Today's BrokeAndBroker.com Blog comes upon yet another bleak bit of ongoing probate litigation, now in the form of a FINRA arbitration, swirling around the heirs of J. Howard Marshall II, who, you may recall, was a so-called oil tycoon who died in 1995 at age 90 after having married, you may recall, a 26-year-old stripper named Vickie Lynn Hogan, who, you may recall, was also known as Anna Nicole Smith, who, you may recall, was a Playboy playmate, who, you may recall, died of a drug overdose in 2007 and, who, you may recall, was not named as a beneficiary in her husband's will, which her estate is contesting on behalf of her daughter notwithstanding that the United States Supreme Court has already rejected the claims. Also, you may recall that J. Howard Marshall II's son E. Pierce Marshall died in 2005 and that Pierce's widow Elaine Marshall is often listed among the wealthiest women in the United States. Preston Marshall, you may recall, was Pierce and Elaine's son, and, you may recall, he filed a temporary restraining order against his mom. You may also recalled that a Louisiana state probate court judge got so fed up with the ongoing lawsuits that he famously said "I'm honestly -- I'm trying to get recused. Because I can't -- it is not fair to me, my staff, my life to have to deal with you people who do not want to resolve this cases."I am reminded of the first chapter of "Bleak House" by Charles Dickens where we are introduced to that legendary probate case:
Jarndyce and Jarndyce drones on. This scarecrow of a suit has, in course of time, become so complicated that no man alive knows what it means. The parties to it understand it least, but it has been observed that no two Chancery 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; innumerable old people have died out of it. Scores of persons have deliriously found themselves made parties in Jarndyce and Jarndyce without knowing how or why; whole families have inherited legendary hatreds with the suit. The little plaintiff or defendant who was promised a new rocking-horse when Jarndyce and Jarndyce should be settled has grown up, possessed himself of a real horse, and trotted away into the other world. Fair wards of court have faded into mothers and grandmothers; a long procession of Chancellors has come in and gone out; the legion of bills in the suit have been transformed into mere bills of mortality; there are not three Jarndyces left upon the earth perhaps since old Tom Jarndyce in despair blew his brains out at a coffee-house in Chancery Lane; but Jarndyce and Jarndyce still drags its dreary length before the court, perennially hopeless.
Jarndyce and Jarndyce has passed into a joke. That is the only good that has ever come of it. It has been death to many, but it is a joke in the profession. Every master in Chancery has had a reference out of it. Every Chancellor was "in it," for somebody or other, when he was counsel at the bar. Good things have been said about it by blue-nosed, bulbous-shoed old benchers in select port-wine committee after dinner in hall. Articled clerks have been in the habit of fleshing their legal wit upon it. The last Lord Chancellor handled it neatly, when, correcting Mr Blowers, the eminent silk gown who said that such a thing might happen when the sky rained potatoes, he observed, "or when we get through Jarndyce and Jarndyce, Mr Blowers" - a pleasantry that particularly tickled the maces, bags, and purses.
And now, the BrokeAndBroker.com Blog present for your reading pleasure, the latest installment in the Marshall family lawyers-full-time-employment-saga.
Case In Point
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in October 2015, Claimants asserted breach of fiduciary duty and intentional interference by Preston Marshall with the Marshall Legacy Foundation. As set forth in the FINRA Arbitration Decision:
Claimants asserted that they are the only individuals authorized to make decisions on behalf of the Marshall Legacy Foundation and are entitled to direct the placement and disposition of the accounts at Frost.
As set forth in the FINRA Arbitration Decision, Claimants sought
a) An order unfreezing all Marshall Legacy Foundation accounts at Frost Brokerage Services, Inc. and Frost Bank; b) An order adding Dr. Cook, as co-trustee of the Marshall Legacy Foundation, as a signatory to the Brokerage Account; c) A declaration that Mrs. Marshall and Dr. Cook, as trustees of the Marshall Legacy Foundation, are permitted to manage all Marshall Legacy Foundation accounts at Frost Brokerage Services, Inc. and Frost Bank as they see fit and without any interference from Preston Marshall; d) An award of compensatory damages from Preston Marshall in an amount to be determined by the Panel, plus interest and costs; e) An award of attorneys fees incurred in bringing this action and in defending against claims asserted by Preston Marshall in Cause No. 2015-55637 pending in the 295th Judicial District Court of Harris County, Texas . . .
