Bankruptcy Court, Northern District of Illinois, Eastern Division
Issued November 18, 2014 by Judge Jack B. Schmetterer
In June 2013 the US Supreme Court published an opinion arising from a dispute over the estate of Pierce Marshall – better known as the husband of Anna Nichole Smith. That case, Stern vs. Marshall, gave rise to a surprising decision; namely, that Bankruptcy Courts could not rule on the State-law aspects of a dispute even if they were before the Bankruptcy Court as part of the larger dispute. The operative distinction would henceforth come down to whether or not a dispute qualified as a “core proceeding” (i.e. whether it was the kind of question over which the Bankruptcy Court had jurisdiction).
Since the Stern decision was released in 2011, results across the country have often been inconsistent as Bankruptcy Lawyers and Judges attempt to apply this new set of distinctions and decide whether cases should be heard or referred back to the State Courts. In many cases, Bankruptcy Courts defaulted back to State Courts without much discussion.
In an update and clarification to its Stern vs. Marshall Opinion, the Supreme Court recently decided Executive Benefits vs. Ch. 7 Trustee for Bellingham Ins. Agency(Jun. 09). The opinion answered a number of questions that had arisen in the wake of Stern. In particular, the Supreme Court clarified how Bankruptcy Courts should proceed when faced with “core” claims that were now designated as “non-core” under the Stern standard. These claims fall into the so-called “statutory gap” in the Bankruptcy Code.