SCOTUS Reprise: Stripper's Estate Gets Second Oral Argument

Money isn't everything, right.  Yet here is SCOTUS, taking a close second look at the money.

A case involving a Texas Billionaire's massive estate and a washed-up model turned stripper is on the SCOTUS docket for oral argument today, for the second time.  You recall this case.

The estate of former Guess Jeans model whose, er, "married" name was Vickie Lynn Marshall, and who worked under the name Anna Nicole Smith, has carried on the lawsuit she filed shortly after J. Howard's death in 1995 at age 90.

Plenty of eyebrows were raised and family feathers ruffled in 1994 when Mr. Marshall took Smith as his third wife.  Then he died and the lawsuits began.

And these lawsuits have just not stopped, despite (and perhaps because of) the fact that all the litigants have died.  Anna Nicole Smith died in a drug overdose in 2007, shortly after the U.S. Supreme Court reversed an unfavorable decision for Smith issued by the U.S. Court of Appeals for the Ninth Circuit.

The case involves the scope of federal jurisdiction, eventually engulfing three separate court systems. At his death, Marshall had long established a trust estate plan leaving everything to his son, E. Pierce Marshall, who was also named trustee of the trusts.  Smith contested the trust plan, asserting that Marshall told her he would leave a portion of his estate to Smith.

What would have been a simple, although large, Texas county probate tussle went federal when Ms. Smith was hit with a default-judgment for, of all things, sexual harassment.  She filed for bankruptcy in California and her deceased husband's trustee-son claimed non-dischargability along with libel for statements Smith allegedly made against the decedent.  Smith counter claimed in the bankruptcy court for interference with her husband's estate plan.

Now hang with me on this....

The federal bankruptcy court not only dismissed the trustee's claim, it awarded Smith nearly half a billion dollars on her counter claim, finding that Marshall's son did interfere with his father's testamentary wishes.  This ruling was taken to the U.S. District Court where Smith's award was reduced to a paltry $88 million.

In the meantime, in an entirely separate proceeding, a Texas probate jury found that the decedent's estate plan was valid, ruling against Smith.  These decisions were then considered by the Ninth Circuit who invalidated the federal district court's award to Smith, holding that the Texas probate court had exclusive jurisdiction over such matters.

SCOTUS disagreed back in 2006, reversing the Ninth Circuit and holding that some issues tainted by state probate court could legitimately find their way into federal court via a properly raised bankruptcy-related issue; i.e. Smith's counterclaim.  The High Court then remanded the case back to the Ninth Circuit for a determination on the merits of that claim.

On those said merits, the Ninth Circuit again ruled against the stripper.  Again, the stripper, this time through her estate because she had died, appealed to SCOTUS who once again granted certiorari.  Responding to her claims is the estate of E. Pierce Marshall, who died shortly after Smith.

And now, viola, oral argument, chapter two is here today.  Stay tuned for the result.

This time, the issue concerns the very nature of federal jurisdiction and the constitutional powers (under Article II of the Constitution) of the federal courts; delving even deeper into that subject than the first go around. For a more detailed analysis of this case, SCOTUS expert Lyle Denniston has put together an excellent oral argument "recap" published on the SCOTUSblog.

Regardless of how the High Court rules, the lesson we take away from this suit is that money drives the bulk of all litigation.  Sometimes justice is just roadkill in the process.

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info@clarkstonlegal.com

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Posted in: Anna Nicole Smith,bankruptcy,constitution,J. Howard Marshall,Lyle Denniston,probate court litigation,SCOTUS,trust,trustee

What Happens at Your Creditors' Meeting Once You've Filed for Bankruptcy

 This post is the original content of the Colorado law firm of Wink & Wink, bankruptcy specialists.  They maintain an excellent law blog with frequent updates on matters of bankruptcy that are as relevant here in Michigan as they are in Colorado.  We hope you find this post as informative as we did!

For many bankruptcy filers, the prospect of the §341 Meeting of Creditors causes some stress and anxiety. It’s normal to be apprehensive about your 341 Meeting, but at the same time it’s nothing to be afraid of because most 341 hearings go quickly and smoothly. As with all other aspects of your bankruptcy case, preparation is the key. So what follows is an overview of the 341 process to ease your worried mind.
What Is A 341 Meeting?

The Meeting of Creditors is described in section 341 of the Bankruptcy Code, hence the name “341 Hearing”. It provides for a United States Trustee to convene and preside at a meeting of creditors and directs the Trustee to “orally examine the debtor” in a Chapter 7 case to make sure they are aware of 1) the consequences of filing for bankruptcy, 2) their ability to file a petition under another chapter, 3) the effect of any discharge of debts and 4) the effect of reaffirming any debt.

