830-Small Smiles Dental Centers-CSHM Objection To $39M Settlement

IN THE UNITED STATES BANKRUPTCY COURT FOR THE MIDDLE DISTRICT
AT NASHVILLE
)
Chapter 11
IN RE:
)
)
CS DIP, LLC
)
No. 312-01573
(f/k/a Church Street Health Management, LLC)
)
)
SSHC DIP, LLC
)
No. 312-01574
(f/k/a Small Smiles Holding Company, LLC)
)
)
FNY DIP, LLC
)
No. 312-01575
(f/k/a FORBA NY. LLC)
)
)
(Jointly Administered under
)
Case No. 312-01573)
Debtors.
)
Judge Lundin
OBJECTION OF STERLING MUSTERED BY NEXT FRIEND LAURA

MUSTERED TO SETTLEMENT, INJUNCTION, AND CLAIM PROCEDURES
AND REQUEST FOR HEARING THEREON
Comes now Sterling Mustered by his next friend, Laura Mustered, and objects to
the proposed settlement propounded by the Jointly Administered Reorganized Debtor and
requests a hearing thereon. In support of said objection, the following would be shown
unto the Court:
1. The Jointly Administered Debtors filed a petition for relief under Chapter 11
of the Bankruptcy Code on February 20, 2012. Said Chapter 11 plan was
confirmed by order of this Court. Sterling Mustered is a minor, was not on
notice of the Chapter 11 proceeding at the time of confirmation, and is acting
through his next friend, Laura Mustered.
2. The intent of the Jointly Administered Debtors is to terminate the right to
recover insurance and/or liability insurance coverage of National Union Fire
Insurance Company of Pittsburgh.
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ARGUMENT
This case presents the Bankruptcy Court with an opportunity to examine whether
Article I permits the exercise of the judicial power of the United States by a Bankruptcy
Judge on the basis of the rights conferred under a confirmed Chapter 11 plan. The
proposed settlement of the Joint Administered Debtors proposes to limit the ability of
claimants who are children and minors to make claims ultimately to be paid by a Third
Party Insurance Company who are effectively not before this Court.
In Stern v. Marshall, 131 S. Ct. 2594 (2011), the Supreme Court ruled that a nonArticle III bankruptcy judges entry of final judgment of a bankruptcy estates permissive
state-law counterclaim against a creditor who filed a claim against the estate violates
Article III. Although Stern did not address whether litigant consent is sufficient to cure
the constitutional infirmities highlighted by the Court in the bankruptcy context, id. at
2614-2615, and the Courts subsequent decision of Executive Benefits Ins. Agency v.
Arkinson, 134 S. Ct. 2165, 2170 n. 4 (2014), reserve[ed] that question for another day,
this Court recently granted review in Wellness Intl Network Ltd. v. Sharif, ___ S. Ct.
___, 2014 WL 497634 (U.S. July 1, 2014), to consider that issue. Sharif may have broad
ramifications regarding the constitutionality of the ability of National Union Fire
Insurance Company of Pittsburgh (National Union) to consent to a final determination
before an Article I Bankruptcy Judge, The legal effect of this settlement serves to bar
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children for whom the statute of limitations has not matured from adjudicating their
claims before a judge having jurisdiction to hear this matter.
In Stern, this Supreme Court ruled that an Article I bankruptcy judges entry of
final judgment on a bankruptcy estates permissive state-law counterclaim against a
creditor violates Article III. 131 S. Ct. at 2608-09. The Court did not address whether
litigant consent to jurisdiction is sufficient to cure any such Article III infirmities in
Stern, and it expressly reserved the issue for another day in Executive Benefits, 131S. Ct.
at 2170 n.4. However, on July 1,2014, this Court granted certiorari in Wellness Intl
Network Ltd. v. Sharif, ___ S. Ct.___, 2014 WL 497634 (U.S. July 1, 2014), to address
that issue, and this Courts decision in Sharif may have a significant impact on the
question any final determination by this Court is constitutional.
An analogous situation would be when litigants consent to jurisdiction before a
Magistrate Judge pursuant to 28 USC 636(c). Prior to Stern, the courts of appeals
uniformly upheld 636(c)s facial constitutionality in non-class action contexts,
maintaining that litigant consent to entry of final judgment by a magistrate judge serves
to cure any Article III concerns. The courts of appeals have begun to reexamine their preStern decisions upholding 636(c)s facial constitutionality, questioning whether litigant
consent is sufficient to alleviate the Article III concerns articulated in Stern. See Brown v.
U.S., 748 F.3d 1045,1070 (11th Cir. 2014) (The fact that the parties consent to a
magistrate judge entering final judgment does not (notwithstanding Congresss statement
in the 1979 congressional reports to the contrary) obviate the Article III concerns); In re
