In re Marshall, No. 02-56002.

CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)
Writing for the CourtBEEZER; Concurrence by KLEINFELD
Citation600 F.3d 1037
Docket NumberNo. 02-56002.
Decision Date19 March 2010
PartiesIn re Vickie Lynn MARSHALL, Debtor. Elaine T. Marshall, Executrix of the Estate of E. Pierce Marshall, Plaintiff-Counter-Defendant/Appellant-Cross-Appellee, v. Howard K. Stern, Executor of the Estate of the Estate of Vickie Lynn Marshall, Defendant-Counter-Claimant/Appellee-Cross-Appellant.

600 F.3d 1037

In re Vickie Lynn MARSHALL, Debtor.
Elaine T. Marshall, Executrix of the Estate of E. Pierce Marshall, Plaintiff-Counter-Defendant/Appellant-Cross-Appellee,
v.
Howard K. Stern, Executor of the Estate of the Estate of Vickie Lynn Marshall, Defendant-Counter-Claimant/Appellee-Cross-Appellant.

No. 02-56002.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 25, 2009.

Filed March 19, 2010.


600 F.3d 1038

G. Eric Brunstad, Jr., Collin O'Connor Udell, Matthew J. Delude, Michael J. Newman, Joshua Richards, Peter F. Herzog, Kate O'Keeffe, Frank L. Tamulonis, III, Francesco P. Trapani, Dechert, LLP, Hartford, CT, for the appellant-cross-appellee.

Kent L. Richland and Alan Diamond, Greines, Martin, Stein & Richland LLP,

600 F.3d 1039
Los Angeles, CA, for the appellee-cross-appellant

Kathleen M. Sullivan, Quinn Emanuel Urquhart Oliver & Heges, LLP, Redwood Shores, CA; Craig Goldblatt, Wilmer Cutler Pickering Hale and Dorr LLP, Washington, D.C., for the amici.

Before: ROBERT R. BEEZER, ANDREW J. KLEINFELD and RICHARD A. PAEZ, Circuit Judges.

Opinion by Judge BEEZER; Concurrence by Judge KLEINFELD.

BEEZER, Circuit Judge:

This case returns to us after the Supreme Court determined that we had construed too broadly the "probate exception" to our subject matter jurisdiction. Marshall v. Marshall, 547 U.S. 293, 126 S.Ct. 1735, 164 L.Ed.2d 480 (2006). Confident that we have subject matter jurisdiction over this case, id.; 28 U.S.C. § 1291, we turn to the merits of the longstanding and acrimonious dispute.

This case involves a tort claim by Vickie Lynn Marshall against E. Pierce Marshall, the son of her late husband J. Howard Marshall II, for Pierce Marshall's purported interference with a substantial inter vivos gift (estimated to exceed $300 million) that her late husband intended to give to her. The claim comes to us in an unusual procedural posture. It was asserted as a state law counterclaim to a nondischargeability complaint and proof of claim that Pierce Marshall filed in Vickie Lynn Marshall's bankruptcy proceedings in the Central District of California. Both the bankruptcy and district courts found that Pierce Marshall was liable for tortious interference and awarded Vickie Lynn Marshall millions of dollars in compensatory and punitive damages.

While Vickie Lynn Marshall's tortious interference claim was pending in federal court in California, a probate court in Texas was administering the estate of J. Howard Marshall II. Both Vickie Lynn Marshall and Pierce Marshall were actively engaged in this Texas litigation, participating fully in the five-month jury trial held by the Texas probate court. To discern J. Howard Marshall II's true intentions regarding his will and assets held in trust, the Texas probate court had to resolve allegations that J. Howard Marshall II's estate plan and the transactions underlying it were tainted by illegality and that, contrary to his estate plan, J. Howard Marshall II intended to give Vickie Lynn Marshall a substantial inter vivos gift. In its judgment, which was issued after the bankruptcy court's "judgment" on Vickie Lynn Marshall's tortious interference claim but before the district court had adjudicated the appeal from the bankruptcy court, the Texas probate court upheld the validity of J. Howard Marshall's estate plan and estate planning documents, finding that J. Howard knowingly effected his estate plan free from the undue influence or coercion of his son Pierce Marshall. The Texas probate court further found that J. Howard Marshall II did not intend to give Vickie Lynn Marshall a gift from the assets that passed through his will or that were held in his living trust. These and other legal and factual determinations adverse to Vickie Lynn Marshall would be fatal to her tortious interference counterclaim, should they be afforded preclusive effect in this proceeding.

