IV. STERN v. MARSHALL
On June 23, 2011, the United States Supreme Court revisited a bankruptcy court's jurisdiction in its decision of Stern v. Marshall, 131 S. Ct. 2594 (2011).
Stern arose out litigation in two separate courts. The first was a lawsuit filed by Vickie Lynn Marshall1 ("Vickie"), against her husband's son, Pierce Marshall ("Pierce") in Texas state probate court asserting that Vickie's husband meant to provide Vickie with a trust, and Pierce tortiously interfered with that gift. See Stern, 131 S. Ct. at 2601. After her husband's death, Vickie filed for bankruptcy protection. Pierce then filed in the bankruptcy court both a non-dischargeability lawsuit and a proof of claim in Vickie's bankruptcy case based upon a claim of defamation against Vickie. Vickie responded to this defamation claim by filing a counterclaim for tortious interference with a gift she expected from her husband. Id.
The bankruptcy court, finding that the matters were "core proceedings," disallowed Pierce's claim and entered a substantial judgment in favor of Vickie on account of her counterclaim, as a "final" order under 28 U.S.C. § 157(b)(1). Id.
On appeal, the district court reversed, finding that the counterclaim was not a "core proceeding," and that the district court was required to review the bankruptcy court's judgment as proposed findings rather than final judgment under 28 U.S.C. § 157(c)(1). Id. at 2602.
Following a separate appeal, decision, and remand from the Supreme Court on different grounds, the Court of Appeals for the Ninth Circuit reversed the district court's decision. The Ninth Circuit found that a state law counterclaim is "a 'core' proceeding arising in a case under the [Bankruptcy] Code only if the counterclaim is so closely related to a [creditor's] proof of claim that the resolution of the counterclaim is necessary to resolve the allowance or disallowance of the claim itself." Id.
Thereafter, the Supreme Court granted certiorari to consider the question of "whether a bankruptcy court judge who did not enjoy such tenure and salary protections [of an Article III judge] had the authority under 28 U.S.C. § 157 and Article III [of the Constitution] to enter final judgment on the counterclaim" filed by Vickie against Pierce in Vickie's bankruptcy proceeding. Id. at 2595. The Supreme Court concluded that the bankruptcy court did not have the constitutional authority to enter a final judgment on Vickie's state law counterclaim. Id. at 2596.
In reaching its conclusion, the Supreme Court agreed with the bankruptcy court that Vickie's counterclaim for tortious interference was a "core proceeding" under 28 U.S.C. § 157(b)(2) (c), and that under this statute, the bankruptcy court had the authority to enter a "final" judgment on Vickie's counterclaim. Id. at 2604.
However, the Supreme Court went on to find that, notwithstanding the bankruptcy court's statutory authority to enter a final judgment on Vickie's state law counterclaim, the bankruptcy court lacked...
