Stern v. Marshall

Facts of the Case

Petitioner bankruptcy debtor Vickie Lynn Marshall (Smith), aka as Anna Nicole Smith, married J. Howard Marshall II, creditor E. Pierce Marshall’s (Pierce) father, approximately a year before J. Howard’s death. Shortly before J. Howard died, Smith filed a suit against Pierce in Texas state court, asserting that J. Howard meant to provide for Smith through a trust, and Pierce tortiously interfered with that gift. After J. Howard died, Smith filed for bankruptcy in federal court. Pierce filed a proof of claim in that proceeding, asserting that he should be able to recover damages from Smith’s bankruptcy estate because Smith had defamed him by inducing her lawyers to tell the press that Pierce had engaged in fraud in controlling his father’s assets. Smith responded by filing a counterclaim for tortious interference with the gift she expected from Pierce’s father. The Bankruptcy Court granted summary judgment on the defamation claim and eventually awarded Smith $88 million in damages on her counterclaim. Pierce objected that the Bankruptcy Court lacked jurisdiction to enter a final judgment on that counterclaim because it was not a “core proceeding” as defined by

Question

When a creditor files a claim in bankruptcy court, the debtor is sometimes required to file any counterclaim she may have or lose the right to assert that claim later or in another court. Can a bankruptcy judge conclusively resolve such compulsory counterclaims?

CONCLUSION

Conclusion: No. The Supreme Court affirmed the lower court order in an opinion by Chief Justice John Roberts. Although the Bankruptcy Court had the statutory authority to enter judgment on Vickie’s counterclaim, it lacked the constitutional authority to do so, the chief justice wrote. Meanwhile, Justice Stephen Breyer dissented, joined by Justices Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan. The majority fails to follow the analysis that this Court more recently has held applicable to the evaluation of claims of a kind before us here, namely, claims that a congressional delegation of adjudicatory authority violates separation-of-powers principles derived from Article III, Breyer wrote.

Case Information

  • Citation: 564 US _ (2011)
  • Granted: Sep 28, 2010
  • Argued: Jan 18, 2011
  • Decided Jun 23, 2011