The Supreme Court in the Stern v. Marshall case 10-179 decided on June 23, 2011, declared unconstitutional a bankruptcy judges entering a final judgment in a tort claim that is non-core. The Court ruled that consent was irrelevant to the authority of an non-Article III bankruptcy judge to exercise judicial power by rendering a final judgment.
Previously the Northern Pipeline case from 1982 had been used to justify the current system enacted in 1984 in response to that case which declared the 1978 system unconstitutional. Arguments for the current system included that parties could consent to having a bankruptcy judge handle non-core matters, that bankruptcy is a public right, and that bankruptcy judges are adjuncts to Article III judges with life tenure and a prohibition against salary dimunition. The Supreme Court rejected all three of these arguments and even went so far as to say that Section 157 of Title 28 which defines core proceedings violates Article III of the Constitution to the extent it allows state law tort claims to be decided by a bankruptcy judge without consent.
Core-bankruptcy matters concerning the administration of the estate and other things central to the bankruptcy process may technically not have been before the Court today, but I cannot think of any logical reasons why they would be different. The reasoning applies equally to these and Northern Piepline is practically overruled. The Court ruled that a judge who makes final judgments is not an adjunct. I have argued this before and almost been laughed at for doing so. I feel vindicated by todays decision. Read it here:
Stern v. Marshall why Anna Nicole Smith may have brought down the bankruptcy judge system with her.
Photo courtesy of DoggiesRule04 through Wikimedia Commons.
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