SUPREME COURT TRANSCRIPT IN THE EBIA CASE FOR ORAL ARGS JAN 14 2014 RE: BANKRUPTCY COURTS--WILL THE BANKRUPTCY COURTS BE WEAKENED WITH THE SUPREME COURT RULING?

8/13/2019 SUPREME COURT TRANSCRIPT IN THE EBIA CASE FOR ORAL ARGS JAN 14 2014 RE: BANKRUPTCY COURTS--WILL T

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Official - Subject to Review

1 I N THE SUPREME COURT OF THE UNI TED STATES

2 - - - - - - - - - - - - - - - - - x

3 EXECUTI VE BENEFI TS I NSURANCE :

4 AGENCY, :

5 Pet i t i oner : No. 12- 1200

6 v . :

7 PETER H. ARKI SON, CHAPTER 7 :

8 TRUSTEE OF THE ESTATE OF :

9 BELLI NGHAM I NSURANCE AGENCY, I NC. :

10 - - - - - - - - - - - - - - - - - x

11 Washi ngt on, D. C.

12 Tuesday, J anuar y 14, 2014

13

14 The above- ent i t l ed mat t er came on f or or al

15 argument bef ore the Supr eme Cour t of t he Uni t ed St ates

16 at 10: 11 a. m.

17 APPEARANCES:

18 DOUGLAS HALLWARD- DRI EMEI ER, ESQ. , Washi ngt on, D. C. ; on

19 behal f of Pet i t i oner .

20 J OHN POTTOW, ESQ. , Ann Ar bor , Mi chi gan; on behal f of

21 Respondent .

22 CURTI S E. GANNON, ESQ. , Assi st ant t o t he Sol i ci t or

23 Gener al , Depar t ment of J ust i ce, Washi ngt on, D. C. ; f or

24 Uni t ed St at es, as ami cus cur i ae, suppor t i ng

25 Respondent .

Alderson Reporting Company


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C O N T E N T SORAL ARGUMENT OF PAGEDOUGLAS HALLWARD- DRI EMEI ER, ESQ.

On behal f of t he Pet i t i oner 3ORAL ARGUMENT OFJ OHN POTTOW, ESQ.

On behal f of t he Respondent 24ORAL ARGUMENTCURTI S E. GANNON, ESQ.

For Uni t ed St at es, as ami cus cur i ae, 45support i ng t he Respondent

REBUTTAL ARGUMENT OFDOUGLAS HALLWARD- DRI EMEI ER, ESQ.

On behal f of t he Pet i t i oner 55



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Official - Subject to Review3

1 P R O C E E D I N G S2 ( 10: 11 a. m. ) 3 CHI EF J USTI CE ROBERTS: We wi l l hear 4 ar gument f i r st t hi s mor ni ng i n Case 12- 1200, Execut i ve5 Benef i t s I nsur ance Agency v. Ar ki son, t he Chapt er 76 Trust ee of t he Est at e of Bel l i ngham I nsur ance Agency. 7 Mr . Hal l war d- Dr i emei er . 8 ORAL ARGUMENT OF DOUGLAS HALLWARD- DRI EMEI ER9 ON BEHALF OF THE PETI TI ONER

10 MR. HALLWARD- DRI EMEI ER: Mr . Chi ef J ust i ce11 and may i t pl ease t he Cour t : 12 The j udgment enf orced agai nst EBI A i n t hi s13 case was ent ered by a non- Ar t i cl e 3 bankr upt cy cour t 14 pur suant t o a st at ut e t hat t hi s Cour t has decl ar ed15 unconst i t ut i onal as vi ol at i ng t he separ at i on of power s. 16 The ent r y of a j udgment of t he Uni t ed Stat es17 i s not near l y a mat t er of pr i vat e i nt er est t o t he18 l i t i gant s. Rat her , i t car r i es t he f or ce of l aw t hat i s19 bi ndi ng on ot her cour t s, bi ndi ng on t he execut i ve br anch20 whi ch must enf orce t he j udgment , and even bi ndi ng on the21 l egi sl at ur e whi ch cannot r eopen the j udgment . 22 The ent r y of f i nal j udgment of t he Uni t ed23 St at es i s t he ul t i mat e exer ci se of t he j udi ci al power 24 under Ar t i cl e 3, j ust as t he enactment of l egi sl at i on i s25 t he ul t i mat e exer ci se of t he l egi sl at i ve power under



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1 Ar t i cl e I . 2 J USTI CE GI NSBURG: Why shoul d t hat mat t er 3 gi ven t hat , af t er t he bankrupt cy j udge r ul ed, t he U. S. 4 Di st r i ct Cour t gave de novo r evi ew t o thi s case and5 ent er ed a f i nal j udgment t hat met al l t he r equi r ement s6 of Ar t i cl e 3?7 MR. HALLWARD- DRI EMEI ER: The j udgment t hat 8 was ent er ed by t he di st r i ct cour t was not an exer ci se of9 or i gi nal j ur i sdi ct i on but r at her appel l at e j ur i sdi ct i on.

10 I n f act , Sect i on 1334 i s cl ear t hat i t conf er s t he11 di st r i ct cour t or i gi nal j ur i sdi ct i on, but once a12 j udgment has been ent er ed by t he bankrupt cy cour t , t he13 r evi ew by t he di st r i ct cour t i s an exer ci se of appel l at e14 j ur i sdi ct i on under Sect i on 158. 15 J USTI CE ALI TO: Here' s somet hi ng - - I ' m16 sor r y. Her e' s somet hi ng t hat happens ever y day. A17 di st r i ct j udge r ef er s t o a magi st r at e j udge a mot i on f or 18 summary j udgment . The magi st r ate j udge i ssues a r epor t 19 and r ecommendat i on. The di st r i ct j udge r evi ews i t de20 novo and may agr ee or di sagr ee. I f i t agr ees, t he21 di st r i ct cour t wi l l ent er summar y j udgment . 22 I don' t see a di f f er ence ot her t han a pur el y23 semant i c di f f er ence bet ween that si t uat i on and what 24 happened here. 25 MR. HALLWARD- DRI EMEI ER: Your Honor , t he



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1 ent r y of j udgment i s t he act of t he j udi ci al br anch t hat 2 car r i es t he f or ce of l aw. The i ssuance of a r epor t and3 r ecommendat i on by a magi st r at e does not . I t ' s onl y4 af t er t he exer ci se of j udgment and t he ent r y of j udgment 5 t hat i t has bi ndi ng ef f ect . Bi ndi ng on t he ot her -

6 J USTI CE SOTOMAYOR: Ar e you t al ki ng about a7 mer e f or mal i t y? Ar e you ar gui ng t hat because i t was t he8 bankrupt cy j udge and not t he di st r i ct cour t j udge who9 si gned t he f i nal j udgment , t hat t hat makes a di f f er ence?

10 MR. HALLWARD- DRI EMEI ER: I t - - yes, Your 11 Honor . 12 J USTI CE SOTOMAYOR: That ' s t he essence of13 your ar gument . 14 MR. HALLWARD- DRI EMEI ER: Yes, Your Honor . 15 Because t he act i ve ent r y of j udgment -

16 J USTI CE SOTOMAYOR: So i f we vacat ed and17 r emanded, and t he di st r i ct cour t l ooked at t hi s, because18 i t ' s al r eady seen i t , and basi cal l y j ust si gned bel ow19 t he l i ne that t he bankrupt cy j udge si gned, you woul d be20 okay?21 MR. HALLWARD- DRI EMEI ER: Yes, Your Honor . 22 But t he act of ent er i ng j udgment i s, bot h as a l egal 23 mat t er and as a pr act i cal mat t er , di f f er ent f r om t he24 appel l at e - - exer ci se of appel l at e j ur i sdi ct i on. The25 act of ent er i ng j udgment , t he di st r i ct cour t must - - i f



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1 i t i s t he one ent er i ng t he j udgment , has t o det er mi ne2 t hat j udgment i s pr oper l y ent er ed. I t ' s a pr oper 3 exer ci se of t he appel l at e - - of t he Ar t i cl e 3 power . 4 The di st r i ct cour t woul d have t he5 di scret i ons under Ni nt h Ci r cui t l aw consi st ent wi t h6 Anderson v. Li bert y Lobby t o car r y a mot i on f or summary7 j udgment t o al l ow t he r ecor d t o devel op f ur t her . That 8 opt i on, avai l abl e t o t he di st r i ct cour t when i t ' s 9 si t t i ng as a mat t er of or i gi nal j ur i sdi ct i on, i s not

10 avai l abl e t o t he di st r i ct cour t si t t i ng on appeal . 11 J USTI CE SOTOMAYOR: I t r evi ewed t hi s case de12 novo. 13 MR. HALLWARD- DRI EMEI ER: That ' s t r ue. 14 J USTI CE SOTOMAYOR: And i t deci ded t hat 15 t her e wer e no i ssues, no f act ual i ssues i n di sput e and16 t hat t he l aw cl ear l y appl i ed t he way i t di d. I don' t 17 underst and why t hat opt i on was t aken away f r om i t on18 appel l at e r evi ew. 19 MR. HALLWARD- DRI EMEI ER: On appel l at e20 r evi ew, i t had t wo opt i ons: Af f i r m or rever se. As an21 or i gi nal mat t er , t hough, i t woul d have had a t hi r d22 opt i on, whi ch woul d have been t o deny t he mot i on at t hat 23 t i me t o l et t he r ecor d devel op mor e f ul l y. 24 But more f undament al l y -

25 J USTI CE GI NSBURG: Why woul d t he - - why



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1 woul d t he di st r i ct j udge do t hat when t he di st r i ct cour t 2 sai d t hat t her e ar e no di sput ed i ssues, no r el evant 3 di sput ed i ssues of f act and i t ' s a pur e l egal quest i on?4 MR. HALLWARD- DRI EMEI ER: Wel l , Your Honor , I 5 t r ul y bel i eve t hat on t hi s r ecor d, wher e t her e cl ear l y6 wer e di sput es bet ween t he t wo af f i davi t s, t hat an7 Ar t i cl e 3 j udge woul d not have entered summary j udgment 8 as an or i gi nal mat t er . Si t t i ng as an appel l at e cour t 9 wher e i t s deci si on was goi ng t o be subj ect t o appel l at e

10 r evi ew i mmedi at el y, per haps i t s anal ysi s was di f f er ent . 11 But I t hi nk mor e f undament al l y, t he absence12 of a j udgment ent er ed by a cour t wi t h aut hor i t y t o do so13 means t hat t he appel l at e cour t al so l acks appel l at e14 j ur i sdi ct i on, and t hi s Cour t has so r ecogni zed i n15 Ayr shi r e Col l i er i es, i n t he Gl i dden case -

16 J USTI CE KENNEDY: Wi l l i t be conceded, so17 f ar as you know, by your f r i ends on t he ot her si de t hat 18 t hi s was appel l at e?19 MR. HALLWARD- DRI EMEI ER: Wel l , I don' t 20 know -

21 J USTI CE KENNEDY: What i s i t t hat makes i t 22 appel l at e?23 MR. HALLWARD- DRI EMEI ER: Wel l , 24 Sect i on 158( a) speaks i n l anguage of t he di st r i ct cour t 25 exer ci si ng appel l at e j ur i sdi ct i on. I t uses t he wor d



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1 Thi s Cour t has, i n numer ous deci si ons, 2 at t r i but ed si gni f i cance t o Congr ess' s use of t he wor d3 " j ur i sdi ct i on, " t hat Congr ess knows what t he wor d means4 and when i t uses t hat wor d, i t means i t i s5 j ur i sdi ct i onal . 6 The - - Sect i on 1334, on t he ot her hand, 7 whi ch i s on page 14a of t he gover nment ' s st atut or y8 appendi x, 1334( b) says t hat "The di st r i ct cour t s shal l 9 have or i gi nal but not excl usi ve j ur i sdi ct i on of al l

