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Wellness Int'l Network, Ltd. v. Sharif

Not unconstitutional for bankruptcy litigants to waive right to Article III adjudication of Stern claims, and have them heard by bankruptcy judge.





Cite as

2015 DJDAR 5667

Published

May 26, 2015

Filing Date

May 25, 2015

Summary

Richard Sharif attempted, through Chapter 7 bankruptcy, to discharge a debt owed to Wellness International Network, Ltd. (Wellness). When Wellness sought a declaratory judgment relating to a suspicious trust of Sharif's the Bankruptcy Court entered a default judgment against Sharif. On appeal to the Seventh Circuit, Sharif contended that the recent U.S. Supreme Court case Stern v. Marshall prevented the Bankruptcy Court from making such a judgment; the Seventh Circuit agreed, holding that the Bankruptcy Court lacked constitutional authority to enter final judgment on the claim at issue.
Reversed and remanded. Consenting litigants have "referred adjudication of entire disputes to non-Article III referees" since the early years of this country's nascence. Recent cases of Commodity Futures Trading Comm'n v. Schor, Gomez v. United States and Peretz v. United States all underscore the constitutional viability (and importance) of such fora. These cases, together, demonstrate that "the entitlement to an Article III adjudicator is a personal right and thus ordinarily subject to waiver." Though, this court noted, resort to Article I adjudicators should not reach a point of "emasculating constitutional courts," lest separation of power concerns arise. Here, because Bankruptcy judges are subject to removal by Article III judges, and because the matters they hear are referred to them at district courts' pleasure, "separation of powers concerns are diminished," Further, Stern does not instruct a different result, as the parties in that case did not "truly consent" to resolution of their claims by a non-Article III court.
Opinion by Justice Sotomayor; concurrence by Justice Alito; dissent by Chief Justice Roberts; dissent by Justice Thomas.

— Brian Cardile



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