The stakes are high. Forbes Magazine lists Marilyn Monroe as the third-highest money-maker in its annual ranking of “The Top–Earning Dead Celebrities,” with an annual income of $27 million in 2011 alone. This income stream has been growing since Ms. Monroe’s death 50 years ago in 1962, and if Forbes’ 2011 figures are any indication, it isn’t going to run out anytime soon.  Who controls this fortune has been litigated by Marilyn Monroe’s estate for years in New York and California, culminating in the 9th Circuit’s August 30, 2012 decision in Milton H. Greene Archives, Inc. v. Marilyn Monroe LLC, — F.3d —-, 2012 WL 3743100 (9th Cir. 2012).

The fundamental question before every court that’s heard this case is the following: Did the residuary clause of Marilyn Monroe’s will gift her post mortem right of publicity to her heirs?

Here’s the problem for Ms. Monroe’s heirs: when she died in 1962, her state of domicile, New York, didn’t recognize any post mortem publicity rights (to this day, New York is one of the few holdouts not recognizing this posthumous property right, click here). Also, under New York probate law, Marilyn Monroe’s will can’t gift a property right that didn’t exist when she died. Bottom line: the heirs lose (although some creative financial engineering by the estate may have saved the day anyway).

The following is an excerpt from Marilyn Monroe’s estate loses right to charge for image use, reporting on the 9th Circuit’s recent ruling.

It is a decision one imagines the legendary Hollywood star might well have embraced: Marilyn Monroe, according to a new legal ruling, belongs to everybody.

A US federal court said on Thursday that Monroe’s estate was wrong to pursue photo libraries and other organisations that use her image without permission or payment on T-shirts and other memorabilia. It all stems from a decision made almost half a century ago by the Some Like It Hot star’s legal representatives in the wake of her 1962 death. Faced with a grand tax bill from the Californian authorities if they registered her final abode in the state, they chose to list the actor’s official domicile as New York, where Monroe had a second home, because the latter did not charge estate taxes.

Unfortunately, a move that saved Monroe’s heirs millions of dollars at the time could now end up costing them far more. New York does not share California’s generous laws regarding control of dead celebrities’ images, and last week’s hearing ruled in favour of those who believe the actor’s estate has, for decades, been wrongly extracting a fee each time Monroe’s image is used.

The issue came to light when the estate took a number of photo libraries to court in the middle of the last decade for selling her image on without permission. Several courts, noting that Monroe’s official final abode was New York, opted to abide by that state’s statutes and threw out the cases. The legal battle continued up until last week’s decision by the federal ninth circuit court of appeals, despite efforts by the state of California at one point to retrospectively award rights to the estate via a change in the law. That position now appears to have been reversed.

. . .

In a footnote to its ruling, the [9th Circuit] pointed out that Monroe once foresaw the battle over rights to her image and its outcome. “We observe that the lengthy dispute over the exploitation of Marilyn Monroe’s persona has ended in exactly the way that Monroe herself predicted more that 50 years ago,” reads the judgment. “‘I knew I belonged to the public and to the world, not because I was talented or even beautiful but because I had never belonged to anything or anyone else.'”

Would Marilyn Monroe’s heirs have fared better if she’d died domiciled in Florida?

Two keys points determined the ultimate outcome of this litigation: [1] New York’s non-recognition of a posthumous right of publicity; and [2] New York probate law limiting the inheritance flowing under Marilyn Monroe’s will only to property she owned at the time of her death in 1962. To really understand what happened here you need to compare and contrast what the outcome would have been under Florida law.

In contrast to New York, Florida law does recognize a posthumous property right in a decedent’s right of publicity. Under F.S. 540.08 a decedent’s posthumous publicity rights are statutorily recognized and enforceable for 40 years. If F.S. 540.08 had applied at the time of Marilyn Monroe’s death, her heirs would have won their case if she’d died domiciled in Florida. But it didn’t. Florida didn’t recognize a posthumous right of publicity until 1967 . . . five years after Marilyn Monroe’s death.

Is the 1967 timing of Florida’s adoption of F.S. 540.08 significant? Yes! Why? Because Florida law limits what you can gift under your will only to what you owned at the time of your death. Under F.S. 732.6005(2), which states in relevant part that “a will is construed to pass all property which the testator owns at death,” your will can’t gift new property rights you weren’t somehow entitled to at the time of your death. New York law is identical to Florida law on this point, as explained in Shaw Family Archives Ltd. v. CMG Worldwide, Inc., 486 F.Supp.2d 309 (S.D.N.Y. 2007), one of the underlying federal cases leading up to the 9th Circuit’s latest ruling.

It is well-settled that, under New York law, “A disposition by the testator of all his property passes all of the property he was entitled to dispose of at the time of his death.” N.Y. Est. Powers & Trusts Law § 3-3.1 (formerly N.Y. Decedent Est. Law 14) (emphasis added). The corollary principle recognized by the courts is that property not owned by the testator at the time of his death is not subject to disposition by will. . . .

Nor does § 2-602 of the Uniform Probate Code, which states that a will may pass “property acquired by the estate after the testator’s death,” have anything to do with the present case, because . . . New York [is not] among the 18 states that have adopted the Uniform Probate Code in whole or even in part. This court has not found, nor has [Marilyn Monroe’s estate] cited, any provision in . . . the New York . . . probate laws that codifies § 2-602. 

Did you catch the big distinction between existing Florida and New York probate law and the change triggered by UPC § 2-602? It’s a big deal. Under the UPC section the residuary beneficiaries of your will can inherit entirely new property rights acquired by your estate after your death. If this law had applied to Marilyn Monroe’s estate her heirs would have won (it didn’t, so they lost). Here’s the official commentary to UPC § 2-602 explaining what this section is intended to do.

This section is revised to assure that, for example, a residuary clause in a will not only passes property owned at death that is not otherwise devised, even though the property was acquired by the testator after the will was executed, but also passes property acquired by a testator’s estate after his or her death. This reverses a case like Braman Estate, 435 Pa. 573, 258 A.2d 492 (1969), where the Court held that Mary’s residuary devise to her sister Ruth “or her estate,” which had passed to Ruth’s estate where Ruth predeceased Mary by about a year, could not go to Ruth’s residuary legatee. The Court held that Ruth’s will had no power to control the devolution of property acquired by Ruth’s estate after her death; such property passed, instead, by intestate succession from Ruth. This section, applied to the Braman Estate case, would mean that the property acquired by Ruth’s estate after her death would pass under her residuary clause.