OPINION

LAURIE SELBER SILVERSTEIN, UNITED STATES BANKRUPTCY JUDGE.

On December 14, 2015, I entered an order confirming a plan of reorganization for then-debtors Millennium Lab Holdings II, LLC and certain of its affiliates ("Millennium" or "Debtors").1 The plan provided for third party releases in favor of various non-debtor entities, including, as relevant here, certain of the Debtors' equity holders who contributed $325 million to the estate as part of a settlement contained in the plan. At the confirmation hearing, I overruled the objection filed by Voya,2 which did not assent to the third party releases and found that the Debtors had met their burden of proof to show that the releases were warranted under Continental.3 Voya appealed. Now, on remand from the district court, I have been asked to "consider whether, or clarify [my] ruling that, [I, as a] Bankruptcy Court had constitutional adjudicatory authority to approve the nonconsensual release of Appellants' direct non-bankruptcy common law fraud and RICO claims against the Non-Debtor Equity Holders."4 I conclude that I did.5 In so concluding, I reject Voya's expansive reading of Stern,6 which not only applies Stern outside of the narrow context in which it was made, but far beyond the holding of any court, and which would, if accepted, dramatically change the division of labor between the bankruptcy and district courts.

Because I find that I had constitutional adjudicatory authority to approve, in a final order, the nonconsensual third party releases, I need not strike the nonconsensual release of Voya's claims from the confirmation order, nor make and submit to the district court additional proposed findings of fact and conclusions of law regarding the final disposition of Voya's RICO claims. Even if I am wrong, however, I still would not do so. Not only did Voya forfeit and/or waive any argument that I did not have constitutional adjudicatory authority to enter the confirmation order by not raising it at the confirmation hearing or at any time prior to entry of the order confirming the plan, Voya also independently waived its right to any trial on the merits of its RICO claims in the context of confirmation. Thus, to the extent that it is ever appropriate to have a hearing on the merits of claims being released by third parties in connection with confirmation — as opposed to, or in addition to, a hearing on the merits of the releases themselves or any settlement in which they are contained — Voya made a calculated decision not to put the merits of its RICO claims at issue during the confirmation hearing. I will not consider the merits now.

BACKGROUND7

A. The Confirmation Hearing

On November 10, 2015, the Debtors filed voluntary petitions under chapter 11 of title 11 of the United States Code8 together with their prepackaged plan of reorganization ("Plan") and accompanying disclosure statement.9 The filing was the culmination of a seven-month process in which Millennium entered into multiple settlements, including a terms sheet with the United States and certain individual states, and a restructuring support agreement with both an ad hoc group of bondholders and the Non-Debtor Equity Holders. After an attempted out-of-court restructuring effort failed to garner the required support, the Debtors filed their bankruptcy petitions.

The Plan provided for a global resolution of claims related to the Debtors' April 2014 $1,825 billion senior secured credit facility, the proceeds of which funded a $1.3 million dividend to Millennium's equity holders, paid off certain debt and provided for working capital. As part of the lender group, Voya funded $106.3 million of the loan. Under the Plan, in exchange for an Allowed Claim (that is, a claim allowed under § 502 of the Bankruptcy Code), each lender, including Voya, received its pro rata share of: (i) a new $600 million term loan; (ii) 100% of the beneficial ownership interests of the reorganized Debtors; and (iii) any recoveries from a trust created to pursue the Debtors' retained causes of action.

On December 10, 2015, I held a combined hearing on confirmation of the Plan and the adequacy of the Disclosure Statement. Prior to that hearing, Voya filed two objections.10 Voya did not object to the overall compromise embodied in the Plan, which allowed the claims of all bondholders, brought $325 million into the estate (permitting the Debtors to reorganize and make the distributions required under the Plan) and included releases of both debtor and third party claims against the Non-Debtor Equity Holders. Instead, Voya only objected to the inclusion in the Plan of releases of claims that creditors, including Voya, might assert against the Non-Debtor Equity Holders and an accompanying bar order and injunction, As to the releases, Voya made the following arguments: (i) that I did not have subject matter jurisdiction to grant nonconsensual third party releases; (ii) that third party releases are impermissible; (iii) that the Plan must permit parties to opt-out of the releases; and, in any event, (iv) that the releases did not meet the Continental standard. To crystalize its claims against the Non-Debtor Equity Holders, the day before the confirmation hearing, Voya filed a complaint asserting RICO and common law fraud claims against those entities in the United States District Court for the District of Delaware (the "RICO Lawsuit"), which remains pending before the Honorable Gregory M. Sleet.11

On December 11, 2015, I issued a bench ruling12 confirming the Plan and addressing all of the issues raised by the parties, save one. As part of that ruling, I held that, at the very least, I had "related to jurisdiction."13 I made this ruling because Voya argued (relying on Combustion Engineering14) that I did not have subject matter jurisdiction over the RICO Lawsuit, which was fatal to my ability to grant the third party releases as to Voya. I also stated that Stern did not change my conclusion on Voya's jurisdictional argument. At no time before I ruled did Voya argue that I lacked constitutional adjudicatory authority to enter a confirmation order containing releases or to otherwise enter a final order approving the nonconsensual releases in the Plan.

As part of my Bench Ruling, I informed the parties that (i) I was not in a position to rule on the bar order provision, as it had not been the subject of argument and I had not, independently, had a chance to fully understand it; and (ii) I had not yet reviewed the proposed form of confirmation order. After some discussion, I agreed that the parties could submit further briefing on the bar order provision and continued the hearing. But, before the conclusion of the hearing, the staff attorney for the Office of the United States Trustee commented on the proposed form of order and asked me to pay particular attention to paragraph LL, which she said contained detailed proposed findings on the injunctions and releases. I then asked: "Does any other party have [a] question or clarification they need to make on the record?"15 As reflected in the transcript, there was no response. The hearing was then recessed until December 15.

Prior to the continued hearing, the Debtors filed a letter on the docket informing me that, with the consent of Voya and all other necessary parties, the bar order provision was deleted from the Plan.16 The letter also informed me that: (i) Voya had no further objections to the Plan that had not been ruled upon; and (ii) the Office of the United States Trustee believed that the findings in paragraph LL of the proposed order regarding releases should be stricken in favor of a reference to the Bench Ruling, and the Debtors disagreed. After considering the letter, on December 14, 2015, I entered an order confirming the Plan.

B. The Appeal and the Request for Certification to the Third Circuit

That same day, Voya filed its Notice of Appeal17 together with an emergency motion requesting certification of a direct appeal to the Third Circuit18 and a motion for stay pending appeal.19 Voya argued that a direct appeal would "enable the Third Circuit to clarify two crucial legal issues that remain undetermined in this Circuit: whether nonconsensual releases of non-debtors' direct claims against other non-debtors are permissible and if so, under what circumstances."20

Thereafter, Voya filed its Statement of the Issues on Appeal21 identifying the following questions.

At no time before me on the Stay Motion or the Certification Motion did Voya argue that the appeal involved a question of my constitutional authority to enter a final order confirming the Plan.

C. The Remand Decision

On March 20, 2017, the district court issued its Memorandum Opinion remanding the case for further proceedings. As the district court explained in the Remand Decision:

Accordingly, the district court remanded the bankruptcy case for further proceedings on the following:

The parties made then submissions on remand and, on July 27, 2017, I heard extensive argument. The matter is now ripe for decision.

D. The Parties' Positions

On remand, the parties each proffer their interpretation of Stern, Voya asserts its application of Stern to this matter is "straightforward." But, at argument on remand, Voya's counsel admitted that no party has ever articulated its position.24

Voya posits that in analyzing whether I have constitutional adjudicatory authority to enter a final order confirming a plan containing nonconsensual third party releases, I should:

Voya further asserts that Stern stands for the proposition that because Voya chose to filed its RICO Lawsuit in the district court, Voya has an absolute right to have the merits of its claims determined in the context of that civil lawsuit. Voya asserts that granting the third party releases over its objection constitutes an "adjudication" of the RICO Lawsuit, which is prohibited so neither the bankruptcy court nor the district court can enter a confirmation order containing releases. Indeed, Voya argues that no court can enter any order which impacts its RICO Lawsuit.27 Voya's true argument, therefore, is not a Stern argument as Stern addresses which judge — an Article III judge or an Article I judge — must issue the confirmation order, not whether the order should issue at all.

The Debtors28 respond to Voya's argument on Voya's terms, that is, they assume Stern is applicable. The Debtors contend Stern stands for the proposition that bankruptcy judges have constitutional authority to resolve matters that are "`integral to the structuring of the debtor-creditor relationship.'"29 The Debtors argue that it is the relationship of the claim to the bankruptcy process that is important, not the nature of the claim itself. The Debtors further posit that if it is necessary for the bankruptcy judge to rule on a matter in the context of plan confirmation, then the judge has the constitutional power to enter a final judgment on that core bankruptcy proceeding, even if it impacts state law claims. Here, they contend, it was necessary for me to approve the releases because both the feasibility and the implementation of the Plan required the contribution from the Non-Debtor Equity Holders. The Debtors conclude, therefore, that the Stern standard is met because my determination that the Continental hallmarks were satisfied means that the releases were integral to the debtor-creditor relationship and necessarily resolved as part of confirming the Plan.

