When an Alleged Wrong Becomes a Protected Right: Casey Anthony's Life-story and Future Book Rights Are Property of the Bankruptcy Estate

• Publication year: 2014

When an Alleged Wrong Becomes a Protected Right: Casey Anthony's Life-story and Future Book Rights Are Property of the Bankruptcy Estate

Rachel M. Neufeld

WHEN AN ALLEGED WRONG BECOMES A PROTECTED RIGHT: CASEY ANTHONY'S LIFE-STORY AND FUTURE BOOK RIGHTS ARE PROPERTY OF THE BANKRUPTCY ESTATE

Abstract

First-degree murder. This was one of the charges facing Casey Anthony during trial for the alleged murder of her two-year-old daughter, Caylee, in 2008. After living through three years branded as a child murderer, Ms. Anthony was acquitted by a jury in 2011 and disappeared from the spotlight. Two years after this traumatic experience, she filed a chapter 7 bankruptcy, with about $1,000 in listed assets and $792,000 in debt. Absent from Ms. Anthony's list of assets are intellectual property rights in a book that she has stated she will write based on her life-story. Those rights may have a significant commercial value.

No court has addressed the issue of whether a life-story and future book rights should be considered property of the bankruptcy estate. This Comment aims to solve this issue by drawing upon several sources to show that these assets rightly belong in the bankruptcy estate. The sources include legal arguments based on 11 U.S.C. § 541(a)—the section of the Bankruptcy Code that addresses property of the bankruptcy estate—copyright law, labor theory, and the right of publicity. These sources also include arguments based on real-world practice and public policy, such as the entry of intellectual property into the public domain and Son of Sam statutes. After determining that Ms. Anthony's life-story and future book rights should be considered property of the bankruptcy estate, this Comment also argues that a market-based approach to valuation is the appropriate method to be used for assessing the value of intellectual property rights of this sort.

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Introduction

Casey Anthony's story is well known to many Americans. Accused of murdering her two-year-old daughter, Caylee, Ms. Anthony's trial and eventual acquittal in 2011 was in the national spotlight for several years.¹ Most Americans do not know, however, that Ms. Anthony filed for chapter 7 bankruptcy in 2013, claiming only about $1,000 in personal assets available to pay off about $792,000 in debts owed to over eighty creditors.² Most of this debt was due to the legal fees incurred during the murder trial.³ One item conspicuously absent from Ms. Anthony's claimed assets was a book that she intends to write detailing her life-story and trial experience.⁴ She has not written any parts of this book yet, and has not signed any book deal with a publisher.⁵ However, this asset potentially has a huge value. The trustee of Ms. Anthony's bankruptcy estate moved to include the rights to publicity and commercialization of a future life-story as property of the estate, which would make this asset a source of profit to be used to pay off her creditors.⁶ Ms. Anthony and her lawyers fought to dismiss this motion.⁷ To avoid lengthy litigation over whether this asset is property of the bankruptcy estate, the bankruptcy judge allowed Ms. Anthony to pay $25,000 into the bankruptcy

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estate so that the estate would "relinquish any right to publicity and commercialization of [Ms. Anthony's] story."⁸

Courts have not determined whether rights to a life-story and a future book based on that life-story are property rights to be included in the bankruptcy estate. This unprecedented situation is in need of a solution because determining whether this asset should be included in the bankruptcy estate has the potential to drastically alter the division of Ms. Anthony's assets. Several authorities support the conclusion that this asset is property of the bankruptcy estate.

These authorities include 11 U.S.C. § 541(a)—the section of the Bankruptcy Code (the "Code") that addresses property of the bankruptcy estate—copyright law, and labor theory and the right of publicity. The practical authorities are based on real-world practice and public policy arguments draw from the public domain and Son of Sam Statutes. This Comment will use these sources to argue that Ms. Anthony's life-story and future book rights are property of the bankruptcy estate.

Part I is divided into two subparts. Part I.A focuses on the legal sources of authority: § 541 of the Bankruptcy Code (the "Code"), labor theory and the right of publicity, and copyright law. Part I.B focuses on the practical sources of authority: real-world practice and public policy arguments based on the entry of intellectual property into the public domain and Son of Sam Statutes. Next, Part II is divided into four subparts. Part II.A and Part II.B analyze and apply each source of authority directly to Ms. Anthony's case. Part II.C addresses arguments that suggest Ms. Anthony's life-story and future book are not property of the bankruptcy estate; and Part II.D addresses the proper method to value of an intangible asset, such as a life-story.

