As tawdry and ridiculous as the tale of Anna Nicole Smith is, her saga has already had important real-world consequences to Americans.
By gaming our legal system in pursuit of her deceased husband's fortune, including a victory at the U.S. Supreme Court, Ms. Smith's tragic life leaves a legacy beyond tasteless late-night jokes and tabloid obsessions. Indeed, that legacy may include increasing litigation costs and courtroom burdens for businesses, philanthropies and everyday citizens across America.
By now, many are familiar with the tragic tale underlying this case.
Anna Nicole Smith, whose real name was Vickie Lynn Marshall, married 89-year-old, wheelchair-confined billionaire J. Howard Marshall (II) in June 1994. Although Mr. Marshall lavished gifts and wealth upon Anna Nicole, he never included her in his actual will. In fact, Mr. Marshall named his beneficiaries and made it irrevocable shortly after he married Anna Nicole, not before.
According to Anna Nicole, however, Mr. Marshall had promised "to provide for her financial security through a gift" in the form of a trust.
One of Mr. Marshall's sons, E. Pierce Marshall, was instead the ultimate beneficiary of Mr. Marshall's estate. The elderly Mr. Marshall ultimately passed away in August 1995, igniting a firestorm of litigation regarding his fortune.
Anna Nicole filed a lawsuit in Texas probate court, alleging that Mr. Marshall had promised half of his wealth to her, and that E. Pierce Marshall had illegally interfered with that promised gift to her by forging documents and distorting evidence.
Months after filing her Texas lawsuit, however, Anna Nicole filed a second action, this time in federal bankruptcy court in California. In that action, Anna Nicole alleged the same essential facts as she did in the Texas court.
Thus, Anna Nicole Smith initiated duplicative and parallel lawsuits in two different courts, hoping to cherry-pick the better result. The state and federal cases centered upon identical claims, and obviously multiplied the costs in judicial and private resources to litigate them.
Ultimately, the Texas court conducted an exhaustive 95-day trial that included six days of testimony from Anna Nicole, and found in favor of E. Pierce Marshall, Mr. Marshall's son. According to the unanimous jury, Mr. Marshall had never made the promises that Anna Nicole alleged, nor had E. Pierce forged documents or evidence. Accordingly, Anna Nicole was denied recovery from Mr. Howard's estate.
In contrast, unfortunately, the federal bankruptcy court, after a much more abbreviated and superficial procedure, accepted Anna Nicole's version of the facts. That court refused to defer to the Texas Court, held that E. Pierce had forged documents and evidence and awarded Anna Nicole $475 million.
The Ninth Circuit Court of Appeals later reversed the federal bankruptcy court's decision, ruling that the federal courts should have abstained in deference to the Texas state court. In doing so, it cited the long-recognized "Probate Exception" to federal jurisdiction, which holds that state courts are much more capable of applying state probate laws and possess much greater expertise in evaluating exhaustive evidence than federal courts.
The U.S. Supreme Court, however, reversed the Ninth Circuit decision in May 2006 and remanded the case. The Supreme Court greatly narrowed this "Probate Exception," thereby expanding federal courts' jurisdiction and increasing their ability to intrude into traditionally state-level affairs.
So why does this matter beyond the tabloids? Several reasons.
First, the case illustrates the increasingly corrosive power of judicial abuse in America. By sanctioning increased federal intrusion into traditionally state matters, the Supreme Court opened the door to duplicative litigation and lawsuit abuse. Potential plaintiffs now possess greater potential power to multiply litigation in parallel courts, thereby increasing costs and potential losses upon businesses and individual defendants.
After all, businesses and individuals already settle cases rather than defend themselves against litigious plaintiffs, simply because the alternative of exhaustive litigation, bad publicity and potential losses is far too high. Recent studies estimate that litigation currently costs Americans between $140 billion and $250 billion every single year. Increasing plaintiffs' ability to forum-shop and duplicate lawsuits, and then cherry-pick the most beneficial verdict, will only multiply this injustice.
Just as ominously, state attorneys general will now possess even more leverage power, as they'll be more inclined to file duplicative lawsuits in pursuit of political self-aggrandizement. Think Elliot Spitzer and California's Bill Lockyer.
In other words, "jackpot justice" just got easier.
Second, this decision undermines states' rights. As the Probate Exception recognized, state courts are more adept at applying state laws and evaluating exhaustive evidentiary conflicts than more distant federal courts. Now, however, federal courts, including even highly-specialized bankruptcy courts, may increasingly serve as de facto "appellate courts" over state court decisions. This clearly weakens our federalist system and only encourages greater federal overreach.
Third, this case threatens philanthropies and estate planning across America. Previously, estate planners and philanthropies could rely upon the greater consistency and predictability of state courts' interpretation of their own laws, thereby avoiding acrimonious litigation by disgruntled potential heirs. Now, however, federal courts that are less familiar with individual states' estate-planning laws may distort them and undermine confidence in speedy and efficient estate distribution. Smaller philanthropies and less-wealthy individuals are particularly threatened, as they're less-capable of conducting burdensome litigation in multiple venues.
The Anna Nicoles of the world will instead possess increased leverage.
In the end, as George Mason University law professor Horace Cooper noted in a recent Legal Times column, Anna Nicole's actual legal claim will likely be extinguished on separate grounds. Accordingly, as he observes, the original Texas trial verdict will probably ultimately prevail in this specific case.
Nevertheless, because of the Supreme Court's ruling, the Anna Nicole Smith tragedy thus includes unfortunate damage to business interests, judicial efficiency, states' rights, philanthropic gifts and estate-planning across America. As judicial intrusion, including that of federal courts, increases across America, this will likely be her most lasting legacy of all.April 12, 2007