The U.S. Supreme Court has handed down a unanimous ruling in a case involving questions about court jurisdiction over the allegations made in an insurance agency bankruptcy case. The ruling in the case, Executive Benefits Insurance Agency vs. Arkison (Supreme Court Case Number 12-1200), may affect how bankruptcy court judges proceed when they decide that Article III of the U.S. Constitution puts some claims outside their jurisdiction.
Executive Benefits Insurance Agency Inc. began doing business in Washington state in February 2006. It filed for bankruptcy court protection in Washington state in June 2006.
Peter Arkison, a bankruptcy court trustee, alleged that the owners of the agency had violated bankruptcy rules by putting assets from another, defunct agency into Executive Benefits Insurance. The bankruptcy court granted summary judgment for the trustee. The agency appealed to a U.S. District Court, which affirmed the bankruptcy court’s decision.
While Executive Benefits Insurance was appealing the ruling, the Supreme Court held in another case, Stern vs. Marshall, that Congress violated Article III requirements in bankruptcy statutes it passed in 1984. Congress decided to let the bankruptcy courts handle many claims, such as claims for tortious interference, that should be reserved for district courts, the Supreme Court held.
Bankruptcy courts can handle “non-core” claims, and give their views on how “core” Stern claims relate to bankruptcy cases, but the district courts have to have the final say on the core Stern claims, the Supreme Court held.