[JURIST] The US Supreme Court [official website] heard oral arguments [day call, PDF] in three cases Tuesday, including a case on the General Railroad Right-of-Way Act of 1875 and a case on whether certain employee severance payments are taxable. In Executive Benefits Insurance Agency v. Arkison [transcript, PDF; JURIST report] the court heard arguments on: (1) whether Article III permits the exercise of the judicial power of the US by bankruptcy courts on the basis of litigant consent, and, if so, whether “implied consent” based on a litigant’s conduct, where the statutory scheme provides the litigant no notice that its consent is required, is sufficient to satisfy Article III; and (2) whether a bankruptcy judge may submit proposed findings of fact and conclusions of law for de novo review by a district court in a “core” proceeding under 28 USC § 157(b) [text]. 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 Tuesday’s oral arguments, counsel for the petitioner argued that the initial judgment in favor of the respondent had been “entered by a non-Article 3 bankruptcy court pursuant to a statute that this Court has declared unconstitutional as violating the separation of powers.” Counsel for the respondent argued that 28 USC § 157(b) allows district courts to refer issues to bankruptcy judges, who may then “hear and determine the matter and may enter an order or judgment,” in an attempt to convince the court to let the Ninth Circuit’s ruling stand. Counsel for the US also argued on the respondent’s behalf.

In Brandt Revocable Trust v. United States [transcript, PDF; JURIST report] the court heard arguments regarding the General Railroad Right-of-Way Act of 1875 (1875 Act) and specifically, the question, “[d]id the United States retain an implied reversionary interest in 1875 Act rights-of-way after the underlying lands were patented into private ownership?” The Supreme Court ruled in Great Northern Ry. Co. v. United States (1942) [opinion] that rights-of-way are easements and not limited fees with an implied reversionary interest. The US Court of Appeals for the Tenth Circuit ruled that the US did retain an implied reversionary interest in 1875 Act rights-of-way after the underlying lands were patented into private ownership, creating a circuit split. Counsel for the petitioner argued that the Tenth Circuit’s ruling is inconsistent with both the Supreme Court’s decision in Great Northern as well as with the “Department of Interior’s longstanding interpretation that the 1875 Act granted only an easement.” Counsel for the respondent, however, argued that the legislative history and the “surrounding statutory context” of the 1875 Act, which predated the Supreme Court’s decision in Great Northern, both show that the US “retains the reversionary interest in the surface of the land of right-of-ways granted to railroads.”

In United States v. Quality Stores [transcript, PDF; JURIST report] the court heard arguments on “[w]hether severance payments made to employees whose employment was involuntarily terminated are taxable under the Federal Insurance Contributions Act [26 USC § 3101 et seq].” The Sixth Circuit held [opinion] that such payments are not taxable. Counsel for the petitioner argued that “[t]he payments in this case fall squarely under FICA’s definition of wages, which includes all remuneration for employment.” Counsel for respondents, however, in an attempt to have the court affirm the Sixth Circuit’s decision, argued that the US government has agreed with the fact that only certain supplemental unemployment benefits are wages and therefore covered under FICA. Counsel for respondents further argued that the supplemental unemployment benefits in this case are not a form of remuneration, as their receipt is contingent upon the recipient’s loss of a job.