Marshall v. Marshall (In re Marshall)
| Decision Date | 28 June 2013 |
| Docket Number | No. 09-55573,D.C. No. 8:03-cv-01354-DOC,09-55573 |
| Parties | IN THE MATTER OF: J. HOWARD MARSHALL, ILL AND ILENE O. MARSHALL, Debtors, ELAINE T. MARSHALL, AS SUCCESSOR TRUSTEE OF THE BETTYE B. MARSHALL Living Trust, Trustee of the J. HOWARD MARSHALL, II Marital Trust Number Two, and Trustee of the E. PIERCE MARSHALL Family Trust Created Under BETTYE B. Marshall Living Trust Indenture Dated October 30, 1990, Appellant, v. J. HOEARD MARSHALL,III and ILENE O. MARSHALL, Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
IN THE MATTER OF: J. HOWARD MARSHALL, ILL AND ILENE O. MARSHALL, Debtors,
ELAINE T. MARSHALL, AS SUCCESSOR TRUSTEE OF THE BETTYE B. MARSHALL
Living Trust, Trustee of the J. HOWARD MARSHALL, II Marital Trust Number Two, and Trustee of
the E. PIERCE MARSHALL Family Trust Created Under BETTYE B.
Marshall Living Trust Indenture Dated October 30, 1990, Appellant,
v.
J. HOEARD MARSHALL,III and ILENE O. MARSHALL, Appellees.
No. 09-55573
D.C. No. 8:03-cv-01354-DOC
UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
Filed June 28, 2013
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The panel affirmed the district court's affirmance of bankruptcy court decisions arising from the dispute over the estate of J. Howard Marshall, II, who left nearly all of his assets to his son, E. Pierce Marshall, but excluded his wife, Vickie Lynn Marshall, also known as Anna Nicole Smith, and his other son, J. Howard Marshall, III, from receiving any part of his fortune.
The panel held that non-random assignment of the Chapter 11 case of Howard III and his wife Ilene (Debtors) to Bankruptcy Judge Bufford, who presided over Vickie's Chapter 11 case, was within the court's discretion and in the interests of efficiency. The panel held that Judge Bufford did not abuse his discretion in denying the motion of Pierce's widow, Elaine T. Marshall, for recusal.
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For the reasons outlined in the second amended opinion of the bankruptcy court filed on October 9, 2003, the panel concluded that the district court correctly affirmed the bankruptcy court's confirmation of the Debtors' Chapter 11 Plan and denial of Elaine's motion to dismiss with respect to the constitutional issues raised in the motion.
The panel held that the "Best Interests of Creditors" test in 11 U.S.C. § 1129(a)(7)(A) did not apply to Pierce or his Texas fraud judgment against Howard III, where Pierce never filed a proof of claim in the Debtors' Chapter 11 proceedings, and the deadline for doing so had passed by the time the bankruptcy court confirmed the Plan.
The panel held that the bankruptcy court's finding that the Debtors' Plan was proposed in good faith was not clearly erroneous, and that the confirmation of the Plan was not an abuse of discretion. The panel likewise held that the bankruptcy court's finding that the Debtors' Chapter 11 petition was filed in good faith was not clearly erroneous, and that the bankruptcy court did not abuse its discretion in denying Elaine's motion to dismiss.
G. Eric Brunstad, Jr. (argued), Matthew Joseph Delude, and Collin O'Connor Udell, Dechert LLP, Hartford, Connecticut; Jeffrey W. Chambers, Ware, Snow, Fogel & Jackson, LLP, Houston, Texas, for Appellant.
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David L. Neale (argued) and Michelle Sharoni Grimberg, Levene, Neale, Bender, Yoo & Brill LLP, Los Angeles, California; Anne Wells, Futter-Wells, PC, Santa Monica, California, for Appellees.
NGUYEN, Circuit Judge:
This case marks the third time we have been asked to intervene in the infamous feud over the estate of the late Texas oil magnate and billionaire J. Howard Marshall, II ("J. Howard"). J. Howard died in 1995, leaving nearly all his assets to his son, E. Pierce Marshall ("Pierce"), but excluding his young wife, Vickie Lynn Marshall, also known as Anna Nicole Smith ("Vickie"), and his other son, J. Howard Marshall, III ("Howard"), from receiving any part of his fortune. The ensuing controversy, pitting wife against son and brothers against each other, has defied resolution for nearly two decades, and has survived almost all of its original players.
