600 F.3d 1037 (2010)
This case returns to us after the Supreme Court determined that we had construed too broadly the “probate exception” to our subject matter jurisdiction. Marshall v. Marshall, 547 U.S. 293 (2006). Confident that we have subject matter jurisdiction over this case, id.; 28 U.S.C. § 1291, we turn to the merits of the longstanding and acrimonious dispute.
This case involves a tort claim by Vickie Lynn Marshall against E. Pierce Marshall, the son of her late husband J. Howard Marshall II, for Pierce Marshall’s purported interference with a substantial inter vivos gift (estimated to exceed $300 million) that her late husband intended to give to her. The claim comes to us in an unusual procedural posture. It was asserted as a state law counterclaim to a nondischargeability complaint and proof of claim that Pierce Marshall filed in Vickie Lynn Marshall’s bankruptcy proceedings in the Central District of California. Both the bankruptcy and district courts found that Pierce Marshall was liable for tortious interference and awarded Vickie Lynn Marshall millions of dollars in compensatory and punitive damages.
While Vickie Lynn Marshall’s tortious interference claim was pending in federal court in California, a probate court in Texas was administering the estate of J. Howard Marshall II. Both Vickie Lynn Marshall and Pierce Marshall were actively engaged in this Texas litigation, participating fully in the five-month jury trial held by the Texas probate court. To discern J. Howard Marshall II’s true intentions regarding his will and assets held in trust, the Texas probate court had to resolve allegations that J. Howard Marshall II’s estate plan and the transactions underlying it were tainted by illegality and that, contrary to his estate plan, J. Howard Marshall II intended to give Vickie Lynn Marshall a substantial inter vivos gift. In its judgment, which was issued after the bankruptcy court’s “judgment” on Vickie Lynn Marshall’s tortious interference claim but before the district court had adjudicated the appeal from the bankruptcy court, the Texas probate court upheld the validity of J. Howard Marshall’s estate plan and estate planning documents, finding that J. Howard knowingly effected his estate plan free from the undue influence or coercion of his son Pierce Marshall. The Texas probate court further found that J. Howard Marshall II did not intend to give Vickie Lynn Marshall a gift from the assets that passed through his will or that were held in his living trust. These and other legal and factual determinations adverse to Vickie Lynn Marshall would be fatal to her tortious interference counterclaim, should they be afforded preclusive effect in this proceeding.
We conclude that the findings of the Texas probate court should be afforded preclusive effect because it is the earliest final judgment on matters relevant to this proceeding. The bankruptcy court exceeded its statutory grant of power and the constitutional limitations on that power when it purported to enter a final judgment in favor of Vickie Lynn Marshall on her counterclaim. The bankruptcy court is empowered by 28 U.S.C. § 157(b)(1) to hear and finally determine “core proceedings arising under title 11, or arising in a case under title 11.” Vickie Lynn Marshall’s counterclaim for tortious interference is not such a “core proceeding” because its resolution was not a necessary precursor to the resolution of Pierce Marshall’s claim against the bankruptcy estate for defamation. In other words, her counterclaim was not so closely related to his claim that they essentially merged, with her counterclaim becoming part and parcel of the bankruptcy court’s claims determination and allowance process. Thus, the bankruptcy court could, at most, enter proposed findings of fact and conclusions of law on Vickie Lynn Marshall’s counterclaim for tortious interference. See 28 U.S.C. § 157(c).
The district court should have afforded preclusive effect to the Texas probate court’s factual findings and relevant legal conclusions. The determinations adverse to Vickie Lynn Marshall in the Texas probate court prevent her from establishing the elements of her counterclaim, such as J. Howard Marshall II’s intent to give her a substantial inter vivos gift, the tortious nature of Pierce Marshall’s conduct regarding the estate planning documents, and the reasonableness and amount of her expectancy. We reverse the judgment of the district court and remand with instructions that judgment be entered in favor of the Estate of Pierce Marshall.
This case arises out of the bankruptcy of appellee/cross-appellant Vickie Lynn Marshall, the widow of the late J. Howard Marshall II. During the course of her bankruptcy, Vickie Lynn Marshall made a counterclaim for tortious interference with a gift expectancy against appellant/cross-appellee E. Pierce Marshall, the younger of J. Howard Marshall II’s two sons, who had sought a determination of nondischargeability and filed a proof of claim against Vickie Lynn Marshall’s bankruptcy estate.1 Vickie Lynn Marshall’s counterclaim is the focus of this appeal. Although the case arises out of her bankruptcy, a broader review of the relationships between Vickie Lynn Marshall, J. Howard Marshall II, and Pierce Marshall, the business and estate planning measures of J. Howard Marshall II, and the Texas probate proceeding is necessary to appreciate the issues before us.
As detailed by the district court, J. Howard Marshall II was a self-made entrepreneur who eventually found great success in the oil industry. Born in 1905, J. Howard Marshall II attended Haverford College and graduated magna cum laude from Yale Law School before working during the 1930s for the Roosevelt Administration on the proration of oil production. After continued involvement in the oil industry, J. Howard Marshall II became one of the founders of the Great Northern Oil and Gas Company in 1954. The wealth of the Marshall family is primarily based on the interest acquired by J. Howard Marshall II in Great Northern Oil and Gas, which was the predecessor company to Koch Industries.2
In 1982, as an estate planning mechanism to reduce (or avoid) the cost of probate, J. Howard Marshall II placed almost all of his assets (including his interest in Marshall Associates, the family partnership that then held the Koch stock) in a revocable inter vivos trust, known as the J. Howard Marshall II Living Trust, or the Living Trust.3 From 1982 until his death, J. Howard Marshall II executed a series of amended and restated instruments governing the terms of the Living Trust.
During his lifetime, J. Howard Marshall II retained the income from the Living Trust’s assets, and the Living Trust was responsible for his debts. The terms of the Living Trust permitted J. Howard Marshall II to borrow money using the Living Trust’s assets as security. Although the distributions from the Living Trust were his primary source of income, J. Howard Marshall II also drew a salary from Marshall Petroleum, Inc. (MPI), earned directors’ fees from the corporate boards of which he was a member, and received minor pension payments.
