It has been over two years since the Supreme Court decided Stern v. Marshall. Now, one would assume that the dust is settling on the decision. However, that is not the case. A simple search on Lexis Advance reveals that there are over 1,000 cases citing to Stern and 118 law review articles written about the opinion. This leads to a question of why? To paraphrase the Court’s own dicta, it is no big deal.
In Stern, the Supreme Court attempted to answer the question of whether the bankruptcy courts had jurisdiction to enter a final judgment on a tort law counterclaim filed by the debtor. The Supreme Court held that the bankruptcy court could not enter a final judgment on the counterclaim, and that to do so was in violation of Article III, Section 1 of the U.S. Constitution. However, the issue of whether the parties could consent to the bankruptcy court issuing a final decision was left open by the Court’s holding. This created a circuit split between the Ninth Circuit and the Sixth Circuit. The Seventh Circuit has weighed in on the issue, but the two recent Seventh Circuit decisions on the issue are contradictory, and rely on the Sixth Circuit’s reasoning. Other circuits have weighed in on the issue of consent, but seem to be waiting on the Supreme Court to give additional guidance.
The Supreme Court recently granted certiorari on Executive Benefits Insurance Agency v. Arkison (In re Bellingham Insurance Agency) to finally answer the questions that led to the circuit split. This article describes and demonstrates that the Ninth Circuit’s holding in In re Bellingham Insurance Agency was correct. The Supreme Court should affirm the Ninth Circuit’s holding. This article also shows that if a party impliedly consents to the bankruptcy court’s authority, and engages in litigating its rights in the bankruptcy court, it cannot consent to the court’s “jurisdiction” only to the point that it remains in their favor.