APRIL 1986 by Arkansas Bar Association

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April 1986 Vol. 20. No.2

OFFICERS Don M. Schnipper. President Richard F. Hatfield. President-Elect Annabelle D. Clinton. Sec.路Treasurer Philip E. Dixon. Council Chair Wm. A. Martin. Executive Director Judith Gray. Assistant Executive Director EXECUTiVE COUNCIL Jack A. McNulty Bobby E. Shepherd Gary Nutter William Russ Meeks III Robert R. Wright III Tom Overbey Robert S. Hargraves John D. Eldridge III Joe Reed David Solomon Stephen M. Reasoner Dovid K. Harp

Giving Your Appeal...More by Bart F. Virden

54 A Judicial Maze. Bankruptcy: An Overview of 1984 Jurisdictional Amendments, by Judge Robert Fussell Measuring DWL by David H. Williams

EDITOR Ruth M. Williams

The Arkansas Lawyer (USPS 546-040) is published quarterly by the Arkansas Bar Association. 400 West Markham. Little Rock. Arkansas 72201. Second class postage paId at Little Rock. Arkansas. Subscription price to nonmembers of the Arkansas Bar Associa-

tion $15.00 per year and to members $10.00 per year included in annual dues. Any opinion expressed herein is that of the author. and not necessarily that of the Arkansas Bar Association. or The Arkansas Lawyer. Contributions to The Arkansas Lawyer aTe welcome and

should be sent in two copies to the AI路 kansas Bar Center. 400 West Markham. Little Rock. Arkansas 72201. All inquiries regarding advertising should be sent to The Arkansas Lawyer at the above address.

The Deficit Reduction Act, Use of the Company Car. by Joseph Erwin

The President's Report Point of View/Letters Law, Literature & Laughter

Generations in the Law: The Impact of Good Lawyering The Barrett路Deacon Family, by Brooks Landen

59 66 113 116

EX-OFFICIO Don M. Schnipper Richard F. Hatfield William R. Wilson. Jr. Annabelle D. Clinton Richard L. Ramsay Philip E. Dixon

47 48 51 52

119 121 123 124 125

Supreme Court Committee on Professional Conduct. Disciplinary Actions In Memoriam

Bulletin: Statute Revision in Arkansas Executive Director's Report Arkansas Bar Foundation Report In-House News

ON THE COVER: In "Measuring OWl in Arkansas," David H. Williams. of Lillie Rock. examines the vorious devices used to determine blood alcohol content <BAC) in the body. Since passage of Act 549 of 1983, he concludes, a defendant's BAC has become the crime itself in a Driving While Intoxicated charge, making it absolutely necessary lor defense counsel to be familiar with breath testing devices. "Defense counsel must be prepared to educate the judge and jury about these machines in order to lay the groundwork for fairer OWl trials. Unless we are willing to do our homework we might as well do as one judge suggested - place a black robe over the breath testing machine and do away with the judge and jury," Williams suggests.

April 1986/Arkansas Lawyer/45

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THE PRESIDENT'S REPORT public were not addressed, and, our public image dwindled. Lawyers were referred to as

hustlers, crooks, shysters, charlatans, etc. Quite frankly, it was the opinion of many that the practice of law had become little more than a business in the eyes of some practitioners and the public. The pendulum, however, is taking a swing.

Improving Our Public Image By Don M. Schnipper The Arkansas Bar Association conducted its first Long-Range Planning Conference in the Spring of 1978, giving the membership an opportunity to design the legal profession's future and the bar's role in it. But. while mandatory continuing legal education and the interest on lawyers' trust accounts program were being discussed, a black cloud was forming that would have shocked our brethren 25 years ago. We were inundated with numerous developments of commercialism - lawyer advertising and the use of public relations firms to increase lawyer visibility had become commonplace. Members of the profession seemed more interested in enhancing their income than in providing legal services to the public. And bar associations and their leaders readily adapted to these changes with an increasing number of seminars

directed toward law office management and other economic topics. Our professionalism and the services we provided to the

We now recognize that the practice of law requires individual lawyers to consider their practice as not a business or commercial enterprise, but as a profession, to be conducted honorably. And, while we may deserve some of the bad image we currently hold in the public's eye, I do not think we should take all the blame. The question is what, if anything, can be done to improve our profession from within and the image of the profession among the public? In February 1985, American Bar Association President John Shepherd appointed a Commission on Professionalism to study this question and offer solutions which will restore the practice of law as a profession rather than as a business. We are privileged to have William H. Allen, of Little Rock, appointed to this commission. And, the Arkansas Bar Association is becoming more concerned with what the public thinks of the profession and what can be done to improve our public image. "Professionalism" will be the

theme of the Association's LongRange Planning Conference on May I to 2, 1986, at the Sheraton Lakeshore Resort in Hot Springs. Chair David M. "Mac" Glover has worked diligently and promised all attendees some eye-opening discussions and an opportunity to develop ideas and programs for the Association and our individual members. No doubt these discussions will be the basis for the Association's programs and projects in the years to come. All members of the Executive Council and House of Delegates and committee chairs have been invited and urged to attend this conference. I too strongly urge their attendance and participation, as well as the attendance and participation of any other members as concerned about this subject as I am. I am convinced the legal profession in Arkansas can at least improve and possibly totally change the public's perception of our work, but only when each lawyer becomes aware of the problem and agrees to cooperate in its cure.

Our staff, officers, governing bodies, sections and committees are equipped for this endeavor. I call on each member to meet the challenge as well. Just as in 1978, the long-range planning conference of 1986 will be the most important meeting of the past few years and in the years to come. 0

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POINT OF VIEWILEITERS Insurance Industry Driving Wedge Between Doctors, Lawyers By Winslow Drummond Physicians and attorneys serve the public through their respective disciplines, and to this extent their mutual interests and concerns, rather than their differences, deserve repeated em-

phasis. In two significant respects there can be no interprofessional disagreement. First, the professional liability premiums being paid by medical care providers are so

high as to merit legislation requiring investigation and disclosure beyond a submission and cursory review of a carrier's "filings" with the insurance commissioner. And second. there are too many nonmeritorious suits being filed against physicians. The wedge between doctors and lawyers is being driven by the insurance industry. A doctor's request of a carrier for an explana-

tion about increased liability premiums will evoke a response identifying lawyers and lawsuits as the cause. Even the 95 plus percent of lawyers who have never contemplated the filing of a medical malpractice claim find a purely social encounter with doctors to be guarded. Anyone familEditor's Note: Winslow Drummond, of Little Rock, a member of the McMath law firm, is president of the Arkansas Trial Lawyers Association, chair of the Arkansas Supreme Court's Committee on Jury lnstructions, Civil and a member of the Arkansas Bar Association's House of Delegates. He is a diplomate in the American Board of Trial Advocates, a fellow in the American College of Trial Lawyers and specializes in medical malpractice, products liability and general torts. 48/Arkansas Lawyer/April 1986

iar with the liability insurance industry is aware of the games that can be played with reserves in order to affect tax liabilities or premium rates or both. Legislation permitting the insurance commissioner to conduct fullscale investigations of rating procedures is the only means of establishing whether the legal profession is indeed a culprit deserving of the medical profession's anger and whether current premium rates are indeed justi-

fied. No doubt physicians would be delighted to learn that professional liability insurance premium rates for lawyers are escalating at an unprecedented rate. The group carrier for the Arkansas Bar Association

increased

premiums

charged to attorneys by 78 percent on October I. 1985. Another carrier increased its rates by 295 percent in 1985. Why? Lawyers have more recently shown little reluctance to represent clients who have sus-

tained damage by reason of the negligence of an attorney. Just as doctors know that medical malpractice occurs, we lawyers know that we too are not free from error.

