Marshall v. Marshall opens the doors to federal court for undue influence and probate claims
For many years, many probate litigators, myself included, believed that the so-called probate exception to federal jurisdiction served to prevent federal courts from adjudicating any matters that were even slightly related to a probate estate. This whole notion was turned on its head in 2006 when Justice Ginsberg wrote the majority opinion in Marshall v. Marshall, 547 U.S. 293 (2006). With the second anniversary of the death of Anna Nicole Smith approaching this fall, I think it is a good time to review the holding of Marshall and also view how lower federal courts have interpreted its holding since 2006.
Many people are familiar with the details of the case: Vickie Lynn Marshall (Vickie), a.k.a. Anna Nicole Smith, was the surviving widow of J. Howard Marshall II (J. Howard), who died without providing for Vickie in his will. According to Vickie, J. Howard intended to provide for her through a gift in the form of a “catchall” trust. On the other side of the case was E. Pierce Marshall (Pierce), J. Howard’s son, who was the ultimate beneficiary of J. Howard’s estate plan.
While the estate was subject to ongoing Texas Probate Court proceedings, Vickie filed for bankruptcy in California. Pierce filed a proof of claim in the Federal Bankruptcy Court, alleging that Vickie had defamed him when, shortly after J. Howard’s death, her lawyers told the press that Pierce had engaged in forgery, fraud, and overreaching to gain control of his father’s assets. Vickie also filed a claim that Pierce had tortiously interfered with a gift she expected from J. Howard. After a trial on the merits, the court entered judgment for Vickie and awarded Vickie substantial compensatory and punitive damages. Pierce then started the case’s trip to the Supreme Court by filing an appeal arguing that Vickie’s tortious interference claim could be tried only in the Texas probate proceedings based on the “probate exception” to federal jurisdiction.
The Supreme Court examined the matter and recognized the existence of a probate exception to federal jurisdiction, however “a federal court has no jurisdiction to probate a will or administer an estate, … it has [long] been established … that federal courts of equity have jurisdiction to entertain suits ‘in favor of creditors, legatees and heirs’ and other claimants against a decedent’s estate ‘to establish their claims’ so long as the federal court does not interfere with the probate proceedings or assume general jurisdiction of the probate or control of the property in the custody of the state court.” The Court next described a probate exception of distinctly limited scope:
“[W]hile a federal court may not exercise its jurisdiction to disturb or affect the possession of the property in the custody of a state court, … it may exercise its jurisdiction to adjudicate rights in such property where the final judgment does not undertake to interfere with the state court’s possession save to the extent that the state court is bound by the judgment to recognize the right adjudicated by the federal court.”
The Court believed that Vickie’s claim did not involve the administration of an estate, the probate of a will, or any other purely probate matter. Instead, Vickie’s claim alleged the widely recognized tort of interference with a gift or inheritance. She was seeking an in personam judgment against Pierce, not the probate or annulment of a will. The Court observed that trial courts, both federal and state, often address the conduct of the kind Vickie alleges. State probate courts possess no “special proficiency” in handling such issues.
The new scope of the exception after Marshall is best summed up by the following passage from Marshall:
“when one court is exercising in rem jurisdiction over a res, a second court will not assume in rem jurisdiction over the same res. Thus, the probate exception reserves to state probate courts the probate or annulment of a will and the administration of a decedent’s estate; it also precludes federal courts from endeavoring to dispose of property that is in the custody of a state probate court. But it does not bar federal courts from adjudicating matters outside those confines and otherwise within federal jurisdiction”
What About Undue Influence and Tortious Interference Claims?
After Marshall, the law seems well settled that tort claims involving probate matters may be brought in federal court so long as they don’t interfere with a state probate court’s jurisdiction over the property.
For example, a recent Florida federal court allowed a claim to be brought in its jurisdiction by an estate administrator against another estate administrator for money damages resulting from his alleged breach of fiduciary duty and conversion. Kelley v. Kelley 2006 WL 3922104 (Bankr.M.D.Fla.).
This holding is in line with some federal court’s view that money damages could be sought in federal court against probate administrators, heirs, etc., so long as the recovery was not sought from the estate. For example, see Breaux v. DiSlaver, 254 F.3d 533 (5th Cir. 2001)( holding that district court could exercise diversity jurisdiction over a suit by heirs against the administrator of decedents’ estates, in which heirs sought damages against administrator personally for his alleged fraud and breach of fiduciary duty, where any judgment would be satisfied from administrator’s own property and not from that of estates, one of which had already been closed; probate exception to federal diversity jurisdiction did not apply.)
Also, a recent post-Marshall decision from the Sixth Circuit, Wisecarver v. Moore, 489 F.3d 747 (6th Cir.2007) explained that an undue influence claim would not fall within the scope of the probate exception if that claim sought in personam jurisdiction over a defendant for money damages. see also Masood v. Saleemi, 2007 WL 2069853 (2007) (claims that sound in tort do not fall under the probate exception).
Simply stated, claims can be brought in federal court involving probate matters if a couple of conditions (in addition to diversity jurisdiction) are met. First, the relief sought cannot involve the administration of a probate estate or the probate of a will. Second, the claim in federal court cannot seek to reach property that is in the custody of a state court. The greatest and most lasting benefit of Marshall in my view is that it made clear federal courts had been previously been applying the probate exception in an overly broad scope.