What happens in reality is that the bankruptcy trustee reads an advisement and then begins calling cases by debtor name. Once you hear your name called, you and your attorney walk up to the desk or podium and the panel trustee places you under oath, checks your identification and asks you questions on the record about your bankruptcy petition and your financial situation.

In Colorado, where I practice bankruptcy law, you will also hand a completed “Trustee Information Sheet” to the panel trustee along with a bank statement and pay stub that covers the date your case was filed. Additionally, the trustee must already have received a copy of your most recent tax return. As I will discuss below, these requirements alone are enough reason to make sure you are represented by an attorney at your 341 Hearing.

In fact, if you meet with an attorney who does not provide representation at the 341 Hearing as part of their services, you should keep looking. If there is ever a time to have the services of a bankruptcy lawyer, it is when you are answering questions about your case under oath.

Who Is the Bankruptcy Trustee?

In a Chapter 7 bankruptcy, private trustees—or panel trustees—are appointed to administer estates under the supervision of the United States Trustee for their judicial district. That means there is a U.S. Trustee’s office in each judicial district (part of the Department of Justice), and then each U.S. Trustee’s office has a panel of private trustees who do the day-to-day work of administering Chapter 7 cases, which includes presiding at the 341 Hearings.

These panel trustees are usually private bankruptcy attorneys who do the work on a part-time basis. They take a cut of any assets they find in the bankruptcy estate, along with a flat fee for each case they administer.

So, in a Chapter 7 case, you have two levels of trustee involvement: 1) the U.S. Trustee, who is reviewing your case to make sure you qualify for chapter 7 and that your case is not an ‘abusive filing’; and 2) the panel trustee who is looking for assets they can sell to make some money.

What Is the Trustee Looking For?

Because the panel trustee has a financial stake in every Chapter 7 case they see, the 341 Hearing really boils down to one thing: money. The panel trustee is looking to see if you have assets they can liquidate because that is how they get paid. (The panel trustee takes 25% of the first $5,000, 10% of the next $45,000, etc.) Therefore, the questions you are asked are tailored to determine if your estate has any non-exempt assets.

For example, if you own a car, the trustee will want to know how you came to the value the vehicle(s) you listed for the car in your bankruptcy petition. If the trustee thinks the value is too low, they may order an appraisal.

A bankruptcy attorney is invaluable in preparing you for the types of questions you may be asked at the 341 Hearing.  This is because your attorney, in preparing your bankruptcy case, will know what property or interests you have that will be of interest to the trustee and can prepare you accordingly.

What About the Creditors?

Since the 341 is technically called the Meeting of Creditors, you may be wondering where the creditors are in the process. All of your creditors receive notice of your bankruptcy and also the date of your 341 Hearing. However, it is very rare for a creditor to appear at this meeting.

In fact, the only time you usually see creditors at the 341 Hearing is when the creditor is an ex: ex-wife, ex-husband or ex-business partner, someone with an opinion about your bankruptcy or who wants the trustee to know that they think you have some very fancy golf clubs in the garage that you didn’t list on your petition (another reason to have an attorney prepare your bankruptcy case!). In other words, you probably will never see Bank of America at the 341 meeting, they just aren’t emotionally involved and they don’t have the staff or money to send someone to every meeting of creditors when one of their customers files for bankruptcy.

The Role of the Attorney

The 341 Hearing is a perfect example of why having a lawyer prepare your bankruptcy AND represent you at the trustee meeting is essential. If you spend any time at all in the hearing room, listening to other cases as they go before the panel trustee, the benefits are obvious.

Last month, I saw an extreme example of what can happen when you aren’t prepared for or represented at the 341 Hearing. The trustee called the next case and the debtor approached the table, raised his right hand and took an oath. Once he sat down he was shaking and obviously nervous. The trustee asked him a few preliminary questions, checked his identification and then asked him if he had personal knowledge of the contents of his bankruptcy petition. This very basic question threw this guy for a loop. He asked to have the question repeated, and repeated again. And then he turned very, very pale and passed out. It was scary and sad because the poor guy was obviously nervous about his case and his petition and would have benefitted greatly from professional advice and representation. My client actually turned to me and said “Am I ever glad we have a good bankruptcy attorney!”

Fainting at the 341 Hearing is not at all common, but having your case dismissed for failure to provide your tax return to the trustee is, along with having to surrender property (like your tax refund) that you could have kept if you’d had legal advice.

Overall, the 341 Hearing is nothing to be scared of, as long as you are prepared and accompanied by an attorney who has prepped you for the meeting. Most 341’s go quickly and painlessly, especially when your case was properly prepared, you know what to except, and are ready for the specific questions that might come your way.

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Posted in: 341 meeting,Bankrupcty,creditors,debtor,discharge,trustee,Wink and Wink