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The Anna Nicole Smith case: an opera in five acts: the fascinating battle over Anna Nicole Smith's husband's estate is over, and the late Anna Nicole lost everything. Or is it? And did she?

The immortality of Anna Nicole Smith was something that could have never been predicted. Her legal battle has ensued for over 15 years, including two years beyond her death, and has found a voice in nearly every court. Her entangled case has been heard by the bankruptcy court, probate court, district court, appellate court and the U. S. Supreme Court.

On March 19, 2010, on remand from the Supreme Court, the ninth circuit ruled that two prior federal court rulings in favor of Anna Nicole Smith should be vacated and the initial Texas probate court should be upheld. The Texas probate court left Anna Nicole Smith nothing of her deceased billionaire husband's estate. Though the ruling itself is not that interesting, the little known story, both factual and legal, is fascinating.

A little personality

We all seem to know who Anna Nicole Smith was. When she met J. Howard Marshall II, she was a 24-year-old divorcee and single mother living in Houston. She worked as a waitress and dancer but dreamed of being a model and actress.

But who was J. Howard Marshall II? He was a Yale Law School graduate who worked for the Roosevelt Administration on the proration of oil production. He then became an entrepreneur in the oil industry and was one of the founders of the Great Northern Oil and Gas Company. His wealth came from this company.

He was married and divorced twice before his marriage to Anna Nicole Smith. He had two children, J. Howard Marshall III and E. Pierce Marshall.

A little history

The elder son of J. Howard Marshall II, J. Howard Marshall III worked with his father at Great Northern. In 1980, father and son had a heated disagreement about the management of the company. Son threatened to vote father off the board of directors. Father bought back son's company stock and removed son as a beneficiary of his estate plan.

In 1982, in order to avoid probate, J. Howard Marshall II executed a pour over will and revocable living trust, and titled most of his business assets into the revocable living trust. The primary beneficiary of his estate plan was his younger son, E. Pierce Marshall. When J. Howard Marshall II met Anna Nicole Smith, most of his assets were held by the revocable living trust.

The estate plan

J. Howard Marshall met Anna Nicole Smith in 1991. Their courtship lasted a little over two years, and they married on June 27, 1994, when he was 89 years old.

Though he was ripe in age, he seemed to have clarity and present state of mind in providing for Anna Nicole Smith. He intentionally segregated her from his current estate plan and formed what according to his lawyer's notes was a "new community." He did not gift or devise Anna Nicole Smith any business assets or stock holdings. He did not make her a beneficiary of his will or revocable living trust.

Rather, he transferred gifts to Anna Nicole pursuant to a formal document, called an "Act of Donation." In 1994, he gifted Anna Nicole Smith approximately $6 million worth of assets, including a ranch, several houses, cars, jewelry, and a large amount of cash. All of the gifts were memorialized in the Act of Donation, under which Anna Nicole Smith (legally known as Vickie Lynn Marshall) accepted the gifts formally (in writing).

He also made efforts to boost Anna Nicole Smith's modeling and acting career. With this conduct, and a legal background, it appears that he knew exactly how he wanted to benefit his new wife, while keeping her separate from the rest of his family. J. Howard Marshall II died of heart failure (happily, we hope) one year later on August 4, 1995.

Texas court

Though Anna Nicole Smith was no longer a waitress or dancer, and her son was aptly supported, she was not happy with only $6 million. She felt entitled to a portion of her late husband's estate.

Specifically, Anna Nicole Smith referenced some questionable events that took place shortly after her June 27, 1994, wedding. On July 13, 1994, with heavy involvement from his son E. Pierce Marshall, J. Howard Marshall II made his revocable living trust irrevocable. He thereby gave up all powers retained over the assets in the trust and retained (a) a limited power of appointment to appoint a charity and (b) the power to substitute a beneficiary of the trust with another beneficiary, provided that beneficiary was already a beneficiary of the trust as of that July 13, 1994, date. Anna Nicole Smith was not a beneficiary of that trust.

The heavy involvement of his son, and the fact that the legal documents that J. Howard Marshall II signed to make the trust irrevocable were typed in a font too small for him to see according to testimony from his doctors, seemed naturally to create a cause of action.

Anna Nicole Smith, however, did not wait until her husband died. She filed suit against E. Pierce Marshall, her husband's lawyers, and others on April 15, 1995 (J. Howard Marshall II died on August 4, 1995). She stated that they were interfering with her statutory right to be financially supported by her husband and that E. Pierce Marshall breached his fiduciary duty as trustee of his father's trust and used fraud and undue influence to force his father to make his revocable living trust irrevocable in order to secure his interest therein. This alone could have caused heart failure for a man who carefully carved out a separate nest egg for his new wife.

