In Stern v. Marshall, 131 S. Ct. 2594 (2011), the Supreme Court ruled that bankruptcy courts cannot constitutionally issue a final judgment over state law claims. The case received attention because it involved Anna Nicole Smith who married a very rich man in Texas, J. Howard Marshall. Although Marshall had lavished gifts on Smith, his will left her nothing.

Smith, referred to in this litigation as Vicki Lynn Marshall, filed for bankruptcy. Marshall’s son, Pierce Marshall, filed a proof of claim in her bankruptcy proceeding. Pierce contended that Vicki had defamed him in asserting that Pierce had exercised undue influence over his father to deny her an inheritance. Vicki counterclaimed against Pierce asserting that he had tortiously interfered with her recovery under the estate.

The bankruptcy court ruled in favor of Vicki on her counterclaim and awarded her $449 million in compensatory damages and $25 million in punitive damages. The federal district court affirmed the ruling in favor of Vicki, but reduced her recovery to $88 million, evenly divided between compensatory and punitive damages.

In between the ruling by the bankruptcy court and that of the district court, a probate court in Texas decided entirely in favor of Pierce. There thus was an issue of preclusion. If the bankruptcy court had the authority to issue a final judgment, then the Texas probate court’s ruling was precluded and Vicki – or more precisely her estate since she is no longer alive – wins. But if the bankruptcy court lacked the authority to issue a final judgment, then Pierce – or more precisely his estate since he is no longer alive – wins.

The Supreme Court ruled 5-4 in favor of Pierce. Chief Justice Roberts wrote the opinion for the Court and held that it violated separation of powers for Congress to allow non-Article III bankruptcy judges, who lack life tenure and protection of their salary, the ability to issue a final judgment over state law claims. The Court declared: “Article III could neither serve its purpose in the system of checks and balances, nor preserve the integrity of judicial decisionmaking, if the other branches of the Federal Government could confer the Government’s judicial power on entities outside Article III.” The Court rejected Justice Breyer’s claim in dissent that this would create a practical nightmare for the federal district courts.

Immediately after Stern v. Marshall was decided, I said that the significance of the case will turn on whether consent can cure the problem. In the vast majority of instances, the parties will consent to allow the bankruptcy court to issue a final judgment. But if consent is not sufficient, then the implications are enormous. A significant percentage of bankruptcy cases have state law claims and other matters where the bankruptcy court will have to make reports and recommendations to the district court. As Justice Breyer feared, cases will ping-pong back and forth between the bankruptcy courts and the district courts.

The workload increase for already overtaxed federal district courts will be great. As Justice Breyer pointed out, “the volume of bankruptcy cases is staggering, involving almost 1.6 million filings last year, compared to a federal district court docket of around 260,000 civil cases and 78,000 criminal cases.”

If bankruptcy courts cannot issue final judgments on state law claims with the consent of the parties, then district courts will need to do so. No longer will the Bankruptcy Appellate Panels be able to decide such matters.

The implications for the federal judicial system go far beyond that. Federal magistrate judges issue final judgments in civil cases, including holding jury trials, with the consent of the parties. Magistrate judges, like bankruptcy judges, are non-Article III judges who sit for fixed terms. If consent is not sufficient, no longer could they decide state law matters. The workload increase for federal district courts will be dramatic.

There is no clear answer to whether consent is sufficient to allow a bankruptcy court to issue a final judgment over state law claims. On the one hand, it is possible to draw a distinction between subject matter jurisdiction, which cannot be gained by consent, and the authority to issue a final judgment, which arguably can be gained by consent. Arbiters, who are not Article III judges, have this authority all the time.

On the other hand, both limits on subject matter jurisdiction and limits on the authority to issue a final judgment are based on Article III of the Constitution. Both are structural constitutional limits, and structural limits cannot be overcome by consent.

Not surprisingly, there is a split among the federal courts of appeals as to whether a bankruptcy court can issue a final judgment with consent of the parties. Three Circuits have now said that consent is not sufficient to cure a Stern v. Marshall problem. Waldman v. Stone, 698 F.3d 910 (6th Cir. 2012), cert. denied, 133 S. Ct. 1604 (2013); Wellness Intern. Network Ltd. v. Sharif, --- F.3d ---, 2013 WL 4441926 (7th Cir. Aug. 21, 1013); In re Frazin, --- F.3d ---, 2013 WL 5495920 (5th Cir. Oct. 1, 2013). The Ninth Circuit, though, came to the opposite conclusion in In re Bellingham Insurance and held that even implied consent is sufficient.

Executive Benefits v. Arkison likely will be argued in January 2014 and decided in the spring. It is a case of potential enormous significance for the work of the bankruptcy courts and of the federal district courts.

* Erwin Chemerinsky is the Dean and Distinguished Professor of Law, Raymond Pryke Professor of First Amendment Law, University of California, Irvine School of Law.