Supreme Court Grants Cert in Two Slips-Worthy Cases

The Supreme Court granted cert this morning in two cases of note to Credit Slips readers, one on the CFPB and one on bankruptcy court jurisdiction. First, in NLRB v. Noel Canning, the Court agreed to decide whether the president properly exercised his power to make recess appointments to the National Labor Relations Board. Because the current director of the CFPB, Richard Cordray, was appointed at the same time as the NLRB members, the case would seem to have implications for the CFPB as Adam Levitin outlined when the case was in the lower courts. In addition to the questions raised in the cert petition, the Court asked the parties also to brief the issue of the president making recess appointments during pro-forma 3-day sessions of the Senate, suggesting the Court may be looking for narrow grounds on which to reach a decision.

The second case is a bankruptcy case named Executive Benefits Ins. Agency v. Arkison about the scope of the bankruptcy court's powers in the wake of the Court's ruling in Stern v. Marshall. In a Ninth Circuit case that drew a good bit of attention after Stern was decided, a fraudulent transfer defendant argued the bankruptcy court lacked jurisdiction to enter judgment against it. The Ninth Circuit agreed that the bankruptcy court could not enter a final judgment in a fraudulent transfer action but held the defendant had consented to the bankruptcy court's jurisdiction through its litigation conduct. The Supreme Court will decide whether parties can consent to bankruptcy court jurisdiction as well have to decide a statutory issue about a gap Stern created in the jurisdictional framework. A potential outcome is that bankruptcy courts will lose the power to hear any fraudulent transfer actions.

Coming on the heels of the cert grant in Law about bankruptcy court's general equitable powers in section 105, Executive Benefits could be a signal that the Supreme Court wants to substantially trim the powers of the bankruptcy courts. The October 2013 Term could prove to be a momentous one for bankruptcy judges and practitioners.

UPDATE (6/24): I neglected to mention that John Pottow posted an analysis of the lower court decision here.