Stern v. Marshall (10-179)

argument 10-179

Stern v. Marshall

Supreme Court of the United States 1h 0m 6 speakers 8 chapters transcribed 5 days ago official recording ↗

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What is the central dispute in Stern v. Marshall and how did it reach the Supreme Court?

John G. Roberts 0:02

We'll now hear argument in case 10-179, Stern v. Marshall. Mr. Richland?

Paul D. Clement 0:10

Mr. Chief Justice, and may it please the Court, Pierce Marshall filed a claim in Vicki Marshall's bankruptcy case. He alleged he was damaged because she falsely accused him of cheating her out of money that her late husband intended to give her. In order to preserve its claim against him, the bankruptcy estate had no choice but then to file its counterclaim in the bankruptcy court, alleging that those statements were in fact true and that far from Pierce being entitled to money from the estate, he owed money to the bankruptcy estate. This Court's case has established that the bankruptcy court was constitutionally authorized to decide that entire dispute. Congress drafted the bankruptcy statutes. Excuse me, Your Honor.

Paul D. Clement 1:07

I'm sorry.

Elena Kagan 1:07

JUSTICE KAGAN. What's the authority at all for a bankruptcy court to adjudicate proof of claims without violating Article III? I don't think we've ever had a case that's actually said that.

Paul D. Clement 1:20

MR. This Court has never approached that issue directly. Of course — JUSTICE KAGAN. So what — MR. Excuse me. JUSTICE KAGAN. Well, of course, it need not reach that issue in this case because the court below and the respondents assumed for the purposes of this case that, in fact, there was authority for the

Elena Kagan 1:41

bankruptcy. I'm not sure how that helps. If there is no jurisdiction for the bankruptcy court to adjudicate proof of claims, then how can it adjudicate counterclaims. But don't both fall if there's an Article III violation?

Paul D. Clement 2:01

Well, I don't think so, Your Honor, because Article III, of course, is not jurisdictional in the sense that we think of basic fundamental jurisdiction, subject matter jurisdiction. It can be waived, of course. But beyond that, I think that Marathon, as I said, assumes that there is an Article III authority to adjudicate the proof of claim.

Elena Kagan 2:22

So answer the question. Don't assume it.

Paul D. Clement 2:25

Well, the answer is that under the various theories that this Court has put forth, there is a basis for the bankruptcy Court to adjudicate a proof of claim. One theory, of course, is the public rights theory. And in Gran Financiera, this Court established that the public rights theory was broader than just the kind of situation where the government was a party, and it said that it The public rights are defined as whether Congress acting under Article I has created a seemingly private right that is so closely integrated into a public regulatory scheme as to be a matter appropriate for agency resolution with limited involvement by the Article III judiciary. The claim here was not one that was created by Congress, though, was it?

Paul D. Clement 3:17

That's correct. But this Court has never held that in fact the claim had to be created by — literally created by Congress. What this Court has always talked about is, is the claim one that Congress has established as being applicable within the system, but that may be based on a State law claim? For example, when this Court analyzed the claims which were at issue in Gran Financiera, It looked at the fact that they were fundamentally common law claims. It didn't depend on the fact that they were federal claims. The same thing is true in the way that this Court analyzed the claim in Marathon itself. It made the determination that because this was — I think the way Justice Rehnquist stated it was, this is the stuff that would have been

Paul D. Clement 4:13

adjudicated at common law in Westminster in 1789. So it was not the federal or state nature of the claim. It was the fact that these were common law claims that made it important.

Anthony M. Kennedy 4:24

Are there any limits, Mr. Richland? Suppose that Congress had authorized bankruptcy courts to decide contract disputes between two creditors in a bankruptcy proceeding. Would that be all right?

Paul D. Clement 4:37

I think that there are limits, and they must be related to the purpose of bankruptcy. I think that that sort of thing would be related to, perhaps, within the related to jurisdiction of bankruptcy, and that would fall within the problems identified in Gran Financiera, for example.