                         RECOMMENDED FOR FULL-TEXT PUBLICATION
                              Pursuant to Sixth Circuit Rule 206
                                      File Name: 12a0372p.06

                 UNITED STATES COURT OF APPEALS
                                  FOR THE SIXTH CIRCUIT
                                    _________________


                                               X
                                                -
 RANDALL SCOTT WALDMAN; RW LIMITED,
                                                -
 CO.; STONE MACHINE AND FABRICATION,
 LLC; INTEGRITY MANUFACTURING, LLC,             -
                      Defendants-Appellants, -
                                                    No. 10-6497

                                                ,
                                                 >
                                                -
                                                -
           v.
                                                -
                                                -
 RONALD B. STONE,
                          Plaintiff-Appellee. N
                  Appeal from the United States District Court
               for the Western District of Kentucky at Louisville.
              No. 10-00164—John G. Heyburn II, District Judge.
                                   Argued: January 10, 2012
                            Decided and Filed: October 26, 2012
   Before: KETHLEDGE and STRANCH, Circuit Judges; GWIN, District Judge.*

                                      _________________

                                            COUNSEL
ARGUED: Michael R. Wilson, WILSON AND WILSON, ATTORNEYS AT LAW,
PLLC, Louisville, Kentucky, for Appellants. Dennis D. Murrell, MIDDLETON
REUTLINGER, Louisville, Kentucky, for Appellee. Jeffrey A. Clair, UNITED
STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Amicus Curiae.
ON BRIEF: Michael R. Wilson, John R. Wilson, WILSON AND WILSON,
ATTORNEYS AT LAW, PLLC, Louisville, Kentucky, for Appellants. Dennis D.
Murrell, John M. Matter, Loren T. Prizant, MIDDLETON REUTLINGER, Louisville,
Kentucky, for Appellee. Jeffrey A. Clair, UNITED STATES DEPARTMENT OF
JUSTICE, Washington, D.C., for Amicus Curiae.




        *
           The Honorable James S. Gwin, United States District Judge for the Northern District of Ohio,
sitting by designation.


                                                  1
No. 10-6497        Waldman, et al.v. Stone                                       Page 2




                                 _________________

                                      OPINION
                                 _________________

       KETHLEDGE, Circuit Judge. Ron Stone, a Chapter 11 debtor-in-possession,
brought this adversarial proceeding in bankruptcy court against his principal creditor,
Randall Waldman. After a trial, the bankruptcy court found that Waldman had obtained
nearly all of Stone’s business assets by means of fraud. As relief, the court discharged
the debts that Stone owed to Waldman, and awarded Stone more than $3 million in
compensatory and punitive damages. Waldman now challenges the bankruptcy court’s
judgment on several grounds, including that the court lacked constitutional authority to
enter it. Although we affirm the bankruptcy court’s discharge of Stone’s debts, we hold
that the court lacked authority to award him damages. We therefore affirm in part,
vacate in part, and remand.

                                             I.

       Stone was the founder and owner of Stone Tool and Machine, Inc. (“STM”), a
Kentucky corporation. Although STM had positive equity, it had limited cash flow. By
2003, STM owed Fifth Third Bank more than $1 million, secured by mortgages and liens
on STM’s business assets and on Stone’s house. Eventually, Stone could not keep up
with the payments to Fifth Third.

       Stone’s attorney, Bruce Atherton, introduced Stone to Waldman as a potential
investor in STM. What Stone did not know was that Atherton was himself indebted to
Waldman for tens of thousands of dollars that Atherton had no means to repay. Atherton
planned to settle up with Waldman by helping him to exploit Stone. Without Stone’s
knowledge, Atherton gave STM’s proprietary business data to Waldman to review.

       In August 2004, Atherton filed on behalf of STM a Chapter 11 bankruptcy
petition that he said would buy time for STM to acquire new capital from Waldman. In
fact, however, Atherton was advancing only Waldman’s interests, seeking to preserve
No. 10-6497        Waldman, et al.v. Stone                                        Page 3


as many of STM’s assets as possible so that Waldman could later acquire them for
himself. Atherton barely prosecuted STM’s bankruptcy case and allowed the bankruptcy
court’s automatic stay to expire on November 3, 2004. Fifth Third, STM’s principal
creditor, then foreclosed on STM’s assets in state court. By early 2005, Fifth Third held
judgments against both STM and Stone, a related judgment lien on Stone’s house, and
a mortgage on the house.