In the Matter of the FINRA Arbitration Between Elaine T. Marshall and Dr. Stephen D. Cook, Claimants/Counter-Respondents, v. Preston Marshall, Respondent/Cross-Respondent, and Frost Bank, and Frost Brokerage Services, Inc., Respondents/Counter-Claimants/Cross-Claimants (FINRA Arbitration 15-02709, November 28, 2017).
Respondent Preston Marshall generally denied the allegations and asserted various affirmative defenses. Pointedly, Respondent Marshall asserted that the claims were not appropriate for FINRA arbitration and should be dismissed.
Respondent Frost Bank and Respondent Frost Brokerage Services, Inc. (hereinafter "Frost") generally denied the allegations and asserted various affirmative defenses. Frost counterclaimed seeking reimbursement of costs and indemnification; and cross-claimed asserting breach of contract, reimbursement of costs, and indemnification. Frost alleged that Preston Marshall materially breached the Brokerage Agreement by filing the lawsuit. Frost requested that the FINRA Arbitration Panel "determine the proper party or institution to whom Frost is to distribute all funds on closure of the accounts in question . . ."
Going Counter and Cross
As further set forth in the FINRA Arbitration Decision:
In the Counter-Claim, Frost requested: a) That Frost Bank and Frost Brokerage Services, Inc. be awarded reimbursement, against and from the funds held on deposit in the accounts at issue, of all costs and expenses, including attorneys' fees, incurred by Frost Bank and Frost Brokerage Services, Inc. in relation to Claimants' and Preston Marshall's conflicting instructions and demands with respect to the accounts at issue, the related dispute between Claimants and Preston Marshall, and the legal proceeding including the lawsuit and this arbitration; b) A determination and declaration that Frost Bank and Frost Brokerage Services, Inc. may proceed to close the Bank Account and Brokerage Account and disperse the remaining balances of the accounts, following the aforementioned reimbursement of costs and expenses, to the party, parties or other financial institution as determined by the Panel; c) That Frost Bank and Frost Brokerage Services, Inc. be discharged of any and all liability in relation to the Bank Account, Brokerage Account, and the funds so applied and disbursed; and d) Such other relief as the Panel may find just and proper.
In the Cross-Claim, Frost requested: a) An award of actual and compensatory damages against Preston Marshall, including attorneys' fees, costs, and expenses incurred in responding to the legal proceedings brought by Preston Marshall, in the amount to be determined by the Panel, plus pre-award interest running from the date of filing of the legal proceeding; b) In the alternative, an award of Frost Bank's and Frost Brokerage Services, Inc.'s costs and expenses, including attorneys' fees, against and from the funds held on deposit in the accounts at issue, incurred by Frost Bank and Frost Brokerage Services, Inc. in relation to Preston Marshall's conflicting instructions and demands with respect to the accounts at issue, the related ongoing dispute and legal proceedings, including the lawsuit and this arbitration; and c) Such other relief as the Panel may find just and proper.
This Is Gonna Take A While
In an "Explained Decision and Award," the FINRA arbitrators offered this explanation in pertinent part:
The Marshall Legacy Foundation (the "MLF") is a Louisiana trust and exists as a result of the division (decanting) in February 2014 of the Marshall Heritage Foundation (a Louisiana predecessor Trust) into two new separate Louisiana Trusts. The governing Articles of the MLF provide that the Foundation "is organized exclusively for charitable, educational and scientific purposes". Upon the formation of the MLF, Elaine Marshall, Preston Marshall and Dr. Steven Cook were named in the governing Articles as Trustees. No evidence was presented by the Parties that the Article naming the original Trustees has been amended, modified or deleted or that any court or other competent body has removed or changed the persons named as Trustees to manage the affairs of the MLF. Louisiana law (Louisiana Trust Code) provides that "a power vested in three or more trustees may be exercised by a majority of the trustees unless the trust instrument provides otherwise".
