Bankruptcy – jurisdiction — waiver

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United States Court of Appeals For the Seventh Circuit

Civil

Bankruptcy – jurisdiction — waiver

A constitutional objection to a bankruptcy court’s jurisdiction over state law claims cannot be waived.

“We think the Sixth Circuit has the better view under current law. Schor holds that waiver or consent may be a factor in determining whether delegation of judicial business to non? Article III tribunals is unconstitutional, but it cannot be dispositive because of the structural role of Article III, § 1. And Stern unequivocally holds that 28 U.S.C. § 157(b) violates the structural protections of Article III, § 1, in permitting a bankruptcy judge to enter final judgment in certain ‘core proceedings.’ In other words, unlike Schor, where party consent was permissible because the statutory scheme at issue did not implicate structural concerns, the Supreme Court has already held that the statutory scheme granting bankruptcy judges authority to enter final judgment in core proceedings does implicate structural concerns where the core proceeding at issue is ‘“the stuff of the traditional actions at common law tried by the courts at Westminster in 1789,”’ Stern, 131 S. Ct. at 2609 (quoting N. Pipeline, 458 U.S. at 90 (Rehnquist, J., concurring in judgment)). Therefore, we cannot agree with our colleagues on the Ninth Circuit that the allocation of authority between bankruptcy courts and district courts with regard to core proceedings does not implicate structural interests. We also observe that in Stern the Court rejected the proposition that the fact that bankruptcy judges are appointed by Article III judges makes a difference; the Court explained that since it was the bankruptcy court itself that ‘exercise[d] “the essential attributes of judicial power [that] are reserved to Article III courts,” it [did] not matter who appointed the bankruptcy judge or authorized the judge to render final judgments in such proceedings. The constitutional bar remain[ed].’ Id. at 2619 (second alteration in original) (quoting Schor, 478 U.S. at 851).”

Affirmed in part, and Reversed in part.

12-1349 Wellness International Network, Ltd., v. Sharif

Appeal from the United States District Court for the Northern District of Illinois, Leinenweber, J., Tinder, J.