Stern v. Marshall

131 S.Ct. 2594 (2011)

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Nature of the Case

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Facts

D married J. Howard, P's, father, about a year before his death. Before J. Howard died, D filed a suit against P in Texas state court, asserting that J. Howard meant to provide for D through a trust, and P tortiously interfered with that gift. After J. Howard died, D filed for bankruptcy in federal court. P filed a proof of claim in that proceeding, asserting that he should be able to recover damages from D's bankruptcy estate because D had defamed him by inducing her lawyers to tell the press that he had engaged in fraud in controlling his father's assets. D responded by filing a counterclaim for tortious interference with the gift she expected from J. Howard. The Bankruptcy Court granted D summary judgment on the defamation claim and eventually awarded her hundreds of millions of dollars in damages on her counterclaim. P objected that the Bankruptcy Court lacked jurisdiction to enter a final judgment on that counterclaim because it was not a “core proceeding” as defined by 28 U.S.C. § 157(b)(2)(C). The Bankruptcy Court concluded that D's counterclaim was a core proceeding and gave judgment for D. The District Court held that it was not a core proceeding and must only treat the Bankruptcy Court’s decision as proposed. Although the Texas state court had by that time conducted a jury trial on the merits of the parties' dispute and entered a judgment in P's favor, the District Court then went on to decide the matter itself, in D's favor. The Court of Appeals reversed; D's counterclaim was not “so closely related to P’s proof of claim that the resolution of the counterclaim is necessary to resolve the allowance or disallowance of the claim itself.” The Court of Appeals held that the District Court should have given the state judgment preclusive effect. D appealed, and the Supreme Court granted certiorari.