Stern v. Marshall

Citation131 S.Ct. 2594,180 L.Ed.2d 475,564 U.S. 462
Decision Date23 June 2011
Docket NumberNo. 10–179.,10–179.
Parties Howard K. STERN, Executor of the Estate of Vickie Lynn Marshall, Petitioner, v. Elaine T. MARSHALL, Executrix of the Estate of E. Pierce Marshall.
CourtUnited States Supreme Court

Kent L. Richland, Los Angeles, CA, for Petitioner.

Malcolm L. Stewart, for United States as amicus curiae, by special leave of the Court, supporting the Petitioner.

Roy T. Engler, Jr., Washington, DC, for Respondent.

Roy T. Englert, Jr., Robbins, Russell, Englert, Orseck, Untreiner & Sauber LLP, Washington, DC, G. Eric Brunstad, Jr., Collin O'Connor Udell, Matthew J. Delude, Dechert LLP, Hartford, CT, Seth P. Waxman, Craig Goldblatt, Danielle Spinelli, Wilmer Cutler Pickering Hale and Dorr, LLP, Washington, DC, Kenneth N. Klee, Daniel J. Bussel, Whitman L. Holt, Klee, Tuchin, Bogdanoff & Stern LLP, Los Angeles, CA, Don Jackson, Ware, Jackson, Lee & Chambers, LLP, Houston, TX, Sanford Svetcov, Robbins Geller Rudman & Dowd LLP, San Francisco, CA, Joseph A. Eisenberg, Julia J. Rider, Jeffer, Mangels, Butler & Marmaro LLP, Los Angeles, CA, for Respondent.

Philip W. Boesch, Jr., The Boesch Law Group, Santa Monica, California, Bruce S. Ross, Vivian L. Thoreen, Holland & Knight LLP, Los Angeles, California, Kent L. Richland, Alan Diamond, Edward L. Xanders, Greines, Martin, Stein & Richland LLP, Los Angeles, California, for Petitioner Howard K. Stern, Executor of the Estate of Vickie Lynn Marshall.

CHIEF JUSTICE ROBERTS delivered the opinion of the Court.

This "suit has, in course of time, become so complicated, that ... no two ... lawyers can talk about it for five minutes, without coming to a total disagreement as to all the premises. Innumerable children have been born into the cause: innumerable young people have married into it;" and, sadly, the original parties "have died out of it." A "long procession of [judges] has come in and gone out" during that time, and still the suit "drags its weary length before the Court."

Those words were not written about this case, see C. Dickens, Bleak House, in 1 Works of Charles Dickens 4–5 (1891), but they could have been. This is the second time we have had occasion to weigh in on this long-running dispute between Vickie Lynn Marshall and E. Pierce Marshall over the fortune of J. Howard Marshall II, a man believed to have been one of the richest people in Texas. The Marshalls' litigation has worked its way through state and federal courts in Louisiana, Texas, and California, and two of those courts—a Texas state probate court and the Bankruptcy Court for the Central District of California—have reached contrary decisions on its merits. The Court of Appeals below held that the Texas state decision controlled, after concluding that the Bankruptcy Court lacked the authority to enter final judgment on a counterclaim that Vickie brought against Pierce in her bankruptcy proceeding.1 To determine whether the Court of Appeals was correct in that regard, we must resolve two issues: (1) whether the Bankruptcy Court had the statutory authority under 28 U.S.C. § 157(b) to issue a final judgment on Vickie's counterclaim; and (2) if so, whether conferring that authority on the Bankruptcy Court is constitutional.

Although the history of this litigation is complicated, its resolution ultimately turns on very basic principles. Article III, § 1, of the Constitution commands that "[t]he judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish." That Article further provides that the judges of those courts shall hold their offices during good behavior, without diminution of salary. Ibid. Those requirements of Article III were not honored here. The Bankruptcy Court in this case exercised the judicial power of the United States by entering final judgment on a common law tort claim, even though the judges of such courts enjoy neither tenure during good behavior nor salary protection. We conclude that, although the Bankruptcy Court had the statutory authority to enter judgment on Vickie's counterclaim, it lacked the constitutional authority to do so.


Because we have already recounted the facts and procedural history of this case in detail, see Marshall v. Marshall, 547 U.S. 293, 300–305, 126 S.Ct. 1735, 164 L.Ed.2d 480 (2006), we do not repeat them in full here. Of current relevance are two claims Vickie filed in an attempt to secure half of J. Howard's fortune. Known to the public as Anna Nicole Smith, Vickie was J. Howard's third wife and married him about a year before his death.

