Jessica Polley, et al v. Golden Restaurants, Inc., et al

Filing

UNPUBLISHED OPINION ORDER FILED. [10-10672 Dismissed for Lack of Jurisdiction] Judge: JLW , Judge: ECP , Judge: PRO. Mandate pull date is 11/29/2010; granting motion dismiss for lack of subject matter jurisdiction filed by Appellee Ms. Jessica Polley [6637803-2] [10-10672]

Jessica Polley, et al Case: 10-10672 Document: 00511287665 v. Golden Restaurants, Inc., et al

Page: 1 Date Filed: 11/08/2010

Doc. 0

IN THE UNITED STATES COURT OF APPEALS United States Court of Appeals FOR THE FIFTH CIRCUIT Fifth Circuit FILED
November 8, 2010 N o . 10-10672 S u m m a r y Calendar Lyle W. Cayce Clerk

I n the Matter of: GOLDEN RESTAURANTS, INCORPORATED, Debtor; D E N A R RESTAURANTS, LIMITED LIABILITY CORPORATION, Debtor; F R I E S MANAGEMENT, LIMITED LIABILITY CORPORATION, Debtor; T A G CORRAL, LIMITED LIABILITY CORPORATION, Debtor; INDY C O R R A L , LIMITED LIABILITY CORPORATION, Debtor; KANSAS C O R R A L , LIMITED LIABILITY CORPORATION, Debtor; SUNNY CORRAL M A N A G E M E N T , LIMITED LIABILITY CORPORATION, Debtor, D ebtors -----------------------------G O L D E N RESTAURANTS, INCORPORATED; DENAR RESTAURANTS, L IM I T E D LIABILITY CORPORATION; KANSAS CORRAL, LIMITED L IA B I L I T Y CORPORATION; SUNNY CORRAL MANAGEMENT, LIMITED L IA B I L I T Y CORPORATION; TAG CORRAL, LIMITED LIABILITY C O R P O R A T I O N ; INDY CORRAL, LIMITED LIABILITY CORPORATION; M E T R O A, LIMITED LIABILITY CORPORATION; POP RESTAURANTS, L IM I T E D LIABILITY CORPORATION; FIREBRAND PROPERTIES, L IM I T E D PARTNERSHIP; CORRAL GROUP, LIMITED PARTNERSHIP; F R I E S MANAGEMENT, LIMITED LIABILITY CORPORATION; G U I L L E R M O PERALES; SUN HOLDINGS, LIMITED LIABILITY C O R P O R A T IO N , A p p e lla n ts

v. J E S S I C A POLLEY, A p p e lle e

Dockets.Justia.com

Case: 10-10672 Document: 00511287665 Page: 2 Date Filed: 11/08/2010

No. 10-10672

A p p e a l from the United States District Court for the Northern District of Texas U S D C No. 4:10-CV-55

B e fo r e WIENER, PRADO, and OWEN, Circuit Judges. P E R CURIAM:* A p p e lla n t s appeal the district court's decision to remand this case to Texas s t a t e court and to vacate several bankruptcy court orders. Appellee Jessica

P o l le y ("Appellee") has moved to dismiss the appeal for lack of subject matter ju r is d ic t io n pursuant to 28 U.S.C. §§ 1334(d) and 1452(b). The issues presented h e r e are (1) whether we lack jurisdiction to hear the appeal under 28 U.S.C. §§ 1 3 3 4 (d ) and 1452(b), or instead under 28 U.S.C. § 1447(d), and (2) if so, if any p o r t io n of the district court's decision is separable and may be heard on appeal. Because we find that the district court's decision to remand and its related o r d e r s to vacate were jurisdictional under 28 U.S.C. § 1447(d), and none of the o p in io n is separable, we grant Appellee's motion to dismiss. I . FACTUAL AND PROCEDURAL BACKGROUND T h is factual and procedural background of this case are complex, and we h a v e therefore included only those facts relevant to provide background and to a d d r e s s the current issues in this case. O n July 25, 2007, Appellee won a judgment for $869,172.92 against Metro R e s ta u r a n t s , LLC ("Metro") in the 48th District Court in Tarrant County, Texas (" s t a t e court"), based on the finding that she was sexually assaulted by a

Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4.

