and further ruled that the order enjoining the Board would remain in effect until October 6, 1982 at 3:00 PM at which time a hearing would be held before him in order to consider the merits of the verified motion for leave to amend and for a temporary restraining order.On October 1, 1982 the Board filed before this Court a petition for writ of mandamus to vacate the temporary restraining order issued by Judge Beckerleg on September 30, 1982 claiming due process violations in its ex-parte issuance and further alleging that the October 6, 1982 hearing scheduled before the Bankruptcy Court would be held two days after the effective date of the Supreme Court decision in Northern Pipeline v. Marathon Pipeline Co., 50 USLW 4892 (1982) declaring unconstitutional the grant of jurisdictional power to the Bankruptcy Court pursuant to Section 471 of the Bankruptcy Code. On that same date we issued an Order stating that, although federal courts may issue mandamus to review an inferior court's exercise of power in excess of its jurisdiction, this is so only where the absence of jurisdiction is manifestly evident, In Re Union Leader Corp., 292 F.2d 381 (1st Cir. 1961). The Bankruptcy Court's lack of jurisdiction in issuing the temporary restraining order did not appear from the record since there was no way of determining from the allegations of the petition and the affidavits in support thereof if it was acting under its traditional powers or if the decision of the Supreme Court in Northern Pipeline was applicable to the present situation. Accordingly, the exparte request for a writ of mandamus was denied and a hearing was scheduled for October 4, 1982 at which respondent would show cause why the Order issued by the Bankruptcy Court enjoining the administrative hearing until the application for permanent injunction was heard on October 6, 1982 should not be set aside. It should be noted that at the time that the Court issued this Order, the Board did not submit with its petition for mandamus filed on October 1, 1982 at 5:00 PM any of the documents, including the temporary restraining order issued by the Bankruptcy Court, which could place this Court in a position to be informed of the proceedings previously held before the Bankruptcy Court. On October 4, 1982 the parties presented oral argument and a Motion to Dismiss filed by respondent on that same date was discussed. The sole ground for the dismissal motion is that the Bankruptcy Judge was not included as a party in the mandamus petition and that he is the proper respondent in this case. The Court deferred its ruling on the Motion to Dismiss until it heard argument on the merits of the issues raised in the mandamus petition. Although the absence of the Bankruptcy Judge as a respondent would suffice to dismiss the petition outright, the Court, having heard the positions of the other parties directly involved, shall rule on the matters raised by them.
It should be noted from the outset that whether the Bankruptcy Court had jurisdiction when it issued the temporary restraining order enjoining the Board from holding its October 4, 1982 hearing is no longer a relevant issue at this stage of the proceedings. The due process claim raised by the petitioner alleging lack of prior notice before the issuance of the temporary restraining order has turned moot. The Court could not determine the merits of the due process claim in a timely manner and could likewise not grant appropriate relief to petitioner because of the insufficiency of the mandamus petition at the monent of its filing. The relevant issues now before us are whether the Bankruptcy Court has jurisdiction to hold an injunction hearing on October 6, 1982, despite the decision of the Supreme Court in Northern Pipeline and whether, if the latter is inapplicable to the present situation, the Board has exclusive jurisdiction to determine if unfair labor practices have been committed by the trustee precluding the Bankruptcy Court from entertaining such matter. After examining the nature of the matter which would be discussed at the hearing before the Board and the decision rendered by the Supreme Court in Northern Pipeline, this Court concludes that the situation present in this case is not governed by the latter. As recognized by petitioner in oral argument, federal courts do not rule on whether unfair labor practices have occurred. The determination of whether such practices do in fact exist is the matter which has raised the conflict between the Board and the Bankruptcy Court. In discussing the public rights doctrine, the Supreme Court in Northern Pipeline reaffirmed, that there are matters, involving public rights, which are susceptible of judicial determination for which Congress may or may not bring within the cognizance of the courts of the United States. The doctrine "is grounded in a historically recognized distinction between matters that could be conclusively determined by the Executive and Legislative Branches and matters that are inherently . . . judicial.'" Northern Pipeline, supra, at p. 4897 (citations omitted). The Court has upheld the constitutionality of the legislative courts and administrative agencies to adjudicate cases involving public rights and has established in prior cases that only controversies involving public rights may be removed from federal courts and delegated to legislative courts or administrative agencies for their determination. Atlas Roofing Co. v Occupational Safety Commission, 430 U.S. 432, 450 (1977). Conversely, private rights are issues inherently judicial and within the cognizance of the judicial power. The matter of whether unfair labor practices have been committed, as recognized by petitioner, is an issue which does not fall within the cognizance of the courts of the United States but rather one which is normally adjudicated by specialized agencies or tribunals in the performance of their constitutional functions. The holding in Northern Pipeline that the broad grant of jurisdiction to the Bankruptcy Courts contained in Section 241(a) is unconstitutional is precisely based on the fact that such courts under that grant of jurisdiction adjudicate controversies which do not fall within any of the historically recognized situations, one of which is the exceptional grant of power to adjudicate controversies involving public rights to legislative courts and administrative agencies created by Congress.
