Stern v. Marshall

Supreme Court of the United States · 2011 · Federal Courts

564 U.S. 462 (2011)

Updated August 1, 2026

Federal Courtsbankruptcy courtsArticle IIIbankruptcycore proceedings28 U.S.C. §157counterclaims by the estatepublic rights

Facts

After J. Howard Marshall died, Vickie filed for bankruptcy in federal court. Pierce filed a proof of claim in the bankruptcy proceeding, alleging Vickie had defamed him, and Vickie filed a counterclaim alleging Pierce tortiously interfered with a gift she expected from J. Howard. The bankruptcy court granted Vickie summary judgment on Pierce's defamation claim and then entered final judgment for Vickie on her state-law tortious interference counterclaim. The legal dispute centered on whether a non-Article III bankruptcy judge could constitutionally enter that final judgment.

Issue

Did 28 U.S.C. §157 authorize the bankruptcy court to enter final judgment on Vickie's counterclaim, and if so, did Article III permit a bankruptcy judge without life tenure and salary protection to do so? More specifically, could the bankruptcy court finally decide a state-law counterclaim by the estate against a creditor who had filed a proof of claim when that counterclaim was not resolved in ruling on the proof of claim?

Rule

Section 157(b)(2)(C) statutorily authorizes a bankruptcy court to enter final judgment on a counterclaim by the estate against a person filing a claim against the estate. But Article III forbids a bankruptcy court from entering final judgment on a state-law counterclaim that is not resolved in the process of ruling on the creditor's proof of claim, because such a claim is a matter of private right and does not fall within the public rights exception.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In a Chapter 11 case in Denver, creditor Nolan Price files a proof of claim against the estate of Maya Rios for unpaid consulting fees. The estate responds with a Colorado common-law fraud counterclaim seeking $900,000, alleging Nolan lied during a separate prebankruptcy business deal; resolving Nolan's fee claim would not determine whether the alleged fraud occurred.

May the bankruptcy court constitutionally enter final judgment on the estate's fraud counterclaim?

Explanation. The majority held that §157(b)(2)(C) statutorily classifies counterclaims by the estate against persons filing claims as core, but Article III still forbids final judgment by a bankruptcy court on a state-law counterclaim that is not resolved in the claims-allowance process. Here the fraud claim is a private-right common-law action that would augment the estate and is not necessarily decided by allowance or disallowance of Nolan's claim.