DISCUSSION

I. Bankruptcy Jurisdiction

Bankruptcy jurisdiction is conferred in 28 U.S.C. § 1334, titled "Bankruptcy cases and proceedings." With exceptions not applicable here, district courts have original and exclusive jurisdiction in all bankruptcy cases, i.e., the main proceeding.30 District courts also have original but not exclusive jurisdiction of all "civil proceedings arising under title 11, or arising in or related to cases under title 11."31 Because this jurisdiction is granted to the district court, bankruptcy judges exercise bankruptcy jurisdiction only to the extent the district court refers the case or proceeding to the bankruptcy judge.32 In the District of Delaware, there is a standing order referring all bankruptcy cases and their attendant civil proceedings to bankruptcy judges.33

Bankruptcy cases and civil proceedings arising in and arising under title 11 are "core" proceedings, while civil proceedings related to cases under title 11 are denominated "non-core." The distinction is significant because bankruptcy judges can both hear and determine core proceedings, meaning that bankruptcy judges can enter final orders in these proceedings subject to appeal to the district court. On the other hand, bankruptcy judges can only hear, but not determine, non-core proceedings, meaning that the bankruptcy judge must enter proposed findings of fact and conclusions of law for review by the district court under Federal Rule of Bankruptcy Procedure 9033.

If the proceeding before the court is neither core nor non-core, then it does not fall within the subject matter jurisdiction granted to district courts in § 1334 and neither the district court nor the bankruptcy judge may enter an order in the matter.

"Confirmations of plans" is one of sixteen core proceedings listed in § 157(b)(2).34 The foremost treatise on bankruptcy places these sixteen enumerated core proceedings into five categories: (i) matters of administration; (ii) avoidance actions; (iii) property of the estate; (iv) omnibus categories; and (v) cases filed under chapter 15.35 Confirmations of plans is in the first category together with matters concerning the administration of the estate, allowance and disallowance of claims against the estate and exemptions, estimations of claims for purposes of confirming a plan, orders with respect to obtaining financing, motions to terminate the automatic stay, dischargability determinations and objections to discharges.36 As Collier states with respect to matters of administration, such as confirmations of plans:

II. A Bankruptcy Judge has Constitutional Adjudicatory Authority to Enter a Confirmation Order Containing Nonconsensual Third Party Releases

A. Decisional law Applying Marathon and Stern Uniformly Hold that Bankruptcy Judges have such Authority

1. The Marathon Decision

Before Stern, there was Marathon.38

In Marathon, the Supreme Court of the United States concluded that Congress's broad grant of jurisdiction to bankruptcy judges in the Bankruptcy Act of 1978 ("Act") was unconstitutional. This ruling was made in the context of civil litigation asserting state law causes of action. In Marathon, the plaintiff/debtor Northern Pipeline sued defendant Marathon Pipe Line by filing a complaint in the bankruptcy court in which Northern Pipeline's bankruptcy case was pending. Northern Pipeline asserted state law claims sounding in breaches of contract and warranty, misrepresentation, coercion and duress. Marathon moved to dismiss the complaint asserting that the Act unconstitutionally conferred judicial powers on non-Article III judges. In a plurality opinion, the Supreme Court agreed with Marathon. Striking down the entire Act — as opposed to so much of the Act as permitted the bankruptcy judge to render judgment on the state law action — upended the bankruptcy community and created significant uncertainty regarding bankruptcy jurisdiction.39 In the wake of congressional inaction after the Marathon decision, on December 3, 1982, the Judicial Conference of the United States proposed emergency model rules, which each judicial circuit approved for adoption by district courts as local rules.40 Congress subsequently adopted the Emergency Rules as part of the Bankruptcy Amendments and Federal Judgeship Act of 1984, the current statute conferring bankruptcy jurisdiction.41

In the heyday/melée of Marathon, the United States Court of Appeals had occasion to address whether bankruptcy judges have constitutional authority to enter final orders confirming plans of reorganization containing third party releases. In In re AOV Industries, Inc.,42 a case having strong parallels to Millennium, the bankruptcy court approved such a plan over objection. AOV consisted of an integrated group of coal mining, processing, exporting and trading companies. Its exclusive European marketing agent, Steag Handel GmbH ("Steag"), was also a major creditor. Pre-bankruptcy, AOV needed working capital; it raised that cash by negotiating a stock purchase agreement through which Sleigh, Ltd. ("Sleigh") acquired a 50% interest in AOV. Once Sleigh took control of AOV, AOV filed its bankruptcy case. Two pieces of litigation figured prominently in AOV Industries: (i) a postpetition lawsuit by AOV against Sleigh surrounding the stock acquisition; and (ii) a prepetition lawsuit by Hawley Fuel Coalmart ("Hawley") against Steag asserting that Steag guaranteed AOV's indebtedness to Hawley.

After negotiations, AOV, Sleigh and Steag entered into a plan contribution agreement that formed the basis of AOV's plan of reorganization. Sleigh and Steag collectively agreed to forego over $51 million in claims against AOV for, respectively, 100% of the AOV stock and a $2.6 million security interest in AOV's assets. Further, as a "critical component" of the plan, Sleigh and Steag agreed to contribute $3 million of a $4.5 million fund for unsecured creditors. This fund, however, would not be available unless all but a few creditors gave Sleigh and Steag releases.43 One of those required to give a release if he wanted a distribution was AOV's founder Hubert Bruce.

AOV's creditors voted overwhelmingly in favor of the plan. Bruce, however, challenged the bankruptcy court's jurisdiction to render a binding judgment on the plan based on the recent Marathon decision. Mindful of this challenge, the bankruptcy judge certified the case to the district court pursuant to the bankruptcy Emergency Rules then in effect.44 Brace and Hawley also took a direct appeal of the bankruptcy court's ruling to the district court. In the consolidated certification/appeal proceeding, the district court rejected the constitutional challenge and held that the bankruptcy court could enter a final order on confirmation consistent with Marathon.

On further appeal, the D.C. Circuit described Bruce's argument as follows: (i) the confirmation of the debtor's plan could only be approved by the district court because the confirmation hearing was "outside the core of normal bankruptcy proceedings" as the plan involved the release of "non-bankruptcy claims — those held by one creditor against another creditor"; (ii) Bruce had separate, outstanding claims against both Sleigh and Steag, which the plan significantly affected; therefore, (iii) such releases are prohibited because it permits an Article I court to influence cases that can only be resolved by an Article III court.45

Keenly aware of the recent jurisdictional upheaval, the D.C. Circuit began its ruling with an analysis of bankruptcy jurisdiction following Marathon. The court acknowledged the Supreme Court's holding that Congress had overstepped its bounds in the Bankruptcy Reform Action of 1978 by impermissibly — and unconstitutionally — granting Article I judges judicial power reserved for Article III courts. The court also recognized the Emergency Rules subsequently adopted by Congress in the Bankruptcy Amendments and Federal Judgeship Act of 1984, which distinguished between related and core proceedings. Acknowledging the state of play, the D.C. Circuit Court soundly rebuffed Bruce's expansive reading of Marathon:

The only other circuit court that appears to have addressed the issue is the Seventh Circuit. In a single sentence, the Seventh Circuit adopted the AOV Industries position, stating: "As a preliminary matter, we note that a bankruptcy court does have the power to determine the legality of provisions, including releases, incorporated into a reorganization plan."47

2. The Stern Decision

Stern followed Marathon by twenty-nine years, It did not change much.

In Stern, Vickie Lynn Marshall filed a chapter 11 bankruptcy case in the Central District of California. Prior to filing her bankruptcy petition, Vickie,48 who was the third wife of the elderly and very wealthy J. Howard Marshall, filed suit in Texas state probate court ("Texas Litigation") against Pierce Marshall, J. Howard's son, for tortious interference with an inter vivos gift. In the Texas Litigation, Vickie asserted that Pierce had fraudulently induced J. Howard to exclude Vickie from J. Howard's living trust (and, later, his will) even though, Vickie asserted, J. Howard meant to give her one-half of his estate.

Pierce initiated an adversary proceeding in Vickie's bankruptcy case seeking both damages for defamation and a declaration that the defamation claim was nondischargeable under 11 U.S.C. § 523(a). Pierce also filed a proof of claim for damages due to defamation. Vickie defended Pierce's defamation claim in the adversary proceeding and filed a counterclaim for tortious interference with the gift she believed J. Howard sought to give her. Vickie's counterclaim appeared to mirror, at least in part, the state law complaint she filed in the Texas Litigation.

