Source: http://www.bankruptcylitigationblog.com/archives/us-supreme-court-cases-bankruptcy-professors-hop-on-anna-nicole-smith-bandwagon-in-amicus-brief-filed-with-the-us-supreme-court.html
Timestamp: 2013-05-22 02:06:27
Document Index: 293227811

Matched Legal Cases: ['§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334', '§ 1334']

Home > US Supreme Court Cases > Bankruptcy Professors Hop on Anna Nicole Smith Bandwagon in Amicus Brief Filed with the US Supreme Court > Wednesday, November 30, 2005 | Posted By Steve Jakubowski | 0 Comments | Bankruptcy Professors Hop on Anna Nicole Smith Bandwagon in Amicus Brief Filed with the US Supreme Court
Add an all-star lineup of bankruptcy gurus to the chorus of voices (including our own government) lining up in support of Anna Nicole Smith's position before the US Supreme Court in her continuing efforts to wrestle money from the flush estate of her late husband, the oil tycoon J. Howard Marshall II (at least she got half his ashes!).
The Amici Curiae are law professors who have devoted their careers to the study and teaching of bankruptcy law and bankruptcy jurisdiction. They are deeply interested in this case because of the important effect its outcome could have on the scope of bankruptcy jurisdiction. The Amici file this pro bono brief to offer what assistance they can to the Court as it considers and decides whether the broad and unqualified jurisdiction specially conferred by Congress on the courts of bankruptcy is cut down by the judicially-created probate exception so as to exclude from their jurisdiction any matter that might affect a decedent's legatees or heirs.
In supporting Petitioner and seeking reversal of the decision of the Circuit Court, the Amici urge the Court to hold that the probate exception does not limit the bankruptcy jurisdiction broadly conferred by 28 U.S.C. § 1334, and that the bankruptcy-related abstention provisions in 28 U.S.C. § 1334(c), which include the role of state courts and state law among its relevant abstention considerations, govern the circumstances in which bankruptcy jurisdiction shall not be exercised. This brief focuses on the issue by emphasizing the special nature of the bankruptcy jurisdiction and abstention statutes, whereas the Circuit Court viewed this bankruptcy case from the vantage point of a decedent's heirs and legatees and state probate courts.
Their "Summary of Argument," in true professorial style, is long, but compelling. It states:
This is a bankruptcy case. The issue posed is whether the judicially-crafted probate exception nullifies a portion of the unqualified bankruptcy jurisdiction conferred by Congress on the courts of bankruptcy under 28 U.S.C. § 1334(b) and (e). This bankruptcy case should not be decided by focusing on a decedent's estate. As the Circuit Court itself recognized, "this case does not involve the administration of an estate, the probate of a will, or any other purely probate matter ...." 392 F.3d at 1133. Nor would the judgment granted by the District Court (the "court of bankruptcy") in the exercise of its bankruptcy jurisdiction and voided by the Circuit Court, have been enforceable against the estate of the Petitioner's deceased husband, but only against the defendant, who is her stepson and the Respondent herein.
The court of bankruptcy below, exercising its bankruptcy jurisdiction, granted an approximate $88 million judgment to the Petitioner-Debtor (the "Debtor") on her claim against Respondent for his tortious interference with her expectancy of an inter vivos gift from her husband, only to be vacated on the basis of the Circuit Court's holding that the probate exception removed the Debtor's tort claim from the broad and unqualified statutory bankruptcy jurisdiction conferred by Congress.
Although the Circuit Court stated that it was only "incidentally ... required to determine whether the probate exception applies in a bankruptcy case," 392 F.3d at 1121, the central issue in this case involves whether the probate exception cancels a portion of the bankruptcy jurisdiction conferred by Congress on the courts of bankruptcy, not the role of state probate courts or state probate law. Moreover, although this was a bankruptcy case, the Circuit Court did not even review the District Court's order dated July 20, 2001 denying Respondent's motion for abstention predicated on 28 U.S.C. § 1334(c)(1) and (2), although it could have reviewed the denial of his subsection (c)(2) motion on his appeal from the final judgment. [FN 4] Instead, the Circuit Court addressed, as the only question, whether the probate exception cut out a portion of the unqualified bankruptcy jurisdiction conferred by 28 U.S.C. § 1334. As stated by the Circuit Court, "[o]ur jurisdiction on the merits depends upon whether the probate exception to federal court jurisdiction applies," 392 F.3d at 1121, and it held that bankruptcy jurisdiction conferred by 28 U.S.C. § 1334 succumbed to the probate exception.
[FN 4] By virtue of 28 U.S.C. § 1334(d), the District Court's order denying § 1334(c)(1) abstention was not subject to review by the Circuit Court, whereas the limitation on its appellate jurisdiction by that provision did not apply to the denial of § 1334(c)(2) abstention. In any event, because Respondent did not contend in the Ninth Circuit briefing that the District Court's ruling on abstention was erroneous, the issue was waived. TRW, Inc. v. Andrews, 534 U.S. 19, 34 (2001); Confederated Tribes of Umatilla Indian Reservation v. Bonneville Power Administration, 342 F.3d 924, 933 (9th Cir. 2003).
