Executive Benefits Insurance Agency v. Arkison

PETITIONER: Executive Benefits Insurance Agency
RESPONDENT: Peter H. Arkison
LOCATION: William K. Nakamura Courthouse

DOCKET NO.: 12-1200
DECIDED BY: Roberts Court (2010-2016)
LOWER COURT:

CITATION: 573 US (2014)
GRANTED: Jun 24, 2013
ARGUED: Jan 14, 2014
DECIDED: Jun 09, 2014

ADVOCATES:
Curtis E. Gannon -
Douglas Hallward-driemeier - on behalf of the petitioner
John Pottow - on behalf of the respondent

Facts of the case

Bellingham Insurance Agency, Inc. (BIA) was a company owned by Nicholas Paleveda and his wife, Marjorie Ewing. Shortly before BIA filed for voluntary Chapter 7 bankruptcy in 2006, the company assigned the insurance commission from one of its largest clients to Peter Pearce, a long-time employee. Additionally, Paleveda used BIA funds to incorporate the Executive Benefits Insurance Agency, Inc. (EBIA). Pearce then deposited over $100,000 into an account held jointly by EBIA and another company owned by Paleveda and Ewing. The Trustee, Peter Arkison, filed a claim against EBIA in the BIA bankruptcy proceeding. Arkison alleged fraudulent conveyances and that EBIA, as a successor corporation, was liable for BIA's debts. The bankruptcy court granted summary judgment in favor of the Trustee and the district court affirmed.

On appeal to the U.S. Court of Appeals for the Ninth Circuit, EBIA argued, for the first time, that the bankruptcy judge's entry of a final judgment on the Trustee's claims was unconstitutional. The Court of Appeals affirmed the district court's decision. It held that, while a bankruptcy court may not decide a fraudulent conveyance claim, it may hear the claim and make a recommendation for review by a district court. Additionally, the Court of Appeals determined that EBIA, by failing to object to the bankruptcy court's jurisdiction, waived its Seventh Amendment right to a hearing before an Article III court.

Question

(1)May a bankruptcy judge hear a fraudulent conveyance claim and submit a report and recommendation to a district court for review?

(2) May a litigant consent to the entry of a final judgment by a non-Article III bankruptcy judge? And, if so, does the litigant's failure to object to the bankruptcy judge's entry of a final judgment amount to implied consent?

Media for Executive Benefits Insurance Agency v. Arkison

Audio Transcription for Oral Argument - January 14, 2014 in Executive Benefits Insurance Agency v. Arkison

Audio Transcription for Opinion Announcement - June 09, 2014 in Executive Benefits Insurance Agency v. Arkison

Justice Thomas has our opinion this morning in case 12-1200, Executive Benefits Insurance Agency v. Arkison.

This case comes to us on a writ of certiorari to the United States Court of Appeals for the Ninth Circuit.

The case began when a company filed for Chapter 7 bankruptcy.

The bankruptcy trustee, who's the responded here, filled a complaint in Bankruptcy Court against the petitioner, Executive Benefits Insurance Agency.

The complaint alleged that assets of the bankrupt company were fraudulently conveyed to the petitioner.

The Bankruptcy Court granted some rejudgment to the trustee.

The District Court reviewed that decision de novo, affirmed and then entered judgment.

Petitioner appealed to the Ninth Circuit.

Before argument in the Court of Appeals, this Court decided Stern v. Marshall.

In that case, we held that even though the bankruptcy statute permits bankruptcy courts to enter final judgment on certain claims.

Article III of the Constitution does not.

The Ninth Circuit subsequently affirmed the District Court.

In this case again, concluding that even if the trustees' claims were like the claims in Stern, petitioner had consented to adjudication in the Bankruptcy Court.

In an opinion filed with the clerk today, we affirm the judgment of the Ninth Circuit on other grounds.

We assume without deciding that the fraudulent conveyance claim at issue are Stern claims and that petitioner did not consent to the Bankruptcy Court's adjudication.

Under those circumstances, the Bankruptcy Court may not as a constitutional matter enter final judgment.

The Bankruptcy Court may, however, enter proposed finding of facts and conclusions of law.

That is because the statute sever ability provision allows the Bankruptcy Court to treat the claims as ?non-core? within the meaning of the bankruptcy statute.

For claims that fall within the none-core category, the statute states that the bankruptcy judge shall enter proposed findings of facts and conclusions of law subject to de novo review by the District Court although this case did not proceed and precisely that fashion, we affirm nonetheless.

Petitioner argues that Bankruptcy Court's adjudication of these claims violates the Constitution unless a District Court conducts de novo review and enters judgment.

As it turns out, that is exactly what petitioners received here, de novo review and entry of judgment by the District Court.

For these reasons and other set forth in our opinion, we affirm the judgment of the Ninth Circuit.

The opinion of the Court is unanimous.