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STERN v. MARSHALL
131 S.Ct. 2594 (2011)
180 L. Ed. 2d 475
Howard K. STERN, Executor of the Estate of Vickie Lynn Marshall, Petitioner,
v.
Elaine T. MARSHALL, Executrix of the Estate of E. Pierce Marshall.
No. 10-179.
Supreme Court of United States.
Argued January 18, 2011.
Decided June 23, 2011.
Malcolm L. Stewart, for United States as amicus curiae, by special leave of the Court, supporting the Petitioner.
Roy T. Englert, Jr., Robbins, Russeh, Englert, Orseck, Untreiner & Sauber LLP, Washington, DC, G. Eric Brunstad, Jr., Collin O'Connor Udell, Matthew J. Delude, Dechert LLP, Hartford, CT, Seth P. Waxman, Craig Goldblatt, Danielle Spinelli, Wilmer Cutler Pickering Hale and Dorr, LLP, Washington, DC, Kenneth N. Klee, Daniel J. Bussel, Whitman L. Holt, Klee, Tuchin, Bogdanoff & Stern LLP, Los Angeles, CA, Don Jackson, Ware, Jackson, Lee & Chambers, LLP, Houston, TX, Sanford Svetcov, Robbins Geller Rudman & Dowd LLP, San Francisco, CA, Joseph A. Eisenberg, Julia J. Rider, Jeffer, Mangels, Butler & Marmaro LLP, Los Angeles, CA, for Respondent.
Philip W. Boesch, Jr., The Boesch Law Group, Santa Monica, California, Bruce S. Ross, Vivian L. Thoreen, Holland & Knight LLP, Los Angeles, California, Kent L. Richland, Alan Diamond, Edward L. Xanders, Greines, Martin, Stein & Richland LLP, Los Angeles, California, for Petitioner Howard K. Stern, Executor of the Estate of Vickie Lynn Marshall.
CHIEF JUSTICE ROBERTS delivered the opinion of the Court. This "suit has, in course of time, become so complicated, that ... no two ... lawyers can talk about it for five minutes, without coming to a total disagreement as to all the premises. Innumerable children have been born into the cause: innumerable young people have married into it;" and, sadly, the original parties "have died out of it." A "long procession of [judges] has come in and gone out" during that time, and still the suit "drags its weary length before the Court." Those words were not written about this case, see C. Dickens, Bleak House, in 1 Works of Charles Dickens 4-5 (1891), but they could have been. This is the second time we have had occasion to weigh in on this long-running dispute between Vickie Lynn Marshall and E. Pierce Marshall over the fortune of J. Howard Marshall II, a man believed to have been one of the richest people in Texas. The Marshalls' litigation has worked its way through state and federal courts in Louisiana, Texas, and California, and two of those courts—a Texas state probate court and the Bankruptcy Court for the Central District of California—have reached contrary decisions on its merits. The Court of Appeals below held that the Texas state decision controlled, after concluding that the Bankruptcy Court lacked the authority to enter final judgment on a counterclaim that Vickie brought against Pierce in her bankruptcy proceeding.1 To determine whether the Court of Appeals was correct in that regard, we must resolve two issues: (1) whether the Bankruptcy Court had the statutory authority under 28 U.S.C. § 157(b) to issue a final judgment on Vickie's counterclaim; and (2) if so, whether conferring that authority on the Bankruptcy Court is constitutional. Although the history of this litigation is complicated, its resolution ultimately turns on very basic principles. Article III, § 1, of the Constitution commands that "[t]he judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish." That Article further provides that the judges of those courts shall hold their offices during good behavior, without diminution of salary. Ibid. Those requirements
of Article III were not honored here. The Bankruptcy Court in this case exercised the judicial power of the United States by entering final judgment on a common law tort claim, even though the judges of such courts enjoy neither tenure during good behavior nor salary protection. We conclude that, although the Bankruptcy Court had the statutory authority to enter judgment on Vickie's counterclaim, it lacked the constitutional authority to do so. IBecause we have already recounted the facts and procedural history of this case in detail, see Marshall v. Marshall, 547 U.S. 293, 300-305, 126 S.Ct. 1735, 164 L.Ed.2d 480 (2006), we do not repeat them in full here. Of current relevance are two claims Vickie filed in an attempt to secure half of J. Howard's fortune. Known to the public as Anna Nicole Smith, Vickie was J. Howard's third wife and