*

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Case: 10-10672 Document: 00511287665 Page: 3 Date Filed: 11/08/2010

No. 10-10672 s u p e r v is o r at one of Metro's Burger King franchises. Appellee claims she had d iffic u lt y collecting her judgment from Metro, and filed suit on July 2, 2008 a g a in s t both Metro and Appellants for alleged transfers between the various e n tit ie s "to delay or frustrate satisfaction of the judgment" ("Polley II"). On July 1 0 , 2008, Metro filed a voluntary petition for relief under Chapter 7 of the B a n k r u p t c y Code in the Northern District of Texas, which was assigned to B a n k r u p t c y Judge Hale (the "Metro bankruptcy"). After Judge Hale issued a s t a y pursuant to 11 U.S.C. § 362(a), the parties ceased action on Polley II. On September 10, 2008, Appellee filed suit against Appellants in state c o u r t in the current case, claiming joint and severable liability for Metro's n e g lig e n c e ("Polley III"). Appellants failed to file a timely answer in Polley III, a n d the state court, after verbally "nonsuiting" An-Mar Companies, LLC ("AnM a r " ) at the request of Appellee, entered a default judgment against Appellants o n October 15, 2008. The state court subsequently denied Appellants' motion for a new trial. On January 29, 2009, Appellants appealed the default judgment e n te r e d in Polley III to the Second Court of Appeals in Fort Worth, Texas ("state a p p e lla te court"). A few days after the appeal, the state appellate court wrote t o Appellants expressing concern about its jurisdiction because it was unclear if the judgment disposed of An-Mar and therefore was a final appealable order. Appellants responded that the judgment was final and not an interlocutory o r d e r . This issue is a key dispute underlying this case. O n March 24, 2009, Appellant Denar Restaurants, LLC ("Denar") filed for C h a p t e r 11 bankruptcy relief in the Northern District of Texas ("bankruptcy c o u r t " ) , and the case was assigned to Judge Nelms. Denar subsequently had P o lle y III removed from state court to bankruptcy court, and on April 10, 2009, a ll Appellants had the appeal of the Polley III judgment moved from state a p p e lla te court to bankruptcy court. On May 28, 2009, the bankruptcy court r e m a n d e d Polley III to the state court except as to Denar, and on June 4, 2009, 3

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No. 10-10672 r e m a n d e d the appeal from the Polley III judgment to the state appellate court e x c e p t as to Denar. The state appellate court reopened the case on June 30, 2 0 0 9 , and, inter alia, remanded the case to the state court for entry of a written o r d e r nonsuiting An-Mar, reinstated the appeal following the state court's c o m p lia n c e with the remand, and denied a stay of enforcement of the Polley III ju d g m e n t . The state court complied with the remand and entered an order s t a t in g that "[o]n the 15th day of October, 2008, the Court granted Plaintiff's N o n -S u it as to [An-Mar]." The parties dispute whether the non-suit occurred at t h is point, or on October 15, 2008, affecting when the judgment was final and a p p e a la b le . O n July 23, 2009, four of the Appellant companies (Golden, Kansas, TAG, a n d Indie) filed for bankruptcy relief under Chapter 11, and were joined by a fift h (Sunny) on August 7, 2009. Appellants again moved the appeal from state a p p e lla te court to the bankruptcy court. On September 4, 2009, the bankruptcy c o u r t set aside Denar's default and granted it a new trial, and did the same for t h e remaining Appellants on October 9, 2009. Appellee timely appealed to the d is t r ic t court. O n June 11, 2010, the district court issued its opinion. It remanded the P o lle y III appeal to the state appellate court and Polley III to the state court, r e m o v e d the stays imposed by 11 U.S.C. § 362 and vacated the bankruptcy court o r d e r s that had vacated the default judgment and granted a new trial. The d i s t r i c t court explained that if the Polley III state court judgment "was not in t e r lo c u t o r y when it was signed on October 15, 2008, the bankruptcy court w o u ld not have had jurisdiction to make the rulings that adversely affected the ju d g m e n t " because of the pendency of a Polley III appeal at the time of its r e m o v a l. In re Denar Rests., LLC, 2010 WL 2403039, *13 (N.D. Tex. June 11, 2 0 1 0 ). The district court held that because "the Polley III judgment was final a n d appealable on October 15, 2008, . . . the bankruptcy court [did] not . . . have 4

