Restructuring

Contributed by Doron P. Kenter.

“Who by water and who by fire, who by sword and who by beast, who by famine and who by thirst, who by [bankruptcy courts deciding matters that are outside their constitutional authority]”
– Rosh Hashanah liturgy, as modified

On this Friday before Rosh Hashanah (the Jewish New Year), observers worldwide look back on the previous year and prepare to seek atonement, repentance, and new meaning for the coming year.  The imagery of the holiday focuses on judgment, righteousness, forgiveness, prayer, divine sovereignty, recollection, and the loud blast of the shofar (the ritual instrument formed frequently – but not exclusively – from a ram’s horn). 
As we at the Weil Bankruptcy Blog look back at the year 5775 (in the traditional Jewish religious calendar system), we cannot help but think about our country’s High Court – the Supreme Court of the United States – and its scrutiny of our world of bankruptcy.  That’s right, you guessed it – we’re talking about Stern and Wellness.  (Incidentally, the imagery invoked by the very names of those cases is particularly appropriate for the holiday.)
We’ve covered the Supreme Court’s take on the constitutional authority of bankruptcy judges at length – perhaps ad nauseam.  But what you may not have known is that the issues most recently before the Supreme Court in the Wellness case have a long and deep history, dating to before the English courts of yore.
And so we bring you to the Babylonian Talmud, Tractate Sanhedrin (folio 24A-B), which discusses the qualifications for people to serve on a judicial panel (a “beit din”).  The Mishnah and the Talmud recount that certain civil matters, particularly in small outlying towns and villages, would be resolved by small judicial panels (batei din) of three laypeople.  There were, however, restrictions on who may serve on such panels.  For example, gamblers, lenders who charged impermissible interest, and others who transgressed laws and social mores in pursuit of personal financial gain were entirely excluded from participating on a beit din (because they could not be trusted to put personal interest aside to render a fair verdict).
But here’s where things get really interesting.  Other categories of people were ordinarily excluded from serving on a beit din, but could serve with the express consent of the affected litigants.  For example, certain relatives were precluded from adjudicating disputes involving their kin.  However, if a litigant expressly stated that he or she accepted another litigant’s parent, or his or her own parent, that litigant would still be bound by the panel’s judgment, notwithstanding the presence of a relative on the panel.
The question then arises – until when may a litigant retract his or her consent?  The text suggests that all rabbis agreed that litigants could retract their consent before a decision was rendered (thus requiring a new panel to be appointed).  However, there is a “circuit split” (so to speak) regarding whether a retraction is valid after a decision was rendered (i.e., whether an attempted retraction of consent nullifies the panel’s judgment).
(It should be noted that trials before a beit din did not involve nearly as much time or effort as our modern-day litigations, so it would be unlikely that even a post-judgment retraction would have created excessive repetition or an undue burden on the beit din.)
Of course, the foregoing passage brings Wellness Int’l Network v. Sharif to mind.  In Wellness, the Supreme Court concluded that litigants can consent to have a bankruptcy court enter a final judgment on Stern claims (i.e., core matters as to which bankruptcy courts otherwise lack final constitutional authority).  Disagreeing with the majority, Chief Justice Roberts would not have permitted such an encroachment on the integrity and sanctity of Article III courts.  He wrote that he would not have bargained away the “hard-won constitutional birthright” to have such matters finally decided by Article III courts simply because “two private parties” agreed to have their dispute resolved in a different forum.  And, as we’ve noted, the Chief Justice went so far as to invoke Jesus’s words in observing that “[i]t profits the Court nothing to give its soul for the whole world . . . but to avoid Stern claims?”
The majority in Wellness, however, was not persuaded.  Indeed, Justice Sotomayor, writing for the Court, opined that if the Chief Justice’s dissent was to be believed, “the world will end not in fire, or ice, but in a bankruptcy court.”  Instead, as the majority recognized, “[a]djudication based on litigant consent has been a consistent feature of the federal court system since its inception.”  As we learn from the Talmud, adjudication with the litigants’ consent significantly predates the Judiciary Act of 1789.*  Even in the times of the Talmud (circa 500 CE**), legal authorities were considering these very questions and adopted a permissive attitude toward private parties’ rights to have their claims adjudicated by their chosen judges, notwithstanding the potential structural infirmities inherent where a judgment is rendered by those who would otherwise be precluded from presiding over the case.  A fascinating and rich history, indeed.
In any event, we close with another Talmudic text, this one from Eruvin (folio 13b).  A fierce dispute had arisen between two dominant and strong-willed camps, and after three years, the two sides still could not come to agreement.  At last, a heavenly voice descended, telling both camps, “elu v’elu divrei elohim chaim…v’ha’halakha k’veit Hillel” (“Both these and those are the words of the living God…but the law is according to the House of Hillel”).  Indeed, even though disputes must be resolved, and in many cases one side must ultimately prevail over the other, the Divine Voice in the text reminds us that both the winning and the losing sides can be important, legitimate, and even sacred.
May we all remember this lesson, even in the throes of debate, discussion, and litigation.  These, and those, are the words of the living God.
Shanah Tovah u’Metukah: A healthy, sweet, and happy new year to all.
*We don’t mean to imply that these concepts are derived – directly or indirectly – from the Talmud.  Rather, we merely note that the questions presented and issues considered in assessing the role of the adjudicator are deeply rooted in any number of legal systems, and the Supreme Court of the United States was not the first to devote serious thought and debate to these very questions.
**The precise dates of the compilation and redaction of the Talmud are the subject of tremendous scholarly debate.