       Waldman approached Fifth Third before it took possession of any assets. He
offered the bank a deal: he would pay $900,000 to Fifth Third in exchange for the
bank’s rights as a creditor of Stone and STM. Thus, under this scheme, Waldman rather
than Fifth Third would become Stone’s principal creditor.

       Waldman did not have the $900,000 that he needed to buy Stone’s debts, so he
sought financing from the Bullitt County Bank. As collateral, Waldman offered STM’s
assets. The problem was that he did not own them yet. So Waldman and Atherton went
back to Stone and offered him a deal: Stone would transfer STM’s assets to two
companies that Waldman owned; in exchange, Waldman would pay off Stone’s debts
to Fifth Third, the IRS, and other creditors. Waldman also promised Stone a 40%
ownership interest in a new business that Waldman would operate with STM’s assets,
and a job for at least five years. Stone agreed to the deal.

       Soon thereafter, Atherton called Stone and demanded that Stone come to his
office right away. When Stone arrived, Atherton and Waldman told Stone to sign the
deal’s closing documents immediately, without reading them, supposedly to meet a filing
deadline. Atherton and Waldman assured Stone that the documents reflected the terms
of their deal. Waldman also reiterated his promise to pay off Stone’s debts. Stone
signed the documents. Atherton said that Stone would receive his own copies later.

       In fact, however, the documents reflected a different deal: they transferred all
of STM’s assets to Waldman in exchange for nothing more than a job for Stone with the
new company. The documents made no mention of Stone’s 40% interest in the new
company or of any obligation on Waldman’s part to pay off Stone’s debts.
No. 10-6497         Waldman, et al.v. Stone                                          Page 4


        While Stone signed his company away, representatives from Fifth Third sat in
the room across the hall. Waldman, with the deed to STM’s assets in hand and his loan
from Bullitt Bank secured, then completed his deal with Fifth Third. (Neither Bullitt nor
Fifth Third was aware that Waldman and Atherton had defrauded Stone.) By the time
these transactions were complete, Waldman and his companies owned all of STM’s
assets. Waldman also owned all of Stone’s prior indebtedness to Fifth Third, with no
obligation to forgive it.

        After the deal closed, Waldman and Stone worked together at the new
business—called Stone Machine and Fabrication—for more than a year. During that
time, Stone repeatedly tried to obtain copies of the May 20, 2005 closing documents.
Atherton refused to provide them and eventually he stopped returning Stone’s calls. In
October 2006, however, Atherton’s assistant finally gave Stone the documents. Stone
then figured out that he had been swindled. He confronted Waldman, and a fist-fight
broke out. With no equity in his business and all of his debts still in place, including the
mortgage on his home, Stone resigned from the company.

        Waldman and his companies then filed garnishment actions against Stone in an
effort to collect on the Fifth Third judgment. Stone responded by filing his Chapter 11
bankruptcy petition. He identified the Waldman debts in his petition as “Disputed.”
Stone then filed an adversarial proceeding in bankruptcy court, alleging that Waldman
had acquired Stone’s debts and assets by fraud. Stone also sued Atherton, who is not a
party to this appeal but who was disbarred for his involvement in the fraud upon Stone.

        Stone’s complaint against Waldman sought two types of relief. First, Stone
asked the bankruptcy court to discharge his debts to Waldman, all of which Waldman
had acquired from Fifth Third (the “disallowance claims”). Specifically, Stone asked
the court to discharge a judgment against him, a judgment lien on his property, and a
mortgage on his residence.       Second, Stone sought affirmative relief to enforce
Waldman’s promises (the “affirmative claims”). Stone asked for damages (or specific
performance) that would satisfy a judgment against him held by MBNA Bank, satisfy
No. 10-6497         Waldman, et al.v. Stone                                          Page 5


a federal tax lien, and compensate him for a forty percent share of the Waldman-
controlled entity that now owned STM’s assets.

        Waldman appeared in bankruptcy court and counterclaimed against Stone. He
sought a judgment on the Fifth Third debts and relief from the bankruptcy court’s
automatic stay in order to enforce the liens and mortgages on Stone’s residence.