10 ci vi l pr oceedi ngs ar i si ng under Ti t l e 11. " 11 So t he di st r i ct cour t does have or i gi nal 12 j ur i sdi ct i on at t he out set , but when i t has r ef er r ed t he13 mat t er t o the bankr upt cy cour t and t he bankr upt cy cour t 14 has ent er ed f i nal j udgment , t hen pur suant t o 157( b) and15 pur suant t o 158( a) , t he di st r i ct cour t i s now exer ci si ng16 appel l at e j ur i sdi ct i on. 17 J USTI CE BREYER: But t hen t her e i s a - - I 18 want you t o get on a bi t , because I ' d say t he quest i on19 t hat we' r e, at l east f or me, i s one of congr essi onal 20 i nt ent , not i n necessar i l y your case but i n f ut ur e21 cases. And t he ar gument t hat i s t hat t he st at ut e can be22 r ead, i t si l ences, t o say i f Congr ess want ed t o al l ow23 peopl e i n noncor e cases t o submi t r epor t s and24 r ecommendat i ons, t hey surel y woul d have want ed i t i n25 what t hey thought was a cor e case t hat t ur ned out t o be



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1 noncore. 2 So I want your r esponse t o t hat , and I woul d3 coupl e t hat wi t h my own resear ch of an opi ni on when I 4 was one the Fi r st Ci r cui t about t he f r audul ent 5 conveyances, and t hey are about bankr upt cy. I gr ant you6 t hat t her e i s a St at ut e of El i zabet h, i t ' s a l egal 7 mat t er f or sever al hundr ed year s, but t he per son who i s8 def r auded, t he peopl e def r auded ar e t he cr edi t or s. And9 i n most i nst ances, t he f r aud consi st s of t r ansf er r i ng

10 pr oper t y t o a f r i end, r at her t han a cr edi t or , wher e you11 know you ar e i nsol vent . 12 Now, t hat i s a l egal mat t er . But i t i s13 about bankrupt cy. And i t ' s St at e l aw, but i t i s about 14 bankr upt cy. And i t i s, accor di ng t o you - - I may not 15 agr ee wi t h t hat , but I t hi nk we have t o t ake i t as16 noncore. But why woul dn' t Congr ess have, of cour se, 17 want ed r epor t s and recommendat i ons i f t hey coul dn' t get 18 what t hey real l y want ed, whi ch i s t o have t he bankrupt cy19 j udge deci de i t ?20 MR. HALLWARD- DRI EMEI ER: To be cl ear , 21 Congr ess desi gnated f r audul ent conveyance act i ons as22 cor e. 23 J USTI CE BREYER: I know t hat , and I woul d24 have sai d t hey wer e r i ght . But , nonet hel ess, I am f aced25 wi t h case l aw t hat says t o t he cont r ar y. Okay. So my



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1 quest i on i s , i f t hey coul dn' t get - - i f t hey coul dn' t 2 get what t hey want ed, whi ch i s t o have t he bankrupt cy3 j udge deci de i t , why woul dn' t t hey at l east have want ed4 t he bankrupt cy j udge t o wr i t e a r epor t and5 r ecommendat i ons and send i t on t o the di st r i ct j udge so6 he can r evi ew i t de novo?7 MR. HALLWARD- DRI EMEI ER: Wel l , I t hi nk t hat 8 what ' s const r ai ni ng t he cour t i s t he l anguage t hat 9 Congr ess enacted. Congr ess -

10 J USTI CE BREYER: I f I f i nd an ambi gui t y i n11 t hat l anguage, t hen you woul d say I woul d be sensi bl e t o12 r ead i t cont r ar y t o what you want . 13 MR. HALLWARD- DRI EMEI ER: I - - I don' t 14 bel i eve t her e i s an ambi gui t y, Your Honor . 15 J USTI CE BREYER: Wel l , okay. That ' s - - I 16 got t hat poi nt . One i s you say, I t ' s t ot al l y17 unambi guous, you can' t do anyt hi ng about i t . But i f , i n18 my opi ni on, i t i s - - t ake i t as a hypothet i cal - - i t ' s19 ambi guous enough t o get what Congress want ed. Now, can20 you gi ve me any ar gument agai nst what I j ust sai d?21 J USTI CE SCALI A: What i s t he ambi gui t y we22 ar e t al ki ng about ?23 MR. HALLWARD- DRI EMEI ER: Wel l , t he24 ambi gui t y - - I actual l y t hi nk t her e i s no ambi gui t y25 because - -



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1 J USTI CE SCALI A: What i s t he non- ambi gui t y2 we ar e t al ki ng about ?3 ( Laught er . ) 4 MR. HALLWARD- DRI EMEI ER: Congr ess -

5 Congr ess ver y cl ear l y di st i ngui shed a di chot omy bet ween6 t hose cases i n whi ch t he bankrupt cy cour t s wer e t o i ssue7 pr oposed f i ndi ngs and r ec- - - concl usi ons and t hose t hat 8 i t was t o hear and determi ne. 9 The cases t hat bankrupt cy cour t s were t o

10 hear and determi ne were cases i n whi ch the bankr upt cy11 cour t s wer e t o ent er f i nal j udgment subj ect onl y t o12 appel l at e r evi ew -

13 J USTI CE BREYER: I ' ve got i t . I ' d l i ke an14 answer t o my quest i on. My quest i on i s I want you t o15 assume that t he l anguage i s at l east somewhat ambi guous. 16 And on t hat assumpt i on, i s t her e any r eason not t o adopt 17 t he gover nment ' s posi t i on. 18 MR. HALLWARD- DRI EMEI ER: There are - - t here19 ar e sever al , Your Honor . And par t of t he pr obl em i s20 t hat t he quest i on of how t o const r ue t hat l anguage i n21 157( b) does not onl y af f ect how St er n cl ai ms are goi ng22 t o be handl ed, but al so, al l ot her cl ai ms under 157( b) . 23 Congr ess ver y cl ear l y want ed an ef f i ci ent system i n24 whi ch bankr upt cy j udges woul d ent er j udgment and there25 woul d onl y be appel l at e r evi ew by the di st r i ct cour t .



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1 I f t he Cour t r eads 157( b) ' s "hear and2 det ermi ne" l anguage t o al so encompass t he aut hor i t y t o3 i ssue non- f i nal r epor t s and r ecommendat i ons, t hat woul d4 not be l i mi t ed t o t he cl ass of cases cover ed by St er n5 t hat ar e cor e, but not -

6 J USTI CE KAGAN: Wel l , why woul d we have t o7 do t hat , Mr . Hal l war d- Dr i emei er ? Why coul dn' t we say8 t hat t hi s pr esent s a di st i nct pr obl em, t hese St er n- t ype9 cl ai ms, and i t ' s r eal l y a pr obl em of sever abi l i t y, and

10 t hat we shoul d under st and t hi s st at ut e i n l i ght of St er n11 as essent i al l y cr eat i ng t hi s mi ddl e cat egor y whi ch12 Congr ess cl ear l y meant t o have t he t r eat ment t hat t he13 noncore cl ai ms get . 14 MR. HALLWARD- DRI EMEI ER: I t ' s -

15 unf or t unat el y, t he st at ut or y l anguage does not admi t 16 of severance of t he ki nd t hat Respondent s suggest . And17 t hat ' s because f r audul ent conveyance act i ons are cor e, 18 not si mpl y because t hey' r e l i st ed i n 157( b) ( 2) ( H) , but 19 because they ar e pr oceedi ngs t hat ar i se under Ti t l e 11. 20 That ' s t he def i ni t i on of cor e proceedi ngs. And so even21 i f t he Cour t wer e t o l i ne out -

22 J USTI CE GI NSBURG: But t he def i ni t i on - - t he23 def i ni t i on was l i nked t o a pur pose. You- - you l ai d out 24 ver y ni cel y the t wo cat egor i es; t he one cat egor y wher e25 t he bankr upt cy j udge ent ers a j udgment , t he ot her



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1 cat egory where t he bankr upt cy j udge makes2 r ecommendat i ons. So, i f you - - t he pur pose of t he3 cl assi f i cat i on was t o i ndi cat e t he bankr upt cy j udge can4 make the f i nal j udgment , can onl y make recommendat i ons. 5 Suppose t he di st r i ct j udge had sai d, I ' m6 uncer t ai n af t er St er n about whet her t he bankrupt cy j udge7 had aut hor i t y t o ent er a f i nal j udgment . So I am goi ng8 t o t r eat t hat summary j udgment as a r ecommendat i on. 9 I ' l l t r eat i t as a recommendat i on and I wi l l r evi ew i t

10 de novo. I agr ee, I ent er f i nal j udgment . 11 I f t he di st r i ct j udge had sai d t hat , t hen12 you woul d have no case, r i ght ?13 MR. HALLWARD- DRI EMEI ER: I - - I don' t t hi nk14 t hat 157( b) envi si ons t hat t he di st r i ct cour t coul d do15 t hat . The di st r i ct cour t ' s r evi ew under - - of a16 j udgment ent er ed under 157( b) i s, on appeal , pur suant t o17 158, whi ch i s an exer ci se of appel l at e j ur i sdi ct i on, not 18 or i gi nal j ur i sdi ct i on. 19 J USTI CE SCALI A: I f - - i f - - i f we bel i eve20 t hat t he word "det ermi ne" means make a f i nal j udgment , 21 whi ch you asser t i t means, so that t her e' s no ambi gui t y, 22 i t seems t o me you have a st atut e i n whi ch the23 bankrupt cy j udge i s onl y aut hor i zed t o make24 r ecommendat i ons i n some si t uat i ons and t o make f i nal 25 j udgment s i n ot her s. And surel y, t her e' s a probl em wi t h



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1 a di st r i ct j udge al t er i ng t hat di sposi t i on -

2 MR. HALLWARD- DRI EMEI ER: That - - t hat ' s3 r i ght . 4 J USTI CE SCALI A: - - by j ust sayi ng, oh, I 5 know you' r e supposed t o make a f i nal det ermi nat i on, but 6 j ust f or f un, gi ve me your r ecommendat i on. I mean, 7 t hat ' s j ust cont r ar y t o t he st at ut e. 8 MR. HALLWARD- DRI EMEI ER: That ' s cl ear l y not 9 what Congr ess pr ovi ded. I t had di f f er ent -

10 J USTI CE SCALI A: Congress mi ght have -

11 mi ght have pr ovi ded t hat i f i t had known about St ern, 12 r i ght ?13 ( Laught er . ) 14 MR. HALLWARD- DRI EMEI ER: That ' s - - t hat ' s15 t r ue. And -

16 J USTI CE SCALI A: But do we si t her e t o wr i t e17 t he st at ut es t hat Congr ess woul d have wr i t t en -

18 MR. HALLWARD- DRI EMEI ER: No, Your Honor . 19 J USTI CE SCALI A: - - i f t hey knew about some20 f ut ur e event s? I don' t t hi nk so. 21 MR. HALLWARD- DRI EMEI ER: And - - and, i n22 f act , t her e ar e a number of -

23 J USTI CE KAGAN: Wel l , we do t r y t hough, 24 agai n, t o appl y sever abi l i t y pr i nci pl es t o wr i t e t he25 st at ut e t hat Congr ess woul d have wr i t t en i f i t had known



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1 about a const i t ut i onal r ul i ng. And t hat ' s essent i al l y2 what J ust i ce Br eyer i s suggest i ng. 3 MR. HALLWARD- DRI EMEI ER: I t hi nk, Your 4 Honor , t her e ar e t wo pr obl ems wi t h t hat . Fi r st i s t hat 5 by changi ng t he def i ni t i on of "cor e pr oceedi ngs, " t her e6 ar e ot her col l at er al consequences f or ot her pr ovi si ons7 of t he code. Under Sect i on 1 - - 1334( c) , f or exampl e, 8 t her e i s an abst ent i on i n cer t ai n noncor e pr oceedi ngs. 9 And so Congr ess has def i ned t he scope of t he abst ent i on

10 accor di ng to t he same l anguage that i t uses i n 157( b) 11 whet her a pr oceedi ng ar i ses under Ti t l e 11 or does not 12 do so, but i s mer el y i n r el at i on t o a case under Ti t l e13 11. 14 So i f t he Cour t goes and r evi ses what 15 Congr ess has pr ovi ded as t he def i ni t i on of cor e i n16 157( b) , t her e wi l l be col l at er al consequences f or ot her 17 st atut es t hat Congr ess had enact ed. 18 But t he second poi nt i s t hat t her e ar e, as I 19 t hi nk J ust i ce Scal i a was suggest i ng, pol i cy deci si ons20 t hat r eal l y onl y Congr ess can make i n deci di ng how t o21 r espond t o St ern, because one can compare, f or exampl e, 22 t he pr ovi si ons of 157( c) ( 1) , whi ch i s t he bankrupt cy23 j udge i ssui ng a proposed f i ndi ngs and concl usi ons, and24 t he Magi st r at es Act , 636. The t wo ar e act ual l y qui t e25 di f f er ent .



