Opinion ID: 64232
Heading Depth: 2
Heading Rank: 2

Heading: Bankruptcy Court's Adjudicative Authority

Text: As a threshold matter, we consider Dr. Beitel's assertion  one that he made for the first time on appeal to the district court  that the bankruptcy court was without power to enter the default judgment against him. We must determine, in a two-step inquiry, (1) whether the bankruptcy court had subject-matter jurisdiction, and, if we find that it did, (2) the extent of that court's judicial power. Bankruptcy courts have jurisdiction over, inter alia, civil cases related to Chapter 11 bankruptcy cases. [9] A proceeding is related to the main case if `the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy.' [10] The instant case obviously could have an affect on the bankruptcy estate because a judgment against Dr. Beitel could increase the estate. The bankruptcy court thus had subject-matter jurisdiction over the instant adversary proceeding. A bankruptcy court's adjudicative authority is constrained, however, if the proceeding is non-core. Bankruptcy courts have full adjudicative power over core proceedings; in non-core proceedings they are restricted to issuing proposed findings of fact and conclusions of law, which the district court may adopt or reject. [11] A non-exhaustive list of core proceedings appears in 28 U.S.C. § 157(b)(2). In In re Wood, Judge Wisdom distilled the formula for [core proceedings] thus: `We hold ... that a proceeding is core under section 157 if it invokes the substantive right provided by title 11 or if it is a proceeding that, by its nature, could arise only in the context of a bankruptcy case.' [12] We agree with both Dr. Beitel and the district court that this proceeding is non-core. As in In re Wood, the instant claim is not based on any right created by the federal bankruptcy law, but instead is simply a state contract action that, had there been no bankruptcy, could have proceeded in state court. [13] OCA's attempts to classify its adversary proceeding as specific to bankruptcy fail. Even though this is a non-core proceeding, we nevertheless conclude that the bankruptcy court exercised its adjudicative power appropriately because Dr. Beitel impliedly consented to the bankruptcy court's entry of final orders and judgments. In a non-core proceeding, the parties may consent to have a bankruptcy court enter appropriate orders and judgments. [14] Such consent may be express or implied. [15] Failure to object in the bankruptcy court may constitute implied consent. [16] Even if we ignore any opportunity that Dr. Beitel might have had to challenge the bankruptcy court's adjudicative authority prior to its entry of default judgment, his post-default conduct was entirely inconsistent with raising such a challenge. When Dr. Beitel sought to set aside the default judgment in the bankruptcy court, he never once raised the core/non-core issue, and even filed an answer admitting to the complaint's allegation that [t]his matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2). Dr. Beitel mounts a two-pronged challenge regarding his implied consent. First, he contends that only the bankruptcy court, not the district court sitting as an appellate court, may determine consent, a fact issue. The case cited by Dr. Beitel for this proposition, however, does not go that far, stating only that consent to ... jurisdiction is not lightly to be inferred and requires a clear manifestation by the adverse party. [17] This language does not lend support to Dr. Beitel's contention: It neither indicates that only the bankruptcy court may make determinations as to consent nor causes us to question whether Dr. Beitel consented in this case. Dr. Beitel contends alternatively that his post-default conduct is irrelevant. [18] On this point, Dr. Beitel misinterprets our precedent: A defendant may lose the opportunity to object after a relevant hearing, but a defendant does not possess free license not to object after a hearing. [19] This is particularly true in the default-judgment context, in which a defendant may not have had an opportunity to object previously. To hold otherwise would only create needless appellate litigation by encouraging defendants like Dr. Beitel to wait until appeal to object to the bankruptcy court's jurisdiction. We agree with the district court's observation that Dr. Beitel's objection to the bankruptcy court's jurisdiction at this stage of the proceeding more closely resembles an afterthought than a bona fide objection. [20] The bankruptcy court had both subject-matter jurisdiction over the instant case and authority to enter final orders and judgments.