In a recent Sixth Circuit Decision, Waldman v. Stone
, decided October 26, 2012, the Court may have significantly expanded the intended reach of a 2011 Supreme Court decision, Stern v. Marshall, 131 S.C.T. 2594 (2011). In Stern v. Marshall, the Supreme Court held that Bankruptcy Court Judges, as Article I Judges and not Article III Judges under the United States Constitution, could not exercise Article III judicial power to decide state law cause of action even where such state cause of action was arguably a core proceeding under 28 U.S.C. §157. Under 28 U.S.C. §157 bankruptcy judges can enter final judgments in core proceedings but can only make recommendations to the District Court in non-core proceedings unless the parties consent.
Following Stern, most courts and commentators assumed that a party could waive the limitations on the Bankruptcy Court’s jurisdiction imposed by Stern and consent to an adjudication in the Bankruptcy Court. However, in the Waldman decision, the Sixth Circuit held that not only did the Bankruptcy Court lack constitutional authority to enter a judgment against Waldman but that Waldman could raise the issue for the first time on appeal.