U.S. Supreme Court

ABA seeks to limit reach of Anna Nicole Smith case restricting bankruptcy judges' powers

Bankruptcy courts may decide matters outside their constitutional authority without violating Article III of the Constitution, as long as the litigants consent, the ABA argues in an amicus brief filed with the U.S. Supreme Court.

The brief (PDF) says the Supreme Court should not extend the holding in the 2011 decision Stern v. Marshall, which barred the heirs of Anna Nicole Smith from collecting a tortious interference claim. A bankruptcy judge had awarded Smith $474 million, later reduced to $88.6 million, after finding that the son of Smith’s late billionaire husband had interfered with the older man’s efforts to set up a trust on her behalf.

The billionaire’s son never consented to being sued in bankruptcy court, and the decision should be limited to those facts, the ABA says. “The argument that, following Stern, litigants can no longer consent to having non-Article III courts decide their claims runs contrary to … precedent and to the court’s statement that its holding in Stern was ‘narrow,’ ” the ABA brief says.

“This argument also would strip bankruptcy courts of adjudicative powers they have held since Congress enacted the modern Bankruptcy Code and force that work upon the district courts’ already very crowded dockets, ” the brief says. The brief asserts that federal district courts are “stressed and without adequate resources.”

Bankruptcy judges are appointed for 14-year terms and don’t have lifetime appointments under Article III of the Constitution.

An ABA press release and the Wall Street Journal Bankruptcy Beat blog have news of the amicus brief in the case, Executive Benefits Insurance Agency v. Arkison.

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