Stern v. Marshall, No. 10-179
In the bankruptcy case of Anna Nicole Smith (then known as Vickie Lynn Marshall), her former stepson, Pierce Marshall, filed a claim for damages based on alleged defamation. Vickie Lynn Marshall asserted a compulsory counterclaim alleging that Pierce Marshall had tortiously interfered with certain inter vivos gifts she anticipated from her now-deceased husband, and maintained that the compulsory counterclaim was within the core jurisdiction of the bankruptcy court under 28 U.S.C. §157(b)(2)(C) (stating that core proceedings include "counterclaims by the estate against persons filing claims against the estate"). The Ninth Circuit, 600 F.3d 1037, held for Pierce Marshall, concluding that, despite the explicit language of §157(b)(2)(C), even a compulsory counterclaim cannot constitutionally be within the core jurisdiction of the bankruptcy court unless it is so closely related to the claim that the claim cannot be allowed or disallowed without resolution of the counterclaim. The Supreme Court has granted certiorari on three issues: (1) Whether the Ninth Circuit decision contravenes Congress' intent in enacting §157(b)(2)(C); (2) Whether Congress may, under Articles I and III, constitutionally authorize core jurisdiction over debtors' compulsory counterclaims to proofs of claim; and (3) Whether the Ninth Circuit misapplied Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982) and Katchen v. Landy, 382 U.S. 323 (1966) by holding that Congress cannot constitutionally authorize non-Article III bankruptcy judges to enter final judgment on all compulsory counterclaims to proofs of claim.
The Supreme Court today on Thursday, June 23, 5-4 against the estate of Anna Nicole Smith, saying that a bankruptcy judge's decision giving millions to Smith from the estate of oil tycoon J. Howard Marshall was decided incorrectly because those judges do not have the constitutional right to reach outside of bankruptcy cases into a probate case. Read the Supreme Court opinion.