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I. Background Facts and Legal Doctrine

A. Legal Theory Arguments in Favor of Confirming a Property Right in a Life-Story

1. 11 U.S.C. § 541(a)—Property of the Estate

Section 541(a) of the Code is the governing provision that controls what is property of the bankruptcy estate.⁹ Section 541(a)(1) defines property of the bankruptcy estate as "all legal or equitable interests of the debtor in property as of the commencement of the case."¹⁰ This includes, as stated in § 541(a)(6), all "[p]roceeds, product, offspring, rents, or profits of or from property of the estate, except as such are earnings from services performed by an individual debtor after the commencement of the case."¹¹ Judges have interpreted § 541(a)(6) to include future royalties or profits earned by a debtor arising from prepetition services or agreements.¹² The relevant dividing line for § 541(a)(6) is whether the item or service from which the royalties or profits arise was created before or after the debtor filed for bankruptcy.¹³

The scope of § 541(a) is broad and should not be construed strictly.¹⁴ A debtor's interest can be property of the estate even if it is "novel or contingent."¹⁵ This means that a debtor's interest is not excluded from the bankruptcy estate based solely on the fact that the debtor's interest has not yet been addressed by a court and specified as property of the bankruptcy estate.¹⁶ In addition, a debtor's interest is not excluded from the bankruptcy estate based solely on the contingency of an interest upon future events occurring before that asset materializes.¹⁷ Courts have developed three tests to determine

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whether contested assets are property of the bankruptcy estate: (1) the entanglement test; (2) the control test; and (3) the dissection test.¹⁸

The first of these tests, the entanglement test, emphasizes that the main purposes of the bankruptcy process—fair treatment to creditors and the debtor's fresh start¹⁹ —must be taken into account when determining what should qualify as property of the bankruptcy estate.²⁰ The entanglement test was originally defined and addressed by the U.S. Supreme Court in Segal v. Rochelle.²¹ The Court held that the debtors' tax refunds were property of the bankruptcy estate because these refunds were "sufficiently rooted in the prebankruptcy past" and "so little entangled" with the debtors' ability to make an unencumbered fresh start that they should be regarded as property of the bankruptcy estate.²² The Court reasoned that the refund existed at the time the bankruptcy petition was filed since the debtors had both a prior net income and a net loss and would have deserved an immediate refund had their tax year terminated on that date.²³ The fact that the tax year terminated later did not remove the refunds from the bankruptcy estate.²⁴ Thus, the entanglement test is a balancing test that factors in both of the purposes of the bankruptcy process.

The entanglement test was also used by the bankruptcy court in In re Dillon, which involved property rights to future royalties from songs that the debtor had written prior to filing for bankruptcy.²⁵ The court reaffirmed the entanglement test as a two-prong balancing test that should be used to determine whether an asset is property of the bankruptcy estate.²⁶ This test weighed (1) whether the debtor's asset was "sufficiently rooted" in the debtor's pre-bankruptcy past and (2) whether the debtor's asset was "so little entangled"

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with the debtor's ability to make an unencumbered fresh start.²⁷ The court reasoned that the plaintiff's royalty rights to songs that she had written prepetition were "plainly rooted in, and grew out of, [the debtor's] prepetition activities."²⁸ In this case, the court added the language "and grew out of" to signify that a later payment, like a royalty, can grow out of prepetition assets, meaning that in addition to being rooted in the past, the profits also expanded from the past. While the profits themselves did not exist prepetition, they grew out of an asset that did exist prepetition.²⁹ Since the written songs were property of the estate, the court held that the profits that grew out of the songs were property of the estate as well.³⁰

The second of the tests used by bankruptcy courts to define the scope of § 541(a)(6) is the control test. The control test was defined and used by the court in Paige v. Jubber (In re Paige) to address whether an Internet domain name was property of the bankruptcy estate.³¹ Under the control test, "property that is titled in the name of the debtor and that is under the debtor's 'dominion of control' is presumptively property of the estate. The debtor has dominion or control if he has 'the ability to direct the disposition of [the transferred property].'"³² Since the debtor in this case directed who could use the domain name, he controlled it.³³ Because he controlled it at the time his bankruptcy was filed, the court held that...