Trained in knowledge of the litigation process, we are better able to accept with some degree of understanding the filing of an action against one of our own. (I doubt that physicians will ever be able to treat service of a summons as anything less than the descent of the guillotine blade.) As lawyers, we do not respond to the increasing number of suits

against us by attempting to legislate away the aggrieved client's right of recovery or the amount of recovery. That approach merely shifts responsibility for professional wrongdomg to the person who has suffered harm at the hands of the wrongdoer. And that's not professional. If lawyers

are concerned about their liability premiums, they should see that their profession is cleansed of incompetency and must be willing, if necessary, to provide expert testimony against professional

colleagues who have failed to meet acceptable standards of practice. Legal malpractice suits in Arkansas are frequently settled and, when tried, do not require

expert testimony by an out-ofstate attorney. If necessary, we are willing to go to bat against one of our own, motivated by a desire to see justice done and professional standards preserved. Invariably the defendant attorney bears no ill will toward the expert witness testifying for the plaintiff client. I would urge that Arkansas physicians attempt to emulate the approach taken by lawyers to legal malpractice litigation. Specifically, I would like to see doctors in this state manifest a willing-

ness to consult candidly with lawyers about the merits of claims and to testify. if necessary, even if their opinions may be adverse to a professional colleague. Admittedly, this may be difficult in terms of continuing professional relationships. But. on the other hand. even the expression on the part of a physician that he may be willing to do this could lead to realistic settlement discussions prior to the filing of any lawsuit and. most importantly. could enhance standards of medical practice. Too often lawyers can elicit an "off the record" medical opinion that a particular doctor may have been negligent, only to find that that opinion is ultimately useless because the physician rendering that opinion does not want to "get involved." Lawyers on both sides of the table respect the courageous physician who is willing to take the unpopular position

in criticizing a professional colleague while supporting a claim of a patient of that colleague. A malpractice claim or suit against any professional- physician. lawyer. accountant. engineer, etc. - cannot be prosecuted if baseless. A "bad result" in a legal matter does not establish actionable negligence on the part of the lawyer on the short end of the stick. And yet, there are still too many of us ready and willing to haul off and sue a doctor because of a patient's dissatisfaction with a medical result or the doctor's "attitude" As lawyers we can evaluate a legal malpractice claim. As lawyers, we need to learn again and again that only the opinion of a medical expert is determinative of the validity of a medical malpractice claim. Even when negligence may be apparent, a medical opinion may be essential to establish proximate causation. It behooves all of us to proceed cautiously, taking that long, hard look at every case before embarking on the prosecution of a non-meritorious claim or suit. Many claims are generated by

little more than a breakdown in communications between doctor and patient. I personally receive an average of five inquiries a week about medical malpractice matters and, at most, will find one in 20 worthy of even preliminary screening. And of those subjected to more careful scrutiny, only one in two will prove worth pursuing further. All too often, the complaining patient or his referring lawyer can only point to a breakdown in communications between the physician and the patient or the patient's family. A simple expression of personal concern or even an apology (not an admission of legal liability) by the doctor would result in fewer phone calls and personal visits to lawyers' offices. A doctor's patient is a lawyer's client. The patient and the client deserve competent, professional service. Whether patient, client, or customer, a member of the public is entitled to non-negligent handling of his affairs and to compensation if he suffers damage due to negligent wrongdoing. While self-interest dictates that

we mitigate the cost of our liability insurance. we cannot deny remedies to our victims in order to satisfy that self-interest. As professionals, we must share the burdens imposed by reasons of our particular professional standards and common credentials, seeking as nearly as possible to assure the public whom we serve that our professions are peopled by competents and that the disciplinary and compensatory responsibility for occasional imperfections will be jointly discharged by our peers. D

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Law, Literature & Laughter

"American lawyers are undeni-

ably the best in the world at what they do." wrote John J. Fialka in a December 1985 issue 01 the Wall Street Journal. Himself an attorney. the author suggested that U.S. attorneys could be "the most ellective product to counter the $37 billion trade deficit with

Japan." He pointed out that American lawyers are a logical commodity to export. We have them "in abundance." he said. They are "01 high quality." And they are "something that can overcome bureaucratic opposition like the Refrigerator does opposing lines in football." Also. whereas we have one lawyer for every 355 people. the Japanese ratio is 1:9000. We should introduce the Japanese to such things as our anti-trust laws and "imaginative and flamboyant" personal injury theories. Fialka contended. Japan then would develop a need to import hundreds more attorneys to defend the thousands of lawsuits that would be filed. "After the imported lawyers have done their work for awhile." Fialka concluded. "the entire trade deficit will simply have withered away." While reading the Fialka piece. I was nipping on eggnog in front of a Christmasy blaze in the fireplace. I closed my eyes lor a moment. TOKYO HARBOR. 2005 - How did I get here? Looking around. I See several familiar laces: deputy prosecutors. assistant attorneys general. lellow business lawyers and many P.I. types. It is very crowded. I am puzzled. I did not sign up for a CLE seminar in the Far East. What is this tag on my arm? It reads. "Grade 21A - Foreclosures. Lease Disputes. Contracts - Inspected by No. 17." All the people around me also have tags on their arms. Have I

By Vic Fleming

that 90 percent should be exported. The big surprise to the public was the Supreme Court's denial 01 certiorari. It should not have been such a surprise. Federal judges were exempt from the competency test. The justices knew il they overturned the legislation. a new law would remove the exemption. So. here we are. I can see signs over doors on the dock: "Securities Regulation - Quality Control;" "Torts - Quality Control;" "Wills. Estates & Trusts - Quality Control." They are screening the arriving shipment lor defective product. In the distance I hear a voice, with a heavy Japanese accent. saying. "Tell me Chief Justice Marshall's reasoning in Marbury v. Madison. okay?" From another direction: "Define 'Ioreseeable' as per the doctrine 01 Hadley v. Baxendale." And from still another area: "Plea bargain. you fool! Plea bargain!" [ am now in line. awaiting my turn with the examiner. He is a 250-pound Samurai warrior. as well as a real estate attorney (and a licensed broker). The rumor is that upon lailure 01 the onequestion test, one either is sum-

been drugged? Slowly now. things are coming back to me. First there was the legislation: the Attorney Export Act 01 1999. also known as the "FalwellRobertson Amendment." so named lor the President and VicePresident who fostered the legislation in Congress. Then there was the competency test. The top 25 percent and the bottom 25 percent stayed at home. The other 50 percent were designated for export. Then there was the inevitable challenge by class action. It is unconstitutional. we argued, to send 50 percent 01 the country's lawyers overseas. Our opponents argued

marily executed or shipped to a Legal Aid office atop Mount Fuji. I hope lor an easy question. It is now my turn. The intimidating examiner says to me. "You

landlord. I tenant. Month to month lease. How much notice you give me to vacate premises?"

Automatically I respond. "Twenty-one years lrom the death 01 the last life in being as 01 creation of the interest in question." His narrow eyes grow large as saucers. With a bloodcurdling scream, he withdraws his sword. I awoke from my slumber in a cold sweat. I tossed the Wall Street Journal into the fireplace.D ÂŠ 1985 by Vic Fleming

April 19B6/Arkansas Lawyer/51

..-

., , ,

Giving Your Appeal ... More BY BART F. VIRDEN 52/Arkansas Lawyer/April 1986 _

ne couldn't begin to list the many mistakes made in briefs before the Arkansas Supreme Court. Of recent fame, one brief termed "num-chucks" - two clubs connected by a chain - a marital arts weapon rather than a martial

arts weapon.

Eleven months of headscratching, chortles and occasional groans over errors of this nature have resulted in this article. You will, hopefully, gain a few ideas to help if you are subject to the trial by fire we call an appeal. Regardless of a judge's and clerk's efforts to remain impartial. a sloppy brief may make a subliminal statement to them about the case. Proof-reading easily cleans up most problems. Take for example these recent errors: "The Appellant was charged. along

with three alleged accomplishes ..." "This co-defendant was to testify against the other co-defendants, and was to be granted ammunity." "The prosecutory didn't make the statement available to the defendant."

In one case, the appellant objected to being forced to use a preinventory challenge. In another, the appellant complained that the trial court "erred when it reused the appellant's motion to suppress." In the same brief. "... the state, according to the appellant, moved the court to instruct the appellant's counsel not to mention or bring before the jury the feat he represented one of the defendants earlier ..." You have to sympathize with the landowner's attorney who stated that they refused to sign an oil and gas division order that was "one-sided and unilateral." I'm not sure, but that may be "repetitively redundant." While many problems are stylistic and do not violate any appellate rules or Rules of the Supreme Court and Court of Appeals, some errors and omissions simply are not in com· pliance. Here's a few you might look up and keep in mind: RECENT APPLICATIONS OF APPELLANT RULES 4 AND 5. If you make a new trial motion, it is up

to you to see that within 30 days there appears on the record one of the following: an order setting a

hearing date; a statement by the Court that the motion is under advisement; or. a ruling on the motion.

The motion is denied if one of these does not appear on the record within 30 days. You then have 10 days to file a Notice of Appeal. After this, the clerk will not accept your appeaL nor will the Court order it to be accepted. If yours is a criminal case, the Court will accept the late filing upon an admission of error by the attorney. A letter is sent to the Court's Committee on Professional Conduct and you will probably get a Letter of Reprimand from the Committee. RULE 29 AND 9(F) OF THE SUPREME COURT AND COURT OF APPEALS, Under Rule 29, you are required to include a jurisdictional statement at the beginning of your brief. It is not helpful to state, "This appeal is taken pursuant to rule 29." Rule 9(F) requires you to give the official citation to a case. The official cite is the cite to Arkansas Reports, This is required because the judges and clerks have Arkansas Reports and not Southwestern Reporter, Other helpful hints, some quasi-official and in no particular order. are: • When numbering arguments. the appellee is required 10 make his arguments correspond to those of the appellant. • Avoid the word "clear" or any variation. (If the matter is clear then there is no need for an appeal.) • Don't sling mud at the other side, In a recent case, a large insurance defense firm stated, "Even in 'Roe vs. Joe,' relied on so heavily by the appellants, the judicially activist New Jersey Supreme Court .. ," In another case, the appellee commented on the appellant's refusal to settle before trial. "The plaintiffs made no effort to do this and neither they, nor more likely, their attorney, should be allowed to profit by their own breach of the agreement." • Remember, nothing is too obvious to require authority to support it. There are many cases on the books in which the Court has stated that without authority to support it, they may ignore the issue completely. • If you refer to testimony or evidence, a reference to the record is not helpful to those reading your brief without the one copy of the record. Cite to the abstract. II it's not in the abstract, only in the record, you have not properly abstracted the case, If you read the cases annotated in Rule 9, you will see that the Court won't explore the record to lind the references. In fact, it is quite possible that the judgment will be

summarily affirmed. • Don't cite only "Act 148 of 1959," for example. Include the cite to Ark. Stat. Ann. 66-2216. Locate Volume 8 of the Arkansas Statutes. The cross· reference tables will give you the statute as codified. • Don't abstract matters which have no relevance to the issues raised on appeal. Conversely, don't be too frugal. For instance, if a complaint was dismissed on a 12(bX6) motion, put enough in the abstract for the Court to review it. Again, there is only one copy of the record on hand. • I might be chastised for suggesting this, but a well-written reply brief is almost always helplul. It means more reading but it does direct the researcher to issues raised by the appellee's response.

