Ask the Scholar
Document scope · 1 page
Scholar
Ask about this object, its catalog metadata, its source description, or the page inventory.
For page-specific OCR and visual context, open one of the page chats.
Scholar Source Context
Document identity
localId
1669239
label
1976/02/27 HR6184 Compensation of Referees in Bankruptcy
core
doc
dtoType
document
citationUrl
pageCount
1
Source metadata
id
1669239
sourceUrl
contentType
document
title
1976/02/27 HR6184 Compensation of Referees in Bankruptcy
citationUrl
collections
White House Records Office: Legislation Case Files
Legislation Case Files
subjects
Supreme Court of the United States. 2/2/1790-
Legislation
thumbnailUrl
largeImageUrl
imageCount
1
hasImages
yes
source
import
hasTranscription
no
Source extras
naId
1669239
coverageEndDate
logicalDate
1976-02-29
month
2
year
1976
coverageStartDate
logicalDate
1976-02-01
month
2
year
1976
levelOfDescription
fileUnit
recordType
description
ocrSource
nara-archive
Single page context
seq
1
pageIndex
0
type
document
mediaId
f14d1e820b3cda3c
ocrText
The original documents are located in Box 40, folder "1976/02/27 HR6184 Compensation of
Referees in Bankruptcy" of the White House Records Office: Legislation Case Files at the
Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Exact duplicates within this folder were not digitized.
Digitized from Box 40 of the White House Records Office Legislation Case Files at the Gerald R. Ford Presidential Library
APPROVED 1976
$2/27/76
ACTION
THE WHITE HOUSE
WASHINGTON
Last Day: February 28
February 23, 1976
Posted
2/27/76
MEMORANDUM FOR
THE PRESIDENT
Jo archives
FROM:
JIM CANNON
SUBJECT:
H.R. 6184 - Compensation
2/27/76
of Referees in Bankruptcy
Attached for your consideration is H.R. 6184, sponsored
by Representative Edwards, which repeals the authority
of the Judicial Conference of the United States to
fix the salaries of full-time referees in bankruptcy
at a rate below the statutory maximum and increases
the salary for these court officers to a maximum of
$37,800.
A detailed discussion of the bill is provided in
OMB's enrolled bill report at Tab A.
The Administrative Office of the U.S. Courts recommends
disapproval of H.R. 6184.
OMB, Max Friedersdorf, Counsel's Office (Lazarus) and
I recommend approval of the enrolled bill. In addition,
Max indicates that he has received calls in support
of the bill from Senators Eastland, McClellan, Burdick
and Hruska.
RECOMMENDATION
That you sign H.R. 6184 at Tab B.
GERALD FORD
OFFICE
am
EXECUTIVE OFFICE OF THE PRESIDENT
UNITED
OFFICE OF MANAGEMENT AND BUDGET
STATE
WASHINGTON, D.C. 20503
FEB 2 0 1976
MEMORANDUM FOR THE PRESIDENT
Subject: Enrolled Bill H.R. 6184 - Compensation of
referees in bankruptcy
Sponsor - Rep. Edwards (D) California
Last Day for Action
February 28, 1976 - Saturday
Purpose
Increases the salary of full-time referees in bankruptcy
to the maximum authorized by law and repeals the authority
of the Judicial Conference to establish lower rates for
these court officers.
Agency Recommendations
Office of Management and Budget
Approval
Civil Service Commission
Approval
Department of Justice
No objection
Administrative Office of the
U. S. Courts
Disapproval (Veto
message attached)
Discussion
H.R. 6184 would repeal the existing authority of the
Judicial Conference to fix the salary of full-time referees
in bankruptcy at a rate below the statutory maximum for
such positions. It would establish the current statutory
maximum of $37,800 as the salary for these employees,
subject to future adjustment under the procedures pre-
scribed by law for executive, legislative, and judicial
salaries. The bill would also provide a maximum annual
salary rate of $18,900 for part-time referees in bankruptcy--
half that of full-time referees--but would continue to allow
these salaries to be fixed by the Judicial Conference, based
on numbers and types of cases closed, and other factors.
a
FORD
GERALD
2
Based on the congressional committee reports and the views
of the Administrative Office of the U. S. Courts, this
enrolled bill appears to be the product of a seven-year
controversy between the Congress and the Judicial Confer-
ence about the salaries of full-time referees in bankruptcy.
The executive branch was not asked to report, and took no
position on this legislation, in the course of congressional
consideration.
Background
Under present law, the maximum salary for full-time referees
is set every four years under the procedures of the Federal
Salary Act of 1967. Pursuant to that Act, the quadrennial
Commission on Executive, Legislative and Judicial Salaries
recommends salary adjustments for high-level Government
positions to the President, who transmits his recommendations
to the Congress. The rates proposed by the President are
effective within 30 days unless either House disapproves.
As a result of the enactment last year of P.L. 94-82, ref-
erees' compensation is now also subject to annual automatic
adjustment by operation of the "comparability" pay law, with
the result that the maximum referee rate was increased from
$36,000 to $37,800 in October 1975.
Referees do not receive the maximum salary authorized by law,
however, because of action by the Judicial Conference under
the Bankruptcy Act. That Act authorizes the Judicial Confer-
ence to set referee salaries at less than the statutory
maximum to accord with individual variations in caseload and
size of estates administered. This authority dates back to
1946, when referees were converted from a fee-basis to a
salary system and there was significant variation in caseload
among referees throughout the country.
A further relevant background factor is that, under the
Magistrates Act of 1968, the compensation of full-time U. S.
magistrates is set at a rate not to exceed that for referees,
subject to a ceiling of 75% of the salary of a District
Court judge.
The position of the Judicial Conference is that (1) referees
should receive the same salary as U. S. Magistrates and
(2) both of these groups should receive 75-80% of a district
judge's salary. Accordingly, in recent years, the Judicial
Conference has held the compensation for both referees and
magistrates below the maximum. In 1969, the referee/magistrate
rate established by the Conference was $30,000--75% of the
3
then District Court Judge rate of $40,000--instead of the
$36,000 maximum. At present, the rate is ,500--about
80% of the judge's rate of $42,000--instead of $37,800
which the enrolled bill would mandate for referees. All
full-time referees and magistrates are currently being
paid the same salary rate.
The major arguments advanced in support of H.R. 6184 in the
congressional committee reports are:
-- The action of the Judicial Conference in setting
referee salaries below the maximum is a "studied rejection
of congressional standards in the exercise of delegated
power" which "more than warrants Congress' cancellation of
the delegation and reassumption of the authority itself.'
-- The need for delegation of the salary fixing power
has been eliminated since the Conference has set a uniform
salary for all referees, thereby implicitly recognizing
that the original differences in caseloads no longer exist.
-- The creation in 1967 of the quadrennial Commission
procedures has obviated the need for the Conference to super-
vise the salary levels of the bankruptcy referees.
-- The increased judicial responsibilities of the bank-
ruptcy referees and the increased case volume warrants
implementation of the maximum salary authorization. The
quality and effectiveness of the bankruptcy bench is being
endangered by resignations based on "salary inequity."
The major arguments advanced in opposition to H.R. 6184 by
the Administrative Office of the U.S. Courts are:
-- The increase in salaries of full-time referees
required by the bill is not consistent with the internal
alignment of salaries of court officials, as determined by
the Judicial Conference at its October 1971 session and
steadfastly adhered to since.
-- The bill would place referees in a more favored
position than magistrates, although the Conference regards
the responsibilities of both groups as officers of the
courts to be on an equal basis and meriting the same salary.
-- Until there is an increase in the salary of district
judges, to whom referees are subordinate, it would be a
mistake to alter referee compensation by separate legislation.
4
Agency Recommendations
The Administrative Office of the U. S. Courts, on behalf of
the Judicial Conference, strongly recommends a veto of this
bill.
The Civil Service Commission recommends that the enrolled
bill be approved, stating that it appears that the adminis-
trative flexibility vested in the Judicial Conference is no
longer needed and that "the issue here does not seem to us
to be of sufficient importance to justify a veto." The
Justice Department has no objection to approval.
*********
We concur with the Civil Service Commission that this legis-
lation does not warrant disapproval. The question of salary
parity between referees in bankruptcy and magistrates does
not appear to be at the heart of the issue; the same day that
the Senate passed H.R. 6184, it also passed S. 2923, which
provides that magistrates will receive the same compensation
as referees.
