{"id":50,"date":"2014-06-09T15:14:51","date_gmt":"2014-06-09T19:14:51","guid":{"rendered":"http:\/\/blogs.duanemorris.com\/bankinglaw\/?p=50"},"modified":"2014-08-12T12:54:35","modified_gmt":"2014-08-12T16:54:35","slug":"u-s-supreme-court-decision-answers-question-arising-out-of-stern-vs-marshall-decision","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/bankinglaw\/2014\/06\/09\/u-s-supreme-court-decision-answers-question-arising-out-of-stern-vs-marshall-decision\/","title":{"rendered":"U.S. Supreme Court Decision Answers Question Arising Out of Stern vs. Marshall Decision"},"content":{"rendered":"

In Executive Benefits Insurance Agency, petitioner vs. Peter H. Arkison, Chapter 7 Trustee, Case No. 12-1200, 573 U.S. __(2014) the United States Supreme Court ( Court) delivered its opinion as a follow up to its landmark decision in Stern v. Marshall<\/em>. In Stern v. Marshall<\/em>, the Court held that even though bankruptcy courts are statutorily authorized to enter final judgments on a class of bankruptcy related claims, Article III of the Constitution prohibits bankruptcy courts from finally adjudicating certain of those claims. Under Stern\u2019s reasoning, the Constitution does not permit a bankruptcy court to enter final judgment on a bankruptcy related claim, the relevant statute does permit a bankruptcy court to issue proposed findings of fact and conclusions of law to be reviewed de novo<\/em> by a federal district court. Because the District Court conducted the de novo<\/em> review that petitioner demanded, the Court affirmed the judgment of the Court of Appeals upholding the District Court\u2019s decision. The following information has been extracted from the syllabus prepared by the Reporter of Decisions and does not represent the actual written decision by the Court.<\/p>\n

Bellingham Insurance Agency, Inc. (BIA), filed a voluntary chapter 7. Peter Arkison, the bankruptcy trustee, filed a complaint in the Bankruptcy Court against petitioner EBIA and others alleging a fraudulent conveyance of assets from BIA to EBIA. The Bankruptcy Court granted summary judgment for the trustee. While EBIA\u2019s appeal to the Ninth Circuit was pending, the Court held that Article III did not permit a Bankruptcy Court to enter a final judgment on a counterclaim for tortious interference, even though final adjudication of that claim by the Bankruptcy Court was authorized by statute. citing Stern v. Marshall<\/em>.<\/p>\n

Under the Bankruptcy Amendments and Federal Judgeship Act of 1984, federal district courts have original jurisdiction in bankruptcy cases and may refer to bankruptcy judges two statutory categories of proceedings: \u201ccore\u201d proceedings and \u201cnon-core\u201d proceedings. In core proceedings, a bankruptcy judge \u201cmay hear and determine \u2026 and enter appropriate orders and judgments,\u201d subject to the district court\u2019s traditional appellate review. In non-core proceedings-those that are \u201cnot \u2026core\u201d but are \u201cotherwise related to a case under title 11, \u00a7 157(c)(1)-final judgment must be entered by the district court after de novo<\/em> review of the bankruptcy judge\u2019s proposed findings of fact and conclusions of law, except that the bankruptcy judge may enter final judgment if the parties consent.<\/p>\n

In Stern<\/em>, the court held that Article III prohibits Congress from vesting a bankruptcy court with the authority to finally adjudicate the \u201ccore\u201d claim of tortious interference. The Court did not, however, address how courts should proceed when they encounter a Stern<\/em> claim.<\/p>\n

Stern<\/em> claims may proceed as non-core within the meaning of \u00a7 157(c). Lower courts have described Stern claims as creating a statutory \u201cgap,\u201d since bankruptcy judges are not explicitly authorized to propose findings of fact and conclusions of law in a core proceeding. \u201cThis so-called gap is closed by the Act\u2019s severability provision, which instructs that where a \u201cprovision of the Act or [its] application\u2026 is held invalid, the remainder of th[e] Act \u2026 is not affected thereby\u2026\u201d where a claim otherwise satisfies \u00a7 157(c)(1), the bankruptcy court should simply treat the Stern<\/em> claim as non-core.<\/p>\n

Section 157(c)(1)\u2019s procedures apply to the fraudulent conveyance claims by the trustee in this case because the claims assert that property of the bankruptcy estate was improperly removed, they are self-evidently \u201crelated to a case under title 11\u201d. Accordingly, they fit within the category of claims governed by \u00a7 157(c)(1).<\/p>\n

Here, the District Court\u2019s de novo<\/em> review of the Bankruptcy Court\u2019s order and entry of its own valid final judgment cured any potential error in the Bankruptcy Court\u2019s entry of judgment. EBIA contended that it was constitutionally entitled to review by an Article III court regardless of whether the parties consented to bankruptcy court adjudication. EBIA received the same review from the District Court that it would have received had the Bankruptcy Court treated the claims as non-core proceedings under \u00a7 157. Judgment of the Court of Appeals was affirmed. It is important to note that the Court did not decide whether a bankruptcy court can issue final decisions if all parties consent.<\/p>\n

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, or should be construed, as legal advice. For more information, please see the firm\u2019s full disclaimer.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

In Executive Benefits Insurance Agency, petitioner vs. Peter H. Arkison, Chapter 7 Trustee, Case No. 12-1200, 573 U.S. __(2014) the United States Supreme Court ( Court) delivered its opinion as a follow up to its landmark decision in Stern v. Marshall. In Stern v. Marshall, the Court held that even though bankruptcy courts are statutorily … <\/p>\n

Continue reading “U.S. Supreme Court Decision Answers Question Arising Out of Stern vs. Marshall Decision”<\/span><\/a><\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[30,61,59,64,63,62,60,65,26],"ppma_author":[332],"class_list":["post-50","post","type-post","status-publish","format-standard","hentry","category-general","tag-bankruptcy","tag-core","tag-fraudulent-transfer","tag-litigation","tag-non-core","tag-proceeding","tag-stern-marshall","tag-tortious-interference","tag-walter-greenhalgh"],"authors":[{"term_id":332,"user_id":15,"is_guest":0,"slug":"wjgreenhalgh","display_name":"Walter J. Greenhalgh","avatar_url":"https:\/\/blogs.duanemorris.com\/bankinglaw\/wp-content\/uploads\/sites\/14\/2014\/08\/greenhalghwalter-125x150.jpg","0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":"","8":""}],"_links":{"self":[{"href":"https:\/\/blogs.duanemorris.com\/bankinglaw\/wp-json\/wp\/v2\/posts\/50","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.duanemorris.com\/bankinglaw\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.duanemorris.com\/bankinglaw\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/bankinglaw\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/bankinglaw\/wp-json\/wp\/v2\/comments?post=50"}],"version-history":[{"count":0,"href":"https:\/\/blogs.duanemorris.com\/bankinglaw\/wp-json\/wp\/v2\/posts\/50\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.duanemorris.com\/bankinglaw\/wp-json\/wp\/v2\/media?parent=50"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/bankinglaw\/wp-json\/wp\/v2\/categories?post=50"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/bankinglaw\/wp-json\/wp\/v2\/tags?post=50"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/bankinglaw\/wp-json\/wp\/v2\/ppma_author?post=50"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}