        The bankruptcy court held a bench trial in October 2009. At its conclusion, the
court found that Waldman and Atherton had perpetrated upon Stone one of the most
egregious frauds the court had ever encountered. Consequently, the court invalidated
all of Stone’s obligations to Waldman on the disallowance claims. It also awarded Stone
$1,191,374 in compensatory damages and $2,000,000 in punitive damages on the
affirmative claims. The district court affirmed the bankruptcy court’s judgment in all
respects.

        This appeal followed.

                                              II.

        Waldman challenges on three grounds the bankruptcy court’s power to enter its
judgment in this case. First, Waldman argues that Stone’s state-law fraud claims are
beyond the jurisdiction of any federal court. Second, Waldman argues that the judgment
here was beyond the statutory authority of the bankruptcy court in particular. And third,
Waldman argues that the judgment was beyond the bankruptcy court’s power as limited
by Article III of the Constitution. We consider these arguments in turn.

                                              A.

        Waldman argues that Stone’s claims lie outside the jurisdiction of any federal
court. To that end, he first contends that Stone’s claims do not “arise under” federal law,
and thus are beyond the judicial power that the Constitution confers on the federal courts
in Article III, § 2. But Waldman overlooks that a debtor’s state-law claim, even for
affirmative relief, “may be adjudicated in federal court on the basis of its relationship to
the petition for reorganization.” N. Pipeline Constr. Co. v. Marathon Pipe Line Co.,
No. 10-6497         Waldman, et al.v. Stone                                           Page 6


458 U.S. 50, 72 n.26 (1982) (plurality opinion). Stone’s claims were adjudicated on
precisely that basis here, so Waldman’s first objection is meritless.

        Waldman also contends that Stone’s claims are beyond the federal courts’
statutory jurisdiction. Title 28 U.S.C. § 1334(b) provides that “the district courts shall
have original but not exclusive jurisdiction of all civil proceedings arising under title 11,
or arising in or related to cases under title 11.” Thus, so long as Stone’s claims are at
least “related to” his bankruptcy petition—which is itself a case under title 11—the
federal courts have jurisdiction over Stone’s claims. See Mich. Emp’t Sec. Comm’n v.
Wolverine Radio Co. (In re Wolverine Radio Co.), 930 F.2d 1132, 1141 (6th Cir. 1991).
A claim is “related to” a bankruptcy case if the “outcome of that [claim] could
conceivably have any effect on the estate being administered in bankruptcy.” Lindsey
v. O’Brien, Tanski, Tanzer and Young Health Care Providers of Conn. (In re Dow
Corning Corp.), 86 F.3d 482, 489 (6th Cir. 1996) (quoting Pacor, Inc. v. Higgins,
743 F.2d 984, 994 (3d Cir. 1984)). Each of Stone’s claims will have an effect on his
estate here. His disallowance claims challenge the validity of debts that Waldman has
sought to enforce in bankruptcy. And a damages award on Stone’s affirmative claims
would provide assets for his other creditors. See Celotex Corp. v. Edwards, 514 U.S.
300, 307 n.5 (1995) (“related to” jurisdiction includes causes of action owned by the
debtor that become property of the estate). Thus, the federal courts have jurisdiction
over all of Stone’s claims notwithstanding their state-law basis.

                                              B.

        Waldman next challenges the bankruptcy court’s statutory authority to enter final
judgment on Stone’s claims. Congress has granted bankruptcy judges differing authority
depending on whether a claim in bankruptcy is “core” or not. 28 U.S.C. § 157. In “core
proceedings,” a bankruptcy judge “may enter appropriate orders and judgments,” subject
to appellate review in the district court. Id. § 157(b)(1). In non-core proceedings, the
bankruptcy judge “shall submit proposed findings of fact and conclusions of law to the
district court, and any final order or judgment shall be entered by the district judge after
. . . reviewing de novo” the objections of either party. Id. § 157(c)(1).
No. 10-6497          Waldman, et al.v. Stone                                       Page 7


          Waldman contends that Stone’s claims were not “core proceedings” under § 157,
and thus that the bankruptcy court had no power to enter final judgment with respect to
them. Waldman’s own pleadings expressly stated, however, that all of Stone’s claims
in this case were core. (Waldman’s Answer to Stone’s 1st Am. Compl. ¶ 5.) And this
objection—that the bankruptcy court acted beyond its statutory authority under
§ 157—can be forfeited. See The Cain Partnership, Ltd. v. Pioneer Inv. Servs. Co. (In
re Pioneer Inv. Servs. Co.), 946 F.2d 445, 449–50 (6th Cir. 1991). Thus, Waldman has
forfeited his objection under § 157 here. See Stern v. Marshall, 131 S. Ct. 2594, 2608
(2011).