BP RE, L.P., 744 F.3d 1371, 1372 (5th Cir. 2014). See Brown, 748 F.3d at 1068-1070);
In re BP RE, L.P., 744 F.3d at 1372 (Higginson, C.J., with whom, Stewart, Jolly, Davis,
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Dennis and Graves, JJ., join, dissenting from the denial of rehearing en banc) (footnote
omitted). Even if litigant consent is sufficient to cure any Article III infirmities in the
non-class action context, the Court could still find 636(c) unconstitutional as applied to
class actions because absent class members *9 have not (and cannot) validly consent to
forgoing their rights to have their claims adjudicated by an Article III judge. Although
Day ruled that 636(c) is constitutional as applied to absent, unconsenting absent class
members, a unanimous panel of the Eleventh Circuit has since called that conclusion into
serious question. See Brown, 748 F.3d at 1068 (explaining in detail why we harbor
serious concerns as to the facial constitutionality of 636(c)).
First, Stern focused heavily on the separation-of-powers concerns of the Northern
Pipeline plurality, 131 S. Ct. at 2609-10, which in turn had noted that allowing magistrate
judges to issue recommendations to district judges under 28 U.S.C. 636(b) is
constitutional because, unlike under 636(c), Article III judges retain final decision
making authority. N. Pipeline, 458 U.S. at 79 (discussing United States v. Raddatz, 447
U.S. 667 (1980)). Stern thus draws into question the continuing importance of litigantspecific concerns such as consent. See Executive Benefits, 131 S. Ct. 2170, n.4 (leaving
open the question whether consent may surmount what otherwise would be the
unconstitutional entry of judgment by a non-Article III decision maker); Commodity
Futures Trading Commn v. Schor, 478 U.S. 833, 867 (1986) (Brennan, J., dissenting)
(explaining why consent is irrelevant to Article III analysis); Hart & Wechsler, supra,
at 30 (noting that Stern s separation-of-powers focus echoes Justice Brennans Schor
dissent). See generally Brown, 748 F.3d at 1069 (relying heavily on Stern in explaining
the courts serious concerns as to the facial constitutionality of 636(c)); Knight ex rel.
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P.K. v. Colvin, 2014 WL 59994 at *8 n.4 (D.N.M. Jan. 2, 2014) (questioning the
constitutionality of 636(c) following Stern).
Second, Stern rejected the argument that bankruptcy judges, who, like magistrate
judges, do not receive the protections of Article III, are adjuncts to district court judges.
The Court found that bankruptcy judges are not adjuncts because they resolve [a]ll
matters of fact and law in whatever domains of the law to which the parties []claims
might lead. 131 S. Ct. at 2618-19 (quoting N. Pipeline, 458 U.S. at 91) (first alteration in
original). So, too, does a magistrate judge exercising authority under 636(c). The Court
in Stern was swayed by the extent of the bankruptcy judges final decision-making
authority: [A] bankruptcy court has the power to enter appropriate orders and
judgments - including final judgments - subject to review only if a party chooses to
appeal. Id. at 2619 (internal citation omitted). That describes precisely the authority that
a magistrate judge exercises under 636(c) - that is, a magistrate judge, when authorized
to enter final judgment, is no more an adjunct to the district court than was the
bankruptcy judge in Stern. See Brown, 748 F.3d at 1058-59.
The sum and substance of this argument is that this Court simply lacks the power
and jurisdiction to make and enforce an order binding on non-party litigants, i.e. the
minor children who are unrepresented before this Court who have not been heard nor had
the right to be heard as well as any settlement with National Union Fire Insurance
Company of Pittsburgh, who cannot consent to a final adjudication before this Court.
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Respectfully submitted,
/s/ Steven L. Lefkovitz
Steven L. Lefkovitz
Attorney for Plaintiff
618 Church Street, Suite 410
Nashville, TN 37219
(615) 256-8300
[email protected]
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing was filed
electronically. Notice of this filing will be sent via operation of the Courts electronic
filing system to those parties specifically requesting electronic service and also was
served via first class, U.S. Mail, postage prepaid on this the 26th day of May, 2015.
/s/ Steven L. Lefkovitz
Steven L. Lefkovitz
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830-Small Smiles Dental Centers-CSHM Objection To $39M Settlement

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IN THE UNITED STATES BANKRUPTCY COURT FOR THE MIDDLE DISTRICT

OBJECTION OF STERLING MUSTERED BY NEXT FRIEND LAURA

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