You know things probably won't turn out well when the first sentence in a 5-4 U.S. Supreme Court opinion quotes from a 158 year-old novel.
So begins Chief Justice John Roberts's opus for the majority in Stern v. Marshall, No. 10-179 (U.S. June 23, 2011). It says:
This "suit has, in course of time, become so complicated,that . . . no two . . . lawyers can talk about it for five minutes, without coming to a total disagreement as to all the premises. Innumerable children have been born into the cause: innumerable young people have married into it;" and, sadly, the original parties "have died out of it." A "long procession of [judges] has come in and gone out" during that time, and still the suit "drags its weary length before the Court."
The Chief Justice seems to have taken Bleak House as his starting point because the outcome in Stern v. Marshall so resembles the lawsuit that provides Dickens's backdrop. The book tells a tragic tale about Richard Jarndyce's pinning way too much hope on winning a fight in Chancery court — Jandyce and Jarndyce – over which of several wills will prove the binding one. That case ended, after many years, not on the merits but when "the whole estate is found to have been absorbed in costs" of litigation. And the end came just after Richard found a newer will that would have assured him victory.
Fight Over a Texas Fortune
Stern v. Marshall involved a long-running tussle, in multiple courts, between the son of a wealthy Texan, J. Howard Marshall, II, and the father's third bride, Anna Nicole Smith, whom the Court calls by her regular name, Vickie Lynn Marshall. The warfare over whether Ms. Smith would get half of the elder Marshall's fortune landed at length in a bankruptcy court, in which Ms. Smith filed for protection from her creditors. That court made rulings in her favor and against the son, awarding her $425 million.
The appeal, as it reached the Supreme Court, revolved around the question of whether the bankruptcy court had the power to render a final judgment. The majority held that it did not. And told the parties to start over (although Ms. Smith died awhile back).
Article III Power
The why of the decision turns on the fact that bankruptcy judges don't qualify as "Article III" judges. Article III of the U.S. Constitution allows Congress to "ordain and establish" courts "inferior" to the "supreme Court." It also specifies that "Judges, both of the supreme and inferior Courts, shall hold their Offices during good Behavior, and shall, at stated Times, receive for their Services a Compensation which shall not be diminished during their Continuance in Office."
Bankruptcy judges serve 14-year terms. That by itself takes them outside the Article III realm.
The non-Article III status of bankruptcy judges mattered, the majority in Stern v. Marshall held, because the battle that raged between the third wife and the son related to claims that didn't fall within the unique competency of bankruptcy courts — adjusting the bankrupt's debts and the like. The claims instead concerned the wife's claim that the son prevented the father from giving her half his estate and the son's claim that she defamed him by accusing him of interfering with such an inter vivos gift.
The dissent, by Justice Breyer, urged that Article III judge had enough power to review bankruptcy judgments such that giving final effect to the judgments didn't violate the Constitution.
Blawgletter won't go into the statutes — although we've always liked that the provisions that govern the most familiar kind of bankruptcy, Chapter 11, appear in Title 11 — or the details about "core" versus "non-core" proceedings in bankruptcy. But we will point out that the outcome in Stern v. Marshall will provide cause for litigants who lost certain kinds of claims in a bankruptcy court to try for a second go, asserting that the bankruptcy judge lacked the jurisdiction (per Stern v. Marshall) to issue a binding judgment. And lack of jurisdiction usually voids a judgment.
(Mr. Dickens, we suspect, might have smiled at the result.)
The outcome for living litigants may prove far better than for poor Richard Jarndyce. He lost not because his claim lacked merit but because the litigation process had consumed the estate he would have at long last won. We imagine people today will find instances in which a lot of money remains available to satisfy their claims. And they will ask for, and likely get, a second bite at the apple.