A 2006 Supreme Court Case arising from a story most laypeople learned from supermarket tabloids reaffirms an age old exception to the jurisdiction of the Federal Courts. As many people know, deceased model and celebrity personality Anna Nicole Smith (then aged 26) married billionaire Oil Industry magnate J. Howard Marshall when Marshall was 89 years of age. Famously, the marriage lasted fourteen months, until Marhsall’s death, leading many to comment that Marshall must have died a happy man. Following Marshall’s passing, Smith (whose real name was Vicky Lynn Marshall) became embroiled in a protracted dispute over the estate of her late husband with the deceased billionaire’s son and her own adult step-son, E. Pierce Marshall. While Smith’s unrelated Bankruptcy proceedings were pending in Bankruptcy Court in California, Pierce Marshall asserted a claim against Smith, seeking to have the Bankruptcy Court declare that a claim which he intended to bring against Smith for defamation could not be discharged in Bankruptcy.
Before the Bankruptcy Court, Pierce Marshall claimed that Smith had defamed him shortly after the elder Marshall’s death by making statements through her lawyers accusing Pierce Marshall of engaging in forgery, fraud, and overreaching in order to deprive Smith of certain testamentary gifts which her husband had made for her benefit. In response, Smith pleaded the affirmative defense of truth – asserting that Pierce Marshall’s claims should fail because the content of her lawyers’ statements were true, and filing a counterclaim for tortious interference with a testamentary gift that she had expected from the elder Marshall. The Bankruptcy Court granted summary judgment in favor of Smith on the issue of his claim for defamation, and after a trial on the merits, entered judgment in favor of Smith and against Pierce Marshall, finding that he had in fact conspired to falsify documents, and alter and destroy a trust instrument which the late J. Howard Marshall had directed his lawyers to prepare for the benefit of his wife, Anna Nicole Smith. Pierce Marshall then sought District Court review of the Bankruptcy Court’s findings, after which the District Court adopted the Bankruptcy Court’s findings and entered an award of compensatory damages in the amount of $44.3 million, and following a finding of “overwhelming” evidence of Pierce Marshall’s “willfulness, maliciousness, and fraud,” the District Court awarded an equal amount of punitive damages.
Predictably, Pierce Marshall appealed the District Court’s judgment to the Ninth Circuit Court of Appeals, seeking to have the District Court’s judgment vacated, asserting that the Bankruptcy Court and District Court lacked the authority to adjudicate Smith’s counterclaims citing the “probate exception” to the general jurisdiction of the Federal Courts. The Ninth Circuit reversed the District Court’s judgment, and Smith appealed to the United States Supreme Court.
The United States Supreme Court reversed the Ninth Circuit, finding that the “probate exception” did not apply to Smith’s counterclaims, and therefore that the Bankruptcy Court and District Court did have jurisdiction over Smith’s claims. In a majority opinion penned by Justice Ginsburg, the Supreme Court clarified the Court’s prior holdings establishing a probate exception to Federal Jurisdiction. The Court first noted that, although nothing in the text of the Constitution compels the exception to jurisdiction, such an exception was recognized by the English Courts of Chancery - which is the correlative jurisdiction granted to the Federal Courts in the First Session of the First United States Congress under the Judiciary Act of 1789. The Court then explained that the probate exception did not preclude all claims related to or arising from a decedent’s estate, as the Ninth Circuit had erroneously concluded, but that claims for the annulment or probate of a will or the administration of a decedent’s estate should properly remain in the State Courts.
