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Author Archives: Sharon J Richardson
Stern v. Marshall Update – Ninth Circuit Holds That Bankruptcy Courts Lack Constitutional Authority To Finally Determine Fraudulent Transfer Claims Against Non-Claimants
On December 4, 2012, the United States Court of Appeals for the Ninth Circuit added to the growing body of case law delineating the extent of bankruptcy courts’ jurisdiction in the wake the Supreme Court’s decision in Stern v. Marshall. In In re Bellingham Insurance Agency, Inc., the Ninth Circuit held that (i) non-Article III courts lack the Constitutional authority to enter final judgments in fraudulent transfer actions against non-claimants, (ii) bankruptcy courts may hear and enter findings of fact and conclusions of law in fraudulent transfer actions, and (iii) a defendant may waive its Constitutional right to be heard before an Article III court. Continue reading
Posted in Stern v. Marshall Updates
Because of Winn-Dixie? SDNY Bankruptcy Court Looks Beyond Literal Compliance with Venue Statute and Transfers Patriot Coal Cases to Eastern District of Missouri
On November 27, 2012, in a ruling that undoubtedly will impact the choice of venue for many large corporate bankruptcies in the future, Judge Shelley C. Chapman of the United States Bankruptcy Court for the Southern District of New York transferred venue of the chapter 11 cases of Patriot Coal Corporation and ninety-eight of its affiliates to the Eastern District of Missouri. Drawing on an array of jurisprudence regarding venue, Judge Chapman found that notwithstanding literal compliance with the applicable statute, the New York domicile of two of the debtors was insufficient to establish venue for all ninety-nine cases in the Southern District of New York when the two debtors were formed on the eve of the commencement of the chapter 11 cases admittedly for the sole purpose of establishing venue. In re Patriot Coal Corp., 12-12900-SCC (Bankr. S.D.N.Y. Nov. 27, 2012) [docket no. 1629]. The Patriot decision is the latest in a line of recent decisions by courts in the Southern District of New York and the District of Delaware granting motions to transfer venue to other districts. The decision is notable in that it strongly discourages the practice of “bootstrapping” a corporate bankruptcy case to the case of a recently formed affiliate in New York when the debtor has no meaningful presence in the jurisdiction, change of venue is requested by economic parties in interest, and moving the case is unlikely to inflict demonstrable economic harm to the estate. Continue reading
Posted in Analysis
Stern v. Marshall Updates – DC Bankruptcy Court Has Jurisdiction to Hear State Law Counterclaims
In GB Herndon, the District of Columbia Bankruptcy Court determined that it had constitutional authority to determine state common law counterclaims and state law claims against nondebtor codefendants. Adams Nat’l Bank v. GB Herndon & Assocs., Inc. (In re GB Herndon & Assocs., Inc.), 459 B.R. 148 (Bankr. D.D.C. 2011). The case involved a routine contract dispute. Adams National Bank lent money to the debtor to finance the construction of a housing complex. The debtor and its guarantors failed to meet their obligations, first under the original loan agreement, then under a forbearance agreement, and the bank sued in state court for breach of contract. Continue reading
Posted in Stern v. Marshall Updates
Amended Standing Order of Reference, 12 Misc. 00032 (S.D.N.Y. Jan. 31, 2012).