It appears, therefore, that the issue relates more directly
to the effect of the enrolled bill in closing the gap between
the salaries of referees and District Court judges, within
the broader context of dissatisfaction with the salary levels
of judges (and Government executives) generally--as evidenced
by the current judges' suit for "back pay.
The enrolled bill will not, in our view, materially affect
this larger issue either favorably or adversely and, accord-
ingly, we recommend its approval.
Jamesm. Frey
Assistant Director for
Legislative Reference
Enclosures
UNITED
STATE
CIVIL SENCE
UNITED STATES CIVIL SERVICE COMMISSION
WASHINGTON, D.C. 20415
CHAIRMAN
February 11, 1976
Honorable James T. Lynn
Director
Office of Management and Budget
Attention: Assistant Director for
Legislative Reference
Dear Mr. Lynn:
This is in reply to your request for the views and recommendations of
the Civil Service Commission on H.R. 6184, an enrolled bill "To amend
section 40 of the Bankruptcy Act to fix the salaries of referees in
bankruptcy.
"
The purpose of this enrolled bill is to remove from the Judicial
Conference of the United States the authority to fix the salaries of
full-time referees in bankruptcy at a rate below the statutory maximum,
and thereby to require that all full-time referees be paid at the
statutory maximum, now $37,800. Part-time referees in bankruptcy would
continue to have their pay fixed by the Judicial Conference, at rates
not to exceed one-half of the rate for full-time referees. A retired
referee assigned to serve on a full-time basis in the territory of a
part-time referee would be paid at the rate of full-time service.
For nearly thirty years, the Judicial Conference has been empowered to
fix the pay of full-time referees in bankruptcy, in accordance with
certain criteria in the Bankruptcy Act relating to caseload, and sub-
ject to a statutory maximum pay rate. Since 1969, however, the Judicial
Conference has chosen to exercise this authority by paying all full-time
referees at the same rate, substantially below the statutory maximum.
At present, for example, the full-time referees are all paid $33,500,
although the statutory maximum for their positions is $37,800. We under-
stand that the Judicial Conference has apparently chosen to keep the pay
rate for full-time referees below the maximum in order to maintain an
internal alignment pattern the conference believes to be appropriate
between the salaries of referees and other officers and employees of the
judicial branch, including district judges.
2
Since the Judicial Conference, by deciding to pay all full-time referees
at the same rate, has recognized that there are no longer such variations
in the workload of the different full-time referees as to require differ-
ent salaries, it appears that the administrative flexibility vested in
the Judicial Conference by the 1946 Referees' Salary Act is no longer
needed. Therefore, the practical effect of the enrolled bill will be
to supersede the Judicial Conference's determination of what differentials
should exist between the salaries of full-time referees and other officers
and employees of the judicial branch.
Although we understand from the Administrative Office of the U.S. Courts
that the judicial branch has been opposed to this bill, because it would
interfere with the internal alignment of judicial salaries, the issue here
does not seem to us to be of sufficient importance to justify a veto.
Therefore, the Civil Service Commission recommends that the President sign
enrolled bill H.R. 6184 into law.
By direction of the Commission:
Sincerely yours,
Robert
Hampton
Chairman
ASSISTANT ATTORNEY GENERAL
LEGISLATIVE AFFAIRS
Department of Justice
Washington, D.C. 20530
February 10, 1976
Honorable James T. Lynn
Director, Office of Management
and Budget
Washington, D.C. 20503
Dear Mr. Lynn:
In compliance with your request, I have examined
a facsimile of the enrolled bill H.R. 6184, "To amend
section 40 of the Bankruptcy Act to fix the salaries
of referees in bankruptcy."
The enrolled bill would amend the Bankruptcy Act
to set the salary of a full-time referee in bankruptcy
at $37,800 per annum, subject to adjustment in accord-
ance with the Federal Salary Act of 1967 and section
461 of title 28 of the United States Code. Annual
salaries for part-time referees in bankruptcy would be
limited to $18,900 and subject to the same adjustments
applicable to full-time referees as well as to adjust-
ment within limits by the Judicial Conference.
The Department of Justice has no objection to
Executive approval of this bill.
Sincerely,
alichael lle ahlmann
Michael M. Uhlmann
Assistant Attorney General
AMERICAN REVOLUTION
1776-1978
ADMINISTRATIVE OFFICE OF THE
UNITED STATES COURTS
SUPREME COURT BUILDING
WASHINGTON, D.C. 20544
ROWLAND F. KIRKS
DIRECTOR
February 9, 1976
WILLIAM E. FOLEY
DEPUTY DIRECTOR
Mr. James M. Frey
Assistant Director for Legislative
Reference
Office of Management and Budget
Washington, D. C. 20503
Re: Enrolled Bill H.R. 6184
Dear Mr. Frey:
This will refer to enrolled bill request on
H. R. 6184, dated February 6, 1976.
The proposed legislation has been considered
and strongly disapproved by the Judicial Conference of
the United States and, accordingly, Executive dis-
approval is strongly recommended on behalf of the
Judicial Conference.
Attached hereto is a summary of the position of
the Judicial Conference.
Sincerely,
(iii William Deputy Director E. Foley Lazy
PROPOSED LEGISLATION TO INCREASE THE SALARIES
OF FULL-TIME REFEREES IN BANKRUPTCY BY STATUTE
At its September 1975 session, the Judicial Conference
of the United States strongly disapproved S. 582, a
bill similar to H.R. 6184, which would amend the
Bankruptcy Act to fix the salaries of full-time referees
by statute at $36,000 per annum (now $37,800).
The Judicial Conference took the position that such
legislation was not consistent with the alignment of
salaries of court officials as determined by the Judicial
Conference at its October 1971 session. The alignment
of salaries adopted by the Judicial Conference in 1971
for ungraded officers of the court is as follows:
(1) Circuit Court Executive -
80 to 85% of a circuit judge's salary
(but not to exceed 90% of a district
judge's salary).
(2) Full-time Referee in Bankruptcy -
75 to 80% of a district judge's salary.
(3) Full-time United States Magistrate -
75-80% - of a district judge's salary.
(4) Clerks of Court -
At least 50 but no more than 75% of a
district judge's salary, the salaries
to be proportioned as follows:
-2-
(a) Clerk, Courts of Appeals and Court
of Customs and Patent Appeals -
70-75%
(b) Clerk, Large District and Court of
Claims, 70-75%
(c) Clerk, Medium District - 65-70%
(d) Clerk, Small District, including
Territorial Court - 50-60%
Since that time the Conference has steadfastly
adhered to the necessity of maintaining this align-
ment of salaries. As recently as February 3, 1976,
the Committee on Court Administration voted against
approval of an increase in the salaries of the clerks
of court which would bring the salary scale out of
alignment insofar as clerks are concerned.
In addition, the Conference has consistently
taken the position that the salaries of full-time
referees in bankruptcy and the salaries of full-time
United States magistrates shall be on a parity. The
salaries of United States magistrates are fixed by statute
at $30,000 per year, although the magistrates did benefit
by the five percent cost-of-living increase adopted in
the fall of 1975.
-3-
The views of the Judicial Conference on the Senate
bill, S. 582, were communicated to the Senate Committee
in response to its request. The House Committee did not
solicit the views of the Judicial Conference.
In view of the position steadfastly maintained by
the Judicial Conference, Executive disapproval of the
proposed enrolled bill is strongly recommended.
ADMINISTRATIVE OFFICE OF THE
UNITED STATES COURTS
SUPREME COURT BUILDING
WASHINGTON, D.C. 20544
ROWLAND F. KIRKS
DIRECTOR
February 10, 1976
WILLIAM E. FOLEY
DEPUTY DIRECTOR
Mr. James M. Frey
Assistant Director for Legislative
Reference
Office of Management and Budget
Washington, D. C. 20503
Re: Enrolled Bill H.R. 6184
Dear Mr. Frey:
In accordance with the request of your
office, I am enclosing herewith a proposed draft
of a veto message relating to enrolled bill
H.R. 6184.
Sincerely,
William Leving Deputy Director E.
Enclosure
PROPOSED VETO MESSAGE
I am returning herewith without approval H.R. 6184,
a bill to increase the salaries of full-time referees
in bankruptcy. Referees in bankruptcy are an integral
part of the federal judicial system. Their salaries
have through the years been set by the Judicial Conference
of the United States in accordance with the provisions
of the Bankruptcy Act.