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1 The magi st r at es, f or exampl e, ar e assi gned a2 speci f i c mot i on t o consi der and i ssue a r epor t and3 r ecommendat i on on. By cont r ast , t he bankrupt cy cour t i n4 ( c) ( 1) exer ci ses j ur i sdi cti on over t he ent i r e5 pr oceedi ng, i ncl udi ng up t o conduct i ng a t r i al i n6 somet hi ng t hat i sn' t subj ect t o j ur y t r i al , and t hen7 i ssui ng a repor t and r ecommendat i on t o the di st r i ct 8 cour t . 9 J USTI CE ALI TO: But none of t hat i s i nvol ved

10 i n t hi s case. We have t hi s case i n f r ont of us. We11 don' t have ever y ot her possi bl e case that coul d12 i mpl i cat e t hi s i ssue. We have one case and i t i nvol ves13 summar y j udgment . 14 And so t her e i sn' t - - t her e ar e no f i ndi ngs15 of f act , and t her e i s no subst ant i ve di f f er ence bet ween16 a di st r i ct cour t ' s r evi ewi ng a r epor t and r ecommendat i on17 on summary j udgment and what happened here. I - - I have18 hear d not hi ng ot her t han f or mal i t i es. 19 MR. HALLWARD- DRI EMEI ER: But t he f ormal i t i es20 mat t er . 21 J USTI CE ALI TO: Wel l , why do t hey mat t er f or 22 Ar t i cl e 3? Maybe t hey mat t er f or st at ut or y r easons. 23 Why do t hey mat t er f or Ar t i cl e 3? What your cl i ent got 24 was exact l y - - subst ant i vel y exact l y what your cl i ent 25 woul d have got t en had thi s been ref er r ed to a magi st r at e



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1 j udge f or a r epor t and r ecommendat i on. 2 MR. HALLWARD- DRI EMEI ER: Wel l , I - - t o3 begi n, I t hi nk t he f or mal i t i es do mat t er and not onl y do4 I t hi nk so. Thi s Cour t has repeat edl y sai d t hat t he5 absence of a j udgment ent ered wi t h aut hor i t y means t he6 absence of appel l at e j ur i sdi ct i on as wel l . And al l t he7 appel l ate cour t can do i s t o vacat e and r emand. 8 J USTI CE SCALI A: Counsel , i s Ar t i cl e 3 not 9 vi ol at ed so l ong as t he par t i es are happy?

10 MR. HALLWARD- DRI EMEI ER: No, Your Honor . 11 J USTI CE SCALI A: Can t he par t i es agr ee t o12 have a - - an Ar t i cl e 3 cour t deci de a case i t has no13 j ur i sdi ct i on t o deci de, and so l ong as no har m i s done14 t o t he par t i es, i t ' s okay?15 MR. HALLWARD- DRI EMEI ER: Qui t e - - qui t e t he16 cont r ar y, Your Honor . The Cour t has r epeat edl y st r essed17 t hat t he par t i es may not , by t hei r agr eement , conf er 18 j ur i sdi ct i on t hat woul d not ot her wi se exi st . 19 J USTI CE BREYER: I t hought t her e were t wo20 aspect s t o t he Ar t i cl e 3 pr obl em. One af f ect s t he21 i ndi vi dual s and i t ' s an unf ai r ness, and t he ot her i s22 st r uctur al , as J ust i ce Scal i a has sai d. But bot h ar e at 23 i ssue. And so wher e you have onl y a st r uct ur al i ssue24 and i t ' s a quest i on of get t i ng t he bankr upt cy cour t s t o25 wor k and nobody' s hur t by i t , doesn' t t hat at l east cut



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1 i n f avor of i nt er pr et i ng a st at ut e t o pr event chaos -

2 not chaos, t hat ' s too st r ong - - but t o pr event - - t o3 al l ow t he f unct i on of t he cour t t o wor k bet t er ?4 MR. HALLWARD- DRI EMEI ER: To t he cont r ar y, 5 Your Honor , i n Schor , t he Cour t made cl ear t hat wher e6 t he st r uct ur al f eat ur es of t he Const i t ut i on ar e at 7 i ssue, t hat i s pr eci sel y wher e par t i es cannot be8 depended upon t o asser t t he i nt er est , and i t cannot be9 j oi ned by consent . And her e we have an exampl e.

10 The const i t ut i onal vi ol at i on i dent i f i ed by11 t he Cour t i n St er n exi st ed f or 25 year s bef or e t he i ssue12 f i nal l y made i t t o t hi s Cour t . I n par t because par t i es13 wer e r el uct ant t o asser t t hat i ssue bef or e a bankrupt cy14 cour t i n whi ch i t s f at e hel d. 15 The - - t he i ssues her e, t he ot her si de says16 t her e i s no st r uct ur al pr obl em because t her e' s no17 aggr andi zement or encr oachment . But t o t he cont r ary, 18 Congr ess has r eserved t o i t sel f power over bankrupt cy19 j udges t hat t he Const i t ut i on deni es i t over Ar t i cl e 320 j udges. 21 The presi dent ' s power t o appoi nt has been22 encr oached upon. 23 J USTI CE KAGAN: Wel l , coul dn' t you say t he24 same thi ng once agai n about magi st r ates, t he exact same25 argument s woul d appl y t o t hem?



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1 MR. HALLWARD- DRI EMEI ER: I t hi nk i n l arge2 par t t hey do. Al t hough t her e i s a di st i nct i on, per haps3 an i mpor t ant di st i nct i on, t hat i n t he Magi st r at es Act , 4 t he consent r equi r ement i s bui l t i nt o t he st at ut e. 5 J USTI CE KAGAN: Wel l , I don' t see why t hat 6 woul d make a di f f er ence i f you say t he pr obl em i s 7 congr essi onal aggr andi zement or congr essi onal 8 encr oachment of a cer t ai n ki nd. I t doesn' t seem t o me9 t o make any di f f er ence i n t hat case, i f Congr ess says,

10 by the way, you can consent t o i t . 11 MR. HALLWARD- DRI EMEI ER: You' r e absol utel y12 r i ght , Your Honor . And I t hi nk t hat t he pr obl em t hat 13 t hi s Cour t i dent i f i ed i n St er n and t hat we i dent i f y her e14 appl i es equal l y t o t he magi st r at es. But we have15 expl ai ned t hat t hat ar gument , even i f not accept ed i n16 f ul l , woul d di st i ngui sh our case f r om t he Magi st r at es17 Act , because here, t he Act enact ed by Congr ess was18 unconst i t ut i onal . I t assi gned, i r r egar dl ess of consent , 19 t hi s act i on t o det er mi nat i on and f i nal j udgment by a20 bankrupt cy j udge. The Cour t consi der ed t hi s st at ut e and21 hel d i t unconst i t ut i onal i n St er n. 22 So i f consent wer e to cur e the pr obl em her e, 23 t hen t he j ur i sdi ct i on of t he Cour t woul d depend sol el y24 on t he consent of t he par t i es. I f , on t he ot her hand, 25 t he Cour t was consi der i ng i n t he f i r st i nst ance whet her



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1 consent as a l i mi t i ng f eat ur e on t he j ur i sdi ct i on of t he2 non- Ar t i cl e 3 body meant t hat t here was not t he t ypes of3 st r uct ur al pr obl ems t hat t he Cour t i dent i f i ed i n St er n, 4 t hen i t woul d be as par t of t he det er mi nat i on whet her 5 t her e was or was not an Ar t i cl e 3 vi ol at i on i n t he f i r st 6 i nst ance. 7 J USTI CE ALI TO: Can I ask you t o cl ar i f y8 what you' r e sayi ng about t he const i t ut i onal i t y of t he9 Magi st r at es Act ? Ar e you sayi ng t hat i t i s

10 unconst i t ut i onal i nsof ar as i t al l ows magi st r at e j udges11 t o t r y mat t er s by consent , or ar e you sayi ng f ur t her 12 t hat i t i s unconst i t ut i onal i nsof ar as i t al l ows a13 di st r i ct j udge t o r ef er a di sposi t i ve mat t er t o a14 magi st r ate j udge f or a report and recommendat i on subj ect 15 t o de novo r evi ew, or bot h?16 MR. HALLWARD- DRI EMEI ER: Onl y - - onl y t he17 f or mer, Your Honor . 18 J USTI CE ALI TO: The f or mer i s not i mpl i cat ed19 i n t hi s case. 20 MR. HALLWARD- DRI EMEI ER: That - - t hat ' s21 r i ght . I was answer - - j ust answer i ng t he quest i on -

22 J USTI CE ALI TO: I see. 23 MR. HALLWARD- DRI EMEI ER: - - about t he l ogi c24 of t he ar gument and how f ar i t went . 25 And - - and, I guess, agai n, what we suggest



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1 i s t hat t her e mi ght be a di st i nct i on when t he Cour t i s2 consi der i ng a st at ut e. And as Schor l ays out t he many3 f act or s t hat t he Cour t mi ght consi der , t he f act t hat 4 consent i s a l i mi t i ng f eat ur e on t he non- Ar t i cl e 35 body' s j ur i sdi ct i on mi ght l ead t he Cour t t o concl ude6 t her e was no Ar t i cl e 3 vi ol at i on. 7 But here, where t here was no consent i n t hi s8 st at ut e, t he Cour t has al r eady hel d i n St er n t hat t her e9 was an Ar t i cl e 3 vi ol at i on. The st at ut e does not

10 const i t ut i onal l y conf er j ur i sdi ct i on on t he bankr upt cy11 cour t s. So i f t her e i s j ur i sdi cti on her e, i t woul d be12 pur el y a mat t er of pr i vat e par t y consent . And t hat ' s13 pr eci sel y what t he Cour t has hel d i s not per mi ssi bl e as14 a mat t er of j ur i sdi ct i on. 15 J USTI CE SOTOMAYOR: So ar e you sayi ng, 16 cont r ar y t o our case l aw, t hat you can never have17 i mpl i ed consent ? We have hel d di f f er ent l y i n ot her 18 cases. 19 MR. HALLWARD- DRI EMEI ER: I ' m not argui ng20 t hat t her e cannot be i mpl i ed consent , but i n Roel l , 21 as - - as a const r uct i on of t he Magi st r at es Act , t he22 Cour t hel d t hat consent must be knowi ng and vol unt ary. 23 Ther e, of course, t he l i t i gant had not i ce because t he24 st at ut e had advi sed t he l i t i gant t hat i t had t he r i ght 25 t o r ef use consent .



