Thursday, June 4, 2015

Bankruptcy court jurisdiction may be expanded by consent

Federal bankruptcy judges may decide related state law claims outside their constitutional authority if the parties consent, the U.S. Supreme Court has ruled in a 6-3 decision.
The decision (PDF) on Tuesday limits the reach of the 2011 decision Stern v. Marshall, holding that bankruptcy judges, who have no Article III protections, have no constitutional authority to decide a related common law tort claim that does not stem from the bankruptcy itself. That case involved the late Anna Nicole Smith, whose real name was Vickie Lynn Marshall.
In  Wellness International Network v. Sharif, the majority said Article III is not violated when the parties “knowingly and voluntarily consent” to handling of the related claim by a bankruptcy judge. That consent, the majority said, need not be express.
The related claim in Wellness International alleged Richard Sharif had concealed about $5 million in assets from creditors by claiming they were in a trust.