Thursday, December 13, 2012

Stern v. Marshall Circuit Split

As recently posted, the Sixth Circuit Court of Appeals held that Stern vs. Marshall’s limitations on the jurisdiction of bankruptcy courts were not waivable.  On December 4, 2012, the Ninth Circuit Court of Appeals ruled to the contrary. Executive Benefits Insurance Agency v. Arkison (In re Bellingham Insurance Agency, Inc., Debtor).

In Bellingham, EBIA was sued by Trustee Arkinson, alleging various fraudulent transfers and also alter-ego and successor-liability claims.  EBIA initially moved to withdraw the reference on the grounds that it was entitled to a jury trial, but stayed consideration of its motion to permit the Bankruptcy Court to adjudicate the Trustee’s Motion for Summary Judgment.  After the Bankruptcy Court ruled against it, EBIA abandoned the Motion to Withdraw, the District Court dismissed that action and EBIA appealed the summary judgment ruling to the District Court.  EBIA did not raise any objections to subject matter jurisdiction or the power of the Bankruptcy Court to act until the matter reached the Ninth Circuit.