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Granfinanciera, S.A. v. Nordberg

Supreme Court of the United States · 1989 · Civil Procedure

Civil ProcedureSeventh AmendmentBankruptcyJury TrialSeventh Amendmentjury trialbankruptcyfraudulent conveyance

Facts

After Chase & Sanborn filed for Chapter 11 reorganization, its reorganization plan vested respondent trustee Nordberg with causes of action for fraudulent conveyances. In 1985, Nordberg sued Granfinanciera, S.A., and Medex, Ltda., alleging they had received about $1.7 million from Chase & Sanborn's corporate predecessor within one year before the bankruptcy filing without consideration or reasonably equivalent value. Petitioners requested a jury trial on all triable issues, but the Bankruptcy Judge denied the request and tried the case without a jury. Petitioners had not filed claims against the bankruptcy estate, and the trustee sought recovery of determinate sums of money under 11 U.S.C. §§ 548 and 550.

Issue

Whether a person who has not submitted a claim against a bankruptcy estate has a Seventh Amendment right to a jury trial when the bankruptcy trustee sues that person to recover an allegedly fraudulent monetary transfer. More specifically, the question was whether Congress' designation of fraudulent conveyance actions as "core proceedings" eliminates that jury-trial right.

Rule

To determine whether the Seventh Amendment applies, a court compares the statutory action to 18th-century English actions at law or in equity and then examines whether the remedy sought is legal or equitable, with the second inquiry being more important. If the action is legal in nature and involves a matter of private right, Congress may not eliminate the jury-trial right by assigning the claim to a non-Article III tribunal or by labeling it a core bankruptcy proceeding. A bankruptcy trustee's suit to recover a determinate sum of money as a fraudulent conveyance from a defendant who has not filed a claim against the estate is such a legal, private-right action.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

A Chapter 11 trustee in Phoenix sues Desert Mesa Logistics, a shipping company that never filed a proof of claim in the bankruptcy case. The trustee seeks to avoid a prepetition transfer and recover a fixed $420,000 in cash allegedly paid without reasonably equivalent value, plus interest.

Is Desert Mesa Logistics entitled to a jury trial if it timely demands one?

Explanation. The Seventh Amendment analysis asks whether the action is analogous to an 18th-century action at law or equity, and more importantly whether the remedy sought is legal or equitable. A trustee's fraudulent-transfer suit seeking recovery of a definite sum of money from a defendant who has not filed a claim against the estate is legal in nature and involves a private right. Congress cannot eliminate the jury-trial right merely by classifying the suit as a core proceeding.