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With current docker versions, when you bind mount /dev from the host to /dev in the container (i.e. -v/dev:/dev), it does not also mount devpts.  Therefore, the host becomes unusable because the virtual ptys are no longer able to start.  This is a critical bug.

These patches remedy this bug:

  * https://github.com/docker/docker/pull/16639
  * https://github.com/opencontainers/runc/commit/c9d58506297ed6c86c9d8a91d861e4de3772e699

Lokesh built a scratch build and we confirmed the problem is corrected.

This version has been shipped already.