As soon as Anna Nicole Smith's husband died, she claimed that he died intestate and challenged the will and trust on undue influence and fraud grounds. on December 7, 2001, six years later, the Texas probate court entered its final judgment (a jury verdict that was amended twice) finding that the will and revocable living trust of J. Howard Marshall II, as amended, were valid and were not the product of undue influence. Furthermore, they found that "J. Howard Marshall did not intend to give and did not give Vickie Lynn Marshall...a gift or bequest from the Estate of J. Howard Marshall II or from the [trust] either prior to or upon his death."

The battle, not the war

She lost the battle but not the war. or so she thought. Anna Nicole Smith's attorneys levied a broad attack against the primary beneficiary of her husband's estate, E. Pierce Marshall, including in a controversial and unusual bankruptcy proceeding that tendered a judgment against E. Pierce Marshall of $450 million on the grounds that he tortiously interfered with Anna Nicole Smith's inter vivos expectancy of gifts from her husband.

At the district court level, Anna Nicole Smith's legal team also won. The district court found that from the date of his marriage, J. Howard Marshall intended to share with his wife, on an equal basis, the growth of his assets. They determined this by reviewing his estate attorney's notes and draft documents, which included a draft of a trust that referred to this intent.

Further, the district court found that E. Pierce Marshall backdated documents, altered documents, destroyed documents, suborned falsified notary statements, presented documents to his father under false pretenses, and committed perjury, all in an effort to prevent his father from carving a piece of his estate out for Anna Nicole Smith. Finally, the district court found that J. Howard Marshall II was duped into making his revocable living trust irrevocable by his son. They concluded that E. Pierce Marshall tortiously interfered with Anna Nicole's expectancy of an inter vivos gift from J. Howard Marshall and awarded Anna Nicole Smith $88 million in damages, plus legal costs.

As expected, E. Pierce Marshall appealed the district court ruling to the Ninth Circuit Court of Appeals. The ninth circuit tossed out the district court's judgment, citing the probate exception to federal subject matter jurisdiction. In other words the district court was precluded from reconsidering the facts and legal issues determined at the Texas probate court level ($88 million judgment in favor of Anna Nicole was thus vacated). The ninth circuit also caused the $450 million bankruptcy judgment in favor of Anna Nicole to be vacated.

The Supreme challenge

With multiple proceedings at the probate level, bankruptcy level, district court level, and appellate level, the strand of various matters became knotted and it became necessary to reconcile each court's jurisdiction. The Supreme Court granted certiorari to detangle the mess. The Supreme Court disagreed with the ninth circuit's determination that the district court was precluded by the probate exception from re-addressing the issues determined at the Texas probate court level, and remanded back the ninth circuit to consider the case on its merits.

On March 19, 2010, the ninth circuit in its published opinion found that the district court erred in refusing to give preclusive effect to any of the Texas probate court's jury findings, factual findings or legal conclusions, and did not have authority to arrive at opposite findings on the same legal and factual questions. "The district court was not free to reach these contradictory findings of fact; instead, it was bound to afford preclusive effect to the relevant factual findings made by the Texas probate court [and] was similarly bound to afford preclusive effect to the overlapping legal issues finally determined by the Texas probate court." In re Marshall, 2010 WL 986781 *22.

E. Pierce Marshall was now free to enjoy his father's legacy. Unfortunately, E. Pierce Marshall died in 2006 and was not alive to appreciate the fortune or the verdict. Representatives for Marshall family members have expressed hope that the legal fight is over.

Kent Reichland, who represents Anna Nicole Smith's estate, says he will appeal this ruling. He stated that he has not yet decided whether to look to the ninth circuit for a larger panel or take the case back to the Supreme Court.

Meanwhile, the Royal Opera House in London plans to stage the world premier of "Anna Nicole" an opera about her life and death. Anna Nicole Smith died in 2008, and has been spared the continued legal gyrations, but she finally attained international notoriety and publicity she couldn't even buy with a billion dollars.

Katarinna McBride <kmcbride@beermannlaiv.com> is an estate planning partner with the Chicago firm of Beermann Swerdlove, LLP and editor of the ISBA Trusts and Estates newsletter.
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Author:McBride, Katarinna
Publication:Illinois Bar Journal
Date:May 1, 2010
Words:1741
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