Referees in bankruptcy are ungraded officers of the
court, as are circuit court executives, full-time United
States magistrates and clerks of court. The Judicial
Conference of the United States in 1971 provided that the
salaries of full-time referees in bankruptcy and full-
time United States magistrates should be on a parity and
should be between seventy-five and eighty percent of the
salary of a United States district judge.
The proposed legislation would have the effect of
taking from the Judicial Conference the authority to fix
the salaries of the referees in bankruptcy and would place
them in a more favored position insofar as the United States
magistrates are concerned though the Judicial Conference of
the United States regards the responsibilities of both of
these officers of the court to be on an equal basis and
meriting the same salary.
-2-
Until such time as there is a change in the
salary base of the United States district judge,
therefore, I believe it is a mistake by separate
legislation to make any alteration in the salaries of
these court officers, especially in view of the strong
opposition thereto by the Judicial Conference of the
United States.
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
2-20-76.m.
FEB 20 1976
MEMORANDUM FOR THE PRESIDENT
Subject: Enrolled Bill H.R. 6184 - Compensation of
referees in bankruptcy
Sponsor - Rep. Edwards (D) California
Last Day for Action
February 28, 1976 - Saturday
Purpose
Increases the salary of full-time referees in bankruptcy
to the maximum authorized by law and repeals the authority
of the Judicial Conference to establish lower rates for
these court officers.
Agency Recommendations
Office of Management and Budget
Approval
Civil Service Commission
Approval
Department of Justice
No objection
Administrative Office of the
U. S. Courts
Disapproval (Veto
message attached)
Discussion
H.R. 6184 would repeal the existing authority of the
Judicial Conference to fix the salary of full-time referees
in bankruptcy at a rate below the statutory maximum for
such positions. It would establish the current statutory
maximum of $37,800 as the salary for these employees,
subject to future adjustment under the procedures pre-
scribed by law for executive, legislative, and judicial
salaries. The bill would also provide a maximum annual
salary rate of $18,900 for part-time referees in bankruptcy--
half that of full-time referees--but would continue to allow
these salaries to be fixed by the Judicial Conference, based
on numbers and types of cases closed, and other factors.
THE WHITE HOUSE
ACTION MEMORANDUM
WASHINGTON
LOG NO.:
Date:
Time:
February 2B
700pm
FOR ACTION:
Dick Parsons
oh
CC (for information):
Jack Marsh
Max Friedersdorf
Ken Lazarus the
comments
Jim Cavanaugh
FROM THE STAFF SECRETARY
DUE: Date:
February 23
Time: 300pm
SUBJECT:
H.R. 6184 - Compensation of referees in Bankruptcy
ACTION REQUESTED:
For Necessary Action
For Your Recommendations
Prepare Agenda and Brief
Draft Reply
x For Your Comments
Draft Remarks
REMARKS:
Please return to Judy Johnston, Ground Floor West Wing
/ FORD
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
delay in submitting the required material, please
K. R. COLE, JR.
telephone the Staff Secretary immediately.
For the President
THE WHITE HOUSE
ACTION MEMORANDUM
WASHINGTON
LOG NO.:
Date: February 20
Time: 700pm
FOR ACTION: Dick Parsons
CC (for information): Jack Marsh
Max Friedersdorf
Jim Cavanaugh
Ken Lazarus
FROM THE STAFF SECRETARY
DUE: Date: February 23
Time: 300pm
SUBJECT:
H.R. 6184 - Compensation of referees in Bankruptcy
ACTION REQUESTED:
For Necessary Action
For Your Recommendations
Prepare Agenda and Brief
Draft Reply
X
For Your Comments
Draft Remarks
REMARKS:
I recommend approval. RDP
Please return to Judy Johnston, Ground Floor West Wing
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
delay in submitting the required material, please
telephone the Staff Secretary immediately.
yor
THE WHITE HOUSE
WASHINGTON
February 23, 1976
MEMORANDUM FOR:
JIM CAVANAUGH
FROM:
MAX L. FRIEDERSDORF m.b.
SUBJECT:
H.R. 6184 - Compensation of referees
in Bankruptcy
The Office of Legislative Affairs concurs with the agencies
that the bill be signed.
Attachments
THE WHITE HOUSE
ACTrON MEMORANDUM
WASHINGTON
LOG NO.:
Date: February 20
Time: 700pm
FOR ACTION: Dick Parsons
CC (for information): Jack Marsh
Max Friedersdorf
Jim Cavanaugh
Ken Lazarus
FROM THE STAFF SECRETARY
DUE: Date: February 23
Time: 300pm
SUBJECT:
H.R. 6184 - Compensation of referees in Bankruptcy
ACTION REQUESTED:
For Necessary Action
For Your Recommendations
Prepare Agenda and Brief
Draft Reply
X
For Your Comments
Draft Remarks
REMARKS:
Please return to Judy Johnston, Ground Floor West Wing
Recommend approval on the merits and alsowish to note that I have
received a number of phone calls expressing support for H. R. 6184
by Senators Eastland, McClellan, Burdick and Hruska.
Ken Lazarus 2/23/76
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
delay in submitting the required material, please
telephone the Staff Secretary immediately.
For
Calendar No. 600
94TH CONGRESS
SENATE
REPORT
2d Session
No. 94-626
REVISION OF THE SALARY FIXING PROCEDURE FOR
BANKRUPTCY JUDGES
FEBRUARY 3, 1976.-Ordered to be printed
Mr: BURDICK, from the Committee on the Judiciary,
submitted the following
REPORT
[To accompany S. 582]
The Committee on the Judiciary, to which was referred the bill
(S. 582) to improve judicial machinery by amending the procedure
for fixing the salaries of bankruptcy judges and to implement the
Congressional salary authorization of 1969 and for other purposes,
having considered the same, reports favorably thereon and recom-
mends that the bill as amended, do pass.
AMENDMENT
The Committee proposes amendments to the bill as follows:
On page 1, line 10, after the words (81 Stat. 643) delete the period
and insert the words:
and Sec. 461 of Title 28, United States Code, Public Law
94-82, August 7, 1975, (89 Stat. 419).
PURPOSE OF THE AMENDMENT
S. 582 provides that the salary of Bankruptcy Judges shall be sub-
ject to adjustment pursuant to Public Law 90-206, title II, De-
cember 16, 1967, 81 Stat. 643. Recent congressional action authorized
a cost of living increase for referees in bankruptcy.
The purpose of this amendment is to specifically provide that the
salary of each full-time referee in bankruptcy shall be subject to ad-
justment as provided by Congress in Public Law 94-82, August 9,
1975. The salary of the full-time bankruptcy judge shall be $37,800 and
the maximum salary of the part-time bankruptcy judge shall be
$18,400.
57-010
3
2
approved by the Judicial Conference for most full-time bankruptcy
PURPOSE OF THE BILL
judges, effective October 1, 1963.³ The statutory maximum of $22,500
The purpose of the Bill is to amend the salary setting procedure
as fixed by Public Law 88-426 in 1964 was approved for the over-
(11 U.S.C. 40) of the Bankruptcy Act. The bill would restore to the
whelming majority of referees by the Judicial Conference on Septem-
Congress the sole and exclusive authority to fix salaries of full-time
ber 23-24, 1964 and was made retroactive to June 30, 1964.4
In 1969 two decisions of the Judicial Conference significantly
bankruptcy judges. The bill would implement the Congressional
salary authorization of 1969.
altered the salary setting authority authorized by Congress in 40a of
the Bankruptcy Act. The Judicial Conference adopted the policy that
STATEMENT
all full-time bankruptcy judges should be paid at the same rate.5 The
Conference report dated November 1, 1969, also approved elimination
This bill restores to the Congress the sole and exclusive authority
of the criteria originally set by Congress in Section 40a.6 Thus, the
to fix salaries of full-time bankruptcy judges and it implements the
Judicial Conference decided to ignore the very statutory standards
salary authorization made by Congress in 1969. It does not affect the
which accompanied the grant of salary fixing authority.
authority of the Judicial Conference to fix salaries of part-time bank-
Second, the Judicial Conference went on record as favoring salary
ruptcy judges within the maximum set by Congress.
parity between bankruptcy judges and U.S. magistrates. The policy
Under current law, the salary of a full or part-time bankruptcy
decision also served to set the maximum salary which could be paid
judge is determined in four steps. First, the Commission on Execu-
bankruptcy judges at 75-80 percent of the salary authorized Federal
tive, Legislative, and Judicial Salaries forwards suggested salary levels
district judges.
for various judicial officers and employees to the President. The Presi-
The result of these policy changes was the refusal, for the first time,
dent with such changes as he deems appropriation, transmits the sug-
to permit any bankruptcy judge to receive the maximum salary
gested salaries to the Congress and the salaries thus recommended
authorized by section 40a. In 1968 the newly created Postal Revenue
become effective unless Congress takes contrary action. Congressional
and Federal Salary Commission recommended that full-time bank-
approval is final as to all recommended salaries except full and part-
ruptcy judges reecive $40,000. The President reduced this recom-
time bankruptcy judges. The Judicial Conference, using criteria pre-
mended salary to $36,000 and Congress, taking no contrary action,
scribed by Congress in section 40a of the Bankruptcy Act is given
approved his recommendation. The Judicial Conference, acting on its
the authority to determine the salary of individual bankruptcy judges
new policy, ignored the congressional salary maximum by applying
within the statutory maximum.
criteria nowhere authorized by statute and limited all full-time bank-
ruptcy judges to a salary of $30,000.
