The Trials of Vickie Lynn Marshall

The Trials of Vickie Lynn Marshall

On March 19, 2010, the United States Court of Appeals for the Ninth Circuit dealt a serious blow to the estate of Anna Nicole Smith (actual name: Vickie Lynn Marshall).  Unfortunately for spectators, the meat of this latest ruling in the now deceased Mrs. Marshall's various legal entanglements involving the estate of her late husband, J. Howard Marshall II, is dully procedural. 

The origins of In re Marshall[1] were, of course, fodder for the tabloids.  Vickie was working as an exotic dancer in Texas when she met Howard, a very wealthy oil company founder and executive.  The two married in 1994; Vickie was 26 years old, Howard was 89.  A few days after the wedding, allegedly at the behest of Howard's younger son, E. Pierce Marshall, Howard modified his living trust to make it irrevocable, without adding Vickie as a beneficiary. 

Vickie filed a lawsuit against Pierce before Howard died, alleging that Pierce had used fraud and undue influence to cause his father to release his right to revoke his living trust (and to unduly benefit Pierce in other estate planning documents).  This lawsuit languished when Howard died, just over a year after marrying Vickie.  Vickie asked the probate court in Texas to find that Howard died without a valid will, but did not succeed.  Vickie then joined a will contest filed by J. Howard Marshall III, Howard's older son. 

While the will contest in Texas was pending, Vickie filed for bankruptcy in California, where she resided.  Vickie then alleged in the Texas will contest that Pierce tortiously interfered with her right to take from Howard's estate.  Pierce commenced an adversary proceeding in the California bankruptcy court seeking a declaration that, in the event that Vickie were to be found liable for defaming him (by publicly stating that he had "duped" his father), such liability would not be discharged in the bankruptcy proceeding.  Vickie responded with truth as a defense, claiming that Pierce had indeed cajoled his father into disinheriting her, violating promises he had made to her.  The bankruptcy court determined that Pierce had tortiously deprived Vickie of her expectancy in Howard's estate, and not only disallowed any defamation claim, but further awarded Vickie, to be paid by Pierce, the immense sum of $449,754,134, less any amount she recovered from Howard's estate in Texas.  This amount appears to have been the California court's estimate of the amount that Vickie could have received under a Texas widow's election as a pretermitted spouse.

With her California award in hand, and against the advice of the probate court judge, Vickie withdrew from the will contest in Texas.  She nevertheless remained part of the probate proceeding as a defendant to Pierce's request for declaratory relief that Howard's living trust and will were valid.  A full trial followed, and the Texas probate court found for Pierce on all grounds; specifically, that Pierce did not use fraud or undue influence to convince his father to change his estate planning documents, that Howard was fully competent at the time of the change, and that there was no oral agreement between Vickie and Howard that Howard would give to her half of their "community" assets (note that Howard gave Vickie $7 million of jewelry and other assets during the short time that they were married).  Howard's will and trust were to stand as written.

With his Texas ruling in hand, Pierce appealed the California bankruptcy court's judgment against him on the basis of issue preclusion.  The district court did not reverse the bankruptcy court's findings, but did lower Vickie's award to $88,585,535, plus costs of suit (this amount appears to be based on the value of an inter vivos gift that the California court believed Howard promised Vickie, rather than the larger amount related to the Texas widow's election).

Pierce then appealed to the Ninth Circuit, which determined that, as a federal court, it had no jurisdiction over the matter under the "probate exception" doctrine, holding essentially that probate of a will is strictly the purview of state law, and should not be interfered with by the federal courts.  As a result, Vickie's award in the bankruptcy court was vacated.  In yet another reversal of fortune, however, the United States Supreme Court granted certiorari.  The Court strictly defined the probate exception to apply only to core probate proceedings--not ancillary "non-core" matters (like the tortious interference/defamation claims)--and reversed and remanded the case to the Ninth Circuit, with instructions that the court reconsider Pierce's claim of issue preclusion.  Shortly after the Court's ruling, both Pierce and Vickie died (in June of 2006 and February of 2007, respectively).

This brings us to the most recent ruling.  The opinion takes a good amount of time recounting the history of the case(s), and another 45 pages to support its final conclusion, again, that the California bankruptcy court had no jurisdiction over Vickie's and Pierce's dueling tortious interference/defamation claims.  This time, however, the jurisdictional issue was not related to the probate exception.  To quote the holding:

Pierce asserted a personal injury claim, defamation, in Texas, and prevailed in a five month jury trial in Texas.  All he filed in Vickie's bankruptcy case was a claim for declaratory judgment that whatever judgment he obtained in Texas would stand undischarged by Vickie's bankruptcy.  Vickie used the vehicle of her bankruptcy case, even though it was effectively over, to file a personal injury claim against Pierce for interfering with a  putative gift to her from his father.  The bankruptcy court could not grant final judgment because her claim was for personal injury, was not related to the bankruptcy estate because she had obtained her discharge, and it was not "core" [to the bankruptcy proceeding].  Pierce's constitutional rights to an Article III court and to jury trial as well as his statutory rights prevented jurisdiction in the bankruptcy court over Vickie's claim against him.  When the bankruptcy court decided otherwise, it was without jurisdiction to do so.[2]

So, the personal injury claims were not "core" to the California bankruptcy proceeding, but they were core to the Texas probate proceeding.  Thus, the Texas probate court's finding for Pierce was final, and the bankruptcy court did not have jurisdiction to consider the same issues.

On April 7, lawyers for Vickie's estate filed a petition for a rehearing en banc in the Ninth Circuit.  Its headline reads as follows:  "[e]n banc review is necessary because the opinion's restrictive construction of bankruptcy court core jurisdiction over compulsory counterclaims creates a conflict with other circuits, subverts Congressional intent and fundamentally changes and confounds bankruptcy practice in this circuit."  This is a somewhat desperate effort, and given the multiple adverse rulings in the Ninth Circuit (and the Supreme Court's ruling, which disagreed with the reasoning for the lack of jurisdiction in California, but not necessarily the outcome), it is unlikely to be successful.  Vickie's only living heir and the presumed beneficiary of any recovery by her estate is her daughter, Dannielynn Birkhead.

 

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Morrison & Foerster's Trusts and Estates group provides sophisticated planning and administration services to a broad variety of clients.  If you would like additional information or assistance, please contact Patrick McCabe at (415) 268-6296 or PMcCabe@mofo.com.

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[1] 9th Cir., March 19, 2010

[2] In re Marshall, at 4545).