ORAL ARGUMENTS The Court does listen to oral arguments. They do not have their minds made up when they sit at the bench on Monday mornings. They do, however, have questions in their minds. Here's a few things you can do in oral arguments to help your case. Firsl, you already have an advantage of the eight or nine cases being reviewed since the Court is devoting extra time to your case at your request. II the case is complicated with many issues, use the time to clear up difficult questions. Never assume the Court needs a long recitation of the facts. Focus on your strongest point first. The Court may have questions. If you don't get to all of your prepared text (which I don't recommend) it won't matter much. There is really no way to guess what the Court will find important or dispositive of your case. Therefore, you should try to control their focus as much as possible and still fully respond to the questions. One final note regarding a brief. A lesson in geography might be in order for the attorney who wrote. "Two witnesses identified the defendant's van at the Oklahoma crime scene in Arkansas." 0 Editor's Note: Bart F. Virden is associated with the Loh, Massey and Yates law firm of Morrilton. Virden received a B.A. in journalism from the University of Arkansas at Fayetteville and is a graduate of the U of A at Fayetteville School of Law. He is a former law clerk for Arkansas Supreme Court Associate Justice David Newbern. April 19861Arkansas Lawyer/53

(from left) Rush, Jack and Barry Deacon with photograph of Joe Barrett in background

The Impact of Good Lawyering THE BARRETT-DEACON FAMILY

Brooks Landon

541Arkansas Lawyer/April 1986

hen John C. Deacon was elected president of the National Conference of Commissioners on Uniform State Laws in 1979, he became only the second Arkansan to be so honored, the first having been Joe C. Barrett in 1954. That Jack Deacon was Joe Barrett's law partner in

the lonesboro firm of Barrett, Wheatley, Smith & Deacon, and his son-in-law, suggests the remarkable axis of achievement outlined by their legal careers. In fact. it is hard to imagine how these two Jonesboro "country" lawyers could have so consistently and so effectively contributed to the develop-

ment of state, national and international professional concerns. An entry in the September 1972 issue of The Arkansas Lawyer marveled that "Jack Deacon seems more like Joe Barrett's sOn than his son-in-law," explaining "lawyers with talent like theirs come along about one in a thousand." Between them, Joe Barrett and Jack Editor's Note:

Brooks Landon is an associate professor in the Department of English of the University of Iowa. He has studied the Barrett/Deacon family for the last 13 years, instructed in great part by his wife, Marie, Jack Deacon's daughter.

Deacon have been elected to more prestigious legal positions, having received more honors from their peers, have been more involved in legal public service and community activities and have had a greater impact on the formulation of state, national and international law than can possibly be detailed in the brief space of this mticle, However, even a partial record of their activities and honors suggests the extraordinary impression these two men have made in

their pursuit of excellence in the law. Before he died in 1980. having devoted 56 of his 83 years to the practice of law, Joe Barrett had established himself as one of America's most esteemed and in-

fluential architects of the law. In 1953, Barrett became the first Arkansas lawyer to be awarded an honorary LL.D. from the University of Arkansas; in 1960, the first recipient of the Outstanding Lawyer Award of the Arkansas Bar Association/Arkansas Bar Foundation; and. in 1977. recipient of the Hatton W. Sumners Award from the Southwestern Legal Foundation for his outstanding contribution to the improvement of the administration of justice in the southwestern states. Perhaps the capstone to his career came when he received in 1979 the prestigious Fellows Fifty-Year Award of the Fellows of the American Bar Foundation, a presentation greeted by a standing ovation of more than 1000 persons at the Foundation's 23rd Annual Meeting. One of Barrett's Arkansas colleagues has observed that he had "probably done more throughout the years than any other member of the Arkansas Bar to enhance the image of the legal profession nationally and internationally." And Professor Robert A. Leflar, a nationally renowned legal scholar and dis tinguished professor of law at the University of Arkansas at Fayetteville School of Law, was fond of repeating his belief that there were "few lawyers in America. and none in Arkansas, more

loved and respected than Joe Barrett." Born near Bono. Arkansas in 1897, one of 10 children in a farm family, Barrett received his B.A. from the U of A in 1920. where he was editor of both the Razorback and the student newspaper, and his LL.B. with honors from George Washington University in 1924. He was a representative of the United States Department of Agriculture in Rome, Italy, from 1922 to 1923. While overseas he renewed his acquaintance with another

Arkansan. Bertha Campbell. whom he

had met at First Baptist Church in Fayetteville. and they were married in 1923. They had one daughter, Dorine, whom Jack Deacon was to marry in 1947.

arrett returned to Jonesboro to be-

gin a small law practice. an "ev-

erything practice." centering on commercial work for banks and local businesses, estate planning and tax work. He was elected president of the Arkansas Bar Association in 1943-44. having been a member since 1922. and. following his appointment by Governor Adkins as a commissioner from Arkansas to the National Conference of Commissioners on Uniform State Laws. became chairman of the Arkansas commission. John P. Frank, of Phoenix and a legal scholar, notes that Arkansas "came to have what was probably the foremost trinity of Uniform Law commissioners in America." referring to Barrett. Ed Wright (later president of the American Bar Association) and Prof::e::ss::o::r:...L::e:.f::l::a:.;r.:...Barrett served on many national drafting committees, most significantly the one that drafted the Uniform Commercial Code. Professor Leflar wrote of Barrett's servIce that:

'Jack Deacon seems more like Joe Barrett's son than his son-in-law .. lawyers like theirs come along one in a thousand'

"He was quickly recognized as one of the best draftsmen in the Conference. His

facility for wise analysis of the probable consequences, both legal and politicaL of proposed new laws. caused other commissioners to consult him constantly. And his constant effort to seek out and develop new forms of law. not for the sake of change as such but to strengthen the legal and social order in America generally. made him a major contributor to the continuing work of the Conference."

For 31 years. Barrett never missed an annual meeting of the Conference and his leadership was recognized by his selection first as chairman of the Executive Committee and later as president. In 1959 he became a life member of the Conference. He also became a member of the permanent editorial board of the Uniform Commercial Code and served on the Committee to Review Article IX of the Code. Noting that Barrett's accomplishments as a commissioner benefited in part from his friendship and work with William Schnader of the Philade1-

Generations in the Law: A Series April 1986/Arkansas Lawyer/55

phia law firm of Schnader. Harrison. Segal & Lewis. Frank concluded: "Sales. Commercial paper. Bank Deposits

and Collection. Leiters of Credit, Bulk Transfers. Warehouse Receipts, Bills of Lading. Investm.ent Securities, Secured Transactions and a host of lesser subjects: most of the commercial transactions of the general run of mankind in the 50 states of this union are governed by the Uniform

Commercial Code. and Joe Barrett of Jonesboro. Arkansas did as much as any other man in America to build it ... This is an astonishing monument. Most of us

lawyers write on water. We make a little ripple and we are gone. Nobody in America for the rest of this century is going to

be doing commercial business as he would have done it if Joe Barrett had not

lived. None of our hundreds of thousands of law students will learn the law as they

Joe C, Barrett

56/Arkansas Lawyer/April 1986

would have learned it but for Joe Barrett." Barrett spearheaded the U.S.'s efforts to unify private international law as well, a pioneering concern which led to his serving as a U.S. delegate to seven international law conferences. He was a member of the U.S, Observer Delegation to the 8th and 9th Hague Conferences on Private International law in 1956 and 1960, and in 1964, when the U.S. became a member of the Hague Conference, he served as a member of the U.S. delegation. He attended a special session in 1966. Barrett was also a 1964 member of the U.S. delegation in Rome at the Diplomatic Conference on Uniform Law on the International Sale of Goods, a member from 1964 to 1967 of the Department of State's Advisory Committee on Private International Law and became a member in 1967 of the Department's Advisory Panel on Public International Law dealing with problems affecting U.S, foreign policy. He was a member of the Advisory Committee to the U.S. Commission on International Rules of ludicial Procedures and in 1967 was elected chairman of the ABA's International and Comparative Law Section, As Professor Leflar observed, "few, if any other country lawyers without an international law practice, with expertise derived solely from intellectual interest, have ever been so recognized." The depth of that intellectual interest is also attested to by Barrett's having lectured widely at law schools and by his several articles in such publications as the American Bar Association Journal. International Lawyer, and the Arkansas Law Review, In 1981, Volume 35, Number I of the Arkansas Law Review was dedicated as the loe C. Barrett

