Wellness International Network, Ltd. v. Sharif

Wellness International Network, Ltd. (Wellness) (plaintiff) manufactured health products. Richard Sharif (defendant) distributed Wellness’s products. Sharif sued Wellness in federal district court and, after ignoring Wellness’s discovery requests, was ordered to pay $650,000 in attorney’s fees to Wellness. Subsequently, in 2009, Sharif filed for bankruptcy. The bankruptcy petition included Wellness as a creditor. Wellness discovered that Sharif may have had more assets than he initially disclosed. Wellness filed a lawsuit against Sharif in bankruptcy court seeking, among other things, a declaration that the newly discovered assets should be included in Sharif’s bankruptcy estate. In his answer to the lawsuit, Sharif acknowledged that the lawsuit was a core proceeding that the bankruptcy court could decide. The bankruptcy court ruled in favor of Wellness. Sharif appealed to the district court, and the district court affirmed the bankruptcy court. While the case was being decided in district court, the United States Supreme Court held in Stern v. Marshall, 564 U.S. 462 (2011), that claims seeking to augment a bankruptcy estate must be decided by an Article III court rather than a bankruptcy court. Bankruptcy courts are Article I tribunals that are under the control of federal district courts. The United States Court of Appeals for the Seventh Circuit reversed the district court, holding that the bankruptcy court lacked authority to rule on the claim because it was a Stern claim. Wellness appealed.