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A Modern-Day Bleak House

The legal inheritance of Anna Nicole Smith.

By From the March 2009 issue

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More than 150 years ago, Charles Dickens mocked the delays and foot-dragging in England's chancery system of litigation in one of his finest works, Bleak House. Central to the story, delivered to readers at the time in 67 chapters in 20 installments over 18 months, was a lawsuit over an inheritance. The suit, Jarndyce v. Jarndyce, dragged on so long that the original parties had died, and legal costs consumed what was left of the estate, making clear Dickens's point that justice delayed cannot only be justice denied but can amount to more injustice. The book is credited with encouraging needed reforms in England's lackadaisical and cumbersome legal process.

Today, Americans, if they pay attention, may either enjoy or stand aghast at a modern rendition of Bleak House in another case about a wayward inheritance, Marshall v. Marshall. It is the case brought by actress and celebrity Anna Nicole Smith in 1995 to collect money from her deceased husband, J. Howard Marshall, II, after an unusually brief marriage. Fourteen years later, Anna Nicole Smith is dead.

So, too, is E. Pierce Marshall, whom a Texas probate court appointed as executor of J. Howard's estate, and who was Smith's primary target. The case has gone up and down, and in and out of state courts and federal courts. It's reached appellate levels in both, rising to the U.S. Supreme Court in 2006, where it was returned for further proceedings to the Ninth Circuit Court of Appeals. Thus, as in Bleak House, all the original participants are dead, but the case lives on.

Taking Anna Nicole's place in the litigation is her companion and lawyer Howard K. Stern. Who claims to be doing this for the livelihood of Dannielynn, the infant daughter of Anna Nicole Smith, though not by the late ancient and great J. Howard Marshall, II. Dannielynn became famous in her own right as the subject of a paternity fight between Howard K. Stern and one of Anna Nicole's lovers, Larry Birkhead. On the other side of the litigation table sit the actual descendents of J. Howard Marshall, II. What a bleak testament to what happens when judges overreach and attempt to play detective rather than strictly apply the law.

TO MAKE THE ludicrousness of this story clear, one needs to begin at the beginning. Texas octogenarian multimillionaire J. Howard Marshall, II married young Anna Nicole on June 27, 1994. Throughout the course of their short marriage, he gave her gifts, including transfers of property, valued at approximately $6 million "in consideration of her marriage to me." Now, the Ninth Circuit Court of Appeals specifically found in a ruling issued prior to her death that Anna Nicole "does not contend that J. Howard Marshall, II lacked the mental capacity to make these itemized gifts." During this period (on July 13, 1994), J. Howard also revised his trust and made no provision for Anna Nicole. J. Howard then dies, thinking that he had taken care of both Anna Nicole with millions in gifts and property while protecting the family business and fortune for his other descendants.

So upon what do her lawyers base her lawsuit?

Her claim was that J. Howard gave her "oral" promises to give her a lot of money when he died. She said that she relied on such oral statements instead of his written statements that were quite to the contrary.1

So, on this slim pretext, Anna Nicole began her suit in a probate court in Texas in April 1995. And what happened? The trial judge indicated that he thought Anna Nicole's statements were, to put it politely, lies. The jury came to the same conclusion as the judge and ruled against Anna Nicole. After years of litigation and a trial lasting nearly six months, the Texas jury entered on March 7, 2001, a unanimous verdict against Nicole's "oral" promise, and in favor of J. Howard's written statements. Six months later, the probate court issued a final judgment, on December 7, 2001. Case closed? Hardly.

Although the procedure was standard law, the results were not. What the Texas jury found did not end the matter because, unknown to it, Anna Nicole had filed another case before a bankruptcy court in California.

In the bankruptcy case, Anna Nicole did not have to go before a jury, and she had the benefit of appearing before a judge who did not know and appeared not to want to know all the facts that the Texas jury knew. It was like getting a second ticket in the Marshall family fortune lottery.

How did Anna Nicole get this ticket? She claimed that she was bankrupt because she had too many debts. Why did she have so many debts? Because she had lost a sexual harassment suit against her. There's a bit of irony worthy of a novel—a woman claiming that she, as the aggrieved widow, should get more money from her dead husband's estate by admitting that she was less than faithful during their brief marriage.