                                            C.

          Waldman’s more serious argument is that the bankruptcy court lacked
constitutional authority to enter judgment on Stone’s claims. Article III, § 1 of the
Constitution mandates that “[t]he judicial Power of the United States, shall be vested”
in courts whose judges “shall hold their Offices during good Behaviour” and “receive
for their Services[] a Compensation[] [that] shall not be diminished during their tenure.”
This requirement—that the federal judicial power be exercised by judges whose tenure
and salary is protected—is “an inseparable element of the constitutional system of
checks and balances that both defines the power and protects the independence of the
Judicial Branch.” Stern, 131 S. Ct. at 2608 (internal quotation marks omitted).

          Bankruptcy judges lack Article III’s tenure and salary protections.        And
Waldman contends that the bankruptcy court exercised Article III “judicial Power” when
it entered final judgment here. Thus, Waldman concludes, the judgment against him was
entered in violation of the Constitution.

                                               1.

          Both Stone and the United States, as amicus curiae, respond that Waldman has
forfeited this objection too by not raising it below. “Article III, § 1 not only preserves
to litigants their interest in an impartial and independent federal adjudication of claims
within the judicial power of the United States, but also serves as an inseparable element
No. 10-6497         Waldman, et al.v. Stone                                           Page 8


of the constitutional system of checks and balances.”         Commodity Futures Trading
Comm’n v. Schor, 478 U.S. 833, 850 (1986) (internal quotation marks omitted). The
Article III, § 1 guarantee thus has a dual character: one part personal right of the litigant,
one part structural principle. The argument, as presented by the United States, is that the
personal right predominates in cases not involving “the encroachment or aggrandizement
of one branch at the expense of the other.” Id. Here, it is undisputed that bankruptcy
courts—unlike the Executive agency in Schor—are located within the Judicial Branch.
Thus, the United States says, neither the Executive nor the Legislature has encroached
upon the Judiciary, which means that Waldman’s objection is based upon a waivable
“personal right,” rather than a non-waivable structural principle.

        The argument takes too narrow a view of the interests preserved by Article III.
The issue here is not so much the aggrandizement of the Legislative or Executive
Branches, as it is the diminution of the Judicial one. “Article III could neither serve its
purpose in the system of checks and balances nor preserve the integrity of judicial
decisionmaking if the other branches of the Federal Government could confer the
Government’s ‘judicial Power’ on entities outside Article III.” Stern, 131 S. Ct. at 2609.
Article III envisions—indeed it mandates—that the judicial Power will be vested in
judges whose tenure and salary are protected as set forth in that Article. To the extent
that Congress can shift the judicial Power to judges without those protections, the
Judicial Branch is weaker and less independent than it is supposed to be. See Schor, 478
U.S. at 850 (Article III “safeguards the role of the Judicial Branch in our tripartite
system by barring congressional attempts to transfer jurisdiction to non-Article III
tribunals for the purpose of emasculating constitutional courts”).

        Waldman’s objection thus implicates not only his personal rights, but also the
structural principle advanced by Article III. And that principle is not Waldman’s to
waive. See Spierer v. Federated Dep’t Stores, Inc. (In re Federated Dep’t Stores, Inc.),
328 F.3d 829, 833 (6th Cir. 2003) (“That the Spierers failed to suggest while in
bankruptcy court that the stay was imposed in violation of Article III is irrelevant”). We
therefore proceed to the merits of his Article III objection.
No. 10-6497         Waldman, et al.v. Stone                                           Page 9


                                              2.

