Friday, May 05, 2006

Vickie Victorious

For those who are interested, here's more detail on the U.S. Supreme Court's unanimous decision in Marshall v. Marshall (thanks to POC for suggesting the headline for this post).

Our story thus far: Vickie Lynn Marshall, a former topless dancer and the 1993 Playboy Playmate of the Year using the name Anna Nicole Smith, met oil billionaire and former Yale Law School Assistant Dean J. Howard Marshall II in October 1991. She was in her mid-20s, he was approaching 90. Following a courtship of more than two years, the couple married on June 27, 1994. J. Howard lavished gifts upon Vickie, promised her a trust fund, and apparently ordered his attorneys to begin the paperwork for the trust. Unfortunately for Vickie, J. Howard’s estate plan (a living trust coupled with a pourover will) did not yet include her when he died on August 4, 1995.

Vickie’s attorneys publicly asserted that J. Howard’s youngest son, Pierce, had engaged in forgery and fraud to prevent the promised gift to her from her husband. When Vickie filed for bankruptcy in California, Pierce asserted that he had a defamation claim against her for the statements, a claim that should not be discharged by the bankruptcy proceeding. Vickie responded that truth was a defense against the defamation claim, and filed a counterclaim for Pierce’s tortious interference with her expected gift. The Bankruptcy Court heard the case and awarded Vickie $449 million in compensatory damages and $25 million in punitive.

Meanwhile, back in Texas, following a jury trial the probate court declared J. Howard’s will and trust arrangement to be valid.

Pierce next sought federal District Court review of the Bankruptcy Court judgment, arguing that the federal courts were without power to resolve the matter because of the “probate exception” to federal jurisdiction. The District Court rejected that argument, but held that adjudicating the tort was not a “core proceeding” of the Bankruptcy Court. Therefore, the District Court reviewed the case de novo.

Compensatory damages were reduced to $44.3 million, as the Court found J. Howard had promised Vickie half of the appreciation in the value of his assets from the date of their marriage (not half the value of all his assets). However, with overwhelming evidence of Pierce’s “willfulness, maliciousness and fraud,” the Court awarded an equal amount as punitive damages.

On appeal, the Ninth Circuit Court of Appeals reversed, holding that despite the framing of the issue as a tort, the underlying cause of action was so closely related to probate that the probate exception stripped the federal courts of jurisdiction. A unanimous decision by the U.S. Supreme Court now restores Vickie’s access to the federal courts, holding that the Ninth Circuit was wrong to read the probate exception so expansively. “Vickie seeks an in personam judgment against Pierce, not the probate or annulment of a will,” writes Justice Ruth Bader Ginsburg for the majority. “No ‘sound policy considerations’ militate in favor of extending the probate exception to cover the case at hand.”

Concurring, Justice John Paul Stevens would have gone further, eliminating the doctrine of a probate exception to federal jurisdiction altogether. “I would provide the creature with a decent burial in a grave adjacent to the resting place of the Rooker-Feldman doctrine.”

However, the story is not over yet, not when a $1.4 billion estate is at stake. The parties next return to the Ninth Circuit to explore Pierce’s arguments concerning claim and issue preclusion and whether Vickie’s claim was “core.”. Stay tuned.


JLM said...

The Wall Street Journal celebrates Vickie's Victory with an article (subscribers only) on How to Disinherit Neatly.

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