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Geras v. Lafayette Display Fixtures Inc.

August 23, 1984

JODY ANN GERAS, PLAINTIFF-APPELLANT,
v.
LAFAYETTE DISPLAY FIXTURES, INC., DEFENDANT-APPELLEE, UNITED STATES OF AMERICA, INTERVENOR-APPELLEE



Appeal from the United States District Court for the Northern District of Indiana, Hammond Division. No. 82 C 0788 -- Andrew P. Rodovich, Magistrate.

Author: Cudahy

Before PELL, CUDAHY and POSNER, Circuit Judges.

CUDAHY, Circuit Judge. This appeal presents as a sole issue the constitutionality of a provision of the Federal Magistrate Act of 1979, 28 U.S.C. § 636(c), Pub. L No. 96-82, § 2(2), 93 Stat. 643 (1979), which permits magistrates with the consent of the parties to try civil cases and to enter judgment with respect to them. Jurisdiction for this suit in the district court was based on diversity of citizenship, 28 U.S.C. § 1332. The plaintiff sued on theories of negligence, breach of implied warranties and strict liability in tort. The case was filed on November 30, 1982. On February 3, 1983, the district court referred the matter to the United States magistrate for the Northern District of Indiana for all further proceedings under 28 U.S.C. § 636(c). The plaintiff and defendant consented to trial of the case before the magistrate. A jury trial was held before the magistrate on August 22 and 23, 1983, and a verdict was returned for the defendant. The magistrate ordered the clerk of the court to enter judgment on the jury verdict, and a direct appeal to this court was taken pursuant to 28 U.S.C. § 636(c)(3). The only point raised on appeal is the question whether section 636(c) of the Magistrate Act conflicts with Article III of the United States Constitution and is therefore unconstitutional. We hold that section 636(c) does not conflict with Article III and is therefore constitutional.

I

Section 636(c)(1) of the Federal Magistrate Act provides that, with the consent of both parties, a United States magistrate may conduct all proceedings in a jury or non-jury civil matter and can order the entry of judgment in the case. Section 636(c)(2) provides safeguards to ensure that the consent of the parties is truly voluntary, and, under section 636(c) (6), the reference to the magistrate may be withdrawn at any time by the district court for good cause on its own motion or under extraordinary circumstances shown by any party.

After entry of judgment by a magistrate, a party may appeal directly to the appropriate court of appeals in the same manner and presumably subject to the same standards of review as an appeal is taken from a judgment of the district court. The consent of the parties allows a magistrate to exercise the civil jurisdiction granted in section 636(c)(1) and to direct the entry of judgment of the district court. The parties may also, however, at the time of the reference to the magistrate, consent to appeal on the record to a judge of the district court in the same manner and subject to the same standards of review as on an appeal from a judgment of the district court to a court of appeals. The district court may then affirm, reverse, modify or remand the magistrate's judgment. In this latter situation, a case may be reviewed by the appropriate court of appeals at its discretion only upon petition for leave to appeal by a party stating specific objections to the judgment. In either case, there is no limitation on any party's right to seek review by the Supreme Court.

Six circuits have, to date, considered the constitutionality of section 636(c) of the Magistrate Act. Panels of four circuits have held that the provision is constitutional: the First Circuit in Goldstein v. Kelleher, 728 F.2d 32 (1st Cir. 1984); the Second Circuit in Collins v. Foreman, 729 F.2d 108 (2d Cir. 1984), petition for cert. filed, 52 U.S.L.W. 3777 (U.S. April 2, 1984) (No. 83-1616); the Third Circuit in Wharton-Thomas v. United States, 721 F.2d 922 (3d Cir. 1983), and the Fifth Circuit in Puryear v. Ede's Ltd., 731 F.2d 1153 (5th Cir. 1984). The Eighth Circuit has reached the same conclusion in Lehman Brothers Kuhn Loeb, Inc. v. Clark Oil Refining Corp.,739 F.2d 1313 (8th Cir. 1984) (en banc). A panel of the Ninth Circuit held that the provision was unconstitutional in Pacemaker Diagnostic Clinic of America, Inc. v. Instromedix, Inc., 712 F.2d 1305 (9th Cir. 1983), but this decision was vacated and the provision was held constitutional by the Ninth Circuit sitting en banc, 725 F.2d 537 (9th Cir. 1984), petition for cert. filed, 52 U.S.L.W. 3875 (U.S. May 16, 1984) (No. 83-1873).