        The adjudication of so-called private rights—historically described as “the
liability of one individual to another under the law as defined”—is part of the judicial
Power reserved to Article III courts under the Constitution. Stern, 131 S.Ct. at 2612.
Bankruptcy courts therefore cannot enter final judgments as to claims involving liability
between individuals, unless the claim falls within the so-called “public rights” exception
to Article III. Id. at 2610. A public-rights claim is one that “derives from a federal
regulatory scheme, or in which resolution of the claim by an expert governmental agency
is essential to a limited regulatory objective within the agency’s authority.” Id. at 2613.
Whether Stone’s claims involve “public rights” is the issue here.

        The law in this area has a potluck quality. In Stern, the Court reviewed the line
of cases applying the public-rights doctrine to bankruptcy proceedings. 131 S. Ct. at
2609–14. That line begins with Northern Pipeline, which held that “the restructuring
of debtor-creditor relations”—i.e., the bankruptcy court’s power to rule on a debtor’s
objections to a creditor’s proof of claim against the estate—“must be distinguished from
the adjudication of state-created private rights,” such as, in that case, a debtor’s state-law
action for contract damages against a non-creditor. 458 U.S. at 71 (plurality opinion).
“The former may well be a ‘public right,’” the Court said, “but the latter obviously is
not.” Id.

        Next came Granfinanciera, S.A. v. Nordberg, which held that the public-rights
doctrine does not allow a bankruptcy court to decide a fraudulent-conveyance claim filed
by a bankrupt estate’s trustee against a non-creditor. 492 U.S. 33, 55 (1989). By means
of such a claim, the estate seeks to recover property that the debtor transferred in
anticipation of bankruptcy.       Fraudulent-conveyance claims, Granfinanciera said,
“constitute no part of the proceedings in bankruptcy.”              Id. at 56.     They are
“quintessentially suits at common law that more nearly resemble state-law contract
claims . . . to augment the bankruptcy estate than they do creditors’ hierarchically
ordered claims to a pro rata share of the bankruptcy res.” Id. Thus, only an Article III
court can enter final judgment on such a claim. (Granfinanciera actually involved the
No. 10-6497         Waldman, et al.v. Stone                                        Page 10


limits of the bankruptcy court’s equity jurisdiction for Seventh Amendment purposes,
not the limits of the bankruptcy court’s authority for purposes of Article III. But the
Supreme Court stated that the analysis for each is the same. See id. at 53–54.)

        In contrast, the Supreme Court has twice authorized the bankruptcy courts to
decide statutory preference actions brought by trustees against creditors who filed a
proof of claim in the bankruptcy. See Katchen v. Landy, 382 U.S. 323 (1966);
Langenkamp v. Culp, 498 U.S. 42 (1990) (per curiam). When a debtor transfers property
to a creditor shortly before filing for bankruptcy, the effect is to increase the creditor’s
share of the estate. Thus, under the bankruptcy statute, if a debtor transfers property to
a creditor within a certain period (90 days for most creditors, 1 year for “insiders”)
before the date of the bankruptcy petition, the trustee of the estate can void the transfer.
See 11 U.S.C. § 547. Katchen held that the bankruptcy court can decide a preference
action against a creditor of the estate—even an action that seeks return of property to the
estate, rather than only disallowance of the preferred creditor’s proof of claim—because
the determination whether the creditor received a voidable preference is “part and
parcel” of the claims-allowance process. 382 U.S. at 330; see also Langenkamp, 498
U.S. at 44.

        Stern itself involved the estate of Vickie Lynn Marshall (better known as Anna
Nicole Smith). One of Vickie’s creditors, Pierce Marshall, filed a proof of claim in the
bankruptcy. Vickie then counterclaimed, arguing that Pierce had tortiously interfered
with her receipt of an inter-vivos gift from Vickie’s late husband (Pierce’s father).
Vickie’s counterclaim arose under state tort law. The claim sought to augment her
bankrupt estate, not to disallow Pierce’s proof of claim. And resolution of Pierce’s
proof of claim would not resolve the counterclaim, which “raise[d] issues of law entirely
different from those” raised by Pierce’s proof of claim. Stern, 131 S. Ct. at 2617.
Vickie’s counterclaim therefore concerned private rights, which meant that the
bankruptcy court could not enter final judgment with respect to it. Id. at 2620.