After J. Howard died, Vickie and Howard each unsuccessfully challenged his will in Texas probate court. In addition to losing the will contest, Howard suffered a multimillion dollar judgment after Pierce successfully counterclaimed against him on the basis of fraud. Following this loss, Howard and his wife, Ilene, filed for Chapter 11 bankruptcy in the Central District of California. Their case was assigned to United States Bankruptcy Judge samuel
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Bufford, who had previously presided over Vickie's Chapter 11 bankruptcy case.1
Pierce moved for random reassignment or recusal of Judge Bufford, objected to Howard and Ilene's proposed Chapter 11 Plan, and moved to dismiss the bankruptcy action. Judge Bufford published three separate opinions: (1) denying Pierce's motion for reassignment or recusal; (2) confirming the Plan and denying Pierce's motion to dismiss with respect to his constitutional arguments; and (3) confirming the Plan and denying Pierce's motion to dismiss with respect to his statutory arguments. Pierce appealed to the district court, which affirmed the bankruptcy court's decisions in all respects on March 18, 2009.
Appellant Elaine T. Marshall ("Elaine"),2 Pierce's widow, now appeals the district court's decision, contending that the district court erred in affirming the bankruptcy court's orders because: (1) there was no basis for non-random assignment of the case to Judge Bufford, and alternatively, Judge Bufford should have recused himself on account of apparent bias; (2) Howard and Ilene's Chapter 11 petition and proposed Plan
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were unconstitutional; and (3) Howard and Ilene's Chapter 11 petition and proposed Plan were filed in bad faith. We have jurisdiction pursuant to 28 U.S.C. § 158(d), and we affirm.
In the Texas probate court, Vickie claimed that she was entitled to a portion of J. Howard's estate, and that Pierce had tortiously interfered with her expectancy of a gift from her husband. While the probate case was pending, she filed for bankruptcy in California, and the matter was assigned to Judge Bufford. Pierce filed a proof of claim, arguing that he held a defamation claim against Vickie that was not subject to her bankruptcy discharge. Vickie counterclaimed, contending, as she had in probate court, that Pierce tortiously interfered with her expectancy of a gift from J. Howard. Judge Bufford dismissed Pierce's proof of claim against Vickie, and proceeded to consider Vickie's counterclaim against Pierce. Over the course of the bankruptcy proceedings, Judge Bufford determined that Pierce had engaged in various discovery abuses and issued both monetary and non-monetary sanctions against him.3
In September 1998, Pierce moved to withdraw the case from bankruptcy court. District Judge William D. Keller
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withdrew the bankruptcy reference in part4 in October 1998, after which Judge Bufford stated his intent to submit a memorandum to "assist [Judge Keller] in his review of the matter." On February 1, 1999, Judge Keller stayed Judge Bufford's prior sanctions orders. The next day, Judge Bufford declared the stay invalid and issued terminating sanctions against Pierce on Vickie's tortious interference counterclaim as a result of Pierce's purported discovery abuses. On March 9, 1999, Judge Keller vacated and remanded Judge Bufford's initial sanctions order, citing a lack of evidence. Then, after acknowledging receipt of Judge Bufford's memorandum, Judge Keller vacated his order withdrawing the bankruptcy reference.5 On May 20, 1999, Judge Bufford entered a final sanctions order, once again deeming many of Vickie's allegations established as a sanction against Pierce.
Judge Bufford then held a five-day hearing on Vickie's counterclaim. On the first day, Judge Bufford conducted an unusual press conference of sorts on the record, where he responded to reporters' questions, noted that the case was related to the Texas probate litigation, and explained the procedures by which reporters could obtain public records or court filings. Approximately eleven months later, Judge
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Bufford entered judgment in Vickie's favor and against Pierce in the amount of $449,000,000, with an additional punitive damages award of $25,000,000. See Marshall v. Marshall (In re Marshall), 257 B.R. 35, 39, 40 (Bankr. C.D. Cal. 2000).6 Judge Bufford acknowledged that the damages were "mainly based" on facts that were presumed to be true by virtue of his final sanctions order.7
Several months later, the Texas probate court rendered judgment in favor of Pierce in the probate case, ordering Vickie to pay Pierce's attorneys' fees in the amount of $541,000. The Probate Court later modified its order to specify that the fee award arose solely out of conduct that occurred after Vickie's bankruptcy discharge. However, Judge Bufford overturned the probate court's fee award, finding that it violated Vickie's bankruptcy discharge and was barred by judicial estoppel. The district court affirmed Judge Bufford's decision, but we...
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