| Stern v. Marshall | ||||||
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Supreme Court of the United States |
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| Argued January 18, 2011 Decided June 23, 2011 |
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| Full case name | Howard K. Stern (Executor for the Estate of Vickie Lynn Marshall) v. Elaine T. Marshall (Executrix for the Estate of E. Pierce Marshall) | |||||
| Docket nos. | 10-179 | |||||
| Citations | 564 U.S. [1] (more) 2011 U.S. LEXIS 4791 |
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| Prior history | Marshall v. Marshall (In re Marshall) 253 B.R. 550 (Bankr. C.D. Cal. 2001); affirmed in part, vacated and remanded, 264 B.R. 609 (C.D. Cal. 2000); 275 B.R. 5 (C.D. Cal. 2002); reversed and remanded with instructions 600 F.3d 1037 (9th Cir. 2010); cert. granted, 131 S. Ct. 2594 (2011) | |||||
| Subsequent history | None | |||||
| Holding | ||||||
| The U.S. Bankruptcy Courts lack constitutional authority under Article III to issue a final decision on a debtors unrelated state law counterclaim eventhough they are granted statutory authority under 28 U.S.C. §157 (b)2(C).Ninth Circuit Court of Appeals affirmed. | ||||||
| Court membership | ||||||
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| Case opinions | ||||||
| Majority | Roberts, joined by Kennedy, Thomas, Alito | |||||
| Concurrence | Scalia | |||||
| Dissent | Breyer, joined by Ginsberg, Sotomayor, Kagan | |||||
| Laws applied | ||||||
| 28 U.S.C. § 1331, 28 U.S.C. § 1334, 28 U.S.C. § 157 | ||||||
Stern v. Marshall, 564 U.S. ___ (2011),[1] is a case in which the United States Supreme Court held that a bankruptcy court, as a non-Article III court (i.e. courts without the independence and protection) lacked constitutional authority under Article III to issue a final decision on a debtors unrelated state law counterclaim eventhough they are granted statutory authority under 28 U.S.C. §157 (b)2(C). The case drew an unusual amount of interest because the petitioner was former Playboy Playmate and celebrity Anna Nicole Smith (whose legal name was Vickie Lynn Marshall).
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For additional background, see article for previous case (Marshall v. Marshall)
The case was sent back to the 9th Circuit Court of Appeals to decide the remaining issues. On March 19, 2010, the same three-judge panel found in favor of E. Pierce Marshall holding that the bankruptcy court did not have the authority to decide the case and because the California federal district court should not have reviewed matters previously decided in the Texas probate court.[2][3] Following the 9th Circuit's decision, lawyers for the estate of Anna Nicole Smith requested the appeal be heard before the entire circuit. However, on May 5, 2010, that request was denied.[4] On September 28, 2010, the U.S. Supreme Court again agreed to hear the case.[5]
Article III, § 1 of the Constitution vests "[t]he judicial power of the United States" in life-tenured and salary-protected judges, who are nominated by the President and confirmed by the Senate. Non-Article III bankruptcy judges may not exercise the general judicial power of the United States and therefore may not finally resolve controversies that are not within the core Article I bankruptcy power Congress relied upon in creating the current system of bankruptcy jurisdiction. In Northern Pipeline Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982), a fractured plurality of the Court held that Article I bankruptcy courts could not constitutionally hear a state law breach of contract claim when the debtor was the plaintiff. The main question presented in Stern v. Marshall was whether a bankruptcy court could constitutionally enter a final judgment on an otherwise non-core tort cause of action asserted as a compulsory counterclaim to a creditor's nondischargeability complaint and proof of claim against the debtor.[6]. When the matter came before the 9th Circuit appellate court, it rendered the District Court's decision invalid on preclusion grounds since the Bankrutpcy Court's decision was non-core.
The Obama administration and the Office of the US Trustee, which wanted to expand bankruptcy jurisdiction in state law matters, instructed the United States Solicitor General to submit a brief on the side of the petitioner.
1.) Whether the Ninth Circuit opinion, which renders §157(b)(2)(C) surplusage in light of §157(b)(2)(B), contravenes Congress’ intent in enacting §157(b)(2)(C).
2.) Whether Congress may, under Articles I and III, constitutionally authorize core jurisdiction over debtors’ compulsory counterclaims to proofs of claim.
3.) Whether the Ninth Circuit misapplied Marathon and Katchen and contravened this Court’s post-Marathon precedent, creating a circuit split in the process, by holding that Congress cannot constitutionally authorize non-Article III bankruptcy judges to enter final judgment on all compulsory counterclaims to proofs of claim.
On January 18, 2011, the United States Supreme court re-heard heard oral arguments in the case (now styled Stern v. Marshall, no. 10-179). In this case, the Court was to consider, among other things, whether by enacting 28 U.S.C. § 157(b)(2)(C), Congress can constitutionally authorize non-Article III bankruptcy judges to enter final judgments on all counterclaims to proofs of claim.On June 23, 2011, the United States Supreme Court decided the case 5-4 in favor of E. Pierce Marshall on the question of bankrutpcy jurisdiction.[7] The majority of the Court decided Congress cannot constitutionally authorize non-Article III bankruptcy judges to enter final judgments on state law based counterclaims to proofs of claim which are not necessary to resolve the claim itself.[8] The minority opinion expressed the view that such broad powers are necessary to implement legislative intent and authority under Article I and concerns about the reduced efficiency of the bankruptcy courts. This decision effectively ended the case, and let stand the decision that Smith's estate was not entitled to the money that had previously been awarded to her.