Symposium. "Ioe Barrett." wrote Robert Braucher, associate justice of the Supreme ludicial Court of Massachusetts in the personal tribute which opened that issue, "personified the flow of the stream of the common law, working itself pure,"

arrett always gave unselfishly of his time and talent to the bar as well as to his community. He was the delegate from the Arkansas Bar Association to the ABA's House of Delegates from 1946 to 1955, was one of the original Fellows of the American Bar Foundation and served on many ABA committees through the years. He was chairman of the Scope and Correlation Committee in 1958 and chairman of the Special Committee on Unification of Private International Law from 1957 to 1961. His community and civic service included three years as chairman of the Democratic State Committee for Arkansas, five years as a member of the lonesboro School Board, 12 years as chairman of the Board of Trustees of the lonesboro Public Library, president of the U of A Alumni Association and director of the Mercantile Bank of lonesboro for 25 years. In the last years of his life, Barrett remained fascinated by the legal implications of technological advance, most notably the need for a law of outer space and for new laws concerning electronic banking. For him, every era was stirring, the challenges to intelligence and ingenuity ever new. Hailed by Frank as "that unusual figure, the master of the telescope and the microscope," Barrett never failed to meet those challenges,

ollowing in the footsteps of a legend must be one of the most difficult tasks there is, but lack Deacon is well on his way to forging a reputation legendary in its Own right, having long since joined Barrett as one of the best known and most respected members of the American bar. It has been said that he "leads every organization he joins," and even a brief glance at a resume in which every other word seems to be "president." "chairman" or "director" supports that observation. Deacon's election as president of the National Conference of Commissioners on Uniform State Laws in 1979, for example, marked the 14th time in his career that his peers had entrusted him with the direction of a professional organization. In 1970-71. he had been president of the Arkansas Bar Association; in 1974-75,

president of the American Counsel Association; in 1977-79, chairman of the National College of Defense Lawyers; from 1971-79, chairman of the Eminent Domain Code Committee of the NCCUSL; from 1975-77, chairman of its Scope and Program Committee and the list goes on and on, prompting the writer of a profile in The Arkansas Lawyer to wonder. "When does he sleep?" "Jack can keep more balls in the air at one time than anyone I have ever

known," says Judge Henry Woods, who was chairman of the Association's Ex-

ecutive Committee the year Deacon was president. The real significance of that remark begins to emerge when one con-

siders that Deacon's public service has encompassed everything from being president of the Arkansas Amateur Athletic Union, to being on the Board of Directors of the Arkansas Conference of Christians and Jews, to serving the last 28 years as president of the Advisory Board of St. Bernard's Regional Medical Center in Jonesboro. Throw in the presidencies over the years of the Jonesboro Chamber of Commerce, the Jonesboro Rotary Club (also serving as district governor of Rotary International District GIS). eight years as president of the United Fund of Jonesboro and memberships and fellowships in countless other civic and professional organizations - not to mention a highly successful legal practice, four children and 11 grandchildren - and the profile of an unbelievably full life is clear. Phillip CarrolL now Arkansas' third president of the Conference, has gone so far as to suggest that if Deacon's "ability to use a 24 hour day could be bottled into an elixir (Deacon's liniment) and then sold in a drug store, the entire economy could go on the two-day work week." Deacon was born in Newport. Arkansas, in 1920, the son of John Campbell and Marie Brennan Deacon. He grew up in Little Rock, attended Little Rock Junior College and then the U of A, receiving his B.A. in 1941. During World War II he served as an officer in Military Intelligence. Following the war, he married Dorine Barrett and received his LL.B. from Arkansas in 1948. Initially practicing alone in Little Rock, he became an associate with Rose, Meek, House, BarrOn & Nash, remaining there until 1951 when he was recalled to active duty during the Korean War and assigned to the Pentagon. When he was discharged as a major in 1952, he and his family, now including a daughter, Marie, and sons Barry and John, returned to Jonesboro where he joined Barrett, Archer Wheat-

ley and Berl S. Smith in the practice of law. Soon thereafter a fourth child, Rush, was born.

eacoD's involvement with professional organizations immediate-

ly intensified, as he became chairman of the Association's Young Lawyers' Section in 1954 and director of the ABA's Junior Bar Conference in 1955. After moving back to Jonesboro, it took Deacon all of three years before his dedication and enthusiasm won him the award as Outstanding Young Man of Jonesboro in 1955. In 1979, one of Deacon's colleagues found an even better way to recognize his place in the community. In presenting an award honoring Deacon's 25 years of continuous board service to the United Way, John Phelps identified him as

'representative man' in Emerson's

phrase, One who embodies the consciousness of a community and who perceives things in fresh lights and with new conceptions." Significantly, Phelps also recalled an early conversation where Deacon had expressed his conviction that Jonesboro was a community shaped and defined by the hearts and civic virtue of its citizens rather than' by strategic location for commerce. Most would assent to such a civic-minded proposition, but the record of Deacon's life reveals his unwavering commitment to it.

Deacon's work with civic

organizations such as the United Fund of Jonesboro, the Jonesboro Jaycees, the Craighead County Red Cross, St. Bernard's Hospital and the Craighead County Library offers clear evidence of his leadership skills as well as his public spirit. Carroll has explained those skills in terms of flexibility, enthusiasm and communication: "He can follow traditional paths when he knows where they lead. and he can also

strike out on totally uncharted courses. Conservatives and liberals both claim him as their champion. He has the extraordinary power to enlist the Joe Barrett at International Law efforts of persons whom he . stimulates. and then he draws Conference In Rome, Italy from them effort that is a surprise to everyone except Jack. Part of his success formu-

April 1986/Arkansas Lawyer/57

10 in his enthusiasm. It is as infectious as a virus. Above all else. Jack communi路 cates.'

In recent years. Deacon has served as a member of the ABA's Board of Governor's from the Eleventh District (Arkansas, Texas and Oklahoma), as a member of the Board of Directors of the International Academy of Trial Lawyers and as chairman of the Research Fellows of the Southwestern Legal Foundation, A member of the American Bar Commission on Medical Professional Liability from 1975 to 1980 and a member of the American Academy of Hospital Attorneys, Deacon has developed noteworthy expertise in healthcare law. Although

~~~~~===~~~~jh~e calls himself a general practitioner, representing a broad spectrum of

Jack Deacon

clients, in the last 15 to 20 years he has spent a large portion of his time in the defense of medical malpractice cases. Indeed, he has been on the cutting edge of many of the significant Arkansas appellate decisions in healthcare law during the last decade. Today, the busy law practice and work for his community and profession continue. This year, he will have served 20 consecutive years in the ABA's House of Delegates. He also serves as chairman of the prestigious Steering Committee of the ABA's Public Education Division, planning and coordinating all the ABA's activities for the 1987 Bicentennial of the U.S. Constitution, along with other ABA public education programs. Two of Deacon's sons have followed their father and grandfather into the law, first Barry in 1975, then Rush in 1978 - both continuing many of the interests and involvements long associated with their family and both having added activities and developed specialties of their own. Joseph Barrett Deacon (Barry) was born in 1950 and raised in Jonesboro where he distinguished himself as a champion swimmer, holding many state records. He attended the U of A on a swimming scholarship. At Arkansas. he was a member of Sigma Chi fraternity, as had been his father, and served as its president. Barry was named to Omicron Delta Kappa honorary fraternity before he graduated in 1972 with a degree in Business and Finance. In 1975, he graduated from the U of A School of Law and joined the Barrett, Wheatley, Smith & Deacon law firm where he is now a partner.

SS/Arkansas Lawyer/April 1986

arry has served as president of the Board of Blessed Sacramen t School in Jonesboro and is currently serving a second term as president of the Board of Cottage of Hope, a school for children with developmental disabilities. He has also chaired various sections of United Way and has served on the Board of Directors of the Jonesboro Rotary Club. He is a member of the ABA's Litigation and General Practice Sections and is active in the Association, where he has served on various committees and the YLS' Executive Council. Rush Brennan Deacon was born in 1953 and raised in Jonesboro, where he also became a champion swimmer. After attending Hendrix College for one year, he graduated from the U of A in 1975 with a B.S.B.A. degree in Accounting. At Arkansas, Rush like his father and two brothers before him, became a Sigma Chi. and like Barry, was elected president. After graduating from the U of A School of Law in 1978, Rush worked with Price Waterhouse & Co. in Houston, Texas, as a stall accountant in the international division of its tax department. Alter one year in Houston, he moved to London, England, for a one year assignment in Price Waterhouse's international headquarters. Leaving Price Waterhouse to return to school. Rush earned a Master of Laws Degree in Taxation from Southern Methodist University Law School in 1981. He worked for two years with the North Little Rock law firm of Wallace, Hilburn, Clayton, Calhoun & Forster before joining Stephens, Inc. of Little Rock in June 1983. He is currently vice presidentFinance at United Pacific Trading, Inc., an international trading company formed in 1983 by Stephens and the Lippa Group of Indonesia. Rush is on the Board of Directors of the Mid-South International Trade Association, is a certified public accountant and a registered securities representative licensed both federally and in Arkansas. Chief Justice Vincent L, McKusick of Maine once praised Joe Barrett as a man who "showed the way to all of us who come from smaller states and smaller communities the impact that a good lawyer can have." Jack Deacon's ellorts on behalf of his profession and of his community dramatically underscore and add to that lesson. And now Rush and Barry represent a third generation of Barrett/Deacon lawyers, insuring that the family tradition of excellence and service will continue to have an impact - on Arkansas and beyond. 0

A Judicial Maze Bankruptcy: An Overview of the 1984 Jurisdictional Amendments' By Judge Robert Fussell

he judicial code provisions' contained in the Bankruptcy Amendments and Federal Judgeship Act of 19843 have created a maze for attorneys practicing in United States bankruptcy courts, U.S. district courts and state courts. This article will briefly review the jurisdictional grants made to U.S. district judges and bankruptcy judges by 28 U.S.C. ยง1471, enacted by the Bankruptcy Reform Act of 1978'; the U.S. Supreme Court's decision in Northern Pipeline Construction Co. v. Marathon Pipe Line Co.'; the Interim General Orders of the District Court after Marathon'; the 1984 Bankruptcy Amendments (1984 act)'; and "core," "non-core" and "related" proceedings under the 1984 amendments.' This article will further present and discuss. through the use of a hypotheticaL various motions under the 1984 amendments. including references of cases and proceedings by the district court to the bankruptcy judges, motions to withdraw the references and motions to abstain from jurisdiction. Section 147l of 1978 Act I / / / / / / / / / / / / / In the Bankruptcy Reform Act of / / / / / / / / / / / / / / 1978. Congress extended a broad than the district courts. the disgrant of jurisdiction to the bank-

trict courts shall have original

ruptcy court. The purpose was to

but not exclusive jurisdiction of

have one forurp. where all the litigation affecting the bankrupt's

all civil proceedings arising under title II or arising in or re-

estate could be adjudicated. Seclion 1471 of that act provided:

lated to cases under title II .. (c) The bankruptcy court for the dls-

(0) Except as provided in 5ubsechon (b) of this section. the district court shall have original and exclusive jurisdiction of all cases under title II.

(b) Notwithstanding any act of Congress that infers exclusive jurisdiction on a court or courts other

tn~t

In which a case under h.tle II IS com~e~ce~ s.hall exerCise all of. the JU~lsdlchon con~err~d by this sechon on the dIstnct courts.

The Marathon Decision The U.S. Supreme Court, in its plurality opinion. held that

April t986/Arkansas Lawyer/59

.... .: .... _.r

1////////////////////////////////////////////II 搂147I(c) of the 1978 act, which conceedings filed by the debtor's ferred jurisdiction in the hankestate against parties who have " .. ' agamst ' t he d e bt ruptcy court to adjudIcate all CIvil not h'I e d a c IOlm , " h h路 procee.dings ~elated tc? cases or.s estate and In WhlC t e achon under tItle ll, vIOlated ArtIcle 1lI of anses under state or federal nonthe U.S. Constitution. The Subankruptcy laws.! preme Court reasoned that the The Interim General Orders conferred jurisdiction amounted After the Marathon decision the to an unlawful delegation of Artibankruptcy judicial system was in cle 1lI judicial powers upon judges disarray, Interim General Orders who lack life tenure and protecwere enacted by each of the U,S, tion against salary diminution, district courts until Congress The factual situation presented could enact remedial legislation, in Marathon was one where The District Court for the EastNorthern Pipeline filed a petition ern and Western Districts of for chapter II reorganization in Arkansas adopted General bankruptcy court. Northern PipeOrders No, 24 and No, 28 which set line then filed in bankruptcy court forth the jurisdictional basis of the a complaint against Marathon operation of the bankruptcy courts seeking damages for an alleged until Congress enacted remedial breach of contract and warranty, legislation," Under General Order as well as for misrepresentation. 28 "related proceedings" were decoercion and duress, The defenfined as follows: dant Marathon had not filed a (T)hose civil proceedings, that, in claim against the debtor's estate the absence of a petItion m ban~. at the time the complaint was ruptcy" could have been brought In 'l d a dIstrIct court or a state courl. Red M th th f commence, I ate d procee d"Ings inC Iu d e, b U t , d"ara onf en I kl e f a mohon to Ism . . .ISS- or . ac 0 were no tl'Iml't e d t0, c I' QIms (b roug ht subject molter JunsdlctIon of the by the estate) against parties who bankruptcy court. have not filed claims against the esI~ essence, the Supreme. Court tate. (That outlines the facts under deCIded that bankruptcy Judges the Marathon case,) Related prowho do not have life tenure as ceedings do not include: contested . . . ArtIcle 1lI Judges cannot enter hand uncontested matters concern' d 'In pro' th e a d mlms ' 't ra t'Ion 0 f th e es ta te,' nol or d ers or JU groents mg - , allowance of and objection to a EdItor s Note: . claim against the estate; counter. Judge Robert fussell.. of LaUe claims by the estate in whatever Rock, U,S, bankruptcy Judge lor amount against persons filing the Eastern and Western Dlstncts claims against the estate; orders in of Arkansas, is a former chief respect to obtaining credit; orders assistant and assista~t U.S. atto.rto turn o.ver property of.the estate; ney, and former speCial master ln proceedmgs to set aSide preferthe U,S, District Court for the Eastences and fraudulent conveyances; proceedings m respect to hftmg of e rn District of Arkansas , He is also , 'd' a former attorney for the National the automatic stay, procee mgs to . object to the discharge; proceedLabor RelatIOns Board and a for"mgs In respec t t0 th e con f'ama t'iOn . mer lecturer on tnal advocacy at of plans; orders approving the sale the UALR School of Law,

60/Arkansas Lawyer/Apri) 1986

