The decision comes as another blow to the main beneficiary of Smith's estate: her 3 1/2-year-old daughter, Dannielynn Birkhead.
"It's been a very sort of sad story – so many people involved in this case have died," says Kent Richland, the appellate lawyer for the model's estate. Still, he vows that "this is not the final step" in the legal battle.
The appellate court decision is the latest development in a long battle over the fortune left by Marshall, who died in 1995 at age 90. A bankruptcy judge awarded $450 million to Smith, who had been married to him for 14 months. The award was later reduced by a federal district judge to $88 million.
But a Texas probate court then ruled in favor of Marshall's son, Pierce Marshall, who argued there was no provision in his father's will to give Smith anything. Pierce Marshall died in 2006, but his wife, Elaine Marshall, has continued the fight on behalf of herself and her children.
While the matter wound through the courts, Smith died in 2007 from a toxic combination of prescription drugs after becoming despondent over her teenage son Daniel's death from similar causes.
On Friday, a three-judge panel of the 9th U.S. Circuit Court of Appeals upheld the probate court's decision siding with Marshall's son.
Smith estate attorney Richland said he will take the battle to the entire 9th Circuit panel, and then, if necessary, to the U.S. Supreme Court. "This is not the final step," he says. "This is only an intermediate court's ruling."