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decision (restricted to the facts in Stern) and a broad reading of it (whereby bankruptcy courts could not enter final judgment in avoidance actions because such actions are "quintessentially suits at common law" that must be decided by an Article III judge. The court here concluded that the narrow reading was the more appropriate reading of Stern. The court restricted its reading of Stern to "the case of a 'state-law counterclaim that is not resolved in the process of ruling on a creditor's proof of claim.'" Here, the court found that Stern was inapplicable because the trustee's suit did not involve a state-law counterclaim by the estate. Thus, the court found that it could enter final judgment "on the core preference, post-petition transfer, fraudulent transfer, and unjust enrichment claims and issue proposed findings of fact and conclusions of law on the non- core causes of action." The court rejected the movants' argument that, in the event the court found that it had no authority to finally adjudicate a particular claim, the court must dismiss the actions because there is no statutory authority for a bankruptcy court to submit proposed findings and conclusions where the proceeding is core but precluded by Article III. The court stated: "I reject this argument, as it implies that Stern has eviscerated the grant of subject matter jurisdiction to the bankruptcy courts under 28 U.S.C. §§ 1334 and 157(a)-a reading that the Stern majority expressly disavowed.... As the court noted in Refco, there is language in the Stern majority opinion that strongly suggests that any such 'core but precluded' proceedings are to be treated as matters 'related to' the bankruptcy case, i.e. that the bankruptcy court should make recommendations to the district court." Finally, the court rejected the movants' argument that since the bankruptcy court could not conduct a jury trial, it would be a waste of judicial resources to issue proposed findings and conclusions to the district court. Said the court: "The recommendation system that Movants are disparaging is the exact mechanism that 28 U.S.C. § 157(c)(1)-and the court in Stern-contemplates and that has long been used by bankruptcy and district courts across the country. These concerns about judicial economy were undoubtedly considered when § 157 was enacted. Moreover, Movants misconstrue what is meant by 'de novo review.' De novo review does not mean a de novo hearing; rather, it means that 'district judge may accept, reject, or modify the proposed findings of fact or conclusions of law, receive further evidence, or recommit the matter to the bankruptcy judge with instructions.'" The court thus denied the movants' motion to dismiss.
vi. Liquidating Trustee of the MPC Liquidating Trust v. Granite Financial Solutions, Inc. (In re MPC Computers, LLC et al.), 465 B.R. 384 (Bankr. D. Del. 2012)
Issue: Whether the bankruptcy court had subject matter jurisdiction over the liquidating trustee's suit.
Holding: The court denied the defendant's motion to dismiss, holding that it had subject matter jurisdiction over the liquidating trustee's suit. The court first addressed the argument that its entry of judgment in the trustee's suit would be unconstitutional under Stern v. Marshall. The court concluded that the Stern court merely held that although the Bankruptcy Court had the statutory authority to enter final judgment on the bankruptcy estate's state law counterclaim, it lacked the constitutional authority to do so. The court noted that "[i]n so holding, the [Supreme]
©2014 William L. Norton III
