The Res Judicata Effect of Bankruptcy Court Judgments: The Procedural and Constitutional Concerns

Abstract

This article seeks to resolve the conflict in the circuits and argues that bankruptcy court judgments should not bar the assertion of non-core claims because to do so violates the basic principles of res judicata and threatens to undermine fundamental Article III values or create judicial inefficiencies in an effort to preserve such values.

Part II of the article provides the relevant Article III background, and identifies the key Article III cases: Northern Pipeline Construction Company v. Marathon Pipe Line Company and Commodity Futures Trading Commission v. Schor. This section explores the impact of Northern Pipeline which held that the 1978 Bankruptcy Reform Act was unconstitutional because it impermissibly gave Article III judicial powers to bankruptcy judges.

Describing the Congressional response to Northern Pipeline, Part III explains the Bankruptcy Amendments and Federal Judgeship Act of 1984. The next section examines the current split in the courts over whether a bankruptcy court's judgment bars further litigation of any claim, including non-core claims, that arises out of the transaction at issue. Finally, Part V seeks to resolve the split in the circuits by arguing that the general principles of res judicata, concerns about fundamental Article III values and judicial economy support the proposition that bankruptcy court judgments should not bar non-core claims.

Keywords: Res Judicata, Article III, Bankruptcy Court Judgments, Northern Pipeline Construction Company v. Marathon Pipe Line Company, Commodity Futures Trading Commission v. Schor