Bankruptcy

Anna Nicole Is to Have Her Day in Court

By mcbride

Although she is dead, Anna Nicole Smith’s estate is making law.  Short version of her legal story: Young blond ex playboy model (hereafter: “New Model”) marries old rich man (”ORM”).  (Note that ORM used to teach estate planning at Yale Law School….)  New Model challenges ORM’s estate plan saying that he verbally agreed to pay her lots and lots of money.  (The estate plan allowed her to retain all the expensive gifts he had given her, but not any part of his multi million dollar estate created after his death.) Probate Court in Texas holds that ORM’s estate is well drafted and gives it its intended legal effect: New Model gets nothing from the estate.  Next New Model moves to Cali (kinda obvious when you think about it) and files for bankruptcy.  In the bankruptcy, the same legal issues are raised (that New Model should get lots of ORM’s estate), in a slightly different context.  This time, New Model wins!  Now she has a Court awarding her 475 million.  The United State’s Supreme Court has agreed to this case to re-visit some legal issues which are fundamental to the working of the Bankruptcy Court in the US. 

Legal Background: based on the current arrangement, Bankruptcy Courts cannot exercise the same powers as can a US District Court because they are not Article III Judges.  Up before the United States Supreme Court is the issue of what power does the Bankruptcy Court have to decide this legal issue.  Stated another way: is the legal issue which resulted in New Model’s huge monetary award “related” enough to the core bankruptcy proceeding such that this Court, not a District Court, can make a final ruling. 

“With the Justices? grant of new review of the case last September, the Court is taking on the task of interpreting both a federal law ? the Bankruptcy Code of 1984 ? and the Constitution?s Article III spelling out the powers of the federal judiciary.  The Court in essence will be reexamining constitutional issues that led to a widely splintered ruling in 1982 in the case of Northern Pipeline Construction v. Marathon Pipeline. There, the Court struck down part of an earlier bankruptcy law because it assigned tasks to judges not chosen under Article III.   Under that provision, only judges with life tenure can make final decisions.

In fact, since that ruling in 1982, the courts, federal court administrators, and Congress have repeatedly sought to clarify the powers of the specialized courts that handle debtors? bankruptcy ? courts that are far more often involved with mundane problems of average debtors than with multi-million-dollar estates of the rich and famous.”

Here is a link to the ScotusBlog: http://www.scotusblog.com/2011/01/argument-preview-legal-soap-opera-runs-on/

Michael

Full post as published by Texas Lawyer Blog on January 19, 2011 (boomark / email).