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Implications of the SCOTUS Ruling in Wellness International vs. Sharif

On May 26, the U.S. Supreme Court issued a ruling in Wellness International v. Sharif, a case that will have major implications for bankruptcy law throughout the nation. The court decided Article III does not prevent judges in bankruptcy cases from issuing final judgment on claims that only attempt to augment the bankruptcy estate and would otherwise exist beyond bankruptcy proceedings if parties of the proceeding voluntarily and knowingly consent. This consent, according to the ruling, does not need to be express.

Wellness International had filed the lawsuit against Richard Sharif. When Sharif filed for bankruptcy, Wellness International filed a complaint in bankruptcy court, objecting to the discharge being issued to Sharif and arguing that a trust containing certain assets was essentially an “alter ego” of Sharif, which meant the assets should be considered part of his bankruptcy estate. Wellness International believed the proceeding was in fact a “core proceeding,” which meant the bankruptcy court should be able to enter a final judgment.

The bankruptcy court ultimately sided with Wellness International, denying Sharif his discharge on the grounds that the assets were property of his bankruptcy estate. Sharif appealed the decision, and the Seventh Circuit eventually sided with him, stating that Wellness International’s claim about the trust assets was not under the jurisdiction of the bankruptcy court.

The Supreme Court’s reversal of this decision returns some of the power bankruptcy courts had lost in Stern v. Marshall, a 2011 Supreme Court case that had removed some powers Congress had given these courts to decide lawsuits. Now, if parties agree to take a lawsuit to a bankruptcy court, they have the ability to waive their rights to have the case heard by an Article III judge.

For more information and guidance on what this court ruling means for your potential claim, speak with a trusted Georgia bankruptcy attorney at Jeff Field & Associates by calling 404-381-1278 or by contacting us online.

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