The bankruptcy judge entered orders in the adversary proceeding all in Vickie's favor. As to Pierce's defamation claim, the judge granted summary judgment for Vickie, thus denying Pierce any recovery. After a bench trial on Vickie's counterclaim for tortious interference, the bankruptcy judge awarded Vickie over $400 million in compensatory damages and $25 million in punitive damages. In the meantime, the judge in the Texas Litigation presided over a jury trial and entered judgment in favor of Pierce on his defamation claim.

In post-trial proceedings, Pierce re-asserted an argument that Vickie's counterclaim was not a core proceeding and thus the bankruptcy judge was limited to submitting proposed findings of fact and conclusions of law to the district court for review de novo on that claim. The bankruptcy court rejected Pierce's argument finding that counterclaims are core based on § 157(b)(2)(C). On appeal the district court disagreed holding that while Vickie's counterclaim fell within the literal language of § 157(b)(2)(C), the Supreme Court's decision in Marathon precluded the court from holding that "any and all" counterclaims are core. Eventually, the Ninth Circuit agreed with the district court's legal conclusion, holding that "a counterclaim under § 157(b)(2)(C) is properly a `core' proceeding `arising in a case under' the Code only if the counterclaim is so closely related to a [creditor's] proof of claim that the resolution of the counterclaim is necessary to resolve the allowance or disallowance of the claim itself."49 The Supreme Court granted certiorari.

In its opinion, the Supreme Court first addressed the bankruptcy court's statutory authority to enter a final order on Vickie's counterclaim. The Court rejected Pierce's argument that Vickie's counterclaim was in a new category of proceedings — namely, core proceedings that do not arise in or arise under title 11. Instead, the Court recognized core proceedings are "at most, those that arise in title 11 cases or arise under title 11"50 and that each of the sixteen types of proceedings enumerated in § 157 are core. Thus, the Court agreed with Vickie that "§ 157(b)(2)(C) permits the bankruptcy court to enter a final judgment on her tortious interference claim."51

Notwithstanding the finding that as a statutory matter the bankruptcy judge could enter a final order on Vickie's counterclaim, the Court ruled that Article III of the Constitution precluded it. The Court held that Vickie's state law counterclaim was not a public right under any of its admittedly inconsistent and various formulations of that doctrine articulated to date.52 Vickie's counterclaim was not related to federal governmental action;53 it did not flow from a federal statutory scheme;54 nor was it "completely dependent upon" adjudication of a claim created by federal law.55 The Court also held that the bankruptcy court does not qualify as an authority (such as a federal agency) limited to a "particularized area of the law."56

The Supreme Court also conducted a lengthy examination of Vickie's counterclaim in light of the preference actions brought by the trustees in Katchen and Langenkamp. In each of those cases, a preference defendant filed a proof of claim against the estate. The Court held that the defendants were not entitled to an Article III adjudicator because the trustee's claims could be determined as part of the claims allowance and disallowance process.57 The Supreme Court also noted that in both Katchen and Langenkamp, the trustee was asserting a right of recovery created by federal bankruptcy law. By contrast, Vickie's counterclaim, "is in no way derived from or dependent upon bankruptcy law; it is a state tort action that exists without regard to any bankruptcy proceeding."58 And, the Supreme Court noted the discussion in Granfinanciera distinguishing between suits to augment the estate (such as fraudulent conveyance claims and Vickie's counterclaim) and "creditors' hierarchically ordered claims to a pro rata share of the bankruptcy res."59

It was in the context of its discussion of Katchen, Langenkamp and Granfinanciera (all lawsuits brought by trustees seeking affirmative recoveries), that the Stern Court announced a disjunctive test (the "Disjunctive Test") for whether a bankruptcy judge can enter a final order on a trustee's counterclaim:

Vickie's counterclaim failed the Disjunctive Test. Vickie's counterclaim did not "stem" from the bankruptcy itself as it did not derive from bankruptcy law and it existed without regard to the bankruptcy proceeding. And it was not necessarily resolved in the claims allowance process because there never existed a reason to believe that the process of ruling on Pierce's proof of claim would necessarily resolve Vickie's counterclaim. Thus, the Court ruled that the bankruptcy judge lacked the constitutional authority to "enter a final judgment on a state law counterclaim that is not resolved in the process of ruling on a creditor's proof of claim."61 In doing so, it emphasized its narrow ruling stating: "[w]e do not think the removal of counterclaims such as Vickie's from core bankruptcy jurisdiction meaningfully changes the division of labor in the current statute."62

The actual outcome of Stern — that a bankruptcy judge cannot enter a final order on a trustee's state law counterclaim against a creditor that is not resolved in the process of ruling on the creditor's proof of claim — tread little new ground. As Chief Justice Roberts observed: if you substitute "tort" for "contract" — and, I would add, "counterclaim" for "claim" — you have Marathon.63 What was novel about Stern is that Vickie's counterclaim falls into one of the enumerated categories of core proceedings in § 157(b)(2). For the first time, the Supreme Court held that notwithstanding the statutory designation of a proceeding as core, a bankruptcy judge could not enter a final judgment in that proceeding. Unlike Marathon, however, the Supreme Court did not find the entirety of Congress's referral of core proceedings to bankruptcy judges to be unconstitutional, mandating a congressional fix. Upon finding "one isolated" instance of constitutional infirmity, the Stern Court dealt with that instance; it did not expand its holding to the entirety of § 157(b)(2).

The parties directed me to only two post-Stern cases addressing the constitutionality of bankruptcy judges entering final orders confirming plans containing third party releases.64 In the first case, Charles Street African Methodist Episcopal Church of Boston,65 the bankruptcy judge determined he had constitutional authority to enter a final confirmation order containing releases even though he considered the proposed third party release inappropriate on the facts before him and ultimately did not confirm the debtor's plan. In Charles Street, the debtor filed its bankruptcy petition because it was facing foreclosure by its largest creditor, OneUnited. OneUnited's loans were secured by the church property and one of the loans was the subject of a disputed guarantee from the First Episcopal District of the African Methodist Episcopal Church ("FEDAME"). A complex plan was proposed, which, as relevant here, contained a release of FEDAME's guaranty obligations. OneUnited objected to the plan on nineteen different grounds, including that the releases were an impermissible means of implementation. Specifically, OneUnited contended that: (i) the bankruptcy court lacked subject matter jurisdiction to approve a plan containing releases; (ii) the bankruptcy court lacked constitutional authority to adjudicate a plan containing third party releases; (iii) § 524(e) prohibits the grant of third party releases; (iv) third party releases cannot be approved over objection; (v) equity barred the release because FEDAME fraudulently induced OneUnited to rely on the guarantee and false financial statements; and (vi) the release did not meet the Master Mortgage standards.

In analyzing OneUnited's objection, Judge Bailey first concluded that he had subject matter jurisdiction under § 1334(b) over confirmation of plans, which "is the matter before the Court" and is "the quintessential bankruptcy matter."66 Next, he concluded that he had constitutional authority to enter a final order confirming a plan with releases. Judge Bailey determined the operative proceeding was the confirmation hearing, which stems from federal law. Indeed, he declared confirmation of a plan to be a public right. And he rejected the same argument now made by Voya on remand, concluding that approval of the release in the plan was not tantamount to adjudication of FEDAME's guaranty, and thus Stern did not preclude him from entering a final order confirming a plan containing third party releases. In ruling, Judge Bailey determined that confirmation of a plan is not an adjudication of all the disputes it may touch.

In the second case, MPM Silicone, Judge Drain came to the same conclusion. In a bench ruling confirming a plan of reorganization containing releases, Judge Drain stated: "I also should note, because this was raised in the objection, that I firmly believe that I have jurisdiction over [releases] for the reasons that I stated at the beginning of this ruling, and that I can issue a final order on it within the confines of Stern v. Marshall, given that this is in the context of the confirmation of the plan, and pertains ultimately to the debtors' rights under the Bankruptcy Code."67

B. Bankruptcy Judges have Constitutional Adjudicatory Authority to Enter Final Orders Confirming Plans Containing Nonconsensual Releases Under Any Interpretation of Stern

1. The Various Interpretations of Stern

In the immediate aftermath of Stern, courts and commentators debated its implications. Some supported a narrow interpretation of Stern: Stern stands for the sole proposition that a bankruptcy judge "lacked constitutional authority to enter a final judgment on a state law counterclaim that is not resolved in the process of ruling on a creditor's proof of claim" (the "Narrow Interpretation"). To support this view, courts and commentators point to Chief Justice Roberts' repeated and express statements that the practical consequences of the decision would not be significant, that the limitation imposed by Stern would not "meaningfully change[] the division of labor in the current statute" and that "the question presented [to the Court] was a `narrow' one." Others supported a broad interpretation of Stern, not limited to counterclaims: that a bankruptcy judge cannot enter a final judgment on all state law claims, all common law causes of action or all causes of action under state law (the "Broad Interpretation"). Support for the Broad Interpretation comes from the varying language used in Stern, which does not consistently limit the discussion to a "Vickie-type" counterclaim. Under both the Narrow Interpretation and the Broad Interpretation, Stern is limited to a state law claim or counterclaim brought by the debtor-in-possession or trustee. In other words, Stern is limited to claims based on state law that are commenced in the context of traditional civil litigation, or generically "Debtor/Trustee v. Defendant."68

