Involved, as well, are the discharge of the debtor, his need for a prompt fresh start and, ofttimes, the emotional stability of his family which only conclusion of his case can bring.

In the commercial case especially, it is essential that immediate action be taken to liquidate or continue the operation of the business, as the case may be, before waste, theft, vandalism, and depreciation render the estate assets valueless. Absent prompt action, frequently necessitating judicial decision as a prerequisite, the loss may be irreparable.

Of course, the Judges bill would lodge the appointive power with the active circuit judges in the first instance so as to reduce the likelihood of any delay as well as to enhance the role of merit in the selection process.

Finally, the Judges suggest a third possibility; namely, that the 6year terms of incumbent bankruptcy judges be automatically extended upon the date of enactment to a period of 15 years from the date of original appointment. Both full-time and part-time bankruptcy judges would remain in office through the 7-year period above noted, pending the survey and ultimate fixing by the Congress of the territories and the location and number of bankruptcy judges.

Thereupon, all those who have reached age 70 would then be subject to compulsory retirement. Presumably, the part-time positions would largely, if not entirely, have been eliminated by the Congress as of the close of the 7-year period. Should the survey have resulted in a constriction in the number of bankrupcty judges in a given territory, it would fall the duty of the active circuit judges to appoint from among the incumbents.

Thus, this proposal is one of fold-in for a 15-year term, subject to divestment at the end of the initial 7-year period, where it is found that a judgeship is no longer required.

The Judges recognize the desirability of the creation of full-time judgeships throughout the system. On the other hand, it is apparent in some States and in some broad geographical areas within a given State that there simply may not be an adequate caseload to merit the full-time attention of a bankruptcy judge. We naturally leave to the Congress the question of how these situations are to be met, including the possibility of combining existing territories even when located in separate circuits.

It is possible, even likely, that the director having administrative responsibilities under the new act will not be fully equipped on the effective date to carry out all of the duties and responsibilities of his office. In order to avoid the confusion and neglect which might otherwise develop on a local level, it would seem wise to provide a safety valve within the proposed structure that would permit the court to bring about the performance for a limited time of the director's duties locally where he makes request of the court therefor, coupled with provision of the funds necessary to meet the cost of any such undertaking.

As already observed, both the Judges bill and the Commission's bill propose the establishment of an independent bankruptcy court with judges appointed for 15-year terms. The National Bankruptcy Conference, in its draft, has endorsed the creation of an independent bankruptcy court and approved 15-year terms for judges of that court.

Indeed, there is general agreement on these two principles-an independent court and a 15-year term.

There is some difference of opinion as to the procedures for appointment. The Judges bill provides for appointment by the judicial councils; the Commission's bill and the NBC draft proposal provide for appointment by the President with the advice and consent of the Senate.

Both the Judges bill and the NBC draft proposal provide for a fold-in of incumbent bankruptcy judges the Judges bill for a period of 7 years and the NBC proposal for 15 years. The Commission's bill, which for reasons earlier noted largely overlooked the problems of transition, contains only precatory language with respect to the retention of incumbents.

It is our understanding that the subcommittee staff, as a result of its analysis of the pending proposals, has raised questions concerning the constitutionality of the appointment procedure as well as of the constitutionality of the new court itself.

The National Conference of Bankruptcy Judges has asked its counsel, Murray Drabkin, to consider these issues. With the committee's permission I should like to ask that Mr. Drabkin be allowed, at this time, to go forward with the discussion of these issues.

Mr. DRABKIN. Thank you, Mr. Chairman.

Pages 9 through 16, that is the balance of Judge Copenhaver's statement, contain a discussion of the constitutional questions.

There are two issues involved. One is the question of the constitutionality of the appointment procedure; and the other is the constitutionality of the new court itself.

If I may, I would like to summarize the prepared statement here, in the understanding that the statement itself will be made a part of the record. As I understand it, the concern with the appointing procedure was prompted by the recent decision of the Supreme Court in Buckley v. Valeo. That case, as you will recall, raised questions about the constitutionality of the procedure used in appointing the Federal Elections Commission.

