Wellness International Network, Limited v. Sharif

Bankruptcy courts have authority to issue final judgments on whether assets are included in a bankruptcy estate if all parties knowingly and voluntarily consent to the adjudication.

Respondent filed for bankruptcy and Petitioner sought relief in bankruptcy court for debt owed to Petitioner. Petitioner claimed that the family trust administered by Respondent was Respondent’s alter ego and was used to conceal personal property and assets. Therefore, Petitioner claimed that these assets should be included in Respondent’s bankruptcy estate so that the debt could be paid. The bankruptcy court entered a default judgment against Respondent and Respondent appealed to the district court. While the appeal was pending, this Court ruled in Stern v. Marshall that a bankruptcy court lacks the authority to issue a final judgment on claims to “augment” the assets of a bankruptcy estate (i.e. Stern claim). The district court denied Respondent’s motion and affirmed the bankruptcy court. The Seventh circuit reversed, holding that the bankruptcy court lacked constitutional authority to enter a final judgment on Petitioner’s claims. This Court reversed, holding that bankruptcy courts have the authority to decide whether assets are included in a bankruptcy estate if all parties to the litigation “knowingly and voluntarily” consent. This Court remanded to the Seventh circuit to decide whether the parties consented to bankruptcy court adjudication on the Stern claim. Reversed and remanded.