A Bunny’s Tale: Hopping Toward the End of Bankruptcy Jurisdiction?

By Intro by Prof. Ralph U. Whitten

On June 23, 2011, the United States Supreme Court decided Stern v. Marshall, previously discussed at ConsiderChapter13.org in A Bunny’s Tale:  The Impact of a Playboy Playmate on Federal Jurisdiction on February 11, 2011.   Readers will recall that the general question in the case concerned the power of a non-Article III bankruptcy judge to enter judgment on a state counterclaim, although there were many other interesting peripheral questions, such as the preclusive effect of a Texas state probate court judgment on the issues being determined in the bankruptcy court.  In a nutshell, the Supreme Court held that the bankruptcy judge had statutory power to decide the counterclaim, but lacked power under Article III of the Constitution to do so.  On the statutory point, the Court held that the counterclaim was a “core proceeding” under 28 U.S.C. § 157(b) (2006) that the bankruptcy judge was authorized to enter final judgment on.  On the constitutional issue, the Court held that the bankruptcy court was exercising the judicial power of the United States when it purported to resolve and enter final judgment on the state-law counterclaim.  The Court further rejected the arguments (1) that the counterclaim could be considered a matter of “public right” that could be decided outside the judicial branch and (2) that the bankruptcy court was not authorized by the Court’s precedents to hear the counterclaim because it was in response to a proof of claim filed by the creditor (the party defending against the counterclaim), (3) that the bankruptcy court could not be considered as acting as an “adjunct” to the district court, as opposed to itself exercising the essential attributes of judicial power, when it entered judgment on the counterclaim and (4) that any practical difficulties that would be caused by forbidding the bankruptcy courts from entering judgment on counterclaims like the one involved in the case did not justify departing from the important separation of powers policies embodied in Article III of the Constitution.  Thus, the Court affirmed the judgment of the court of appeals, with the ultimate result that the Texas probate court’s decision on the issues governing the counterclaim is preclusive and the counterclaim fails as a consequence.

Ralph U. Whitten Ralph U. Whitten is the Senator Allen A. Sekt Professor of Law at Creighton
University Law School. Professor Whitten has taught Civil Procedure, Conflict of
Laws, and Federal Courts for over thirty years. He is the author of numerous
articles in those subjects and has co-authored multiple editions of casebooks
and treatises in Civil Procedure and Conflict of Laws. He knows little or
nothing about bankruptcy and is, after a long career, pretty much uninterested
in learning more about the subject.
No Author Biography has been linked to this Article.

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