The Commission was to be composed of six voting members; two appointed by the President, two by the Speaker, and two by the President pro tem of the Senate. The Supreme Court held that the appointments by Congress violated the principle of separation of powers as contained in the appointments clause, article II, section 2, clause 2, of the Constitution.

Let me read the appointments clause:

[The President] shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the Supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.

Now, as applied to bankruptcy judges, the concern is that by folding-in the sitting judges the Congress would, as in Buckley, be exercising the appointive power, the power to appoint officers or inferior officers of the United States, and that this power is vested not in the Congress but in the President and the courts.

59-591-76-pt. 4- -47

We think that Buckley does not apply. The reason we think Buckley does not apply is that in Buckley, Congress clearly conferred upon itself the power to select any four people in the world as its appointments to the Commission. In the case of the bankruptcy judges' fold-in, you have a far different situation. Under the Judges bill there would simply be an extension in term of office of those serving on the date of enactment. That provision itself is reasonably calculated to deal with the transition. It is not an arbitrary attempt by Congress to confer upon itself an appointing procedure which will be followed normally. It is a procedure which is established to deal with a particular situation and it is reasonably calculated to deal with it.

Furthermore, the bankruptcy judges whose terms will be extended were not appointed by the Congress in the first place. They were appointed by the courts; and that is a procedure which is sanctioned and contemplated under article II, section 2. So that all in the world that Congress would be doing would be extending the terms of office of persons who had been appointed by the courts as provided under the Constitution to deal with problems of transition pending the initiation of a new system.

I have some difficulty believing that that would in any way run afoul of the constitutional limits on congressional appointments.

Mr. KLEE. Mr. Drabkin, article II, section 2, clause 2 of the Constitution is concerned about the separation of powers. What you are advocating is that the appointed bankruptcy judges, who were appointed by courts of law in the judicial branch, be folded-in to an article I court, possibly, as one of the options, in the executive branch.

Do you think that article II, section 2, clause 2 should be construed to allow the appointment of inferior Federal officers across the traditional branches of government?

Mr. DRABKIN. I do not find any inhibition in article II, section 2, clause 2 against that. I think we have to read that clause as being a prohibitory clause and we have to view it in terms of just what it prohibits. It does not prohibit the kind of thing that you have raised. It says that Congress may not appoint; it says that the appointments must be made by the courts or by the President. And it is our view that the Congress here would not be arrogating to itself a power to appoint judges of courts.

Mr. KLEE. The clause also allows for appointments by heads of departments. And consistent with your construction, the Secretary of Defense could appoint all the judges of the United States district court.

Mr. DRABKIN. I do not know that that is the case. I think we might then run into some problems under article III with respect to what constitutes the judicial power. If we are dealing with a court which must be an article III court, then it must be appointed by the President.

Mr. KLEE. Well, nothing in article III specifies how the judges of inferior Federal courts shall be appointed. The appointment process is governed by article II, section 2, clause 2, and Congress has traditionally vested the power to appoint those judges by the President by and with the advice and consent of the Senate.

Mr. LEVIN. If what you say is correct about the cross-branch fold-in, following Mr. Klee's question, would you agree then that the Congress could vest in the circuit courts the power to appoint the Secretary of Defense?

Mr. DRABKIN. Well, we could conjure up all sorts of strained possibilities. I think that is an interesting intellectual exercise, but I think what we are dealing with here is whether or not we have a reasonable procedure designed to deal with this situation. I think that is the test on which it has to be dealt with.

Certainly, any decision by the courts on this matter would be based, not upon, I think, some abstract, far-fetched possibility, but one of whether the challenged procedure is a reasonable one under the Constitution. I have some difficulty believing that it is not.

Now, I have mentioned briefly that I think that the proposal with respect to the fold-in for a 7-year term, an extension of term of office, if you will, is a reasonable one and would not be barred by the Constitution. We think that the fold-in provisions, which are proposed by the NBC, which are somewhat different from those contained in the Judges bill, would also meet the constitutional test.

You will recall the NBC proposes that all judges in office on the effective date of the new act be folded in for a period of 15 years from that date, subject to certification of their qualifications by the judicial

.councils.

Again, the selection of the judges under that proposal would be by the courts and not by the Congress. That is, these would be bankruptcy judges initially appointed by the courts, and those who would remain. in office under the 15-year term would be selected by the judicial councils, or, we think, perhaps more appropriately, by the courts of appeal, who are the same people in a different corporate status. So there, too, we have some difficulty believing that Buckley v. Valeo presents any impediment.

The second problem is a more difficult one, and that is the possibility that the establishment of the court as an article I court runs afoul of the Constitution.

The suggestion was made that the administration of the bankruptcy law and the adjudication of cases under it is an exercise of judicial power of the United States, and, that under article III, section 1, the judicial power can be exercised only by judges who are appointed for life, subject to good behavior and whose salaries may not be diminished during their continuance in office.

In short, the question is raised as to whether only a so-called article. III court can handle bankruptcy cases. It seems to us that that is not a conclusion which is required by the Constitution, either.

First of all, there are precedents for article I courts with a broad range of jurisdiction. We have had in the past, and we have still among us, certain article I courts in which judges have less than life

tenure.

The Court of Claims was an article I court at one time, as was the Court of Customs Appeals. The Tax Court, the Court of Military Appeals, and the District of Columbia courts are presently article I

courts.

In those cases, the power to establish the particular court has been viewed as derived from the authority contained in article I; section 8; that is, the portion of the Constitution containing specific grants of jurisdiction as to particular areas. Clause 4 of article I gives the Congress the power to enact bankruptcy legislation.

The extent of Congress' power to establish article I courts was ruled. upon very recently in Palmore v. United States, a 1973 U.S. Supreme

Court case. In that case, Palmore, the appellant, had been convicted by a District of Columbia court of a felony under the D.C. Code. The D.C. Code had been enacted by the Congress of the United States. It was a law of the United States, and the question was whether a conviction under a Federal statute was constitutional, where the judges who had presided over that trial were not lifetime judges. That, of course, is what Palmore's attorney_contended; the U.S. Supreme Court rejected Palmore's contention. I will take the liberty of reading briefly from the Court's opinion.

This position [Palmore's] ultimately rests on the proposition that an Article III judge must preside over every proceeding in which a charge, claim, or defense is based on an Act of Congress or a law made under its authority. At the very least, it asserts that criminal offenses under the laws passed by Congress may not be prosecuted except in courts established pursuant to Article III. In our view, however, there is no support for this view in either Constitutional text or in Constitutional history and practice.

Article III describes the judicial power as extending to all cases, among others, arising under the laws of the United States; but, aside from this Court, the power is vested "in such inferior Courts as the Congress may from time to time ordain and establish." The decision with respect to inferior Federal courts, as well as the task of defining their jurisdiction, was left to the discretion of Congress. That body was not Constitutionally required to create inferior Article III courts to hear and decide cases within the judicial power of the United States, including those criminal cases arising under the laws of the United States.

Palmore, to be sure, did not deal with the bankruptcy power, and to that extent, it certainly cannot be said to be totally dispositive of the questions with which we are wrestling here this morning. But the fact is that it did deal with something which was very important. And, while we also view the bankruptcy process as important, certainly nobody will say that it is any more important than convictions under the criminal law.

Here we had a defendant who was convicted of a felony, and he was convicted of a felony under a law passed by Congress. The Supreme Court said the trial did not have to be presided over by an article III judge.

We think there is some further authority in the Tax Court for an article I court if Congress should choose to take that route.

Until 1969, the Tax Court was an agency within the executive branch, and, indeed, it was in the Treasury Department itself. In 1969, in response to considerable unhappiness with the status of the Tax Court, Congress, as part of the Tax Reform Act, made the Tax Court specifically an article I court and folded in the preexisting tax tribunal judges into the new court.

The salary of the judges was increased; a 15-year term was established in place of a 12-year term; and there were various other changes which were beneficial to the judges who were folded in.

If one looks at the legislative history of the change in the status of the Tax Court, one finds statements that the court was performing solely judicial duties. Congress further noted that the powers of the court, as an executive agency, were inadequate and that the Tax Court had to look to the District courts to enforce its authority. For example, the Tax Court could not enforce a subpena; it could not punish for contempt; it could not compel the carrying out of its orders generally. So, under the Tax Reform Act, Congress came along and said we are creating a new Tax Court by transforming the old one into an