“Wellness” Has Made Us Better

May 27, 2015Article
Small Enough To Fail

Yesterday the Supreme Court, in a 6-3 decision authored by Justice Sotomayor, answered the question in the affirmative and provided us all a good measure of relief.  In the case of Wellness International Network, Ltd., et al. v. Shariff (“Wellness”), Richard Shariff tried to discharge a debt he owed to Wellness International Network, Ltd.  After a series of procedural rulings on discovery, the bankruptcy court eventually entered a default judgment against Shariff.  While Shariff’s appeal was pending in the District Court, the U.S. Supreme Court held in Stern v. Marshall, 131 S. Ct. 2594 (2011) that Article III forbids bankruptcy courts from entering final judgments on claims that seek only to “augment” the bankruptcy estate and would otherwise “exist without regard to any bankruptcy proceeding.”  Thereafter in Wellness, the 7th Circuit Court of Appeals held that the judgment entered by the bankruptcy court against Shariff could not stand because the bankruptcy court lacked the constitutional authority to enter a final judgment on the claim.

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