HISTORY
There are three reasons for enacting this legislation which will
restore to the Congress the sole and exclusive authority to fix salaries
The delegation of salary fixing authority for bankruptcy judges was
of full-time bankruptcy judges and to implement the salary author-
enacted by Congress as a solution to a specific dilemma. Prior to 1946
ization made by Congress in 1969. They are:
bankruptcy judges were compensated by the universally deplored fee
(1) the Judicial Conference rejection of the criteria estab-
system. Congress, while decrying the fee system, determined that it
lished legislatively by Congress in 40a of the Bankruptcy Act has
would not be appropriate to grant a uniform salary level for bank-
eliminated the reason for the original congressional delegation
ruptcy judges as, in 1946, unlike today, there was a wide disparity in
of power;
caseloads and geographical boundaries for the various bankruptcy
(2) the Congressional authorizations of a salary of $36,000 is
courts. It was obviously impractical for Congress itself to monitor the
even more warranted by circumstances today than in 1969;
bankruptcy system on a continual basis. The only practical alternative
(3) the impact of the denial of the maximum salary author-
was to delegate salary fixing authority to the Judicial Conference
ization has threatened the quality of the bankruptcy bench at the
while, at the same time, limiting this authority by the imposition of
most crucial period in its history.
specific statutory standards and maxima which would insure that the
implementation of this power would be within Congressional limits.
NEED FOR DELEGATION OF SALARY FIXING POWER HAS BEEN
Historically, the Judicial Conference invariably and without excep-
ELIMINATED
tion authorized most full-time bankruptcy judges to receive the maxi-
mum salary permitted by section 40a.
The Judicial Conference in adopting the single salary policy which
The first statutory ceiling under the Referees' Salary Act, effective
would be determined by criteria other than that prescribed by Con-
July 1, 1947, was immediately allowed to become effective as to all but
gress has eliminated the justification or purpose for the Congressional
16 full-time bankruptcy judges.¹ The $12,500 maximum authorized by
the Act of July 7, 1952 was allowed to the bulk of full-time bankruptcy
3 Report of Proceedings of the Judicial Conference of the U.S. Sept. 19-20, 1946, at 18
judges by Judicial Conference action in the fall of 1952.2 The maxi-
(Administrative Office of the U.S. Courts. 1956).
4 Report of Proceedings of Judicial Conference of the U.S. Sept. 23-24, 1964 at 71
mum $15,000 salary authorized by the act of May 10, 1956 was
(Administrative Office of the U.S. Courts, 1964).
5 Report of Proceedings of the Judicial Conference of the U.S. Oct. 31-Nov. 1, 1969, at 76
(Administrative Office of the U.S. Courts, 1969).
1 22 Ref. J. 25 (1948).
6 Ibid.
% 28 Ref. J. S (1954).
S.R. 626
S.R. 626
5
4
filed which represents an increase of 18.6 percent over the prior fiscal
year. The following table illustrates the number of business and non-
grant of authority in 1946. The creation of the Commission on Execu-
business bankruptcies filed since 1969.
tive, Legislative, and Judicial Salaries to conduct quadrennial reviews
of the salary rates of designated federal judicial officers, including
bankruptcy judges gives Congress the necessary capability to recom-
Fiscal year-
Numerical
Percentage
mend the appropriate rates and relationships for federal bankruptcy
1975 (7 mos)
1974 (7 mos)
increase
increase
judges' salaries. The Commission on Executive, Legislative and Ju-
Voluntary straight
111,025
85,253
+25.772
+30.2
dicial Salaries has in fact twice recommended that full-time bank-
780
542
+238
+43.9
Involuntary straight
ruptcy judges receive a uniform salary of $36,000. These recommenda-
Chapter IX
1
1
Chapter X
123
63
+60
+95.2
tions were made in 1969 and 1973.
1,875
1,162
+713
+61.4
Chapter XI
142
74
+68
+91.9
Judge Cyr in his opening statement at the hearings before the Sub-
Chanter XII
Chanter XIII
23,976
16,268
+7,708
+47.4
committee on Improvements in Judicial Machinery on May 1, 1975,
Section 77
0
15
-15
questioned whether the Judicial Conference was equipped to exercise
Total
137,922
103,378
+34,544
+33.4
its salary fixing authority for bankruptcy judges. He stated:
The Conference generally meets but two days in March
Number of
Percentage of
and two days in October of each year. It is comprised of
1st 9 mo fiscal year
filings
Increase
increase
twenty-five circuit and district judges who are concerned
primarily with the administrative and judicial problems con-
184,655
48, 058
35.2
1975
136,597
fronted in the effort to cope with the expanding caseloads of
1974
their own busy courts. The Conference functions through a
number of committees, including its Bankruptcy Committee,
whose decisions are invariably adopted by the Conference
Non-
Percent
Percent
Total
business
of total
Business
of total
filings
itself.
Fiscal year
Bankruptcy judges have never been permitted to appear
1969
169,500
91. 7
15,430
8.3
184,930
either before the Conference or its Bankruptcy Committee.
1970
178,202
91. 7
16,197
8.3
194,399
1971
182,249
90.5
19,103
9.5
201,352
Of course, no bankruptey judge has been allowed member-
1972
164,737
90.1
18,132
9.9
182,869
1973
155,707
89.9
17,490
10.1
173,197
ship on the Bankruptcy Committee * * * nor in any advisory
1974
168,767
89.1
20,746
10.9-
189,513
capacity either to the Conference or its Bankruptcy
Committee.
In summary, as the Judicial Conference has ignored the criteria
When the Salary Commission recommended a salary level of $36,000
established by Congress in setting bankruptcy judges' salaries, the
in 1969 the total business filings numbered 15,430. In 1974, there were
reason for the original delegation of power has been eliminated. The
20,746 filings representing an increase of 5,136 filings or 39.7 percent.
creation of the Commission on Executive, Legislative and Judicial
In addition, the increasingly heavy caseload which brings more and
Salares' gives Congress the requisite assistance necessary to exercise
more complex issues before the bankruptcy court falls on a relatively
the salary-fixing power. No further delegation of this authority is
static number of bankruptcy judges. As the following table indicates,
the number of full-time bankruptcy judges serving as of March 1975
necessary.
has increased by seven with a corresponding decrease of five in the
JUSTIFICATION FOR IMPLEMENTING 1969 SALARY AUTHORIZATION
number of part-time bankruptcy judges serving on the bench.
A. INCREASED VOLUME OF BANKRUPTCY FILINGS
Number
Number
full-time
part-time
bankruptcy
bankruptcy
In the years from 1948 to 1974 the number of filings in the bank-
Date
judges
judges
Total
ruptcy courts climbed from 18,510 to 189,513. Since fiscal 1974, the
number of bankruptcy cases has continued to grow at an explosive
April 1969
183
35
218
190
30
220
rate. Testimony presented at the May 1 hearings indicates that during
March 1975
the first 9 months of fiscal 1975, 184.655 bankruptcy filings were re-
ported as compared to 136,597 in the first 9 months of fiscal 1974. This
Thus, the individual bankruptcy judge must, through his own
represents an increase of 48,058 filings or 35.2 percent as can be seen
increased workload, cushion the ever heavier number of bankruptcy
in the following tables.