By holding that the probate exception placed the Debtor's tort claim outside the jurisdiction of the court of bankruptcy, the Circuit Court brought a concept into 28 U.S.C. § 1334 that is nowhere in that statute, and read § 1334 as if it automatically excluded a portion of the jurisdiction it conferred. This invaded the province of Congress by judicially amending the bankruptcy jurisdictional statutes to narrow their scope. Without even mentioning the bankruptcy abstention provisions in 28 U.S.C. § 1334(c), the Circuit Court addressed, as the only question, whether the probate exception cut out a portion of the unqualified bankruptcy jurisdiction conferred by § 1334(b) and (e).
Amici proffer several reasons explaining why the probate exception does not apply to this and other cases within the jurisdiction conferred by 28 U.S.C. § 1334 on the courts of bankruptcy.
First, the plain text of § 1334(b) and (e) broadly grants jurisdiction of the Debtor's tortious interference claim because it is "related to" her bankruptcy case, and also consists of "property of the estate," which includes a debtor's causes of action. None of the language of § 1334 or of any other statute provides a basis for reading out of the statute any of the jurisdiction so conferred. Thus, with its decision, the Circuit Court essentially repealed part of the bankruptcy statute when it applied the probate exception to bankruptcy.
Second, the principle of Markham v. Allen, 326 U.S. 490, 495 (1946), is controlling. In that case, the probate exception was held not to impair the district court's jurisdiction specially granted by a specific federal statute even thought the decedent's estate was undergoing administration in a probate court. Under the Court's analysis, the probate exception, developed under the diversity jurisdiction statute conferring jurisdiction generally on the district courts, could not be read to limit the district court's specially conferred jurisdiction pursuant to the Trading With the Enemy Act. Likewise, 28 U.S.C. § 1334 is a special jurisdictional statute; it grants broad bankruptcy jurisdiction as a means to accomplish the purposes of the bankruptcy law.
Third, although a federal court has an unflagging duty to exercise its jurisdiction, and not to abstain in the absence of exceptional circumstances that may exist in a particular case, a court of bankruptcy, in deciding whether to abstain from hearing a proceeding within its jurisdiction, is not limited to examining bankruptcy considerations. Section 1334(c)'s abstention provisions contemplate that the court give consideration to numerous factors, including the interest of the debtor and creditors, as well as the administration of a decedent's estate for the benefit of its legatees and heirs. Accordingly, the probate exception, concerned with one factor only, has no place in the bankruptcy context in which the courts of bankruptcy are guided by many considerations in deciding whether to abstain.
Fourth, the goals of bankruptcy, to centralize bankruptcy litigation and to maximize the debtor estate for the benefit of the creditors, guide the interpretation of § 1334. The cancellation by the Circuit Court of a portion of the bankruptcy jurisdiction conferred by Congress by means of the probate exception interferes with Congress' purpose in creating broad bankruptcy jurisdiction and its intention that all property of the debtor be brought into the estate.
Fifth, a party who invokes bankruptcy jurisdiction cannot thereafter seek to void it. Respondent filed both a proof of claim and an adversary proceeding against the Debtor in this bankruptcy case. By so proceeding, Respondent invoked bankruptcy jurisdiction as a means to contest her position and to challenge her right to receive a discharge in bankruptcy. In response, the Debtor filed a counterclaim against Respondent for tortious interference with her expectancy of an inter vivos gift. Having invoked the jurisdiction of a court of bankruptcy by an action in which the Debtor counterclaimed, Respondent cannot thereafter assert that the court of bankruptcy could no longer exercise its statutory jurisdiction.
Their arguments in the brief are developed under the following sub-headings:
I. A Plain Text Reading of 28 U.S.C. § 1334 Demonstrates That the Probate Exception is Inapplicable in the Bankruptcy Context ... p.6
II.Under the Theory of Markham v. Allen, the Probate Exception is Inapplicable Because 28 U.S.C. § 1334 "Specially Confers" Jurisdiction on the Courts of Bankruptcy ... p.9
A. The Probate Exception Has No Place in the Context of Bankruptcy Jurisdiction ... p.9
B. Congress Did Not Intend to Abrogate the Theory of Markham v. Allen When It Enacted 28 U.S.C. § 1334 ... p.11
III. The Bankruptcy-Related Provisions for Abstention from the Exercise of Specially Conferred Bankruptcy Jurisdiction Are Controlling ... p.13
IV. The Paramount Jurisdiction of the Courts of Bankruptcy, By Virtue of Their Exclusive In Rem Jurisdiction Under § 1334(e), Reinforces the Basic Notion That Abstention is the Exception Rather Than the Rule ... p.17
V. The History of the Probate Exception Explains Why It Does Not Apply to Bankruptcy ... p.21
VI. Application of the Probate Exception to Oust the Court of Bankruptcy of Jurisdiction Would Deprive the Estate of Substantial Value In Contravention of the Goal of Bankruptcy Law To Maximize the Value of the Debtor's Estate for the Benefit of Creditors ... p.22
A. Bankruptcy Provisions Should Be Interpreted in Light of Their Congressional Purpose ... p.23
B. Bankruptcy Code Provisions Were Designed to Maximize the Estate For the Benefit of Creditors ... p.23
VII. A Party Who Invokes Bankruptcy Jurisdiction is Precluded From Contesting the Jurisdiction of a Court of Bankruptcy Over Counterclaims Involving Generally the Same Subject Matter That is Before a Probate Court ... p.25
CONCLUSION ... p.27