The Supreme Court’s ruling in Stern v. Marshall has signaled a need to alter the bankruptcy court’s jurisdictional structure. In Stern, the Supreme Court ruled that bankruptcy judges, who lack the life tenure and salary protection of Article III, cannot issue final rulings in bankruptcy proceedings previously believed to be within their core jurisdiction. In response to the constitutional challenge raised by Stern, and in recognition that bankruptcy court’s jurisdictional limits represent a long-standing problem, many argue for a long-term solution: the restructuring of the system to create specialized Article III bankruptcy courts.
This paper evaluates this proposal in light of classic principles of system restructuring, namely, that any proposed restructure should stem from the underlying goals or strategy for that system.… Read More
Rodgers had filed a complaint for claims arising from a real estate dispute. The Bankruptcy Court granted a judgment on the pleadings as to two defendants, but, in light of Sterns v. Marshall, the District Court returned the matter to the Bankruptcy Court for a determination of whether the issues raised were “core” or “non-core” and the basis for jurisdiction. (See: http://ncbankruptcyexpert.com/?p=1137) The Bankruptcy Court then found that the claims were “non-core” pursuant to 28 U.S.C. § 157, but that it did have jurisdiction under § 157(c)(1).
On this second appeal, the District Court agreed with the Bankruptcy Court both that the claims were non-core, but that jurisdiction was property as the claims were “related to” the bankruptcy as they “could have any conceivable effect on the bankruptcy estate.” See Morrison v.… Read More
Having previously found that several claims brought by the Debtor against Bank of America were, pursuant to Stern v. Marshall, 131 S. Ct. 2594 (2011), core and subject to bankruptcy court jurisdiction, while others were “statutorily core, but did not qualify as constitutionally core”, the bankruptcy court retained the core issues and referred the non-core claims to arbitration. The Trustee then sought a stay of arbitration pending a determination of the core issues as allowing the arbitration to go forward apace with the Adversary Proceedings, could result in an arbitration award being given “preclusive effect” or the possibility of inconsistent judgments.… Read More
In December 2005, the Eichorns were seeking to purchase a home and entered hired Preferred Carolinas Realty (“PCR”) and James Allen to represent them in the process. The Eichorns wer shown property located in Wake Forest, North Carolina (”the property”) and were told by PCR that it was owned by Toth Building Company, when it was, in fact, owned by Rodgers. Following negotiations through PCR, the Eichorns signed as sales contract with Toth, although Rodgers, the true owner of the property, had no knowledge of it. Unbeknownst to the Eichorns, PCR had modified the contract by “whiting out” the name of the seller, Toth Building Company, and substituting Rodgers’ name.… Read More
Chapter 13 Debtor brought an Adversary Proceeding against Cashcall, seeking a declaratory judgment that the debt owed to Cashcall (resulting from a $1,500.00 payday loan) was in violation of the North Carolina Consumer Finance Act, N.C. Gen. Stat. §§ 53-164 to -191 (2012) and alleging that Cashcall engaged in acts that qualify as Prohibited Acts by Debt Collectors under N.C. Gen. Stat. § 75-50 to -56 (2012) in attempts to collect on the debt, seeking actual and statutory damages.
Cashcall sought dismissal of the Adversary Proceeding on the basis that it was a non-core matter or, alternatively, that it be sent for arbitration.… Read More
Under the test formulated by the Supreme Court in Stern v. Marshall the court may enter final judgment in a core proceeding where “the action at issue stems from the bankruptcy itself or would
necessarily be resolved in the claims allowance process.” Stern, 131 S. Ct. at 2618. Where a defendant has filed a proof of claim, a fraudulent transfer action brought under either section 548 or
section 544 becomes a part of the process of allowance and disallowance of claims. See Langenkamp v. Culp, 498 U.S. 42, 44 (1990).
For a copy of the opinion, please see:
Ivey v.… Read More
Judge Ahart revisits his 2005 article, The Limited Scope of Implied Powers of a Bankruptcy Judge: A Statutory Court of Bankruptcy, Not a Court of Equity, 79 Am. Bankr. L.J. 1, in light of the Stern v. Marshall, 131 S. Ct. 2594 (2011), decision, finding that Stern reinforces his earlier position, namely that “a bankruptcy judge should function as a court of statutorily-defined powers, not as a court of equity.” With the repeal of the Bankruptcy Act of 1898 in 1978 and the 1984 amendments, there is no specific grant of jurisdiction for a bankruptcy court at law and equity.… Read More
This Article considers the Supreme Court’s decision in Stern v. Marshall, which limited the power of a bankruptcy judge to decide a common law claim. Stern is best understood as a combination of three arguments drawn from the Court’s prior Article III cases. The first is an argument from history — the past division of labor between the Article III judiciary and non-Article III adjudicators. The second is an argument from expertise — the appropriate selection of disputes that benefit from a specialized non-Article III forum. The third is an argument from separation of powers — the limitations on when the political branches may assign disputes outside the tenured judiciary.… Read More
Congress regularly makes judgment calls of constitutional dimension. One important example of the interaction between the constitutional analysis of the Court and that of Congress involves disputes over the broad grant of jurisdiction exercised by untenured bankruptcy judges. The legislative history preceding the Supreme Court’s decisions in Northern Pipeline Co. v. Marathon Pipe Line Co. and Stern v. Marshall suggest that Congress’s constitutional interpretation is different in kind from that of the Supreme Court. Because Congress is a political, not a deliberative, body, its constitutional analysis is infused with political judgments. The political compromises reached in enacting the bankruptcy court provisions in 1978 and 1984 may well have contributed to the Court’s constitutional rulings.… Read More
This paper discusses the possible meaning and effect of the Supreme Court’s recent decision in Stern v. Marshall, in which the Court held that the bankruptcy courts’ statutory authority to enter final judgments on certain counterclaims against creditors violates Article III of the Constitution. It was prepared by the authors as a report to the fall 2011 annual meeting of the National Bankruptcy Conference.
The Stern decision is enigmatic. While stressing the narrowness of the issue decided, the Court’s opinion rests on a rationale that, carried to its logical conclusion, could have broad implications for the exercise of bankruptcy jurisdiction specifically and more generally for the authority of other non-Article III decision makers.… Read More