Marshall v. Marshall (In re Marshall)

Summarized by Lovee Sarenas , Sklar Hirsh
12 years 8 months ago

Citation:

No citation as of yet

Tag(s):

Ruling:

The Ninth Circuit upheld the decision of the District Court to affirm three decisions of the Bankruptcy Court involving the chapter 11 bankruptcy estate of Howard Marshall III and his wife, Ilane (collectively, the "Debtors") that was appealed by Pierce Marshall ("Pierce"). First, the Ninth Circuit held that a party has no due process right to a random assignment of a bankruptcy case absent a showing of bias or partiality by the presiding judge. Thus, assigning Debtor's chapter 11 case to Judge Bufford, who was the presiding judge in the related chapter 11 case of Vickie Marshall was not error. The appellate court rendered a broad view of "related cases" as defined under the bankruptcy court's local rule 1015-2(a). The circuit court rejected evidence of bias solely from the bankruptcy judge's adverse decisions in the Vickie Marshall bankruptcy case against Pierce for purposes of 28 USC sec. 455. Without more, the Ninth Circuit opined that decisions based on facts shown or events that took place during the court's decision do not demonstrate bias. The bankruptcy judge's actions highlighted by Pierce are not the type of situation and conduct contemplated by the case of Liteky v. U.S., 510 U.S. 540 (1994). Thus, there was no basis for recusal. Second, the Ninth Circuit adopted the findings of the district court in affirming the denial of Pierce's motion to dismiss the Debtors' chapter 11 and affirming the confirmation of the Debtors' chapter 11 plan over Pierce's objection on constitutional grounds. Lastly, the Court affirmed the finding that the plan satisfied the best interest test of creditors. The Court made a finding fundamental in any chapter 11 case-- that Pierce had no standing to object to the confirmation of the plan having failed to file a proof of claim in his brother's bankruptcy case when his claim was disputed by his brother. The Ninth Circuit also rejected overturning plan confirmation on the basis of bad faith, finding that the bankruptcy court's decision was not clearly erroneous.

Procedural context:

The bankruptcy court's decisions were affirmed in the district court and circuit court levels.

Facts:

The facts involve the convoluted and toxic relations among Howard Marshall's sons and his young wife, Vickie Marshall. The case has surpassed the lives of 3 of the 4 main parties in these cases. Debtors' case was precipitated by an adverse judgment originally at $39 million against Debtor Howard Marshall III in favor of his brother, Pierce Marshall. The judgment arose from a fraud counterclaim against Debtor Howard Marshall III by Pierce after Debtor Howard Marshall III unsuccessfully challenged their father's will in a Texas Probate Court. The challenge against J. Howard Marshall II's will was based on similar grounds as Vickie Lynn Marshall's suit in the Texas probate court which also led in an adverse result against her. The bankruptcy case was assigned to the same judge that handled Vickie Lynn Marshall's bankruptcy case upon Debtors' statement in their petition that the cases were related. The bankruptcy petition listed the judgment as "disputed". Pierce affirmatively decided not to file a proof of claim in his brother's case in view of the adverse ruling on his claim in Vickie Marshall's bankruptcy case. Pierce challenged his brother (and his wife's) bankruptcy case in several levels. Pierce challenged the assignment of his brother's case to the same judge who handled Vickie Lynn Marshall's case. He sought dismissal of the bankruptcy case on bad faith grounds and lastly, he challenged plan confirmation arguing that the plan failed the best interest test and that the plan was not filed in good faith. He lost on all three fronts.

Judge(s):

Hon. David Ebel (sitting by designation from the 10th Circuit); Hon. Kim McLane Wardlaw; and Hon. Jacqueline Nguyen deciding an appeal from the decision of district court judge, David Carter.

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