Last week the United States Supreme Court heard oral arguments in Stern v. Marshall. Will this be the end of a 16 year old legal battle? Only time will tell, as the decision is expected to be announced within a few months. In the meantime, the High Court must decide some very technical issues that address bankruptcy jurisdiction.
The case began when former reality TV star, Anna Nicole Smith, sued the son of her late husband, J. Howard Marshall II, for supposedly interfering with her ability to inherit half the Marshall estate. A Texas Probate Court ruled that Marshall took the necessary steps to protect his estate and intentionally disinherited Smith. Long story short, Smith filed bankruptcy in California during the Texas trial. This forum shopping, or, looking for a court that might provide a more favorable outcome, was utilized by Smith and her legal team; they seemed to succeed when the bankruptcy court ruled in her favor. Smith’s claim, however, (tortious interference with an expectancy of inheritance) is a personal injury tort. Notably, the U.S. Code says personal injury torts are automatically considered non-core to bankruptcy proceedings.
The fate of this case now rests with the Supreme Court Justices who will determine bankruptcy jurisdiction on matters of core versus non-core issues. During oral argument Justice Ruth Ginsburg said “this whole thing would be a futile exercise if the tort claim comes out of the bankruptcy judge’s” rulings. Lady Justice will keep you up to date on the latest!