In its historic 2011 ruling, the U.S. Supreme Court held in Stern v. Marshall that U.S. bankruptcy courts, which were not created under Article III of the U.S. Constitution, lacked constitutional authority to enter a final judgment on a debtor's state law counterclaim against one of its creditors.1 While the Supreme Court's decision made clear that bankruptcy courts generally lack authority to enter final orders on "state law action[s] independent of the federal bankruptcy law and not necessarily resolvable by a ruling on the creditor's proof of claim in bankruptcy," the court did not address the question of whether litigants may confer such authority on a bankruptcy court, either through express consent or waiver.2

Recently, the U.S. Court of Appeals for the Seventh Circuit became the third U.S. Court of Appeals to address this issue.3 In Wellness International Network v. Sharif, the Seventh Circuit held that the constitutional objection raised by the appellant to the bankruptcy court's ability to enter a final judgment on a state law claim could not be waived, and therefore the objection should have been considered on appeal to the district court despite the fact that it was not raised in an otherwise timely manner. In so holding, the Seventh Circuit joined the U.S. Court of Appeals for the Sixth Circuit, which similarly found in October 2012 that a Stern objection to the bankruptcy court's constitutional authority is not waivable, and took issue with a December 2012 decision from the U.S. Court of Appeals for the Ninth Circuit that reached the opposite conclusion.4

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