Could the Vickie Marshall (a.k.a. Anna Nicole Smith) v. Pierce Marshall Spectacle Result in a Legal Malpractice Case?

A fellow blogger recently raised my curiosity in the infamous Vickie Marshall (Anna Nicole Smith) v. Pierce Marshall legal entanglement. According to the blog Hoops and Other Pop Culture, as a result of the recent U.S. Supreme Court Decision Pierce Marshall (the son of Vickie's deceased husband J. Howard) may have a legal malpractice claim against the attorney(s) who represented him in Vickie’s Chapter 11 bankruptcy proceeding. Here is how the potential legal malpractice claim arose: When J. Howard Marshall died in 1995, his will did not provide for his surviving widow (Vickie) and she now alleges that J. Howard intended to provide her with a gift in the form of a “catch-all” trust. J. Howard’s son Pierce was the ultimate beneficiary of J. Howard’s estate. In 1996, while the estate was being handled in the probate court in Texas, Vickie filed for bankruptcy in California. Later that same year, Pierce (it would appear out of spite since Vickie had no money at the time and Pierce was walking away from the Texas Probate Court an extremely wealthy man) filed a proof of claim in Vickie’s federal bankruptcy proceeding alleging that his step-mother had defamed him when, shortly after J. Howard’s death, her lawyers told members of the press that Pierce had engaged in forgery, fraud, and overreaching to gain control of his father’s assets (the federal courts have seemed to find some truth in these accusations). Why Pierce’s attorneys (according to my colleague Steve Jakubowski’s bankruptcy litigation blog - see comment 4, on Pierce’s proof of claim Texas lawyer John Melko was listed as his counsel) would counsel Pierce to file such a claim is baffling. By doing so Pierce who appeared to be free and clear in the Texas Probate Court and sought to gain very little from the claim subjected himself to the jurisdiction of the federal courts which have not been kind to him.

After Pierce filed his proof of claim, Vickie filed counterclaims against him. One of the claims alleged Pierce had tortiously interfered with the gift she expected from J. Howard. The bankruptcy court hammered Pierce, granting summary judgment for Vickie on Pierce’s claim and after a trial on the merits, ruling for Vickie on her counterclaim and finding that the objection and counterclaim were “core” proceedings – which meant that the court had authority to enter final judgment disposing of those claims and awarding compensatory and punitive damages just under $475 million.

Pierce then filed a motion to dismiss for lack of subject matter jurisdiction – claiming Vickie’s tortiuous interference claim could only be tried in the Texas Probate Proceeding – but the bankruptcy court denied the motion (relying on the famous Markham case), finding federal courts have jurisdiction to adjudicate rights in probate, as long as its final judgment does not interfere with the state courts possession of the property. After the bankruptcy court’s decision, the Texas probate court declared J. Howard’s estate plan valid.

Back in federal court, Pierce sought review to the District Court of the Bankruptcy Court’s decision. The District Court held that Vickie’s counterclaim did not qualify as a “core” proceeding which meant the Bankruptcy Court decision could be treated as proposed rather than final and the could be reviewed de novo. Adopting and supplementing the Bankruptcy Court decision, the District Court agreed that Pierce had tortiuously interfered with Vickie’s expectancy by conspiring to suppress or destroy the inter vivos trust instrument J. Howard had directed his lawyers to prepare for Vickie, and that Pierce intented to strip J. Howard of his assets by backdating, altering and otherwise falsifying documents and presenting them to his father before his death under false pretenses. The District Court then reduced the damages to the still very significant sum of just under $90 million ($44.3 million in compensatory and $44.3 million in punitives – finding “overwhelming” evidence of maliciousness and fraud).

On appeal, the 9th Circuit reversed the District Court, reading the probate exception very broadly and finding that the exception barred federal jurisdiction. The U.S. Supreme Court then granted cert and in its recent decision reversed the 9th Circuit and remanded the case back for further proceedings (e.g. is the counterclaim a “core” proceeding?), holding that the tortious interference case does not fall within the probate exception and that the Bankruptcy and District Court properly asserted federal jurisdiction over Vickie’s counterclaim against Pierce.

And this is where the case stands today. It sure looks like Pierce is going to pay a high price for being spiteful and the question remains – will the lawyers who filed his proof of claim in Vickie’s bankruptcy proceeding pay a high price, as well? We can all speculate. We don’t know what advice the lawyers may have given Pierce at the time – or if they strongly counseled him against filing the proof of claim. We don’t know if they warned him of the jurisdictional dangers he would face by filing the proof of claim. And we don’t know what the 9th Circuit will ultimately decide in this case. What is known is that the case with-in-the-case (the term commonly used in legal malpractice cases to refer to the original case that was handled by the supposedly negligent lawyer) is strong.

Hat Tip to Steve Jakubowski at The Bankruptcy Litigation Blogfor bringing the details of the case to my attention. Steve has written some very informative posts on the case from a bankruptcy perspective.

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