564 U.S. 462, 131 S. Ct. 2594, 180 L. Ed. 2d 475 (2011)
Vickie Lynn Marshall married J. Howard Marshall II, Pierce Marshall’s father, approximately one year before J. Howard’s death.1 Shortly before J. Howard died, Vickie filed suit against Pierce in Texas state probate court asserting that Pierce had tortiously interfered with a gift J. Howard intended to provide her through a trust.2 After J. Howard’s death, Vickie filed a petition for bankruptcy in the United States Bankruptcy Court for the Central District of California.3
Pierce filed a proof of claim in the bankruptcy proceeding asserting a defamation claim against Vickie’s estate arising from statements made to the press by Vickie’s lawyers accusing him of fraud in controlling his father’s assets.4 Vickie responded by filing a counterclaim for tortious interference with the expected gift from J. Howard.5 On November 5, 1999, the Bankruptcy Court granted Vickie summary judgment on Pierce’s defamation claim.6 After a bench trial, on September 27, 2000, the Bankruptcy Court entered judgment for Vickie on her counterclaim and later awarded her over $400 million in compensatory damages and $25 million in punitive damages.7
The District Court concluded that Vickie’s counterclaim was not a core proceeding under 28 U.S.C. §157(b)(2)(C) and therefore treated the Bankruptcy Court’s judgment as proposed findings of fact and conclusions of law.8 The District Court conducted an independent review of the record.9 It declined to give preclusive effect to a Texas state court judgment that had been entered in Pierce’s favor.10 The District Court awarded Vickie compensatory and punitive damages, each in the amount of $44,292,767.33.11
The Court of Appeals for the Ninth Circuit reversed.12 It held that the Bankruptcy Court lacked authority to enter final judgment on Vickie’s counterclaim because the counterclaim was not so closely related to Pierce’s proof of claim that its resolution was necessary to resolve the allowance or disallowance of that claim.13 This holding made the Texas probate court judgment the earliest final judgment, which the Court of Appeals held the District Court should have afforded preclusive effect.14 The Supreme Court granted certiorari.15
Whether 28 U.S.C. §157(b) authorized the Bankruptcy Court to enter final judgment on Vickie’s tortious interference counterclaim?16
Section 157(b)(1) authorizes bankruptcy judges to hear and determine all core proceedings arising under title 11 or arising in a case under title 11.17 Counterclaims by the estate against persons filing claims against the estate are designated as core proceedings under §157(b)(2)(C).18 The structure of the statute indicates that core proceedings are those that arise in or under title 11. No category of core proceedings exists that do not arise in a bankruptcy case or under bankruptcy law.19
Yes. Vickie’s tortious interference counterclaim qualifies as a counterclaim by the estate against a person filing a claim against the estate within the meaning of 28 U.S.C. §157(b)(2)(C).20 The plain text of the statute therefore authorized the Bankruptcy Court to enter final judgment on the counterclaim as a core proceeding.21
The Bankruptcy Court had the statutory authority under 28 U.S.C. §157(b) to enter final judgment on Vickie’s tortious interference counterclaim.22
Whether Article III of the Constitution permitted the Bankruptcy Court to enter final judgment on Vickie’s tortious interference counterclaim?23
Article III vests the judicial power of the United States in courts whose judges enjoy tenure during good behavior and protection against salary diminution.24 The public rights exception to Article III is limited to matters that arise between the government and others or that are integrally related to a federal regulatory scheme.25 A state law tort claim between private parties that does not stem from the bankruptcy itself and is not necessarily resolved in the claims allowance process must be adjudicated by an Article III court.26 Bankruptcy courts exercising final judgment authority over such claims are not mere adjuncts of the district courts.27
No. Vickie’s counterclaim is a state common law tort action that exists without regard to any bankruptcy proceeding.28 It required the Bankruptcy Court to resolve factual and legal issues not disposed of in ruling on Pierce’s proof of claim.29 The claim does not fall within the public rights exception because it is not derived from a federal regulatory scheme and is not completely dependent upon adjudication of a claim created by federal law.30 The bankruptcy court is not an adjunct because it enters final judgments subject only to appellate review.31
Article III of the Constitution did not permit the Bankruptcy Court to enter final judgment on Vickie’s tortious interference counterclaim.32
Related opinions on this issue
Justice Scalia concurs in the judgment.33 He agrees with the Court’s interpretation of our Article III precedents.34 He adheres to his view that a matter of public rights must at a minimum arise between the government and others.35
The sheer surfeit of factors the Court was required to consider in this case should arouse the suspicion that something is seriously amiss with our jurisprudence in this area.36 He counts at least seven different reasons given for concluding that an Article III judge was required.37 Apart from their sheer numerosity, the more fundamental flaw in the many tests suggested by our jurisprudence is that they have nothing to do with the text or tradition of Article III.38
For example, Article III gives no indication that state-law claims have preferential entitlement to an Article III judge.39 Leaving aside adjudications by federal administrative agencies, which are governed (for better or worse) by our landmark decision in Crowell v. Benson, 285 U. S. 22 (1932), in my view an Article III judge is required in all federal adjudications, unless there is a firmly established historical practice to the contrary.40 Vickie points to no historical practice that authorizes a non-Article III judge to adjudicate a counterclaim of the sort at issue here.41
Joined by Justices Ginsburg, Sotomayor, And Kagan
Justice Breyer dissents.42 He believes the statute is constitutional under the pragmatic approach of Thomas and Schor.43 He argues that the delegation of adjudicatory authority does not pose a genuine threat to the separation of powers.44
He weighs factors including the control exercised by Article III judges through de novo review, the consent of the parties through filing a proof of claim, and the important legislative purpose served by granting bankruptcy courts authority over compulsory counterclaims.45 This authority creates an efficient federal bankruptcy system.46 He concludes that any intrusion on the judicial branch is de minimis.47
Whether 28 U.S.C. §157(b)(5) created a jurisdictional bar preventing the Bankruptcy Court from resolving Pierce’s defamation claim?48
Section 157(b)(5) provides that personal injury tort and wrongful death claims shall be tried in the district court.49 The provision is not jurisdictional in character because it does not refer to jurisdiction and the statutory context shows it allocates authority between courts rather than creating a jurisdictional bar.50 Parties may consent to the bankruptcy court’s resolution of such claims.51 Failure to timely raise the objection results in forfeiture.52
No. Section 157(b)(5) lacks the hallmarks of a jurisdictional decree.53 Pierce consented to the Bankruptcy Court’s resolution of his defamation claim by repeatedly advising the court that he was happy to litigate his claim there and by failing to raise the objection promptly after filing the claim.54
Section 157(b)(5) did not create a jurisdictional bar preventing the Bankruptcy Court from resolving Pierce’s defamation claim.55