The Supreme Court’s Decision in Stern v. Marshall: Analysis & Implications

Abstract

This paper discusses the Supreme Court’s June 23, 2011 decision in Stern v. Marshall, on bankruptcy court jurisdiction, in which the Court held: (1) that all core proceedings (including all counterclaims filed against creditors who have filed claims) arise under title 11 or arise in the case under title 11, with none being merely “related to” proceedings; (2) that 28 U.S.C. § 157 must be interpreted to grant jurisdiction to bankruptcy judges to enter final judgments on all counterclaims filed against creditors who have filed claims, with all such counterclaims being core proceedings; and (3) that Article III of the Constitution prohibits bankruptcy judges from entering final judgments on some counterclaims, even where the creditors have filed claims in the bankruptcy case.

The paper explains that the Court’s decision, though perhaps modest in direct effect, fails to lay to rest continued questions about the possible vulnerability of the entire system of bankruptcy court jurisdiction. The paper also explains the circumstances under which bankruptcy courts have jurisdiction to enter final judgments on counterclaims. It discusses the rationales for the distinctions made by the Court, including issues of public rights, res judicata, and consent to jurisdiction.

Keywords: Stern, Marshall, Bankruptcy, Jurisdiction, Article III, Supreme Court, Core Proceedings, Bankruptcy Judges, Stern v. Marshall, Counterclaims, Arising Under, Arising In, Related To, 28 U.S.C. § 157, Res Judicata, Consent, Public Rights, Private Rights, Article III Judges, Article III Courts

JEL Classification: D73, G33, H11