The Living Trust also named the beneficiaries who would receive the Living Trust property after J. Howard Marshall II’s death. At the time J. Howard Marshall II died, the primary beneficiary of the Living Trust was Pierce Marshall.4
Also as part of his estate planning measures, J. Howard Marshall II executed a will that provided for the disposition of the assets that he held directly, i.e., not in the Living Trust or any other form of trust. J. Howard Marshall II executed his last will and testament relevant to these proceedings on December 22, 1992. This will contained pour-over provisions, which required the distribution of J. Howard Marshall II’s probate estate to the Living Trust. Thus, the Living Trust was J. Howard Marshall II’s primary estate planning document. Also in 1992, J. Howard Marshall II signed a document requesting that Pierce Marshall be appointed his guardian if a guardianship was ever warranted.
At the time J. Howard Marshall II met Vickie Lynn Marshall, essentially all of his assets were held by the Living Trust. J. Howard Marshall II modified his Living Trust for the last time on July 13, 1994, just a few days after his marriage. On that date, J. Howard Marshall II made the Living Trust irrevocable.5
J. Howard Marshall II met Vickie Lynn (Smith) Marshall in October 1991. At the time, Vickie Lynn was a twenty-four year old divorcee and single mother living in Houston, Texas. She worked as a waitress and dancer to provide for her son, but she aspired to become an international superstar like her idol Marilyn Monroe. After a courtship lasting more than two years, J. Howard Marshall II and Vickie Lynn Marshall married on June 27, 1994.
Their union was short lived: J. Howard Marshall II died on August 4, 1995, of heart failure at the age of ninety. Although he lavished gifts and significant sums of money on Vickie Lynn Marshall during their courtship and marriage,6 J. Howard Marshall II did not devise any real or personal property to her in his will, nor was a provision for distribution of income or principal of the Living Trust ever made in her favor. Similarly, J. Howard Marshall II did not give Vickie Lynn Marshall any interest in his business assets or stock holdings.
In April 1995, before J. Howard Marshall II had died, Vickie Lynn Marshall filed suit against Pierce Marshall and others in Texas probate court, which was handling guardianship proceedings relating to J. Howard Marshall II. She alleged that Pierce Marshall was tortiously interfering with her statutory right to support from her husband and that Pierce Marshall had breached his fiduciary duties as a trustee of the Living Trust. She also asserted that Pierce Marshall used fraud and undue influence to have J. Howard Marshall II make the Living Trust irrevocable and make other estate planning changes that favored Pierce Marshall. By way of relief, Vickie Lynn Marshall sought the level of support to which she had become accustomed, a declaration from the court that J. Howard Marshall II was a beneficiary of the Living Trust, and the removal of Pierce Marshall from certain fiduciary capacities with respect to his father and his father’s assets.
In August 1995, three days after J. Howard Marshall II died, Vickie Lynn Marshall added an application in the Texas probate court requesting that the court find that J. Howard Marshall II died intestate. Pierce Marshall opposed this application and petitioned for a declaration that his father’s Living Trust and will were valid. Pierce Marshall offered J. Howard Marshall II’s will for probate on August 16, 1995.
J. Howard Marshall III, J. Howard Marshall II’s elder son, filed a will contest on December 20, 1995.7 On January 23, 1998, Vickie Lynn Marshall joined this will contest. Several other individuals and institutional claimants brought actions seeking a share of J. Howard Marshall II’s estate, but none are parties to this appeal.
By a third amended petition dated January 4, 2000, Vickie Lynn Marshall alleged that Pierce Marshall in his representative capacities, his attorneys, and others tortiously interfered with her expectation based upon her belief that J. Howard Marshall II had made oral promises to give her gifts both during his lifetime and upon his death.8 In her third amended petition, Vickie Lynn Marshall again challenged the validity of both the Living Trust, as amended, and J. Howard Marshall II’s will.
After the Texas proceedings had commenced, but before she had filed her amended petition and will contest in that forum, Vickie Lynn Marshall filed for protection under federal bankruptcy laws in California, the state of which she claimed to be a resident. Vickie Lynn Marshall filed a voluntary chapter 11 bankruptcy petition in the United States District Court for the Central District of California on January 25, 1996. At this point, all non-exempt assets owned by Vickie Lynn Marshall, including her claims against J. Howard Marshall II’s estate and against Pierce Marshall, constituted the bankruptcy estate.9 See 11 U.S.C. § 541.
On May 7, 1996, Pierce Marshall commenced an adversary proceeding in the bankruptcy court seeking a declaration that in the event Vickie Lynn Marshall were to be found liable to Pierce Marshall for earlier instances of alleged defamation, her liability to him would not be dischargeable in her bankruptcy proceeding.10 See 11 U.S.C. § 523(a)(6). Specifically, Pierce Marshall filed a “complaint to determine dischargeability of debt pursuant to 11 U.S.C. § 523(a)(6),” in which he alleged that after J. Howard Marshall II’s death Vickie Lynn Marshall and her attorneys “instituted a plan to obtain a quick recovery from the estate of J. Howard Marshall II by embarking on a tortious smear campaign against E. Pierce Marshall and his family.” According to the complaint, Vickie Lynn Marshall’s attorney expressed concern to a member of the press about the “blizzard of documents” that Pierce Marshall presented to his father in the days following his marriage to Vickie Lynn Marshall, noting that J. Howard Marshall II “signed [the documents] in an almost completely illegible fashion, which makes sense because he couldn’t read at the time” and that “[t]he effect of it was basically an attempt to remove [J. Howard Marshall II] from control of his estate.” The attorney further told a member of the press that “the law clearly entitles [Vickie Lynn Marshall] to half of whatever her late husband earned during the marriage” and described Pierce Marshall as “greedy and miserly” and a “real control freak.” The complaint further alleges that the attorney knew the documents had been validly executed and effected J. Howard Marshall II’s estate planning wishes, but nevertheless suggested in the media that Pierce Marshall had engaged in one or more criminal acts in an effort to obtain his father’s property. It also alleges that Vickie Lynn Marshall knew of the smear campaign efforts and in fact “participated in the civil conspiracy in an effort to extort a speedy settlement.” By way of relief, Pierce Marshall specifically sought the following:
- A determination that [Pierce Marshall’s] claims against [Vickie Lynn Marshall] have not been discharged; 2. An order granting [Pierce Marshall] recovery for his reasonable costs and attorney’s fees incurred herein and pre- and post-judgment interest as allowed by law; and 3. An order granting [Pierce Marshall] such other relief as is just.