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1 J USTI CE SCALI A: You' r e conf usi ng me. I 2 t hought you - - you di d say t hat t her e can' t be i mpl i ed3 consent or even expr ess consent t o what happened her e. 4 I sn' t t hat your posi t i on?5 MR. HALLWARD- DRI EMEI ER: I ' m - - I ' m sor r y. 6 I was - - I was - - I t hought I was answer i ng a di f f er ent 7 quest i on. I n our vi ew, consent cannot be t he basi s f or 8 t he exer ci se of j ur i sdi ct i on by a non- Ar t i cl e 3 cour t . 9 J USTI CE SCALI A: Expr ess or i mpl i ed.

10 MR. HALLWARD- DRI EMEI ER: Expr ess or i mpl i ed. 11 That ' s r i ght , Your Honor . 12 J USTI CE SCALI A: I t hought t hat ' s what -

13 MR. HALLWARD- DRI EMEI ER: So t hi s i s the14 subsi di ar y ar gument , our , r eal l y, f al l back ar gument , 15 whi ch i s t o say, even i f consent coul d pl ay a r ol e, i t 16 woul d onl y be wher e that was par t of t he st at ut e, and17 t hus, par t of t he Cour t ' s anal ysi s of whet her t hi s18 st at ut e was const i t ut i onal . 19 J USTI CE SOTOMAYOR: I ' m a l i t t l e conf used. 20 MR. HALLWARD- DRI EMEI ER: I ' m sor r y, Your 21 Honor . 22 J USTI CE SOTOMAYOR: Let ' s j ust save your 23 t i me. I ' l l ask on r ebut t al . 24 MR. HALLWARD- DRI EMEI ER: So t here - - t here25 wer e two cases t hat t he ot her si de had ci t ed, Roel l and



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1 McDonal d, f or t hat poi nt . But i n each case, t he st at ut e2 i t sel f f eat ur ed consent as a l i mi t i ng f eat ur e on t he3 non- Ar t i cl e 3 cour t ' s aut hor i t y. 4 I f t her e ar e no f ur t her quest i ons, I ' l l 5 r eserve t he bal ance of my t i me. 6 CHI EF J USTI CE ROBERTS: Thank you, counsel . 7 Mr . Pot t ow. 8 ORAL ARGUMENT OF J OHN POTTOW9 ON BEHALF OF THE RESPONDENT

10 MR. POTTOW: Thank you, Mr . Chi ef J ust i ce, 11 and may i t pl ease t he Cour t : 12 J ust i ce Al i t o i s ent i r el y cor r ect , f or t he13 r eason we can wi n t he most st r ai ght f orward way i s 14 because he got everyt hi ng he want ed i n t he cour t s bel ow. 15 And I woul d l i ke t o al so addr ess J ust i ce Gi nsbur g' s16 quest i on about what coul d have happened i n t he17 hypot het i cal si t uat i on. 18 But i f I may begi n, pl ease, I ' d l i ke t o19 addr ess J ust i ce Scal i a' s poi nt about wher e' s t he20 ambi gui t y i n t he st at ut e. And unf or t unat el y, my f r i end21 and I di sagr ee, because I t hi nk t he st at ut e under 22 157( b) ( 1) i s unambi guous i n my f avor . 23 So i f I coul d t ake you back t o t he st at ut e, 24 and I ' l l use t he Sol i ci t or Gener al ' s br i ef f or 25 conveni ence. 157( b) ( 1) i s t he pr ovi si on by whi ch



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1 di str i ct cour t s, i f t hey want t o - - t her e' s no2 compul si on on t hese Ar t i cl e 3 of f i cer s - - i f t hey want 3 t o, t hey can r ef er mat t er s t o bankrupt cy j udges. And i t 4 says, when t her e i s a mat t er r ef er r ed, t hat t hey may5 hear and determi ne t he mat t er and may enter an order or 6 j udgment . 7 My i nt er pr et at i on, I bel i eve, i s t he mor e8 nat ur al one of "may ent er an or der of j udgment , " i t ' s a9 per mi ssi ve gr ant of aut hor i t y. Ther e' s no compul si on t o

10 ent er an order and j udgment . They can si mpl y hear and11 determi ne the mat t er and not ent er an order and12 j udgment . And I can cont r ast t hi s t ext ual l anguage -

13 you don' t have t o go ver y f ar - - down i n ( c) ( 1) and14 ( c) ( 2) , wher e ( c) ( 2) , t her e was onl y one "may, " t hey15 don' t have t he doubl e "may permi ssi ve gr ant of16 aut hor i t y. " And t her e' s - - and i n t he noncor e mat t er s, 17 t her e' s a - - a " i t shal l , " when " i t shal l det er mi ne. " 18 They use t he ver b "shal l " i n ( c) ( 2) . So I t hi nk t hat 19 ( b) ( 1) wi t h t wo uses of "may" i s ver y cl ear t hat when a20 mat t er i s r ef er r ed under ( b) ( 1) , t hey may ent er an or der 21 of j udgment , but don' t have t o ent er an or der of22 j udgment . And I t hi nk t hi s get s us ar ound hi s23 di f f i cul t y -

24 J USTI CE KENNEDY: Does t hi s bear on t he25 quest i on whet her t hi s i s appel l at e? Do you agr ee t hat



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1 t hi s i s appel l at e, once t he di str i ct j udge - - di str i ct 2 cour t has t he mat t er i n f r ont of i t ?3 MR. POTTOW: So i f t here i s a j udgment , I 4 woul d concede t hat we then have an appeal t hat occurs, 5 J ust i ce Kennedy. 6 But what i s cr i t i cal l y i mpor t ant why I t hi nk7 t hat doesn' t creat e a pr obl em -

8 J USTI CE KENNEDY: I f t her e i s a j udgment i n9 t he bankr upt cy cour t , you woul d concede t here i s an

10 appeal t o t he di st r i ct cour t ?11 MR. POTTOW: I f t her e i s a di st r i ct - - f or 12 exampl e, i n a noncore pr oceedi ngs -

13 J USTI CE KENNEDY: Yes. 14 MR. POTTOW: I ' m sor r y. I n a cor e15 pr oceedi ng where t here woul d be a j udgment i n t he16 bankr upt cy cour t , I woul d concede t hat t hat woul d be an17 appel l at e mat t er bef or e t he di st r i ct cour t , i f t her e was18 a f ul l j udgment . 19 J USTI CE SCALI A: So you - - you r ead me -

20 want me t o r ead t hat - - t hat when a di st r i ct j udge21 r ef er s t he mat t er t o a bankrupt cy j udge t o hear and22 det er mi ne and t o ent er an appr opr i at e or der , t he23 bankrupt cy j udge can say, you know, I ' m j ust t oo busy. 24 MR. POTTOW: No. No. 25 J USTI CE SCALI A: I ' m on East er vacat i on and



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1 I may hear and determi ne i t , and I may ent er appr opr i ate2 order s, but I don' t f eel l i ke i t . 3 MR. POTTOW: No. The "may - - t he "may" 4 pr er ogat i ve, J ust i ce Scal i a, i s wi t h t he di st r i ct cour t . 5 The di st r i ct cour t may r ef er t o i t and i t may r ef er t o a6 f i nal j udgment or may not . 7 J USTI CE SCALI A: I t doesn' t say t hat i t may8 r ef er . I t says, "bankrupt cy j udges may hear and9 det er mi ne. "

10 MR. POTTOW: At t he i nst r uct i on of t he11 di st r i ct j udge. I don' t bel i eve t he bankr upt cy j udge12 has t he aut hor i t y t o f eel l azy or di si ncl i ned. 13 J USTI CE SCALI A: How do you br i ng t he "may" 14 over t o t he di st r i ct cour t ?15 MR. POTTOW: I n t he order of r ef erence, so16 we have t o go back t o 157( a) , whi ch i s what - - what 17 st ar t s wi t h t he whol e r ef er ence of cases f r om di st r i ct 18 cour t s. Recal l t hat a bankr upt cy cour t i s a uni t of t he19 di st r i ct cour t . So as an i nsti t ut i onal mat t er , i t ' s t he20 di st r i ct cour t t hat exer ci ses j ur i sdi ct i on. 21 Under 1334, t he Federal subj ect mat t er 22 j ur i sdi ct i on of bankrupt cy i s vest ed i n t he di st r i ct 23 cour t . Now, as a mat t er of whi ch of f i cer -

24 J USTI CE SCALI A: Then t he "may" t hat you' r e25 concer ned wi t h i s t he "may" i n ( a) , not t he "may" i n



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1 (b) . 2 MR. POTTOW: I - - I use bot h of t hose "mays" 3 i f I may, J ust i ce Scal i a. And - - and I t hi nk t hat 4 t he - - t hat t he r evi si on post St er n of many di st r i ct 5 cour t s t hat government put s f or ward i n appendi x of how6 t hese cour t s have changed t hei r or der s of r ef er ences7 have expl i ci t l y used t hi s power . And t hey say f or 8 mat t er s i n whi ch we r ef er a st at ut or i l y cor e pr oceedi ng, 9 we woul d - - but t her e i s a St er n cl ai m t hat ar i ses. So

10 when we ref er a cl ai m and you t hi nk t hat Ar t i cl e 311 pr esent s a pr obl em, we do not want you t o ent er a f i nal 12 j udgment . On t hose r ef er r ed proceedi ngs, we onl y want 13 you t o enter a repor t and r ecommendat i on. 14 So t he di st r i ct cour t s bel ow ar e wor ki ng15 t hi s out by changi ng t hei r or der s of r ef er ences and not 16 havi ng t hement er j udgment . 17 J USTI CE SCALI A: And what t he ot her si de18 says i s t hat ' s ver y ni ce, but t hat ' s not what t he19 st at ut e says. The st at ut e does not gi ve t he bankrupt cy20 cour t t he aut hor i t y t o ent er a - - a si mpl y21 r ecommendat i on f or what has been def i ned as a core22 pr oceedi ng. 23 For cor e pr oceedi ngs, what t he st at ut e says24 i s you' l l - - i s you' l l det er mi ne i t . And you' r e sayi ng, 25 wel l , i t says t hat , but si nce i t ' s been hel d



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1 unconst i t ut i onal , we' r e goi ng t o shi f t t hi s over t o2 t he - - t o t he cat egor y i n whi ch t hey - - t hey can i ssue3 an or der and r ecommendat i on. Wher e does t hat come f r om?4 MR. POTTOW: I t hi nk i t has t o come f r oma5 t extual di sagr eement wi t h my f r i end. He says t he phr ase6 "may hear and deter mi ne" shoul d be r ead t o mean must 7 det er mi ne and ent er a f i nal j udgment . And I t hi nk t he8 t extual phr ase "may hear and det ermi ne" and "may enter 9 an or der or j udgment , " suggest s t hat t hey, i f r ef er r ed

10 t o by t he di st r i ct cour t , may ent er a j udgment . 11 J USTI CE SCALI A: No, t hat ' s not my probl em. 12 My pr obl em i s - - i s not why t hey don' t have t o ent er an13 order and j udgment . My pr obl em i s why t hey are14 aut hor i zed to i ssue a r ecommendat i on. 15 MR. POTTOW: Oh, because I don' t t hi nk -

16 J USTI CE SCALI A: Wher e does t hat come f r om?17 They' r e not i ssued - - t hey' r e not aut hor i zed t o i ssue18 r ecommendat i ons f or cor e pr oceedi ngs. 19 MR. POTTOW: I see. I don' t bel i eve, 20 J ust i ce Scal i a, t hat t he i ssuance of a r epor t i s a21 mat t er of such si gni f i cance t hat t her e woul d need t o be22 an expl i ci t r ef er ence t o what i ssue i n a r epor t . A23 j udgment , i f you cont r ast Sect i on 157 -

