Supreme Court rules on agency bankruptcy case

Executive Benefits Insurance asked the 9th U.S. Circuit Court of Appeals to dismiss a tortious interference judgment, arguing that the bankruptcy court had no jurisdiction over the interference claim. The 9th Circuit found that Executive Benefits Insurance had consented to bankruptcy court jurisdiction.

In the new Supreme Court opinion, Justice Thomas writes that the Supreme Court failed to indicate in Stern what parties should do when they find that bankruptcy law gives a bankruptcy court more jurisdiction than the U.S. Constitution allows.

A bankruptcy court should decide which claims are affected by the Stern decision and which aren’t, then handle the claims it’s allowed to handle and leave the Stern claims for the district courts, Thomas writes. In the Executive Benefits Insurance case, the tortious interference claims were, generally, the types of claims that a district court should handle, but they were also clearly related to a bankruptcy case, Thomas writes.

Because the claims were the kinds district courts should handle, but also related to bankruptcy, a bankruptcy court seeing claims like those should have come up with proposed findings of fact and conclusions of law, then sent those findings to a district court with the understanding that the district court could review the findings and conclusions from scratch, Thomas writes. In the Executive Benefits Insurance case, the district court reviewed the bankruptcy court’s findings from scratch, and that cured any possible problems with the fact that the bankruptcy court entered judgment on the tortious interference claims, the Justice writes.