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Anna Nicole Smith Returns to the Supreme Court

Posted By Robert Alt On October 4, 2010 @ 5:30 pm In Legal | Comments Disabled

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Today is “first Monday,” the beginning of the Supreme Court’s 2010 term. With the beginning of the term comes a flurry of cases added to the docket for the year. These additions form a significant portion of the select few cases that the Court chooses to hear during the course of the term: less than 100 out of more than 10,000 vying for review. Among the cases that the Court added to the docket late last week is Stern v. Marshall—the unending case of Anna Nicole Smith [2] (actually her estate) against her deceased husband’s deceased son’s estate.

As the last sentence suggests, this case has dragged on for so long that everyone directly involved in it have shuffled off this mortal coil. (Ironically, Howard K. Stern, a man who is currently on trial charged with conspiring to provide excessive prescription drugs to the known addict Smith, is the executor of Smith’s estate, and as such is the named party in the litigation.) As another indication of the duration of this litigation, this will be the second time that the Supreme Court has heard this case! For the sake of maintaining a proper, constitutionally limited role for bankruptcy courts, and to promote requisite certainty for probate decisions, the Court would be well advised—I never thought I would say these words—to affirm the Ninth Circuit’s well-reasoned decision.

The case has been likened numerous times to Charles Dickens novel Bleak House—and rightly so given that it began some 15 years ago. In an attempt to gain more than the millions in cash and gifts that she had received during his life, Anna Nicole challenged her wealthy husband’s estate plan, claiming that he had made a verbal promise of half of his fortune—a claim which was flatly contradicted by his very detailed, written estate plan. The jury in Texas probate court didn’t buy this self-serving story, so she shopped for a more receptive court in California, and she found one in a federal bankruptcy court. On appeal, the Ninth Circuit dismissed the millions awarded by the court based upon a federal jurisdictional rule, but the Supreme Court in 2006 reversed, saying that the federal court could consider the merits of the case.

In March of this year, the Ninth Circuit found that the decision of the Texas probate court, which was charged with determining the validity of J. Howard Marshall II’s estate plan, must be given preclusive effect over the bankruptcy court’s decision. This is to say that in resolving the conflicting decisions between the courts—the Texas probate court saying that she was entitled to nothing after a detailed trial analyzing the content and validity of his estate plan, and the California bankruptcy court saying that she was entitled to millions—the Texas probate decision is the one that must be enforced.

Key to understanding this decision is knowing that bankruptcy courts are not organized under Article III of the Constitution, which covers the judiciary. In establishing bankruptcy courts, Congress did not apply the requirements of Article III judges to bankruptcy judges, namely bankruptcy judges do not serve during good behavior (popularly referred to as a lifetime appointment) as is required by Article III, but serve 14-year terms, and they can be removed by the judicial council for grounds other than impeachment. Based on this constitutional distinction and statutory restrictions, bankruptcy judges do not exercise the same broad authority as Article III judges, with one of the major limitations being that they can only hear and finally determine “core proceedings” arising under the bankruptcy code. The Ninth Circuit found that the Anna Nicole’s claims were not core to the bankruptcy case, and that the bankruptcy court “exceeded its statutory grant of power and the constitutional limitations on that power when it purported to enter a final judgment in favor of Vicki Lynn Marshall [a/k/a Anna Nicole] . . . .”

The Supreme Court has taken the case presumptively to clarify the issue of when bankruptcy statutes and the Constitution permit bankruptcy courts to make final rulings on counterclaims that debtors like Anna Nicole Smith make that are dubiously or at best ancillarily related the bankruptcy case itself. In addition to the serious constitutional concerns about broadening the jurisdiction of bankruptcy courts over non-bankruptcy matters, Smith’s litigation itself should serve as an instructive warning to the court. From the beginning, Smith’s claim was designed to forum shop and to manipulate the legal system—to bring a claim into federal court that was already being addressed by a state court of competent jurisdiction. Were she to win, it would bring uncertainty and added expense to estate planning, and promote forum shopping—all bad results. The Ninth Circuit opinion is well-reasoned, right on the law, and has the salutary effect of being good policy. Law and policy would be well-served if the Supreme Court affirmed, and finally put an end to this lengthy exercise in forum shopping and avarice.


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URL to article: http://blog.heritage.org/2010/10/04/anna-nicole-smith-returns-to-the-supreme-court/

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[1] Image: http://www.foundry.org/wp-content/uploads/AnnaNicoleSmith.jpg

[2] unending case of Anna Nicole Smith: http://www.heritage.org/Research/Commentary/2009/12/Two-Front-War-on-Estates

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