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September 29, 2011 6:02 PM

Anna Nicole Smith Makes Her Mark on Heller Bankruptcy Case

Posted by Victor Li

The U.S. Supreme Court's ruling this year in the fight over Anna Nicole Smith's estate is complicating the Heller Ehrman bankruptcy case, according to sibling publication The Recorder.

Earlier this month, 16 law firms defending themselves against so-called Jewel claims brought by the Heller estate over fees from unfinished business asked the federal bankruptcy judge overseeing the matter to move those disputes to federal district court.

On Tuesday, eight of those firms—including Arnold & Porter, Cooley, Hogan Lovells, Pillsbury Winthrop Shaw Pittman and Proskauer Rose—agreed to pay a combined total of $2.25 million to the estate, the Recorder reports.

The other eight—including Davis Wright Tremaine, Goodwin Procter, and Orrick, Herrington & Sutcliffe—have so far refused to settle and are instead asking that their cases be removed from bankruptcy court to federal district court in line with the Supreme Court's June ruling in Stern v. Marshall.

In that case, which involved the estate of the deceased former Playmate of the Year, the Supreme Court held that bankruptcy judges do not have the authority to issue final judgment on state law counterclaims by an estate and that those claims belong in federal district court. 

On Wednesday, The Recorder reports, San Francisco federal bankruptcy judge Dennis Montali stated in a court filing that he believes he should keep the case and that Stern's narrow holding has been extended in ways the Supreme Court did not intend. Montali, The Recorder notes, also wrote that keeping the disputes before him would best serve the judicial system's interests, because of his deep knowledge of the case.

Attorney Christopher Sullivan of Trepel McGrane Greenfield, who represents Heller liquidation plan administrator Michael Burkart, opposed the motion to transfer, citing a fear that such a move would disrupt the ability of bankruptcy courts to handle their cases efficiently. Sullivan said he hopes the eight remaining firms opt to settle soon and that the window of opportunity to do so is closing, according to The Recorder.

"In order to get the full benefit of the next distribution there'd have to be a settlement in the next few weeks," Sullivan said. "If they want to settle it's the time to do it."

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