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Anna Nicole’s Heirs Lose Fight for Marshall Estate

(CN) - Anna Nicole Smith's estate - namely, her 4-year-old daughter, Dannielynn Birkhead - cannot touch the multimillion judgment previously awarded to the late Playboy model from her deceased oil tycoon husband's living trust, the Supreme Court ruled Thursday.

Before his death at the age of 90 in 1995, J. Howard Marshall had been Smith's husband of one year and was considered one of the richest people in Texas. Marshall's son, E. Pierce Marshall, and Smith, became locked in a long legal battle over his estate that continues today, though both have died. The main beneficiary to Smith's estate is her now 4-year-old daughter, Dannielynn Birkhead.

Pierce Marshall died in 2006, and Smith died of a prescription drug overdose in 2007, at age 39.

In describing the case, which has returned to the nation's high court for the second time now, Chief Justice John Roberts quoted Charles Dickens' novel "Bleak House."

"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, [] but they could have been," Roberts wrote.

State and federal courts in Louisiana, Texas and California have each had a say in the case, according to the ruling, but problematically a Texas state probate court and the Bankruptcy Court for the Central District of California reached contrary decisions on the merits. The Texas probate court ruled that Smith, who was not named in her late husband's will, was entitled to nothing.

The former model, whom the court describes by her former legal name, Vicki Lynn Marshall, then filed for bankruptcy in California. Pierce intervened, seeking damages from her bankruptcy estate for defamation because Smith had publicly accused him of using fraud to gain control of his father's assets. Smith counterclaimed that Pierce tortiously interfered with the "gift" her husband had promised.

The bankruptcy court tossed the defamation claim and awarded Smith $425 million for tortious interference.

After the case went to District Court, a judge there said Smith was owed about $447 million in damages, and subsequently reduced that amount to $89 million.

Last year, the 9th Circuit ruled that that the Texas state decision controlled and that the bankruptcy court exceeded its authority in entering a final judgment on Smith's counterclaim. A three-judge panel sitting in San Francisco reversed both decisions, finding that the Houston jury's 2001 verdict for the Marshall family should be honored over the two federal judgments awarding Smith the billionaire's assets. The court refused to rehear the case in May 2010.

On Thursday, the Supreme Court affirmed that decision, finding that the bankruptcy court lacked the constitutional power to exercise statutory authority over the case.

In coming to the conclusion, the justices note that Pierce partly brought this thorny case upon himself by involving himself in the California bankruptcy proceedings.

"If Pierce believed that the Bankruptcy Court lacked the authority to decide his claim for defamation, then he should have said so - and said so promptly," Roberts wrote. "Instead, Pierce repeatedly stated to the Bankruptcy Court that he was happy to litigate there. We will not consider his claim to the contrary, now that he is sad."

Ultimately, however, the bankruptcy court simply lacks constitutional authority to rule in the manner it did.

"What is plain here is that this case involves the most prototypical exercise of judicial power: the entry of a final, binding judgment by a court with broad substantive jurisdiction, on a common law cause of action, when the action neither derives from nor depends upon any agency regulatory regime," Roberts wrote. "If such an exercise of judicial power may nonetheless be taken from the Article III Judiciary simply by deeming it part of some amorphous 'public right,' then Article III would be transformed from the guardian of individual liberty and separation of powers we have long recognized into mere wishful thinking."

Justice Antonin Scalia, who joined in Roberts' majority, authored a concurring opinion that emphasized why an Article III judge was required to adjudicate this lawsuit.

Justice Stephen Breyer authored the dissent, joined by Justices Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan, defending the constitutionality of the statute that gave the bankruptcy court the power to adjudicate Smith's counterclaim.

The dissenting justices conclude that the majority's holding creates a long-term problem.

"Because these types of disputes arise in bankruptcy court with some frequency," Breyer explained. "Because the volume of bankruptcy cases is staggering, involving almost 1.6 million filings last year, compared to a federal district court docket of around 280,000 civil cases and 78,000 criminal cases. Because unlike the 'related' non-core state law claims that bankruptcy courts must abstain from hearing, compulsory counterclaims involve the same factual disputes as the claims that may be finally adjudicated by the bankruptcy courts. Because under these circumstances, a constitutionally required game of jurisdictional ping-pong between courts would lead to inefficiency, increased cost, delay, and needless additional suffering among those faced with bankruptcy."

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