On June 12, 1996, Pierce Marshall filed a proof of claim against Vickie Lynn Marshall’s bankruptcy estate seeking an unliquidated amount of damages for his unsecured nonpriority claim arising from the alleged defamation. Attached to his proof of claim as “exhibit A” was his previously filed “complaint to determine dischargeability of debt pursuant to 11 U.S.C. § 523(a)(6).”11 Two days later, on June 14, 1996, Vickie Lynn Marshall’s bankruptcy estate filed an answer to Pierce Marshall’s nondischargeability complaint asserting a number of affirmative defenses, an objection to Pierce Marshall’s creditor’s claim, and counterclaims against Pierce Marshall in his individual capacity. Vickie Lynn Marshall asserted as an affirmative defense that “the statements complained of in this action are in fact substantially true, in whole and in part, and therefore cannot form the basis of a [defamation claim].”12 Vickie Lynn Marshall’s counterclaims included: tortious interference with her expectation of a gift or inheritance from J. Howard Marshall II; tortious interference with her rights as J. Howard Marshall II’s spouse; breach of fiduciary duty; fraudulent transfer of J. Howard Marshall II’s assets; abuse of the legal process; imprisoning J. Howard Marshall II against his will; breach of agreement and contract; and fraud, duress, and undue influence over J. Howard Marshall II.
Pierce Marshall moved to dismiss the counterclaims based on jurisdiction and also moved for the bankruptcy court to abstain from hearing the tortious interference claim. The bankruptcy court denied both motions.
Vickie Lynn Marshall entered into a settlement with her creditors, and the bankruptcy court confirmed Vickie Lynn Marshall’s chapter 11 plan of reorganization on March 8, 1999.13 The reorganization plan specifically provided that any proceeds from “disputed claims/interests” determined in Vickie Lynn Marshall’s favor would be held by a disbursing agent to first satisfy creditors’ claims, with any remaining amounts then going to Vickie Lynn Marshall. The reorganization plan also discussed the specific disbursement process for the “Marshall Claims,” defined as those in the adversary proceeding initiated by Pierce Marshall.14 In the order confirming the plan, the bankruptcy court discharged Vickie Lynn Marshall’s preexisting debts and caused the property remaining in the bankruptcy estate to be revested in her.
Trial of the adversary proceeding began on October 27, 1999. Marshall v. Marshall (In re Marshall), 253 B.R. 550, 553 (Bankr. C.D. Cal. 2000). On November 5, 1999, the bankruptcy court granted summary judgment for Vickie Lynn Marshall on Pierce Marshall’s adversary complaint, concluding that she did not publish or ratify any defamatory statements about him. Marshall v. Marshall (In re Marshall), 275 B.R. 5, 9 (C.D. Cal. 2002).
On September 27, 2000, the bankruptcy court found that Pierce Marshall had tortiously interfered with Vickie Lynn Marshall’s expectation that she would inherit from J. Howard Marshall II’s estate.15 The bankruptcy court reasoned that a “widow’s election” under Texas law supported a monetary judgment.16 The court awarded Vickie Lynn Marshall $449,754,134, but stated that the final calculation of damages remained to be determined after completion of the Texas probate action.
On October 6, 2000, the bankruptcy court entered a revised judgment against Pierce Marshall in his individual capacity, again for $449,754,134, less whatever proceeds Vickie Lynn Marshall received from J. Howard Marshall II’s estate. In its revised judgment the bankruptcy court did not rely on Vickie Lynn Marshall’s “widow’s election,” but concluded based upon “a preponderance of the evidence admitted at trial and the findings imposed as sanctions against Pierce Marshall for discovery abuses, that Pierce . . . tortiously deprived [Vickie Lynn Marshall] of her expectancy of a substantial inter vivos gift from her deceased husband.”17 On December 29, 2000, the bankruptcy court entered a judgment against Pierce Marshall in the amount of $474,754,134. A timely appeal of this ruling to the federal district court followed.
Proceedings in the Texas probate court continued unabated during Vickie Lynn Marshall’s bankruptcy in California. On January 5, 2001, days after the bankruptcy court entered its judgment, Vickie Lynn Marshall filed a voluntary nonsuit of all her claims against Pierce Marshall in the Texas probate proceeding. The probate judge explained to Vickie Lynn Marshall’s counsel that, by doing so, she would be giving up any claim to money that was in her late husband’s estate and any claim that the Living Trust or will were invalid. The Texas probate judge warned her in open court as follows:
Even if you take a nonsuit, which under the Rules of Civil Procedure give you a right to refile it, as a practical matter you don’t, because the Estate is gone. . . . Your claim to anything that [J. Howard Marshall II] had at any time in his life is over when this final judgment is signed. The fact that the Rules of Civil Procedure allow you to take a nonsuit and re-file later doesn’t really apply in Probate Court when we’re talking about who is entitled to an Estate.
Despite the probate court’s warnings, and in apparent reliance on her belief that the bankruptcy court had the authority to enter a final judgment on the counterclaim against Pierce Marshall, Vickie Lynn Marshall elected to dismiss her claims against J. Howard Marshall II’s estate and against Pierce Marshall both individually and in his representative capacities.18
On February 9, 2001, with the leave of the Texas probate court, Pierce Marshall filed an amended counterclaim against Vickie Lynn Marshall for declaratory relief to determine her rights as to the estate and property of J. Howard Marshall II. Pierce Marshall also sought a declaratory judgment against Vickie Lynn Marshall and J. Howard Marshall III that J. Howard Marshall II’s Living Trust and will reflected his true intentions and were valid. Thus, Vickie Lynn Marshall remained in the probate proceedings as a defendant to Pierce Marshall’s counterclaims. The Texas probate court held a five-month jury trial in which all parties, including Vickie Lynn Marshall, fully participated.19 On March 7, 2001, the Texas jury returned its verdict. The jury unanimously answered a number of special verdict questions, making the following factual findings: (1) the Living Trust and will were valid and had not been forged or altered; (2) J. Howard Marshall II had not been the victim of fraud or undue influence; (3) he had the requisite mental capacity when he executed his Living Trust and will; and (4) he did not have an agreement with Vickie Lynn Marshall that he would give her one-half of all his property.