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No. 10-10672 ju r is d ic t io n to make rulings during and after May 2009 that adversely affected t h e judgment . . . . " Id. at *14. In further explanation, the district court noted t h a t the "same reasons the bankruptcy [court] had for remanding Polley III" the fir s t time "provide ample justifications for the remands that are now being o r d e r e d ." Id. Appellee notes that the district court referenced the portion of the fir s t bankruptcy court ruling that noted it was remanding "pursuant to 28 U.S.C. S e c tio n 1452(b)." A fte r explaining the rationale for its order, the district court addressed in a n o t h e r section, "The Significance Given By Judge Nelms To The Automatic S t a y Existing By Reason Of An Earlier-Filed Bankruptcy Case In The Dallas D iv is io n ." Id. at *15. First noting that "[t]he subject of discussion under this h e a d in g is of a matter that does not directly . . . bear on the rulings this court is m a k in g in this memorandum opinion and order," the district court discussed the e ffe c t of the stay in the Metro bankruptcy case on the bankruptcy court's d e c is io n . Id. at *16. The district court disagreed with the bankruptcy court's o p in io n that the Metro bankruptcy stay was a reason why Appellants failed to t im e ly file an Answer in Polley III, and with the bankruptcy court's conclusion t h a t Polley III violated the bankruptcy stay in Metro. Id. at *18­19. A p p e lla n t s appealed the district court's decision, and Appellee filed a m o t io n to dismiss the appeal for lack of subject matter jurisdiction, arguing that o u r ability to hear an appeal was precluded by 28 U.S.C. §§ 1334(d) and 1452(b). I I . ANALYSIS " C o n g r e s s has placed broad restrictions on the power of federal appellate c o u r ts to review district court orders remanding removed cases to state court." Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 127 (1995). Two relevant s t a t u t e s curtail the ability of federal appeals courts to hear appeals of a district c o u r t's decision to abstain or remand a case to state court on discretionary g r o u n d s . First, a district court's decision to abstain from "hearing a particular 5

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No. 10-10672 p r o c e e d in g arising under title 11 or arising in or related to a case under title 11" fo r reasons of comity is not reviewable by the court of appeals. See 28 U.S.C. § 1 3 3 4 (d ). Second, a district court's decision to remand a case, "on any equitable g r o u n d ," that had been removed to the district court under 28 U.S.C. § 1452(a) is not reviewable by the court of appeals. See 28 U.S.C. § 1452(b). Additionally, a third statute strips federal appeals courts of appellate jurisdiction of a district c o u r t's mandatory remand based on a lack of subject matter jurisdiction. See 28 U .S .C . § 1447(d). A p p e lle e argues that we have no jurisdiction to hear Appellant's appeal b e c a u s e the district court, on a discretionary basis, chose to abstain and remand u n d e r 28 U.S.C. §§ 1334(d) and 1452(b). In support of this argument, Appellee p o in ts to the district court's language noting that "[t]he same reasons the b a n k r u p t c y court had for remanding Polley III [the first time], provide ample ju s tifi c a t i o n s for the remands that are now being ordered by this court." In re D e n a r Rests., 2010 WL 2403039, at *14. Appellee points out that the district c o u r t opinion cites to the portion of the bankruptcy court order that noted it was r e m a n d in g "pursuant to 28 U.S.C. Section 1452(b)." W e agree with Appellee that we are without jurisdiction to hear this a p p e a l. Despite the district court's language referring back to the bankruptcy c o u r t 's original discretionary remand, it is apparent that the district court p r im a r ily based its decision to remand on a lack of jurisdiction. The district c o u r t identified as a threshold issue whether the state court had issued a final a p p e a la b le order in Polley III, and spent the majority of its opinion discussing it. It stressed that this issue is important because, "[i]f it was final and

a p p e a la b le at that time, the state district court lost jurisdiction over the ju d g m e n t before Polley III was removed to the bankruptcy court," and therefore " t h e bankruptcy court did not have jurisdiction in the removed state district c o u r t action to make certain rulings it made affecting the judgment." Id. at *2. 6