Never mind. The bankruptcy court, armed with this debt, claimed jurisdiction. And based on some procedural rulings by the bankruptcy judge against executor Pierce producing evidence against Anna Nicole's claims, the judge then ruled all Anna Nicole's factual allegations—the same ones a Texas court and jury after a six-month trial believed to be lies—to be true. The judge then awarded Anna Nicole $474 million.

Later on, the bankruptcy judge reversed his sanctions order against the estate, though, oddly, he did not reverse any of his other rulings on which he based the sanctions order.

THE MARSHALL ESTATE, no doubt feeling much like Mr. Bumble in another of Dickens's novels, Oliver Twist, that "if the law says that, then the law is a ass—a idiot," naturally, wanted a clearer set of eyes reviewing the case. So, following procedure, it appealed the case to the federal district court.

There, the court treated the bankruptcy court's decision as a "proposed" ruling, rather than a final one, and undertook de novo review. While the federal district court was considering what to do, the bankruptcy court in February 2001 enjoined Pierce from proceeding with his affirmative claims against Anna Nicole in the Texas probate court, which enjoined Anna Nicole from proceeding against Pierce in the bankruptcy court.

Nevertheless, the Texas jury issued its verdict on March 7, 2001, a year before the district court delivered its judgment on March 7, 2002. In normal circumstances, such a ruling might give a federal judge pause. Not here.

The federal trial judge decided a jury's weighing all the evidence shouldn't preclude him from deciding on some of it. And so, on a partial hearing and partial facts, he ruled to reverse the bankruptcy judge's findings substantially, yet still award more than $88 million to Anna Nicole.

Thus, another step up the litigation ladder and a few more years of time—the Court of Appeals for the Ninth Circuit. There, in 2004, the judges threw out all Anna Nicole's claims and, on the basis that a state probate ruling should settle estate matters, not a bankruptcy court, dismissed her suit. So, by now, the state court had rejected her claims, the federal district judge had rejected most of her award, and the court of appeals had thrown out her case completely. But Anna Nicole and her lawyers didn't give up: they appealed to the U.S. Supreme Court.

And the Supreme Court took the case, and she won a reprieve, sort of, in 2006. The Court did not give Anna Nicole any money. Instead, it ruled that the Ninth Circuit should examine the case yet again. It said that that court's application of a probate exception was not applicable to the district court's jurisdiction in deciding Anna Nicole's claim that E. Pierce Marshall had tortiously interfered with her inter vivos gift from J. Howard. Thus, the lawsuit was sent back to the Ninth Circuit.

Amazingly, Anna Nicole's only son, an offspring from a relationship prior to J. Howard, died, eliminating one potential heir. Then Anna Nicole herself died in February 2007, but not before giving birth to little Dannielynn, whose father was determined by a court to be Larry Birkhead, in a battle over paternity that had the hallmarks of being a contest over a ticket to the Marshall fortune lottery, not the love of a little girl.

Or at least that is what the media has speculated during the poor girl's 15 minutes of fame. In fact, Dannielynn is unlikely to strike gold. Why is she unlikely to win? Because the Supreme Court decided only that the Texas probate court's claim of exclusive jurisdiction over all the widow's (Anna Nicole's) claims against Marshall's son did not deprive a federal district court of jurisdiction over the widow's tort claim as asserted in her bankruptcy proceeding. It, in short, dealt only with a procedural and technical part of the Ninth Circuit ruling.

INDEED, JUSTICE GINSBURG, speaking for the majority, carefully noted, first, that the Court "did not address the question whether" Anna Nicole's claim was a "core proceeding" under the bankruptcy law. The Ninth Circuit will have to decide that issue on remand.

Ginsburg also noted that the Court's ruling did not "address Pierce's arguments concerning claim and issue preclusion." "Claim preclusion" prevents a second court (federal or state) from deciding a legal claim that another court with jurisdiction has already decided, even foreclosing litigation of matters that had never been litigated but are part of the claim. "Issue preclusion" prevents a court from deciding a particular issue that another court has already decided. These doctrines are broader than the "probate exception" to federal jurisdiction, which was all the Supreme Court considered. Federal courts routinely reject cases because of claim or issue preclusion— we do not have unlimited bites at the apple. Ginsburg cautioned in her opinion that these issues "remain open for consideration on remand."2

Next, after reminding us that the "Court of Appeals considered only the issue of federal subject-matter jurisdiction," Justice Ginsburg twice emphasized that the Ninth Circuit must decide whether the Texas pprobate jury verdict is "res judicata" (a lawyer's term meaning that the case, or the particular issue, has been decided and another court cannot decide it yet again).