The increase in the number of bankruptcy filings does not indicate
case filings.
the full measure of the increased strain on the resources of the bank-
ruptcy courts. In fiscal year 1974, 20,746 business bankruptcies were
S.R. 626
S.R. 626
6
7
B. THE INCREASED JUDICIAL RESPONSIBILITY OF THE BANKRUPTCY JUDGE
ings; New York-New Jersey-26 filings; Brooklyn, N.Y.-27 filings;
The bankruptcy judge is in reality a trial judge of the bankruptcy
Westbury, N.Y.-20 filings; Philadelphia, Pa.-46 filings; San Juan,
Puerto Rico-73 filings; Memphis, Tenn.-15 filings; San Antonio,
court.8 This is not a new concept by any means. With the passage of
Public Law 91-467 the so-called "Dischargeability Bill," and the adop-
Tex.-21 filings; Roanoke, Va.-16 filings; and Milwaukee, Wis.-21
tion of the Rules of Bankruptcy Procedure, the judicial responsibil-
filings. Thus, there are 505 additional filings just in those limited areas
ities of bankruptcy judges have been greatly expanded, vesting the
which due to the incomplete reporting in this fiscal year are not in-
cluded in the above data.
bankruptcy court and specifically the bankruptcy judge with juris-
diction to determine the dischargeability of debts, and render judg-
IMPACT OF THE DENIAL To IMPLEMENT CONGRESSIONAL SALARY
ments thereon,10 to conduct jury trials, to determine and punish for
AUTUHORIZATION
contempt and to issue writs of habeas corpus.11
As Judge Conrad Cyr testified at the May 1st, hearings:
The refusal of the Judicial Conference to implement the maximum
The jurisdictional responsibilities of bankruptcy judges
salary authorized by Congress of $36,000 has had an economic impact
embrace a wide gamut of cases. Their cases range from
on the bankruptcy bench which is severe and threatens to become ir-
exceedingly large and complicated multiplaintiff and multi-
revocable. Since April, 1969 when the salary of fulltime bankruptcy
defendant adversary proceedings involving vast sums of
judges was set by the Judicial Conference at a level of $30,000, 20
money and intricate interpretations of the appropriate inter-
percent below the maximum authorized by Congress, the purchasing
relationships of the complex provisions of the Bankruptcy Act
power of that salary has eroded to $17,400 which is 23 percent below
with those of State and Federal commercial, tax, constitu-
the $22,500 the bankruptcy judge was receiving in 1965. Furthermore,
tional and other laws, to the relatively simple, but no less
even though corrective action were to be taken at once to restore the
important, consumer cases wherein the rights of ordinary
salaries to the statutory maximum, more than $30,000 will have been
citizens to be relieved from the burdens of unmanageable
irretrievably lost by every full-time bankruptcy judge in the country,
indebtedness are the critical issues presented.
due to the 6-year refusal of the Judicial Conference to permit imple-
The increased jurisdictional responsibilities of the bankruptcy
mentation of the $36,000 salary authorized by Congress. Likewise, im-
judges, coupled with the increase in bankruptcy filings since 1969 have
mediate congressional action in returning these salaries to the statu-
given the bankruptcy courts a truly staggering caseload, both in
tory maximum historically allowed would at best give bankruptcy
regard to the number of filings and the complexity of legal issues pre-
judges approximately the same purchasing power enjoyed in 1968.
sented by these filings. A random sampling of bankruptcy judges
But the harsh erosive effects alone do not indicate the full brunt of
resulted in reports from 56 of the total 190 full-time and 31 part-time
the economic impact of the Judicial Conference action on the bank-
bankruptcy judges which are authorized for the 92 judicial districts.
ruptcy judges. As the Salary Commission itself expressly stated:
The matter of retirement benefits ought to be considered
in any comparative salary study.
Number of
Number of
Dollar amount
Dollar amount
Type of case
cases
creditors
of assets
of liabilities
A compulsory contribution of 7 percent of the bankruptcy judge's
gross annual salary is required to provide the relatively meagre Civil
Chapter 10
80
110,882
$973,261,000
$861, 449, 000
Chapter 11
,569
593, 102
3,978,686,000
4,683,750,000
Service retirement benefits available to him,12 whereas district judges
Chapter 12
73
9,024
140,165,000
93,884,000
receive full salary upon retirement without having made any financial
Total
1,722
713,008
5,092,112,000
5, 639, 083, 000
contribution whatever. Even if section 40a of the Bankruptcy Act did
authorize the Judicial Conference to set the salaries of bankruptcy
judges on the basis of a comparison with district judges salaries, it
As the data reflects, approximately one-third of the bankruptcy
would be patently unrealistic and unfair to ignore that each full-time
judges in the country are handling 722 business reorganization cases
involving 713,000 creditors with dollar assets of over $5 billion
bankruptcy judge must now contribute more than $2,200 each year
toward his retirement fund.
and dollar amounts of liabilities extending to almost $6 billion. Sig-
nificantly, these statistics do not include many of the heavy chapter XI
The effect of the 6-year salary freeze imposed by the Judicial Con-
areas. For example, the following localities are not included in the
ference has seriously endangered the quality and effectiveness of the
bankruptcy bench.
first 7 months of fiscal 1975 calculations: Tucson, Ariz.-13 filings;
The latest records of the Bankruptcy Division of the Administra-
Eureka, Calif.-13 filings; San Francisco, Calif.-17 filings; Los
tive Office of the U.S. Courts indicates that in the past 51/2 years
Angeles, Calif.-134 filings; Tallahassee, Fla.-12 filings; Baltimore,
14 bankruptcy judges have resigned giving salary inequity as the
Md.-13 filings; Grand Rapids, Mich.-10.filings; Nebraska- 19 fil-
reason for their resignation. Two such resignations occurred in 1970,
8 20 Ref. J. 105 (1946).
none in 1971, three in 1972, two in 1973, five in 1974, and four through
9 10 Ref. J. 48, 52 (1936).
10 Public Law 91-467, §§ 1 and 8 (Oct. 19. 1970).
12 Report of Proceedings of the Judicial Conference of the United States, Sept. 17 and 18,
11 See, e.g. Rules (a) (3), 810, 913 and 920(a) of the Rules of Bankruptcy Procedure.
1963, at 85. (Administrative Office of the U.S. Courts, 1963).
S.R. 626
S.R. 626
8
the first half of 1975. The following listing gives the name and loca-
tion of bankruptcy judges who have resigned since 1970 because the
9
authorization. Judicial Conference refused to implement the congressional salary
Congress has directed. For 6 years, in disregard of the criteria
June 30, 1975 John J. Dillenschneider, Columbus, Ohio (Return
provided by Congress, the Conference has substituted its own
to private practice).
salary policy. The effect is to deny all bankruptcy judges the
practice). June 30, 1975 Joseph Patchan, Cleveland, Ohio (Return to private
full $36,000 figure authorized by Congress in 1969. Thus, the
only hope for many sorely pressed to remain in this bench
June 25, 1975 Dudley H. Bower, Savannah, Georgia (Return to
is in Congress, via (the) amendment to Section 40 of the
private practice).
Bankruptcy Act. Unless Congress returns to itself the exclu-
practice). June 1, 1975 James E. Yacos, Miami, Florida (Return to private
sive power to fix bankruptcy judges' salaries in whatever
relation it deems proper to other judicial officers, I believe
December 31, 1974: Raymond J. Pellman, Cincinnati, Ohio (Retire-
the already high rate of resignations from the bankruptcy
ment compensation).
bench will increase substantially.
December 31, 1974: Authur Moller, Houston, Texas (Return to
With 1975 already well on its way to becoming the year with the
private practice).
largest number of filings in history, the committee deems it altogether
December 1, 1974 Stephan J. Covey, Peoria, Illinois (Assume State
imperative to rectify the salary inequities experienced by bankruptcy
judgeship).
judges over the past several years.
November 7, 1974: Edward A. Quinnell, Marquette, Michigan
(Assume State judgeship).
ADMINISTRATIVE OFFICE OF THE U.S. COURTS,
October 5, 1974: Daniel Cowans, San Jose, California (Return to
Washington, D.C., April 25, 1975.
private practice).
Hon. QUENTIN N. BURDICK,
November 16, 1973 : Robert P. Fullerton, Denver, Colorado (Assume
Committee on the Judiciary, U.S. Senate,
State judgeship).
Washington, D.C.
