Saturday, June 14, 2014
In Executive Benefits Insurance Agency v. Arkison, the Supreme Court decided in favor of federal bankruptcy judges. In this case, the Court left intact a lower-court ruling that enforced a fraudulent-conveyance judgment against EBIA. The Supreme Court reaffirmed its 2011 decision in Stern v. Marshall, removing from bankruptcy judges the power to decide “non-core” matters not directly related to dividing up a debtor’s assets among creditors.
Stern v. Marshall involved a dispute among the heirs of J. Howard Marshall II and the lawyers for Anna Nicole Smith. The court overruled a portion of the federal bankruptcy laws assigning certain matters to bankruptcy judges and reaffirming the power of Article III judges, who are protected with life tenure and salary protections. Although the Stern case established the doctrine of “core” and “non-core” matters, the Supreme Court has never fully decided the jurisdiction of bankruptcy cases.
The court’s decision in Arkison was based on very narrow grounds that the insurance agency allegedly funded with a debtor’s fraudulent conveyances had gotten the benefit of an Article III judge’s review of the case even if it disagreed with authority of the bankruptcy judge in that case. Yet, the decision has little impact on most personal bankruptcies, since those rarely involve the claims against third parties that bankruptcy trustees make in larger cases when trying to recover money they think has been “bled from the estate.”
See Daniel Fisher, Supreme Court Decides Case With Echoes of Anna Nicole Smith Bankruptcy, Forbes, June 9, 2014.