Petition For Supreme Court Review Filed In Ninth Circuit's Bellingham Case Highlighting Circuit Splits Post-Stern

The Supreme Court may revisit two of the many questions left open by its much-discussed decision in Stern v. Marshall, 131 S. Ct. 2594 (2011), an opinion famous not only for its subject - the estate of the late actress and model Anna Nicole Smith - but also for redefining the allocation of judicial authority between an Article III federal district court and a bankruptcy court. Appellants have filed a petition for a writ of certiorari seeking review of the Ninth Circuit's decision in Executive Benefits Insurance Agency v. Arkison (In re Bellingham Insurance Agency), 702 F.3d 553 (9th Cir. Dec. 4, 2012), and asking the nation's highest court to take on two questions about which lower courts have disagreed in the wake of Stern:

Whether Article III permits the exercise of the federal judicial power by non- Article III bankruptcy courts on the basis of litigant consent, and, if so, whether "implied consent" is sufficient to satisfy Article III; and Whether a bankruptcy judge may submit proposed findings of fact and conclusions of law for review by a district court in a "core" proceeding under 28 U.S.C. § 157(b). ALLOCATION OF ARTICLE III POWERS AND LITIGANT CONSENT

In Bellingham, the bankruptcy trustee brought a complaint for fraudulent transfer against non-creditor Executive Benefits Insurance Agency ("EBIA") in bankruptcy court. Seeking to recover for the estate, the trustee alleged that EBIA was the successor corporation to the debtor and liable for claims against the debtor. 702 F.3d at 557. The bankruptcy court found for the trustee and held that EBIA was the successor corporation to the debtor and the debtor fraudulently transferred funds to EBIA. Id. After the district court affirmed the bankruptcy court's decision, EBIA appealed to the Ninth Circuit. Id. While the appeal was pending, the Supreme Court issued its de- cision in Stern. Id. On the eve of oral argument, EBIA filed a motion before the circuit court to vacate the judgment, arguing the bankruptcy court did not have constitutional authority to enter final judgment on the trustee's claims. Id. at 568.

Interpreting the Supreme Court's decision in Stern, the Ninth Circuit held that a bankruptcy court, as a "legislative court" created by Congress and not authorized to exercise the judicial power of the United States under Article III of the Constitution, does not have the authority to enter final judgments on fraudulent conveyance claims asserted by non-creditors to a bankruptcy...