September 1, 1973 Jerold L. Strashein, Omaha, Nebraska (Return
DEAR SENATOR BURDICK This is in response to your letter of April
to private practice).
22, 1975, extending the opportunity to testify or submit a statement on
July 31, 1972 William Corrigan, St. Louis, Missouri (Assume State
behalf of the Administrative Office at the hearing to be held on May 1,
judgeship).
1975, on S. 582, a bill to amend Section 40 of the Bankruptcy Act.
June 15, 1972 Robert Ervin, Tallahassee, Florida (Return to private
As you know, the Judicial Conference of the United States and this
practice).
office have urged the Congress to enact legislation to increase the com-
February 15, 1972 Charles T. Hamlin, Fresno, California (Assume
pensation of all federal judicial officers. While we, of course, favor an
State judgeship).
increase in the salaries of referees in bankruptcy, we. believe it would
June 30, 1970: Edward J. Houston, Miami, Florida (Return to
be unfortunate to increase the salaries of one segment of the federal
private practice).
judiciary without doing SO for the judges of the United States Courts
While the 3-year period 1970 thru 1972 saw four resignations, a
of Appeals, the United States District Courts, and the United States
period of 2 and one-half years, 1973 thru June 30, 1975 has seen the
Magistrates. Furthermore, the Judicial Conference of the United
number of resignations nearly triple to 11.
States is on record as favoring parity in the salaries of magistrates
Among those who resigned are three former law professors, two
and referees in bankruptcy and the provisions of S. 582 are limited
former State court judges, and one of the authors of the prestigious
solely to referees in bankruptcy.
Collier on Bankruptcy. Other bankruptcy judges are on the verge of
The foregoing represents the position both of the Judicial Confer-
returning to State courts or private practice in the absence of prompt
ence and of the Administrative Office of the United States Courts and
relief from their economic problems. Not surprisingly, the Bankruptcy
is submitted in response to your letter. In the circumstances I do not
Division of the Administrative Office of the U.S. Courts advises that
believe it will be necessary for any further testimony to be submitted
recruitment is already becoming markedly more difficult because quali-
on behalf of either the Conference or the Administrative Office.
fied attorneys are apprehensive over the existing inadequacies and the
Sincerely,
long judges. range prospects for salary relief and security for bankruptcy
WILLIAM E. FOLEY, Deputy Director.
In hearings before the Subcommittee on Improvements in Judicial
COST
Machinery, Judge Joseph Patchan, Northern District of Ohio, urged
that Congress take corrective action. Judge Patchan, who had recently
The anticipated cost of this legislation is $1,218,545. This figure
resigned his judgeship testified:
represents the projected increase of $6,150 per year to the maximum
The more long range reason for my departure is the con-
salary of $37,800 for 190 full-time bankruptcy judges and the maxi-
tinuing failure of the Judicial Conference to fix salaries as
mum salary of $18,900 for 30 part-time bankruptcy judges.
S.R. 626
S.R. 626
10
11
SECTION-BY-SECTION ANALYSIS
[(d) (2) Any referee who has retired or been retired under the
Section (a)-This section amends subdivisions a and b of section 40
provisions of paragraph (1) of this subdivision may, if called upon
of the Bankruptcy Act.
by a judge of a court or bankruptcy, perform such duties of a referee,
Subdivision a (1) is amended to provide that all full-time referees
conciliation commissioner, or special master under this title, within
in bankruptcy shall receive a salary of $36,000 per annum, subject to
the jurisdiction of the court, as he may be able and willing to under-
take. The retired referee shall receive as compensation for his services,
adjustment pursuant to Public Law 90-206, title II, December 16, 1967
(81 Stat. 643). The salary authorization is final and would not be
either full or part time, the salary authorized for the referee serving
subject to adjustment by the Judicial Conference.
the territory to which the retired referee is assigned. However, the rate
Subdivision a (2) provides a maximum salary of $18,000 for part-
of compensation of a retired referee assigned to serve on a full-time
basis in the territory of a part-time referee shall be the minimum
time referees in bankruptcy subject to gradation by the Judicial Con-
rate established by the Judicial Conference of the United States for
ference based on average number and types of, and the average amount
full-time service. Salaries authorized under this paragraph shall be
of gross assets realized from, cases closed and pending in the terri-
tory the referee is to serve, during the last preceding period of 10 years
subject to the provisions of section 8344 (a) of Title 5.]
and to such other factors as may be material.
(a) The compensation of referees in bankruptcy shall be as follows:
Section d(2) is amended to provide that compensation paid retired
(1) Each full-time referee in bankruptcy shall receive a salary
referees who have been recalled to perform specified duties shall be
of $36,000 per annum, subject to adjustment pursuant to Public
Law 90-206, Title II, December 16, 1967 (81 Stat. 643) and Sec.
based on the salary paid the referee serving the territory except if the
referee is assigned to serve on a full-time basis in the territory of a
461 of Title 28, United States Code, Public Law 94-82, August 7,
part-time referee he shall receive the rate for full-time service.
1975, (89 Stat. 419).
(2) Each part-time referee in bankruptcy shall receive a salary
CHANGES IN EXISTING LAW
of not more than $18,000 per annum, subject to adjustment pur-
suant to Public Law 90-206, title II, December 16, 1967 (81 Stat.
In compliance with subsection (4) of rule XXXIX of the Standing
643), and subject to further adjustment by the conference, in the
Rules of the Senate, changes in existing law made by the bill as
light of recommendations of the councils, made after advising
reported are shown as follows:
with the district judges of their respective circuits, and the Direc-
tor. In fixing the amount of the salary to be paid to a part-time
SECTION 40 OF THE BANKRUPTCY ACT
referee, consideration shall be given to the average number and
types of, and the average amount of gross assets realized from,
[(a) Referees shall receive as full compensation for their services
cases closed and pending in the territory which the part-time
salaries to be fixed by the conference, in the light of the recommenda-
referee is to serve, during the last preceding period of ten years,
tions of the councils, made after advising with the district judge of
and to such other factors as may be material.
their respective circuits, and of the Director, at rates not more than
(3) Disbursement of salaries of referees shall be made monthly
$36,000 per annum for full-time referees, and not more than $18,000
by or pursuant to order of the Director.
per annum for part-time referees. In fixing the amount of salary to
(b) The conference, in light of the recommendations of the councils,
be paid to a referee, consideration shall be given to the average number
made after advising with the district judges of their respective cir-
and the types of, and the average amount of gross assets realized from,
cuits, and of the Director, may increase or decrease the salary of any
cases closed and pending in the territory which the referee is to serve,
part-time referee, within the limit prescribed in subdivision a (2) of
during the last preceding period of ten years, and to such other factors
this section, if there has been a material increase or decrease in the
as may be material. Disbursement of such salaries shall be made
volume of business or other change in the factors which may be con-
monthly by or pursuant to the order of the Director."
sidered material in fixing salaries.
[(b) The conference, in the light of the recommendations of the
councils, made after advising with the district judges of their respec-
tive circuits, and of the Director, may increase or decrease any salary,
(d) (2) Any referee who has retired or been retired under the pro-
visions of paragraph (1) of this subdivision may, if called upon by
within the limits prescribed in subdivision (a) of this section, if there
has been a material increase or decrease in the volume of business or
a judge of a court of bankruptcy, perform such duties of a referee,
concitiation commissioner, or special master under this Act, within
other change in the factors which may be considered material in fixing
the jurisdiction of the court, as he may be able and willing to under-
salaries: Provided, however, That during the tenure of any full-time
take. The retired referee shall receive as compensation for his services,
referee his salary shall not be reduced below that at which he was
either full or part time, the salary authorized for the referee serving
originally appointed under this amendatory Act, and during any term
the territory to which the retired referee is assigned. However, the
of any such referee his salary shall not be reduced below the salary
rate of compensation of a retired referee assigned to serve on a full-
fixed for him at the beginning of that term.]
S.R. 626
S.R. 626
12
time basis in the territory of a part-time referee shall be the rate for
full-time service. Salaries authorized under this paragraph shall be
subject to the provisions of section 13 (b) of the Civil Service Retire-
ment Act.
RECOMMENDATIONS
The committee believes that S. 582 is meritorious and recommends it
do pass.