24 J USTI CE SCALI A: Oh, r eal l y? I mean, can a25 di str i ct j udge sor t of - - you know, i t ' s not t err i bl y



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1 i mpor t ant because i t ' s j ust a r ecommendat i on. So I ' m2 goi ng t o ref er i t t o my f or mer par t ner , you know, my3 f or mer l aw par t ner . 4 MR. POTTOW: But wi t h consent of t he5 par t i es?6 J USTI CE SCALI A: Yes, even wi t h t he consent 7 of t he par t i es. 8 MR. POTTOW: That woul d be a speci al mast er 9 si tuat i on, I thi nk, J ust i ce Scal i a. I f t hey - - i f t hey

10 r ef er r ed, and t he di str i ct - - yes, t he di str i ct cour t 11 woul d have i nher ent aut hor i t y t o r ef er an i ssue t o a12 speci al mast er . 13 J USTI CE SCALI A: To a speci al mast er . 14 MR. POTTOW: Yes. 15 J USTI CE SCALI A: But i t has st at utory16 aut hor i t y t o do t hat . Ther e i s no st at ut or y aut hor i t y17 her e to ref er a mat t er t o a bankrupt cy j udge f or not hi ng18 other t han a r ecommendat i on, except f or noncor e mat t ers. 19 MR. POTTOW: And - - and our posi t i on woul d20 be t hat t he i ssuance of a r epor t does not r equi r e a21 st at ut or y aut hor i zat i on t he way the ent r y of a j udgment 22 r equi r es a st at ut or y aut hor i zat i on. So t he cont r ast i ng23 t r eat ment under 157( c) of noncor e mat t er s i s ver y -

24 J USTI CE BREYER: You' r e sayi ng basi cal l y, I 25 t hi nk, t hat t he wor ds ar e, f or cor e pr oceedi ngs, i t



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1 gi ves t he power t o t he bankr upt cy j udge t o hear and2 determi ne. 3 MR. POTTOW: Yes. 4 J USTI CE BREYER: And i f I t el l t he assi st ant 5 chef , you deal wi t h or der s f or bacon and eggs, t hat 6 mi ght mean t hat t he assi st ant chef can deal wi t h eggs7 or der s al one, or i t mi ght mean onl y those that or der 8 both. 9 MR. POTTOW: Yes.

10 J USTI CE BREYER: That ' s why I t hought 11 per haps i t ' s ambi guous. 12 MR. POTTOW: Yes. And - - and i f t her e' s -

13 f ur t her , J ust i ce Br eyer , t her e' s a successi ve "may" 14 af t erwards, af t er t he bacon and eggs, "and may pr epare a15 desser t as wel l , " t hat ' s even mor e per mi ssi ve i n -

16 J USTI CE SCALI A: So i t can do t hat f or cor e17 - - f or t hose cor e pr oceedi ngs t hat wer e not hel d18 unconst i t ut i onal under St er n, r i ght ?19 MR. POTTOW: Yes. And t hat was -

20 J USTI CE SCALI A: I t can j ust r ef er t hem and21 say j ust gi ve me t he eggs. 22 MR. POTTOW: Yes, t hat ' s r i ght . 23 J USTI CE SCALI A: I don' t need t he bacon. 24 MR. POTTOW: And t hat was the pract i ce -

25 J USTI CE SCALI A: You don' t have t o det er mi ne



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1 i t ; j ust gi ve me your r ecommendat i on. 2 MR. POTTOW: Yes. And t hat was a pract i ce3 even bef or e St er n. Some cour t s di d t hat ; t hey had t hem4 j ust r ef er on st r ai ght - up cor e cl ai ms t o gi ve t he5 r eport s and r ecommendat i ons. There' s a case out of t he6 Tent h Ci r cui t cal l ed -

7 J USTI CE SCALI A: I t seems t o me t he8 di chot omy set f or t h i n t he st at ut e di sappear s once you9 say "hear and determi ne" means ei t her "hear and

10 det er mi ne" or "hear or det er mi ne. " 11 MR. POTTOW: But I don' t t hi nk -

12 J USTI CE SCALI A: The whol e di chot omy of t he13 st at ut e di sappear s. 14 MR. POTTOW: J ust i ce Scal i a, I don' t t hi nk15 - - I don' t t hi nk i t ' s a di chot omy. I t hi nk t hat - - what 16 t hey' r e wor r i ed - - I bel i eve what t he Congr ess i s 17 wor r i ed about i s by put t i ng expr ess const r ai nt s on t he18 ent r y of a j udgment , f or pr eci sel y t he r easons Mr . 19 Hal l ward- Dr i emei er says t hat j udgment s are a matt er of20 some, at l east f or mal i st i c si gni f i cance, t hat t hey put a21 const r ai nt on what you can do regar di ng ent r y of a22 j udgment . 23 J USTI CE SOTOMAYOR: Al l r i ght . Can I go t o24 t hat f or a second?25 MR. POTTOW: Yes.



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1 magi st r at e j udge to i ssue a f i nal j udgment i n a noncor e2 pr oceedi ng, but you can have expr ess or i mpl i ed consent 3 t o ent er t he f i nal j udgment i n cor e pr oceedi ngs. 4 MR. POTTOW: I t hi nk -

5 J USTI CE SOTOMAYOR: That - - t hat makes6 ver y - - I under st and t r eat i ng i t l i ke noncor e7 pr oceedi ng, but i f we' r e goi ng t o t r eat i t t hat way, 8 t hen I t hi nk you have t o t r eat i t t hat way f or al l 9 pur poses, not pi ck and choose t he ones you want .

10 MR. POTTOW: I - - f i rs t of al l , I ' d l i ke t o11 gi ve you some hope, J ust i ce Sot omayor , whi ch i s t her e i s12 amendment s t o Rul e 7012 t hat ' s percol at i ng up t o t hi s13 Cour t f or - - f or consi der at i on t o addr ess t he i ssue. I n14 t he i nt er i m, t hi s i s what happened i n Roel l . I n Roel l , 15 we had a rul e of pr ocedur e that sai d t here must be16 expr ess consent bef or e t her e i s t he - - t he t r i al bef or e17 a magi st r at e j udge, a ci vi l t r i al bef or e a magi st r at e18 j udge, whi ch we do bel i eve i s t he exact same syst em as19 t he bankrupt cy cour t j udge. 20 And what t hi s Cour t hel d was when t here' s a21 vi ol at i on of t hat r ul e, r i ght ? When t her e' s not expr ess22 consent , i f t her e i s, i n f act , t r ue consent based on t he23 conduct , t hen consent i s what mat t ers and i t can t r ump24 t he r ul e. And t hat ' s t he squar e hol di ng of Roel l . So25 we woul d ar gue t hat - -



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1 J USTI CE SOTOMAYOR: The l anguage of Roel l , 2 t he magi st r at e j udge' s l anguage di dn' t use t he wor d -

3 t he l anguage i n Roel l , t he magi st r at e j udge' s l anguage4 di dn' t use t he wor d "expr ess consent . " I t j ust - - t he5 par t - - "t he cl er k shal l gi ve wr i t t en not i ce t o t he6 par t i es of t hei r oppor t uni t y t o consent t o t he7 exer ci se. " 8 MR. POTTOW: No, but -

9 J USTI CE SOTOMAYOR: So t he wor d "expr ess" 10 was not i n t he magi st r at e j udge' s act . 11 MR. POTTOW: No, no, no, no. So i n t he act , 12 i n t he st at ut e, t her e was j ust a r ef er ence t o consent , 13 j ust l i ke we have her e i n noncore proceedi ngs r ef er ence14 t o consent . I n t he r ul es -

15 J USTI CE SOTOMAYOR: No, her e you have t o16 expr ess consent . 17 MR. POTTOW: Yes. I n - - i n t he r ul es, t her e18 i s a r equi r ement under bankrupt cy f or expr ess consent , 19 and under Roel l , t her e was a rul e f or a -

20 J USTI CE SOTOMAYOR: Got i t . 21 MR. POTTOW: Okay. 22 J USTI CE SOTOMAYOR: Okay. Now I under st and. 23 MR. POTTOW: May I - - i f I may, I ' d l i ke t o24 go back t o t he quest i on t hat J ust i ce Kennedy rai sed and25 al so back t o J ust i ce Al i t o' s and J ust i ce Gi nsbur g



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1 bef or e. 2 What makes t hi s unusual i f - - even i f I do3 concede t hat i t ' s an exer ci se of appel l at e j ur i sdi ct i on, 4 i t ' s unl i ke al l t he cases ci t ed when t al ked about t he5 l i mi t ed appel l at e j ur i sdi ct i on of somet hi ng l i ke a6 ci r cui t cour t of appeal s. Ther e' s a st at ut or y7 const r ai nt . A ci r cui t cour t of appeal s can' t ent er 8 j udgment i f i t want s t o t o f i x a t r i al cour t t hat f or got 9 t o ent er j udgment .

10 By cont r ast , di st r i ct cour t s i n bankr upt cy11 can ent er j udgment s; t hey have both appel l ate and12 or i gi nal j ur i sdi ct i on. They can wi t hdr aw t he r ef er ence13 f r oma bankrupt cy cour t under 157( d) and t hey can ent er 14 j udgment . So t he Pet i t i oner i n t hi s case got everyt hi ng15 i t want ed. I t had an Ar t i cl e 3 consi der at i on of i t s16 f r audul ent conveyance def ense bef ore Chi ef J udge Pechman17 of t he West er n Di st r i ct of Washi ngt on, and t hey l ost . 18 And on - - on page 45A of t he Pet . App, you can see t hat 19 Chi ef J udge Pechman met i cul ousl y spel l s out her st andar d20 of r evi ew. She says - - she spends a whol e page on i t 21 sayi ng t hi s i s goi ng t o be de novo r evi ew, and she22 wr i t es a 12- page opi ni on wi t h compl ete de novo revi ew, 23 sayi ng t hi s i s why you l ose on t he St at e cl ai m; t hi s i s24 why you l ose on t he Feder al cl ai m; t hi s i s why you l ose25 on t he al t er ego cl ai m. And she says t her e i s no



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1 genui ne i ssue of mat er i al f act t hat has been submi t t ed2 on t hi s r ecor d. 3 CHI EF J USTI CE ROBERTS: You woul d concede4 t hat your case woul d be - - you woul d not have a case i f5 we wer e deal i ng wi t h f act ual f i ndi ngs? 6 MR. POTTOW: Yes, t hat i s - - I bel i eve, 7 Mr . Chi ef J ust i ce, t hi s i s a uni que f actual post ur e, 8 because ot her - - you can' t have de novo r evi ew of a f act 9 t hat t her e' d be a cl ear l y er r oneous st andar d. But

10 t hat ' s not what we have here today. 11 And r egar di ng hi s - - my f r i end' s secondar y12 ar gument t hat even i f consent i s per mi ssi bl e under t he13 Const i t ut i on, and wi t h r espect , I do bel i eve t hi s Cour t 14 has hel d t hat consent i s per mi ssi bl e as a gr and15 const i t ut i onal mat t er , t he t r i l ogy of magi st r at e cases16 of Per et z and Roel l and Gonzal es make i t cl ear t hat 17 consensual voi r di r e i s okay; and i n di scussi ng18 consensual voi r di r e, t hi s Cour t expl i ci t l y says because19 voi r di r e i s compar abl e i n i mpor t ance t o ent r y of ci vi l 20 j udgment wi t h t he consent , whi ch i s what magi st r at e21 j udges can do. So I bel i eve t hi s Cour t has al r eady22 bl essed t he ent r y of ci vi l j udgment by magi st r at e j udges23 upon t he consent of t he par t i es as a const i t ut i onal 24 mat t er f or -

