Executive Benefits v. Arkinson: Supreme Court walks back from Stern v. Marshall

Executive Benefits v. Arkinson: A little background: In 1978, Congress based the bankruptcy courts’ existence on its Article I powers to establish uniform laws on bankruptcy. But then in the 1982 case of Northern Pipeline Construction, the Supreme Court held that federal judicial power could only be exercised by judges appointed under Article III. However, the Court also allowed for certain exceptions, such as cases involving “public” rights.

What exactly constituted a “public” right was never defined, but in 1984, Congress created a list of “core” matters that bankruptcy courts were authorized to decide. (As to “non-core” matters, bankruptcy courts were directed to submit findings of fact and conclusions of law to district courts, which are Article III courts.)

All was fine and good until the 2011 case of Stern v. Marshall reopened the can of worms.  That case involved Vickie Marshall’s (AKA Anna Nicole Smith) estate’s state law counterclaim against her late husband’s son. The Supreme Court held that the counterclaim was indeed a “core” matter under the 1984 Act, but since it only involved state law rights (and were so not “public”), the bankruptcy court had no Constitutional authority to hear it.

Which brings us to June 9’s decision of Executive Benefits v. Arkinson, which asked the question: “What does a bankruptcy court do with these so-called Stern claims (i.e. “core” claims that don’t involve public rights)? Is a bankruptcy court barred from hearing the matter at all?  Or can it issue reviewable findings of fact and conclusions of law (just as it does with “non-core” claims), even though it has no explicit statutory authority to do so)? Justice Thomas, writing for a unanimous Court, held for the latter position.

A very wonkish, non-sexy decision indeed, but important in that it deals with issues of the fundamental basis of bankruptcy courts’ Constitutional authority. It’s notable for the Court’s declining to throw bankruptcy courts’ current bases of authority into disarray (which it could well have done). Instead, it is a very pragmatic decision that walks from the precipice opened by Stern v. Marshall.

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