Voluntary Bankruptcy Adjudication: Why Consent Matters

On June 23, 2011, the Supreme Court upended what many who practice in the bankruptcy courts believed to be a settled law: the ability of bankruptcy courts to enter final judgments on counterclaims against estate creditors. Before the Court decided Stern v. Marshall, 131 S. Ct. 2594 (2011), the widely accepted view was that when a creditor filed a proof of claim, the creditor consented to the entry of a final judgment by the bankruptcy court on any counterclaims the bankruptcy estate might assert against him or her and that the creditor’s consent eliminated any concerns about the constitutional authority of the bankruptcy court to enter judgment. Bankruptcy courts and practitioners accepted this proposition as gospel even though the Court had hinted in Granfinanciera, SA v. Nordberg, a decision involving the right to trial by jury in a fraudulent transfer action, that filing a proof of claim might not equate to consent to be sued in a non-Article III forum. 492 U.S. 33, 59 n.14 (1989).