S.R. 626
94TH CONGRESS
HOUSE OF REPRESENTATIVES
REPORT
1st Session
No. 94-467
REVISION OF SALARY FIXING PROCEDURE FOR
BANKRUPTCY JUDGES
SEPTEMBER 10, 1975.-Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
Mr. EDWARDS of California, from the Committee on the Judiciary,
submitted the following
REPORT
[To accompany H.R. 6184]
The Committee on the Judiciary, to whom was referred the bill
(H.R. 6184) to amend Section 40 of the Bankruptcy Act to fix the
salaries of referees in bankruptcy, having considered the same, report
favorably thereon without amendment and recommend that the bill
do pass.
PURPOSE OF THE BILL
The purpose of the bill is to restore to the Congress the sole and ex-
clusive authority to fix the salaries of full-time bankruptcy judges, as
it now has with respect to all other Federal judicial officers.
STATEMENT
This bill restores to the Congress the sole and exclusive authority to
fix the salaries of the full-time referees in bankruptcy.
Referees in bankruptcy, now called bankruptcy judges under the re-
cently adopted Rules of Bankruptcy Procedure, are full judicial offi-
cers. Though under the original Bankruptcy Act of 1898, it was con-
templated that District Court judges would be the bankruptcy judges,
and the referees would act only as special masters in certain cases,
evolution of practice among the District Courts, and the enactment of
the Chandler Act in 1938 have conferred greater status and respon-
sibilities on the referees in bankruptcy. Presently, in nearly all judi-
cial districts, the bankruptcy judge, or referee, presides over all as-
pects of bankruptcy cases. During the course of a case there may be
several full scale trials, initiated by a complaint, and tried before
the court as in any court of general jurisdiction. The bankruptcy
judge's orders and decisions are final in every such proceeding, unless
appealed to the District Judge. The scope of their responsibilities is
57-006
3
2
wide, for the nature of litigation that finds its way into bankruptcy
these recommendations in 1969, thus amending Section 40a of the
court knows no bounds. A bankruptcy judge in even an uncomplicated
Bankruptcy Act to authorize a maximum salary for full-time referees
case may hear contract, tort, tax, family law, property or labor causes of
of $36,000. According to Section 40a, however, the Judicial Conference
action. He must hear evidence, make findings, and render a decision
had to act before the referees could be given the salary increase.
just as his brethren on the District Court or a State court of general
Instead of following its previous policy of granting the full amount
authorized by law to the great bulk of the full-time referees, the
jurisdiction do. In addition, the bankruptcy courts in this country deal
Judicial Conference articulated a new policy. First, it determined to
with tens of billions of dollars of assets every year in both straight
bankruptcy cases and arrangements and reorganizations, and presided
pay all full-time referees the same amount. That is, it acknowledged
that the differences in caseloads among referees around the country
over more than 248,000 new cases in fiscal 1975 alone.
that had warranted Judicial Conference supervision on referees'
The current procedure for setting the salaries of full-time referees
salaries in 1946 no longer existed. Their workloads were fairly uni-
in bankruptcy is as follows: The Commission on Executive, Legisla-
form, and thus their salaries would be the same. That action alone
tive, and Judicial Salaries reviews salary levels of top Federal em-
would have warranted Congressional action to regain the sole and
ployees, including all Federal judges and bankruptcy judges, every
exclusive control over Federal judicial salaries that Congress had
four years. It forwards its recommendations to the President, who,
traditionally exercised. In addition, however, the Judicial Conference
after review and with such changes as he deems appropriate, trans-
at the same time decided to ignore the statutory maximum and criteria
mits the recommendations to the Congress. If Congress does not act
in setting the salaries of full-time referees. The reasons advanced in-
within 30 days, the recommendations become effective. Congressional
cluded the uniformity of workload among the referees, and consequent
approval is final with respect to all salaries covered by the Commis-
lack of need for statutory standards to measure differences in salary
sion's mandate, except those of full- and part-time referees in bank-
entitlement. The studied rejection of Congressional standards in the
ruptcy. Currently, Congressional approval of the salary recommen-
exercise of a delegated power more than warrants Congress' cancella-
dations of the Salary Commission for full- and part-time referees in
tion of the delegation and reassumption of the authority itself. Thus, it
bankruptcy is then subject to review by the Judicial Conference of the
is now time for the Congress to regain its sole and exclusive authority
United States. Under Section 40 of the Bankruptcy Act, the Judicial
in the setting of judicial salaries-authority which the Judicial Con-
Conference of the United States is to set the salaries of the full- and
ference has exercised in clear violation of the 1969 Congressional
part-time bankruptcy judges according to specific statutory criteria
mandate.
and within the statutory maximum that was last set by the Con-
There are three reasons for this change. First, the Judicial Con-
gressional salary authorization of 1969.
ference has adopted a policy contrary to that expressed by Congress
The reason for this anomaly is historical, and has been eliminated
six years ago, in refusing to grant to any full-time referee the full
both by the current uniformity of salaries among the full-time bank-
amount allowed by the increased statutory ceiling of $36,000 set by
ruptcy bench, and by the creation, by Congress, in 1967. of the Com-
Congress in 1969. That Congress fully expected the Conference to
mission of Executive, Legislative and Judicial Salaries. Prior to 1946,
grant that increase to nearly all full-time referees is evidenced by the
referees in bankruptcy were compensated on the universally deplored
Conference's actions with respect to prior Congressional Authoriza-
fee-system-in essence, in a commission on the size of the estate ad-
tions. The Judicial Conference invariably and without exception au-
ministered. This system gave the referees the appearance of partiality
thorized nearly all full-time referees to receive the maximum salary
in their deliberations, because their fees depended on the outcome of
permitted by Section 40a.
the litigation over which they presided. Congress established the
The first statutory ceiling under the Referees' Salary Act, effective
Referees' Salary and Expense Fund in 1946, and put all referees, both
July 1, 1947, was immediately allowed to become effective as to all
full- and part-time, on a salary basis. However, at that time. the case-
but 16 full-time bankruptcy judges.¹ The $12,500 maximum author-
loads of even full-time referees varied widely around the country. In
ized by the Act of July 7, 1952 was allowed to the bulk of full-time
order to facilitate the transition to the salary system, the Congress
bankruptcy judges by Judicial Conference action in the fall of 1952.2
delegated to the Judicial Conference the power to determine the salary
The maximum $15,000 salary authorized by the Act of May 10, 1956
each referee would receive, according to specific statutory guidelines,
was approved by the Judicial Conference for most full-time bank-
such as caseload and size of estates administered and subject to a
ruptcy judges, effective October 1, 1963.³ The statutory maximum
statutory maximum. For 23 years, the Judicial Conference set salaries
of $22,500 as fixed by Public Law 88-426 in 1964 was approved for
for full-time referees according to the statutory criteria and periodi-
the overwhelming majority of referees by the Judicial Conference on
cally increasing maxima. Nearly all full-time referees were given the
September 23-24, 1964 and was made retroactive to June 30, 1964.4
full amount authorized by law.
In 1967, Congress created the Commission on Executive, Legislative
1 22 Ref. J. 25 (1948).
and Judicial Salaries. The Commission issued its first recommendation
2 28 Ref. J. 8 (1954).
3 Report of proceedings of the Judicial Conference of the United States Sept. 19-20, 1946,
in 1968, suggesting a salary of $40,000 for full-time referees in bank-
at 18 (Administration Office of the U.S. Courts, 1956).
ruptcy. The President reduced this recommendation to $36,000 before
4 Report of proceedings of Judicial Conference of the United States, Sept. 23-24, 1964,
at 71 (Administrative Office of the U.S. Courts, 1964).
transmitting the recommendations to Congress. Congress approved
H.R. 467
H.R. 467
4
5
However, when Congress raised the maximum to $36,000 in 1969,
age number and the types of, and the average amount of gross assets
the Conference did not follow suit. Instead, it set its own ceiling of
realized from, cases closed and pending in the territory which the
$30,000 on the referees' salaries. Congress must now reassert its posi-
referee is to serve, during the last preceding period of ten years, and
tion as the policy-making body for the nation's top judicial officers,
to such other factors as may be material. Disbursement of such salaries
and implement the 1969 decision to pay the bankruptcy judges.
shall be made monthly by or pursuant to the order of the Director.