The Texas probate court entered a final judgment in accordance with the jury’s verdict on August 15, 2001. Subsequently, the probate court amended its judgment on two occasions, the last being entered on December 7, 2001. In the second amended judgement, the Texas probate court found that the will and Living Trust, as amended, were valid and not the product of undue influence. The probate court concluded as a matter of law:
that Vickie Lynn Marshall does not possess any interest in and is not entitled to possession of any property within the estate of J. Howard Marshall II or [the Living Trust] because of any representations, promises or agreements made by J. Howard Marshall II; . . .
that any and all claims that have been or should have been asserted by Vickie Lynn Marshall . . . based upon alleged representations, promises, or agreements made by J. Howard Marshall II to or with Vickie Lynn Marshall . . . have been disposed of in this proceeding; . . .
that J. Howard Marshall did not intend to give and did not give to Vickie Lynn Marshall . . . a gift or bequest from the Estate of J. Howard Marshall II or from the [Living Trust] either prior to or upon his death; . . .
that Vickie Lynn Marshall . . . shall take nothing from any claim that she should have made in this proceeding as a compulsory counterclaim against . . . E. Pierce Marshall.
Accordingly, the Texas probate court entered judgment in favor of Pierce Marshall on all claims and held that Pierce Marshall was entitled to his inheritance, free from all claims by Vickie Lynn Marshall or J. Howard Marshall III.
Pierce Marshall appealed the bankruptcy court’s judgment to the district court, which asserted original bankruptcy jurisdiction. 28 U.S.C. § 1334. After the Texas probate court entered its final judgment, Pierce Marshall moved to dismiss Vickie Lynn Marshall’s claims against him in the district court based on principles of claim and issue preclusion.
On June 19, 2001, the district court issued an opinion and order affirming the bankruptcy court’s determination that it had federal jurisdiction over Vickie Lynn Marshall’s claim of tortious interference with the expectation of a gift. Marshall v. Marshall (In re Marshall), 264 B.R. 609, 619-21 (C.D. Cal. 2001). The district court also held that the Texas probate court had not ruled on Vickie Lynn Marshall’s claim against Pierce Marshall in his individual capacity. See id. at 621-24, 633 & n.24. The district court went on to reverse the bankruptcy court’s determination that the bankruptcy court could enter a final judgment on the claim as a “core” bankruptcy proceeding. Id. at 632-33. The district court recognized that Vickie Lynn Marshall’s claim arguably arose out of the same factual transaction as that of Pierce Marshall, but it reasoned that the “connection [was] attenuated” and “the reasons for why counterclaims arising out of the same transaction should usually be considered core do not apply.” Id. at 631-32. The court explained that the attenuated factual nexus between the claims, the different legal theories underlying the claims, the fact that Vickie Lynn Marshall’s claim dwarfed Pierce Marshall’s claim in terms of recovery sought and evidence required to establish it, and Ninth Circuit jurisprudence cautioning courts to avoid characterizing a proceeding as core if to do so would raise constitutional problems, all counseled in favor of classifying Vickie Lynn Marshall’s counterclaim as non-core. Id. at 625-32. Because bankruptcy courts may only issue proposed findings of fact and conclusions of law in non-core matters (absent the parties’ consent), the district court vacated the bankruptcy court’s entry of judgment. Id. at 632-33.
On December 21, 2001, the district court denied Pierce Marshall’s motion for summary judgment based on claim and issue preclusion. Marshall v. Marshall (In re Marshall), 271 B.R. 858 (C.D. Cal. 2001).
After receiving additional evidence on Vickie Lynn Marshall’s claim, the district court entered judgment in her favor on March 7, 2002. The district court found that “J. Howard always intended to give Vickie . . . half of his ‘new community,’ ” a term he created to mean the growth of his assets during the time of their marriage. In re Marshall, 275 B.R. at 29 & n.19, 52. The district court found that the circumstantial evidence before it “sufficiently establishes the existence of a draft ‘catchall trust’ instrument” prepared by J. Howard Marshall II’s attorney as a means of effecting this gift of new community. Id. at 26-29, 26 n.17. The district court further found that Pierce Marshall, in concert with an attorney, “backdated documents, altered documents, destroyed documents, suborned falsified notary statements, presented documents to [J. Howard Marshall II] under false pretenses, and committed perjury,” all in an effort to prevent his father from giving this gift of new community to Vickie Lynn Marshall. Id. at 53. The district court found that J. Howard Marshall II was “duped” by this fraudulent conduct into making various estate planning changes, such as making the Living Trust irrevocable. See id. at 42-50. Based on this and other factual findings, the district court determined that Pierce Marshall had tortiously interfered with Vickie Lynn Marshall’s expectancy of an inter vivos gift from J. Howard Marshall II. Id. at 58.
The district court awarded Vickie Lynn Marshall damages based upon what it believed she would have received as a gift from J. Howard Marshall II, absent the purported interference. The award consisted of $44,292,767.33 in compensatory damages and an equal amount in punitive damages, for a total of $88,585,534.66, plus costs of suit. In re Marshall, 275 B.R. at 58.
Pierce Marshall appealed the district court’s judgment, and Vickie Lynn Marshall cross-appealed. Believing that the probate exception to federal subject matter jurisdiction precluded our consideration of the case, we vacated the judgment and remanded with instructions that the district court order the bankruptcy court to vacate its judgment against Pierce Marshall. Marshall v. Marshall (In re Marshall), 392 F.3d 1118, 1137-39 (9th Cir. 2004).
The United States Supreme Court granted certiorari “to resolve the apparent confusion among federal courts concerning the scope of the probate exception.” Marshall v. Marshall, 547 U.S. 293, 305 (2006). The Supreme Court concluded that the probate exception did not apply, reversed our decision, and remanded for us to consider the merits of the case, including the question “whether Vickie’s claim was ‘core’ ” and “Pierce’s arguments concerning claim and issue preclusion.” Id. at 314-15; see also id. at 313 n.5 (discussing Texas appellate cases that found tortious interference claims to be “barred” after “applying ordinary principles of preclusion” and stating that, in this case, the “matter of preclusion remains open on remand”).
We ordered supplemental briefing on these and other issues and held oral argument on June 25, 2009.20
We review de novo questions of law.” Forest Grove Sch. Dist. v. T.A., 523 F.3d 1078, 1083 (9th Cir. 2008); see In re Valdez Fisheries Dev. Ass’n, Inc., 439 F.3d 545, 547 (9th Cir. 2006) (bankruptcy court’s determination of its jurisdiction); Kendall v. Visa U.S.A., Inc., 518 F.3d 1042, 1050 (9th Cir. 2008) (issue preclusion); Siegel v. Fed. Home Loan Mortgage Corp., 143 F.3d 525, 528 (9th Cir. 1998) (claim preclusion). We review a district court’s findings of fact for clear error, reversing only if “left with the definite and firm conviction that a mistake has been committed.” Easley v. Cromartie, 532 U.S. 234, 242 (2001).