After considering these opposing viewpoints, it appears that my colleagues on the Delaware bench who have specifically taken a position have consistently adopted the Narrow Interpretation. Our research of reported decisions reveals that in adopting the Narrow Interpretation, Judge Sontchi concluded that Stern was "not applicable" to a complaint asserting equitable subordination,69 Judge Gross concluded that Stern did not preclude him from entering final orders on fraudulent conveyance and preference actions brought to augment the estate,70 Judge Walsh concluded that he could enter final orders on the core preference, postpetition transfer, fraudulent transfer, and unjust enrichment claims before him,71 and Judge Carey concluded that Stern was not a factor when ruling on a motion to enforce releases in a confirmation order.72

Judge Walrath, in her opinion in WaMu,73 did not specifically take a position on the Narrow Interpretation or the Broad Interpretation. Rather, the approach she took might be labeled the "most broad" interpretation, meaning that bankruptcy judges should examine their ability to enter final orders in all enumerated or unenumerated core proceedings ("Broadest Interpretation").74 In WaMu, the plan of reorganization's central component was a global settlement of claims and counterclaims among the debtors, the creditors' committee and multiple major parties in the case. Certain major groups of creditors contended that although Judge Walrath could conduct the confirmation hearing she could only present proposed findings of fact and conclusions of law to the district court because the settlement of the estate's claims could only be determined by an Article III court.75

Judge Walrath rejected the objectors' argument for three separate reasons. First, she recognized the historical practice of approval of settlements dating back to the Bankruptcy Act. She noted that compromises are integral to bankruptcy cases, that compromises are often included in plans of reorganization, and that confirmation of a plan is "within the bankruptcy court's core jurisdiction."76 Second, Judge Walrath looked at the nature of settlement approval. She observed the "fundamental difference" between approving a settlement of a claim and adjudicating the merits of a claim. She ruled that a court does not need jurisdiction over the underlying claims in order to approve a compromise of them. She also examined the standard the court considers when approving a settlement and held that the standard, which is the "lowest point in the range of reasonableness" establishes that the court is not ruling on the merits of the claims being settled.77 Finally, Judge Walrath found the approval of the global settlement "particularly within the core jurisdiction" of the bankruptcy court because it dealt with a determination of whether property is property of the estate.

At bottom, Judge Walrath concluded she had jurisdiction to both hear and determine confirmation of the WaMu plan, which incorporated the global settlement, In her Broadest Interpretation of Stern, Judge Walrath did not try to squeeze the proverbial "square peg" of confirmation into the proverbial "round hole" of trustee claims and counterclaims. In other words, Judge Walrath did not import the Disjunctive Test into her analysis; she tailored her constitutional argument to the proceeding in front of her.

2. The Operative Proceeding is Confirmation of a Plan, Which is Governed by a Federal Standard

In this matter, the operative proceeding for purposes of a constitutional analysis is confirmation of a plan. Confirmation of a plan is not a "claim" or "counterclaim." It is not an "action" as the word is used in Stern.78 The confirmation process is commenced by the filing of a disclosure statement, which, once approved, may be noticed out together with the plan and ballots soliciting acceptances and rejections.79 In addition to classifying claims and specifying treatment for those claims, plans may seek approval of sales, assumption or rejection of contracts, substantive consolidation, equitable subordination and, as it did here, approval of settlements and releases. An objection transforms the confirmation hearing into a contested matter.80

"Confirmations of plans" is an enumerated core proceeding under 28 U.S.C. § 157(b).81 As such, I have statutory authority to enter a final judgment on confirmation of a plan under Stern.82 The question then becomes whether I have constitutional authority to do so. Adopting the Narrow Interpretation, Stern is inapplicable as confirmation of a plan is not "a state law counterclaim that is not resolved in the process of ruling on a creditor's proof of claim." Adopting the Broad Interpretation, the same is true: Stern is inapplicable as confirmation of a plan is not a state law claim of any type. Under both of these interpretations, then, my constitutional analysis stops. My inquiry is limited to the statutory framework, and I can enter a final order confirming Millennium's Plan as a constitutional matter.83

The outcome is the same if I adopt the Broadest Interpretation. First, confirmation of a plan is a "proceeding[] at the core of bankruptcy law,"84 or, in other words, a quintessential "core" proceeding.85 Confirmation of a plan is the goal of chapter 11 cases, and is "historically a core competency of the bankruptcy court."86 "Confirmations of plans," which are "matters of administration" are "unique to bankruptcy cases."87

Second, in confirming a plan, even one with releases, the judge is applying a federal standard. To confirm a plan, it must satisfy each subsection of § 1129(a) and (b), as applicable. To the extent a Stern analysis requires a specific look at releases (and it is not clear that it does), those releases must comply with applicable provisions of the Bankruptcy Code. Courts that permit releases in appropriate circumstances often look to §§ 1129(a)(1),88 1123(b)(6)89 and 105.90 Courts that do not permit releases often cite § 524(e).91 Regardless, courts are interpreting federal law. As the Seventh Circuit held, whether these releases are legally permissible is a matter the bankruptcy court has the power to determine.92

In the Third Circuit, nonconsensual third party releases are permissible in plans of reorganization if they meet the Continental standard of fairness and necessity to the reorganization.93 In my Bench Ruling, I held that the releases in the Millennium Plan met that standard after examining the Continental hallmarks and the Master Mortgage factors.94 The Master Mortgage factors, like the Dow factors95 (or any other standard in circuits that permit third party releases), are a federal, judicially-created yardstick against which a third party release is measured:

The above five factors compel the bankruptcy judge to examine the terms of the plan of reorganization, the outcome of the solicitation of the plan and the necessity of the injunction to the success of the plan. These factors do not ask the bankruptcy judge to examine or make rulings with respect to the many claims that may be released by virtue of the third party releases.97 An order confirming a plan with releases, therefore, does not rule on the merits of the state law claims being released.98

Further, there is no state law equivalent to confirmation of a plan. And, third party releases do not exist without regard to the bankruptcy proceeding.99 Rather, a ruling approving third party releases is a determination that the plan at issue meets the federally created requisites for confirmation and third party releases.100 Thus, looking to historical context, the nature of confirmation and the standard the judge applies to determine whether releases are appropriate, a bankruptcy judge has constitutional adjudicatory authority to enter a final confirmation order containing nonconsensual third party releases.101

3. Voya's Interpretation Finds no Basis in Stern

Voya does not agree with the Narrow, Broad, or Broadest Interpretation of Stern. Voya rejects both the Narrow Interpretation and the Broad Interpretation as it applies Stern outside the context of traditional civil litigation, i.e., § 157(b)(2)(C) (a counterclaim by a debtor a la Vickie's counterclaim), a complaint filed by the trustee to augment the estate (a la Northern Pipeline's breach of contract suit against Marathon) or an objection to a proof of claim (a la Pierce's proof of claim). Voya also rejects the Broadest Interpretation as it recognizes but ignores the context of the proceeding before the court (confirmation of a plan). Rather, Voya contends that because it filed the RICO Lawsuit, the Stern analysis I must do in the confirmation context focuses on that lawsuit. Voya inserts its claims in the RICO Lawsuit into the Stern Disjunctive Test and contends that they neither stem from the bankruptcy itself nor are resolvable in the claims allowance process (the "Voya Interpretation"). Voya, therefore, concludes that I cannot enter a final order confirming a plan that releases those claims.

Assuming that it is ever appropriate to import the Disjunctive Test into a context other than a state law cause of action filed by a trustee/debtor (i.e., complaint or counterclaim),102 Voya does not point to anything in Stern, or in any case interpreting Stern, suggesting that the "action at issue" should be a proceeding other than the operative proceeding before the bankruptcy judge. The Stern Court looked at Vickie's counterclaim in the adversary proceeding before the bankruptcy court and in light of Pierce's proof of claim. It did not, for example, look at the Texas Litigation Vickie commenced prepetition. Nor did it rule on the basis that a court properly exercising bankruptcy jurisdiction could not affect the Texas Litigation, And, there was no other "action at issue" before the bankruptcy judge to look at; certainly confirmation of a plan was not before the bankruptcy judge. Focused as it was on an actual claim, albeit a counter claim in an adversary proceeding (and comparing Vickie's counterclaims to the claims asserted in Katchen, Langenkamp, Granfinanciera and Marathon), the Stern Court defined what was constitutional in that context — a counterclaim by the debtor/trustee against a third party.103 The Stern Court examined Pierce's right to an Article III adjudication on Vickie's counterclaim and found that Vickie's claim "is in no way derived from or dependent upon bankruptcy law,"104 neither was there "reason to believe that the process of ruling on Pierce's proof of claim would necessarily result in the re solution of Vickie's counterclaim."105

