Discerning the Relationship Between Bankruptcy Judges and Article III Judges
This summer, the United States Supreme Court handed down a decision in the case of Executive Benefits Insurance Agency v. Arkison that changed how bankruptcy judges, covered under Article I (the Executive Branch) of the Constitution, and district court Article III judges work together. Arkison helped clarify nagging procedural issues between district and bankruptcy courts. At the same time, Arkison verified a significant reduction in the ability of bankruptcy courts to resolve common claims arising in bankruptcy proceedings.
Arkison began as a seemingly conventional case. In 2006, Bellingham Insurance Agency filed for Chapter 7 bankruptcy. Peter Arkison was assigned as the trustee. Mr. Arkison filed a fraudulent conveyance complaint against Bellingham, something not uncommon in a bankruptcy proceeding. In fact, Title 28 specifically grants bankruptcy courts the ability to hear and determine such claims. The bankruptcy court granted summary judgment on Mr. Arkison’s claim.
The black letter language in Title 28 and Supreme Court precedent contradict each other.