THE WALL STREET JOURNAL.                                        January 12, 2007                  COMMENTARY                 Forum-Shopper of the Year By RONALD A. CASS Anna Nicole Smith makes for good copy. America's most gaudy litigant has spent the last few months dodging eviction notices in the Bahamas and paternity-test subpoenas in the U.S. A few days after the death of her son, she donned a wedding dress for a "commitment ceremony" with her attorney, then made almost a million dollars selling photos of her late son's last hours, her new baby and her "wedding" to tabloid magazines. In the midst of all of this, she has kept up her long-running litigation over the estate of her late husband, J. Howard Marshall II. The litigation, which initially was filed more than a dozen years ago against heirs to the estate of her husband, has changed into a suit against the heirs of E. Pierce Marshall, her husband's son, who died unexpectedly last summer. Ms. Smith, a Texan who married a Texan, still comes to court in California seeking a sizeable share of J. Howard Marshall's Texas-based estate. At the same time, she asserts that she is now a resident of the Bahamas, so California courts lack jurisdiction over her in the paternity litigation. Outlandish as this soap opera appears, her manipulation of our legal system could have significance to the law and to the rule of law. That is why devotees of serious news, as well as tabloid aficionados, should give heed.                                                                                      * * * Ms. Smith's litigation begins with her brief marriage to J. Howard Marshall, when she was 26 and he nearly 90. Mr. Marshall formally memorialized their marriage with a $6 million gift to Ms. Smith but chose not to put her in his estate plan. Ms. Smith sued in Texas probate court seeking half his fortune, estimated at $1 billion, alleging that he had promised this to her only to have his son frustrate those wishes. The Texas court rejected her claims after a lengthy trial, but that didn't end matters because Ms. Smith, after suing in Texas as a Texas resident, had instituted an action in federal bankruptcy court in California as a California resident. She sought asset protection following a default judgment against her (on a sexual harassment claim by her personal assistant). That judgment later was compromised for a smaller sum, but by then she had imported the essence of her Texas claims into the California proceeding. The federal judge in California drew conclusions directly opposite those reached in Texas, a decision overturned by the Federal Court of Appeals for the Ninth Circuit, primarily on the ground that, under the "probate exception," federal courts lack jurisdiction to hear matters within the competence of state probate courts. That conclusion was in turn reversed by the Supreme Court, which sent the case back to the appeals court to consider other reasons for overturning the lower court decision. Proceedings in California between the parties have resumed, and the Ninth Circuit will likely take this matter up again in the spring. When it does, it will look at alternative doctrines that could avoid conflict between state and federal decisions. For example, "claim preclusion" prevents a second court (federal or state) from deciding a legal claim that was asserted in another court and "issue preclusion" prevents decision on a particular issue that was disposed of by another court. These doctrines are broader than the "probate exception" to federal jurisdiction addressed by the Supreme Court but do not have the same tension with federal court supremacy. The legal system generally arrives at predictable outcomes in logical venues based on reasonably foreseeable legal rules. But litigants can frame claims to induce application of less foreseeable rules in less logical venues. However much judges in California federal courts might endeavor to interpret Texas state law the way they believe Texas state judges would, the interpretations inevitably diverge -- and the effort to engage a more remote forum often looks intended to take advantage of the divergence. The difference between determinations in two different court systems was the difference between an $88 million award and nothing. The case is likely to come to an end with a decision on one of the preclusion doctrines. The decision of the state probate court, based on the more extensive proceeding in the more logical venue, will then stand as the final word on the claims Ms. Smith has asserted. That does not, however, make this a story of the legal system working well; it is a story of the system working eventually. If litigation were costless and decision makers consistent, forum shopping would present little problem. But litigation can be costly. A study estimates legal and administrative costs in tort suits (just a portion of the litigation landscape) at $140 billion per year and overall costs at $250 billion. And decisions on some questions, such as punitive damages, vary enough that the process has been compared to a "lawsuit lottery." The problem is particularly acute for businesses, which fear that threats of costly litigation will be leverage for settlements. Such strategic use of litigation can occur because the litigation costs and risks are not symmetrical -- some litigants have more to lose than others. Some law firms specializing in suing businesses, and some state attorneys general, rely on strategies that exploit risk sensitivity to extract settlements, at times very substantial ones. The behavior of former AG Eliot Spitzer and indictments of key partners at the plaintiffs' law firm Milberg Weiss highlight the problem. Risks associated with ordinary litigation are magnified by opportunities to choose favorable venues for litigation, and even more by the prospect that litigants can engage in a repeat-play game, trying successive venues in search of a sympathetic forum. Forum shopping smacks of manipulation to reduce predictability and to secure biased decision makers. Of course, some risks associated with conflicting decisions in parallel litigation are unavoidable in a complex system with overlapping competences in different jurisdictions. Attempting to minimize those risks, courts and lawmakers have developed rules that harmonize and prioritize conflicting legal commands and jurisdictions, that allow courts to stay their hand to avoid conflicts, and that provide for recognition of earlier decisions on the same issue or claim. But the degree to which those rules work efficiently -- the degree to which they effectively limit the ability of determined litigants to exploit slack in the system and craft claims in creative ways that give them strategic advantage -- is open to question. And problems in the U.S. legal system are only one part of the picture. Once a strictly domestic game, forum-shopping has gone international. Not only can a growing roster of foreign enterprises and authorities enter the game, American businesses keen to restrain more successful competitors have a world of opportunities for doing so. If they cannot succeed with litigation at home, they can seek friendlier venues in many parts of the world. Thus, Microsoft, Intel and other market leaders now face proceedings in Europe, South Korea and elsewhere at the urging of American rivals such as IBM, Adobe and AMD. Ms. Smith's story demonstrates that a determined litigant with resources can move litigation among legal forums, tailor legal claims to prolong litigation, tie up assets, and make life difficult enough that most opponents would pay substantial amounts merely to bring the matter to a close. A victory for her would encourage forum-shopping, multiply costs and undermine the predictability of legal rules, doing damage that would last well beyond her 15 minutes of fame. A defeat for her would show that the system can at long last bring such manipulation to an end. And if that is what comes from her extended venture into the American court system, it would be a better legacy than any other she is apt to leave behind. Mr. Cass is chairman of the Center for the Rule of Law and dean emeritus of Boston University School of Law.          URL for this article: http://online.wsj.com/article/SB116856836667074708.html