25 J USTI CE SCALI A: I want t o go back t o your



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1 st at ement t hat t he di st r i ct cour t her e has bot h or i gi nal 2 and appel l at e j ur i sdi ct i on because i t can r ecal l t he3 r ef er ence t o t he bankrupt cy j udge. Can i t r ecal l t he4 r ef er ence af t er t he bankrupt cy j udge has i ssued hi s5 deci si on i n t he case?6 MR. POTTOW: I don' t -

7 J USTI CE SCALI A: Has ent er ed a j udgment i n8 t he case?9 MR. POTTOW: I t hi nk t hat woul d be - - I

10 don' t have any case aut hor i t y f or whether t hey can do11 t hat or not . And I shar e Your Honor ' s skept i ci sm t hat 12 t hat woul d be - - t hat woul d creat e a st at ut or y pr obl em. 13 But t he quest i on we have here i s whether t here' s an14 ar t i cl e - - even i f we concede a st at ut or y vi ol at i on, 15 whi ch I don' t , by t he way; I t hi nk t hat t hi s i s - - i t ' s16 ver y cl ear t hat t her e was consent of t he par t i es, t hat 17 t hey went bef ore t he bankr upt cy j udge, and he went i n18 wi t h wi de - - eyes wi de open. So I ' m spendi ng al l t hi s19 t i me t al ki ng about a backup argument , as t o i f we20 assume, arguendo, t hat t he bankr upt cy j udgment was21 i l l egi t i mat e, we st i l l wi n. And t hat ' s why I sai d i t ' s22 t he most st r ai ght f or war d way t o r esol ve t hi s case. I f23 i t was i l l egi t i mat e, we st i l l wi n because of t he de novo24 r evi ew. 25 My f r i end t r i es t o di spar age Chi ef J udge



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1 Pechman' s and say wel l , i t r eal l y wasn' t de novo because2 even t hough she spent a page sayi ng I ' m doi ng a de novo3 r evi ew, I f ound t he wor d "subst ant i al " and "evi dence" 4 j uxtaposed on page 50A of t he Pet . App. And I don' t 5 t hi nk t hat ' s a f ai r r eadi ng of her opi ni on. I t hi nk i f 6 you r ead her anal ysi s, i t ' s qui t e de novo; she goes7 t hr ough al l t he evi dence t hat ' s submi t t ed and says no8 genui ne i ssue of mat er i al f act ; j udgment as a mat t er of9 l aw.

10 J USTI CE GI NSBURG: But she di d say t hat EBI A11 had t he bur den t o demonst r ate er r or i n bankr upt cy12 cour t s. 13 MR. POTTOW: That - - she does say t hat at 14 one poi nt i n her opi ni on. But I bel i eve i f we r ead t he15 anal ysi s i n i t s cont ext , i t i s cl ear t hat she' s16 accor di ng a f ul l de novo r evi ew of t he cl ai ms. And I 17 t hi nk t hat - - I don' t t hi nk she mi sunder st ood t he - - t he18 st andard of r evi ew t hat shoul d be done and t he t r ue de19 novo nat ur e of i t . 20 But i f I may, I ' d l i ke t o comment on my21 f r i end' s backup ar gument . I f - - i f t he Cour t agr ees22 wi t h me that Ar t i cl e 3 i s not i mper i l ed by consensual 23 adj udi cat i ve regi mes l i ke the magi st r at e' s ci vi l 24 j udgment s and t he bankrupt cy cour t noncore proceedi ngs25 whi ch, by the way, I woul d l i ke t o r emi nd t he Cour t t hat



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1 i n St er n i t sel f , you di d quot e Sect i on 157( c) ( 2) , whi ch2 i s t he noncor e consensual pr oceedi ngs i n an opi ni on3 excl usi vel y devot ed t o Ar t i cl e 3. 4 My f r i end says, wel l , as a backup, even i f5 t hat ' s const i t ut i onal l y okay, I have t o have not i ce t hat 6 I can wi t hhol d my consent . And under t he st at ut e, i t ' s7 cl ear t hat on a noncor e cl ai m under 157( c) ( 2) , t he8 par t i es have t o consent . And he says, but I had a St er n9 cl ai m so I di dn' t r eal l y know t hat I was a noncor e cl ai m

10 and coul d wi t hhol d my consent . 11 So i t ' s a one- of f , qui r ky ar gument he' s12 maki ng because he had a St ern cl ai m bef ore St ern. 13 That ' s bel i ed - - sor r y. 14 CHI EF J USTI CE ROBERTS: I ' m sor r y. Go15 ahead. 16 MR. POTTOW: I was goi ng t o say, t hat ' s17 bel i ed by t he pl eadi ngs i n hi s - - i n hi s answer t o t he18 compl ai nt , whi ch i s at page 80 of t he J oi nt Appendi x on19 t he j ur i sdi ct i onal al l egat i ons of t he Tr ust ee, t hi s i s a20 core pr oceedi ng. He says deni ed. So he t hought he had21 a noncor e pr oceedi ng. 22 CHI EF J USTI CE ROBERTS: You' r e r i ght . We' ve23 been t al ki ng about backup argument s t o backup argument s. 24 Your cent r al ar gument i s t hat t he consent of t he par t i es25 can over come what St er n i dent i f i ed as a st r uct ur al



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1 separat i on of powers pr obl em. 2 MR. POTTOW: I woul d - - I woul d - - I woul d3 sl i ght l y rephr ase t hat , Mr . Chi ef J ust i ce, and say what 4 St er n def i ned as t he pr obl em was t he adj udi cat i on of t he5 pr i vat e r i ght wi t hout t he consent of t he par t i es. So I 6 t hi nk i t ' s al r eady i nt r i nsi c i n how St er n -

7 CHI EF J USTI CE ROBERTS: Wel l , I guess t hat ' s8 my quest i on. I s t her e any other case where we' ve sai d9 t he consent of t he par t i es can over come a const i t ut i onal

10 st r uct ur al separ at i on of power s?11 MR. POTTOW: Wel l , i n t he Heckers case, 12 whi ch we ci t e i n our mat er i al , t he ol d - - t he ol d13 Speci al Mast er ' s case, t hat ' s what happened. Ther e was14 a r ef er ence t o a r ef er ee. And when t her e' s - - and i t ' s15 a - - i t ' s a t wo- part t hi ng, Mr . Chi ef J ust i ce. I t ' s not 16 j ust t he consent of t he par t i es, r emember ; i t ' s t he17 r ef er r al by t he di str i ct cour t . So i f t he di str i ct 18 cour t f eel s t hat i t s Ar t i cl e 3 aut hor i t y i s bei ng19 i mpi nged upon, i t has no obl i gat i on t o r ef er mat t er s out 20 t o a bankr upt cy j udge. The par t i es can say, we consent . 21 We want t o go t o t he bankrupt cy j udge. 22 CHI EF J USTI CE ROBERTS: We' ve al r eady t ol d23 t he di st r i ct cour t , haven' t we, t hat i t s Ar t i cl e 324 st at us i s i nf r i nged when he r ef er s or when t her e' s a25 r ef er ence t o a non- Ar t i cl e 3 t r i bunal ?



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1 MR. POTTOW: No, i n - - I - - t hat ' s why I 2 sai d I t hi nk i t ' s t wo necessar y condi t i ons. I t hi nk3 t her e has t o be bot h di st r i ct cour t per mi ssi on t o gr ant 4 t he r ef er ence out and t he consent of t he par t i es. Okay. 5 CHI EF J USTI CE ROBERTS: So i f t he di st r i ct 6 cour t r ef er s t he case t o hi s l aw par t ner s, and t hat ' s7 f i ne wi t h t he par t i es, t hat l aw par t ner can ent er a8 f i nal j udgment i n t he case subj ect onl y t o appel l at e9 r evi ew?

10 MR. POTTOW: That ' s what Hecker s sai d. 11 Heckers - - and t hat - - t hat ' s bas i cal l y -

12 CHI EF J USTI CE ROBERTS: I s t hat what you' r e13 sayi ng?14 MR. POTTOW: Yes, t hat ' s a Speci al Mast er . 15 That ' s what a Speci al Mast er i s. 16 CHI EF J USTI CE ROBERTS: The Speci al Mast ers17 do not ent er f i nal j udgment subj ect onl y t o appel l at e18 r evi ew. 19 MR. POTTOW: Wel l , t echni cal l y i f we want t o20 go t hr ough t he pr ocedur e of what t hese equi t y of f i cer s21 di d, was t hey woul d pr epar e thei r r epor t , and because22 t hey' r e act i ng as of f i cer s of t he cour t , and t hen t he23 cl er k of cour t ent er s j udgment . And so t he adj udi cat i ve24 t hi nki ng -

25 CHI EF J USTI CE ROBERTS: But t he appel l ate



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1 r evi ew i s the i mpor t ant t hi ng. The Ar t i cl e 3 cour t , 2 under your submi ssi on, i s gi vi ng up i t s aut hor i t y t o3 ent er f act ual f i ndi ngs. I t ' s gi vi ng t hat aut hor i t y t o a4 non- Ar t i cl e 3 t r i bunal , and i t can onl y r evi ew t hose5 f i ndi ngs under cl ear l y er r oneous st andar d. 6 MR. POTTOW: That - - t hat i s t he cur r ent 7 syst emunder t he magi st r ate j udges under 636. 8 CHI EF J USTI CE ROBERTS: Wel l , I know i t ' s9 t he cur r ent syst em under t he magi st r at e j udges. We hel d

10 t hat unconst i t ut i onal i n t he bankrupt cy cont ext . 11 MR. POTTOW: No, you hel d i t 12 unconst i t ut i onal r egar di ng an obj ect i ng def endant . 13 Ther e' s been hundr eds of years of consensual 14 adj udi cat i on wi t h t hese i nf er i or j udi ci al of f i cer s, as15 t hat t hey wer e cal l ed i n t he ear l i er cases, such as16 Go- Bar t . 17 They ar e of f i cer s. They' r e i nf er i or 18 j udi ci al of f i cer s, and t hey are cont r ol l ed by t he19 Ar t i cl e 3 j udi ci ar y. The Ar t i cl e 3 j udi ci ar y r et ai ns20 t he cont r ol t o use them or not use t hem as t hey want , 21 and par t i es can' t be f or ced t o do t hem over t hei r -

22 wi t hout t hei r consent . 23 So when t hi s Cour t has had opport uni t y t o24 addr ess Ar t i cl e 3 concer ns of t hi s, t hey have al ways25 r el i ed upon t he l ack of consent as a pr obl em. And



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1 t hat ' s why t hi s Cour t ' s f or mul at i on i n St er n, I t hi nk, 2 i s cr i t i cal , j ust f ol l owi ng Uni on Car bi de, and i ndeed3 ever y opi ni on i n Nor t her n Pi pel i ne, goi ng back to the4 MacDonal d case under t he ol d act . What mat t ers mi ss i ng5 i s t he l ack of consent . Pl enar y mat t er s can' t be t r i ed6 wi t hout consent under t he ol d Bankr upt cy Act . When7 t her e i s consent , t hi s Cour t r ul ed under MacDonal d, 8 t hat ' s f i ne. I ndeed, when t her e' s i mpl i ed consent , t hi s9 cour t hel d i n Kl ei n agai nst Baker i n t he Amer i can

