EoD Editor’s Note: In the past weeks, EstateofDenial.com has featured posts regarding how techniques and legal maneuvers seen in high profile cases (Astor, Helmsley) can also be used in looting attempts of more modest estates. The legal cases surrounding the estate of J. Howard Marshall II exemplify the ultimate in Involuntary Redistribution of Assets (IRA) acts. With that, we held this analysis until National Estate Planning Awareness Week (October 20 – 26) to help educate the public regarding how wannabe heirs, unscrupulous attorneys and even overreaching courts can (and sometimes do) work to usurp inheritance rights within even the most properly prepared of estate plans.
The legal profession as a whole is not generally well regarded. A particularly ugly sub-culture surrounds the probate industry in which lawyers and select clients use probate venues and/or estate planning instruments (wills, trusts, guardianships) to loot assets in a manner contrary to wishes of the asset owner. Estate attorneys could term this the GAL strategy of probate documents: Generate-Administrate-Litigate. It’s a triple hit of billing for the legal business as disgruntled family members or other wannabe heirs ally with lawyers to initiate Involuntary Redistribution of Assets (IRA) acts. As the primary “victim” of these cases is dead or if alive, disabled or incapacitated, any defense is usually relegated to designated beneficiaries, often other family members, who then become targets of legal action.
E. Pierce Marshall, the son of J. Howard Marshall II, became such a target in the case of Marshall v. Marshall and its parallel Texas suit Marshall v. MacIntyre. Pierce Marshall’s stepmother Vickie – also known as Anna Nicole Smith – was unhappy that her husband did not provide for her in his estate plan. After J. Howard Marshall II spent several million dollars on Vickie in the three years prior to their marriage and another $6.7 million during the 14-month marriage, she claimed that he verbally promised to leave her half of his assets valued by some up to $1.6 billion. This oral commitment was not reflected in six wills and seven other estate planning documents filed in courthouses throughout Texas by a man (J. Howard Marshall II) intent on his distribution wishes being available and well documented for proper execution. Those in his family and circle of friends/employees were aware that he was providing generously for Smith during his lifetime in lieu of making her an estate beneficiary.
J. Howard Marshall II died in 1995 and with this, the unhappy Smith, a woman who lived off but not with her husband during their brief marriage, initiated legal action that continues today. In fact, it appears that there were no less than 13 separate pieces of litigation filed within 12 months of J. Howard Marshall II’s death. With litigants ranging from several disgruntled academic institutions (Haverford College v. MacIntyre), to American Express, Neiman Marcus, bankrupt former business associates and even J. Howard Marshall III, the elder son.
The facts of this matter would seem clear cut such that little should be open for dispute yet this case has traveled from a Harris County (TX) Probate Court to several California courts and then to the U.S. Supreme Court only to be returned and now currently under review by the 9th Circuit Court of Appeals on remand from the U.S. Supreme Court.
The final outcome of Marshall v. Marshall could impact the property rights of all Americans. In addition to an apparent desire for fame, fortune and the spotlight, Smith always wanted to be taken seriously. Who knew that Smith might ultimately become the woman responsible for drastically eroding American inheritance rights!
We’ve recently written about issues relating to the Brooke Astor and Leona Helmsley estates. Our goal is to provide perspective on how elements of these cases, including precedent-setting rulings, can spill over into estate matters of mainstream Americans. We’re not lawyers so we won’t delve into the numerous legal technicalities associated with this case, but the legal gamesmanship and incredible proceedings of Marshall v. Marshall offer many lessons regarding how IRA practitioners use the legal system.
Much has been written on the subject by people far smarter than us including a web site that chronicles the entire case (http://www.factweb.net). In our endeavor, though, to provide common sense information on these sometimes incredibly complicated cases, below are observations made after reviewing numerous media accounts and other documents related to Marshall v. Marshall. The Harris County Probate Court trial (Marshall v. MacIntyre) ran from September 2000 through March 2001. Much of our IRA analysis is based on this trial as it was by far the most extensive and detailed proceeding.
Let us start with a reminder that Anna Nicole Smith’s claim for half of the Marshall estate was based upon an oral promise she alleged that J. Howard Marshall II made. He told her, but no one else. No physical evidence existed to support the claim – just her word that he had made a promise.
Texas probate law has long recognized properly executed – written – probate documents as the determinant in final distributions of assets. Moreover, Texas probate law specifically prohibits oral agreements to make a will (§ 59A). Smith claimed that not only was she entitled to half of J. Howard Marshall’s estate, but she accused Marshall’s designated heir and younger son, Pierce Marshall, of tortious interference with her receipt of the alleged gift. This set the stage for Marshall v. MacIntyre, and later Marshall v. Marshall. If a court upholds Smith’s claim based on an unsubstantiated “commitment,” this sets a precedent within the state that unconfirmed oral promises can actually supersede written wills. Given the legal industry’s enthusiasm for GAL (Generate-Administrate-Litigate) strategies, this could open the door for all sorts of alleged claims while simultaneously destroying any ability of individuals to designate the final distribution of their property.
In the years leading up to the probate court trial, it appears that Anna Nicole Smith and her legal team began to doubt prospects for success in the Houston courtroom. To offset a potential defeat and mounting debt caused in part by a series of Smith-as-a-defendant lawsuits, Smith, a California resident, also filed for bankruptcy in a California court.
Some legal observers viewed this as a “venue shopping” move in which a complainant actively seeks out a judge and/or court venue which they believe will be more friendly to their case. Pierce Marshall intervened in the bankruptcy proceedings to protect his interest in a 1995 lawsuit in which Smith and two attorneys were sued and ordered to pay damages for libel over comments made to the media (E. Pierce Marshall v. Diana Marshall et al). The California “second front” of this dispute generated more legal gamesmanship. In October 1999, the Houston Chronicle wrote about a ruling earlier in the year in which (California) U.S. Bankruptcy Judge Samuel Bufford ruled that Smith and Pierce Marshall were entitled to “share equally” in the estate and Koch Industries (the company in which Marshall had significant interest). Per the Chronicle, “Bufford’s decision was not based on the merits, but as a way to sanction E. Pierce Marshall, 60, the younger of two sons, for allegedly destroying evidence and not showing up for depositions.” This was the first move that granted any legitimacy to Smith’s claim and it wasn’t based on the merits of the case??? The awarding of $449 million or more was based on punishment for one of the court participants?
Other mind-boggling aspects of this case include how Judge Bufford withdrew his ruling in January 2000, but then reinstated it in September 2000, one day prior to jury selection starting in the Harris County Probate Court case. The issue of jurisdiction had long been debated as J. Howard Marshall II lived in Texas. His estate would generally be viewed as subject to Texas law, but this California judge was now dictating the distribution of his assets – and doing so not because of the case’s merits, but as a sanction – punishment – for one of the principals! IRA cases are good at taking on a life of their own. This one sure did — and the form taken was nothing short of a monster.