Restructuring

Co-authored by Kyle J. Ortiz and Doron P. Kenter.
As we have noted, the Ninth Circuit’s decision in In re Bellingham Insurance Agency created a circuit split with the Sixth Circuit’s decision in Waldman v. Stone on the issue of whether the right to have an action adjudicated before an Article III judge could be waived.  Now, the losing party in Bellingham has filed a petition for a writ of certiorari asking the Supreme Court to take up the question noting that the Court has never “addressed the question whether the structural, separation-of-powers function of Article III permits Congress to reassign the powers of the Judicial Branch as long as the parties consent.”If parties can consent to entry of final judgment by bankruptcy judges in matters as to which they otherwise lack constitutional authority to do so, the petition further asks whether such consent can be implied (either from a party’s course of conduct or otherwise).
The petition also asks the Court to resolve a purported “conflict among lower courts” regarding the so-called “statutory gap” – i.e., whether bankruptcy courts may issue reports and recommendations on statutorily “core” matters even though the Bankruptcy Code contemplates such reports and recommendations only in the case of “non-core” matters.  Despite courts’ near-unanimity in holdings that no such statutory gap exists, the petition points to the Seventh Circuit’s early decision in Ortiz for the suggestion that reports and recommendations may in fact be limited to “non-core” matters.
The petition concludes with a plea for the Court to “resolve the tremendous uncertainty in the lower courts following Stern.”  The 600+ cases citing to Stern certainly attest to the uncertainty introduced by that infamous decision, but even this is debatable, as it could be argued that the body of case law that has developed, as well as the local rules that have been instituted and the federal rules that have been proposed,have substantially mitigated much of the uncertainty.
Keep an eye on the Weil Bankruptcy Blog for further developments.  If the Supreme Court grants certiorari, we may have to replace the Stern Files with the Bellingham Files.