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Presenting a live 90-minute webinar with interactive Q&A Post Stern v. Marshall: Navigating Uncertainties in Bankruptcy Claims Litigation Arguing Issues of Fraudulent Transfer/Preference and Ponzi Clawback Claims, Waiver and Consent, and


  1. Presenting a live 90-minute webinar with interactive Q&A Post Stern v. Marshall: Navigating Uncertainties in Bankruptcy Claims Litigation Arguing Issues of Fraudulent Transfer/Preference and Ponzi Clawback Claims, Waiver and Consent, and Core vs. Non-Core Proceedings TUESDAY, NOVEMBER 26, 2013 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Corey R. Weber, Partner, Ezra Brutzkus Gubner , Woodland Hills, Calif. Thomas J. Hall, Partner, Chadbourne & Parke , New York Seven Rivera, Partner, Chadbourne & Parke , New York The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .

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  5. Post STERN v. MARSHALL: Navigating Uncertainties in Bankruptcy Claims Litigation Thomas J. Hall Seven Rivera Corey R. Weber Chadbourne & Parke LLP Ezra Brutzkus Gubner LLP 30 Rockefeller Plaza 21650 Oxnard Street, Suite 500 New York, NY 10112 Woodland Hills, CA 91367 Telephone: 212-827-9000 Telephone: 818-827-9000 E-mail: thall@chadbourne.com E-mail: cweber@ebg-law.com srivera@chadbourne.com Web: www.ebg-law.com 5

  6. DISCLAIMER The written materials distributed and the presentations made by this panel are intended for educational and discussion purposes only. Our panelists are involved in cases involving Stern v. Marshall issues. Any views or opinions expressed during the course of this presentation are not intended to be attributable to clients of our panelists, and are not intended to bind any of our panelists or their clients to any positions they may or may not take in those cases. 6

  7. Part 1 Stern and its Lower Court Progeny 7

  8. Core vs. Non-Core Bankruptcy Jurisdiction • “ As explained below, bankruptcy courts may hear and enter final judgments in “ core proceedings ” in a bankruptcy case. In non-core proceedings, the bankruptcy courts instead submit proposed findings of fact and conclusions of law to the district court, for that court ’ s review and issuance of a final judgment. ” Stern at pp. 2601-2602. 8

  9. Core Claims (Final Judgments May Be Entered by Bankruptcy Courts) “ Bankruptcy judges may hear and enter final judgments in ‘all core proceedings arising under title 11, or arising in a case under title 11.’ § 157(b)(1). ‘Core proceedings include, but are not limited to’ 16 different types of matters, including ‘counterclaims by [a debtor ’ s] estate against persons filing claims against the estate.’ § 157(b)(2)(c). Parties may appeal final judgments of a bankruptcy court in core proceedings to the district court, which reviews them under traditional appellate standards. See § 158(a); Fed. Rule Bkrpcy. Proc. 8013. ” Stern at pp. 2603-2604. 9

  10. Non-Core (Proposed Findings of Fact and Conclusions of Law Submitted to the District Court) “ When a bankruptcy judge determines that a referred ‘proceeding… is not a core proceeding but… is otherwise related to a case under title 11,’ the judge may only ‘submit proposed findings of fact and conclusions of law to the district court.’ § 157(c)(1). It is the district court that enters final judgment in such cases after reviewing de novo any matter to which a party objects. ” Stern at p. 2604. 10

  11. U.S. Constitution, Art. III, § 1 • “The judicial Power of the United States shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish. The Judges, both of the supreme and inferior Courts, shall hold their Offices during good Behaviour, and shall, at stated Times, receive for their Services a Compensation, which shall not be diminished during their Continuance in Office .” • Bankruptcy judges do not hold life tenure and therefore cannot be Article III judges entitled to exercise the “judicial Power of the United States.” 11

  12. The Facts of Stern • Stern arose from the bankruptcy of Vickie Lynn Marshall, more famously known as Anna Nicole Smith. • Vickie married octogenarian oil magnate J. Howard Marshall roughly one year before his death. • As J. Howard’s health failed, Vickie discovered that neither his living trust nor his will made any provision for her. • Vickie then sued J. Howard’s son, Pierce, in Texas probate court, alleging tortious interference with her expected testamentary gift. • With her suit still unresolved at the time of J Howard’s death, Vickie filed for bankruptcy. 12

  13. Background Facts • Pierce commenced an adversary proceeding against Vickie in bankruptcy court, alleging defamation and seeking a declaration of non-dischargability. – Critically, Pierce also filed a proof of claim in the bankruptcy, seeking damages on account of his defamation claim. • Vickie responded by filing a counterclaim against Pierce, raising tortious interference claims identical to those raised before the Texas probate court. • Pierce argued that the bankruptcy court lacked jurisdiction to enter a final order on Vickie’s counterclaim, asserting that it was a “non - core matter” under 28 U.S.C. § 157. • The bankruptcy court rejected this argument and ultimately enter a judgment for $475 million in favor of Vickie. 13

  14. Background Facts • Following the bankruptcy court’s order, the Texas probate court came to the opposite conclusion and held that no tortious interference occurred. • On appeal of the bankruptcy court’s order, the district court concluded that the bankruptcy court lacked jurisdiction to enter a final order on Vickie’s claim, but nevertheless entered its own order in favor of Vickie, albeit for significantly reduced damages. • These conflicting orders created a quandary: – If the district court was correct that the bankruptcy court lacked jurisdiction to enter a final order, then the Texas probate court’s decision was the first final order on the matter and should have been given preclusive effect. – If, however, the bankruptcy court possessed the authority to enter a final order, then its judgment should have been given preclusive effect. – In either case, the district court’s order would necessarily be reversed. – After a number of further appellate proceedings (including a separate hearing by the Supreme Court), the case that is the subject of today’s presentation came before the Supreme Court. 14

  15. Stern v. Marshall • “ We conclude that, although the Bankruptcy Court had the statutory authority to enter judgment on Vickie ’ s counterclaim, it lacked the constitutional authority to do so . . . . ” Stern v. Marshall, 131 S.Ct. 2594, 2601 (S.Ct. 2011). • Bankruptcy Courts have the statutory authority to enter final judgments as to each of the “ core proceedings ” defined in 28 U.S.C. § 157(b)(2), but do not have the Constitutional authority to do so as to certain proceedings defined as core (e.g., state law counterclaims). 15

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