The essence of the claimed constitutional conflict is that the statutory provision permits magistrates to exercise the judicial power of the United States although they do not conform to the requirements of Article III of the Constitution which provides

The judicial power of the United States, shall be vested in one Supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish. The Judges, both of the supreme and inferior Courts, shall hold their offices during good behavior, and shall, at stated times, receive for their services, a compensation, which shall not be diminished during their continuance in office.

The constitutional guarantees of tenure during good behavior and of protection against reduction in compensation are the bulwarks of independence of the federal judiciary against reprisal, fear of reprisal or undue influence from any quarter and particularly from the other branches of the federal government. Judicial independence is crucial to the preservation of our system of government as has been demonstrated throughout the history of the Republic. Despite the current pressure exerted by unprecedented docket burdens in a litigious society, no "work emergency" is adequate grounds for undermining the constitutional guarantees of an independent judiciary.

In contrast to the constitutional guarantees of life tenure afforded to federal judges by Article III, magistrates serve for only eight-year terms but may be reappointed. Magistrates are appointed by vote of a majority of the district judges sitting in a particular district or, lacking such a majority, by the chief judge. A magistrate may be removed by the district judge or judges during his or her term only for incompetency, misconduct, neglect of duty or physical or mental disability. 28 U.S.C. § 631. The compensation of magistrates may not be reduced during a term below the compensation fixed at the beginning of the term, 28 U.S.C. § 634(b), although Congress could presumably effect such a reduction by repealing or overriding this statutory provision.

II

The case before us concerns the exercise of the federal judicial power in adjudicating private, state-created rights under the federal diversity jurisdiction granted in Article III. This case therefore specifically concerns the same type of rights as were at issue in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 71, 73 L. Ed. 2d 598, 102 S. Ct. 2858 (1982) -- in Marathon, the right to contract damages and, in the case before us, the right to tort damages. None of the exceptions delineated by the plurality in Marathon as exempt from Article III strictures is therefore applicable: the "territorial courts" including the District of Columbia courts, the courts-martial and the administrative tribunals, which primarily adjudicate "public rights." Id. at 63-70. Cf. Wharton-Thomas, supra, 721 F.2d at 930 (reaching the constitutional issue although case, based on the Federal Tort Claims Act, was arguably limited to a federally-created right).

The central issue in determining the constitutionality of section 636(c) is therefore whether the magistrates, in exercising the powers granted to them in this section, are performing the functions of federal judges. Because they clearly do not enjoy the Article III judicial protections, if they are acting as judges, then the provision is unconstitutional. If, however, they are in fact acting as "adjuncts" and are not exercising the federal judicial power, then this provision is constitutional.*fn1 In order to make this determination, we must examine several facets of the functioning of the magistrates. In Marathon, the Supreme Court declared the Bankruptcy Act of 1978 unconstitutional because it conferred federal judicial powers on bankruptcy judges who were not accorded Article III protections. This decision, therefore, provides a model for determining whether the magistrates are to be considered as adjuncts to the district court or as judges in fact, if not in name.

In addition, it is possible to identify two preeminent values which the Article III protections are intended to safeguard, much as did the Ninth Circuit in Pacemaker, 725 F.2d at 541. An examination of these values illustrates whether the powers which are given to the magistrates under section 636(c) constitute an excessive delegation of authority to the magistrates so as to negate their status as adjuncts of the district judges. These two values implicated by Article III are the right of the litigant to exercise of the federal judicial power by an independent federal judiciary and the preservation of the separation of powers among the three branches of government.

