Burr Alert: Evolving Bankruptcy Jurisdiction - Ninth Circuit Rules that Bankruptcy Courts Cannot Enter Final Judgment on Fraudulent Conveyance Claims

January 24, 2013

Before the Supreme Court’s seminal ruling in Stern v. Marshall,1 bankruptcy courts regularly entered final orders in fraudulent conveyance actions and other "core"2 matters. In Stern v. Marshall, the Supreme Court ruled that despite being statutorily defined as "core" under the bankruptcy code, bankruptcy courts do not have the constitutional power to adjudicate counterclaims to proofs of claim because they are based in state law. Following the same course, the Ninth Circuit recently held in In re Bellingham Insurance Agency, Inc.,3 that a non-Article III bankruptcy judge lacks constitutional authority to enter a final judgment on a fraudulent conveyance action against a nonclaimant to a bankruptcy estate.

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