Supreme Court Wellness Decision Resolves Issue of Whether Parties Can Consent to Bankruptcy Court Jurisdiction
The recent Supreme Court case of Wellness International Network, Ltd. v. Sharif, – U.S. ___ , No. 13-935 (May 26, 2015) resolved the issue of whether litigants in the Bankruptcy Court can consent to have the Bankruptcy Court decide matters that otherwise would need to be decided by the U.S. District Court.
The Wellness decision resolved an issue that remained undecided since the Court’s prior ruling in Stern v. Marshall, 564 U.S. _ , 131 S.Ct. 2594 (2011), as to whether litigants can consent to having a Bankruptcy Court decide a matter which otherwise would need to be decided by a U.S. District Court judge. The Stern Court had found that the Bankruptcy Court did not have authority to adjudicate counterclaims based on state law.
The Wellness Court distinguished the Stern decision as involving a case in which the parties did not consent to Bankruptcy Court jurisdiction.
It is important to note that the Court in Wellness found that consent does not have to be express and may be implied, but must still be knowing and voluntary, and that parties need to be notified of the right to refuse non-Article III adjudication. The Court indicated that it is a good practice to obtain express consent.