Florida Probate & Trust Litigation Blog : Florida Probate Litigation, Will Contest Lawyer & Attorney : Juan C. Antúnez : Serving Miami, Jacksonville, Tampa Saint Petersburg, Orlando, Fort Lauderdale

Former Playboy Playmate, model, aspiring actress and professional celebrity Anna Nicole Smith probably wanted to be remembered for a lot of things, but her most lasting impact may have been in the court room.

In a 2006 win at the US Supreme Court, Anna Nicole Smith's battle over her late husband's $1.6 billion estate redefined the "probate exception" to federal court jurisdiction over trusts-and-estates related litigation [see here, here], in a way that is likely to result in a greater number of such cases being litigated in federal court [see here, here].

In 2007 Anna Nicole Smith died in Florida triggering litigation over where she would be buried [see here, here, here]. Not surprisingly, this case had a major impact on Florida law governing burial disputes and, I am told, is likely to result in legislation specifically designed to govern all such future disputes in Florida. This type of statue would be a first for Florida.

Now, in 2011, Anna Nicole Smith's estate battle has resulted in a significant Supreme Court decision redefining the power of federal bankruptcy judges. In Stern v. Marshall, --- S.Ct. ----, 2011 WL 2472792 (U.S. Jun 23, 2011), the Supreme Court ruled that a bankruptcy judge, who awarded Smith $475 million in 2000, did not have the constitutional right to try a probate case. Because the battle over oil tycoon J. Howard Marshall II's wealth outlived most of the parties to the suits, Chief Justice John G. Roberts Jr. compared it to "Bleak House," Charles Dickens' novel about a lawsuit that never ends.

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, see C. Dickens, Bleak House, in 1 Works of Charles Dickens 4–5 (1891), but they could have been.

After Smith's death in 2007, Howard K. Stern, her former domestic partner, had carried on the case as executor of her estate. The estate's sole beneficiary is Smith's daughter, Dannielynn Birkhead, who will be 5 in September. The Supreme Court's ruling effectively ends any claim Smith's estate may have had to her late husband's vast estate.

Here's an excerpt from an AP piece entitled Court rules against Anna Nicole Smith’s estate in battle for deceased oil tycoon’s estate that does a good job of putting the Supreme Court's ruling in context:

The family of E. Pierce Marshall, son of J. Howard Marshall, cheered the decision.

“J. Howard’s wishes were always perfectly clear: He gave Anna Nicole Smith approximately $8 million in gifts during his lifetime, and those gifts were all that he intended to give her,” said Eric Brunstad, the Marshalls’ lawyer.

The convoluted dispute over the elder Marshall’s money has its roots in a Houston strip club where he met Smith. The two were wed in 1994 when he was 89 and she 26. Marshall died the next year and his will left his estate to his son and nothing to Smith.

Smith challenged the will, claiming that her husband promised to leave her more than $300 million above the cash and gifts showered on her during their 14-month marriage. A Houston jury said 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, a decision that has been upheld by the federal appeals court.

Smith moved to California after Marshall’s death and then filed bankruptcy in Los Angeles, alleging in federal court filings that her husband promised her a large share of the estate. A bankruptcy judge awarded her $475 million from Marshall’s estate, with a federal judge reducing that amount to $89 million in 2002.

Smith had wanted the courts to accept that ruling. But the 9th U.S. Circuit Court of Appeals in in San Francisco appeals court threw the bankruptcy court ruling out, saying a bankruptcy judge could not rule on the probate case [see here].

Roberts agreed with that decision, and was joined in his judgment by Justices Antonin Scalia, Anthony Kennedy, Clarence Thomas and Samuel Alito.

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A central issue driving almost every will or trust contest is whether the person signing the document knew what he was doing. In other words, did he have testamentary capacity? Any probate judge who has been on the job for more than 6 months will know the law governing these cases cold. What they need from us are the facts.

But which facts matter?

One way to answer that question is to work backwards from the legal definition for testamentary capacity. The problem with this approach is that legal definitions are by necessity general in nature, which means they are pretty useless when you're trying to figure out which facts really matter to your case. 

