Supreme Court Clarifies Scope Of Bankruptcy Courts' Powers

In deciding Executive Benefits Ins. Agency v. Arkison, on Monday, June 9, the U.S. Supreme Court upheld its 2011 Stern v. Marshall decision and provided guidance to the bankruptcy courts in how to address certain claims and proceedings known as "non-core."  Stern held that the bankruptcy courts do not, under the Constitution, have jurisdiction to enter a final judgment on certain claims that relate to a bankruptcy proceeding, despite Congress having provided for such authority under applicable statutes.  Stern, however, did not provide explicit guidance as to how bankruptcy courts should handle that group of claims.  With Arkison, the Supreme Court provides that guidance: the bankruptcy courts should issue proposed findings of fact and conclusions of law to be reviewed by the district court.  Justice Thomas authored the unanimous Arkison decision and addressed whether the bankruptcy court could enter a final judgment where a chapter 7 trustee sued to recover the proceeds of a fraudulent conveyance.  Arkison directs that bankruptcy courts should not issue final orders on such claims but should issue proposed findings of fact and conclusions of law for the district court to review and then issue a final order.  Going forward litigants in bankruptcy court can expect more certainty than has been prevalent in the past three years, where, at times, parties relied on Stern in attempts to slow down the pace of litigation by questioning the bankruptcy courts' right to even hear and decide a case.  While Arkison does add another step--review by the district court--it gives litigants and courts a simple mandate when dealing with these "non-core" claims.  The Court, however, failed to expressly address whether litigants may consent to final orders entered by bankruptcy judges on "non-core" claims.

Spotts Fain publications are provided as an educational service and are not meant to be and should not be construed as legal advice. Readers with particular needs on specific issues should retain the services of competent counsel.


Allowed tags: <b><i><br>Add a new comment: