By Bruce Grohsgal* and Gregory J. Flasser**

I. INTRODUCTION

Section 542 of the Bankruptcy Code generally requires a noncustodial entity who has possession, custody, or control of property of the estate that the trustee may use, sell, or lease under § 363, or that the debtor may exempt under § 522, to deliver to the trustee the property or the value of the property, and to account for such property.¹ Section 543 similarly requires a custodian with knowledge of the commencement of the case to deliver such property and the proceeds of such property to the trustee and account for such property.² This paper reports on opinions regarding turnover published since the 2015 update.³

II. JURISDICTION AND AUTHORITY OF THE BANKRUPTCY COURTS

Jurisdiction and Authority — Generally

Bankruptcy jurisdiction is essentially in rem, based on the district court’s exclusive jurisdiction over all property, wherever located, of the debtor’s estate.⁴ The court’s jurisdiction begins on the filing of the bankruptcy case and for most purposes ends when the property is transferred from the estate or revests in the debtor⁵ or the case is dismissed.⁶ The bankruptcy court stands in the district court’s shoes with respect to its jurisdiction over estate property, by virtue of the standing order of reference from its district court, and has exclusive jurisdiction over property of the debtor’s estate.⁷

The statutory framework for this jurisdiction is set forth in 28 U.S.C.A. § 157. Section 157(b) gives bankruptcy judges the statutory authority to enter final judgments on certain “core” matters arising under or arising in the bankruptcy case. “Core” matters expressly include “orders to turn over property of the estate.”⁸

Under § 157, a bankruptcy judge does not have authority to enter a final judgment on a matter that is not core but is merely “related to” the bankruptcy case. A ubiquitous example of a non-core action is a suit by a debtor to recover a disputed prepetition account receivable. The bankruptcy judge may hear a non-core, “related to” matter, but it cannot enter final judgment on it unless the district court has referred the matter to the bankruptcy court and the parties have consented to the bankruptcy court’s authority to enter final judgment. Absent such referral and consent, the bankruptcy judge may only submit its proposed findings of fact and conclusions of law to the district court. The district judge following its de novo consideration of both the facts and the law, then enters or declines to enter the final judgment.⁹

It follows from this jurisdictional foundation that a turnover action with respect to estate property is a core proceeding, and the jurisdictional statute that governs bankruptcy proceedings expressly so provides.¹⁰

The Supreme Court threw this statutory regime into Constitutional chaos when it issued its 2011 opinion in Stern v. Marshall.¹¹ Stern held that because the bankruptcy courts are established under Article I rather than Article III of the Constitution, and bankruptcy judges do not have lifetime tenure as required for Article III judges, that a bankruptcy judge may have statutory authority but not the Constitutional authority to enter a final order on some matters defined as “core” in § 157(b). The Supreme Court would later describe this type of proceeding as “a so-called ‘Stern claim,’ that is, ‘a claim designated for final adjudication in the bankruptcy court as a statutory matter, but prohibited from proceeding in that way as a constitutional matter.’”¹²

The true characterization of any specific turnover claim for jurisdictional pu