  The presence of highly eccentric extrasolar planets in binary stellar systems
suggests that the Kozai effect has played an important role in shaping their
dynamical architectures. However, the formation of planets in inclined binary
systems poses a considerable theoretical challenge, as orbital excitation due
to the Kozai resonance implies destructive, high-velocity collisions among
planetesimals. To resolve the apparent difficulties posed by Kozai resonance,
we seek to identify the primary physical processes responsible for inhibiting
the action of Kozai cycles in protoplanetary disks. Subsequently, we seek to
understand how newly-formed planetary systems transition to their observed,
Kozai-dominated dynamical states. We find that theoretical difficulties in
planet formation arising from the presence of a distant companion star, posed
by the Kozai effect and other secular perturbations, can be overcome by a
proper account of gravitational interactions within the protoplanetary disk. In
particular, fast apsidal recession induced by disk self-gravity tends to erase
the Kozai effect, and ensure that the disk's unwarped, rigid structure is
maintained. Subsequently, once a planetary system has formed, the Kozai effect
can continue to be wiped out as a result of apsidal precession, arising from
planet-planet interactions. However, if such a system undergoes a dynamical
instability, its architecture may change in such a way that the Kozai effect
becomes operative. The results presented here suggest that planetary formation
in highly inclined binary systems is not stalled by perturbations, arising from
the stellar companion. Consequently, planet formation in binary stars is
probably no different from that around single stars on a qualitative level.
Furthermore, it is likely that systems where the Kozai effect operates,
underwent a transient phase of dynamical instability in the past.
