Saturday, July 26, 2014

Brubaker on Bankruptcy Injunctions and the AIA in the Early Republic

Ralph Brubaker, University of Illinois College of Law, has posted Justice Story, Bankruptcy Injunctions, and the Anti-Injunction Act of 1793, which appears in the Texas Law Review 92 (2014).  Here is the abstract:  
This article explores how the courts of the early Republic interpreted the Anti-Injunction Act ("AIA') of 1793 as applied to federal bankruptcy injunctions restraining state-court proceedings — a common and indeed intrinsic constitutional feature of federal bankruptcy proceedings pursuant to any "uniform Law on the subject of Bankruptcies." The early-Republic bankruptcy injunction cases provide indirect support for James Pfander’s and Nassim Nazemi’s novel original-ancillary theory positing a much more limited scope for the 1793 AIA than do conventional accounts of that statute’s bar. According to Pfander and Nazemi, the 1793 AIA’s prohibition against "writs of injunctions" to stay state-court proceedings (sought via an original bill through a suit in equity) did not prohibit ancillary relief in the nature of an injunction (sought via a motion or petition) granted in an equitable proceeding principally seeking relief other than or independent of such an injunction, but for which an injunctive decree (not via a "writ of injunction") might nonetheless be necessary or appropriate. The original-ancillary distinction identified by Pfander and Nazemi is reflected in one of the most prominent, fundamental, and longstanding jurisdictional and procedural divides with respect to bankruptcy proceedings — the dichotomy between plenary assignee/trustee suits at law or in equity via an original complaint or bill, as distinguished from so-called summary bankruptcy proceedings in equity on motion or petition. Early, influential decisions of Justice Story established that federal bankruptcy injunctions properly issue in ancillary summary proceedings and (consistent with the Pfander-Nazemi original-ancillary theory) found no obstacle in the 1793 AIA to enjoining state-court proceedings thereby.

The bankruptcy cases not only help illustrate that the 1793 AIA had a much more limited scope than has generally been acknowledged (consistent with both the Pfander-Nazemi original-ancillary interpretation and William Mayton’s single-justice interpretation), they also illuminate the central importance of the AIA, nonetheless, in assuaging federalism sensitivities that were easily aroused in the early Republic. Indeed, the federal courts’ administration of nineteenth century bankruptcy laws produced a very acrimonious standoff involving U.S. Supreme Court Justice Joseph Story, New Hampshire Supreme Court Justice Joel Parker, and the New Hampshire legislature, and bearing striking similarities to the Morris v. Allen controversy that many posit as the impetus for enactment of the 1793 AIA. Tellingly, the U.S. Supreme Court ultimately diffused that bankruptcy controversy through a very nuanced invocation of the 1793 AIA that neither broadened its reach (beyond that posited by Pfander and Nazemi) nor posed any enduring obstacle to the effectiveness of federal bankruptcy laws.