Thursday, July 7, 2011

Stern v. Marshall, What's the Deal with More Work?

        People don't like change. People also don't like change that brings more work. When an idea comports with the belief, philosophy, or ideology we've developed, if it involves more work, most people want none of it. That is what has resulted in the Supreme Court's recent decision of Stern v. Marshall. 
        In this opinion published June 23, 2011 the Supreme Court dropped what some call a "bombshell" on the world of Bankruptcy. The case involved the estates of Vickie Lynn Marshall, better known as Anna Nicole Smith, and Pierce Marshall, son to the Oil Tycoon J. Howard Marshall who Vickie was married to for 14 months. The Court found bankruptcy courts "lacked constitutional authority to enter a final judgment on a state law counterclaim that is not resolved in the process of ruling on a creditor's proof of claim."
        What that ultimately means is in each filing of bankruptcy the court will have to determine (1) whether the bankruptcy court has statutory authority, and (2) whether the bankruptcy court has constitutional authority. This problem results in more work for the judiciary. But, it also means an avenue of appeal for debtors and creditors in the joust of bankruptcy.
        In the facts of Stern, Pierce Marshall filed a proof of claim asserting rights to recover damages from Vickie's (Anna Nicole) bankruptcy estate alleging Vickie had defamed him. Vickie responded with a counterclaim for tortious interference under Title 28 USC 157(b)(2)(C). After losing in Bankruptcy court Pierce objected that the court lacked jurisdiction as the counterclaim was not a "core proceeding." The Supreme Court followed the ruling of the Court of Appeals who had reversed the decisions of the Bankruptcy and the District Court.
        The most important facet of all this, in my opinion, is that debtors and creditors alike can appeal the decisions of the Bankruptcy court for a lack of constitutional jurisdiction. In the short run this a load of work for District Courts. A decision disliked in Bankruptcy will be appealed to the District Courts for a lack of constitutional jurisdiction. The District Courts across the country will hammer out modes of analysis and throw as much back to the bankruptcy court as possible. After a few years a case will come on appeal and if judges, clerks, and courts are lucky the Supreme Court will outline the proper constitutional analysis for a bankruptcy court.
        So, for practioners on the other-side of the bench, does it mean more work? Yes. For judges, clerks, and courts, does it mean more work? Yes. The question then becomes how do you feel about it?

1 comment:

  1. Well done, Brandon. That is an interesting case, we'll see how it shakes out.