Chapter 4, B. Core: Arising In and/or Arising Under

• Jurisdiction: United States

B. Core: Arising In and/or Arising Under

Section 157(b) explains that a matter is "core" if it is either "arising under title 11, or arising in a case under title 11[.]"²⁴ Both "arising under" and "arising in" are terms of art. The former refers to "proceedings that involve a cause of action created or determined by a statutory provision of title 11."²⁵ The latter's meaning "is less clear, but seems to be a reference to those "administrative" matters that arise only in bankruptcy cases. In other words, "arising in" proceedings are those that are not based on any right expressly created by title 11, but nevertheless would have no existence outside of the bankruptcy.²⁶

Section 157(b)(2) provides a nonexhaustive list ofmatters that Congress has designated as "core."²⁷ This list, however, has been scrutinized in recent years following the Supreme Court's decision in Stern v. Marshall.²⁸ As described in greater detail below, Stern determined that while a matter may be statutorily "core" under § 157(b)(2), the Constitution may bar the bankruptcy court from entering final orders in said matter.²⁹ Following Stern, courts have looked beyond § 157 to determine whether a matter is in fact "core."

A proceeding is a "core" proceeding if it invokes a substantive right provided by title 11 or if it is a proceeding that, by its nature, could arise only in the context of a bankruptcy case.³⁰ For core matters, it is the Bankruptcy Code itself that is the source of the claimant's right and not merely a procedural vehicle for the assertion of a right conferred by state law.³¹ To determine whether a matter is "core," the "question is whether the action at issue stems from the bankruptcy itself or would necessarily be resolved in the claims allowance process."³²

"[W]hether a contract proceeding is core depends upon (1) whether the contract is antecedent to the reorganization petition; and (2) the degree to which the proceeding is independent of the reorganization."³³ Where declaratory proceedings relate to insurance policies and the proceeds of the policy directly affect the bankruptcy court's core administrative function of allocating assets among creditors, those proceedings may be found to be core.³⁴ However, because litigation involving insurance coverage involves application of state law, it is more appropriate to classify it as a noncore matter.³⁵ As one court put it, "a debtor cannot reclassify what is essentially a non-core state law cause of action by declaring that...