THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA, ET AL.,
PETITIONERS V. BEN COOPER, INC., ET AL.

   No. 90-1280

   In The Supreme Court Of The United States

   October Term, 1990

   On Petition For A Writ Of Certiorari To The United State Court Of
Appeals For The Second Circuit

   Brief For The United States

            TABLE OF CONTENTS
   Questions Presented
   Opinions below
   Jurisdiction
   Statutory provisions involved
   Statement
   Discussion
   Conclusion
   Appendix

                            OPINIONS BELOW

   The opinion of the court of appeals holding that it has appellate
jurisdiction and reinstating its previous opinion and judgment, Pet.
App. A1-A6, is unreported.  This Court's order vacating the court of
appeals' previous judgment and remanding for consideration of the
jurisdictional issue raised by the United States, Pet. App. A10-A11,
is reported at 111 S. Ct. 425.  The previous opinion of the court of
appeals, Pet. App. A12-A33, is reported at 896 F.2d 1394.  The
opinions of the district court, Pet. App. A34-A47, and the bankruptcy
court, Pet. App. A48-A51, are unreported.

                             JURISDICTION

   The judgment of the court of appeals was entered on January 22,
1991.  The petition for a writ of certiorari was filed on February 12,
1991.  The jurisdiction of this Court is invoked under 28 U.S.C.
1254(1).

                     STATUTORY PROVISIONS INVOLVED

   Sections 151, 157, and 1411 of Title 28 of the United States Code
are reproduced in an appendix to this brief.

                          QUESTIONS PRESENTED

   1. Whether post-petition contractual disputes involving estate
administration are core proceedings under 28 U.S.C. 157(b)(2)(A).

   2. Whether adjudicating post-petition contractual disputes
involving estate administration in the bankruptcy court is consistent
with Article III and the Seventh Amendment.

                               STATEMENT

   Respondent Ben Cooper, Inc. (Cooper), is an importer and
manufacturer of costumes and toys.  Petitioners The Insurance Company
of the State of Pennsylvania and Kerwick & Curran, Inc., are an
insurance company and an insurance brokerage corporation,
respectively.  After Cooper filed a petition for reorganization under
Chapter 11 of the Bankruptcy Code, petitioners contracted with the
bankruptcy estate (through Cooper, as the debtor-in-possession) to
insure the res of the estate.  A fire at one of the estate's
facilities led to a dispute over the insurance contract, and the
insurance company brought a declaratory judgment action in New York
state court to rescind the contract.

   As we shall describe more fully below, the bankruptcy court, at
Cooper's behest, stayed the state court proceedings.  Cooper then
filed its own adversary proceeding in the bankruptcy court seeking
payment of its insurance claim and punitive damages.  For their part,
petitioners urged the district court to withdraw the proceeding from
the bankruptcy court under 28 U.S.C. 157(d) on the grounds that it was
not a core proceeding and that it was triable to a jury as of right.
The district court agreed and withdrew the proceeding.  In addition,
the district court abstained in favor of the state court litigation
and dissolved the bankruptcy court's injunction staying that
litigation.  The court of appeals reversed, holding that the
proceedings were core and that the bankruptcy court could preside over
a jury trial.

   1. This matter commenced in April 1988 when Cooper filed its
petition for reorganization in the United States District Court for
the Southern District of New York.  In October 1988, Cooper -- as the
debtor-in-possession of the bankruptcy estate -- purchased a policy to
insure the estate' commercial facilities.  /1/ The insurance was
required under the reorganization plan then pending in the bankruptcy
court.  Petitioners were aware that the policy was sold to a
debtor-in-possession, acting on behalf of a bankruptcy estate, and
that the policy's subject matter consituted assets of that estate.
Pet. App. A15, A23;  see note 1, supra.

   On January 6, 1989, a fire damaged one of the facilities of the
bankruptcy estate.  The insurer refused to pay the claim tendered by
Cooper (as debtor-in-possession) on behalf of the estate.  The insurer
contended that the policy was invalid because the application had
misrepresented the facility to be a warehouse when in fact it was a
manufacturing plant.  The insurer also asserted that it was not liable
on the policy because the claim exaggerated the fire damage.  Pet.
App. A15-A16.

