Executive Benefits Insurance Agency V. Arkison: Does Party Consent Render Bankruptcy Court Adjudication Constitutionally Valid?

This paper is a report of the National Bankruptcy Conference. It analyzes one of the issues currently before the Supreme Court in the case of Executive Benefits Insurance Agency v. Arkison — the constitutional effectiveness of party consent to adjudication by a non-Article III judge. The paper examines how the Supreme Court’s precedents should guide the Court’s analysis of that issue and discusses the negative impact a decision rejecting consent could have on the operation of the bankruptcy system, adjudication of civil actions by magistrate judges, and the workload of the district courts. After reviewing past decisions in which the Court or individual justices suggested that party consent enables bankruptcy courts to decide matters that Article III would otherwise prevent them from adjudicating, this paper examines the Court’s leading precedent on the constitutional effect of consent to non-Article III adjudication — the 1986 decision in Commodity Futures Trading Commission v. Schor. The paper contends that the Court’s analysis in Schor supports the constitutionality of bankruptcy court adjudication of private rights with the parties’ consent, notwithstanding the decision of three federal circuits to the contrary. The paper concludes with a discussion of the practical importance of the Court’s decision of the consent issue in Arkison. It provides examples of the delays and added costs that would result from a bifurcation of bankruptcy adjudication between bankruptcy and non-bankruptcy courts. It also notes the likely effect of the decision on magistrate judges and discusses the impact that a decision rejecting consent to adjudication by bankruptcy and magistrates judges would have on the workload of district courts.