Pierce Marshall argues that the district court correctly concluded that Vickie Lynn Marshall’s tortious interference counterclaim was a non-core proceeding for which the bankruptcy court could issue only proposed findings of fact and conclusions of law. Pierce Marshall further argues that the district court erred, however, when it refused to give any preclusive effect to the Texas probate court’s judgment, which was issued while the case was pending before the district court. Vickie Lynn Marshall responds by arguing that her counterclaim is a core proceeding, that the bankruptcy court properly entered a final judgment on it well before the Texas probate court’s judgment, and that preclusion principles therefore do not apply.
For parties whose views seldom correspond, both sides appear to share the position that the determination whether Vickie Lynn Marshall’s counterclaim is “core” or “non-core” is central to the disposition of this case and will affect the manner in which our analysis proceeds. We agree. For the reasons detailed below, we conclude that Vickie Lynn Marshall’s counterclaim is a non-core proceeding that is, at most, related to her bankruptcy case.
In an article discussing the Bankruptcy Code, Professor Vern Countryman wrote, “To understand how we got where we are, it is necessary to understand where we were.” Vern Countryman, Scrambling to Define Bankruptcy Jurisdiction, 22 Harv. J. on Legis. 1, 2 (1985). This statement holds true today: one must have some familiarity with the evolution of the current bankruptcy regime in order to appreciate the important distinctions between “arising under,” “arising in,” and “related to” proceedings and how the notion of “core” proceedings came to exist.
The Bankruptcy Act of 1898 is the basis for modern bankruptcy law. 30 Stat. 544 (repealed 1979); see Collier on Bankruptcy ¶ 1.0[1] (15th Ed. Revised 2007). It designated the district courts as the “courts of bankruptcy” and created the office of the referee to assist the district courts in the discharge of their duties. Bankruptcy Act of 1898 §§ 1-2, 33-43. The Act gave the referees jurisdiction, “subject always to a review by the judge,” id. § 38, “to perform all duties conferred on ‘courts of bankruptcy’ as distinguished from those conferred on ‘judges,’ which were to be performed only by district judges.” Countryman, supra, at 2-3; see Bankruptcy Act of 1898 §§ 1(20), 38.
The jurisdiction exercised by “courts of bankruptcy” (and, in turn, bankruptcy referees) under the 1898 scheme was customarily referred to as “summary jurisdiction.” Countryman, supra, at 2-4. This “summary jurisdiction” covered three general areas: (1) handling administrative proceedings in the bankruptcy case, such as accepting the bankruptcy petition, allowing claims, granting discharges, and confirming debt adjustment plans, etc., Bankruptcy Act of 1898 §§ 2, 38; see, e.g., U.S. Fidelity & Guaranty Co. v. Bray, 225 U.S. 205, 218 (1912), (2) resolving controversies over property in the actual or constructive possession of the court, Bankruptcy Act of 1898 §§ 2, 38; see, e.g., Thompson v. Magnolia Petroleum Co., 309 U.S. 478, 481 (1940), and (3) deciding, “by consent of the defendant,” actions brought by the bankruptcy trustee that were “plenary in character” because the bankrupt could have brought them in another forum in the absence of the bankruptcy proceedings, Bankruptcy Act of 1898 § 23b; MacDonald v. Plymouth County Trust Co., 286 U.S. 263, 266-67 (1932); see also Countryman, supra, at 2-3.21
Bankruptcy proceedings under the 1898 Act “were generally conducted before referees, except in those instances in which the district court elected to withdraw a case from a referee.” N. Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 53 (1982). The district court presided over any appeal from a referee’s final order. Id.
In 1978, Congress passed the Bankruptcy Reform Act, which eliminated the referee system and established “in each judicial district, as an adjunct to the district court for such district, a bankruptcy court which shall be a court of record known as the United States Bankruptcy Court for the district.” Id. (quoting 28 U.S.C. § 151(a) (Supp. IV 1981)). The 1978 Act eliminated the distinction between “summary” bankruptcy jurisdiction and “plenary” jurisdiction, and it “grant[ed] the new courts jurisdiction over all ‘civil proceedings arising under title 11 [the Bankruptcy title] or arising in or related to cases under title 11.’ ” Id. at 54 (second alteration in original) (emphasis omitted) (quoting 28 U.S.C. § 1471(b) (Supp. IV 1981)); see also 28 U.S.C. § 1471(b) (Supp. IV 1981) (noting that the district courts’ jurisdiction was “original but not exclusive”). With limited exception, under the 1978 Act, the judges of the bankruptcy courts had “all of the ‘powers of equity, law, and admiralty.’ ” Id. at 55 (quoting 28 U.S.C. § 1481 (Supp. IV 1981)).
The most important provision of the 1978 Act was § 1471(c), which provided that “[t]he bankruptcy court . . . shall exercise all of the jurisdiction conferred by this section on the district courts.” 28 U.S.C. § 1471 (Supp. IV 1981). Congress knew that this provision raised serious constitutional concerns because it permitted an Article I tribunal to exercise the same jurisdiction bestowed upon an Article III court, but the risk of invalidation was deemed worth achieving the goal of setting up a faster and cheaper method to accomplish reorganization. See Countryman, supra, at 7-9; see also H.R. Rep. No. 95-595, at 5968 (1977) (acknowledging “serious constitutional doubts” raised by the full grant of jurisdiction under the proposed bankruptcy system to non-Article III judges).
