Zywicki in Washington Times: Confine Wills to Probate Court
Disgruntled claimants should not have the opportunity to contest a will in the bankruptcy court of their choice, says Professor Todd Zywicki in a Washington Times commentary on the 9th Circuit's forthcoming ruling on the efforts of the late Anna Nicole Smith to obtain a larger share of her deceased husband's fortune.
After an extensive trial, a Texas probate court ruled that Smith was not entitled to additional assets from the estate of J. Howard Marshall, a wealthy Texas oilman married briefly to Smith. Prior to the court's ruling, however, Smith filed bankruptcy in California and was subsequently awarded a multi-million-dollar sum from the estate. Since then the matter has been in the courts, including the Supreme Court, which sent it back to the lower court for final resolution.
The core question, says Zywicki, is whether the validity of Smith's challenge to Marshall's will should be decided in a Texas probate court or a Hollywood bankruptcy court.
"The American bankruptcy system exists for the 'honest but unfortunate' debtor, not for those who would use bankruptcy strategically to rewrite obligations just to get a better deal than they could outside bankruptcy," said Zywicki.
Stripper searches for loot loophole, The Washington Times, February 26, 2010. By Todd J. Zywicki.
"The subsequent series of court cases has lasted almost 10 times longer than the Marshalls' star-crossed marriage. According to the federal district judge, the case has generated more paperwork than any other case in that district's history - and legal fees that may even exceed Smith's jewelry bill. The case has been up to the Supreme Court once already to determine a narrow issue of law. After ruling on that issue, the Supreme Court sent the case back to the lower court to resolve one other issue with far-reaching importance - essentially, who should decide the validity of Smith's challenge to Marshall's will, the Texas probate court or the Hollywood bankruptcy court?
"Common sense tells us that the probate court is the place to resolve such issues. And although the issues are technical, relevant law tells us the same thing. According to federal law, bankruptcy courts have authority to resolve only 'core' issues related to the bankruptcy case itself. In particular, bankruptcy law is designed to provide a set of procedures to coordinate an orderly distribution of the bankrupt's assets, not to encourage 'forum-shopping' into bankruptcy merely to rewrite contracts and strategically evade creditors - or, as in Ms. Smith's case, simply to relitigate her failed state court suit.
"If allowed to stand, Smith's case demonstrates the ease by which savvy litigants can game the bankruptcy system and manufacture jurisdiction by a bankruptcy court to get a second bite at the apple."