of property where not arising from proceedings resultmg fro~ clQIms brought agaInst ' h byhthe estate t f'l d I par' ties w 0 ave no I e calms against the estate; and similar matters, A proceeding is not a related proceeding merely because the outcome will be affected by state law, Thus, the bankruptcy judges were authorized in "related" proceedings to hear and make recommended findings of fact and conclusions of law to the U,S, district court, unless the parties in the proceedings consented to entry of the judgment or order by the bankruptcy judge, Under General Order 24, bankruptcy courts could hear and enter final orders and judgments in proceedings which were not classified as "related" proceedings, The General Order did not allow bankruptcy courts to conduct jury trials, 1984 Bankruptcy (Jurisdictional) Amendmentsll Th 1984 'urisdictional amende) " ments relevant to thiS artIcle are set forth in the Appendix" . "Core" and "Non-Core" Proceedings" Prior to the Marathon decision, the terms "core" and "non-core" ' t a P r oceedl'ngs w h en re f erring 'th' b k t d'd t WI . m a Han rup cy case, I no f h eXlsl. owever, a ter t e Marathon court outlined the new jurisdictional limitations for nonlife tenured bankruptcy judges, the terms became important. The core/non-core labels are used to separate proceedings in which bankruptcy judges may enter final orders and judgments subject only t d't' 1 11 t ' to ra Ilona appe a e reVIew ( ) f h ' h' h b k core rom t ose In w IC an路 ruptcy )'udges may enter only proposed findings and conclu-

sions subject to de novo review by the district court, unless all parties consent to a decision by the bankuptcy judge (non-core). While there is no formal legislative history in the form of committee reports to hint a congressional intent as to which proceedings were meant to fall into which category, there is guidance found in the language of the 1984 amendments themselves. 14 Contained in 28 U.S.C. §157(b)(2) is a non-inclusive list of core proceedings. However, two definitions in the list (located in §157(b)(2)(A) and (0)) seem to encompass every proceeding imaginable by including as core proceedings: "matters concerning the administration of the estate" and "other proceedings affecting the liquidation of the assets of the estate or the adjustment of the debtor-<:reditor ... relationship ..."" There is no specific statutory language defining a "non-core" or "related to" proceeding. At best, the 1984 amendments provide guidance to the meaning of those terms in §157(c)(l) which state: "A bankruptcy judge may hear a proceeding that is not a core proceeding but is otherwise related to a case under title 11." That is, of course, all-encompassing language like the statutory language defining certain core proceedings in 28 U.S.C. §157(b)(2)(A) and (D). Therefore, determining what constitutes core and non-core proceedings can be troublesome. Decisions are already in conflict as to what proceedings constitute "core" and "non-core." Examples of how certain actions have been classified include: (1) Collection of accounts receivable for promissory note by debtor in possession. Compare Baldwin United-Corp.. 52 B.H. 541 (8krtcy. S.C. Ohio 1985) (core) and In re American of Ashburn, Inc.. 49 B.H. 926 (Bkrtcy, N.D. Ga. 1985) with In re Atlas Automation. Inc, 42 B.H. 246 (Bkrtcy. E.D. Mich. 1984) and In re Arnold, 54 B.H. 562 (Bkrtcy. D. Mass. 1985) (non-core). (2) Motions to reject executory contracts and turnover of property seized post-petition. Compare In re Turbowind, Inc.. 42 B.H. 579 (Bkrtcy. S.D. Cal. 1984) (core) with In re Bell & Beckwith, 54 B.H. 303 (Bkrtcy. N.D. Ohio 1985) (trustee sought contract redssion: related non-core). (3) Actions to recover property of

HYPOTHETICAL A locallarm implement dealer sells farm equipment to a farmer for S3OO.ooo. The farmer executes a promissory note and security agreement in lavor of the dealer. The farmer's mother co-signs the promissory note. The farmer defaults on the promissory note and the dealer files a foreclosure complaint in Pulaski County Chancery Court. naming the farmer and his mother. who co-signed the promissory note. as defendants and seeking a deficiency judgment. Both the farmer the estate and preference actions under 547 and actions to recover property conveyed with specific intent to hinder. delay and defraud creditors. In re DeLorean Motor Co.. 49 B.H. 900 (Bkrtcy. E. D. Mich. 1985) (core). (4) Actions to enjoin debtor's use of trade name which is property of the estate. In re Nettie Lee Shops of Bristol, Inc.. 49 B,ft, 946 (Bkrtcy, W, D, Va. 1985) (core). (5) Proceeding seeking insurance proceeds. In re Pied Piper Casuals, Inc.. 50 B.H. 549 (Bkrtcy. S.D.N.Y. 1985) (core). (6) Debtor's motion to reject two licenses. In re Chipwich, Inc.. 54 B.R. 427 (Bkrtcy. S.D.N. Y. 1985) (core). (7) State law contract claim seeking injunctive relief in which debtor sued lessor for breach of lease. In re Pierce, 44 B.H. 601 (Dist. Ct. D. Col. 1984) (noncore). (8) Action by debtor against supplier for breach of warranty. Mohawk Industries. Inc .. v. Robinson Indus~ tries. Inc.. 46 B.ft. 464 (Dist. Ct. D. Mass. 1985) (non-core).

WORKING THROUGH

THE MAZE Question One: What Law Applies Once Bankruptcy is Filed? Once the farmer files his bankruptcy petition, the federal bankruptcy law becomes applicable. See 28 U.S.C. §1334(a)(b) (Appendix). Also, at the moment the bankruptcy petition is filed, the civil suit of foreclosure in chancery court is automatically stayed as to the farmer under II U.S.C. §362(a).". When the farmer files his motion for removal of the state case to district court pursuant to 28 U.S.C. §1452, an order for removal will be entered by the district court." Once removed, the matter is then automatically referred to the bankruptcy judge pursuant to 28 U.S.C. §157(a) and U.S.D.C. Local Rule 32." The state

and his mother file answers denying the allegations in the complaint, aUir· matively pleading usury as defense. The day before the trial in chancery court, the farmer files a chapter 11 business reorganization petition in U.S. bankruptcy court. The bankruptcy case is automatically referenced to a bankruptcy judge. The larmer then files a motion in bankruptcy court seeking an order to extend its protection to his mother during the proceed· ings in order to stop the dealer from proceeding against her in the dealer's state court suit. The farmer files a petition in U.S. district court to remove the state chancery court proceedings to U.S. district court. The district judge then enters an order of removal to district court and the suit is automatically referred to the bankruptcy judge assigned the debtor's case and is assigned an adversary proceeding number. Next, the farmer files a third-party complaint in the adversary proceeding against an out~of·state manufac· turer of farm equipment lor $200,000, alleging breach of warranties. He also files in the adversary proceeding a counterclaim against the dealer for $200,000, alleging misrepresentation and breach of warranties in connection with the sale of farm equipment. Both the dealer and the larm equipment manufacturer file motions in district court to withdraw the reference of the adversary proceeding from the bankruptcy judge. They also file in district court motions for the court to abstain from jurisdiction. The dealer files in bankruptcy court a Motion for Helief from Stay to proceed with his suit in state court and files an objection to the farmer's motion for an extension of the stay to his mother. Then, the dealer and the out-ai-state farm equipment manufacturer, while reserving their jurisdictional motions in district court. file answers in bank~ ruptcy court in the adversary proceeding demanding a jury trial. What is the likely outcome?IS

court foreclosure suit is designated an adversary proceeding under Bankruptcy Rule 7001.'" The farmer's counterclaim alleging a breach of warranties and misrepresentation based on the contract of sale of the farm equipment to him would also be a part of that adversary proceeding, as would the farmer's third-party complaint against the farm equipment manufacturer, alleging a breach of warranties. Appropriate state law would govern the interApril 1986/Arkansas Lawyer/61

pretation of the contract issues within the adversary proceeding. Question Two: Are the Proceedings in the Hypothetical "Core" or

ment Manufacturer

The farmer's third party complaint. based on a breach of warranties against the farm equip-

"Non-Core?"21

ment manufacturer who has not

I. The Dealer v. the Farmer The suit filed by the dealer in chancery court against the farmer seeking foreclosure and a judgment against the farmer is based on the farmer's default on a promissory note. Once the farmer filed his chapter II petition, the U.S. district court, under 28 U.S.C. §1334(a), became vested with original and exclusive jurisdiction of his case under title II, and the district court became vested with jurisdiction over all his property and property of the bankruptcy estate pursuant of II U.S.C. §1334(d). The dealer's suit against the farmer, once removed to the bankruptcy court under 28 U.S.C. §1452, can be interpreted as a "claim" against the debtor's estate because the dealer is seeking a right to payment by the farmer under the contract. 11 U.S.C. §101(4XA) (" 'claim' means - (A) right to payment, whether or not such right is ... contingent ..."). Under 28 U.S.C §157(bX2XB) core proceedings include "allowance or disallowance of claims against the estate." Thus, the dealer's claim against the farmer would be classified as a "core" proceeding. Furthermore, the bankruptcy court would have to decide whether the usury defense to the contract raised by the farmer would be categorized as a

filed a claim against the farmer's estate, could be interpreted as a non-core proceeding that is otherwise related to a bankruptcy case. See §157(c)(l) (Appendix). In this regard, the facts fall squarely within the facts of Marathon, i.e., a cause of action based upon state law by the debtor's estate against a non-debtor who has not filed a claim against the debtor's estate. See Mohawk Industries v. Robinson Industries, Inc.. 46 B.H. 464 (Dist. Ct. D. Mass. 1985) (an action by the debtor against a supplier for breach of warranties). 4. The Dealer's Claim Against the Farmer's Mother

"core" or "non-core" issue, in

accordance with II U.S.C. §157(bX3). 2. The Farmer's Counterclaim Against the Dealer The farmer's counterclaim in the adversary proceeding based on alleged breach of warranties and misrepresentation under the contract of sale could be interpreted as falling within the specific language of Section 157(bX2XC): "counterclaims by the estate against persons filing claims against the estate." Thus, the counterclaim would fall within the classification of a "core proceeding." 3. The Farmer's Third Party Claim Against the Farm Equip621Arkansas Lawyer/April 1986