A

In considering the constitutional values to be maintained, we must first examine the proposition that the required voluntary consent of the parties to trial of civil matters before magistrates obviates the need for Article III protections. The fact that magistrates can exercise their authority only with the litigants' consent is a significant distinction from the nature of the authority exercised by the district judges. The statute attempts to ensure the voluntary character of this consent and specifically provides that the district court is authorized only to inform the parties of the alternative of a reference to a magistrate and is then forbidden to persuade or induce the parties to accept the reference. In addition, litigants retain the option of asking the district court, albeit only under extraordinary circumstances, to withdraw the reference.*fn2

The element of required consent in section 636(c) serves to distinguish this provision from both the Bankruptcy Act at issue in Marathon and the section 636(b) provision at issue in United States v. Raddatz, 447 U.S. 667, 65 L. Ed. 2d 424, 100 S. Ct. 2406 (1980).In fact, in Marathon, the Court used the absence of any requirement for the parties' consent as one of the three primary characteristics distinguishing the 1978 Bankruptcy Act from the earlier system of bankruptcy adjudication. Under the prior law, the consent of the parties was needed to authorize bankruptcy referees to exercise jurisdiction over controversies beyond those involving property in the possession of the court. 458 U.S. at 79-80 n.31. See also 458 U.S. at 91 (Rehnquist, J., concurring).

The magistrate reference system is evidently intended to provide a quicker and less costly alternative to the usually more delayed adjudication in a district court. Congress explicitly states that one of the purposes of the 1979 revisions was to "improve access to the federal courts for the less-advantaged." S. Rep. No. 74, 96th Cong. 1st Sess. 1, reprinted in 1979 U.S. Code Cong. & Ad. News 1469, 1472. While this objective may seem to be desirable, some opponents of the system have argued that its working may result in a double system of justice -- a second-class district court system for the wealthy and for large corporations. Pacemaker, 725 F.2d at 553-54. Such a possibility, however, seems to be little more than speculation, at least at this time. In fact, the unlikelihood of this kind of development is apparently bolstered by the fact that parties, regardless of their wealth, often voluntarily choose to settle their disputes through recourse to the extra-judicial avenue of arbitration rather than through the costlier and often much lengthier judicial process. Arbitrated decisions may, in some instances, end up in court for final resolution, but the parties fully realize that in subsequent court litigation the arbitration award is ordinarily denied de novo consideration; instead, the court in its usual practice accords great deference to the decision of the arbitrator. See, e.g., DeCosta v. Columbia Broadcasting System, Inc., 520 F.2d 499, 505-06 (1st Cir. 1975), cert. denied, 423 U.S. 1073, 47 L. Ed. 2d 83, 96 S. Ct. 856, 189 U.S.P.Q. (BNA) 64 (1976) (equating consensual reference to magistrate with arbitration, fact-finding of both being subject to "clearly erroneous" standard).

Of course, a major objection to trial of civil matters by reference to magistrates is that the exercise of the judicial power of the United States cannot depend upon stipulations of the litigants. See Pacemaker, supra, 725 F.2d at 548-52. The Constitution requires that the judicial power be exercised by Article III judges, and the objectors contend that this a requirement of subject matter jurisdiction which is not waivable by the parties in favor of a non-Article III judge. The right of access to Article III judges, however, may be viewed more correctly as personal to the litigants and therefore subject to waiver. Pacemaker, 725 F.2d at 541-43. This characterization is also more realistic in that the issue is not an expansion of the subject matter jurisdiction of the federal courts but rather the parties' choice of the forum in which the suit, for which federal jurisdiction clearly exists, is to be litigated. Once the parties have waived their right to Article III protections, they should not be allowed to challenged the constitutionality of the provisions under which they voluntarily chose to ...


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