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The Fount of Bankruptcy Jurisdiction Overfloweth in the Most Recent ABLJ

posted by Bob Lawless

Those fascinated by the logic and limits of the Bankruptcy Clause, Article III courts, and bankruptcy courts power will want to check out the most recent issue of the Amercan Bankruptcy Law Journal (vol. 88, no. 4):

  • Kurt F. Gurynne, "Pandora's Box and Peace on the Darkling Plain: Setting the Article III Limits on Congress' Power to Assign Claims to Article I Bankruptcy Judges"
  • Randolph J. Haines, "The Conservative Assault on Federal Equity"
  • Adam M. Langley, Hon. David S. Kennedy & Hon. W. Homer Drake, "The Case for a Constitutional Bankruptcy Court"
  • Stephen J. Lubben, "Puerto Rico and the Bankruptcy Clause"

Update: Yes, the headline to this post did originally say "font." Yes, I am that big of an idiot. In my defense, I caught it myself.


From the tenor of oral arguments in Wellness International I would expect the Supreme Court to hold that Wellness’ alter ego action was to augment the estate and is based on state law and must be decided by an Article III Court, absent explicit knowing voluntary consent to proceed in the Bankruptcy Court.

I base this on my reading that Justice Breyer finally capitulated later in arguments that the alter ego action historically has been a plenary Article III proceeding.

And Justice Sotomayor thinks the Court has already held that fraudulent conveyance actions deserve Article III scrutiny, as should the alter ego claim.

Further Justice Kagan would have nothing of the structural separation of powers argument given the far more threatening practice of the District Court deferring to the arbitration process.

So, explicit knowing voluntary consent under 157(c) does not implicate structural separation of powers concerns, the Magistrate system is not threatened, but bankruptcy powers are scaled back.

I was disappointed with arguments in that they only led to a feeble attempt to define what a “Stern type issue” means for future consideration.

Font would have been correct as well, as font means fountain, or source. The sense of "font" (oft misused for "typeface") derives from the original sense of the word because the pieces of movable type were cast at a foundry. Hence, font. As well, the typeface letters (collectively, a font) were themselves the font of printed matter.

Indeed, in my estimation "font" is the more common use (among those who use either with this meaning). First instincts in writing, so often correct!

@Robert White: "Augment[ing] the estate and is based on state law," I am not sure is the clean test for article III requirement. It is what Granfinanciera held, the private rights issue, even if it is created by the Congress, not necessarily borne of state law, that it cannot be assigned to non-article III tribunals. Further Justice Kagan observation regarding District Court deference to the arbitration process is misplaced. Arbitration process is a non-judicial proceeding. In courts and for article III purposes we are talking about the Judicial powers of United States as rolling with the judicial system. Arbitration becomes a judicial proceeding only when it comes to enforcement. However, a proceeding commenced before bankruptcy judge or a magistrate is a judicial one from the get go. Justice Robert has insinuated to this for Justice Kagan benefit in prior cases but somehow she did not get it. Justice Sotomayor thinking as reflected in her questioning in all bankrutcy cases is that of Justice Story, mandatorily vesting all judicial powers with article III judiciary. Justice Breyer, attemping to fasten insolvency history tracing it to the old English laws serves no purpose on the issue of adjudication of pristine bankruptcy laws entailing private rights with article III requirements, a constitutional one. Genesis of law and its adjudication is two distinct items. Further structural separation of power concerns, has absolutely nothing to do with consent or its lack thereof. Separation of power is not malleable theorem, its the framework for containing rest. The solution lies in going back to the practices under 1898 act. Also the brief of the Petitioner did not posit proper questions, it made the whole approach very murky, especially question 1. A second look at that question would reveal that it had nothing to do with what really transpired with the parties and facts.

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