We conclude that the findings of the Texas probate court should be afforded preclusive effect because it is the earliest final judgment on matters relevant to this proceeding. The bankruptcy court exceeded its statutory grant of power and

600 F.3d 1040
the constitutional limitations on that power when it purported to enter a final judgment in favor of Vickie Lynn Marshall on her counterclaim. The bankruptcy court is empowered by 28 U.S.C. § 157(b)(1) to hear and finally determine "core proceedings arising under title 11, or arising in a case under title 11." Vickie Lynn Marshall's counterclaim for tortious interference is not such a "core proceeding" because its resolution was not a necessary precursor to the resolution of Pierce Marshall's claim against the bankruptcy estate for defamation. In other words, her counterclaim was not so closely related to his claim that they essentially merged, with her counterclaim becoming part and parcel of the bankruptcy court's claims determination and allowance process. Thus, the bankruptcy court could, at most, enter proposed findings of fact and conclusions of law on Vickie Lynn Marshall's counterclaim for tortious interference. See 28 U.S.C. § 157(c)

The district court should have afforded preclusive effect to the Texas probate court's factual findings and relevant legal conclusions. The determinations adverse to Vickie Lynn Marshall in the Texas probate court prevent her from establishing the elements of her counterclaim, such as J. Howard Marshall II's intent to give her a substantial inter vivos gift, the tortious nature of Pierce Marshall's conduct regarding the estate planning documents, and the reasonableness and amount of her expectancy. We reverse the judgment of the district court and remand with instructions that judgment be entered in favor of the Estate of Pierce Marshall.

I

This case arises out of the bankruptcy of appellee/cross-appellant Vickie Lynn Marshall, the widow of the late J. Howard Marshall II. During the course of her bankruptcy, Vickie Lynn Marshall made a counterclaim for tortious interference with a gift expectancy against appellant/crossappellee E. Pierce Marshall, the younger of J. Howard Marshall II's two sons, who had sought a determination of nondischargeability and filed a proof of claim against Vickie Lynn Marshall's bankruptcy estate.1 Vickie Lynn Marshall's counterclaim is the focus of this appeal. Although

600 F.3d 1041
the case arises out of her bankruptcy, a broader review of the relationships between Vickie Lynn Marshall, J. Howard Marshall II, and Pierce Marshall, the business and estate planning measures of J. Howard Marshall II, and the Texas probate proceeding is necessary to appreciate the issues before us

A

As detailed by the district court, J. Howard Marshall II was a self-made entrepreneur who eventually found great success in the oil industry. Born in 1905, J. Howard Marshall II attended Haverford College and graduated magna cum laude from Yale Law School before working during the 1930s for the Roosevelt Administration on the proration of oil production. After continued involvement in the oil industry, J. Howard Marshall II became one of the founders of the Great Northern Oil and Gas Company in 1954. The wealth of the Marshall family is primarily based on the interest acquired by J. Howard Marshall II in Great Northern Oil and Gas, which was the predecessor company to Koch Industries.2

In 1982, as an estate planning mechanism to reduce (or avoid) the cost of probate, J. Howard Marshall II placed almost all of his assets (including his interest in Marshall Associates, the family partnership that then held the Koch stock) in a revocable inter vivos trust, known as the J. Howard Marshall II Living Trust, or the Living Trust.3 From 1982 until his death, J. Howard Marshall II executed a series of amended and restated instruments governing the terms of the Living Trust.

During his lifetime, J. Howard Marshall II retained the income from the Living Trust's assets, and the Living Trust was responsible for his debts. The terms of the Living Trust permitted J. Howard Marshall II to borrow money using the Living Trust's assets as security. Although the distributions from the Living Trust were his primary source of income, J. Howard Marshall II also drew a salary from Marshall Petroleum, Inc. (MPI), earned directors' fees from the corporate boards of which he was a member, and received minor pension payments.

The Living Trust also named the beneficiaries who would receive the Living Trust property after J. Howard Marshall II's death. At the time J. Howard Marshall II died, the primary beneficiary of the Living Trust was Pierce Marshall.4

Also as part of his estate planning measures, J. Howard Marshall II executed a will that provided for the disposition of the assets that he held directly, i.e., not in the Living Trust or any other form of trust. J. Howard Marshall II executed his last will and testament relevant to these proceedings on December 22, 1992. This will contained pour-over provisions, which required the distribution of J. Howard Marshall II's probate estate to the Living

600 F.3d 1042
Trust. Thus, the Living Trust was J. Howard Marshall II's primary estate planning document. Also in 1992, J. Howard Marshall II signed a document requesting that Pierce Marshall be appointed his guardian if a guardianship was ever warranted.

At the time J. Howard Marshall II met Vickie Lynn Marshall, essentially all of his assets were held by the Living Trust. J. Howard Marshall II modified his Living Trust for the last time on July 13, 1994, just a few days after his marriage. On that date, J. Howard Marshall II made the Living Trust irrevocable.5

B

J. Howard Marshall II met Vickie Lynn (Smith) Marshall in October 1991. At the time, Vickie Lynn was a twenty-four year old divorcee and single mother living in Houston, Texas.

She worked as a waitress and dancer to provide for her son, but she aspired to become an international superstar like her idol Marilyn Monroe. After a...

