Editor’s Note: This is the Harvard Law School Bankruptcy Roundtable’s last scheduled post for the summer of 2024. The BRT intends to resume posting around mid-September. The BRT wishes all its readers an enjoyable remainder of the summer!
By Judge Robert D. Drain and Angeline J. Hwang (Skadden, Arps, Slate, Meagher & Flom LLP)
The U.S. Supreme Court has on occasion distinguished the bankruptcy courts’ power derived from Article I of the U.S. Constitution from the judicial power under Article III of the Constitution. The best known of these cases, such as Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982), and Stern v. Marshall, 564 U.S. 462 (2011), have recognized constitutional limitations on the power of bankruptcy courts. However, appellate courts have also suggested that specific constraints on Article III courts do not apply to bankruptcy courts. Some recent examples include the Fifth Circuit’s decision in In re Highland Capital, 57 F.4th 494 (5th Cir. 2023), regarding standing (stating that bankruptcy courts “are not presumptively bound by traditional rules of judicial standing” (citing to In re Coho, 395 F.3d 198, at 202 (5th Cir. 2004)) and applying a “person aggrieved” standard rather than Article III’s “case or controversy” standard), and remarks made during the recent oral argument held on March 19, 2024, in front of the U.S. Supreme Court in Truck Insurance Exchange v. Kaiser Gypsum Company, Inc. (In re Kaiser Gypsum Company, Inc.), No. 22-1079, during which certain Justices seemed reluctant to apply the “case or controversy” limitation on standing under Article III to limit the petitioner’s broader request for standing under 11 U.S.C. § 1109.
This article discusses another such example, Kiviti v. Bhatt, 80 F.4th 520 (4th Cir. 2023), in which the Fourth Circuit found that the “case or controversy” requirement under Article III did not limit Article I bankruptcy courts’ exercise of jurisdiction with respect to a mootness argument, implicitly highlighting the potential exceptional reach of the bankruptcy power under Article I.
Kiviti and similar cases also raise questions whether and how bankruptcy courts can use their inherent power to address legitimate concerns about standing, mootness, and sanctionable behavior by employing court-derived doctrines of prudential standing, equitable mootness, and the contempt power in the absence of constitutional or statutory authority (see, for example, the Second Circuit’s decision in In re Markus, 78 F.4th 554 (2nd Cir. 2023), addressing the inherent contempt power of bankruptcy courts).
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