Stern v. Marshall

PETITIONER: Howard K. Stern, Executor of the Estate of Vickie Lynn Marshall
RESPONDENT: Elaine T. Marshall, Executrix of the Estate of E. Pierce Marshall
LOCATION: US Bankruptcy Court for the Central District of California

DOCKET NO.: 10-179
DECIDED BY: Roberts Court (2010-2016)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 564 US (2011)
GRANTED: Sep 28, 2010
ARGUED: Jan 18, 2011
DECIDED: Jun 23, 2011

ADVOCATES:
Kent L. Richland - for the petitioner
Malcolm L. Stewart - Deputy Solicitor General, Department of Justice, as amicus curiae, supporting the petitioner
Roy T. Englert, Jr. - on behalf of respondent

Facts of the case

The saga continues in the long-running inheritance dispute over the estate of a deceased Texas billionare. J. Howard Marshall's will left nearly all his money to his son, E. Pierce Marshall, and nothing to (now deceased wife) Anna Nicole Smith, aka Vickie Lynn Marshall. The younger Marshall died in 2006 and Smith died of a drug overdose in 2007. Smith had previously fought the will, claiming that her husband promised to leave her more than $300 million. Howard K. Stern, Smith's former attorney and boyfriend, has continued the legal battle on behalf of Smith's estate. But the U.S. Court of Appeals for the Ninth Circuit ruled that Marshall was mentally fit and under no undue pressure when he wrote a will leaving nearly all of his $1.6 billion estate to his son and nothing to Smith.

The Supreme Court will revisit the estate battle four years after the justices sent the case back to lower courts for further review. In the earlier case, the court only addressed whether or not federal courts can rule on Smith's claims.

Question

When a creditor files a claim in bankruptcy court, the debtor is sometimes required to file any counterclaim she may have or lose the right to assert that claim later or in another court. Can a bankruptcy judge conclusively resolve such compulsory counterclaims?

Media for Stern v. Marshall

Audio Transcription for Oral Argument - January 18, 2011 in Stern v. Marshall

Audio Transcription for Opinion Announcement - June 23, 2011 in Stern v. Marshall

John G. Roberts, Jr.:

I have the opinion of the court in Case Number 10-179.

The very caption of the case gives you an idea of what is in store, the case of Stern, Executor of the Estate of Marshall, versus Marshall, Executrix of the Estate of Marshall.

The facts of the case are like something out of a 19th Century Dickens novel.

The litigation has been going on for over 15 years.

The original parties have each died and have been replaced by their executors.

To avoid confusion, I'll refer to the original parties rather than their executors and by their first names since everyone in the case is named Marshall.

The case has worked its way through state and federal courts in Louisiana, Texas and California.

It has even been to this case before we sent it back to the Court of Appeals after argument and decision on an unrelated question only to find it before us again.

The underlying facts have a fascination of their own.

Petitioner Vickie Lynn Marshall, better known perhaps as Anna Nicole Smith was 26 when she married the 89-year old Jay Howard Marshall II.

Jay Howard had a fortune estimated to be worth as much as $2 billion.

He died a little more than a year after his marriage to Vickie but did not provide for her in his will.

Vickie claimed that Pierce Marshall, Jay Howard's son from a prior marriage had fraudulently prevented Jay Howard from leaving her roughly half of his fortune which Vickie said is what Jay Howard wanted to do.

Shortly after Jay Howard died, Vickie filed for bankruptcy in federal court.

Pierce filed a claim in that bankruptcy proceeding asserting that Vickie owed him money for defamation because of statements by her attorneys about his alleged fraud.

Vickie responded with a counterclaim against Pierce arguing that those statements were true and that he was liable to her under Texas state law prohibiting interference with an intended gift.

The bankruptcy court held a trial and eventually entered a final judgment awarding Vickie hundreds of millions of dollars on her counterclaim.

Shortly after that however, a Texas State probate court that was considering the same issues in the context of a suit over Jay Howard's will, ruled in Pierce's favor.

Now which of those conflicting judgments controls and whether Vickie, her estate of course, gets to keep those hundreds of millions of dollars depends on whether the bankruptcy court have the authority to enter a final judgment on Vickie's counterclaim.

There are two parts to that question.

First, does the bankruptcy code authorize a bankruptcy judge to enter a final judgment on that sort of claim?

The answer turns out to depend on resolving several arcane issues of statutory interpretation.

After doing that, we conclude that yes, the bankruptcy code does authorize the bankruptcy courts to do what the Court did hear.

That brings us to the second part of the question.

Does the Constitution allow a bankruptcy judge to enter a final judgment on a claim such as Vickie's?

Although the history of this litigation is complicated, the answer to that question turns on very basic and very important Constitutional principles.

We go back to the beginning.

Article III of the United States Constitution commands that, “the 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 same Article provides that the judges of the federal courts, the ones who exercise that judicial power, shall hold their offices during good behavior without any decrease in their salaries.

Now, Article III plays an important role in the system of checks and balances that the framers adopted in the Constitution.