Voya's inverse reasoning finds no justification in Stern. Stern did not address, either expressly or by implication, any context other than counterclaims; the Supreme Court certainly did not announce a broad holding addressing every facet of the bankruptcy process. Stern did not hold, as Voya suggests, that regardless of which articulated (or unarticulated) core proceeding is before the court, the bankruptcy judge cannot, consistent with the Constitution, enter a final order in that core proceeding if that order affects a party's entitlement to have a debtor's or trustee's state law claim heard by an Article III court. All the more, Stern does not endorse the Voya Interpretation — that "[u]nder Stern, Article III prevents a bankruptcy court from entering final judgment disposing of a non-bankruptcy claim against a non-debtor that is not resolved as part of the claim resolution process, regardless of the proceeding (adversary proceeding, contested matter, plan confirmation, etc.)."106

But, if I were going to import the Stern Disjunctive Test into Millennium's plan confirmation proceeding, it would be closer to the Debtors' analysis.107 First, however, I would conclude that confirmation of the Plan, as the operative proceeding, satisfies the first standard articulated in the Disjunctive Test. For all of the reasons set forth above, I would find that the Plan (and/or the releases) "stem(s) from the bankruptcy case" and thus I can, consistent with the Constitution, enter a final order confirming Millennium's Plan. Second, I would also conclude that the confirmation of the Plan satisfies the second standard articulated in the Disjunctive Test. As I already found, the releases were integral to confirmation and thus integral to the restructuring of the debtor-creditor relationship. Thus, the releases would be "necessarily resolved in the confirmation process" or "necessarily resolved in the process of restructuring the debtor-creditor relationship."

Finally, even under the Voya Interpretation, on the facts of this case I would determine that the RICO Lawsuit was "necessarily [] resolved in the claims allowance process." As previously discussed, the Plan settlements were comprehensive in nature. The settlements provided for the contribution of $325 million in exchange for the releases by the Debtors and third parties (including Voya), the settlement with the USA Settling Parties, as well as the allowance and treatment of claims under the Existing Credit Agreement.108 The settlement was global in nature: the claims under the Existing Credit Agreement were "Allowed," but only in the context of the Plan funded by the Non-Debtor Equity Holders, which required the third party releases. Voya held such a claim, and so its claim was "Allowed" by virtue of the Plan. As third party releases were essential to the allowance of those claims, the RICO Lawsuit was necessarily resolved in the claims allowance process.109

C. A Bankruptcy Judge's Final Order on a Core Issue That May Have a Preclusive Effect on a Third Party Lawsuit Does Not Violate Stern

Voya also contends that it is unconstitutional for a bankruptcy judge to enter a final order in any context if that final order might affect a lawsuit filed by a creditor against a third party, Voya is incorrect. While the Third Circuit has not directly ruled on the question before me on remand, it has ruled that Stern does not prevent a bankruptcy judge from entering final orders in statutorily core proceedings notwithstanding the orders' collateral impact on state law claims.

In In re Lazy Days' RV Center Inc.,110 the bankruptcy court re-opened a confirmed bankruptcy case at the request of the reorganized debtor in order to rule on whether a purchase option in an assigned lease that was the subject of a prepetition settlement agreement incorporated into a plan of reorganization survived in light of § 365(f) of the Bankruptcy Code. Post-confirmation, the reorganized debtor attempted to exercise the purchase option, but the landlord refused to honor it. The landlord and the reorganized debtors each filed separate lawsuits in Florida state court to determine their respective rights under the lease. The reorganized debtors also filed an emergency motion in the bankruptcy court seeking a ruling that the lease's anti-assignment clause was unenforceable. The bankruptcy judge ruled that the anti-assignment provision in the lease was unenforceable and that the landlord's refusal to honor the purchase option violated the settlement agreement. On appeal, the district court vacated the bankruptcy judge's order finding it to be an advisory opinion. On further appeal, the Third Circuit reversed the district court's ruling and remanded.

Among the issues on appeal, the Third Circuit addressed the landlord's argument that the bankruptcy judge unconstitutionally "asserted subject matter jurisdiction over a private rights dispute."111 The court quickly dispatched this argument, ruling that unlike Stern, Granfinanciera and Marathon, which "dealt with the difficult question of when a bankruptcy court may constitutionally exercise jurisdiction over common law claims":

In analyzing the Stern argument, the court looked at the proceeding before it — the motion to reopen the bankruptcy case and the request for a declaration of rights under a section of the Bankruptcy Code. It did not look at the Florida state law claims. The Third Circuit was not oblivious to the state law litigation, however, as the landlord also argued that the mandatory abstention provision of 28 U.S.C. § 1334(c)(2) required the bankruptcy court to defer to pending state law litigation.113 The Third Circuit quickly dispatched of this argument as well:

Applying Lazy Days here shows that the Stern line of cases is inapposite. The Third Circuit in Lazy Days focused on the operative proceeding in front of the bankruptcy judge, not the state law claims. Here, the operative proceeding is confirmation of a plan of reorganization under § 1129 of the Bankruptcy Code, a proceeding "based on a federal bankruptcy law provision with no common law analogue." And, even if the operative proceeding is more narrow — namely, Millennium's request for confirmation of a plan that includes third party releases — the Stern line of cases is still inapposite. There is no state law analogue; third party releases in chapter 11 plans are quintessentially federal in nature. Whether this requested relief is permissible or not is based entirely on federal bankruptcy law — the Continental hallmarks.

Even more recently (on March 20 of this year), the Third Circuit held in Linear Electric Company, Inc.115 that Stern did not prevent a bankruptcy judge from entering a final order "discharging" construction liens filed by a non-debtor supplier against real property owned by a non-debtor. Pursuant to New Jersey state law, a supplier who sells materials on credit to a contractor who then incorporates those materials into property owned by a third party may file a lien against the third parties' real property if the supplier goes unpaid. Linear, the contractor/debtor, filed its chapter 11 petition at a time when two of its suppliers had not been paid in full. The suppliers thereafter filed construction liens on the real property into which Linear had incorporated their materials. Linear immediately filed a motion with the bankruptcy court to discharge the liens against the real property (owned by a non-debtor) as violating the automatic stay asserting that the liens were, in actuality, against the funds the non-debtor owed Linear (i.e., Linear's accounts receivable). The bankruptcy judge granted the motion and the non-debtor owner paid its outstanding account payable to Linear. The bankruptcy judge also held the suppliers' construction liens to be void ab initio for violation of the automatic stay.116

On appeal, the suppliers argued that the bankruptcy judge could not enter a final order invalidating their state law construction liens consistent with the constitutional proscriptions found in Stern because their filed state law liens against the non-debtor owner were private rights entrusted to Article III courts. The Third Circuit disagreed. While acknowledging that bankruptcy judges cannot enter final orders on certain state common law claims between private parties without their mutual assent, the Third Circuit found that Congress could assign cases involving "public rights" to non-Article III courts. The Third Circuit described public rights cases as those cases "in which the claim at issue derives from a federal regulatory scheme, or in which resolution of the claim by an expert government agency is deemed essential to a limited regulatory objective within the agency's authority."117 Looking at the operative proceeding — the motion alleging violation of the automatic stay — the court held:

Linear is significant for multiple reasons. Post-Stern and Wellness Int'l Network, Ltd. v. Sharif,119 the Third Circuit has spoken more definitively than the Supreme Court on bankruptcy and public rights. The Third Circuit has now declared that claims arising under the federal bankruptcy laws are public rights.120 In Linear the "claim arising under the federal bankruptcy laws" was the debtor's motion for violation of the automatic stay arising under section 362 of the Bankruptcy Code; here, it is the Debtors' request for confirmation of a plan arising under section 1129 of the Bankruptcy Code (or, more narrowly, the third party releases under the Continental hallmarks.) As such, the Third Circuit has effectively endorsed the view that confirmation of a plan is a public right.