        Stern thus provides a summary of the law in this area: When a debtor pleads an
action under federal bankruptcy law and seeks disallowance of a creditor’s proof of
No. 10-6497         Waldman, et al.v. Stone                                        Page 11


claim against the estate—as in Katchen—the bankruptcy court’s authority is at its
constitutional maximum. 131 S. Ct. at 2617–18. But when a debtor pleads an action
arising only under state-law, as in Northern Pipeline; or when the debtor pleads an action
that would augment the bankrupt estate, but not “necessarily be resolved in the claims
allowance process[,]” 131 S. Ct. at 2618; then the bankruptcy court is constitutionally
prohibited from entering final judgment. Id. at 2614.

                                              i.

        We consider first whether the bankruptcy court was constitutionally permitted
to enter final judgment as to Stone’s disallowance claims against Waldman. Those
claims asked the court to discharge a judgment against Stone, a judgment lien on his
property, and a mortgage—all of which, the claims allege, Waldman obtained by fraud.
Although those claims have state-law fraud as an element, they arise under the
bankruptcy statute. See 11 U.S.C. § 502(b) (upon objection to a proof of claim, the
bankruptcy court “shall allow such claim . . . except to the extent that . . . such claim is
unenforceable against the debtor and property of the debtor, under any . . . applicable
law”). Stone sought no affirmative relief with these claims; instead he sought only to
prevent Waldman from collecting on Stone’s debts or redeeming the accompanying
securities. Cf. Katchen, 382 U.S. at 329–30 (debtor sued, on the ground of voidable
preference, to disallow a creditor’s proof of claim). And whereas Vickie’s counterclaim
in Stern raised issues beyond those presented by Pierce’s proof of claim, Stone’s
disallowance claims were part and parcel of the claims-allowance process in bankruptcy.
See Stern, 131 S. Ct. at 2617. Under Stern, therefore, the bankruptcy court was
authorized to enter final judgment as to these claims.

        (Granfinanciera also explains why the bankruptcy court’s judgment on Stone’s
disallowance claims was consistent with the Seventh Amendment: resolving debtor-
creditor relations is an equity function that does not bring the right to a jury trial.
492 U.S. at 57–58. Moreover, Waldman waived a jury trial by never asking for one.
See Fed. R. Bankr. P. 9015(a).)
No. 10-6497        Waldman, et al.v. Stone                                       Page 12


       Waldman responds that this case is distinguishable from Katchen and
Langenkamp because, unlike the creditor-defendants there, he never filed a proof of
claim. Thus, he says, he resembles the non-creditor defendants in Granfinanciera,
whom the Court held could not be sued in bankruptcy court. See 492 U.S. at 58–59.
Unlike Waldman, however, the Granfinanciera defendants were not creditors at all; they
had no interest in the bankruptcy proceeding and had been hauled into court against their
will. Id. at 36–37. Here, Waldman was Stone’s principal creditor and surely would have
filed a proof of claim if Stone had not beat him to the courthouse with an adversarial
proceeding. Indeed it was Waldman’s attempt to collect on Stone’s debts that pushed
Stone into bankruptcy in the first place. Waldman then appeared in the bankruptcy
proceeding, counterclaimed, and sought relief from the automatic stay to enforce his
security and take possession of Stone’s property. It is true, as Waldman points out, that
the Court in Langenkamp emphasized the consequences of a creditor’s decision to file
a proof of claim. See 498 U.S. at 44–45. Unlike the creditor there, however, Waldman
was a secured creditor, so he was not even required to file a proof of claim in order to
preserve his right to recover from the estate. See PCFS Fin. v. Spragin (In re Nowak),
586 F.3d 450, 455 (6th Cir. 2009) (citing 11 U.S.C. § 506; Fed. R. Bankr. P. 3002(a)).

