Supreme Court rules on bankrtupcy court jurisdiction

[JURIST] The US Supreme Court [official website] ruled [opinion, PDF] unanimously Monday in Executive Benefits Ins. Agency v. Arkison [SCOTUSblog backgrounder] that when a bankruptcy court lacks jurisdiction to enter a final judgment, the bankruptcy court can still issue proposed findings of fact and conclusions of law to be reviewed de novo by the district court. In Stern v. Marshall [JURIST report] the Supreme Court held that Article III of the US Constitution [text] precludes Congress from assigning certain "core" bankruptcy proceedings involving private state law rights to adjudication by non-Article III bankruptcy judges. Applying Stern, the US Court of Appeals for the Ninth Circuit held [opinion] that a fraudulent conveyance action is subject to Article III. The court further held that the Article III problem had been waived by petitioner's litigation conduct and that a bankruptcy court may issue proposed findings of fact and conclusions of law, subject to a district court's de novo review, in "core" bankruptcy proceedings where Article III precludes the bankruptcy court from entering final judgment. In an opinion by Justice Clarence Thomas, the Supreme Court affirmed:

We hold today that when, under Stern's reasoning, the Constitution does not permit a bankruptcy court to enter final judgment on a bankruptcy related claim, the relevant statute nevertheless permits a bankruptcy court to issue proposed findings of fact and conclusions of law to be reviewed de novo by the district court. Because the District Court in this case conducted the de novo review that petitioner demands, we affirm the judgment of the Court of Appeals upholding the District Court's decision.
The court heard oral arguments in the case in January after granting certiorari [JURIST reports] in June.

 

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