Second, the Judicial Conference has recognized that the original
[b. The conference, in the light of the recommendations of the coun-
factors that required the delegation of authority no longer exist. In
cils, made after advising with the district judges of their respective
1946, there was insufficient uniformity in workload among full-time
circuits, and of the Director, may increase or decrease any salary,
referees such that Congress could set a single salary appropriate for
within the limits prescribed in subdivision a of this section, if there
all. It would have been nearly impossible for the Congress to super-
has been a material increase or decrease in the volume of business or
vise the details of the transition from the fee system to the salary
other change in the factors which may be considered material in fixing
system. Since 1969, the Judicial Conference has set the salaries of all
salaries: Provided, however, That during the tenure of any full-time
full-time bankruptcy judges uniformly across the country. This means
referee his salary shall not be reduced below that at which he was
that the detailed supervision required thirty years ago is no longer
originally appointed under this amendatory Act, and during any term
necessary. Congress may now set a uniform salary that will be appro-
of any such referee his salary shall not be reduced below the salary
priate for all full-time bankruptcy judges.
fixed for him at the beginning of that term.
Finally, the creation in 1967 of the Commission on Executive, Leg-
(a) The compensation of referees in bankruptcy shall be as follows
islative, and Judicial Salaries has obviated the need for the Judicial
(1) Each full-time referee in bankruptcy shall receive a salary of
Conference to supervise the salary levels of the bankruptcy judges.
$36,000 per annum, subject to adjustment in accordance with section
Their salaries are reviewed every four years by the Commission. The
225 of the Federal Salary Act of 1967.
President gives additional thought to the matter, before transmitting
(2) Each part-time referee in bankruptcy shall receive a salary of
the Commission's recommendations to the Congress. Congress also
not more than $18,000 per annum, subject to adjustment in accord-
has an opportunity to consider the salary recommendations before
ance with section 225 of the Federal Salary Act of 1967, and subject to
they become law. Further review by the Judicial Conference not only
further adjustment by the conference, in the light of recommendations
duplicates these efforts, but it allows the Conference to thwart the
of the councils, made after advising with the district judges of their
will of Congress, as it has done for the past 6 years. Passage of this
respective circuits, and the Director. In fixing the amount of the
bill would restore to Congress the sale and exclusive authority to fix
salary to be paid to a part-time referee, consideration shall be given
judicial salaries via the mechanism of periodic review of the Salary
to the average number and types of, and the average amount of gross
Commission's recommendations for bankruptcy judges' salaries, just
assets realized from, cases closed and pending in the territory which
as the Congress does for all other judicial salaries.
the part-time referee is to serve, during the last preceding period of
ten years, and to such other factors as may be material.
CHANGES IN EXISTING LAW MADE BY THE BILL, As REPORTED
(3) Disbursement of salaries of referees shall be made monthly
In compliance with clause 3 of rule XIII of the Rules of the House
by or pursuant to order of the Director.
(b) The conference, in light of the recommendations of the councils,
of Representatives, changes in existing law made by the bill, as re-
made after advising with the district judges of their respective cir-
ported, are shown as follows (existing law proposed to be omitted. is
cuits, and of the Director, may increase or decrease the salary of any
enclosed in black brackets, new matter is printed in italic, existing law
part-time referee, within the limit prescribed in subdivision a (2) of
in which no change is proposed is shown in roman) :
this section, if there has been a material increase or decrease in the
volume of business or other change in the factors which may be con-
SECTION 40 OF THE BANKRUPTCY ACT
sidered material in fixing salaries.
§ 40. Compensation of Referees: Referees' Salary and Expense
*
Fund; Retirement of Referees. [a. Referees shall receive as full com-
d. (1) All referees in bankruptcy and employees in the offices of
pensation for their services salaries to be fixed by the conference, in
such referees shall be deemed to be officers and employees in the judi-
the light of the recommendations of the councils, made after advising
cial branch of the United States Government within the meaning of
with the district judges of their respective circuits, and of the Director,
the Civil Service Retirement Act.
at rates, in the case of full-time referees, not more than the rate deter-
(2) Any referee who has retired or been retired under the provi-
mined for such referees under section 225 of the Federal Salary Act
sions of paragraph (1) of this subdivision may, if called upon by a
of 1967 (2 U.S.C. 351-361), as adjusted under section 461 of title 28,
judge of a court of bankruptcy, perform such duties of a referee,
United States Code, and in the case of part-time referees, not more
conciliation commissioner, or special master under this Act, within
than one-half of such rate, as SO adjusted. In fixing the amount of
the jurisdiction of the court, as he may be able and willing to under-
salary to be paid to a referee, consideration shall be given to the aver-
take. The retired referee shall receive as compensation for his serv-
H.R. 467
H.R. 467
6
ices, either full or part time, the salary authorized for the referee serv-
ing the territory to which the retired referee is assigned. However,
the rate of compensation of a retired referee assigned to serve on a
full-time basis in the territory of a part-time referee shall be the [mini-
mum rate established by the Judicial Conference of the United States
for] rate of full-time service. Salaries authorized under this para-
graph shall be subject to the provisions of section 13 (b) of the Civil
Service Retirement Act.
COST OF LEGISLATION
Pursuant to the requirement of clause 7 of rule XIII of the Rules
of the House of Representatives the following estimate of costs in-
curred in carrying out the provisions of this bill are submitted.
The anticipated cost of this legislation would be $826,500. There are
presently 190 full-time bankruptcy judges and the cost would be $4,350
per full-time bankruptcy judge.
STATEMENTS UNDER CLAUSE 2 (1) (3) OF RULE X OF THE RULES OF THE
HOUSE OF REPRESENTATIVES
A. Oversight Statement.-No oversight findings or recommenda-
tions have previously been filed with respect to this area.
B. Budget Statement.-Clause 2 (1) (3) (B) of rule XI is not ap-
plicable. Section 308 (a) of the Congressional Budget Act of 1974 will
not be implemented this year. See last paragraph of House Report
No. 94-25, 94th Congress, 1st Session (1975).
C. No estimate or comparison from the Director of the Congres-
sional Budget Office was received.
D. No related oversight findings and recommendations have been
made by the Committee on Government Operations under clause
2 (g) (2) of rule X.
STATEMENT UNDER CLAUSE (1) (4) OF RULE XI OF THE RULES OF THE
HOUSE OF REPRESENTATIVES CONCERNING ANY INFLATIONARY IMPACT
ON PRICES AND COSTS IN THE OPERATION OF THE NATIONAL ECONOMY
The committee concludes that in view of the modest increased ex-
penditure which would result from enactment of this legislation, there
will be no inflationary impact on prices and costs in the operation of
the national economy.
H.R. 467
H. R. 6184
Ainety-fourth Congress of the United States of America
AT THE SECOND SESSION
Begun and held at the City of Washington on Monday, the nineteenth day of January,
one thousand nine hundred and seventy-six
An Art
To amend section 40 of the Bankruptcy Act to fix the salaries of referees in
bankruptcy.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, That the portion of
section 40 (11 U.S.C. 68) of the Bankruptcy Act which appears before
subsection (c) of such section is amended to read as follows:
"a. The compensation of referees in bankruptcy shall be as follows:
"(1) Each full-time referee in bankruptcy shall receive a salary of
$37,800 per annum, subject to adjustment in accordance with section
225 of the Federal Salary Act of 1967 and section 461 of title 28 of
the United States Code.
(2) Each part-time referee in bankruptcy shall receive a salary of
not more than $18,900 per annum, subject to adjustment in accordance
with section 225 of the Federal Salary Act of 1967 and section 461 of
title 28 of the United States Code, and subject to further adjustment
by the conference, in the light of recommendations of the councils,
made after advising with the district judges of their respective circuits,
and the Director. In fixing the amount of the salary to be paid to a
part-time referee, consideration shall be given to the average number
and types of, and the average amount of gross assets realized from,
cases closed and pending in the territory which the part-time referee
is to serve, during the last preceding period of ten years, and to such
other factors as may be material
(3) Disbursement of salaries of referees shall be made monthly by
or pursuant to order of the Director.
"b. The conference, in light of the recommendations of the councils,
made a fter advising with the district judges of their respective circuits,
and of the Director, may increase or decrease the salary of any part-
time referee, within the limit prescribed in subdivision a(2) of this
section, if there has been a material increase or decrease in the volume
of business or other change in the factors which may be considered
material in fixing salaries."
SEC. 2. The next to final sentence of section 40d(2) of the Bank-
ruptcy Act is amended by striking out "However, the rate of compen-
sation" and all that follows down through the end of the sentence and
inserting in lieu thereof the following "However, the rate of compen-
sation of a retired referee assigned to serve on a full-time basis in
the territory of a part-time referee shall be the rate of full-time
service.".
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.