Constitutional turmoil continued throughout 2014 for bankruptcy courts and practitioners alike, and may ultimately have a broader impact on other areas, including magistrate courts. Under 28 U.S.C. § 157 bankruptcy courts have long held jurisdiction over certain “core matters” in which they are expressly authorized to enter final orders or judgments. But in 2011, the U.S. Supreme Court ruled 5-4 in Stern v. Marshall that bankruptcy courts, as Article I courts, lacked constitutional authority to finally adjudicate state law-based counterclaims against creditors of the bankruptcy estate—claims designated as core matters, therefore statutorily finally judicable by the bankruptcy court, but constitutionally reserved solely for final adjudication by Article III courts.
Three of the many issues stemming from Stern were 1. whether the bankruptcy court statutorily could enter proposed findings of fact and conclusions of law on core matters it lacked constitutional authority to enter final judgment on post-Stern; 2. whether the parties could consent, either expressly or impliedly, to final adjudication by the bankruptcy court of Stern claims; and 3. what other types of core claims, e.g. fraudulent conveyance claims, do bankruptcy courts lack constitutional authority to finally adjudicate. In a much anticipated decision due this year, SCOTUS was faced with the first two offspring issues. SCOTUS ruled in Executive Benefits v. Arkison (In re Bellingham), earlier this year, that if a bankruptcy court lacks constitutional authority to enter final judgment on a core matter, the bankruptcy court can enter proposed findings of fact and conclusions of law in a proceeding so long as the proceeding is “related to” the bankruptcy case.