The dealer's suit against the farmer's mother, co-signer of her son's note, seeking damages for default on the promissory note, is a state cause of action by a nondebtor against a non-debtor. This proceeding, at best, would be on the outer edge of (or beyond) the "non-core" or "related to" categories of proceedings which can be heard by the bankruptcy judge. This matter will be examined further under the discussion regarding the dealer's motion to abstain and the farmer's motion to extend the stay to the mother. Question Three: Should the Jury Trial Demands be Granted? Whether or not the parties are entitled to a jury trial in the bankruptcy forum under 28 U.S.C. §1411 is an issue which will ultimately be resolved by the U.S. Supreme Court. There are cases which have reached different conclusions on the issue. Compare In re Chase & Sanborn Corp.. 54 B.H. 43 (Bkrtcy. S.D. Fla. 1985) (defendant not entitled to jury trial in action to avoid preference) and In re Best Pack Seafood. Inc .• 45 B.R. 194 (Bkrtcy. D. Me. 1984) (defendant not entitled to jury trial in action to avoid preference) with In re Arnett Oil, Inc.. 44 B.H. 603 (Dist. C\. N.D. Ind. 1984) (defendant has right to trial to recover preferential transfer) (decision based upon Bankruptcy Reform Act of

1978) and In re McCrary's Farm Supply, Inc., No. AP 84-149M, case no. LR 81-666M (Bkrtcy. W.D. Ark. November 12, 1985) (jury trial held in a preference action). If a proceeding is determined to be a non-core or "related to" proceeding, the bankruptcy court cannot enter final orders and judgments. Consequently, the use of a jury in bankruptcy court would be inefficient and impractical. In re L.A, Clarke & Son, Inc.. 51 B.R. 31 (Bkrtcy. D. D.C. 1985); In re Morse, 47 B.H. 234 (Bkrtcy. N.D. Ind. 1985). Therefore, the bankruptcy court would likely certify the jury trial to the district court in "non-core" or "related to" proceedings in which parties are entitled to a jury trial. Under the hypothetical. the farm equipment manufacturer's demand for a jury trial on the third party complaint. if interpreted to be a non-core proceeding, would be such an occasion in which the bankruptcy court would likely certify the issue to district court. It should be noted, however, that under 28 U.S.C. §157(cX2) in a non-core proceeding, if the parties and the district court consent to the bankruptcy judge's entering final orders, the bankruptcy forum could be the proper forum for the jury trial. As to the dealer's demand for a jury trial on the counterclaim, if it is interpreted to be a core pro-

ceeding in which a right to jury trial exists, then the bankruptcy court could conduct the jury trial and enter final orders and judgments, with consent of the district court. pursuant to U.S. D.C. Local Rule 32 III(e). Question Four: Should the Motions for the District Court to Abstain from Jurisdiction be Granted? The dealer and farm equipment manufacturer filed motions for the district court to abstain from taking jurisdictions over the adver-

sary proceeding filed in bankruptcy court. In order to predict the district court's decision, it is helpful to have an understanding of the two subsections of 28 U.S.C. §1334 governing abstention: §1334(c)(l), the discretionary abstention provision and §1334(c)(2), the mandatory ahstention provi-

sian.

Under the mandatory abstention provision, the district court will not be required to abstain unless all of the following factors are present: a. a timely motion is made; b. the proceeding is based upon a state law claim or state law cause of action; c. the proceeding is related to a case under title II; d. the proceeding does not arise under title II; e. the proceeding does not arise in a case under title 11;

f. the action could not have been commenced in a court of the United States absent jurisdiction under 28 U.S.C. §1334; and g. an action is commenced and can be timely adjudicated in a state forum of appropriate jurisdiction. A decision to abstain under the mandatory provision is not re-

viewable by appeal or otherwise. 28 U.S.C. §1334(c)(2). Assuming lor purposes of the hypothetical that the state court action can be "timely adjudicated" in state court. all seven factors for mandatory abstention would be present in regard to the complaint of the non-debtor dealer against the non-debtor mother, the farmer's co-signer. Therefore, the district court would abstain in that action. The mandatory abstention provision would not apply to core proceedings because core proceedings either arise under title II or in a case under title II. Thus. factor "c" or "d" would be missing. Therefore. mandatory abstention would not be applicable to the dealer's complaint against the farmer or the farmer's counterclaim against the dealer, both core proceedings. As to the farmer's third party complaint against the farm equipment manufacturer, mandatory abstention would not apply since there is no pending state lawsuit and, therefore, factor "g" is missing. Discretionary abstention powers are found in §1334(c)(I) of title 28 which provides that a district court may abstain from hearing a "particular proceeding" arising

under title 11 or arising in or re-

lated to a case under ti tle I!. District courts may be likely to use their discretionary abstention

powers in proceedings in which a novel issue is raised involving

state law or in which the decision will involve interpretation of state case law on complex issues. Accord, In re Chase & Sanborn Corp" 54 B.R. 43 (Bkrtcy. S.D. Fla. 1985) (abstaining in interest of comity); In re Sweeney. 49 B.R. 1008 (Bkrtcy. N.D. Ill. 1985) (abstaining because usury involved). But see, In re Arnold Print Works, Inc.. 54 B.R. 562 (Bkrtcy. D. Mass. 1985). The decision on discretionary abstention will be made by district courts on a motion-by-motion

basis. Question Five: Should the Dealer's and Manufacturer's Motions

to Withdraw Reference from Bankruptcy Court be Granted? Motions to withdraw reference are filed in district court. The district judges will adjudicate these motions. II U.S.C. §157(a). The district court has original and exclusive jurisdiction over all cases under title II and original, but not exclusive, jurisdiction over all proceedings arising in or under a case in chapter II. Pursuant to 28 U.S.C. §157(a) and U.S.D.C. Local Rule 32, the district court has referenced to the bankruptcy judges all cases under title 11 and all proceedings arising in or related to a case under title II. Therefore, the district court is not likely to grant motions to withdraw the reference. There are at least two situations in which district courts would withdraw the references: (l) noncore or related to proceedings in

which the parties have requested, and are entitled to, a jury trial. and in which all of the parties and the district judge have not consented to the bankruptcy judge's entering final orders or judgments; (2) core proceedings in

which the parties have requested and are entitled to a jury trial and the district court has not consented to the bankruptcy judge's conducting the jury trial. See U.S. D.C. Local Rule 32. Question Six: Should the Dealer's Motion for Relief from the Stay be Granted?

The simplest procedure the dealer could invoke if he wanted to pursue the state foreclosure suit would be to file in bankruptcy court a motion for relief from the stay in accordance with II U.S.C. §362(d)." Because of the space limitations of this article, the hypothetical does not set forth sufficient facts to decide this motion. However, the bankruptcy judge, in deciding whether the motion for relief from stay should be granted would take into consideration the following: (a) whether the farmer had any equity in the farming equipment subject to the sale; (b) whether such property would be necessary to an effective reorganization of the farmer's farming business; (c) whether the farmer can provide adequate protection to the dealer during the bankruptcy proceedings; or (d) whether there exists other cause which would warrant relief. Question Seven: Should the Farmer's Motion to Extend Protection of Automatic Stay to His Mother be Granted? The farmer filed a motion to extend the automatic stay of the state court proceedings provided by II U.S.C. §362(a) to his mother, the co-signer of the promissory note. This motion would be heard and determined by the bankruptcy court. The farmer's argument would probably be that he cannot have a successful chapter II business reorganization without the

stay extending to the mother. The prevailing view is that the protection of the stay should not be extended to a non-debtor. In re Kalispell Feed and Grain Supply, Inc., 55 B.R. 627 (Bkrtcy. D. Mont. 1985) (stay not applicable to codebtors); In re Johnson, 51 B.H. 439 (Bkrtcy. E.D. Pa. 1985) (stay not applicable). Contra, Federal Lile Ins. Co. (Mut.l v. First Financial Group 01 Texas, Inc.. 3 B.R. 375 (Bkrtcy. S.D. Tx. 1980) (stay does apply to co-defendants) (opinion criticized). Conclusion In summary, the 1984 amendments to the judicial code under title 28: (I) vest final judicial authority in the U.S. district courts; (2) provide that in core proceedings under II U.S.C. §157(b)(21 April 19861Arkansas Lawyerl63

bankruptcy judges will enter final orders and judgments; and (3) provide that in non-core or relaled to proce'edings under II U.S.C. § IS7(c)(l) bankruptcy judges will submit proposed findings of facts and conclusions of law to the district judges who will review them de novo. As a practical molter. almost all proceedings will still be heard in the bankruptcy forum. District judges will seldom exercise their powers to abstain from jurisdiclion or to withdraw their reference to bankruptcy judges. There will be no sure answers to many of the issues raised by the enactments of the 1984 amendments to lhe judicial code until the U.S. Supreme Court ultimately reo solves these issues. 23 FOOTNOTES Because of time and space limitations. this article is by no means an in-depth analysis or treatment 01 the jurisdictional statutes and procedural issues raised by the 1984 Amendments. It is written with the intent to acquaint the readers with jurisdictional problem~ and issues they are likely to encounter ID bankruptcy practice. . . . 2 The judicial code prOVISions apphc.able to bankruptcy practice are enacted 10 28 U.S.C. §151·152. 157·158, 1334. 1408-1412 and 1452. , Pub. L. 98-353. 98 Stot. 333 (July 10. 1984). 4 Pub. L. 95-598. generally elfectlve October I. 1979. • 458 U.S. 50, 102 S. Ct. 2858, 73 L.Ed. 2d 598 (982). 'General Order No. 24 became effective on October I. 1982 and amendments thereto were entered. on October 5. 1982; December 20. 1982: and April 2. 1984. General Order No. 28 became effective on August 24. 1984. 1 See n.3, supra. • See II U.S.C_ §157 set forth in relevant part ID the Appendix. , Everyone seems to have an opinio~ a~ to the applicability of the scope and hmlta· tion of the Marathon decision. However. the uncertainty will remain until the Supreme Court lurther addresses the application of its holding. 10 See n.6, supra. II The 1984 jurisdictional statutes became effective on July 10. 1984 but ~re not <;IPplicable to cases or proceedmgs which were pending on the date of enactment. The substantive provisions became effective 00 days after enactment (October 01 1984). 11 Jurisdictional statutes 28 U.S.C. §§1409 and 1410 pertaining to district court v~Due are not applicable to the hypothelical e?Camined in this article and are DOt set out 10 this article. IJ For a brief discussion of the core/noncore dichotomy, read Norton Bankr. L. Advsr.. No. I. p. I (January 1985). See also In re Yagow. 53 B.R. 737 (Bkrtcr' D. N.D. 1985); Zweygardt v. Col. Nat' Bonk of Denver. 52 B.R. 229 (Bkrtcy. D. Cal. 1985) (discussing "core." "non-core," "related. to" proceedings.) 14 See n. 8 Supra. " Because 28 U.S.C. §157(bX2KAl and (0) contain such all-encompassinq lanI

