Term: 2013
Docket: 12-1200
Executive Benefits Ins. Agency v. Arkison
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12-1200 EXECUTIVE BENEFITS INSURANCE AGENCY V. ARKISON DECISION BELOW: 702 F.3d 553 CERT. GRANTED 6/24/2013 QUESTION PRESENTED: In Stern v. Marshall, 131 S. Ct. 2594 (2011), this Court held that Article III of the United States Constitution precludes Congress from assigning certain "core" bankruptcy proceedings involving private state law rights to adjudication by non-Article III bankruptcy judges. Applying Stern, the court of appeals for the Ninth Circuit held that a fraudulent conveyance action is subject to Article III. The court further held, in conflict with the Sixth Circuit, that the Article III problem had been waived by petitioner's litigation conduct, which the court of appeals construed as implied consent to entry of final judgment by the bankruptcy court. The court of appeals also held, in conflict with the Seventh Circuit, that a bankruptcy court may issue proposed findings of fact and conclusions of law, subject to a district court's de novo review, in "core" bankruptcy proceedings where Article III precludes the bankruptcy court from entering final judgment. The court of appeals' decision presents the following questions, about which there is considerable confusion in the lower courts in the wake of Stern: 1. Whether Article III permits the exercise of the judicial power of the United States by bankruptcy courts on the basis of litigant consent, and, if so, whether "implied consent" based on a litigant's conduct, where the statutory scheme provides the litigant no notice that its consent is required, is sufficient to satisfy Article III. 2.Whether a bankruptcy judge may submit proposed findings of fact and conclusions of law for de novo review by a district court in a "core" proceeding under 28 U.S.C. 157(b). LOWER COURT CASE NUMBER: 11-35162
The U.S. Supreme Court case Executive Benefits Insurance Agency v. Arkison (2013) addressed the issue of whether a bankruptcy court has constitutional authority to make final judgments on claims that seek only to augment the bankruptcy estate and do not involve any adjudication of creditor's rights. The case arose after Bellingham Insurance Agency filed for Chapter 7 bankruptcy, and Peter H. Arkison, as trustee for the company’s estate, sued Executive Benefits Insurance Agency (EBIA), alleging fraudulent conveyance under federal and state law. EBIA argued that the Bankruptcy Court lacked jurisdiction because it was not an Article III court with a lifetime-appointed judge. In its decision, the Supreme Court held that while Bankruptcy Courts lack constitutional authority to finally decide certain types of claims known as "Stern Claims", they can still hear these cases and submit proposed findings of fact and conclusions of law to a district court for de novo review before entering judgment.
In the dissenting opinion for Executive Benefits Insurance Agency v. Arkison, Justice Thomas argued that Article III of the Constitution does not permit bankruptcy courts to issue final judgments on claims that seek only to "augment" the bankruptcy estate and would otherwise exist without regard to any bankruptcy proceeding. He contended that such claims are matters of private right which require adjudication by an Article III court. The majority's decision, he believed, blurred this distinction between public rights and private rights in a way that undermined constitutional separation of powers principles. Furthermore, he disagreed with their interpretation of previous case law as allowing consent (even implied consent) to overcome these constitutional limitations.