The risk of invalidation was soon realized. In Northern Pipeline Construction Co. v. Marathon Pipe Line Co., the Supreme Court considered whether the Constitution permitted the bankruptcy court to exercise jurisdiction over a state law breach of contract claim filed by the debtor in possession against a third party who was a stranger to the bankruptcy proceeding. 458 U.S. 50 (1982). The plurality explained that the Bankruptcy Act of 1978 impermissibly shifted essential attributes of judicial power from the Article III district court to the non-Article III bankruptcy court. Id. at 87. The holding of six justices in Marathon is fairly well summarized in a footnote to the plurality opinion:
[A]t the least, the new bankruptcy judges cannot constitutionally be vested with jurisdiction to decide this state-law contract claim against Marathon. As part of a comprehensive restructuring of the bankruptcy laws, Congress has vested jurisdiction over this and all matters related to cases under Title 11 in a single non-Art. III court, and has done so pursuant to a single statutory grant of jurisdiction. In these circumstances we cannot conclude that if Congress were aware that the grant of jurisdiction could not constitutionally encompass this and similar claims, it would simply remove the jurisdiction of the bankruptcy court over these matters, leaving the jurisdictional provision and adjudicatory structure intact with respect to other types of claims, and thus subject to Art. III constitutional challenge on a claim-by-claim basis. Indeed, we note that one of the express purposes of the Act was to ensure adjudication of all claims in a single forum and to avoid the delay and expense of jurisdictional disputes. Nor can we assume, as THE CHIEF JUSTICE suggests that Congress’ choice would be to have these cases “routed to the United States district court of which the bankruptcy court is an adjunct.” We think that it is for Congress to determine the proper manner of restructuring the Bankruptcy Act of 1978 to conform to the requirements of Art. III in the way that will best effectuate the legislative purpose.
458 U.S. at 88 n.40 (Brennan, J., plurality) (joined by Justices Marshall, Blackmun, and Stevens) (citations omitted); see also id. at 91-92 (Rehnquist, J., concurring) (joined by Justice O’Connor). The Court stayed its judgment in Marathon for six months to allow Congress the opportunity to remedy the constitutional flaws in the 1978 Act’s grant of jurisdiction to the bankruptcy courts. Id. at 88.
Congress did not act in time, and the Court’s mandate took effect. Faced with the potential collapse of the bankruptcy system, the Judicial Conference “adopt[ed] a resolution requiring the Director of the Administrative Office of the United States Courts to ‘provide each circuit with a proposed rule’ which was to take effect [as a local rule] in the absence of congressional action.” Countryman, supra, at 19; see Collier ¶ 3.01[2][b][ii] (discussing the emergency rule and reproducing its text). The purpose of this resolution was “to permit the bankruptcy system to continue without disruption in reliance on jurisdictional grants remaining in the law as limited by” Marathon. Countryman, supra, at 19.
The Emergency Rule continued the bankruptcy system established by the 1978 Act with the exception of how “related proceedings” like the contract claim in Marathon would be treated. See Collier ¶ 3.01[2][b][ii] & n.16. The Emergency Rule defined “related proceedings” as “those civil proceedings that, in the absence of a petition in bankruptcy, could have been brought in a district court or state court.”22 Emergency Rule § d(3)(A), reproduced at Collier ¶ 3.01[2][b][ii] n.16. The Emergency Rule prohibited bankruptcy judges from entering a judgment or dispositive order on related proceedings; instead, the bankruptcy court was to “submit findings, conclusions, and a proposed judgment or order to the district judge, unless the parties to the proceeding consent to entry of the judgment or order by the bankruptcy judge.” Emergency Rule § d(3)(B), reproduced at Collier ¶ 3.01[2][b][ii] n.16.
More than two years after the Marathon decision, Congress finally passed the Bankruptcy Amendments and Federal Judgeship Act of 1984. Pub. L. No. 98-353 (HR 5174), 98 Stat. 333 (1984). The 1984 Act, with amendments not relevant to this proceeding, governs the dispute before us.
[1] Under the 1984 Act the district court continues to have original jurisdiction over all cases under title 11 and “all civil proceedings arising under title 11, or arising in or related to cases under title 11.” 28 U.S.C. § 1334(a)-(b). The district court, in turn, may refer “any or all cases under title 11 and any or all proceedings arising under title 11 or arising in or related to a case under title 11” to the bankruptcy court. Id. § 157(a). Thus, as under the 1978 Act, the bankruptcy court’s subject matter jurisdiction under the 1984 Act is coterminous with that of the district court. See id. §§ 157(a), 1334; Fietz v. Great W. Sav. (In re Fietz), 852 F.2d 455, 457 (9th Cir. 1988).
The manner in which the bankruptcy court may exercise its delegated jurisdiction under the 1984 Act, however, differs greatly from its 1978 predecessor. In an obvious effort to comply with the principles of Marathon, gone is the problematic provision from the 1978 Act empowering the bankruptcy court to exercise “all of the jurisdiction” of the district court. 28 U.S.C. § 1471 (Supp. IV 1981). Instead, subsections (b) and (c) to § 157 prescribe the manner in which the bankruptcy court may exercise its delegated jurisdiction by identifying those situations (1) when the bankruptcy court is authorized to issue a final order disposing of some or all of the matters before it and (2) when the bankruptcy court is empowered only to make a report and recommendation to the district court. 28 U.S.C. § 157(b)-(c); see also Countryman, supra, at 35 (noting that like the Emergency Rule, the 1984 Act distinguishes between “when the bankruptcy judge can act as a judge” and “when he acts only as a special master”).
[2] Section 157(b)(1) provides that “Bankruptcy judges may hear and determine all cases under title 11 and all core proceedings arising under title 11, or arising in a case under title 11” that are referred to it by the district court.23 28 U.S.C. § 157(b)(1) (emphasis added). In subsection (b)(2) Congress provided a non-exhaustive definition of core proceedings that includes the omnibus categories of “matters concerning the administration of the estate” and “other proceedings affecting the liquidation of assets of the estate.” Id. § 157(b)(2)(A), (O);24 Harris v. Wittman (In re Harris), 590 F.3d 730, 738 (9th Cir. 2009). Congress also indicated that a matter may be a core proceeding even if its outcome may be affected by state law. See 28 U.S.C. § 157(b)(3).
[3] By way of comparison, § 157(c)(1) authorizes the bankruptcy judge to “hear a proceeding that is not a core proceeding but that is otherwise related to a case under title 11.” Compare id. § 157(c)(1) (emphasis added), with id. § 157(b)(1) (authorizing the bankruptcy court to “hear and determine” certain matters) (emphasis added). For proceedings falling within § 157(c)(1), the bankruptcy court is empowered only to “submit proposed findings of fact and conclusions of law to the district court.” Id. § 157(c)(1). Thus, unless the parties consent to final determination by the bankruptcy judge, id. § 157(c)(2), the responsibility to “determine” a “[non-]core proceeding that is otherwise related to a case under title 11” always remains with the district court, id. § 157(c)(1) (“[A]ny final order or judgment shall be entered by the district judge after considering the bankruptcy judge’s proposed findings and conclusions and after reviewing de novo those matters to which any party has timely and specifically objected.”).
