The breadth and extent of a bankruptcy court’s jurisdiction has been litigation fodder since the Supreme Court issued its landmark decision in Stern v. Marshall, 131 S.Ct. 2594 (2011). The Stern court held that, to enter final judgment, a bankruptcy court must have both statutory authority and constitutional authority. Id. at 2609. Under Stern, the Supreme Court recognized that a bankruptcy court’s statutory jurisdiction emanates from 28 U.S.C. §157, which empowers bankruptcy courts to enter final judgments in “core” proceedings “arising in” and “arising under” Title 11 of the United States Code (the “Bankruptcy Code”). Id. at 2608-09.
With respect to “non-core” claims, Section 157 limits the authority of bankruptcy courts and permits only the submission of proposed findings of fact and conclusions of law to the district court. The Stern court held, however, that the statutory authority of bankruptcy courts is further constrained by the Constitution, which precludes bankruptcy courts from performing the duties or assuming the rights and powers of courts created under Article III of the Constitution, thus creating so-called “Stern claims.” Stern claims are “core” claims that do not “arise in” or “arise under” the Bankruptcy Code, such as a state law counterclaim. Id. at 2618.
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