Detroit bankruptcy ruling: debt, crime and Anna Nicole Smith

Reuters News
Posted: Dec 06, 2013 1:38 PM

By Tom Hals

(Reuters) - The 150-page court ruling finding Detroit eligible for bankruptcy focused on the city's soaring crime, crushing debt - and the late Anna Nicole Smith.

The former Playboy Playmate spent years making headlines with a reality show, brief marriage to J. Howard Marshall, an octogenarian billionaire she met while working at a Houston strip club, and 2007 drug overdose death.

But Smith's contribution to pop culture pales in comparison to her lasting impact on the arcane world of bankruptcy procedure, which was discussed in detail in the Detroit opinion, which was published on Thursday.

A U.S. judge ruled on Tuesday that Detroit, with more than $18 billion in debt, was eligible for bankruptcy protection, making it the largest municipal bankruptcy in U.S. history.

So how did the late Smith find her way into the court ruling?

To oversimplify, the U.S. Supreme Court ruled 5-4 in a 2011 case involving Smith that a U.S. Bankruptcy Court lacks authority to decide some matters of state law.

The judge overseeing Detroit's bankruptcy, Steven Rhodes, found that did not prevent him from deciding the constitutionality of a Michigan law that led to the governor appointing a manager to run the city.

Rhodes' ruling has been appealed by unions.

The Supreme Court case, known as Stern v Marshall, has prompted more than 500 court decisions as judges grapple with how to apply the ruling.

The connection between Smith and Detroit begins with the 1995 death of Smith's husband, who left almost his entire $1.6 billion estate to his son E. Pierce Marshall.

Smith, whose legal name was Vicky Lynn Marshall, began a bitter battle that passed through state, bankruptcy and federal courts in three states and went all the way to the U.S. Supreme Court - twice. Chief Justice John Roberts was inspired to compare it to the convoluted Jarndyce v Jarndyce case in Charles Dickens' "Bleak House."

Like the case in the classic novel, the fight over the Marshall estate outlasted both E. Pierce, who died in 2006, and Smith, who died a year later.

Stern v Marshall bears the names of Howard K. Stern and Elaine T. Marshall, who carried on the case on behalf of the original parties.

(Reporting by Tom Hals in Wilmington, Del.; editing by Matthew Lewis)