On June 23, 2011, the Supreme Court handed down a 5-4 decision in the Stern v.

In a significant decision that reinforced the U.S. Supreme Court’s prior plurality decision in Marathon, the Court determined that while bankruptcy courts have the statutory authority to hear state-law compulsory counterclaims to a creditor’s proof of claim under section 157(b)(2)(C) of Title 28, Article III of the U.S. Constitution requires such proceedings to be heard by Article III judges where they would not be resolved as part of the claims allowance process.

Introduction

On June 23, 2011, after fifteen years of hugely acrimonious litigation, the Supreme Court of the United States (the “Court”) issued a decision on a narrow legal issue that may end up significantly limiting the scope of bankruptcy courts’ core jurisdiction.  

In a decision that may have significant practical implications to the practice of bankruptcy law, the U.S. Supreme Court recently declared, on constitutional grounds, that a bankruptcy court cannot exercise jurisdiction over a debtor’s state law counterclaims, thus considerably limiting the ability of the bankruptcy court to fully and finally adjudicate claims in a bankruptcy case. Stern v. Marshall, No. 10-179 (June 23, 2011).

Trustee must return debtor’s funds after Chapter 13 conversion.

The United States Supreme Court will hand down its decision in the next few weeks in the case of Wellness Int’l Network, Ltd. v. Sharif (“Wellness”), 727 F.3d 751 (7th Cir. 2013) regarding bankruptcy courts’ jurisdiction.  The jurisdictional quagmire is a major and growing virus in the bankruptcy courts, increasing exponentially the costs of bankruptcy litigation.  Hopefully the Wellness decision will eventually provide a belated prescription on bankruptcy courts’ jurisdiction, and make us all feel just peachy.

A little background:

On May 4, 2015, a unanimous United States Supreme Court in Bullard v. Blue Hills, 135 S. Ct.

“I get knocked down / But I get up again / You’re never gonna keep me down.”

 – Chumbawumba

On May 4, 2015, in the case Bullard v. Blue Hills Bank, the United States Supreme Court held that debtors in chapter 13 (and presumably chapter 9 and 11 as well) are not entitled as of right to immediately appeal bankruptcy court orders denying confirmation of a proposed plan of reorganization. This ruling, although consistent with a majority of circuit courts of appeal that have considered the issue, reversed governing precedent in several circuit courts—including the Third Circuit, which reviews Delaware bankruptcy court decisions.

In an opinion issued today, the Supreme Court held that debtors do not have the right to immediately appeal a bankruptcy court’s decision denying confirmation of a proposed reorganization plan. This decision resolves a circuit split, and confirms the balance of power between debtors and creditors in the plan confirmation process. As the Supreme Court explained, “the knowledge that [a debtor] will have no guaranteed appeal from a denial should encourage the debtor to work with creditors and the trustee to develop a confirmable plan as promptly as possible.”