In a much-anticipated decision, the Supreme Court established the parameters of consent to jurisdiction under Stern v. Marshall in Wellness Int’l Network, Ltd. v. Sharif, No. 13-935 Decided May 26, 2015.
Respondent Richard Sharif tried to discharge a debt he owed petitioners, Wellness International Network, Ltd., and its owners (collectively Wellness), in his Chapter 7 bankruptcy. Wellness sought, inter alia, a declaratory judgment from the Bankruptcy Court, contendingthat a trust Sharif claimed to administer was in fact Sharif’s alter-ego, and that its assets were his personal property and part of his bankruptcy estate. The Bankruptcy Court eventually entered a default judgment against Sharif. While Sharif’s appeal was pending inDistrict Court, but before briefing concluded, this Court held that Article III forbids bankruptcy courts to enter a final judgment on claims that seek only to “augment” the bankruptcy estate and would otherwise “exis[t] without regard to any bankruptcy proceeding.” Stern v. Marshall, 564 U. S. ___, ___. After briefing closed, Sharif soughtpermission to file a supplemental brief raising a Stern objection. The District Court denied the motion, finding it untimely, and affirmed the Bankruptcy Court’s judgment. As relevant here, the Seventh Circuit determined that Sharif’s Stern objection could not be waived because it implicated structural interests and reversed on the alter-ego claim, holding that the Bankruptcy Court lacked constitutional authority to enter final judgment on that claim.
1. Article III permits bankruptcy judges to adjudicate Stern claims with the parties’ knowing and voluntary consent. Pp. 8–17
(a) The foundational case supporting the adjudication of legal disputes by non-Article III judges with the consent of the parties is Commodity Futures Trading Comm’n v. Schor, 478 U. S. 833. There, the Court held that the right to adjudication before an Article III court is “personal” and therefore “subject to waiver.” Id., at 848. The Court also recognized that if Article III’s structural interests as “ ‘aninseparable element of the constitutional system of checks and balances’ ” are implicated, “the parties cannot by consent cure the constitutional difficulty.” Id., at 850–851. The importance of consent wasreiterated in two later cases involving the Federal Magistrates Act’sassignment of non-Article III magistrate judges to supervise voir dire in felony trials. In Gomez v. United States, 490 U. S. 858, the Court held that a magistrate judge was not permitted to select a jury without the defendant’s consent, id., at 864. But in Peretz v. United States, 501 U. S. 923, the Court stated that “the defendant’s consent significantly changes the constitutional analysis,” id., at 932. Because an Article III court retained supervisory authority over theprocess, the Court found “no structural protections . . . implicated” and upheld the Magistrate Judge’s action. Id., at 937. Pp. 8–12.
(b) The question whether allowing bankruptcy courts to decide Stern claims by consent would “impermissibly threate[n] the institutional integrity of the Judicial Branch,” Schor, 478 U. S., at 851, must be decided “with an eye to the practical effect that the” practice “willhave on the constitutionally assigned role of the federal judiciary,” ibid. For several reasons, this practice does not usurp the constitutional prerogatives of Article III courts. Bankruptcy judges are appointed and may be removed by Article III judges, see 28 U. S. C.§§152(a)(1), (e); “serve as judicial officers of the United States districtcourt,” §151; and collectively “constitute a unit of the district court”for the district in which they serve, §152(a)(1). Bankruptcy courts hear matters solely on a district court’s reference, §157(a), and possess no free-floating authority to decide claims traditionally heard byArticle III courts, see Schor, 478 U. S., at 854, 856. “[T]he decision to invoke” the bankruptcy court’s authority “is left entirely to the parties,” id., at 855, and “the power of the federal judiciary to take jurisdiction” remains in place, ibid. Finally, there is no indication thatCongress gave bankruptcy courts the ability to decide Stern claims in an effort to aggrandize itself or humble the Judiciary. See, e.g., Peretz, 501 U. S., at 937. Pp. 12–15.
(c) Stern does not compel a different result. It turned on the fact that the litigant “did not truly consent to” resolution of the claimagainst it in a non-Article III forum, 564 U. S., at ___, and thus, doesnot govern the question whether litigants may validly consent to adjudication by a bankruptcy court. Moreover, expanding Stern to hold that a litigant may not waive the right to an Article III court through consent would be inconsistent with that opinion’s own description of its holding as “a ‘narrow’ one” that did “not change all that much”about the division of labor between district and bankruptcy courts. Id., at ___. Pp. 15–17.
2. Consent to adjudication by a bankruptcy court need not be express, but must be knowing and voluntary.
Neither the Constitution nor the relevant statute—which requires “the consent of all parties tothe proceeding” to hear a Stern claim, §157(c)(2)—mandates express consent. Such a requirement would be in great tension with thisCourt’s holding that substantially similar language in §636(c)—whichauthorizes magistrate judges to conduct proceedings “[u]pon consentof the parties”—permits waiver based on “actions rather than words,” Roell v. Withrow, 538 U. S. 580, 589. Roell’s implied consent standard supplies the appropriate rule for bankruptcy court adjudicationsand makes clear that a litigant’s consent—whether express or implied—must be knowing and voluntary. Pp. 18–19
3. The Seventh Circuit should decide on remand whether Sharif’s actions evinced the requisite knowing and voluntary consent and whether Sharif forfeited his Stern argument below. p. 20. 727 F. 3d 751, reversed and remanded.
SOTOMAYOR, J., delivered the opinion of the Court, in which KENNEDY, GINSBURG, BREYER, and KAGAN, JJ., joined, and in which ALITO, J., joined in part. ALITO, J., filed an opinion concurring in part and concurring in the judgment. ROBERTS, C. J., filed a dissenting opinion, in which SCALIA, J., joined, and in which THOMAS, J., joined as to Part I. THOMAS, J., filed a dissenting opinion.
Full text of Opinion: Wellness – Supreme Court opinion – 05 2015