In the Matter of: Marshall

When assigned for the interest of efficiency, a bankruptcy court judge presiding over a Chapter 11 case acts within his discretion when denying a motion for recusal after having presided over a case with a similar factual background and same principal parties.

This case is the most recent in a long line of cases stemming from the settlement of the estate of J. Howard Marshall (“J. Howard”), Texas oil billionaire and the husband of the late Anna Nicole Smith. The case before the Ninth Circuit comes as a result of the Chapter 11 bankruptcy proceedings instituted by Howard Marshall III (“Howard III”), the disinherited son of J. Howard, in response to a Texas fraud judgment entered against Howard III with respect to a counterclaim by his older brother, Pierce, during the initial estate feud. Pierce argued that Judge Bufford, the judge who had handled Smith’s Chapter 11 case, should be reassigned or recused as the cases were not related enough under California Local Bankruptcy Rules to warrant assignment of the same judge, that Howard III had only instituted the Chapter 11 proceedings in bad faith to escape payment of the fraud judgment, and that the Debtors’ Plan that arose from those proceedings did not meet the “Best Interest of Creditors” test. The panel held that the bankruptcy court was not required to reassign the case as it had broad discretion to assign cases to promote efficiency. Further, the panel held that Judge Bufford was not required to recuse himself based on his conduct and rulings in Smith’s Chapter 11 case, finding no basis for impartiality that would require recusal. With respect to the Debtors’ plan, the panel held that the “Best Interest” test did not apply as Pierce had filed to file a proof of claim in Howard III’s Chapter 11 proceedings. The panel further held that due to this failure to file a proof of claim, Howard III’s Debtors’ Plan that did not include payment of the Texas fraud judgment was not filed in bad faith. AFFIRMED.