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89 practice notes
  • Brookview Apartments, L.L.C. v. Bronson Family Trust (In re Know Weigh, L.L.C.), Case No.: 1:13–bk–12439–MB
    • United States
    • United States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — Central District of California
    • August 31, 2017
    ...have any effect on the bankruptcy estate. See 28 U.S.C. § 1334(b) ; In re Harris, 590 F.3d 730, 737 (9th Cir. 2009) ; In re Marshall, 600 F.3d 1037, 1054 (9th Cir. 2010) ; In re Fietz, 852 F.2d 455, 457 (9th Cir. 1988) (adopting "related to" test of Pacor, Inc. v. Higgins, 743 F.2d 984 (3rd......
  • In re Cohen, No. 2:13–bk–26483–NB.
    • United States
    • United States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — Central District of California
    • November 13, 2014
    ...See 28 U.S.C. §§ 157(a), 1334(b); In re Harris, 590 F.3d 730, 737 (9th Cir.2009) (summarizing jurisdictional standards); In re Marshall, 600 F.3d 1037, 1054 (9th Cir.2010) (same); In re Fietz, 852 F.2d 455, 457 (9th Cir.1988) (adopting “related to” test of Pacor, Inc. v. Higgins, 743 F.2d 9......
  • In re Cohen, No. 2:13–bk–26483–NB.
    • United States
    • United States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — Central District of California
    • November 13, 2014
    ...See 28 U.S.C. §§ 157(a), 1334(b); In re Harris, 590 F.3d 730, 737 (9th Cir.2009) (summarizing jurisdictional standards); In re Marshall, 600 F.3d 1037, 1054 (9th Cir.2010) (same); In re Fietz, 852 F.2d 455, 457 (9th Cir.1988) (adopting “related to” test of Pacor, Inc. v. Higgins, 743 F.2d 9......
  • Stern v. Marshall, No. 10–179.
    • United States
    • U.S. Supreme Court
    • June 23, 2011
    ...of the press that he had engaged in fraud to gain control of his father's assets. 547 U.S., at 300–301, 126 S.Ct. 1735; In re Marshall, 600 F.3d 1037, 1043–1044 (C.A.9 2010). The complaint sought a declaration that Pierce's defamation claim was not dischargeable in the bankruptcy proceeding......
  • Request a trial to view additional results
89 cases
  • Brookview Apartments, L.L.C. v. Bronson Family Trust (In re Know Weigh, L.L.C.), Case No.: 1:13–bk–12439–MB
    • United States
    • United States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — Central District of California
    • August 31, 2017
    ...have any effect on the bankruptcy estate. See 28 U.S.C. § 1334(b) ; In re Harris, 590 F.3d 730, 737 (9th Cir. 2009) ; In re Marshall, 600 F.3d 1037, 1054 (9th Cir. 2010) ; In re Fietz, 852 F.2d 455, 457 (9th Cir. 1988) (adopting "related to" test of Pacor, Inc. v. Higgins, 743 F.2d 984 (3rd......
  • In re Cohen, No. 2:13–bk–26483–NB.
    • United States
    • United States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — Central District of California
    • November 13, 2014
    ...See 28 U.S.C. §§ 157(a), 1334(b); In re Harris, 590 F.3d 730, 737 (9th Cir.2009) (summarizing jurisdictional standards); In re Marshall, 600 F.3d 1037, 1054 (9th Cir.2010) (same); In re Fietz, 852 F.2d 455, 457 (9th Cir.1988) (adopting “related to” test of Pacor, Inc. v. Higgins, 743 F.2d 9......
  • In re Cohen, No. 2:13–bk–26483–NB.
    • United States
    • United States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — Central District of California
    • November 13, 2014
    ...See 28 U.S.C. §§ 157(a), 1334(b); In re Harris, 590 F.3d 730, 737 (9th Cir.2009) (summarizing jurisdictional standards); In re Marshall, 600 F.3d 1037, 1054 (9th Cir.2010) (same); In re Fietz, 852 F.2d 455, 457 (9th Cir.1988) (adopting “related to” test of Pacor, Inc. v. Higgins, 743 F.2d 9......
  • Stern v. Marshall, No. 10–179.
    • United States
    • U.S. Supreme Court
    • June 23, 2011
    ...of the press that he had engaged in fraud to gain control of his father's assets. 547 U.S., at 300–301, 126 S.Ct. 1735; In re Marshall, 600 F.3d 1037, 1043–1044 (C.A.9 2010). The complaint sought a declaration that Pierce's defamation claim was not dischargeable in the bankruptcy proceeding......
  • Request a trial to view additional results
1 books & journal articles
  • A RESPONSIVE REMEDY FOR UNCONSTITUTIONAL REMOVAL RESTRICTIONS.
    • United States
    • Notre Dame Law Review Vol. 97 Nbr. 5, May 2022
    • May 1, 2022
    ...Nixon v. Adm'r of Gen. Servs., 433 U.S. 425, 443 (1977)). (136) Id. (137) See id. at 503. (138) See Marshall v. Stern (In re Marshall), 600 F.3d 1037, 1060 (9th Gir. (139) Stern, 564 U.S. at 502. (140) Id. at 502-03. (141) See N. Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, ......

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