married him about a year before his death. Id., at 300, 126 S.Ct. 1735; see In re Marshall, 392 F.3d 1118, 1122 (C.A.9 2004). Although J. Howard bestowed on Vickie many monetary and other gifts during their courtship and marriage, he did not include her in his will. 547 U.S., at 300, 126 S.Ct. 1735. Before J. Howard passed away, Vickie filed suit in Texas state probate court, asserting that Pierce—J. Howard's younger son—fraudulently induced J. Howard to sign a living trust that did not include her, even though J. Howard meant to give her half his property. Pierce denied any fraudulent activity and defended the validity of J. Howard's trust and, eventually, his will. 392 F.3d, at 1122-1123, 1125. After J. Howard's death, Vickie filed a petition for bankruptcy in the Central District of California. Pierce filed a complaint in that bankruptcy proceeding, contending that Vickie had defamed him by inducing her lawyers to tell members of the press that he had engaged in fraud to gain control of his father's assets. 547 U.S., at 300-301, 126 S.Ct. 1735; In re Marshall, 600 F.3d 1037, 1043-1044 (C.A.9 2010). The complaint sought a declaration that Pierce's defamation claim was not dischargeable in the bankruptcy proceedings. Ibid.; see 11 U.S.C. § 523(a). Pierce subsequently filed a proof of claim for the defamation action, meaning that he sought to recover damages for it from Vickie's bankruptcy estate. See § 501(a). Vickie responded to Pierce's initial complaint by asserting truth as a defense to the alleged defamation and by filing a counterclaim for tortious interference with the gift she expected from J. Howard. As she had in state court, Vickie alleged that Pierce had wrongfully prevented J. Howard from taking the legal steps necessary to provide her with half his property. 547 U.S., at 301, 126 S.Ct. 1735.
1. Because both Vickie and Pierce passed away during this litigation, the parties in this case are Vickie's estate and Pierce's estate. We continue to refer to them as "Vickie" and "Pierce."
2. One judge wrote a separate concurring opinion. He concluded that "Vickie's counterclaim... [wa]s not a core proceeding, so the Texas probate court judgment preceded the district court judgment and controls." 600 F.3d, at 1065 (Kleinfeld, J.). The concurring judge also "offer[ed] additional grounds" that he believed required judgment in Pierce's favor. Ibid. Pierce presses only one of those additional grounds here; it is discussed below, in Part II-C.
3. In full, §§ 157(b)(1)-(2) provides:
"(1) Bankruptcy judges may hear and determine all cases under title 11 and all core proceedings arising under title 11, or arising in a case under title 11, referred under subsection (a) of this section, and may enter appropriate orders and judgments, subject to review under section 158 of this title.
"(2) Core proceedings include, but are not limited to—
"(A) matters concerning the administration of the estate;
"(B) allowance or disallowance of claims against the estate or exemptions from property of the estate, and estimation of claims or interests for the purposes of confirming a plan under chapter 11, 12, or 13 of title 11 but not the liquidation or estimation of contingent or unliquidated personal injury tort or wrongful death claims against the estate for purposes of distribution in a case under title 11;
"(C) counterclaims by the estate against persons filing claims against the estate;
"(D) orders in respect to obtaining credit;
"(E) orders to turn over property of the estate;
"(F) proceedings to determine, avoid, or recover preferences;
"(G) motions to terminate, annul, or modify the automatic stay;
"(H) proceedings to determine, avoid, or recover fraudulent conveyances;
"(I) determinations as to the dischargeability of particular debts;
"(J) objections to discharges;
"(K) determinations of the validity, extent, or priority of liens;
"(L) confirmations of plans;
"(M) orders approving the use or lease of property, including the use of cash collateral;
"(N) orders approving the sale of property other than property resulting from claims brought by the estate against persons who have not filed claims against the estate;
"(O) other proceedings affecting the liquidation of the assets of the estate or the adjustment of the debtor-creditor or the equity security holder relationship, except personal injury tort or wrongful death claims; and
"(P) recognition of foreign proceedings and other matters under chapter 15 of title 11."