Having determined that this case falls within the recognized exception of the public rights doctrine, we hold that the decision of the Supreme Court in Northern Pipeline does not bar the Bankruptcy Court from adjudicating the specific matter in controversy, to wit, whether unfair labor practices have been committed by the trustee. In any event, the Supreme Court on October 4, 1982 extended the stay of its judgment in Northern Pipeline beyond the October 4, 1982 deadline and until December 1982.
Petitioner insists, however, that even if the holding in Northern Pipeline were inapplicable to the present situation the Bankruptcy Court would still be precluded from determining whether unfair labor practices exist and from enjoining the Board proceedings on that issue since such matter falls within the exclusive jurisdiction of the Board to which the Bankruptcy Court must defer. Petitioner contends that, even if the Bankruptcy Court had jurisdiction to enjoin the Board because it is confronted with the situation of a threat to debtor's assets, no evidence has been presented to demonstrate the existence of such a threat. Our concern, however, is not whether evidence of a threat to the assets of debtor has been presented but rather whether the Bankruptcy Court has competence, because of the possibility of such a situation, to inquire whether the circumstances permit it to determine if such a threat exists and, further, if the unfair labor practice has been committed or not. The Court must define whether, notwithstanding the Board's jurisdiction to adjudicate such matters, the Bankruptcy Court has the authority to enjoin the Board's proceedings when it is claimed that the proceedings threaten the debtor's assets. The case law does not support petitioner's contention that there is a clear absence of jurisdiction in the Bankruptcy Court to entertain such matters and to receive evidence to determine the truth of the verified allegations concerning the threat situation. In the case of In Re Bel Air Chatau Hospital, Inc., 611 F.2d 1248, 1250-1251 (9th Cir. 1979) the Court determined that if regulatory proceedings threaten the assets of the estate, the decision of the Bankruptcy Court to issue a stay can then be made on a discretionary basis. Although recognizing that under 11 U.S.C. § 362(b)(4) the filing of a petition does not automatically stay an action by a governmental unit to enforce its regulatory power, stays will be granted if a party shows the necessity for one. The issuance of a stay by the Bankruptcy Court in the exercise of its discretion was also recognized in the case of Matter of Shippers Interstate Service, Inc., 618 F.2d 9, 13 (7th Cir. 1980) in which the Court stated that the decision to issue a stay can be made on a discretionary basis where the proper showing is made to the Bankruptcy Court that the regulatory proceedings threaten the estate assets or that the bankruptcy or other proceedings would result in the liquidation of the company.
In the case of In Re Bildisco, 682 F.2d 72, 84 (3rd Cir. 1982) the Court warned that "it is as much a departure from acceptable decision-making for the National Labor Relations Board to decide a case within its competence without accommodating competing principles of bankruptcy law as it would be for a Bankruptcy Court to decide a labor contract issue without accommodating competing principles of our national labor policy." It distinguished between prepetition and post-petition charges of unfair labor practices and observed that where charges of unfair labor practices arise after the date of a Chapter 11 petition, the Board must await the determination of the Bankruptcy Court on the rejection of the collective bargaining agreement before it may proceed to consider the post-petition charges. It expressly stated that if the Bankruptcy Judge determines that the collective bargaining agreement may be rejected, the Board will be bound by that determination, which would preclude any post-petition unfair labor practice arising from the rejected agreement. In the case before us it appears from the documents presented during the show cause hearing that on November 12, 1981 the Bankruptcy Court entered an Opinion and Judgment authorizing the trustee to reject the collective bargaining agreement in effect between the debtor and the Federacion General de Trabajadores de Puerto Rico as burdensome to the trustee. It appears also that the unfair labor practice charges originated after the filing of the Chapter 11 petition. In the complaint filed by the trustee before the Bankruptcy Court he expressly alleged that the casino employees whose reinstatement is requested went on strike for the stated purpose of forcing the trustee to reinstate the economic provisions of the collective bargaining agreement that was rejected by the Bankruptcy Court. It would appear then that if such is the situation and if the unfair labor practices alleged arise in effect from the rejected agreement, under the holding of In Re Bildisco, the Board would be bound by the Bankruptcy Court's determination authorizing the rejection of the collective bargaining agreement and this could preclude post-petition charges of unfair labor practices arising from the rejected agreement after the Chapter 11 petition was filed.
The courts having recognized the discretionary basis for the issuance of a stay to protect the debtor's assets in situations in which the administrative proceedings threaten the estate or may result in the liquidation of the company and in view of the possibility that we may be confronted with a situation such as that dealt with by the Third Circuit in the Bildisco case, we are reluctant to conclude that the extraordinary circumstances of a clear lack of jurisdiction or of the absence of discretion of the Bankruptcy Judge are elements which are present in the case before us. Our decision today is not to be considered as determinative of the jurisdictional conflict. This issue shall be fully analyzed by the parties, if need be, at the hearing to be held on October 6, 1982 before the Bankruptcy Court and its determination is subject to review on appeal. Under the circumstances of the particular proceeding now before the Court, we find that the requisite elements of the writ of mandamus are not present. The petition is, therefore, DENIED.
SO ORDERED.