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 Thursday, January 27 2022 @ 10:54 pm UTC

Texas Tycoon's Real Estate Case Continues Battle in the High Court

General NewsA 1946 Supreme Court opinion, Markham v. Allen, defined the exception, which holds that federal courts can hear claims brought by heirs of a decedent’s estate as long as a federal court doesn’t interfere with state court probate proceedings. The Supreme Court will hear oral arguments today in a case that will determine the scope of the federal courts’ probate exception, once described by Seventh Circuit judge Richard Posner as “one of the most mysterious and esoteric branches of the law of federal jurisdiction.”

When Marshall died in 1995 at the age of 90, a legal battle ensued between his son, E. Pierce Marshall, and his widow Vickie Lynn Hogan, a 27-year-old dancer who had been married to Marshall for only 14 months. Marshall met Hogan at a Houston gentlemen’s club named Gigi’s. The case before the Court involves a dispute over the estate of Texas businessman and Haverford College graduate J. Howard Marshall II, worth nearly half-a-billion dollars.

She sued Marshall’s son, E. Pierce Marshall, in April 1995 in Texas state court, accusing him of fraud and of “tortiously interfering” with her right to support from her late husband. When Marshall died, Hogan, who had adopted the name Anna Nicole Smith and became a successful fashion model and entertainment personality, discovered that she was excluded from Marshall’s estate.

State courts normally handle probate matters. So why did the federal courts get involved? Smith filed for bankruptcy in California federal court in 1996, blaming her financial straits on E. Pierce’s alleged fraud. E. Pierce filed a counterclaim to the bankruptcy action, accusing Smith of defaming him, which prompted a counterclaim by Smith against E. Pierce for “tortiously interfering with her expectancy of a gift or bequest” from her late husband.

Smith then withdrew her Texas probate court claim, but remained a defendant in a separate state court case brought by E. Pierce to determine whether his father’s will was valid. In 2001, a Texas state court jury ruled that the will was valid and Smith wasn’t entitled to any money from Marshall’s estate. In 2000, the bankruptcy court in California awarded Smith $475 million, ruling that E. Pierce engaged in a conspiracy with the estate’s lawyers to keep Marshall’s millions from his young wife.

The federal court agreed that it had jurisdiction and, along the way, decided to throw out the bankruptcy court’s findings — holding that the claims they upheld weren’t “core” bankruptcy claims — and to conduct its own review of the case. In 2002, it ended up essentially agreeing with the bankruptcy court’s finding that E. Pierce had meddled with his father’s trust and that Marshall did plan to give a gift to Smith — but lowered Smith’s award to $88.5 million. Meanwhile, E. Pierce appealed the federal bankruptcy court ruling to the federal district court, arguing that the probate exception gave the court jurisdiction.

Wrote Judge Robert Beazer in a unanimous opinion: “If we were to uphold the decision of the district court we would essentially be allowing Vickie Lynn Marshall a second chance to litigate her claim against the estate of J. Howard Marshall II.” The Ninth Circuit called the court filings, some 440 pages of briefs and other materials, one of “the most exhaustive records ever produced in the Central District of California.” E. Pierce appealed to the Ninth Circuit, which in 2004 threw out the district court’s verdict, ruling that the district court didn’t have jurisdiction in the case and that it had interfered with Texas state probate court proceedings.

Arguing the case for Smith is Kent Richland of the Los Angeles firm Greines, Martin, Stein & Richland. Eric Brunstad of Bingham McCutchen in Hartford, Conn., will argue the case for E. Pierce. Smith appealed to the U.S. Supreme Court, which granted cert last year.

By: Dijon Wainwright

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