In re Marshall

• Decision Date: 21 December 2001
• Docket Number: No. SA CV 01-97 DOC.,Bankruptcy No. LA 96-12510 SB.,Adversary No. AD 96-1838 SB.,SA CV 01-97 DOC.
• Citation: 271 B.R. 858
• Court: U.S. District Court — Central District of California
• Parties: In Re Vickie Lynn MARSHALL, Debtor. E. Pierce Marshall, Plaintiff, v. Vickie Lynn Marshall, Defendant. Vickie Lynn Marshall, Counter-claimant, v. E. Pierce Marshall, Counter-Defendant.

Page 858

271 B.R. 858

In Re Vickie Lynn MARSHALL, Debtor.

E. Pierce Marshall, Plaintiff, v. Vickie Lynn Marshall, Defendant.

Vickie Lynn Marshall, Counter-claimant, v. E. Pierce Marshall, Counter-Defendant.

No. SA CV 01-97 DOC.

Bankruptcy No. LA 96-12510 SB.

Adversary No. AD 96-1838 SB.

United States District Court, C.D. California.

December 21, 2001.

COPYRIGHT MATERIAL OMITTED

Joseph A. Eisenberg, Julia J. Rider, Robert E. Mangels, Jeffer Mangels Butler & Marmaro, Los Angeles, CA, G. Eric Brunstad, Jr., Hebb & Gitlin, Hartford, CT, John P. Melko, Verner Liipfert Bernhard McPherson Hand Chartered, Houston, TX, Rusty Hardin, Rusty Hardin & Associates, Houston, TX, Jerry Don Jackson, B. Lee Ware, Ware Snow Fogel & Jackson, Houston, TX, for plaintiff.

Rex S. Heinke, Sheila S. Kato, Jessica M. Weisel, Jennifer C. Yang, Greines Martin Stein & Richland, Los Angeles, CA, Philip W. Boesch, Jr., Philip W. Boesch Jr. Law Offices, Marina De Rey, CA, for defendant.

ORDER DENYING COUNTER-DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

CARTER, District Judge.

Before the Court is Plaintiff and Cross-Defendant E. Pierce Marshall's (Pierce)¹ motion for summary judgment based on res judicata or collateral estoppel. After reviewing the moving, opposing, and replying papers, and for the reasons set forth below, the Court DENIES the motion.

I. BACKGROUND

Defendant and Cross-Claimant Vickie Lynn Marshall (Vickie) is the surviving widow of J. Howard Marshall II (J. Howard), who died on August 4, 1995. Vickie and J. Howard were married on June 27, 1994, after two and a half years of courtship. At the time of their marriage, Vickie was 26 years old and J. Howard was 89 years old. Vickie, also known as Anna Nicole Smith, is a figure of some notoriety because of her career as a model. Prior to their marriage, J. Howard had assisted in developing her career. J. Howard is also a figure of some notoriety in his own right, as he was said to be either the richest or second-richest man in Texas at the time of his death. His wealth was held in several different ways, including a living trust, and the exact amount and location of his wealth at the time of his death is disputed, but estimates put it at as high as $2 billion.

It is undisputed that J. Howard lavished great sums of money on Vickie during their courtship and marriage. Nonetheless, he did not explicitly provide for Vickie in his will. However, according to Vickie, J. Howard promised Vickie that she would receive substantial wealth and be taken care of. J. Howard, Sr.'s son from a former marriages, Pierce, contests whether J. Howard ever made such promises.

The magnitude of the sums of money involved in J. Howard's estate has sparked intensely contested litigation on several fronts. First, some probate proceedings took place in Louisiana, but were dismissed some time ago after a jurisdictional ruling by the Louisiana Supreme Court. Second, the estate is currently going through probate in Texas. Trial in the probate proceedings has concluded, and the jury has returned a verdict. Judgment was entered on August 15, 2001. After cross-motions by both Vickie and Pierce, and an order from the bankruptcy court holding that parts of the judgment violated Vickie's discharge in her bankruptcy proceedings, the Texas probate court entered a modified judgment on October 25, 2001. Both sides filed cross-motions for a new trial, and the Texas probate court issued a second modified judgment on December 7, 2001.

Third, on January 25, 1996, a few months after J. Howard's death, Vickie filed for Chapter 11 bankruptcy here in the Central District of California. This bankruptcy case engendered the current adversary proceeding. On May 7, 1996, Pierce filed an adversary complaint seeking a determination that Vickie owed him a debt that was nondischargeable. Pierce alleged that Vickie had defamed him when, prior to the time she filed for bankruptcy and with her complicity, some of her lawyers told members of the press that Pierce had used forgery, fraud, and overreaching to gain control of Howard's assets.² On June 11, 1996, Pierce filed a proof of claim in the bankruptcy case. He made the claim by attaching a copy of the complaint from his adversary proceeding.