Numerous documents in evidence show Preston Marshall, Elaine Marshall and Dr. Steven Cook as Co-Trustees of the MLF. These documents include, among other documents, Resolutions of the MFL signed by Preston Marshall, Elaine Marshall and Dr. Steven Cook, the MFL Application for Recognition of Exemption (IRS Form 1023) signed by Preston Marshall as Co-Trustee on February 20, 2015 and the MLF 2013 Federal Tax Return (IRS Form 990 - PF). The MLF 2013 Tax Return lists Preston Marshall, Elaine Marshall and Dr. Steven Cook as Co-Trustees of the MLF, states that the Return was "self-prepared" and was signed by Preston Marshall as "TTEE" on March 12, 2015.
In July 2014, Preston Marshall and Elaine Marshall established the Brokerage Account ending in 8166 at Frost Brokerage with Preston Marshall and Elaine Marshall named as "co-Account Holders, owners and authorized individuals".
In July 2014, the Bank Account was established at Frost Bank in the name of the Marshall Legacy Foundation, with a signature card naming Preston Marshall, Elaine Marshall and Dr. Steven Cook as authorized signatories and expressly stating "Two Signatures Required". The Bank Account and the Brokerage Account were linked.
On cross examination, Kristi Conway of Frost Bank, Garrick Behelfer of Frost Brokerage and Christopher Neidlinger of Frost Brokerage each confirmed that, absent the debit hold referred to below, Preston Marshall or Elaine Marshall could individually transfer funds from the Brokerage Account to the linked Bank Account pursuant to the terms of the Brokerage Account Customer Agreement and related documents for the establishment of the Brokerage Account.
On August 31, 2015, Garrick Behelfer of Frost Brokerage and Kristi Conway of Frost Bank were addressees of an email from Preston Marshall stating it was "notice to place a debit hold on all activity for the Marshall Legacy Foundation". Frost Brokerage placed a debit hold on all funds held in the Brokerage Account and Frost Bank placed a debit hold on all funds held in the Bank Account pursuant to the email request of Preston Marshall.
As a result of the debit holds, the MLF has not been able to disburse funds from the Bank Account to make charitable gifts or pay charitable pledge agreements. The Panel finds this to be inconsistent with the stated purpose of the MLF and the testimony of Preston Marshall and Elaine Marshall who each stated that they want the MLF to be able to disburse funds to pay charitable gifts, particularly funds necessary to satisfy obligations under signed charitable pledge agreements.
During the Hearing, Counsel for Frost Bank and Frost Brokerage stated that his clients do not want to continue to maintain the accounts and would like both accounts closed and the funds in the accounts withdrawn or transferred.
Accordingly, with respect to the management of the Brokerage Account and the Bank Account, including the withdrawal or disbursement of funds in such Accounts, and in order to implement the stated purpose of the MLF and the stated intent of Preston Marshall and Elaine Marshall with respect to the payment by the MLF of charitable gifts and charitable pledge agreements,
The Panel directs that:
1. Frost Brokerage lift the debit hold currently in effect for the Brokerage Account ending in 8166 at Frost Brokerage and that Frost Bank lift the debit hold currently in effect for the Bank Account ending in 1262 at the Frost Bank and that
2. Frost brokerage transfer all funds (or a specified amount of funds) on deposit in the Brokerage Account ending in 8166 at Frost Brokerage to the linked Bank Account ending in 1262 at the Frost Bank upon the direction and written authorization of either Preston Marshall or Elaine Marshall and that
3. Frost Bank disburse funds (and implement such other financial transactions) from the Bank Account ending in 1262 at the Frost Bank as directed by two of the three authorized signatories, in accordance with the terms of the Signature Card and the Deposit Account Agreement for the Bank Account ending in 1262 at the Frost Bank.
Bill Singer's Comment
For purposes of this Arbitration relating to the Accounts described herein, the Panel does not need to (and does not) make any determination as to the current Trustees of the MLF. The Panel understands that issue is the subject of litigation pending in court proceedings.
2. Other than forum fees which are specified below, the parties shall each bear their own costs and expenses incurred in this matter.