On January 31, 2012, Southern District of New York Chief Judge Loretta A. Preska issued an Amended Standing Order of Reference, providing that (i) bankruptcy judges may submit proposed findings of fact and conclusions of law with respect to “core” matters over which bankruptcy courts do not have constitutional authority to enter final judgments and (ii) the district court may treat any order of the bankruptcy court as proposed findings of fact and conclusions of law in the event that the district court determines that entry of a final order by the bankruptcy court would be inconsistent with Article III of the United States Constitution. Continue reading
Posted in Analysis, Stern v. Marshall Updates
Tagged Standing Order, Stern
Ortiz v. Aurora Health Care, Inc. (In re Ortiz), No. 10-3465 (7th Cir. Dec. 30, 2011)
The Seventh Circuit Court of Appeals dismissed the debtors’ appeal of the bankruptcy court’s dismissal of the debtors’ state law counterclaims because the bankruptcy court lacked authority to enter a final judgment on the debtors’ counterclaims, and without a final judgment, there was no basis for appellate jurisdiction. Continue reading
Posted in Stern v. Marshall Updates
Tagged Aurora Health, Marshall, Seventh Circuit, Stern
Coudert Brothers Trust v. Baker & McKenzie, et al., No. 11-2785, 2011 U.S. Dist. LEXIS 110425 (S.D.N.Y. Sept. 23, 2011)
In Coudert Brothers, the Southern District of New York considered whether the parties impliedly consented to the bankruptcy court’s entry of a final order determining non-core claims it otherwise lacked constitutional authority to adjudicate under Stern v. Marshall.[i] Because the parties did not consent, the district court treated the bankruptcy court’s opinion as proposed findings of fact and conclusions of law, which the district court would review de novo. Continue reading
Posted in Stern v. Marshall Updates
Tagged Coudert Brothers, Marshall, Southern District, Stern, Supreme Court
Development Specialists, Inc. v. Akin Gump Strauss Hauer & Feld LLP, No. 11 Civ 5994, 2011 WL 5244463 (S.D.N.Y Nov. 2, 2011)
The plan administrator for the estate of Coudert Brothers, LLP filed with the bankruptcy court thirteen separate adversary proceedings against ten law firms alleging that the law firms were liable to Coudert for “unfinished business” that several of Coudert’s former partners took with them to their new firms. After the Supreme Court issued its decision in Stern v. Marshall, the law firms moved the Southern District of New York to withdraw the bankruptcy reference and abstain from hearing the claims in favor of New York state courts or review the merits of the bankruptcy court’s denial of the firms’ motion to dismiss de novo. The court granted the motion to withdraw the reference, but denied the motion to abstain. Continue reading
Posted in Stern v. Marshall Updates
Tagged Coudert Brothers, Marshall, Southern District, Stern, Supreme Court
In re Canopy Financial, Inc., Case No. 11-A-581, 2011 WL 3911082 (N.D. Ill. Sept. 1, 2011)
Fraudulent transfer claims were under review again in Paloian v. American Express Co., (In re Canopy Financial, Inc.), where the Northern District of Illinois held that the bankruptcy court is authorized to hear fraudulent conveyance claims and propose findings of fact and conclusions of law to the district court.
Posted in Stern v. Marshall Updates
Tagged Canopy, Stern
Special Features – Stern v. Marshall
On June 23, 2011, the Supreme Court issued an opinion in Stern v. Marshall, the well-known case involving the estate of former model Vickie Lynn Marshall (more famously known as Anna Nicole Smith) and the estate of her late husband, wealthy oil magnate J. Howard Marshall. The decision, which was written by Chief Justice Roberts, held that a bankruptcy court, as a non-Article III court, lacked constitutional authority to issue a final judgment on state law counterclaims by a debtor against a claimant notwithstanding that the Bankruptcy Code specified that all counterclaims of a debtor were within the “core” jurisdiction of the bankruptcy court. For an in depth analysis of the decision, please refer to Cadwalader, Wickersham & Taft LLP’s Client & Friends Memo “Stern v. Marshall: How Big Is It?” published July 14, 2011.
Although the decision may have wide-ranging implications on bankruptcy jurisdiction, the nature and extent of its impact are not yet clear. Chief Justice Roberts’ opinion notes that the question it addresses is “a ‘narrow’ one,” and it will be interesting to see how lower courts apply the ruling to the facts of various cases as they arise. As a service to our readers, Cadwalader’s Restructuring Review Blog will examine how courts interpret and apply Stern v. Marshall and the resulting impact on the jurisdiction of bankruptcy courts across the country.
Posted in Stern v. Marshall Updates
Tagged Marshall, Stern
In re Blixseth, No. 10-00088, 2011 WL 3274042 (Bankr. D. Mont. Aug. 1, 2011)
In Samson v. Blixseth, the Bankruptcy Court for the District of Montana determined sua sponte that it did not have constitutional authority to hear a core adversary proceeding to set aside certain transfers as fraudulent conveyances. The adversary proceeding in Blixseth involved a dispute between the bankruptcy trustee and the former spouse of the debtor over property conveyed to the debtor under a marital settlement agreement. The trustee sought to set aside the agreement, recover the allegedly fraudulent and preferential transfers of property, and equitably subordinate the claims of the debtor’s former spouse. Continue reading
Posted in Stern v. Marshall Updates
Tagged Blixseth, Marshall, Stern