As a primer to my article, Granting Certiorari on In re Bellingham; A New Case to an Old Problem, (Gonzaga Law Review 49-2 –due out later this spring), I thought I would take some time to address the recent oral argument in Executive Benefits Insurance Agency (“EBIA”) v. Arkinson (In re Bellingham) and give my predictions on the positions within the Supreme Court.
By way of background, the Supreme Court was petitioned for certiorari to answer the following questions left open by the Court’s holding in Stern v. Marshall:
(1)May a bankruptcy judge hear a fraudulent conveyance claim and submit a report and recommendation to a district court for review?
(2) May a litigant consent to the entry of a final judgment by a non-Article III bankruptcy judge? And, if so, does the litigant’s failure to object to the bankruptcy judge’s entry of a final judgment amount to implied consent?
However, as cases do that reach the level of Supreme Court review — The In re Bellingham case has become more than just the questions proposed in the petition. The case implicates fundamental disagreements among the justices in regards to statutory construction, severability, and the duty of Congress and the courts. Additionally, the bankruptcy schema is very similar to the statute governing the United States Magistrates. Despite the differences between the conservative and liberal wings of the Supreme Court, the possible degradation of the Magistrate Act has made many of the Justices take notice.
While it is still up in the air, I would like to offer my predictions on the Justices’ positions in affirming the 9th Circuit’s holding.
Justice Alito- Justice Alito is usually known as one of the more “conservative” justices. However, Justice Alito, in comparing this case to a district court reviewing a magistrate’s decision under de novo review, stated that “I don’t see a difference other than a purely semantic…” (Audio Transcript 1:45). However, to contrast that, in the discussion of the collateral consequences of Stern v. Marshall, Justice Alito said that the Court could only decide the case before it. (Audio Transcript 17:44). I believe that Justice Alito will make a point to narrow the Supreme Court’s holding to the facts of In re Bellingham, however it appears that he would affirm the 9th Circuit’s holding.
Justice Breyer- Justice Breyer made a couple points during his questioning that suggest that he would affirm the 9th Circuit’s holding in Bellingham. According to his comments, fraudulent conveyance actions should be considered core “bankruptcy” proceedings (Audio Transcript at 8:13) and in the event a core proceedings is declared unconstitutional the bankruptcy court should be able to submit a factual findings to the district court for de novo review. (Audio Transcript 9:56).
What is particularly telling about Justice Breyer’s position — and what I advocate in my article— is that there is a litany of Supreme Court cases that detail that “Congress cannot vest in a non-Article 3 court the power to adjudicate without the consent of the litigants.” (Audio Transcript 57:24). If that truly is the Supreme Court’s holding, then the inverse of that statement is also true. Congress can vest a non-Article 3 court with power to adjudicate with the consent of the litigants. However, I acknowledge, similar to Justice Breyer, that this position may not command a majority. (Audio Transcript 58:17)
Justice Ginsburg- Justice Ginsburg seems to be interested in the practical application of the district court review. Justice Ginsberg asked if EBIA would even have a case if the district court would have stated that it was unsure about the bankruptcy courts authority, and therefore it was going to treat the bankruptcy court’s ruling as de novo and enter judgment. (Audio Transcript 14:12). Although she did not comment on the issue of consent, I believe that Justice Ginsburg would affirm.
Justice Kennedy- Justice Kennedy only offered one question in oral argument. “Will it be conceded… that this was appellate?” While this is not particularly telling, it does highlight that Justice Kennedy’s focus at that time was the district court’s position when addressing the bankruptcy court’s findings.
Chief Justice Roberts- Author of Stern v. Marshall. Chief Justice Roberts was very clear that his position has not changed. As he posed the question, can “two parties who come off the street, if they agree,” take an Article 3 judge’s “Constitutional birthright” away? (Audio Transcript 51:46). It appears that Justice Roberts is taking a bright line position against non-Article 3 courts, and therefore he would not affirm.
Justice Sotomayor- Justice Sotomayor seems concerned that EBIA’s counsel is arguing a “mere formality.” (Audio Transcript 2:50). Justice Sotomayor also foreshadowed her position on the consent issue. In what this author agrees with, Justice Sotomayor indicates that implied consent has already been held to be appropriate. (Audio Transcript 24:01). I believe that Justice Sotomayor would affirm.
Justice Scalia- Justice Scalia is nothing but consistent with his position in statutory interpretation cases. This case seems to be no different. According to Justice Scalia, even though Stern v. Marshall invalidated a portion of the bankruptcy code, it is up to Congress to fix it. (Audio Transcript 15:32) However, in a question that incited some laughter from me, Justice Scalia asked “Counsel, is Article 3 not violated so long as the parties are happy?” Maybe there is some hope yet. I believe that Justice Scalia would not affirm.
The Supreme Court’s position on this case is merely my opinion, and is based solely on the comments and questions presented in oral argument. I would welcome any comments or contrary discussion. You can submit your comments to:
A special thanks to the Oyez Project for posting a very intuitive transcript and audio recording of the oral argument. It can be found at: The Oyez Project at IIT Chicago-Kent College of Law. 27 January 2014