Northern Pipeline Co. v. Marathon Pipe Line Co.

Forced Congress to abandon its relatively new method of adjudicating bankruptcy matters and reemphasized the Article III principles of an independent federal judiciary, but a greatly divided opinion by the Court failed to significantly clear up what was already a muddy issue considering jurisdiction between Article I and Article III courts.

The Northern Pipeline Co. v. Marathon Pipe Line Co case settled an issue in which the two interested parties had only a minor role in the debate itself. The case was a spin-off of a fairly routine corporate bankruptcy case, in which Northern Pipeline Co. had filed for reorganization in Minnesota. As part of the proceeding that company filed a suit for breach of contract against the Marathon Pipe Line Co. Marathon asked for dismissal of that suit on the grounds that the system of bankruptcy courts which Congress had created in 1978 was unconstitutional because its judges lacked the protections in Article III of the U.S. Constitution, which guaranteed a judiciary free from congressional or public meddling. Judges were supposed to be appointed for life and guaranteed that their salaries could not be lowered.

When the framers of the Constitution put together their vision of how the U.S. government would work, they felt that separation of powers between the executive, legislative and judicial branches, as well as a system of checks and balances among the three, was necessary to avoid a possible slip into tyranny. One of the factors which led to the Revolutionary War was that the King of Great Britain held control over the colonial judges' tenure and salary, and could cut their pay or recall them if he was not satisfied with their performance, effectively negating the judges' autonomy. One of the principles set forth under Article III of the Constitution was that federal judges would serve for life, if they so chose, and their salaries could not be diminished during their tenure. This was designed to insulate judges against unfavorable reactions to their rulings from Congress or the electorate, thus guaranteeing their independence. The Constitution did permit Congress, however, to create courts of lower order, as it saw the need, and previous court decisions had decided that non-Article III courts could exist for certain circumstances.

In 1978, Congress revamped the federal method of hearing bankruptcy cases. Since 1938, bankruptcy cases had been heard either by a federal district judge or a referee, and bankruptcy referees had been in existence even earlier than that. Under the Bankruptcy Act of 1978, a special category of bankruptcy courts and judges was created, whose judges would serve 14-year terms and whose salaries would be subject to adjustment under the Federal Salary Act. Those judges also had slightly expanded powers compared to the old referees concerning what aspects of bankruptcy proceedings they would be permitted to oversee. The regular Article III district courts did have oversight powers over the bankruptcy courts, and appeals from bankruptcy court decisions could be heard by district courts or appeals courts.

The bankruptcy court rejected Marathon's appeal to dismiss the case, but the district court overturned that decision, holding that bankruptcy matters must be heard by a proper Article III court. The Supreme Court upheld the appeals court verdict, but by a plurality rather than a majority, meaning there was some limited dissent even within that portion of the Court that agreed on the decision. The official decision of the Court was that Northern's suit against Marathon could not be heard by a non-Article III court, that Article I bankruptcy courts were not constitutionally acceptable, and that Article I courts were only acceptable in certain circumstances. A dissent within the plurality, however, held that the only part of the decision which was proper was that the suit in question could not be heard by an Article I court, and that the Court decided more than it needed to by decreeing that the bankruptcy court system was unconstitutional. Two separate dissents further confused the situation.