Scholars love the Seventh Amendment, but for practicing lawyers, it doesn't come around much. It's not often that a federal court of appeals gets to decide a good old-fashioned -- and I mean old-fashioned -- Seventh Amendment issue. What exactly are the rules on when you get a jury trial and when you don't? Today in Hale v. U.S. Trustee, the Ninth Circuit reviewed this rarely explored area, and got to rely on a 1908 Supreme Court case.
"The judicial tyranny that flows from the chambers of a biased Judge"
Big issues sometimes come up in small ways. What was at stake in Hale was a $250 legal fee. It was charged by Thomas Hale, an Idaho lawyer who provided "prepetition" services to debtors filing bankruptcy. The opinion says that Mr. Hale prepared an bankruptcy petition for two debtors, but did not sign it or appear in the case. The clients testified they did not understand they were appearing pro se and would need to be in court for important hearings; and the petition itself contained mistakes. The bankruptcy judge found Mr. Hale's conduct unethical and his fee unreasonable, and ordered him to give the fee back.
In addition to arguing that the bankruptcy judge was unfair ("This is not the first time that I have attempted to protect the debtors and myself from the judicial tyranny that flows from the chambers of a biased Judge"), Mr. Hale argued that the Seventh Amendment gave him a right to a jury trial on the issue of the reasonableness of his fee.
"The right of trial by jury shall be preserved"
In case you haven't looked at the Seventh Amendment lately, let's start there:
In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise reexamined in any Court of the United States, than according to the rules of the common law.
Like so much of the rest of the Constitution, it's about line-drawing. The clear cases are clear: a negligence lawsuit is a "suit at common law," a request for an injunction isn't. But where is the line between them, and on which side falls a a bankruptcy court's challenge to a lawyer's fee?
The old 18th-century law courts test
The Hale court tells us that in Granfinanciera, S.A. v. Nordberg in 1989, the Supreme Court held that “[t]he Seventh Amendment protects a litigant’s right to a jury trial only if a cause of action is legal in nature and it involves a matter of ‘private right.’ ” Granfinanciera set out a three-part test of this standard. The first test is historical: "First, we compare the statutory action to 18th-century actions brought in the courts of England prior to the merger of the courts of law and equity." The Granfinanciera court explained:
Although the thrust of the Amendment was to preserve the right to jury trial as it existed in 1791, the Seventh Amendment also applies to actions brought to enforce statutory rights that are analogous to common-law causes of action ordinarily decided in English law courts in the late 18th century[.]
The second test is the more mundane, and familiar, distinction between law and equity: "“Second, we examine the remedy sought and determine whether it is legal or equitable in nature." And the third test addresses that issue of public and private rights: “If a claim that is legal in nature asserts a ‘public right,’ . . . then the Seventh Amendment does not entitle the parties to a jury trial if Congress assigns its adjudication to an administrative agency or specialized court of equity. . . . A case asserts a public right if it “arise[s] between the Government and persons subject to its authority in connection with the performance of the constitutional functions of the executive or legislative departments,” . . . or involves “a seemingly private right” created by Congress “that is so closely integrated into a public regulatory scheme as to be a matter appropriate for agency resolution with limited involvement by the Article III judiciary.”
Good in 1908, good today
A court starting from scratch here might have a long opinion coming, but the Hale court found that the Supreme Court had decided this issue already. In re Wood, a 1908 Supreme Court case, held that bankruptcy judges could assess the reasonableness of fees without a jury back when the Bankruptcy Act of 1898 governed bankruptcy courts. The Ninth Circuit held:
The Supreme Court has not overruled Wood. In addition, Wood is consistent with, and reaffirmed by, Granfinanciera. Determining the reasonableness of a debtor’s attorney fees is not analogous to a common-law cause of action ordinarily decided in English law courts in the late 18th century; instead, it is closely integrated into the public regulatory scheme of bankruptcy law that Congress created. We hold that Wood remains binding precedent and forecloses Hale’s argument that the Seventh Amendment includes a right to a jury trial on the reasonableness of attorney fees in bankruptcy proceedings.
(Photo by Tom 7 at http://www.flickr.com/photos/brighterorange/58793871/; license details there.)
