BAFJA and the AO Director’s Decision Not to Pay Bankruptcy Judges
The 1978 Act provides that the terms of bankruptcy judges were to expire on March 31, 1984 (the new system for appointing bankruptcy judges was to go into effect on April Fool’s Day). After failing to act by the end of March, Congress extended the terms to June 27, 1984 but that date came and went without Congressional action. The AO responded by authorizing the retention of bankruptcy judges as “consultants,” and the Judicial Conference took steps to permit the expedited appointment of sitting bankruptcy judges as “magistrates.” Some courts appointed consultants, others started the process of appointing magistrates, and one even appointed a master. A. Thomas Small (E.D.N.C., Ret.) recalls that “[t]hings really got interesting in 1984. I remember being sworn in as a ‘bankruptcy consultant’ and also applying for a position of ‘bankruptcy magistrate.’ Some judges took the opportunity to take early retirement.”
As a jurisdictional fix in response to Marathon, Congress enacted BAFJA, effective July 10, 1984. The next day, AO Director William E. Foley issued a memorandum, addressed to “United States Judges and Former Bankruptcy Judges,” stating that the AO would not pay bankruptcy judges because § 121 of the Act may be constitutionally invalid. During the next week, “few if any of the more than 225 bankruptcy [judges] transacted any business at all.” The AO took the position that BAFJA’s retroactive continuation of bankruptcy judges in office violated the Appointments Clause of the Constitution. The NCBJ President, Hal Bonney, described the reaction to Director Foley’s memorandum this way, “Congressmen, bankruptcy judges, district judges and circuit judges expressed astonishment and outrage in the form of letters to Mr. Foley and of orders entered in defiance of his directive.”
On the morning of July 20, 1984, six courageous bankruptcy judges, Keith M. Lundin (M.D. Tenn., Ret.), Mark B. McFeeley (D.N.M., Ret.), William L. Norton (N.D. Ga., Ret.), George C. Paine, II (M.D. Tenn., Ret.), Hugh Robinson Jr. (N.D. Ga., Ret.), and Arthur N. Vololato, Jr. (D.R.I., Ret.), filed a lawsuit against AO Director Foley in the District Court for the District of Columbia. See Lundin v. Foley, No. 84-2237 (D.D.C. July 20, 1984). The complaint sought, among other things, to compel the Director to pay bankruptcy judges and to compel him to cease his unlawful efforts to restructure the bankruptcy system by forcing bankruptcy judges to resign. Later that day, the Director rescinded his July 11, 1984 memorandum. NCBJ President Hal Bonney, in an article published in the NCBJ Conference News entitled Punishment by Repression, explains why:
What brought this about? The suit brought by six Bankruptcy Judges, the outrage of Congress and the loud dissent of the nation’s Bankruptcy Judges themselves. Congress had acted and agreed with the AO that the U.S. Bankruptcy Court should not be created as an Article III court, but Congress was more than appalled that the AO acted as it did . . . . And never had a Federal court been so demeaned by an agency which should have been its friend . . . . This will stand as their shame before God and before man.
