Why decide when
you can avoid or why avoid when there is nothing to decide? In a unanimous
decision, the United States Supreme Court held that a non-core proceeding
requires the District Court to hold a de novo review of the Bankruptcy Court’s
findings of fact and conclusions of law.
In particular, the Court found that the Appellant was given a de novo
review because it appealed the granting of a motion for summary judgment. See generally, Bagdadi v. Nazar,
84 F.3d 1194, 1197 (9th Cir. 1994). Accordingly, the Ninth Circuit’s decision was
affirmed.
In light of the
narrow holding, a number of scholars will likely analyze the decision based
upon what was not determined. First, the
Court avoided the issue of whether the fraudulent transfer action was a core
proceeding. Why did they avoid it? The Court avoided the issue because no one
appealed such determination. The Court
stated, “[t]he Court of Appeals held, and we assume
without deciding, that the fraudulent conveyance claims in this case are Stern
claims.” Second, the Court avoided
the issue of consent. Why did they avoid
it? The Court stated in a footnote that “this
case does not require us to address whether EBIA in fact consented to the
Bankruptcy Court’s adjudication of a Stern claim and whether Article III
permits a bankruptcy court, with the consent of the parties, to enter final
judgment on a Stern claim. We reserve that question for another day.” Despite such evasive maneuvering, the Court
did emphasize “[i]f the claim satisfies the criteria
of §157(c)(1), the bankruptcy court simply treats the claims as non-core: The bankruptcy court should hear the
proceeding and submit proposed findings of fact and conclusions of law to the
district court for de novo review and entry of judgment.”
The
bigger question still remains, can a party consent to entry of a final judgment
on a non-core proceeding? Perhaps the
Court in footnote 8 gave us a hint in discussing Appellant’s argument that “nothing
in the statute’s text or historical context” that makes it “evident” that
Congress would prefer to suspend Stern claims in limbo.” The Court stated, “[t]o the contrary,
we noted in Stern that removal of claims from core bankruptcy
jurisdiction does not “meaningfully chang[e] the division of labor in the
current statute.” 564 U. S., at ___ (slip op., at 37). Accepting EBIA’s contention that district
courts are required to hear all Stern claims in the first instance, see
Brief for Petitioner 46–48, would dramatically alter the division of
responsibility set by Congress.” If the
Court does not believe that Congress wanted to dramatically alter the division
of responsibility, then one could argue that it is not a large leap to believe
that a party could consent to entry of a final judgment.
However, why
would a party consent? A party gets a “free”
bite at the apple if they do not consent (i.e. a free appeal). The Bankruptcy Court would then be required
to “submit proposed findings of fact and conclusions
of law to the District Court to be reviewed de novo.” The only “problem” with such determination is
that after the District Court reviews the matter de novo, the remaining appeal
you have is to the Court of Appeals.
So
why did the Supreme Court take this appeal?
My initial reaction is that the Court took this appeal based upon what
it perceived as an open issue on consent but after fully analyzing the case
there was nothing for the Court to truly decide. If one demands a de novo review and received
it, then there is nothing to decide and the matter is moot. The Court clearly avoided giving us an
insight to consent, maybe the Court couldn’t get a majority or they determined
that holding would be dicta? Only the
Court and its law clerks know the answer, but for now, as Justice Thomas
stated, the answer to the question of consent awaits for another day.