   Subsequently, on April 4, 1989, the bankruptcy court confirmed the
reorganization plan.  Pet. App. A15.  On that date, title to the
estate's property was transferred from the estate to Cooper.  See 11
U.S.C. 541(a), 1141.

   On April 18, 1989, the insurer filed an action in New York state
court to declare the policy invalid.  On May 9, 1989, Cooper obtained
an order from the bankruptcy court staying the state court
proceedings.  Soon thereafter, Cooper instituted an adversary
proceeding in bankruptcy court claiming that the insurer was liable
for payment of the insurance claim and that the insurance brokers were
liable for negligence if the policy was held void.  Petitioners
opposed the bankruptcy court's jurisdiction, demanded a jury trial,
and moved the district court to withdraw the proceedings from the
bankruptcy court.  Pet. App. A16-A17.

   2. The district court remanded the proceeding to the bankruptcy
court and instructed it to determine whether it was "core" or
"non-core" under 28 U.S.C. 157.  On remand, the bankruptcy court
determined that the proceeding was core.  Pet. App. A49-A51.  Then, on
petitioners' motion the district court reexamined the matter and held
that the proceeding was not core.  Pet. App. A35-A38.  The district
court further held that petitioners were entitled to a jury trial.
Pet. App. A39-A40.  Believing that bankruptcy courts could not conduct
jury trials in non-core proceedings, Pet. App. A39-A40, the district
court withdrew the reference to the bankruptcy court:

         The necessity of preserving (petitioners') right to a jury
      trial in this non-core proceeding constitutes good cause for
      withdrawal of the reference under 28 U.S. Code Section 157(d).

Pet. App. A40;  accord Pet. App. A39.  Rather than try the case
itself, the district court abstained under 28 U.S.C. 1334(c)(1) and
(2) in favor of the action that had been filed in New York state court
and dissolved the bankruptcy court's injunction staying those actions.
 Pet. App. A40-A47.

   3. Cooper appealed to the Second Circuit, which reversed.  Pet.
App. A12-A33.  The court of appeals held that (1) the dispute was a
core bankruptcy proceeding;  (2) petitioners had a right to a jury
trial;  (3) the statute authorizes jury trials in bankruptcy courts;
and (4) neither Article III nor the Seventh Amendment bars bankruptcy
judges from presiding over such trials.  First, the court of appeals
held that the proceeding was within the core jurisdiction of the
bankruptcy court because it was a "matter() concerning the
administration of the estate" under 28 U.S.C. 157(b)(2)(A).  Pet. App.
A18.  The court relied on several factors in determining that this
insurance contract dispute was a core matter:  the dispute involves a
post-petition contract made with the debtor-in-possession, who serves
as an officer of the bankruptcy court;  the facility insured was an
asset of the estate;  insurance of the assets of the estate was part
of the reorganization plan;  and petitioners were aware that they were
dealing with a debtor-in-possession and that the subject matter of the
policy was an asset of the estate.  Pet. App. A23.  The court of
appeals reasoned that Congress intended bankruptcy courts to
adjudicate such disputes as core matters, despite the fact that they
implicate state law, because they lie "at the heart of the
administration of the bankrupt estate." Pet. App. A21.  The court of
appeals concluded that it "is difficult to conceive of a claim, at
least one arising outside of the substantive law of bankruptcy, that
would be more intrinsic to estate administration." Pet. App. A23.

   Second, the court of appeals held that petitioners are entitled to
a jury trial because their claims are legal in nature.  Pet. App.
A28-A29.  The court of appeals explained that Cooper's dispute with
the insurer alleged a breach of contract, and its dispute with the
insurance brokers alleged negligence and malpractice.  Ibid.  These
legal claims for money damages are, the court stated, triable to a
jury under the Seventh Amendment.  Ibid.