Further, the posture of Linear and Millennium are similar, compelling similar results. Although not stated in Linear, it seems clear that the direct claim of the suppliers to a construction lien on the non-debtor owner's real property interests would be, at most, "related to" the bankruptcy case, while the motion for violation of the automatic stay is core. Notwithstanding the decision on the merits, the Third Circuit recognized that the suppliers had two sources of recovery; they could have asserted liens against both the debtor's accounts receivable and the non-debtors' real property.121 Thus, the bankruptcy court's ruling that the construction liens were void ab initio "surely impacted" any claims that the non-debtor suppliers had against the non-debtor's real property interests.122 There is no question, then, that, if the proper standard is met, a bankruptcy judge may enter a final order in a core matter that impacts or even precludes a state law action between two non-debtors.123

The Third Circuit is not the only circuit drawing this conclusion. The Sixth Circuit in In re Hart124 also ruled Stern did not preclude the entry of a final order by a bankruptcy judge even though that order would appear to indirectly preclude certain state law claims. In Hart, the bankruptcy judge entered a judgment finding a bank's loans to debtor Hart nondischarge able under § 523(a)(2)(B) of the Bankruptcy Code. At the bank's request and over Hart's Stern objection, the bankruptcy judge also entered judgment on the amount of each non-dischargeable loan, The Sixth Circuit distinguished Stern both factually and legally. Factually, unlike Vickie, Hart did not assert a counterclaim in the nondischargeabilty proceeding; only the bank's claim was before the bankruptcy court. Legally, unlike Vickie's counterclaim, the bank's claim against Hart arose in the bankruptcy case and was an enumerated core matter under § 157(b)(2)(I) — (J).125 The court also concluded that the bankruptcy court could enter a final order on the amount of a claim in the dischargeability context under Sixth Circuit precedents.126

Hart rejected the debtor's argument that the bankruptcy judge lacked constitutional authority to enter a final judgment because of pending state court litigation even though it precluded Hart from filing and pursuing counterclaims in that litigation. As relevant here, the Sixth Circuit recognized the distinction between entering a judgment that directly extinguished counterclaims filed in state court (which arguably exceeded the bankruptcy court's constitutional authority) and entering a monetary judgment on dischargeability (a federal issue that indirectly precluded Hart from filing her counterclaim in state court). As the Sixth Circuit observed: "Hart should not be able to escape the collateral effects of the bankruptcy court's decision made under proper authority."127

In In re Fisher Island Investments, Inc.,128 the Eleventh Circuit held that a bankruptcy judge had both statutory and constitutional authority to enter a final order determining which of two non-debtor entities owned three alleged debtors in the context of involuntary bankruptcy filings. The involuntary bankruptcy proceedings were "but a small part of global litigation" over the ownership and control of a wealthy businessman's assets, a dispute "spawn[ing] litigation in the Republic of Georgia, the United Kingdom, Liechtenstein, the British territory of Gibraltar, and both state and federal courts in the United States."129

Prepetition, two factions (the Redmond Group and the Zeltser Group) were litigating the ownership issues in New York and California. When the petitioning creditors filed the involuntary petitions, they also moved for joint administration of the cases and to appoint a trustee to take control of the alleged debtors' assets. The Zeltser Group answered the involuntary petition on behalf of the alleged debtors consenting to all the relief sought. The Redmond Group claimed it was the authorized representative of the alleged debtors, moved to strike the Zeltser Group's answer and alleged that the involuntary petitions were improperly filed to stay the state court ownership litigation. Ultimately, the bankruptcy judge ruled in favor of the Redmond Group. Zeltser appealed.

At the circuit court level, the court ruled that the ownership dispute was "core" and that the bankruptcy judge had both statutory and constitutional authority to enter a final judgment. The court determined that resolution of the ownership issue was critical to the administration of the alleged debtors' estates and directly affected the debtor-creditor relationship thus falling within the catch-all enumerated core proceedings of §§ 157(b)(2)(A) and (O).130 It further concluded that the bankruptcy judge necessarily had to determine who owned the alleged debtors in order to adjudicate the involuntary petitions and the $32 million in alleged debt because one faction admitted the debt and the other did not.131 Alternatively, the Eleventh Circuit found that the Zeltzer Group consented to the bankruptcy court's final adjudication of the ownership issue by its actions and representations and even invoked the aid of the bankruptcy court on the issue.

As for Stern, the Eleventh Circuit determined that its "narrow holding" was "wholly inapplicable."132 It recognized that the ownership issue resembled Vickie's counterclaim as it was a state law claim that did not involve public rights, or stem from the federal regulatory scheme. Further, the ownership issue did not involve a particularized area of the law nor was it determined by bankruptcy law. And although the court concluded that the ownership issue was "necessarily resolved by the bankruptcy court through the process of adjudicating the creditors' claims," the claims process was not the proof of claim process referenced by the Stern court as the "relevant parties" did not file a proof of claim. Rather, the "claims process" appears to be the involuntary petition itself.133 As the court repeatedly emphasized, determining the authorized representative of the debtor was a threshold issue in the case because it was necessary to determine whether the involuntary petition was contested or not.134 Thus, the Eleventh Circuit ruled that the bankruptcy judge could enter a final order on the ownership issue, notwithstanding its substantial impact on the pending proceedings in other courts.135

Here, the entry of the order confirming Millennium's Plan did collaterally impact the RICO Lawsuit — I undoubtedly provided the Non-Debtor Equity Holders with a defense that they can use in any continuation of the RICO Lawsuit before Judge Sleet. Whether that defense is the affirmative defense of res judicata (as Voya contends), release,136 a Rule 12(b)(1) mootness defense,137 issue preclusion, or a defense that the claim should be barred by reason of § 1141 of the Bankruptcy Code,138 the confirmation order has surely impacted the RICO Lawsuit. But, as can be seen from AOV Industries, Specialty Equipment, Lazy Days, Linear, Hart, Fisher Island and any number of other cases, a bankruptcy court order that impacts a litigant's state law claims even when litigation is pending does not violate Marathon or Stern.139 This conclusion holds true even if that impact effectively precludes adjudication of the merits of a state law claim.

Voya argues, primarily based on Digital Impact140 and CoreStates (or perhaps a combination of the two), that the entry of a confirmation order containing releases constitutes an "adjudication" of its RICO Lawsuit, which Stern prohibits. Voya's reliance on these cases is misplaced. Taking the position that third party releases in a plan are equivalent to an impermissible adjudication of the litigation being released is, at best, a substantive argument against third party releases, not an argument that confirmation orders containing releases must be entered by a district court. Indeed, neither of these cases examine a bankruptcy judge's constitutional power to enter an order.

Moreover, Voya's position rests on backwards reasoning — it examines the legal consequence of the confirmation order to find fault with the entry of the order, rather than examining the propriety of issuing the confirmation order in the first instance. Citing Digital Impact and CoreStates, Voya starts from a general premise that a confirmation order containing third party releases is res judicata with respect to the claims it releases. Because res judicata requires that the impacted action (the RICO Lawsuit) be based on the same cause of action as the prior suit (the confirmation order),141 Voya reasons that the confirmation order is an adjudication on the RICO Lawsuit. And, because the RICO Lawsuit is non-core, Voya concludes that I cannot enter the confirmation order approving third party releases because I could not enter a final order in the non-core RICO Lawsuit absent its consent, which it does not give.142 This is not the law.

First, as admitted by Voya's counsel at argument, Digital Impact does not hold that confirmation of a plan of reorganization is an adjudication of the merits of the RICO Lawsuit.143 Rather, Digital Impact states that the release before it was "equivalent to issuing a final judgment" in favor of the released party.144 Even so, it is no more "equivalent to a final judgment" than any other order issued by a bankruptcy judge that may be used in subsequent litigation to establish a defense, including the orders entered in Lazy Days, Linear, Hart or Fisher Island.145

Second, Digital Impact is a pure jurisdictional case. In Digital Impact, the bankruptcy judge held a confirmation hearing and sua sponte raised two issues: (i) whether the court could confirm a plan that did not pay priority administrative claimants in full; and (ii) whether the court had jurisdiction or power to enter an order releasing a third party (Dickerson) from claims relating to his participation in the case. After post trial briefing and argument, the Digital Impact judge found that she did not have even "related to" jurisdiction over any potential/theoretical third party litigation against Dickerson because the outcome of that litigation would not have any effect on the administration of the estate.146 The Digital Impact judge also questioned her jurisdiction under § 1334 to grant releases at all — not whether she or the district court must enter the final order granting the releases. It is in this context that Digital Impact cites Western Real Estate Fund (which holds that section 524(e) prohibits third party releases) for the proposition that a confirmation order containing releases is "equivalent" to a ruling on the merits of the litigation it touches.147

Third, an analysis of CoreStates does not assist Voya; rather, it is fatal to Voya's theory. CoreStates analyzed the claim preclusive effect of a specific confirmation order and held that where a subsequent claim arose from the same cause of action as a claim actually asserted in the bankruptcy case and resolved by the confirmation order, claim preclusion was applicable.148 It did not, as Voya suggests, hold that every confirmation order is res judicata on every issue raised in a post-confirmation lawsuit.149 More importantly, Voya ignores the first ruling of the CoreStates Court: that a confirmation order has claim preclusive effect on a "related to" proceeding if that proceeding otherwise meets the requisites for res judicata.

CoreStates involved an intercreditor dispute between two lenders (CoreStates and Huls) regarding which of them was entitled to funds from their mutual borrower/debtor United Chemical Technologies. Prepetition, CoreStates, Huls and United Chemical were parties to a subordination agreement under which Huls agreed to hold in trust for CoreStates any funds it might receive in a United Chemical bankruptcy, and to immediately deliver any such funds to CoreStates. When United Chemical subsequently filed its bankruptcy case, it sponsored a plan by which it proposed to pay CoreStates over time and permit CoreStates to retain certain liens. Huls was to receive $600,000 in cash on its claim. CoreStates objected to the plan on the basis that the payment to Huls unfairly discriminated between creditors, but CoreStates did not specifically base its objection on the subordination agreement. CoreStates' objection was overruled and the plan was confirmed, After multiple appeals and payment of the $600,000 to Huls, an amended plan was confirmed; the amended plan did not change Huls' plan treatment or purport to change CoreStates' rights vis-à-vis Huls. After confirmation, CoreStates sued Huls in the district court on the subordination agreement, and Huls raised a res judicata defense. Based on the specific facts and posture of the case, the district court granted Huls's motion to dismiss.