[4] The 1984 Act does not specifically detail what it means for a civil proceeding to “arise under title 11,” “arise in a case under title 11,” “or relate[ ] to a case under title 11.” Our case law, however, holds that proceedings “arise under title 11” if they “involve a cause of action created or determined by a statutory provision of title 11.” In re Harris, 590 F.3d at 737. On the other hand, civil proceedings “arise in a case under title 11” when they are “not based on any right expressly created by title 11, but nevertheless, would have no existence outside of the bankruptcy.” In re Eastport Assocs., 935 F.2d 1071, 1076-77 (9th Cir. 1991) (quoting In re Wood, 825 F.2d 90, 96-97 (5th Cir. 1987)); see In re Harris, 590 F.3d at 737.25 Like the Fourth, Fifth, and Eight Circuit Courts of Appeal, we adopted without modification the Third Circuit’s definition of what constitutes a “related” proceeding:
The usual articulation of the test for determining whether a civil proceeding is related to bankruptcy is whether the outcome of the proceeding could conceivably have any effect on the estate being administered in bankruptcy. . . . An action is related to bankruptcy if the outcome could alter the debtor’s right, liabilities, options, or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankrupt estate.
In re Feitz, 852 F.2d 455, 457 (9th Cir. 1988) (quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984)).
With this constitutional and statutory backdrop in mind, we turn to the question before us today: whether the bankruptcy judge could “hear and determine,” as a “core proceeding[ ] arising under title 11, or arising in a case under title 11,” Vickie Lynn Marshall’s counterclaim for tortious interference against Pierce Marshall.
Pierce Marshall takes the position that even if a counterclaim is asserted in response to a proof of claim against the bankruptcy estate, such that it meets Congress’ definition of a core proceeding contained in § 157(b)(2)(C), the bankruptcy court cannot exercise “final order” jurisdiction over it under § 157(b)(1) unless the counterclaim “arises under” or “arises in a case under” the Bankruptcy Code. Pierce Marshall argues that Vickie Lynn Marshall’s claim neither “arises under” nor “arises in a case under” the Bankruptcy Code: it is a state law counterclaim that could have been brought and was brought, at least in part, in a non-bankruptcy forum. Because there is nothing unique to bankruptcy about her claim, Pierce Marshall argues that the bankruptcy court could not, consistent with the Constitution, the Marathon decision, and the bankruptcy court’s statutory grant of power in § 157(b)(1), enter a final judgment against him.
We agree with Pierce Marshall that our case law presents a two-step approach. A bankruptcy judge may only determine a claim that meets Congress’ definition of a core proceeding and arises under or arises in title 11. See In re Harris, 590 F.3d at 737-41. We disagree, however, with Pierce Marshall’s argument that the fact that Vickie Lynn Marshall’s counterclaim could have been brought in state court and was not a bankruptcy-specific claim automatically renders the claim non-core. This approach goes too far and may render § 157(b)(2)(C) superfluous.26 Under Pierce Marshall’s narrow reading of the statute it is difficult to imagine a counterclaim against a person filing against the estate that “arises under” the Bankruptcy Code or “arises in a case under” the Bankruptcy Code and that is not already covered by a more specific provision of § 157(b)(2). Many creditor claims filed against a bankruptcy estate are based upon state law, not the Bankruptcy Code or something else that is unique to the bankruptcy context.27 We do not believe that Congress intended § 157(b)(2)(C) to be a meaningless (or near meaningless) provision, which is what it would become under Pierce Marshall’s overly restrictive approach. See United Sav. Ass’n v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365, 370-71 (1988) (construing several sections of the Bankruptcy Code and observing that “[s]tatutory construction . . . is a holistic endeavor”); see also Dole Food Co. v. Patrickson, 538 U.S. 468, 467-77 (2003) (cautioning against construing a “statute in a manner that is strained and, at the same time, would render a statutory term superfluous”).
Harris may seem to provide some validity to Pierce Marshall’s argument because that decision relied on the fact that the contract claim “arose from the administration of [the] bankruptcy estate.” In re Harris, 590 F.3d at 740. However, in Harris we required a bankruptcy nexus only because there we dealt with § 157(b)(2)(A), one of the “catchall” provisions. See id. at 739-41. Section 157(b)(2)(A) refers to “matters concerning the administration of the [bankruptcy] estate.” Harris relied on earlier precedent to determine that if the only applicable provision in § 157(b)(2) is one of the catchall provisions, the claim must literally fit within the wording of the catchall provision to be considered core. See Harris, 590 F.3d at 740. Here, we do not deal with the catchall provisions of § 157(b)(2) but with one of the specific provisions, § 157(b)(2)(C). Thus, although Vickie Lynn Marshall’s counterclaim for tortious interference could have been brought independently from the bankruptcy proceeding and was not unique to the bankruptcy context, we have not reached the end of our inquiry.
While Pierce Marshall’s approach is too narrow, Vickie Lynn Marshall’s is too expansive. She takes the position that her counterclaim falls within the plain language definition of a “core proceeding” as a “counterclaim[ ] by the estate against persons filing claims against the estate.” 28 U.S.C. § 157(b)(2)(C). As far as Vickie Lynn Marshall is concerned, that should end the matter because the “ ‘core proceedings’ listed in § 157(b), by definition, meet the arising in/arising under standard.” Vickie Lynn Marshall Supplemental Br. at 6. Her criticism of Pierce Marshall’s two step approach finds some support in the fact that few courts consider separately the questions whether something is a “core proceeding” and whether it “arises under” the Bankruptcy Code or “arises in a case under” the Bankruptcy Code. But see In re Harris, 590 F.3d at 737-41.
Even so, Vickie Lynn Marshall’s reading of § 157(b)(2)(C) sweeps too broadly and would permit the bankruptcy court to consider under § 157(b)(2)(C) counterclaims that are factually and legally unrelated to the claim being asserted against the bankruptcy estate. Such an expansive reading of § 157(b)(2)(C) would certainly run afoul of the Court’s holding in Marathon.28 It would also arguably be inconsistent with the Congress’ intent to revise the Bankruptcy Code in a manner consistent with the principles of Marathon to make its jurisdictional grant constitutional.