   Third, the court of appeals held that bankruptcy courts have
statutory authority to conduct jury trials in core proceedings.  That
holding rested on the combined effect of "two separate but related
provisions." Pet. App. A30.  The first provision, 28 U.S.C. 151,
provides that bankruptcy courts "may exercise the authority conferred
under this chapter with respect to any action." The second provision,
28 U.S.C. 157(b), states that bankruptcy courts have authority to
conduct trials and issue final orders in core proceedings.  Reading
the two provisions together, the court of appeals reasoned that
Congress intended bankruptcy courts to enter final orders in all core
proceedings, even those triable to a jury.  Pet. App. A30.

   Finally, the court of appeals concluded that this authority does
not violate Article III of the Constitution or the Seventh Amendment.
The court of appeals held that jury trials in bankruptcy court do not
violate the Seventh Amendment, because no facts found by the jury
would be reexamined by the district court, which exercises only
appellate review over judgments in core bankruptcy proceedings.  Pet.
App. A31-A32.  Nor would jury trials in bankruptcy court violate
Article III, because "(i)f bankruptcy courts have the power to enter
final judgments without violating Article III, it follows that jury
verdicts in the bankruptcy court do not violate Article III." Pet.
App. A32-A33.  Accordingly, the court of appeals reversed the district
court's judgment and remanded the case to the bankruptcy court.  Pet.
App. A15.

   4. Petitioners sought review in this Court, see petition for cert.
in No. 89-1784, citing a conflict between the decision below and a
decision of the Eighth Circuit holding that bankruptcy courts have no
statutory authority to conduct jury trials, see In re United Missouri
Bank of Kansas City, N.A., 901 F.2d 1449 (1990).  /2/ On June 28,
1990, this Court granted the petition for a writ of certiorari.  110
S. Ct. 3269.

   On September 28, 1990, the United States moved to intervene as of
right under 28 U.S.C. 2403 and to file a brief in intervention.  The
Court granted that motion.  111 S. Ct. 241 (1990).  The brief filed by
the United States raised and addressed a question concerning the
jurisdiction of the court of appeals, concluding that that court had
jurisdiction because the district court's order withdrawing the
reference to the bankruptcy court (which is ordinarily interlocutory)
was appealable as part of the district court's decision abstaining in
favor of the state court litigation under 28 U.S.C. 1334(c)(1) and
(2).  Although our brief observed that abstention decisions with
respect to non-core matters are "not reviewable by appeal or
otherwise," 28 U.S.C. 1334(c)(2), it explained that the district
court's order was appealable in this case precisely because it did
involve a core matter.

   On November 13, 1990, the Court vacated the judgment of the court
of appeals and remanded the case "for consideration of the
jurisdictional issue raised by the United States." Pet. App. A11.

   5. On November 27, 1990, the court of appeals directed the
simultaneous filing of briefs on the jurisdictional issue.  On January
22, 1991, the court of appeals "conclude(d) in the exercise of our
independent judgment that we ha(ve) jurisdiction." Pet. App. A3.
Although the parties "reach(ed) this result by different analyses,"
the court of appeals "agree(d) with the analysis of the Solicitor
General." Ibid.; see Pet. App. A5-A6.  The court then reinstated its
previous opinion and judgment.  Pet. App. at A6.

                              DISCUSSION

   1. This case presents the important questions, reserved by this
Court in Granfinanciera S.A. v. Nordberg, 109 S. Ct. 2782, 2802
(1989), whether the Bankruptcy Amendments and Federal Judgeship Act of
1984, Pub. L. No. 98-353, 98 Stat. 333, authorizes non-Article III
bankruptcy courts to conduct jury trials, and, if so, whether that
authority is consistent with Article III and the Seventh Amendment.
The Second Circuit in this case held that the Act permits bankruptcy
judges to preside over jury trials and that such power is
constitutional.  In contrast, the Eighth and Tenth Circuits have held
that bankruptcy judges have no statutory authority to conduct jury
trials.  See In re United Missouri Bank of Kansas City, N.A., 901 F.2d
at 1454-1457 (8th Cir.);  In re Kaiser Steel Corp., 911 F.2d 380, 392
(10th Cir. 1990).

