The justices listened to arguments from a lawyer of the deceased former Playmate, whose estate is locked in a years-long battle for money they say was promised her by her husband, oil tycoon J. Howard Marshall.
The convoluted dispute over Marshall's money has its roots in a Houston strip club where he met Smith. The two were wed in 1994 when he was 89 and she 26. Marshall died the next year and his will left his estate to his son, E. Pierce Marshall, and nothing to Smith, whose real name was Vickie Lynn Marshall.
Smith challenged the will, claiming that her husband promised to leave her more than $300 million above the $7 million in cash and gifts showered on her during their 14-month marriage.
Smith moved to California after his death and filed bankruptcy in Los Angeles, alleging in federal court filings that her husband promised her a large share of the estate. A bankruptcy judge awarded her $475 million from Marshall's estate, with a federal judge reducing that amount to $89 million in 2002.
Smith had wanted the courts to accept that ruling but the 9th U.S. Circuit Court of Appeals in San Francisco threw it out, saying the bankruptcy judge could not rule on the probate case.
The appeals court said that determining court decision was that of a Houston jury that said Marshall was mentally fit and under no undue pressure when he wrote a will leaving nearly all of his estate to his son and nothing to Smith.
The younger Marshall died in 2006 and Smith died of a drug overdose in 2007.
The legal issue the justices are grappling with is whether bankruptcy judges can make rulings on issues outside of bankruptcy law.
Her lawyer, Kent L. Richland, said the appeals court was wrong on its limiting of the bankruptcy court's reach. "This court's cases established that the bankruptcy court was constitutionally authorized to decide that entire dispute," he said.
The Marshalls' lawyer, Roy T. Englert, Jr., said the law is clear: Bankruptcy courts which are non-Article III courts unlike the federal courts can only bring final judgments on issues that are related to the Bankruptcy Code.
When debtors say, "'I get to bring my counterclaim against the creditor in a non-Article III forum and the non-Article III forum gets to hear it and determine . then I suggest there is a constitutional problem," Englert said.
It is not immediately known when the court will rule on this case. But it is unlikely that the Supreme Court's ruling will end the legal wrangling, with other appeals of other aspects of the case working their way through the court system.
In fact, this was not the first time Smith's name had been heard at the high court.
She showed up at the Supreme Court in 2006, dressed in all black, to hear the justices debate whether she could pursue her late husband's fortune in court. She wept in the courtroom as justices discussed Marshall and whether he had intended to provide for his young wife in death.
The high court ruled in her favor that time.
And Justice Anthony Kennedy in 2009 refused to lift a court order that prevented Smith's estate from collecting any money under the bankruptcy court ruling. Elaine Marshall, Pierce Marshall's widow, had argued that the order preventing Smith's estate from collecting the money should remain in place while the tangle of competing claims was sorted out.
Smith's daughter, Dannielynn Birkhead, was named Smith's heir in 2008. The girl's father, Larry Birkhead, and attorney Howard K. Stern are in charge of the estate.
The case is Stern v. Marshall, 10-179.
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