Id., at 300, 126 S.Ct. 1735; see In reMarshall, 392 F.3d 1118, 1122 (C.A.9 2004). Although J. Howard bestowed on Vickie many monetary and other gifts during their courtship and marriage, he did not include her in his will. 547 U.S., at 300, 126 S.Ct. 1735. Before J. Howard passed away, Vickie filed suit in Texas state probate court, asserting that Pierce—J. Howard's younger son—fraudulently induced J. Howard to sign a living trust that did not include her, even though J. Howard meant to give her half his property. Pierce denied any fraudulent activity and defended the validity of J. Howard's trust and, eventually, his will. 392 F.3d, at 1122–1123, 1125.

After J. Howard's death, Vickie filed a petition for bankruptcy in the Central District of California. Pierce filed a complaint in that bankruptcy proceeding, contending that Vickie had defamed him by inducing her lawyers to tell members 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 proceedings. Ibid. ; see 11 U.S.C. § 523(a). Pierce subsequently filed a proof of claim for the defamation action, meaning that he sought to recover damages for it from Vickie's bankruptcy estate. See § 501(a). Vickie responded to Pierce's initial complaint by asserting truth as a defense to the alleged defamation and by filing a counterclaim for tortious interference with the gift she expected from J. Howard. As she had in state court, Vickie alleged that Pierce had wrongfully prevented J. Howard from taking the legal steps necessary to provide her with half his property. 547 U.S., at 301, 126 S.Ct. 1735.

On November 5, 1999, the Bankruptcy Court issued an order granting Vickie summary judgment on Pierce's claim for defamation. On September 27, 2000, after a bench trial, the Bankruptcy Court issued a judgment on Vickie's counterclaim in her favor. The court later awarded Vickie over $400 million in compensatory damages and $25 million in punitive damages. 600 F.3d, at 1045; see 253 B.R. 550, 561–562 (Bkrtcy.Ct.C.D.Cal.2000) ; 257 B.R. 35, 39–40 (Bkrtcy.Ct.C.D.Cal.2000).

In post-trial proceedings, Pierce argued that the Bankruptcy Court lacked jurisdiction over Vickie's counterclaim. In particular, Pierce renewed a claim he had made earlier in the litigation, asserting that the Bankruptcy Court's authority over the counterclaim was limited because Vickie's counterclaim was not a "core proceeding" under 28 U.S.C. § 157(b)(2)(C). See 257 B.R., at 39. As explained below, bankruptcy courts may hear and enter final judgments in "core proceedings" in a bankruptcy case. In non-core proceedings, the bankruptcy courts instead submit proposed findings of fact and conclusions of law to the district court, for that court's review and issuance of final judgment. The Bankruptcy Court in this case concluded that Vickie's counterclaim was "a core proceeding" under § 157(b)(2)(C), and the court therefore had the "power to enter judgment" on the counterclaim under § 157(b)(1). Id., at 40.

The District Court disagreed. It recognized that "Vickie's counterclaim for tortious interference falls within the literal language" of the statute designating certain proceedings as "core," see § 157(b)(2)(C), but understood this Court's precedent to "suggest[ ] that it would be unconstitutional to hold that any and all counterclaims are core." 264 B.R. 609, 629–630 (C.D.Cal.2001) (citing Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 79, n. 31, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982) (plurality opinion)). The District Court accordingly concluded that a "counterclaim should not be characterized as core" when it "is only somewhat related to the claim against which it is asserted, and when the unique characteristics and context of the counterclaim place it outside of the normal type of set-off or other counterclaims that customarily arise." 264 B.R., at 632.

Because the District Court concluded that Vickie's counterclaim was not core, the court determined that it was required to treat the Bankruptcy Court's judgment as "proposed[,] rather than final," and engage in an " independent review" of the record. Id., at 633; see 28 U.S.C. § 157(c)(1). Although the Texas state court had by that time conducted a jury trial on the merits of the parties' dispute and entered a judgment in Pierce's favor, the District Court declined to give that judgment preclusive effect and went on to decide the matter itself. 271 B.R. 858, 862–867 (C.D.Cal.2001) ; see 275 B.R. 5, 56–58 (C.D.Cal.2002). Like the Bankruptcy Court, the District Court found that Pierce had tortiously interfered with Vickie's expectancy of a gift from J. Howard. The District Court awarded Vickie compensatory and punitive damages, each in the amount of $44,292,767.33. Id., at 58.

The Court of Appeals reversed the District Court on a different ground, 392 F.3d, at 1137, and we—in the first visit of the case to this Court—reversed the Court of Appeals on that issue. 547 U.S., at 314–315, 126 S.Ct. 1735. On remand from this Court, the Court of Appeals held that § 157 mandated "a two-step approach" under which a bankruptcy judge may issue a final judgment in a...

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