3. Any and all claims for relief not specifically addressed herein, including compensatory damages, punitive damages, attorneys fees, and costs, are denied. Each party shall pay its own attorneys' fees.
4. The parties shall comply with the provisions of this Award within thirty (30) days ofthe date of service of the Award.
Pages 1 - 3 of the LA Court OpinionThis matter, as well as related litigation, has been before this court on multiple occasions. In Re: Marshall Legacy Foundation, 16-747 (La.App. 3 Cir. ___/___/17), ___ So.3d ___.This matter arises out of a dispute over the control of the Marshall Legacy Foundation (MLF), which was created on December 23, 2013, when the Fourteenth Judicial District Court granted Elaine Marshall's (Elaine) request to divide the Marshall Heritage Foundation (MHF-Old) into two foundations: the Marshall Heritage Foundation (MHF-New) and the MLF. The MLF was to be governed by co-trustees, Elaine, Dr. Stephen Cook (Dr. Cook), and Preston Marshall (Preston). Preston disagrees with Elaine's assertion that the MLF was "created" and instead argues that the old foundation was divided equally into two new foundations. The distinction is important because if there is nothing "created," "the existing articles of the foundation would carry over to the new foundations." The existing articles contained an "anti-amendment provision" which prohibited the amendment of the provisions contained in articles V, IX, and X. Article V contained a provision that limited Dr. Cook's tenure as a trustee to a single year. The new articles, which were not executed by the co-trustees until February, 2014, completely rewrote Article V and deleted the provision limiting Dr. Cook's tenure.In the course of this litigation in connection with his claim that Dr. Cook engaged in self-dealing, Preston subpoenaed Dr. Cook's and Salkeld's personal tax returns and tax records from 2000-2014; tax returns for the Fellowship of Orthopedic Researchers (the Fellowship); all tax returns, articles of organization, and member ownership records of Moirai Orthopedics, LLC (Moirai), Moirai Orthopedics II, LLC (Moirai II), Gomboc, and Kuli Orthopedics since 2006; all lease agreements between the Fellowship and the Joe W. and Dorothy Dorsett Brown Foundation; any and all research agreements between Dr. Cook or Salkeld and the Fellowship; and any and all research support agreements between the Fellowship and Dr. Cook, Salkeld, MHF-Old, or MLF; and any and all corporate records relating to the Fellowship; copies of any and all proposals by the Fellowship to MHF-Old or MLF and any other foundation or trust which Dr. Cook and any member of the Marshall family served as a trustee; and copies of any and all trust administration records relating to MLF.Dr. Cook and Salkeld filed a motion to quash and for a protective order. The matters came for hearing on November 17, 2015, along with several other motions filed by other parties, and the court rendered its ruling in open court. A judgment was signed on December 14, 2015, denying the motion to quash filed by Dr. Cook and Salkeld and ordering them to produce the requested documents but stayed production thereof pending the disposition of their writ application to this court and entered a protective order as to the tax returns.Dr. Cook and Salkeld timely filed a notice of intent to apply for supervisory writs. With respect to that writ application, this court issued a ruling on January 25, 2016, denying it and finding no abuse of discretion in the trial court's ruling. See In Re: Marshall Legacy Foundation, 15-1206 (La.App. 3 Cir. 11/25/15), an unpublished writ decision.On February 12, 2016, the Louisiana Supreme Court granted Relators' writ application and vacated the trial court's order requiring the production of their personal income tax returns. In Re: Marshall Legacy Foundation, 16-215 (La. 2/12/16), 186 So.3d 1171. Citing Stolzle, 819 So.2d 287, the court remanded the matter to the trial court "to make a finding of whether the party requesting these tax returns has demonstrated good cause for their production and whether the information sought could be discovered in a less intrusive manner." In Re: Marshall Legacy Foundation, 186 So.3d 1171.Following the remand, a hearing was held on March 31, 2016.1 Daphne Berken, a certified public accountant, testified on Preston's behalf. Following the presentation of the evidence, the trial court stated: "I find that the need has been demonstrated and that the tax returns are . . . the best and most reliable source of income and other benefits. And I don't see a less intrusive means of obtaining that information. . . . I'm going to order the production of the tax returns." . . .