       All that said, we recognize that the Supreme Court has never squarely decided
whether Article III allows a bankruptcy court to enter judgment on a debtor’s objections
to a creditor’s proof of claim. But neither has the Court ever intimated that Article III
bars a bankruptcy court from performing this function—“which is of basic importance
in the administration of the bankruptcy estate[.]” Katchen, 382 U.S. at 329 (internal
quotation marks omitted). All the intimations instead point the other way: in Northern
Pipeline, for example, the Court said that this function—“the core of the federal
bankruptcy power”—“may well be” a matter of public right. 458 U.S. at 71 (plurality
opinion). And in Stern, the Court explained its result in that case, and in prior ones,
partly by reference to whether the claims were practically subsumed in the claims-
allowance process. 131 S. Ct. at 2617. We do not read the Court’s precedents to require
the bankruptcy courts to abandon this power, which they have exercised for more than
two centuries. See Act of Apr. 4, 1800, ch. 19, 2 Stat. 19 (repealed 1803) (creating the
No. 10-6497        Waldman, et al.v. Stone                                      Page 13


first federal bankruptcy courts). We therefore hold that the bankruptcy court here was
authorized to enter final judgment on Stone’s disallowance claims.

                                             ii.

       In contrast, Stone’s affirmative claims sought money damages arising from the
fraud that Waldman perpetrated on Stone. Like Vickie’s counterclaim in Stern, those
claims arose exclusively under state law and existed without regard to any bankruptcy
proceeding. See 131 S. Ct. at 2618 (“Vickie’s claim . . . is in no way derived from or
dependent upon bankruptcy law”). And the affirmative claims were not a part of Stone’s
effort to restructure his relations with his creditors in bankruptcy; rather, they only
sought money damages to augment the bankruptcy estate. Cf. Granfinanciera, 492 U.S.
at 56 (debtor sued for affirmative relief, on fraudulent-conveyance grounds, to augment
the bankrupt estate).

       Stone emphasizes that his affirmative claims turn on the same fraudulent conduct
as his disallowance claim; and thus, he argues, the bankruptcy court could award
damages under Katchen. But Katchen does not authorize the bankruptcy court to award
money damages on the ground that a claim arises from the same transaction or
occurrence as a disallowance claim; “some overlap” between the claims is not enough.
Stern, 131 S. Ct. at 2617. Instead, for a bankruptcy court to enter final judgment as to
claims that seek an award of money damages to the estate, there must have been, at the
outset of the claims-disallowance process, “reason to believe that the process of
adjudicating [the] proof of claim would necessarily resolve” the damages claim. Id.

       Stone’s affirmative claims required him to prove facts beyond those necessary
to his disallowance claims. Those facts included that Waldman had promised to pay off
Stone’s tax lien and other debts, and to give Stone a forty percent interest in the new
company. Moreover, just as in Stern, Stone’s request for punitive damages required him
to show that Waldman’s conduct warranted retribution and deterrence. See id. Hence
there was never any reason to think that Stone’s disallowance claims would necessarily
resolve his affirmative claims. The bankruptcy court’s judgment with respect to those
claims, therefore, was entered in violation of Article III.
No. 10-6497        Waldman, et al.v. Stone                                       Page 14


                                             iii.

       What to do about the violation is another question. A practical remedy would be
simply to direct the bankruptcy court to convert its final judgment as to Stone’s
affirmative claims into proposed findings of fact and conclusions of law, which the
district court would then review de novo. Cf. 28 U.S.C. § 157(c)(1). In core
proceedings, however, § 157(b)(1) authorizes the bankruptcy court to “enter appropriate
orders and judgments,” not to propose them. (Emphasis added.) (Of course, one might
argue that—in core proceedings as to which Article III bars the bankruptcy courts from
entering final judgment—Congress’s grant of the greater power to enter final judgments
implies a lesser authority to propose them.) Thus, if Stone’s affirmative claims are core,
the most practical remedy here is one that the statute does not expressly permit.

       But Stone’s affirmative claims are not core. Whether a proceeding is core is
determined on a claim-by-claim basis. See In re Exide Techs., 544 F.3d 196, 206 (3d
Cir. 2008). “A core proceeding either invokes a substantive right created by federal
bankruptcy law or one which could not exist outside of the bankruptcy.” Lowenbraun
v. Canary, 453 F.3d 314, 320 (6th Cir. 2006) (internal punctuation omitted). Neither is
true here: Stone’s affirmative claims are based on Kentucky law, not federal bankruptcy
law; and he could have filed them as easily before he declared bankruptcy as afterward.
Nor do the claims fall within the types of proceedings listed as core in § 157(b)(2).
Stone’s affirmative claims are just ordinary state-law claims for fraud. Thus they are
only “related to” the bankruptcy estate, which means the bankruptcy court may submit
proposed findings of fact and conclusions of law for them. 28 U.S.C. § 157(c)(1).

