The United States Supreme Court issued its opinion yesterday on whether certain types of cases may be heard in bankruptcy courts. The Court had previously ruled that bankruptcy courts lacked “constitutional authority” to hear certain types of “core” proceedings involving disputes between a debtor and third parties (so called “Stern” cases named after the case of Stern v. Marshall). An example of such a case might be where a debtor attempts to recover a transfer it made before filing bankruptcy based on a theory of fraudulent conveyance. After Stern, the Seventh Circuit Court of Appeals ruled that parties cannot consent to a bankruptcy court deciding these issues, and that the case therefore had to be transferred to a federal district court for proceedings and a decision.
The Court reversed the Seventh Circuit and held that parties can knowingly and voluntarily consent to a bankruptcy court deciding Stern issues in the case of Wellman International v. Sharif. Read the Court’s Opinion here: Wellness – Supreme Court opinion – 05 2015