I had been meaning to post a few days ago on today’s Supreme Court argument in the Anna Nicole Smith case (since it overlaps with one of the areas I write in: Estates & Trusts). After the 9th Circuit reversed an 88.5 million dollar bankruptcy judgment in favor of Anna Nicole Smith, Anna–using her usual restraint–told a reporter: “The judges were so paid off.”
Despite Anna’s ridiculous claim about the 9th Circuit, Anna’s lawyers sought certiorari in the US Supreme Court. Not only did the Court grant cert., but the Solicitor General filed a brief supporting her side of the case. So going into the oral arguments today, Anna Nicole Smith (aka Vickie Lynn Marshall) had 3 things going for her:
1. The Supreme Court reverses more cases than it affirms.
2. The 9th Circuit is known, rightly or wrongly, as the most reversed circuit.
3. One of the best predictors of winning in the Supreme Court is for a private citizen to have the Solicitor General join your side.
Then Anna had a fourth thing going for her: the 9th Circuit statement of the law is clearly wrong. Before I explain why, I reprint most of SCOTUSBlog’s good account of the argument held today:
For all the media fascination with the second case argued Tuesday, Marshall v. Marshall (04-1544), the actual argument was a treat mainly for experts in civil procedure and the laws of bankruptcy and inheritance. The case involves what Judge Richard Posner once described as “one of the most mysterious and esoteric branches of the law of federal jurisdiction.”
The single aspect of that issue that the Court was reviewing is whether the so-called “probate exception” to federal court jurisdiction bars federal bankruptcy courts from deciding a case that might implicate an estate that is simultaneously being administered in a state probate court. The tone was set for the argument when Vickie Lynn Marshall’s attorney, Kent L. Richland of Los Angeles, began his presentation this way: “This is a bankruptcy case.”
Vickie Lynn (who made fame under her performing name Anne Nicole Smith) was married for 14 months to billionaire Texan J. Howard Marshall. She has been seeking in federal bankruptcy court to recover more than $88.5 million in damages awarded her, against Marshall’s son, Pierce. That sum is to compensate her for the son’s attempt to undermine — allegedly by fraud — her claims that her husband intended to give her, while he was alive, a substantial gift.
Richland ultimately seemed to have most if not all of the Court with him, after overcoming a somewhat shaky start when he argued excessively that bankruptcy law allows no exceptions whatsoever for estate probate matters when those involves a disputed asset — here, Vickie Lynn’s recovery in her tort lawsuit against Pierce. (Texas probate courts would later award Vickie Lynn nothing from the estate itself.)
Justice Antonin Scalia bluntly suggested that Richland back off of such a sweeping claim, and other Justices joined in. Essentially, Richland did. “It is not necessary to our case,” he conceded. “Obviously, this case is miles away from probate…This case has nothing to do with probate jurisdiction.” The attorney was not rigorously challenged after that, as the Justices explored the interrelationship between bankruptcy law and Texas probate law, seemingly inclined to favor the former.
Richland picked up some support from Deanne E. Maynard, an assistant to the U.S. solicitor general, who urged the Court to clear up the confusion among lower courts on the “probate exception” but to do so by giving it a very narrow scope, so that it applied only when specifically interpreting a will would be at stake. Justice Scalia, however, suggested that Maynard may have suggested taking away too much of a bankruptcy court’s jurisdiction if will interpretation were completely beyond its reach.
A Yale law professor, G. Eric Brunstad, Jr., of New Haven, Conn., representing Pierce Marshall, made a thoroughly competent argument that Texas probate law should prevail — but it was an argument that attracted no significant support from the bench. His plea essentially boiled down to a claim that Vickie Lynn could bring her claim based on the tort verdict only by undermining the entire “estate plan” that had been probated in Texas court. “It is never appropriate,” he argued, “for a federal court to invalidae a will or an estate plan,” and that is what Vickie Lynn would have to do to prevail, he said. . . .
The problem with the 9th Circuit opinion is that it assigns to state probate courts jurisdiction over matters that determine the property subject to probate (often to the exclusion of federal courts), including specifically theories based on “tax liability, debt, gift, bequest, tort.” This can’t be right. State probate courts do not determine federal estate tax liability under the Internal Revenue Code, nor are they the main court source determining pensions and insurance governed by ERISA. So the 9th Circuit’s statement of law can’t stand.
Yet, even if the law announced by the 9th Circuit is overturned, as it almost certainly must be, there may be other ways that Anna could still lose her case eventually. For example, the District Court’s opinion explicitly found that Texas law would recognize tortious interference with a lifetime gift, even though Texas had no authority on this one way or the other.
For those who are interested, the district court opinion (Marshall v. Marshall, 275 B.R. 5 (C.D. Cal. 2002), reversed by the 9th Circuit) has a fascinating account of Anna’s courtship and marriage, as well as the court’s staggering conclusions that Anna’s stepson Pierce and/or his lawyer had committed repeated fraud by altering and backdating documents involved in the litigation. One surprising courtship fact: Anna met J. Howard Marshall because she was working the day shift at the strip club since she was too heavy to be assigned the better evening shift.
By the way, according to the Forbes list of the richest Americans, Pierce Marshall is worth 1.7 billion dollars, just behind Mark Cuban.
Wonkette, not surprisingly, is having a field day, with multiple posts, including this one.
UPDATE: The Bankruptcy Litigation Blog has a nice roundup of commentary on the Marshall (Smith) case.