The Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 1981, was a significant case in which the U.S Supreme Court ruled on the constitutionality of bankruptcy courts and their jurisdictional powers. The dispute arose when Northern Pipeline filed for bankruptcy and subsequently sued Marathon Pipe Line for breach of contract in a newly created federal bankruptcy court. However, Marathon argued that these new courts were unconstitutional as they lacked life tenure and protection against salary diminution - two protections granted to judges under Article III of the Constitution. In its decision, the Supreme Court sided with Marathon stating that Congress had overstepped its authority by creating non-Article III bankruptcy courts with broad judicial power to hear traditional common law claims such as breach-of-contract actions like this one between private parties where no public rights were involved. This ruling effectively invalidated portions of Bankruptcy Act passed by Congress in 1978 because it violated separation-of-powers principles embedded within Article III.

In the dissenting opinion for Northern Pipeline Construction Co. v. Marathon Pipe Line Co., Justice White, joined by Chief Justice Burger and Justices Powell and Rehnquist, argued that Congress had constitutional authority to establish bankruptcy courts with broad jurisdiction as it did in the Bankruptcy Act of 1978. They believed that historical practice supported this view since non-Article III judges have long been involved in adjudicating claims related to bankruptcy matters without any serious constitutional challenge. The dissenters also contended that there was no violation of separation of powers because these new bankruptcy courts were subject to substantial control and oversight by Article III judges who could review their decisions de novo (from scratch). Furthermore, they disagreed with the majority's strict interpretation of public rights doctrine which limited congressional power to assign disputes over private rights only to Article III courts; instead, they favored a more flexible approach considering practical consequences and functional relationships among branches.