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 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
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
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.
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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provides sophisticated planning and administration services to a broad variety
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Cir., March 19, 2010
 In re Marshall,