Recognizing this shortcoming in her argument, and taking heed of our warning that the term “core proceeding” must be construed narrowly “to avoid potential constitutional problems arising from having Article I judges issue final orders in cases requiring an Article III judge,” Dunmore, 358 F.3d at 1115, Vickie Lynn Marshall argues that her claim is a core proceeding arising in a case under the Bankruptcy Code because it is a compulsory counterclaim to the defamation claim asserted in Pierce Marshall’s proof of claim and underlying his nondischargeability complaint. Vickie Lynn Marshall argues that the adjudication of a compulsory counterclaim effectively becomes part of the claims allowance process, something that is unique and core to bankruptcy proceedings. She further argues that Pierce Marshall consented to the bankruptcy court’s entering a final order on the counterclaim because it is a compulsory counterclaim to the proof of claim that Pierce Marshall chose to file with the bankruptcy court knowing that the proof of claim would be finally determined as a “core proceeding[ ] arising under title 11, or arising in a case under title 11.” In support of these related arguments, she relies primarily on the Supreme Court case of Katchen v. Landy, 382 U.S. 323 (1966), and other cases that have discussed and reaffirmed Katchen after the passage of the 1984 Bankruptcy Amendments and Federal Judgeship Act. See, e.g., Langenkamp v. Culp, 498 U.S. 42, 44-45 (1990); Granfinanciera v. Nordberg, 492 U.S. 33, 57-60 (1989).
[5] We agree with Vickie Lynn Marshall that her claim is
Additionally, on March 19, 2009, we ordered the parties to “identify (1) all parties in interest, (2) the attorneys of record, (3) the real parties in interest, (4) any executors of an estate having an interest in these proceedings and (5) any guardian and/or guardian ad litem of an interested minor.” Both parties filed responses to our order stating that the correct parties are currently before us. No third party has sought to intervene in this appeal.
The interests of Vickie Lynn Marshall’s minor daughter, “DB,” are represented by DB’s father and legal guardian, Larry E. Birkhead, as determined by the Los Angeles Superior Court in In re Vickie Lynn Marshall, Case Nos. BP-104574, BP-104575. Mr. Birkhead had notice of these proceedings, attended oral argument, and at no time sought to intervene as a party on behalf of his daughter. Under California law, the executor or administrator of an estate is the real party in interest. See Olson v. Toy, 54 Cal. Rptr. 2d 29, 33 (Ct. App. 1996). Both parties here agreed that we did not need to appoint a guardian ad litem for DB, but that her interests in this proceeding were adequately represented by Mr. Birkhead and Mr. Stern. See Supplemental Opening Br. filed by Elaine Marshall at 58; Supplemental Answering Br. filed by Howard Stern at 66.
J. Howard Marshall II also took steps to promote Vickie Lynn Marshall’s career as a model.
[The statements] were made in good faith, honestly, and not maliciously in that the signatures of J. Howard Marshall, II on the several documents allegedly signed by him shortly after his marriage to Mrs. Marshall were almost completely illegible; the physician of J. Howard Marshall, II has declared that [J. Howard Marshall II] could not read the typeface of the size used in the several documents at issue; the several documents allegedly signed by J. Howard Marshall, II did purport to give [Pierce Marshall] full control over the . . . Living Trust; and the several documents did purport to have the effect of transferring control over Mr. Marshall’s estate.
We further note that, when it took additional evidence on the case, the district court likewise limited to some extent the testimony and evidence Pierce Marshall was able to introduce. Pierce Marshall claims that the district court violated his due process rights with this ruling and other evidentiary decisions. Because we conclude that Pierce Marshall is entitled to judgment in his favor for other reasons, we need not address his due process claim.
Related proceedings include, but are not limited to, claims brought by the estate against parties who have not filed claims against the estate. Related proceedings do not include: contested and uncontested matters concerning the administration of the estate; allowance of and objections to claims against the estate; counterclaims by the estate in whatever amount against persons filing claims against the estate . . . . A proceeding is not a related proceeding merely because the outcome will be affected by state law.
Emergency Rule § d(3)(A), reproduced at Collier ¶ 3.01[2][b][ii] n.16.
In contrast, Justice Brennan explained that “the liability of one individual to another under the law as defined, is a matter of private rights. . . . Private-rights disputes . . . lie at the core of the historically recognized judicial power.” Id. at 69-70. He further cautioned that “the restructuring of debtor-creditor relations, which is at the core of the federal bankruptcy power, must be distinguished from the adjudication of state-created private rights, such as the right to recover contract damages that is at issue in this case. The former may well be a ‘public right,’ but the latter obviously is not.” Id. at 71 (emphasis added).
The Supreme Court has not explicitly held that the restructuring of debtor-creditor relations is a public right. See Granfinanciera v. Nordberg, 492 U.S. 33, 56 n.11 (1989) (“We do not suggest that the restructuring of debtor-creditor relations is in fact a public right. This thesis has met with substantial scholarly criticism . . . and we do not seek to defend it here.”).
Core proceedings include, but are not limited to—
(A) matters concerning the administration of the estate;
(B) allowance or disallowance of claims against the estate or exemptions from property of the estate, and estimation of claims or interests for the purposes of confirming a plan under chapter 11, 12, or 13 of title 11 but not the liquidation or estimation of contingent or unliquidated personal injury tort or wrongful death claims against the estate for purposes of distribution in a case under title 11;
(C) counterclaims by the estate against persons filing claims against the estate;
(D) orders in respect to obtaining credit;
(E) orders to turn over property of the estate;
(F) proceedings to determine, avoid, or recover preferences;
(G) motions to terminate, annul, or modify the automatic stay;
(H) proceedings to determine, avoid, or recover fraudulent conveyances;
(I) determinations as to the dischargeability of particular debts;
(J) objections to discharges;
(K) determinations of the validity, extent, or priority of liens;
(L) confirmations of plans;
(M) orders approving the use or lease of property, including the use of cash collateral;
(N) orders approving the sale of property other than property resulting from claims brought by the estate against persons who have not filed claims against the estate;
(O) other proceedings affecting the liquidation of the assets of the estate or the adjustment of the debtor-creditor or the equity security holder relationship, except personal injury tort or wrongful death claims; and
(P) recognition of foreign proceedings and other matters under chapter 15 of title 11.
28 U.S.C. § 157(b)(2).
Thus, on one hand, calling any counterclaim that falls within the literal language of the statute core seems to contradict the holding of Marathon. On the other hand, calling any counterclaim that could have been asserted as an independent lawsuit seems to render § 157(b)(2)(C) itself nugatory, because any counterclaim could have been asserted as a separate lawsuit absent the filing of the bankruptcy petition. Collier notes this problem and states that “[t]he matter is still unsettled.”
In re Marshall, 264 B.R. at 630.