Another approach is to come at the problem from the clinician's viewpoint: what are the indicia of incapacity doctors and other therapists look for when diagnosing and treating adults with diminished capacity? In my opinion, this is the way to go; and the first place you'll want to look for guidance on how to bridge the gap between legal theory and clinical reality is a handbook published jointly by the the American Bar Association and the American Psychological Association: Assessment of Older Adults with Diminished Capacity: A Handbook for Lawyers. Here's an excerpt:

With the coming demographic avalanche of Boomers reaching their 60s and the over-80 population swelling, lawyers face a growing challenge: older clients with problems in decision-making capacity. While most older adults will not have impaired capacity, some will. Clear and relatively obvious dementias will impair capacity, and the prevalence of such dementias increases with age. But what about older adults with an early stage of dementia or with mild central nervous system damage? Such clients may have subtle decisional problems and questionable judgments troubling to a lawyer. This handbook offers a conceptual framework and practice tips for addressing problems of client capacity, in some cases with help from a clinician.

Some might argue that without training in mental disorders of aging and methods of formal capacity evaluation, lawyers should not be making determinations about capacity. Yet lawyers necessarily are faced with an assessment or at least a screening of capacity in a rising number of cases involving specific legal transactions and, in some instances, guardianship. Even the belief that “something about a client has changed” or a decision to refer a client for a formal professional capacity evaluation represents a preliminary assessment of capacity.

The 2002 revision of the ABA’s Model Rules of Professional Conduct, Rule 1.14, concerning the client with diminished capacity, recognizes the bind in which this places the attorney, and provides some guidance. The rule triggers protective action when an attorney reasonably believes that a client has diminished capacity, that there is a potential for harm to the client, and that the client cannot act in his or her own interest. However, the critical question is: how does the lawyer reach a reasonable belief that the client has diminished capacity? This handbook seeks to respond.

The handbook represents a unique collaboration of lawyers and psychologists. While it is a joint project of the ABA Commission on Law and Aging and the APA, its applicability is broad. It can be of use to elder law attorneys, trusts and estates lawyers, family lawyers, and general practitioners. It introduces lawyers to a wide spectrum of mental health professionals, including, but extending beyond, licensed psychologists. Interdisciplinary partnerships between lawyers and clinicians promise more informed approaches for helping older clients meet their legal needs.

And for those "visual" learners out there, the handbook is full of easy-to-follow charts and checklists to help organize your thinking. Here's one of my favorites:

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BankAtlantic v. Estate of Glatzer, --- So.3d ----, 2011 WL 1877839 (Fla. 3d DCA May 18, 2011)

When a business owner passes away you may be asked if this means the business needs to stop operating until the probate court appoints a personal representative or enters some other order having to do with the decedent's estate. The answer is usually NO.

Even when owned 100% by a decedent, corporations retain their separate legal existence, which means the corporation's asset don't automatically become assets of the probate estate. This rule is sometimes forgotten when probate courts deal with closely-held businesses. For example, earlier this year I wrote here about a probate judge getting reversed for failing to recognize the separate legal existence of a New York LLC for jurisdictional purposes, even if a Florida decedent owned 50% of the LLC.

In the linked-to case the dispute was over control of cash in a bank account held in the name of a deceased physician's professional association or "PA." A PA is a form of corporation. The probate judge ruled the cash in the PA's account had to be transferred to the estate's control, even though this cash had been pledged as security by the PA for a loan that came due when the physician died. As explained by the 3d DCA, this ruling ignored the separate legal existence of the PA, warranting reversal. Here's why:

The decedent personally guaranteed his professional association's promissory note, and his death constituted an event of default under that note. The orders requiring transfer of the funds to a different bank thus impaired BankAtlantic's right of setoff. Although the parties agreed that the deceased physician owned all of the shares of his professional association, there was no evidence presented to support a “piercing of the corporate veil” under Dania Jai–Alai Palace v. Sykes, 450 So.2d 1114 (Fla.1984), or any other alter ego theory. While the appellee Estate was apparently entitled to take possession of the professional association stock held by the doctor at his death, no such conclusion extended to the association's funds on deposit in the corporate name at BankAtlantic. In Gettinger v. Gettinger, 165 So.2d 757 (Fla.1964), the Supreme Court of Florida held that “the affairs of a corporation, even though substantially owned by a decedent, cannot be administered by decedent's executor as assets of the decedent's estate.” In this case, “substantially” is 100%, and the result is identical.

. . . The point in this case is that the stock of the professional association is an asset of the Estate, but the funds of the professional association are a step removed from the Estate. The decedent's Estate essentially ignored the separate corporate existence of the professional association and that entity's obligations to its own creditors.

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