10-179 Stern v. Marshall

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Constitutional Law
Bankruptcy courts

The Constitution prohibits a bankruptcy court from considering an unrelated counterclaim in a bankruptcy core proceeding.

Article III is “an inseparable element of the constitutional system of checks and balances” that “both defines the power and protects the independence of the Judicial Branch.” Northern Pipeline , 458 U. S., at 58 (plurality opinion). Article III protects liberty not only through its role in implementing the separation of powers, but also by specifying the defining characteristics of Article III judges to protect the integrity of judicial decisionmaking.

This is not the first time the Court has faced an Article III challenge to a bankruptcy court’s resolution of a debtor’s suit. In Northern Pipeline, the Court considered whether bankruptcy judges serving under the Bankruptcy Act of 1978—who also lacked the tenure and salary guarantees of Article III—could “constitutionally be vested with jurisdiction to decide [a] state-law contract claim” against an entity that was not otherwise part of the bankruptcy proceedings. Id., at 53, 87, n. 40 (plurality opinion). The plurality in Northern Pipeline recognized that there was a category of cases involving “public rights” that Congress could constitutionally assign to “legislative” courts for resolution. A full majority of the Court, while not agreeing on the scope of that exception, concluded that the doctrine did not encompass adjudication of the state law claim at issue in that case, and rejected the debtor’s argument that the Bankruptcy Court’s exercise of jurisdiction was constitutional because the bankruptcy judge was acting merely as an adjunct of the district court or court of appeals. Id., at 69–72; see id., at 90–91 (Rehnquist, J., concurring in judgment). After the decision in Northern Pipeline , Congress revised the statutes governing bankruptcy jurisdiction and bankruptcy judges. With respect to the “core” proceedings listed in §157(b)(2), however, the bankruptcy courts under the Bankruptcy Amendments and Federal Judgeship Act of 1984 exercise the same powers they wielded under the 1978 Act. The authority exercised by the newly constituted courts over a counterclaim such as Vickie’s exceeds the bounds of Article III.

600 F. 3d 1037, affirmed.

10-179 Stern v. Marshall

Roberts, C.J.; Scalia, J., concurring; Breyer, J., dissenting.

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