NEW YORK (The Deal) -- The U.S. Supreme Court has handed down a decision that affirms that bankruptcy judges can have the final say in their cases.
The court ruled 6-3 Tuesday that bankruptcy judges could adjudicate certain claims in cases with the parties' consent. In the opinion, Justice Sonia Sotomayor wrote, "It is no exaggeration to say that without the distinguished service of these judicial colleagues [magistrate and bankruptcy judges], the work of the federal court system would grind nearly to a halt."
The ruling, which had been pending since oral arguments on Jan. 14, determined whether a state property law issue in a lawsuit questioning the "property of the bankruptcy estate means that such action does not 'stem from the bankruptcy itself' and therefore, that a bankruptcy court does not have the constitutional authority to enter a final order deciding that action."
Bankruptcy judges are appointed under Article I of the Constitution, a different statute than Article III, which governs district and appeals court judges. The former have 14-year terms, whereas the latter have life tenure. The Bankruptcy Amendments and Federal Judgeship Act of 1984 established core proceedings that could be handled to conclusion in bankruptcy court.
In the opinion, Sotomayor wrote Article III is not violated when the parties "knowingly and voluntarily consent to adjudication by a bankruptcy judge." Cases in which the Supreme Court has found a violation of a litigant's right to an Article III decision maker have all "involved an objecting defendant forced to litigate voluntarily before a non-Article III court."
Sotomayor contended the court has never held a litigant who has the right to an Article III court may not waive that right through his or her consent.Sotomayor concluded: "To hear the principal dissent [Chief Justice John G. Roberts and Justices Antonin Scalia and Clarence Thomas] tell it, the world will not end in fire, or ice, but in a bankruptcy court. ... Adjudication based on litigant consent has been a consistent feature of the federal court system since its inception. Reaffirming that unremarkable fact, we are confident, poses no great threat to anyone's birthrights, constitutional or otherwise."
The Wellness decision once again addressed issues first raised in the court's Stern v. Marshall ruling on June 23, 2011, and revisited in last year's Executive Benefits Insurance Agency v. Arkison decision.