10 Col l ege' s ami cus br i ef , t hat ' s f i ne. 11 And as t he Amer i can Col l ege al so l ays out 12 wel l , t hese ol d st at ut or y cases under t he ol d Bankrupt cy13 Act wer e i nt er pr et ed wi t h const i t ut i onal val ues i n mi nd. 14 The ol d act was ver y cr ypt i cal l y draf t ed and t er sel y15 dr af t ed, so t hi s cour t used const i t ut i onal pr i nci pl es i n16 i nt er pr et i ng t he scope of t he ol d Bankrupt cy Act and17 uphol di ng the consensual adj udi cat i on of pl enar y mat t er s18 when t here i s consent . 19 So our submi ssi on, Mr . Chi ef J ust i ce, i s20 yes, we do t hi nk t hat consent mat t er s. And t he f i nal 21 t hi ng I ' d l i ke t o say i s, my f r i end has t hi s nar r at i ve. 22 He sai d, wel l , how do you know I consent ed t hrough my23 i mpl i ed conduct t o t he noncor e cl ai m? Remember , he di d24 pl ead i t was noncor e i n hi s answer , and - - my red l i ght . 25 CHI EF J USTI CE ROBERTS: Fi ni sh your



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1 sent ence. 2 MR. POTTOW: I was goi ng t o say i s t hat hi s3 codef endant won bef ore t he very same bankr upt cy j udge. 4 So he made a t act i cal deci si on he i s t r yi ng t o5 second- guess ex post now t hat he' s l ost . 6 CHI EF J USTI CE ROBERTS: Thank you, counsel . 7 Mr . Gannon. 8 ORAL ARGUMENT OF CURTI S E. GANNON, 9 FOR UNI TED STATES, AS AMI CUS CURI AE,

10 SUPPORTI NG THE RESPONDENT11 MR. GANNON: Mr . Chi ef J ust i ce, and may i t 12 pl ease t he Cour t : 13 We bel i eve t hat a par t y may consent t o have14 a f r audul ent conveyance cl ai m determi ned by a bankr upt cy15 j udge. And even i n t he absence of consent , pr i nci pl es16 of sever abi l i t y j ust i f y t r eat i ng such an act i on as a17 noncor e pr oceedi ng i n whi ch a bankr upt cy j udge may ent er 18 pr oposed f i ndi ngs of f act and concl usi ons of l aw. 19 Ther e' s al so one ot her aspect of our argument t hat has20 not yet been ment i oned t hi s mor ni ng, whi ch i s t hat we21 t hi nk t hat even i f consent i s not adequat e t o cur e t he22 const i t ut i onal vi ol at i on or i f you f i nd t hat t her e i s23 not adequat e consent on t hi s r ecor d, we t hi nk t hat i t 24 woul d st i l l be open t o you t o f i nd t hat pet i t i oner has25 f or f ei t ed t hi s const i t ut i onal ar gument .



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1 Const i t ut i onal ar gument s can be f or f ei t ed. 2 He has not - - he di d not advance thi s argument at any3 poi nt - - any r easonabl e poi nt bef or e t he bankrupt cy4 j udge, bef ore t he di st r i ct j udge, unt i l he was bef or e5 t he Cour t of Appeal s. I ndeed, I t hi nk i t ' s t el l i ng t hat 6 t hi s Cour t had al r eady gr ant ed cer t i or ar i i n St er n and7 had al r eady hear d or al ar gument i n St er n bef or e t he8 di st r i ct cour t even r ul ed on t he mot i on f or summar y9 j udgment .

10 J USTI CE BREYER: I t ' s t r ue, but i f you wer e11 i n t he Ni nt h Ci r cui t , and I woul d have - - you woul d have12 t hought t hi s was a core pr oceedi ng. 13 MR. GANNON: You mi ght have t hought t he same14 t hi ng. 15 J USTI CE BREYER: So he says, you know, of16 cour se I di dn' t obj ect. I am f aced wi t h al l ki nds of17 pr ecedent t hat say i t ' s i mpossi bl e; and t her ef or e, t her e18 i s no r eason t o obj ect . That wasn' t consent . 19 MR. GANNON: I f t her e was t r ue f ut i l i t y -

20 and I ' m not t al ki ng about t he consent ar gument now, 21 J ust i ce Br eyer . I ' m t al ki ng about a f or f ei t ure ar gument 22 f or pur poses of pr eser vi ng an argument on appeal . And23 i f i t wer e t r ul y f ut i l e, I t hi nk t hat a Cour t of Appeal s24 coul d over l ook t hat t ype of f or f ei t ur e. I don' t t hi nk25 t hat i t was f ut i l e her e. I t hi nk i t i s demonst r at ed by



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1 t he f act t hat St er n i t sel f came out of t he Ni nt h2 Ci r cui t . The l i t i gant s t her e wer e maki ng t hose3 argument s, and i ndeed t he Heal t hcent r al . Com case t he4 pet i t i oner r el i es upon j ust had a di scussi on of t he5 Sevent h Amendment . 6 I don' t t hi nk i t cl ear l y f or ecl osed t hi s7 cl ai m f or pur poses of t he const i t ut i onal -

8 J USTI CE SOTOMAYOR: And t he answer suggest ed9 i t because we he was cl ai mi ng the f r audul ent conveyance

10 cl ai m i n hi s answer was noncor e. So he had t he basi s of11 t he argument . 12 MR. GANNON: Yes, I t hi nk i t ' s - - he13 cer t ai nl y di d, as my col l eague al r eady poi nt ed out on14 page 80 of t he J oi nt Appendi x and paragr aph 2. 1 of t he15 answer deni ed t he al l egat i on t hat t hi s was a cor e16 pr oceedi ng. 17 And i f you l ook, t hen, t o 157( c) ( 1) and ( 2) , 18 t he st at ut e made consent r el evant at t hat poi nt , and19 Rul e 7012, whi ch, J ust i ce Sot omayor , you wer e ear l i er 20 quot i ng, made i t cl ear t hat he was obl i ged, t hen, t o -

21 or pet i t i oner was obl i ged, t hen, t o - - t o gi ve consent 22 or not . 23 But i f I can t ur n t o t he sever abi l i t y24 quest i on, whi ch was al so the f ocus of a l ot of t he25 ar gument bef or e, J ust i ce Scal i a, you poi nt ed out t hat

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1 Congr ess can r ewr i t e t he st at ut e t he way i t want s t o. 2 And t hat ' s, of cour se, t r ue. But i t i s al ways t he case3 when t hi s Cour t get s t o a sever abi l i t y anal ysi s t hat 4 Congr ess di dn' t get i t s f i r st opt i on. Her e, Congr ess5 di d i ncl ude a sever abi l i t y cl ause i n t he 1984 Act . I t ' s6 i n Sect i on 119, and i t says, i f any pr ovi si on of t hi s7 st at ut e or any appl i cat i on t her eof i s hel d t o be8 unconst i t ut i onal we want t he r est t o st and. 9 CHI EF J USTI CE ROBERTS: That ' s what I

10 t hought sever abi l i t y was. I f you car ve - - i f you f i nd11 par t of i t unconst i t ut i onal , you ask whet her what i s12 l ef t can st and. You don' t say t hat we' r e goi ng t o13 r ewr i t e what i s l ef t . 14 MR. GANNON: I don' t t hi nk any r ewr i t i ng i s15 r equi r ed her e, Mr . Chi ef J ust i ce. And I t hi nk t hi s i s16 actual l y essent i al l y what t he Cour t has al r eady sai d i n17 St er n. I n St er n, on page 2620, t hi s Cour t char act er i zed18 t he ef f ect of i t s deci si on as bei ng, "The r emoval of19 Vi cky' s count er cl ai m t her e f r om cor e bankr upt cy20 j ur i sdi ct i on. " 21 And the consequence of t hat i s t hat , because22 t he Congr ess had di vi ded t he wor l d i nt o core and noncore23 pr oceedi ngs i n t he wake of Nor t her n Pi pel i ne, t hi nki ng24 t hat t he di st i nct i on bet ween them was cor e pr oceedi ngs25 were ones i n whi ch bankr upt cy j udges woul d have



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1 aut hor i t y, const i t ut i onal aut hor i t y t o ent er f i nal 2 j udgment s; noncor e proceedi ngs wer e ones i n whi ch t hey3 coul d not do t hat wi t hout consent , or t hey woul d onl y be4 abl e t o pr ovi de pr oposed f i ndi ngs of f act and5 concl usi ons of l aw. 6 And i n the same paragr aph wher e t hi s Cour t 7 t hat t he ef f ect of i t s deci si on was ef f ecti vel y t o8 r emove t hi s, t hat t ype of count er cl ai m f r om cor e9 j ur i sdi ct i on, i t sai d i t di d not expect t hat t hi s

10 deci si on woul d meani ngf ul l y change the di vi si on of l abor 11 bet ween t he bankrupt cy and di st r i ct cour t j udges, 12 pr eci sel y because Pear ce Mar shal l was not cont est i ng t he13 i dea t hat bankrupt cy j udges woul d st i l l be abl e t o ent er 14 pr oposed f i ndi ngs of f act s and concl usi ons of l aw. 15 CHI EF J USTI CE ROBERTS: Or i t may be because16 t he par t i cul ar cl ai m at i ssue i n St er n was one t hat 17 wasn' t expect ed t o ar i se i n t he nor mal cour se i n18 bankr upt cy pr oceedi ngs. 19 MR. GANNON: Wel l , t hat - - t hat may be20 somet hi ng t he Cour t was thi nki ng. I n t hat par t i cul ar 21 par agr aph, t he Cour t ment i oned t he f act t hat Pear ce22 Mar shal l was not cont est i ng t he di st r i ct cour t ' s abi l i t y23 t o t ake pr oposed f i ndi ngs of f act and concl usi ons of24 l aw. 25 And as Mr . Pot t ow al r eady observed, many



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1 di st r i ct cour t s have al r eady t aken t hi s act i on i n2 r esponse t o St er n. I n t he appendi x t o our br i ef at 3 pages 15A t o 17A, we l i st 25 of t hose di st r i ct s. Si nce4 our br i ef was f i l ed, t wo mor e di st r i ct s have adopt ed5 si mi l ar pr ovi si ons i n Rhode I sl and and i n New Hampshi r e. 6 And we t hi nk t hat t hat i s t el l i ng. 7 I al so t hi nk, wi t h r espect t o t he under l yi ng8 const i t ut i onal cl ai m, i f I coul d el abor at e a l i t t l e bi t 9 on what my col l eague was sayi ng i n response t o t he

10 quest i ons f r om t he Chi ef J ust i ce about i nst ances i n11 whi ch Ar t i cl e 3 j udges may i ndeed del egat e t he abi l i t y12 t o ent er cer t ai n deci si ons wi t h whi ch t he di st r i ct 13 cour t ' s subsequent abi l i t y t o over - - t o l ook over t hat 14 deci si on wi l l be cabi ned by the act i on t hat has happened15 wi t h t he consent of t he par t i es. 16 My f r i end was t al ki ng about t he Heckers17 case. That was one i n whi ch t he or der of r ef er ence18 speci f i cal l y pr ovi ded t hat j udgment woul d be ent er ed i n19 conf or mi t y wi t h a r ef er ee' s r epor t , "as i f t he cause had20 been hear d bef or e the cour t . " 21 So t hat was - - t hat was one wher e t he22 di st r i ct cour t di dn' t come i nt o i t at t hat poi nt . 23 CHI EF J USTI CE ROBERTS: Your - - your 24 posi t i on i s - - I mean, t he aut hor i t y t o deci de cases, 25 whi ch i s our Const i t ut i onal bi r t hr i ght , we sai d i n St er n



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1 t hat Congr ess can' t t ake t hat away f r om us. And your 2 posi t i on i s t hat t wo par t i es who come i n of f t he st r eet , 3 i f t hey agr ee, t hey can t ake t hat away f r om us. 4 MR. GANNON: Dependi ng. I t hi nk t hat under 5 t he ci r cumst ances her e - - and t hi s Cour t has r epeat edl y, 6 i n t he cont ext of consi der i ng Ar t i cl e 3 obj ect i ons i n7 bankrupt cy, has r epeat edl y r ecogni zed t hat t he absence8 of consent i s r el evant . Under Schor , and t he Cour t i s9 obl i ged, I t hi nk, t o l ook i nt o al l t he ci r cumst ances

