Litigation: A “Stern” change in the bankruptcy landscape

Supreme Court case bars federal bankruptcy courts from entering some final judgments.

In Stern v. Marshall, Chief Justice John Roberts penned an opinion with enormously far-reaching consequences for bankruptcy practice, and especially the defense bar. Reading Stern even narrowly, it does what Justice William Brennan for the Northern Pipeline Constr. Co. v. Marathon Pipe Line Co. plurality could not do: Bar federal bankruptcy courts from entering final judgment on at least some “core” proceedings. 

The case arose from a familiar fact pattern. When her husband J. Howard Marshall passed away, the model, star and cultural icon Anna Nicole Smith (also known as Vickie Lynn Marshall) filed for bankruptcy. Her stepson, E. Pierce Marshall, filed a proof of claim alleging defamation, and under state law she counterclaimed, claiming that Pierce had fraudulently prevented his father from including her in his will. Anna Nicole won her counterclaim, and a California bankruptcy court followed with a judgment that purported to enrich the estate by almost $500 million. In post-judgment proceedings, Pierce took the novel position that the bankruptcy court lacked jurisdiction over Anna Nicole’s counterclaim. On the case’s second visit to the Supreme Court, the justices confronted the question squarely.

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Matthew Ingber

Matthew Ingber is a litigation partner at Mayer Brown.

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