The United States Supreme Court, on June 9, 2014, unanimously held that certain “core” proceedings (e.g., fraudulent transfer suits ) could still be litigated in the bankruptcy court, but only if that court’s proposed fact findings and legal conclusions are subject to de novo review by the district court. Executive Benefits Ins. Agency v. Arkison (In re Bellingham Ins. Agency), 2014 WL 2560461 (U.S. Sup. Court, June 9, 2014).

The case of Executive Benefits Insurance Agency v. Arkison (In re Bellingham Ins. Agency), No. 12- 1200, was easily one of the most closely watched bankruptcy cases in many years. Last week’s decision in that case, however, was far less dramatic than  some practitioners feared it might be. The Supreme Court answered two important questions regarding the power of bankruptcy courts that it left open three years ago in Stern v. Marshall.

On June 9, 2014, in Executive Benefits Insurance Agency v. Arkison (In re Bellingham Insurance Agency, Inc.),1 a much-anticipated decision, the Supreme Court addressed how bankruptcy courts should adjudicate so-called Stern claims. Stern claims are “core” claims over which bankruptcy courts have statutory authority to enter orders and judgments,2 but which authority the Supreme Court previously held in Stern v. Marshall3 was not permitted (at least with respect to certain issues) under Article III of the United States Constitution.

The Stern v. Marshall Decision. In its 2011 decision in Stern v. Marshall, decided by a 5-4 vote, the U.S. Supreme Court held that even though Congress designated certain state law counterclaims as “core” proceedings, Article III of the U.S. Constitution prohibits bankruptcy courts from finally adjudicating those claims. Stern v.

On June 9, 2014, the United States Supreme Court addressed an issue left open in Stern v. Marshall.¹ Instead of bringing clarity to procedural confusion created by Stern, the Court’s opinion in Executive Benefits Insurance Agency v.

On Monday, the Supreme Court confirmed¹ that bankruptcy courts may hear “Stern-type” matters (such as tortious interference counterclaims) that relate to bankruptcy proceedings, so long as a district court reviews the bankruptcy court’s proposed findings and renders the final decision. Other questions left in the wake of Stern v. Marshall,² however, remain unanswered and will continue to occupy the attention of parties to bankruptcy matters and courts alike.

BACKGROUND: IN THE WAKE OF STERN V. MARSHALL

On June 9, 2014, a unanimous Supreme Court issued the latest in a series of key rulings regarding the extent of a bankruptcy court’s constitutional authority.¹ Notably, while Monday’s Executive Benefitsdecision answered one important question arising out of the Court’s 2011 decision in Stern v. Marshall,² it also left the primary question that resulted in a split in the Circuit Courts of Appeals to be decided another day.

The Aftermath of Stern v. Marshall

On Monday, the United States Supreme Court decided in Executive Benefits Insurance Agency v. Arkison that while bankruptcy courts do not have the power to make final decisions on so-called "Stern claims," they can try or "hear" those disputes and then make a recommendation to the district courts for entry of final judgment.

In Executive Benefits Insurance Agency, petitioner vs.  Peter H. Arkison, Chapter 7 Trustee, Case No. 12-1200, 573 U.S. __(2014) the United States Supreme Court  ( Court) delivered its opinion as a follow up to its landmark decision in Stern v. Marshall.  In Stern v.

On June 9, 2014, the United States Supreme Court issued a unanimous opinion in Exec. Benefits Ins. Agency, Inc. v. Arkison (In re Bellingham Ins. Agency, Inc.), 573 U.S. ___ (2014), affirming the Ninth Circuit and holding that, while the Constitution does not permit a bankruptcy court to issue a final ruling in certain circumstances, it is permitted to issue proposed findings of fact and conclusions of law to be reviewed de novo by the district court.