Vickie responded to both the adversary complaint and the proof of claim. As to the adversary proceeding, on June 14, 1996 she answered, in part asserting truth as a defense. She also asserted counterclaims for fraudulent transfer, an injunction, conversion, tortious interference with inheritance, breach of fiduciary duty, abuse of process, fraud, promissory estoppel, breach of contract (third-party beneficiary), the imposition of a constructive trust, an accounting, and indemnity and contribution. As to Pierce's proof of claim, Vickie filed an objection on July 3, 1996.

On September 22, 1998, Pierce filed a motion to withdraw the reference for his adversary proceeding. This motion was assigned to Judge Keller for determination. Judge Keller issued a ruling on October 21, 1998, but he then vacated that order and issued a new ruling on March 10, 1999. The March 10, 1999 ruling denied Pierce's request to withdraw the reference. The effect of this ruling was that the Pierce adversary proceeding remained in the bankruptcy court in its entirety.

On November 5, 1999, the bankruptcy court granted summary judgment for Vickie on Pierce's claim. It found that Vickie had published no statements about Pierce, had not ratified any statements about Pierce made by her attorneys, and was not otherwise vicariously liable for any statements her attorneys had made about Pierce. Thus, it held that Vickie had not committed a willful or malicious act under 11 U.S.C. § 523(a)(6).

Vickie's counterclaims against Pierce went to trial in the bankruptcy court in the fall of 1999. Approximately ten months later, on October 6, 2000, the bankruptcy court issued an Amended Memorandum of Decision Following Trial ("Amended Decision"). In re Vickie Lynn Marshall, 253 B.R. 550 (Bankr.C.D.Cal.2000). Based on the evidence at trial and in large part on facts found against Pierce as sanctions for his discovery abuses, the bankruptcy court concluded that Pierce tortiously interfered with Vickie's expectation of an inter vivos gift. The bankruptcy court awarded Vickie $449,754,134 in compensatory damages. Subsequently, the bankruptcy court awarded $25 million in punitive damages and issued a judgment. After the judgment was entered in the bankruptcy court, Vickie voluntarily dismissed her claims against Pierce in the Texas probate proceedings for tortious interference with an inheritance or inter vivos gift.

Pierce appealed the bankruptcy court's judgment to this Court. On June 19, 2001, this Court entered an Amended Order Regarding Subject Matter Jurisdiction. Marshall v. Marshall (In re Marshall), 264 B.R. 609 (C.D.Cal.2001). The Court reversed the bankruptcy court's ruling that this was a core matter pursuant to 28 U.S.C. § 157. Accordingly, the Court deemed the bankruptcy court's Amended Memorandum of Decision to be proposed findings of fact and conclusions of law pursuant to 28 U.S.C. § 157(c)(1). Consistent with that provision, the Court began to undertake a de novo review of the bankruptcy court's proposed findings. On October 5, 2001, this Court held a hearing to review whether the bankruptcy court's evidentiary sanctions were proper.³ The Court determined that it could not at that point determine that the evidentiary sanctions were appropriate, and therefore would allow additional evidence to be presented at the hearing on the de novo review of the merits of Vickie's claim. Pierce was also ordered to produce several hundred boxes of documents subject to previous orders to compel discovery.

Pierce now moves for summary judgment, asserting that Vickie's claims are precluded by the doctrine of claims preclusion by the judgment in the Texas probate proceedings. Alternatively, Pierce asserts that Vickie is estopped from arguing the key elements of her claim for tortious interference with an inter vivos gift under the doctrine of issue preclusion because of the Texas probate judgment.

II. DISCUSSION

The Full Faith and Credit Act requires the Court to give state court judgments the same effect as a court of that state would. 28 U.S.C. § 1738.⁴ The Court must give preclusive effect to judgments whenever a court of the state that the judgment issued from would give the judgment preclusive effect. Allen v. McCurry, 449 U.S. 90, 96, 101 S.Ct. 411, 416, 66 L.Ed.2d 308 (1980).

The federal courts have traditionally adhered to the related doctrines of res judicata and collateral estoppel. Under res judicata, a final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action. Cromwell v. County of Sac, 94 U.S. 351, 352, 24 L.Ed. 195 (1876). Under collateral estoppel, once a court has decided an issue of fact or law necessary to its judgment, that decision may preclude relitigation of the issue in a suit on a different cause of action involving a party to the first case. Montana v. United States, 440 U.S. 147, 153, 99 S.Ct. 970, 973, 59 L.Ed.2d 210 (1979).

Allen, 449 U.S. at 96, 101 S.Ct. at 414-415 (footnote omitted).

A. Res Judicata

The doctrine of res judicata⁵ does not apply here. Vickie did not litigate, and was not required to bring, her claim for interference with an inter vivos gift in Texas. Texas Rule of Civil Procedure 97, which is nearly identical to Federal Rule of Civil Procedure 13(a), includes four specific exceptions to the compulsory counterclaim requirement, one of those exceptions is that a party need not bring a counterclaim if it is subject to a pending action. Here, Vickie's claim was subject to the present adversary proceeding. It is quite literally hornbook law that "[a] party who fails to interpose a counterclaim that falls under one of these exceptions will not be...