   Prompt resolution of those questions is of the utmost importance to
the efficient functioning of the bankruptcy court system.  In 1978,
after almost ten years of study and investigation, Congress enacted
the Bankruptcy Act of 1978, Pub. L. No. 95-598, 92 Stat. 2549
(repealed).  The 1978 Act represented the first comprehensive revision
of the bankruptcy sytem since 1898.  Among other purposes, it was
designed to reduce the serious delays in bankruptcy proceedings caused
by the crowded dockets of non-bankruptcy courts.  This Court held the
1978 Act's grant of jurisdiction to bankruptcy courts unconstitutional
in Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S.
50 (1982).  In response, Congress enacted the legislation challenged
in this case -- the Bankruptcy Amendments and Federal Judgeship Act of
1984.  Congress, in the 1984 Act, intended to conform the bankruptcy
system to the requirements of Article III as determined by this Court.
 The public has a significant interest in this Court's early
determination whether the revised bankruptcy system comports with
constitutional requirements.

   2. Before reaching those questions, the Court should determine
whether post-petition contractual disputes involving estate
administration are core proceedings under 28 U.S.C. 157(b)(2)(A), and
whether such disputes are triable by jury as of right under the
Seventh Amendment.  The Court's answer to the questions of the
bankruptcy court's statutory and constitutional authority to conduct
jury trials may depend on whether post-petition contractual disputes
are "core" or "non-core." The bankruptcy court has authority to "hear
and determine" core matters, 28 U.S.C. 157(b)(1), but may only "submit
proposed findings of fact and conclusions of law to the district
court" in non-core matters, unless the parties consent to the
bankruptcy court's determination, 28 U.S.C. 157(c)(1) and (2).  In
addition, the need for this Court to pass on the bankruptcy court's
statutory and constitutional authority to conduct jury trials would be
obviated in this class of cases if the Court decided that
post-petition contractual disputes do not give rise to a right to jury
trial under the Seventh Amendment.

   The Court issued a writ of certiorari in this case once before,
remanding for consideration of the court of appeals' appellate
jurisdiction.  The court of appeals has now resolved that issue, and
the case is ripe for this Court's review.  /3/

   3. In the interests of judicial economy and the prompt resolution
of the important questions presented, we believe that the Court should
grant the petition for certiorari, order that the case be considered
on the briefs previously submitted, and set the case for argument
during the Court's April sitting.  /4/ The briefs previously filed
fully address both the merits and the jurisdictional issue, which has
now been addressed and decided by the court of appeals.  It is our
understanding that all parties -- petitioners and respondent Ben
Cooper, Inc., in addition to the United States -- would agree to
submitting this case for decision on that basis if the Court is
inclined to hear the case this Term.

                              CONCLUSION

   The petition for a writ of certiorari should be granted.

   Respectfully submitted.

   KENNETH W. STARR

      Solicitor General

   STUART M. GERSON

      Assistant Attorney General

   JOHN G. ROBERTS, JR.

      Deputy Solicitor General

   STEPHEN J. MARZEN

      Assistant to the Solicitor General

   WILLIAM KANTER

   KATHERINE S. GRUENHECK

   ROBERT M. LOEB

      Attorneys

   FEBRUARY 1991

   /1/ The estate was being administered by the debtor-in-possession,
as opposed to a trustee.  See 11 U.S.C. 1107.  Accordingly,
petitioners corresponded with and received checks for the insurance
premiums from "Ben Cooper, Inc., D.I.P."

   /2/ The Eighth Circuit has since been joined by the Tenth Circuit.
See In re Kaiser Steel Corp., 911 F.2d 380 (1990).

   /3/ For the reasons stated in the government's brief on the merits
in this Court in Insurance Company of the State of Pennsylvania v. Ben
Cooper, Inc., No. 89-1784 (at 9-17), and in its brief on the
jurisdictional issue in the Second Circuit, we believe that the Second
Circuit had jurisdiction, and this Court has jurisdiction, if (but
only if) this case falls within the core bankruptcy jurisdiction.  As
explained in our brief, if this Court determines that this case is a
non-core proceeding, the court of appeals and, by extension, this
Court would lack jurisdiction to reach the merits.

   /4/ We also believe that argument should be divided as the Court
previously ordered in this case.  See 111 S. Ct. 292 (1990).

   APPENDIX