On appeal, CoreStates challenged not only the district court's specific application of the doctrine of res judicata, but whether the doctrine could be applied at all. CoreStates argued that the preclusive effect of bankruptcy court orders should be limited. Specifically, CoreStates argued that the claim preclusion doctrine should not "preclude claims that [fall] within the non-core `related' — as opposed to the core — bankruptcy jurisdiction."150 In a several page discussion, the Third Circuit recognized and discussed a split among the circuits with respect to the question of whether a bankruptcy judge — which can only hear, but not determine, a non-core matter (absent consent) — could enter a confirmation order that could bar the prosecution of that non-core matter. Siding with the majority of circuits, and examining the Restatement (Second) of Judgments, the Third Circuit concluded that it could.151 The Third Circuit was persuaded that a limitation on the judicial power of a judge is not a limitation on jurisdiction, and thus not a limitation on the preclusive effect of the judge's order. The Third Circuit, thus, ruled that a confirmation order has preclusive effect with respect to a non-core, "related to" proceeding if the proceeding otherwise meets the requisites of the res judicata doctrine.152

CoreStates runs counter to Voya's argument. It comports with the conclusion reached from an analysis of the Third Circuit's decisions in Lazy Days and Linear, that an order entered by a bankruptcy judge may "surely impact" state law claims.

D. Adopting the Voya Interpretation Would Dramatically Change the Division of Labor Between the Bankruptcy and District Courts

Finally, I feel compelled to briefly address Voya's assertion on remand that under the Voya Interpretation "the vast majority of activities in which a bankruptcy court engages on a day-to-day basis, such as issuing DIP financing orders, approving asset sales, allowing or disallowing claims against a debtor's estate, are entirely unaffected by Stern."153 Voya makes this proclamation in its opening brief on remand without any analysis. As acknowledged at argument, however, Voya recognizes at least two times when district courts would be compelled to enter the final order approving a debtor's requested relief: (i) any § 363 sale of assets in which a purchaser seeks to be free of successor liability — which is every § 363 sale of assets; and (ii) requests to compel annual meetings of stockholders.154 In addition to the contexts already examined in this Opinion,155 I would add: (i) substantive consolidation of debtors, and/or debtors and non-debtors (in which the rights of creditors and non-creditors against non-debtor entities are rearranged); (ii) recharacterization and/or subordination (in which state law debts are transformed); (iii) requests to establish notice procedures to preserve a debtor's net operating losses by prohibiting trading in stock without certain advance notice (in which trades in derogation of those procedures are declared void ab initio); and (iv) a sale of property subject to a co-debtor stay (in which the court compels the sale of a non-debtors' interest in property).156 Voya suggests that consent may permit the bankruptcy court to enter a final order in these instances, but it seems at least arguable that consent would be withheld to leverage a party's position. As Judges Krause and Ambro noted in their respective discussions of equitable mootness in their separate concurring opinions in One2One and Tribune, there is ample room for gamesmanship by both debtors and creditors in the bankruptcy context.157

While recognizing that even a slight encroachment by Congress into the prerogative of the Judicial Branch cannot be tolerated, Chief Justice Roberts was convinced that his ruling in Stern did not "change all that much."158 The main reason is that the bankruptcy system already contemplates that certain state law claims, such as Vickie-type counterclaims, are to be ultimately resolved by non-bankruptcy judges. As Chief Justice Roberts observed, district court judges review de novo and enter final orders in lawsuits that allege "related to" claims, and bankruptcy courts must or may abstain from ruling on state law disputes that can be timely adjudicated.159 But, there is no established alternative framework for ruling on core proceedings interpreting federal law that touch upon state law rights.

For all of these reasons, I conclude that I had constitutional adjudicatory authority to enter a final order confirming Millennium's Plan.160

III. Voya Both Forfeited and Waived any Constitutional Adjudicatory Authority Objection to my Ability to Enter a Final Order Confirming the Plan

Even assuming that I did not have constitutional adjudicatory authority to enter a final order confirming Millennium's Plan, Voya forfeited the right to contest my authority by not raising the argument. Voya also implicitly consented161 to my authority, thereby waiving the right to contest it.

Waiver and forfeiture are commonly confused terms. "Although jurists often use the words interchangeably,"162 waiver and forfeiture have different meanings. "[F]orfeiture is the failure to make the timely assertion of a right[;] waiver is the `intentional relinquishment or abandonment of a known right.'"163

In 2015, the Supreme Court ruled in Wellness that litigants may consent to a bankruptcy court's constitutional adjudicatory authority to enter final orders.164 If litigants consent, any objection to a bankruptcy court's authority is waived.165 Consent may be express or implied,166 but in either event must be knowing and voluntary.167 After the Supreme Court's decision in Wellness confirmed that litigants can consent to a bankruptcy judge's constitutional adjudicatory authority, many courts have found implied consent when a party appears before a bankruptcy judge without raising a constitutional objection.168 While Wellness primarily focused on consent, the Supreme Court also recognized that a party can forfeit a constitutional right.169 Both the concept of implied consent and forfeiture increase judicial efficiency and check gamesmanship.

On remand, I asked the parties to brief the issue of whether Voya had waived any argument that I lacked constitutional adjudicatory authority to enter a final order confirming Millennium's Plan. I did so for a simple reason — I believed I had ruled on all objections fairly raised at the confirmation hearing. I did not remember the words "constitutional adjudicatory authority," "proposed findings of fact and conclusions of law," "report and recommendation," or the like in any of Voya's confirmation submissions or in Voya's argument at confirmation. But, recognizing that I could be incorrect, I asked the parties to identify the portions of the record in which Voya made its Stern argument.170

In its submissions on remand, Voya identified the following portions of the record: (i) its "Local Rule 9013-1(h) reservation of rights;" and (ii) Paragraph 24 of Voya's Initial Confirmation Objection.171 Voya also pointed to the Debtors' statements and written submissions regarding Stern as well as its own lack of assent to the releases. I will address each of these items in order.

Delaware Local Bankruptcy Rule 9013-1(h) (the "Local Rule") provides:

The Local Rule appears to serve two purposes. It draws one bright line for waiver determinations: if a party does not include the proposed statement in its filing (and has not actually made a constitutional argument), the party has waived its right to contest the bankruptcy judge's entry of a final order on the proceeding before the court.173 Conversely, if a party includes the proposed statement in its filing, the Local Rule appears to provide a "safe harbor" and the constitutional adjudicatory authority issue is not waived by way of that initial filing.174

By pointing to the Local Rule, Voya equates not waiving the right with actually making the argument. But, they are not the same, and the rule does not suggest as much. Reciting the statement in the Local Rule is no substitute for timely making the argument clearly and unequivocally in a subsequent filing.175 Failure to make the argument negates any previous "reservation" of the right to do so.176

In any event, Voya did not insert the Local Rule verbatim into its submission. Instead, Voya changed the language of the Local Rule in its filing to state:

The next sentence stated:

Although Voya's editing of the Local Rule only changed a few words — from "if it is determined that the Court, absent consent of the parties, cannot enter final orders or judgments" to "if it is determined that this Court, absent the consent of the parties, lacks jurisdiction to enter a final order or judgment" — the changes are significant. Voya changed the words to reflect a jurisdictional argument (the subject matter jurisdiction argument it raised) rather than a constitutional argument. Ultimately, however, Voya's true focus was the next sentence, which signaled in all caps and bolded text, that Voya did not assent to the third party releases.

The Local Rule is not a trump card for parties to hide behind, allowing them to wait and see how the judge rules before crying "Stern." If a party has a constitutional objection to the bankruptcy judge's adjudicatory authority to enter final orders, it is incumbent upon the party to place that objection squarely before the judge. In expedited proceedings, such as Millennium's confirmation hearing, it is all the more critical that the specific argument be brought to the judge's attention at the hearing as well. The insertion in a party's submission of the statement in the Local Rule (modified or not) — with nothing more — is not sufficient to make a constitutional objection.179

Voya suggests that Paragraph 24 of its Initial Confirmation Objection provides the "something more." Paragraph 24 is the first of four paragraphs under the substantive heading "The Court Does Not Have Jurisdiction To Approve The Third-Party Release Or Related Provisions Of The Plan." It reads, in full:

Nowhere in this paragraph does Voya challenge my constitutional authority to enter a final order confirming Millennium's Plan. Read in context, this paragraph appears to be the first paragraph of an introductory jurisdictional section, citing Stern and Wellness for general jurisdictional principles.181 And, it is yet another statement that Voya does not assent to third party releases. In any event, the argument that Voya now makes is not contained in Paragraph 24.