64JArkansas Lawyer/April 1986

guage. they are con~tit~tic:n~llysuspect, having the broad Jutlsdlchonal grant which the United States Supreme Court held defective in Marathon. I' Even Iimmy-the-Greek wouldn't give odds on the outcome of this hypothetical. 17 II U.S.C. §362(a) provides. in port, that the filing of a bankruptcy petition ?~r ates as a stay. applicable to all enhtles. 01the commencement or continuation ... 01 a judicial. administrative or other action or proceeding against the debtor that was or could have been commenced belore the commencement of the case under title 11 ". The automatic stay is olten one of the most sought-after protections provided. by the bankruptcy forum. .. I' Under the hypothetical. after the dlstnct court has entered. the order for removal. the dealer could object to the order. asking the district court to rema..r;td the action to state court on eqUitable grounds. pursuant to 28 U.S.C. §1452(b). See Appendix 8. It U.S.D.C. Local Rule 32 provides tha.t all bankruptcy petitions and proceedmgs brought under 28 U.S.C. §§I334. 1412and 1452 are automatically referred to bankruptcy judges serving in this district in accordance with 28 U.S.C. §157(a). The Rule became effective on July I. 1985. General Order No. 28 was rescinded on that date. III In essence. Rule 7001 defines "adversary proceeding" as a proceeding in bank· ru ptcy court ( I) to recover money or i?r?perty ~ . ( 2) to determine the valid1ty, pnonty. or extent of a lien or other interest in property, . ( 3) to obtain approval tor sale of mlerest of the estate and of a coowner in property. . ( 4) to object to or revoke a discharge, ( 5) to revoke an order of confirmation of a chapter II or c~apter 13 pl~~, ( 6) to determine the dlschargeablhty of a debt. 7) to obtain an injunction or other equitable relief. . 8) to subordinate any allowed clOim or interest. ( 9) to obtain a declaratory judgment.

(10) to determine a claim or cause of action removed. to a bankruptcy court. 11 Under §157(b)(3) and U.S.D.C. Local Rule 32, the bankruptcy judge wH.1 ini~ially determine whether a proceedmg 1S a core proceeding or non·core proceeding on the judge's motion or on the timely motion of a party. 12 11 U.S.C. §362(d) provides in relevant part: On request of a party in interest and after notice and a hearing. the court shall grant relief from the st~y .... such as by termination. annullIng. modifying or conditioning such stay (1) for cause. including the lack of adequate protection of .a~ interest in property of such party m mterest; or (2) with respect to a stay of ~n act against property under subsection (a) of this section if (A) the debtor does nol have equity in such property; and (8) such property is n?t n~essary to an effective reorgamzatlon. 13 This article was sent to the printer in early January. 1986. Many of the decisions cited herein may have been appealed and either affirmed or reversed. The reader, should research for the !'Tl:0st recent decisions regarding the Issues raised.

APPENDIX 28 U.S.C. §151: Designation of bankruptcy courts In each judicial distri~. the ~ruptcy judges in regular act.lve .servlce constl· tute a unit of the dlstnct court to be known as the bankruptcy court o.od each bankruptcy judge shall exercise the authority conferred by 28 ~.S.C. §lSl at seq. with respect to any achon or roceeding . 28 .S.C. 1157(0): Reference to Bankruptcy

Judges

Each district court may provide that all cases and all proceedings arising under title II or arising in or related to a case under title 11 shall be referred to the bankruptcr judges for the district. 28 U.S.C. §157{bX ): Core Proceedings "Bankruptcy judges may .hear and determine aU cases under htle 11 and aU core proceedings oTising und:er title 11. or arising in a case under htle 11. referred under subsection (0) of this section. and may enter appropriate orders and judgments. :"~ject"to review under section 158 of thiS htle. 28 U.S.C. §157(bX2): Stotutory Delinition of Core Proceedings "Core proceedings include. but are not limited to"(A) matters concerning the administration of the estate; "(B) allowance or disaJlowanc~ of claims against the estate or exemphons from property of the estate. and estimation of claims or interest for the purposes of confirming a plan unde.r c~ap ter II or 13 of title II but not the hquld~ tion or estimation of contingent or unhquidated personal injury tort or wrongful death claims against the estate for purposes of distribution in a case under title 11; "(C) counterclaims by the estate against persons filing claims against the estate; "(D) orders in respect to obtaining credit; "(E) orders to tum over property of the estate; _ "(F) proceedings to determine. avoid. or recover preferences; "(G) motions to terminate. annul or modify the automatic stay; . "(H) proceedings to determine. avoid. or recover fraudulent convexances; • (I) determinations as to the dischargeabilily of particular debts; "(J) objections to discharges; .. "(K) determinations of the vahdlty. extent. or priority of liens; "(L) confirmations of plans; "(M) orders approving the use or lease of property. including the use of cash collateral; "(N) orders approving the sale of property other than property resulting from claims brought by the estate against persons who have not filed claims against the estate; and "(0) other proceedings affecting the liquidation of the assets of the estate or the adjustment of the debtor-er~itor.or the equity security holder relallonshlp. except pe.rson.?l injury tort or wrongful death claims. 28 U.S.C. §157(b)(3): Determination of Core or Related To "The bankruptcy judge shall determine. on the judge's own motion or on timely motion of a party. whether a proceeding is a core proceedin~ under t.his subsection or is a proceedmg that IS otherwise related to a case under title 11. A determination that a proceeding is not a core proceeding shall not be made

I solely on the basis that its resolution may be aHected by State low." 28 U.S.C. §lS7(bXS), Pe,sonal Inju,\, Tort! Wrongful Death Claims The district court shall lry personal injury tort and wrongful death claims

arising in pending bankruptcy cases. 28 U.S.C. S157(c)(I): Proposed Findings in Related Proceedings "A bankruptcy judge may hear a pro-

ceeding that is not a core proceeding but that is otherwise related to a case under title 11. In such proceeding. the bankruptcy judge shall submit proposed findings of foct and conclusions of law to the district court. ond any final order or judgment shall be entered by the district judge after considering the bankruptcy judge's proposed findings and conclusions and after reviewing de novo those matters to which any party has timely and specifically objected:' 28 U.S.C. §157(c)(2}: Consent of Parties for Bankruptcy Judges to Hear and Determine Non-Core and Related to Proceedings "[Tlhe district court, with the consent of all the parties to the proceeding, may refer a proceeding related to a case under title 11 to a bankruptcy judge to hear and determine and to enter appropriate orders and judgments ... " 28 U.S.C. §157(d): Withdrawal of Reference

The district judge may withdraw a case or proceeding on its own motion or on motion of any party. 28 U.S.C. §1334(0): Original Jurisdiction "Except as provided in subsection (b) of this section. the district courts shall have original and exclusive jurisdiction of all cases under title 11:' [The language of this provision is identical '0 .hat 0128 U.S.C. §147I(a) ol.he 1978 Act! 28 U.S.C. §1334(b): Original - not exclusive - jurisdiction "[DUstnct courts shall have original but nol exclusive jurisdiction of all civil proceedings arising under title II or arising or related to cases under title II." [The language of this provision is identical '0 .hal of 28 U.S.C. §147I(b) 01 the 1978 Act! 28 U.S.C. §1334(c}(l): Discretionary Abstention A district court may abstain from hear· ing a particulcrr proceeding in the interest of justice or in the interest of comity with state courts or respect for state law. 28 U.S.C. §1334(c)(2): Mandatory Abstention A district court shall abstain if A. A timely motion is made; B. The proceeding is based upon a state law claim or state low cause of action; C. The proceeding is related to a case under Title II; The proceeding does not arise D.

under Title 11; The proceeding does not arise in a case under Title II; The action could not have been F. commenced in a court of the United States absent jurisdiction under 28 U.S.C. §1334; and An action is commended and can G. be timely adjudicated in a state forum of appropriate jurisdiction. 28 U.S.C. §1334(d): Jurisdiction of Debtor's Estate The district court has exclusive jurisdic· tion over all of the property, wherever located, of the debtor as of commence· ment of the case, and of the estate. 28 U.S.C. §1411, Ju,\, T,ials "(0) Except as provided in subsection (b) of this section. this chapter and title II do not affect anr right to trial by jury that an individua has under applica· ble nonbankruptcy law with regard to a personal injury or wrongful death tort claim. "(b) The district court may order the issues arising under section 303 of title 11 to be tried without a jUry:' 28 U.S.C. §1452: Removal of claim related to bankruptcy case Generally, a party may remove any claim or cause of action in a civil action to the district court for the district where such civil action is pending. if such district court has jurisdiction of such claim or cause of action under section 1334.

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