4. Although Pierce suggests that consideration of "the 157(b)(5) issue" would facilitate an "easy" resolution of the case, Tr. of Oral Arg. 47-48, he is mistaken. Had Pierce preserved his argument under that provision, we would have been confronted with several questions on which there is little consensus or precedent. Those issues include: (1) the scope of the phrase "personal injury tort"—a question over which there is at least a three-way divide, see In re Arnold, 407 B.R. 849, 851-853 (Bkrtcy.Ct.M.D.N.C.2009); (2) whether, as Vickie argued in the Court of Appeals, the requirement that a personal injury tort claim be "tried" in the district court nonetheless permits the bankruptcy court to resolve the claim short of trial, see Appellee's/Cross-Appellant's Supplemental Brief in No. 02-56002 etc. (CA9), p. 24; see also In re Dow Corning Corp., 215 B.R. 346, 349-351 (Bkrtcy.Ct. E.D.Mich.1997) (noting divide over whether, and on what grounds, a bankruptcy court may resolve a claim pretrial); and (3) even if Pierce's defamation claim could be considered only by the District Court, whether the Bankruptcy Court might retain jurisdiction over the counterclaim, cf. Arbaugh v. Y & H Corp., 546 U.S. 500, 514, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006) ("when a court grants a motion to dismiss for failure to state a federal claim, the court generally retains discretion to exercise supplemental jurisdiction, pursuant to 28 U.S.C. § 1367, over pendent state-law claims"). We express no opinion on any of these issues and simply note that the § 157(b)(5) question is not as straightforward as Pierce would have it.
5. The dissent is thus wrong in suggesting that less than a full Court agreed on the points pertinent to this case. Post, at 2622 (opinion of BREYER, J.).
6. Although the Court in Crowell went on to decide that the facts of the private dispute before it could be determined by a non-Article III tribunal in the first instance, subject to judicial review, the Court did so only after observing that the administrative adjudicator had only limited authority to make specialized, narrowly confined factual determinations regarding a particularized area of law and to issue orders that could be enforced only by action of the District Court. 285 U.S., at 38, 44-45, 54, 52 S.Ct. 285; see Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 78, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982) (plurality opinion). In other words, the agency in Crowell functioned as a true "adjunct" of the District Court. That is not the case here. See infra, at 2618-2619.
Although the dissent suggests that we understate the import of Crowell in this regard, the dissent itself recognizes—repeatedly—that Crowell by its terms addresses the determination of facts outside Article III. See post, at 2623 (Crowell "upheld Congress' delegation of primary factfinding authority to the agency"); post, at 2627 (quoting Crowell, 285 U.S., at 51, 52 S.Ct. 285, for the proposition that "`there is no requirement that, in order to maintain the essential attributes of the judicial power, all determinations of fact in constitutional courts shall be made by judges'"). Crowell may well have additional significance in the context of expert administrative agencies that oversee particular substantive federal regimes, but we have no occasion to and do not address those issues today. See infra, at 2615. The United States apparently agrees that any broader significance of Crowell is not pertinent in this case, citing to Crowell in its brief only once, in the last footnote, again for the limited proposition discussed above. Brief for United States as Amicus Curiae 32, n. 5.
7. We noted that we did not mean to "suggest that the restructuring of debtor-creditor relations is in fact a public right." 492 U.S., at 56, n. 11, 109 S.Ct. 2782. Our conclusion was that, "even if one accepts this thesis," Congress could not constitutionally assign resolution of the fraudulent conveyance action to a non-Article III court. Ibid. Because neither party asks us to reconsider the public rights framework for bankruptcy, we follow the same approach here.
8. Contrary to the claims of the dissent, see post, at 2627-2628, Pierce did not have another forum in which to pursue his claim to recover from Vickie's prebankruptcy assets, rather than take his chances with whatever funds might remain after the Title 11 proceedings. Creditors who possess claims that do not satisfy the requirements for nondischargeability under 11 U.S.C. § 523 have no choice but to file their claims in bankruptcy proceedings if they want to pursue the claims at all. That is why, as we recognized in Granfinanciera, the notion of "consent" does not apply in bankruptcy proceedings as it might in other contexts.
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