       It is true, of course, that both parties alleged in the bankruptcy court (albeit
without explanation) that all of Stone’s claims are core; and that Waldman therefore
waived his right to argue to this court that Stone’s affirmative claims are non-core. But
the fortuity of Waldman’s waiver of his own rights does nothing to diminish the
bankruptcy court’s authority under § 157(c)(1).

       That is the authority we direct the court to exercise on remand here. The
bankruptcy court shall recast its judgment as to Stone’s affirmative claims as proposed
No. 10-6497         Waldman, et al.v. Stone                                        Page 15


findings of fact and conclusions of law, which the district court shall review de novo.
In doing so, the district court may “accept, reject, or modify the proposed findings of fact
or conclusions of law, receive further evidence, or recommit the matter to the bankruptcy
judge with instructions.” Fed. R. Bankr. P. 9033(d).

                                            III.

        Waldman challenges the merits of the bankruptcy court’s judgment with respect
to the disallowance claims. As to those claims, we review the court’s factual findings
for clear error and its legal conclusions de novo. Stamper v. United States (In re
Gardner), 360 F.3d 551, 557 (6th Cir. 2004). When reviewing for clear error, the
question is simply “whether a reasonable person could agree with the bankruptcy court’s
decision.” Volvo Comm. Fin. LLC the Americas v. Gasel Transp. Lines, Inc. (In re Gasel
Transp. Lines, Inc.), 326 B.R. 683, 685–86 (B.A.P. 6th Cir. 2005).

                                              A.

        Waldman argues that the bankruptcy court’s fraud determination was against the
great weight of the evidence. This argument boils down to a request that we take
Waldman’s side in a credibility contest. The most important evidence at trial was the
testimony of Stone and Waldman. The bankruptcy court was entitled to credit Stone’s
testimony over Waldman’s; and Stone’s testimony was enough to support the court’s
judgment. Waldman’s argument is meritless.

        Waldman also argues that he cannot be liable for fraud because he became
Stone’s creditor through a deal with Fifth Third, rather than with Stone. But Waldman
used his false promises to induce Stone to transfer STM’s assets, which he then used to
acquire Stone’s indebtedness from Fifth Third. The bankruptcy court reasonably found
that Waldman used fraud to become Stone’s creditor.

                                              B.

        Waldman also argues that we deny him due process by reviewing the bankruptcy
court’s factual findings only for clear error—as required by Federal Rule of Bankruptcy
No. 10-6497        Waldman, et al.v. Stone                                       Page 16


Procedure 8013. This claim is frivolous. The Supreme Court has rejected a virtually
identical challenge to Federal Rule of Civil Procedure Rule 52(a). See Anderson v. City
of Bessemer City, 470 U.S. 564, 573–75 (1985).

       Next, Waldman argues that Kentucky law does not allow fraud claims based on
promises of future performance. See Radioshack Corp. v. ComSmart, Inc., 222 S.W.3d
256, 262 (Ky. Ct. App. 2007). The bankruptcy court’s order on the disallowance claims,
however, did not enforce Waldman’s promise to pay off Stone’s debts (that instead is
what Stone’s affirmative claims sought). Rather, the court simply held that Waldman’s
fraud defeated his right to collect on Stone’s debts or to enforce his securities. Waldman
points to nothing in Kentucky law that forbids this relief.

       Finally, Waldman argues that the bankruptcy court violated Kentucky’s parol-
evidence rule and statute of frauds by hearing evidence of the parties’ oral negotiations.
But fraud is an exception to both doctrines. See United Parcel Serv. Co. v. Rickert,
996 S.W.2d 464, 471 (Ky. 1999) (Kentucky law will not permit a party to take advantage
of the statute of frauds for the purpose of committing fraud); Radioshack, 222 S.W.3d
at 260 (“Parol evidence is admissible to show that the making of a contract was procured
by fraudulent representations”). So neither applies here.

                                     *       *    *

       The bankruptcy court’s judgment is affirmed with respect to Stone’s
disallowance claims. The court’s judgment as to Stone’s affirmative claims is vacated.
On remand, the bankruptcy court shall recast its final judgment as to these claims as
proposed findings of fact and conclusions of law, which the district court shall review
de novo.
