Bankruptcy Partner Kelly Burgan and Associate Adam Fletcher co-authored an article, "Erosion or Landslide?: The Scope and Significance of Stern v. Marshall," which appears in the August 2011 TMA Ohio Chapter Newsletter. TMA is the premier national organization of professionals dedicated to corporate renewal and turnaround management.
The article details the U.S. Supreme Court’s recent decision in Stern v. Marshall, a dispute involving a $1.6-billion estate and allegations of fraud and defamation between Vickie Marshall (better known as Anna Nicole Smith and wife of Texas billionaire J. Howard Marshall) and Pierce Marshall (J. Howard’s son).
According to the article, “Soon after marrying J. Howard, Vickie brought a common law action for tortious interference in Texas state court against Pierce, claiming that Pierce had fraudulently prevented J. Howard from setting up a trust for Vickie. While that suit was pending, J. Howard died without any trust in place for Vickie. She then filed for bankruptcy and Pierce filed a proof of claim in Vickie’s bankruptcy for defamation by Vickie and her lawyers in connection with the Texas tortious interference suit. In response, Vickie filed a counterclaim against Pierce in her bankruptcy, for the same tortious interference that was the subject of the Texas suit.” The case made its way to the U.S. Supreme Court which ultimately upheld a decision in favor of Pierce’s estate.
Burgan and Fletcher suggest that the decision raises procedural and practical concerns for attorneys and restructuring professionals, as well as lenders and others who are often the subject of bankruptcy court disputes and whose rights may be determined by existing and future bankruptcy court orders, particularly the constitutional limits of the bankruptcy courts’ power.
The article concludes on a note of uncertainty. According to Burgan and Fletcher, “Only time will tell whether Stern represents a minor erosion of the bankruptcy courts’ power or a landslide, threatening to bury a significant function of the bankruptcy court.” They advise that, “Until the implications of the decision become clearer, attorneys and other professionals involved in bankruptcy court litigation that includes state law issues should be aware of the potential implications and consider procedural alternatives for ensuring the finality of the order.”