SCOTUS on Bankruptcy Jurisdiction: Prediction

On June 9, 2014, SCOTUS issued one of its rare birds —  a 9-0 ruling.     While all the Justices are unanimously united, the rest of us are now dealing (yet again) with another wrinkle-trying to understand what the heck they are talking about.   In the case of  Executive Benefits Insurance Agency v. Peter Arkison (commonly called the  “Bellingham” case amongst the bankruptcy lawyers)  the Court now seems to have created yet another type of case, or maybe just another name for a type of case,  that bankruptcy courts deal with on a very regular basis.

The Bellingham Opinion effectively creates what the Court calls “Stern Claims” (after its prior case Stern v. Marshall) and attempts to reach a practical resolution to treat “Stern Claims” as non-core claims.  The Court goes through a good “overview” of the history to the bankruptcy court jurisdiction issues, and also reverts back to discussing a case from 943, Carter v. Kubler,  320 U. S. 243 ( 1943) that many prior decisions have left out of the decisional mix.

Interestingly, the Court left open one of the main issues remaining in dispute out here in the real world:  the issues involving the impact if parties’ “consent” to jurisdiction and whether that is even permitted or effective.  Of course, they mentioned this key issue in one of their footnotes
(“whether [Executive] in fact consented to the Bankruptcy Court’s adjudication of a Stern Claim and whether Article III permits a bankruptcy court, with the consent of the parties, to enter final judgment on a Stern Claim. We reserve that question for another day.”).

My prediction is that the real world judges in the bankruptcy and district courts will continue to work things out on a practical basis, but litigious parties with deep pockets just have more ammo to run up expensive and protracted jurisdictional fights, and this case is not much help to those who want practical solutions, and those who were hoping to have the “consent” question answered.


Lexington-Bankruptcy-Attorney_LauraDay-DelCotto7775

Laura Day DelCotto is the founding member of DelCotto Law Group. Her practice of law focuses on helping business owners rehabilitate or sell their companies. Outside of Chapter 11 bankruptcies Laura Day also dedicates her time to educating Kentucky municipalities on ways to avoid Chapter 9 insolvency.

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