Doesn't Anyone Want to Talk About Jurisdiction This Week?

With the Second Circuit's ruling in the Argentina/NML case and the now-urgent need to get secured transactions and bankruptcy into the 1L curriculum, Credit Slips has yet to give attention to Wellness International Network, Limited,  issued on Aug 21 by the Seventh Circuit. Luckily, on this issue, I don't mind getting the ball rolling, and then stepping out of the way. 

Cutting to the chase: the bankruptcy court entered a default judgment in a 727 action after years and years of fighting between the parties. One of the counts was an alter ego claim. The Seventh Circuit finds that the bankruptcy court lacked constitutional authority to enter final judgment on an alter ego claim. Given that the bankruptcy court entered a default judgment, the Seventh Circuit had to consider whether Article III objections are waivable. I will quote its resolution to this question: "under current law a litigant may not waive an Article III, sec. 1, objection to a bankruptcy court's entry of a final judgment in a core proceeding." More Supreme Court guidance on some waiver questions is in our future.

As for the rest of the opinion - there's a lot more, and it deliberates for quite a while on how to move forward from the holding  -  reading it for yourself is quite honestly the best advice I can offer now. Rolling, it is.  

Purple elephant photo courtesy of Shutterstock