Summary
The Supreme Court held that a bankruptcy court had statutory authority under 28 U.S.C. § 157(b)(2)(C) to enter a final judgment on the debtor's state-law tortious-interference counterclaim against a creditor who filed a proof of claim. However, Article III prohibited the bankruptcy court from finally adjudicating that common-law claim because it did not fall within the public-rights exception and was not merely an adjunct function. The Court affirmed the Ninth Circuit's judgment.
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Questions Presented
- Whether 28 U.S.C. § 157(b)(2)(C) authorized the bankruptcy court to enter a final judgment on Vickie's counterclaim.
- Whether 28 U.S.C. § 157(b)(5) deprived the bankruptcy court of authority to resolve Pierce's defamation claim.
- Whether Pierce consented to or forfeited an objection to the bankruptcy court's resolution of his defamation claim.
- Whether Article III permitted a bankruptcy court, whose judges lack Article III tenure and salary protections, to enter a final judgment on a state-law tort counterclaim that was not resolved in the process of ruling on a creditor's proof of claim.
- Whether Pierce's filing of a proof of claim brought Vickie's counterclaim within the public-rights exception or the claims-allowance process.
- Whether bankruptcy courts under the 1984 Act are constitutional adjuncts of Article III district courts for purposes of entering final judgments on such counterclaims.
Holdings
- Section 157(b)(2)(C) authorized the bankruptcy court to enter a final judgment on Vickie's counterclaim because the counterclaim was a core proceeding within the statute's plain text.
- Section 157(b)(5) is not jurisdictional; it specifies the venue in which personal-injury-tort and wrongful-death claims shall be tried and may be waived or forfeited.
- Article III prohibited the bankruptcy court from entering a final judgment on Vickie's state-law tort counterclaim because the claim involved the exercise of the judicial power by a non-Article III court.
- Vickie's tortious-interference counterclaim did not fall within the public-rights exception to Article III.
- Pierce's filing of a proof of claim did not authorize the bankruptcy court to finally adjudicate Vickie's counterclaim because adjudication of the counterclaim was not necessary to resolve the allowance or disallowance of Pierce's claim.
- Bankruptcy courts under the 1984 Act are not mere adjuncts of Article III district courts when they enter final, binding judgments on broad state-law counterclaims.
Key quotations
“Although the Bankruptcy Court had the statutory authority to enter judgment on Vickie’s counterclaim, Article III of the Constitution did not.” (564 U.S. at 482)
“What is plain here is that this case involves the most prototypical exercise of judicial power: the entry of a final, binding judgment by a court with broad substantive jurisdiction, on a common law cause of action, when the action neither derives from nor depends upon any agency regulatory regime.” (564 U.S. at 499)
“The Bankruptcy Court below lacked the constitutional authority to enter a final judgment on a state law counterclaim that is not resolved in the process of ruling on a creditor’s proof of claim.” (564 U.S. at 503)
Factual background
Vickie Lynn Marshall, known publicly as Anna Nicole Smith, married J. Howard Marshall II approximately one year before his death. She alleged that Pierce Marshall, J. Howard's son, tortiously interfered with J. Howard's intended gift to her by inducing him to execute a trust that excluded her. After Vickie filed for bankruptcy, Pierce asserted a defamation claim and proof of claim against her estate, and Vickie counterclaimed for tortious interference. The bankruptcy court entered summary judgment for Vickie on the defamation claim and awarded her more than $400 million in compensatory damages and $25 million in punitive damages on the counterclaim.
Procedural history
Vickie Marshall filed a bankruptcy petition in the Central District of California after initiating Texas probate litigation concerning J. Howard Marshall II's estate. Pierce Marshall filed a defamation claim and proof of claim in the bankruptcy case, and Vickie asserted a counterclaim for tortious interference with an expected gift. The bankruptcy court entered judgment for Vickie, the district court independently adjudicated the matter, and the Ninth Circuit ultimately held that the bankruptcy court lacked authority to enter a final judgment and that the Texas judgment controlled. The Supreme Court affirmed the Ninth Circuit.