It is clearly a fact that before the federal district court issued its opinion, the probate court and jury had already decided crucial facts against Anna Nicole—a decisive piece of information that the Supreme Court specifically noted when it sent the case back to the Ninth Circuit.

Anna Nicole had the chance, and indeed was compelled by Texas law, to litigate all her claims in the Texas probate court—even the claim that E. Pierce Marshall had tortiously interfered with her inter vivos gift or any other expectancy of an inheritance. The jury and the court ruled against her on one fact after another, despite her cross-examination of all witnesses, including Pierce. And the ruling wasn't close.

The jury was unanimous: J. Howard's 1982 trust, as amended, and his last will and testament were valid; no one forged or altered them. J. Howard had the requisite mental capacity when he executed the 1982 trust, as amended, and his last will and testament. J. Howard had not been the victim of fraud or undue influence; J. Howard did not have an agreement with Anna Nicole that he would give her one-half of all of his property; J. Howard did not intend to give and did not give Anna Nicole a gift from his 1982 trust, as amended, or a bequest in his last will and testament.3

MEANWHILE, THE federal district court proceeded to adjudicate, de novo, Anna Nicole's tortuous interference claim, vacating the bankruptcy court's $474 million judgment on June 20, 2001, more than three months after the Texas jury ruled. When on December 21, 2001, the district court denied Pierce's motion to dismiss on grounds of res judicata, it made a torturous twisting of the law to do so, by claiming she had not fully litigated her tortious interference claim in the Texas probate court and that principles of preclusion did not apply in the context of parallel litigation.

A rose, though, is a rose, whatever it is called. The fact that Anna Nicole non-suited her claim of tortuous interference at the very end of the probate proceeding is immaterial to the key legal question. The only things that matter in this context are whether Anna Nicole brought, or should have brought, a claim based on the same facts, argued that claim, and lost fair and square. She clearly did. The jury rejected her factual and legal allegations. The district court's argument that it need not apply res judicata in Pierce's favor because the probate court's decision did not predate the bankruptcy court's decision is likewise a red herring. It has long been the rule, as the Supreme Court has recognized, that an earlier judgment in a concurrently conducted case may be set up as res judicata. The issue is not whether the bankruptcy court's decision was before or after the probate court's judgment, because the bankruptcy court's decision was preliminary; that is why the district court decided the issues de novo. The issue is whether the district court's own judgment was before or after the probate court's decision. It clearly wasn't.

This is a textbook case of res judicata, a legal doctrine that prevents one court from entering findings inconsistent with the findings of another court. If courts allow this type of claim, they will simply encourage plaintiffs to both court and claim shop, looking for new venues in which to advance their claims, denying forever the justice that the law is supposed to serve.

The Texas probate court expressly considered whether J. Howard intended to create a trust for Anna Nicole, and it found he did not. For a federal court in California to disregard this finding and award tens of millions of dollars to Anna Nicole anyway, after she had lost in Texas, creates a mockery of American law and a modern-day version of Jarndyce v. Jarndyce.

Thus, it is unlikely that the Ninth Circuit, on remand, will agree that litigants should be allowed to keep suing until they find a court that is more to their liking. As the Ninth Circuit already announced in its original decision, "if we were to uphold the decision of the district court we would essentially be allowing Vickie Lynn Marshall [i.e., Anna Nicole Smith] a second chance to litigate her claim against the estate of J. Howard Marshall, II."

As it is, the overreaching by some federal courts and judges has already set up a Bleak House for little Dannielynn. Her lawyers and Anna Nicole's creditors will be ahead of her in line to get what is left of Anna Nicole's estate. After that, she may have nothing. When she is older, she may wonder why money that could have been put in trust for her education was instead spent on lawyers' fees chasing a lottery ticket. As in Bleak House, justice delayed has become a massive injustice, to the shame of our own justice system.

1 See 392 F.3d 1118, 1125.
2Marshall v. Marshall, 547 U.S. 293, 314-15.
3 See 392 F.3d at 1123.

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About the Author

Ronald D. Rotunda is professor of law at the Chapman University School of Law.