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No. 10-10672 A fte r a full account of the facts and a discussion of relevant Texas law, the d is t r ic t court concluded that "the Polley III judgment was final and appealable o n October 15, 2008," and therefore "the bankruptcy court did not have ju r is d ic t io n to make rulings during and after May 2009 that adversely affected t h e judgment . . . ." Id. at 14. In other words, the district court rested its d e c is io n to remand and vacate the bankruptcy court's orders on its finding that t h e bankruptcy court did not have jurisdiction to, inter alia, vacate the Polley III d e fa u lt judgment and grant a new trial. Because the district court remanded d u e to a lack of jurisdiction, this court lacks jurisdiction to hear Appellants a p p e a l from the district court under 28 U.S.C. § 1447(d). A p p e lla n t s claim that while a simple remand and vacation by the district c o u r t might preclude review, the district court "affirmatively den[ied] the A p p e lla n t s ' factual and legal basis for a new trial" by finding Appellant's ju s tific a t io n for the default not credible and rejecting arguments that Polley III w a s stayed under the Metro bankruptcy. These issues go to the heart of the r e m a n d e d appeal to be decided by the state appellate court: whether Appellants c a n show good cause to vacate the Polley III default judgment and receive a new t r ia l. Appellants complain that the district court's opinions as to these issues a r e functionally conclusions of fact and law that are unreviewable by the state a p p e lla te court. U n d e r the rule in City of Waco v. U.S. Fidelity & Guaranty Co., 293 U.S. 1 4 0 (1934), federal appeals courts may review orders that are "separable" from a n otherwise unreviewable remand decision. "A decision is `separable' if (1) the d e c is io n preceded the remand order `in logic and in fact' such that it was `made b y the district court while it had control of the case'; and (2) the decision is `c o n c lu s iv e '-- t h a t is, `functionally unreviewable in state courts.'" Certain

U n d e r w r ite r s at Lloyd's v. Warrantech Corp., 461 F.3d 568, 577 (5th Cir. 2006) (c it a t io n s omitted). 7

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No. 10-10672 I n this case, the district court's discussion of the reasons for Appellants' d e fa u lt in Polley III and the applicability of the Metro bankruptcy stay go to the m e r it s of the case that the state appellate court will hear on remand. The d is c u s s io n of these issues, however, while strongly worded, is not itself an order o r decision that can itself be separately reviewed by this court. Further, the d is t r ic t court's orders were based on its finding that the bankruptcy court (and t h e r e fo r e the district court) lacked jurisdiction. Because the district court's r e m a n d was jurisdictional, "the state court will have an opportunity to consider t h e appellants' [arguments]" for vacating the default judgment and granting a n e w trial "and the district court's order will have no preclusive effect." Soley v. F ir s t Nat. Bank of Commerce, 923 F.2d 406, 410 (5th Cir. 1991); see also Nutter v . Monongahela Power Co., 4 F.3d 319, 322 (4th Cir. 1993) ("Because the district c o u r t 's findings have no preclusive effect, they do not affect [Appellant's] s u b s t a n t iv e rights and are not severable from the remand order.") To the extent t h a t the district court made factual and legal conclusions about the default ju d g m e n t beyond the issue of the bankruptcy court's jurisdiction, these opinions are not preclusive. The district court lacked jurisdiction to make any decisions b e y o n d the remand and the vacation orders necessary to effectuate the remand. I I I . CONCLUSION F o r the foregoing reasons, IT IS ORDERED that the appellee's motion to d is m is s appeal for lack of subject matter jurisdiction is GRANTED.

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