10 sur r oundi ng t hi s, and t her e ar e l ot s of t hi ngs t hat make11 t hi s f ar f r om t he hypot het i cal t hat you pose, because12 t hi s i s mor e l i ke t he magi st r at e j udge scheme. And, 13 i ndeed, i n some ways i t ' s sl i ght l y mor e l i mi t ed. 14 Thi s i s an i nst ance wher e bankrupt cy j udges15 ar e not j ust somebody of f t he st r eet t hat a di st r i ct 16 cour t i s choosi ng t o deci de -

17 CHI EF J USTI CE ROBERTS: No, i t ' s t he18 par t i es, t he par t i es who ar e -

19 MR. GANNON: I t ' s not t he par t i es t hat ar e20 choosi ng. 21 CHI EF J USTI CE ROBERTS: You sai d, " I t ' s t he22 consent of t he par t i es t hat al l ows a pr oceedi ng we have23 det er mi ned t o be unconst i t ut i onal t o go f or war d. " 24 MR. GANNON: You det er mi ned t hat i t was25 unconst i t ut i onal i n t he absence of consent , and i t ' s not



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1 j ust t he consent of t he par t i es. I t hi nk i t i s2 i mpor t ant her e, as i t was i n - - i n t he magi st r at e j udge3 cont ext i n Roel l , i n Per et z, i n Gomez. Thi s Cour t has4 pr evi ousl y recogni zed t hat i n t he magi st r at e j udge5 cont ext , consent makes or br eaks t he di f f erence between6 whet her i t ' s okay f or a magi st r at e j udge t o over see7 f el ony voi r di r e, and i t has subsequent l y compar ed t hat 8 t o ent r y of ci vi l j udgment s. I n Roel l , i t sust ai ned t he9 abi l i t y of a magi st r at e j udge t o ent er a ci vi l j udgment .

10 Her e, bankrupt cy j udges are not j ust peopl e11 of f t he st r eet chosen by t he par t i es. They ar e peopl e12 who ar e appoi nt ed by Ar t i cl e 3 j udges. They ar e13 r emovabl e onl y by Ar t i cl e 3 j udges. They never get a14 case -

15 CHI EF J USTI CE ROBERTS: The poi nt of16 ever ythi ng t hat you sai d i s, t hey do not compl y wi t h17 Ar t i cl e 3. 18 MR. GANNON: They t hemsel ves are not Ar t i cl e19 3 j udges, t hat i s cer t ai nl y t r ue. But t hey never get a20 case unl ess i t i s r ef er r ed t o t hem by an Ar t i cl e 321 j udge, and t hen t he Ar t i cl e 3 j udge r eser ves t he abi l i t y22 t o wi t hdr aw t he r ef er ence and, t her ef or e, t hey23 don' t have - - t hey ar e now unabl e t o do anythi ng wi t hout 24 t hat i mpr i mat ur f r om t he di st r i ct cour t , and I -

25 J USTI CE KAGAN: Mr . Gannon - -



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1 CHI EF J USTI CE ROBERTS: Does the di st r i ct 2 cour t have t hat aut hor i t y af t er t he ent r y of j udgment ?3 MR. GANNON: I - - I don' t t hi nk as a4 st at ut or y mat t er t hat 157( d) , whi ch i s t he pr ovi si on5 t hat al l ows t he di st r i ct cour t t o wi t hdr aw t he6 r ef er ence, i t ' s possi bl e t hat t hat can' t be done at t hat 7 poi nt , but I t hi nk t hat i t i s sensi bl e as a mat t er of8 const i t ut i onal r emedy. I f t he - - i f t he ent r y of f i nal 9 j udgment by t he bankrupt cy cour t was a const i t ut i onal

10 vi ol at i on, I t hi nk i t i s a sensi bl e r emedy, as I 11 di scussed bef or e, t o deem t hat f i nal j udgment t o be12 pr oposed f i ndi ngs of f act and concl usi ons of l aw. As13 t hi s Cour t concl uded i n St er n, t hat subj ect mat t er 14 j ur i sdi ct i on i s vest ed i n t he di st r i ct cour t and t hat 15 t he al l ocat i on of aut hor i t y bet ween bankrupt cy j udges16 and di st r i ct j udges cont ai ned i n Sect i on 157 i s not of17 subj ect mat t er j ur i sdi ct i onal consequences. 18 J USTI CE KAGAN: Mr . Gannon, coul d you say a19 wor d about t he r el evance of ar bi t r at i on her e? Because20 I ' ve been t r yi ng t o f i gur e out , i f t her e' s an Ar t i cl e 321 pr obl em i r r espect i ve of consent when Congr ess adopt s22 some ki nd of scheme f or al t er nat i ve adj udi cat i on, why23 schemes of medi at i on and ar bi t r at i on woul dn' t si mi l ar l y24 be const i t ut i onal l y pr obl emat i c. 25 MR. GANNON: I - - obvi ousl y, we don' t t hi nk



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1 t hat - - t hat t hese schemes her e i n t he bankrupt cy j udge2 cont ext and t he magi st r at e j udge cont ext , whi ch ar e -

3 whi ch ar e hedged around wi t h l ot s of pr ocedur al 4 pr ot ect i ons and st at ut or y pr ot ect i ons, r i se t o t hat 5 l evel . But I do t hi nk t hat a pr i nci pal di f f er ence, i f 6 t he Cour t wer e l ooki ng t o di st i ngui sh ar bi t r at i on f r om7 t hese t ypes of concer ns, i s t hat t he ar bi t r at i on i s mor e8 pur el y pr i vat e. 9 Al t hough t her e' s st at ut or y aut hor i zat i on,

10 t he ar bi t r at or s ar e gener al l y not Feder al empl oyees. 11 Bankrupt cy j udges, by cont r ast , ar e act ual l y uni t s of12 t he di st r i ct cour t s. They ar e wi t hi n Ar t i cl e 3. They13 ar e -

14 J USTI CE KAGAN: Yes, but t hat woul d suggest 15 t hat ar bi t r at i on i s mor e const i t ut i onal l y pr obl emat i c16 because i t - - i t extends - - you know, i t goes - - i t ' s17 f ur t her away f r om t he super vi sor y aut hor i t y of t he18 di str i ct court . 19 MR. GANNON: I ' m - - I ' m l oat he t o say t hat 20 i t ' s f ur t her away because I t hi nk t hat t her e may be a21 separ at i on of power s di st i nct i on bet ween -

22 CHI EF J USTI CE ROBERTS: Ar bi t r at i on i s a23 mat t er of cont r act bet ween t wo part i es. Nothi ng happens24 i n an ar bi t r at i on unt i l you get a di st r i ct cour t t o25 ent er a j udgment enf or ci ng t he cont r act . I t seems t o me



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1 t ot al l y di f f er ent f r om t he si t uat i on we' r e t al ki ng about 2 here. 3 MR. GANNON: Wel l , I do -

4 J USTI CE KAGAN: A mat t er of cont r act ver sus5 a mat t er of consent ? Li ke I sai d, you under st and t he6 di f f er ence. 7 CHI EF J USTI CE ROBERTS: But you - - I ' m8 posi ng a quest i on t o you, I guess. 9 ( Laught er . )

10 CHI EF J USTI CE ROBERTS: Cour t s enf orce11 cont r act s al l t he t i me. They don' t ent er j udgment s12 beyond t hei r Ar t i cl e 3 aut hor i t y si mpl y because the t wo13 par t i es bef or e t hem agr ee t hat t hey shoul d. 14 MR. GANNON: That ' s t r ue, Mr . Chi ef J ust i ce. 15 I n cases l i ke Hecker s and Ki mber l y, cour t s, i n l i ght of16 a pr evi ous r ef er ence f r om t he Cour t and t he consent of17 t he par t i es agr eed t o have t hei r power of de novo r evi ew18 l i mi t ed. Obvi ousl y t hat ' s not what happened her e, but 19 we thi nk t hat t he j udgment of t he deci si on bel ow shoul d20 be af f i r med. 21 CHI EF J USTI CE ROBERTS: Thank you, counsel . 22 Mr . Hal l war d- Dr i emei er , you have f i ve23 mi nut es. 24 REBUTTAL ARGUMENT OF DOUGLAS HALLWARD- DRI EMEI ER25 ON BEHALF OF THE PETI TI ONER



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1 MR. HALLWARD- DRI EMEI ER: Thank you, 2 Mr . Chi ef J ust i ce. 3 I have f our poi nt s i n r esponse. Fi r st wi t h4 r espect t o t he hi st or y. Hecker ' s and Ki mber l y wer e not 5 i nst ances i n whi ch t he non- Ar t i cl e 3 act or ent er ed t he6 j udgment of t he Uni t ed Stat es. 7 I n Hecker ' s, t he Cour t compar ed t he8 r ef er ee' s act i ons aki n t o a j ur y. And a j ur y, of9 cour se, onl y f i nds f act s. Onl y t he Cour t can deci de

10 whet her t o ent er j udgment on t he basi s of t he j ur y' s11 ver di ct . Li kewi se an ar bi t r at or can deci de f act s 12 pur suant t o t he par t i es' cont r act , but unt i l t hey br i ng13 i t t o t he Cour t and j udgment i s ent er ed conf i r mi ng -

14 J USTI CE BREYER: What ar e we supposed t o15 assume her e on t hi s poi nt ? I n Thomas, t hi s Cour t hel d16 t hat what Nor t her n Pi pel i ne est abl i shes i s t hat Congr ess 17 cannot vest i n a non- Ar t i cl e 3 cour t t he power t o18 adj udi cat e wi t hout consent of t he l i t i gant s. So t hat ' s19 t he hol di ng. 20 Now, i f we ar e goi ng t o go back i nt o - - and21 t he power of agenci es and whether we want t o r everse t he22 t hi ngs t hat wer e hel d i n 1938 and so f or t h, I guess we23 shoul d have br i ef i ng on t hat . Am I supposed t o assume24 t hat t hi s i s a case - - I t hought I assumed what we have25 hel d bef or e i n r espect t o const i t ut i onal i t y. Not



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1 whet her Nor t her n Pi pel i ne extends t o wher e i t i s wi t h2 consent of t he par t i es. 3 MR. HALLWARD- DRI EMEI ER: Al t hough Nor t her n4 Pi pel i ne, because the par t y had obj ect ed, di d not 5 addr ess t he quest i on whether consent -

6 J USTI CE BREYER: Now, you hear d what I r ead7 f r om Thomas. I was j ust r eadi ng i t , and i t t al ks about 8 wi t hout consent . So what I want t o know i s are we goi ng9 t o open up t hese i ssues agai n? Because I have my own

10 vi ews on t hat , but t hey don' t necessar i l y - - t hey won' t 11 necessar i l y command a maj or i t y, but I t hi nk we shoul d12 have br i ef i ng. 13 ( Laught er . ) 14 MR. HALLWARD- DRI EMEI ER: No, Your Honor . 15 Because t he ear l i er cases do not est abl i sh an aut hor i t y16 t o ent er j udgment of t he Uni t ed St at es by a -

17 J USTI CE BREYER: My quest i on i s ar e we18 supposed t o go i nt o t hat or do we j ust t ake as assumed19 what Thomas sai d and St er n sai d, and I t hi nk - - you know20 what I sai d. I don' t want t o r epeat mysel f . 21 MR. HALLWARD- DRI EMEI ER: Wel l , Thomas22 cer t ai nl y does not f or ecl ose t he ar gument t hat I ' m23 maki ng because -

24 J USTI CE SCALI A: They di dn' t say t hat i t ' s25 okay wi t hout consent .



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