June 12, 2014
On Monday, the United States Supreme Court decided in Executive Benefits Insurance Agency v. Arkison that while bankruptcy courts do not have the power to make final decisions on so-called “Stern claims,” they can try or “hear” those disputes and then make a recommendation to the district courts for entry of final judgment. The decision clarified Stern v. Marshall, an earlier Supreme Court case related to Anna Nicole Smith’s attempt to secure half of her deceased husband’s fortune. That case had decided it was constitutionally impermissible for Congress to grant the bankruptcy courts the power to make the ultimate decision on certain state law claims filed in the bankruptcy courts. Rather, those final decisions must be made by Article III district judges. These and certain common bankruptcy litigation causes of action became known as Stern claims and were in jurisdictional “limbo.” Some litigants had argued that the bankruptcy courts did not even have the ability to hear the claims for recommendation to the district courts for final decision.

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