Elaine Marshall v. J. Marshall, Iii
2013 U.S. App. LEXIS 13398
| 9th Cir. | 2013Background
- This is the third intervention in the J. Howard Marshall estate feud, involving Vickie Lynn Smith (Anna Nicole Smith), J. Howard Marshall II, and Howard III amid Texas probate and California bankruptcy proceedings.
- Howard and Ilene Marshall filed Chapter 11 in the Central District of California; Pierce Marshall (trustee) opposed the plan and sought dismissal due to alleged bad faith and constitutional issues.
- Judge Bufford presided over the bankruptcy case; Pierce sought reassignment/recusal under 28 U.S.C. § 455(a) and due process challenges.
- Judge Bufford denied reassignment; Pierce and Elaine challenged on standing, related-case assignment, and appearance of bias; the district court affirmed the bankruptcy court.
- The court concluded the assignment and recusal rulings were not abuse of discretion and affirmed the plan confirmation and denial of dismissal on constitutional and non-constitutional grounds.
- The opinion addresses the constitutionality of allowing solvent debtors to reorganize under Chapter 11 and the related best-interests/bad-faith analyses.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether non-random assignment to Judge Bufford violated due process | Elaine argues improper assignment; related-case logic insufficient. | Assignment within court discretion; relatedness not required for due process. | No reversible error; broad discretion allowed. |
| Whether Judge Bufford should have recused under § 455(a) | Bufford exhibited bias in Vickie’s case; appearance of impropriety. | Rulings not showing deep-seated bias; press communications not recusal-worthy. | Recusal not warranted; no appearance of bias that taints Howard/Ilene case. |
| Whether the Chapter 11 plan was proposed in good faith and satisfies the Best Interests test | Plan aimed to discharge the Fraud Judgment; misrepresented assets; solvent debtors. | Insolvency not prerequisite for §1129; plan supported by evidence of good faith and feasibility. | Plan confirmed; best-interests requirement not satisfied under Pierce’s missed-proof-of-claim position. |
| Whether dismissal for bad faith was proper | Filed to avoid payment of the Fraud Judgment; misrepresented finances. | Multiple factors; plan viability and reorganization rationale undermine bad faith claim. | Dismissal not warranted; good-faith factors supported confirmation. |
| Whether Congress validly exercised bankruptcy power to permit solvent debtors to reorganize | Balance-sheet insolvency required by Constitution; not satisfied. | Insolvency not required; liquidity/solvency definitions evolve; bankruptcy power broad. | Constitutional to permit solvent debtors to reorganize under Chapter 11. |
Key Cases Cited
- Liteky v. United States, 510 U.S. 540 (Supreme Court 1994) (bias requires appearance of impartiality; rulings may not alone justify recusal)
- Wright v. Union Central Life Ins. Co., 304 U.S. 502 (Supreme Court 1938) (solvency concepts and bankruptcy power analyzed under Commerce and Bankruptcy Clauses)
- Continental Illinois Nat’l Bank & Trust Co. v. Chicago, Rock Island & Pacific Ry., 294 U.S. 648 (Supreme Court 1935) (broad interpretation of federal bankruptcy power; reorganizations)
- Gibbons v. Ogden (not exact), 455 U.S. 457 (Supreme Court 1982) (expansive view of bankruptcy powers in context of commerce)
- Stern v. Marshall, 131 S. Ct. 2594 (Supreme Court 2011) (constitutional authority of bankruptcy court over counterclaims; authority issues in Marshall proceedings)