At oral argument, Voya admitted that its position on remand is novel and that nobody has "really articulated this issue in the way it's being articulated to this Court before."182 On that basis, it is all the more important that Voya articulate its position fully and with specificity, in both its written submissions and at oral argument. Any general discussion of or general reference to Stern did not make a constitutional adjudicatory authority argument.183

Moreover, the Debtors' references to Stern in their written submission or in argument do not assist Voya here. It its confirmation submission, the Debtors apparently treated the above paragraph 24 (with its citation to Stern) as a possible constitutional argument and responded to it accordingly.184 Voya filed its Supplemental Confirmation Objection in response.185 Although Voya's Supplemental Confirmation Objection replies to the Debtors' "arising in" and "related to" jurisdictional arguments, it does not reply at all to the Debtors' constitutional argument. The words "Stern" or "constitution" do not appear in the Supplemental Confirmation Objection, nor does Voya object to the entry of a final order in connection with confirmation or request that proposed findings of fact and conclusions of law be submitted to the district court.186 Failure to respond to an argument simply cannot be construed as making an argument.187

Similarly, Voya failed to respond to the Debtors' preemptive Stern comments made at argument. At no time during the confirmation hearing did Voya utter the word Stern, make any constitutional adjudicatory authority argument, or contend that I was limited to submitting proposed findings of fact and conclusions of law to the district court. Nor did Voya speak up once I concluded my Bench Ruling or even after I asked whether any party had a question or clarification it needed to make on the record. While the United States Trustee offered comments on the proposed form of order immediately after my Bench Ruling and subsequently as reflected in the Debtors' December 14, 2015 letter, Voya stood silent.188

Voya's actions after the confirmation order was entered provide further evidence that Voya did not raise a Stern objection to my entry of the confirmation order. Voya immediately appealed the confirmation order, and as reflected in Voya's Statement of the Issues on Appeal, Voya did not identify my entry of a final order as an issue on appeal. Rather, consistent with its theory of the case, Voya appealed my decision that the RICO Lawsuit was "related to" the bankruptcy case (Issue 1), the substantive issue of whether nonconsensual releases are ever permissible (Issue 2), the standard for assessing third party releases if they are permissible (Issue 3), issues surrounding the appropriate financial contribution to support a release; (Issues 4 and 5) and whether I properly applied the correct legal standard to the facts of the case, assuming both subject matter jurisdiction and that releases are permissible (Issue 6). Because Voya appealed every ruling I made, had Voya raised the Stern issue prior to the entry of the confirmation order, no doubt its Statement of Issues on Appeal would have included a question of whether I erred in entering a final order confirming the Plan.

Finally, Voya points to its statements, both verbally and in writing, that it "does not consent" to the third party releases as an indication that it was objecting to the entry of a final order on a constitutional basis. It is undisputed that Voya did not assent to the grant of third party releases. That was the crux of Voya's objection, the very issue at the heart of the confirmation hearing, and the reason for evaluating the Continental hallmarks and the Master Mortgage factors. The question is not whether Voya assented to the third party releases or whether the releases were permissible (a question addressed by any number of reported decisions), but whether Voya objected to the entry by a bankruptcy judge of a final confirmation order approving those releases (an argument rarely made).

As is plain, I believe that Voya simply did not make the argument, which constitutes a forfeiture. The Debtors contend that Voya made a strategic decision to hold the argument in reserve in order to both obtain the consideration under the Plan and to have the ability to ask for a direct certification to the Third Circuit on whether nonconsensual third party releases are ever permissible. In other words, the Debtors contend that Voya's litigation strategy was to get to the Third Circuit as soon as possible. To support their conclusion, the Debtors point to the following: (i) Voya's true argument was that no judge — neither a bankruptcy judge nor a district judge — could impose a release on Voya without its assent because of a lack of subject matter jurisdiction; (ii) Voya never asked in court that I issue proposed findings of fact and conclusions of law; (iii) Voya did not ask the Debtors' counsel to include in his December 14, 2015, letter a request that I issue proposed findings of fact and conclusions of law; and (ix) Voya needed a final order as a predicate for seeking a direct appeal to the Third Circuit.189

To the extent that Voya intended to keep its constitutional objection in its back pocket to be used on appeal if it was not successful before me, such gamesmanship is prohibited, establishes intent and implied consent and therefore constitutes waiver.190 On the other hand, if Voya simply wanted a final order entered to be in a position to file the Certification Motion (without giving thought one way or the other to Stern's constitutional proscriptions), this was also an intentional act resulting in implied consent to my constitutional adjudicatory authority, and therefore constitutes waiver.

But even if I credit Voya's contention that it either preserved its constitutional adjudicatory argument through its modified Local Rule language or made such an argument in its written submission, Voya fares no better. It is beyond dispute that Voya did not make a constitutional adjudicatory authority argument or request that I enter proposed findings of fact and conclusions of law at the confirmation hearing. Voya had plenty of opportunity to do so.191 To the extent, therefore, that Voya's written submission could ever be considered to evidence an intent not to consent to final orders, its failure to raise the Stern issue at argument constitutes a waiver or abandonment of that right.192

To summarize:

For the above reasons, I conclude that Voya waived or forfeited any argument that it was entitled to have an Article III court enter a final order confirming Millennium's Plan.

IV. Even if Voya was Entitled to a Hearing on the Merits of the RICO Lawsuit in the Context of Confirmation, Voya Waived that Right

In its Remand Decision, the District Court provided two options in the event that I concluded I did not have constitutional adjudicatory authority to enter the order confirming Millennium's Plan: strike the third party release relative to Voya's claims in the RICO Lawsuit, or submit proposed findings of fact and conclusions of law on them. Because I conclude that I did have such authority, I need not do either.

But, even if I found to the contrary, I would not take either path here. If I am wrong, and I did not have constitutional adjudicatory authority to enter a final order, the district court may treat the confirmation order as proposed findings of fact and conclusions of law.193 While the district court would have to enter the final order confirming the Plan, the standard for third party releases is still the same. Third party releases may be granted in the context of confirmation if the plan proponent can prove that it meets the Continental hallmarks of fairness and necessity to the reorganization. Stern does nothing to change that standard; Stern speaks only to which judge must enter the final order.

Voya consistently and repeatedly took the position — at the confirmation hearing and on remand — that the merits of the claims in its RICO Lawsuit were not before me. Voya's argument at confirmation was that I did not have subject matter jurisdiction over the RICO Lawsuit and therefore could not grant the releases, and in any event, the releases were not warranted under the Continental hallmarks and/or the Master Mortgage five factor test. As set out in Part II, that standard considers the terms of the plan, the outcome of the solicitation and the necessity of the injunction to the success of the plan; the standard does not look at the merits of the claims being released nor did Voya argue that it does. Thus, the gravamen of Voya's objection did not put the merits of its claims against the Non-Debtor Equity Holders at issue.

In fact, Voya took the exact opposite view. Voya was clear that it was not putting the merits of the RICO Lawsuit at issue in the confirmation hearing, and balked at the Debtors' suggestion that it had to. Voya succinctly summed up its position in its Supplemental Confirmation Objection made the day prior to the confirmation hearing:

The very idea that the merits were before me ran directly counter to the main thrust of Voya's argument that no court (not the bankruptcy court nor the district court) could enter an order approving third party releases because Voya was entitled to a hearing on the merits of its RICO Lawsuit by Judge Sleet in the context of that lawsuit.195

On remand, Voya made the same argument — that the merits of its RICO Lawsuit were not in front of me — and therefore Voya should not, and could not, put on evidence regarding its claims against the Non-Debtor Equity Holders. In its recently submitted proposed findings of fact and conclusions of law,196 Voya asks me to make the following finding:

At no time, therefore, did Voya put on, or intend to put on, any evidence with respect to its claims against the Non-Debtor Equity Holders. Instead, Voya asserted that the merits of its claims were not relevant to the confirmation hearing.

As previously discussed, on remand, Voya now maintains that the grant of releases in the confirmation order was an actual adjudication of its claims in the RICO Lawsuit. Voya cannot have it both ways. If the entry of the confirmation order was an actual adjudication of Voya's claims, then it was incumbent on Voya to submit evidence on the merits of its claims at the confirmation hearing.198 It did not do so.199

Based on the foregoing, even if I had concluded that I did not have the constitutional adjudicatory authority to enter a final order confirming the Plan, I would not now submit proposed findings of fact and conclusions of law to the district court on the merits of Voya's RICO Lawsuit. To the extent that Voya was entitled to any hearing on the merits of its claims in connection with the confirmation hearing, it consciously chose not to avail itself of that opportunity. And, it continues to make that choice. To the extent Voya had a right to a hearing on the merits of its RICO Lawsuit in connection with plan confirmation, Voya intentionally relinquished that right. It has, therefore, been waived.

CONCLUSION

The district court remanded this case to me so that I could rule on my constitutional adjudicatory authority to issue Millennium's confirmation order. In doing so, the district court recognized that remanding this case to me "was far from ideal at this stage of the Chapter 11 proceedings," but believed that "given [my] experience and expertise, [I] should rule on this issue first." I trust this Opinion will aid the district court on appeal.