Thomas Caton, et al v. Linda Payne

Filing

UNPUBLISHED OPINION FILED. [13-41182 Affirmed ] Judge: JLW , Judge: PRO , Judge: CH Mandate pull date is 08/06/2014 [13-41182]

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Date Filed: 07/16/2014

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 13-41182
Summary Calendar

United States Court of Appeals
Fifth Circuit

FILED
July 16, 2014

In the Matter of: BOYD VEIGEL, P.C.,
Debtor
______________________________________________

Lyle W. Cayce
Clerk

THOMAS CATON; JERRY SANCHEZ; JAMES WALLACE,
Appellants
v.
LINDA PAYNE, Chapter 7 Trustee of the Bankruptcy Estate of Boyd Veigel,
P.C.,
Appellee
Appeal from the United States District Court
for the Eastern District of Texas
USDC No. 4:13-CV-15
Before WIENER, OWEN, and HAYNES, Circuit Judges.
PER CURIAM:*
Thomas Caton, Jerry Sanchez, and James Wallace (collectively, the
“Individual Plaintiffs”) appeal the district court’s order affirming the
bankruptcy court’s decision to grant in part and deny in part their motion for

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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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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summary judgment, and its decision to grant in part and deny in part Linda
Payne’s motion to dismiss. We AFFIRM.
I.

Background

In 1994, Boyd Veigel, P.C. (“Boyd Veigel”) was hired to represent
approximately 1600 firefighters and police officers (the “State Plaintiffs”),
including the Individual Plaintiffs, in Texas state court in a series of class
action lawsuits against the City of Dallas involving allegations of breach of
contract (the “Class Action Lawsuits”). The State Plaintiffs retained Boyd
Veigel on a contingent fee basis. After several years of litigation, Boyd Veigel
entered into a fee-sharing arrangement with Hance Scarborough, LLP (“Hance
Scarborough”) and E. Lee Parsley (“Parsley”), under which Hance Scarborough
and Parsley agreed to serve as co-counsel with Boyd Veigel during the
pendency of an interlocutory appeal of the Class Action Lawsuits to the Texas
Supreme Court in exchange for a percentage of Boyd Veigel’s contingent fee.
In 2009, Bill Boyd (“Boyd”), the sole shareholder of Boyd Veigel and lead
counsel in the Class Action Lawsuits, died. Shortly thereafter, the employment
of Boyd Veigel’s remaining employees, including its attorneys, was terminated.
Hance Scarborough and Parsley continued to represent the State Plaintiffs on
their interlocutory appeal to the Texas Supreme Court, and, during the
pendency of the appeal, entered into new contingent fee agreements with the
State Plaintiffs.
At the end of 2009, Boyd Veigel filed a voluntary petition for relief under
Chapter 7 of the United States Bankruptcy Code in the United Bankruptcy
Court for the Eastern District of Texas, Sherman. Linda Payne was appointed
trustee (the “Trustee”) of the bankruptcy estate. Thereafter, the bankruptcy
court issued an order (the “Authorization Order”) authorizing the Trustee to
employ Susman Godfrey LLP (“Susman Godfrey”) as special counsel. The
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Trustee, through Susman Godfrey, asserted in filings with the Texas Supreme
Court that Boyd Veigel remained counsel of record to the State Plaintiffs.
In 2011, the Texas Supreme Court issued an opinion and judgment in
which it remanded the Class Action Lawsuits to the trial court for further
proceedings. After the Trustee, through Susman Godfrey, asserted in filings
with the trial court that Boyd Veigel remained counsel of record to the State
Plaintiffs, the State Plaintiffs moved to show authority pursuant to TEXAS
RULE OF CIVIL PROCEDURE 12. After reviewing the Authorization Order, the
trial court concluded that Susman Godfrey did not represent the State
Plaintiffs, but instructed them to seek clarification from the bankruptcy court,
if Susman Godfrey disagreed.
Thereafter, the Individual Plaintiffs filed this adversary action (the
“Adversary Action”) in the bankruptcy court, seeking relief under the
Declaratory Judgment Act, 28 U.S.C. § 2201, et seq. The Individual Plaintiffs
requested that the bankruptcy court declare, among other things, that neither
the Trustee nor Susman Godfrey represent the State Plaintiffs in the Class
Action Lawsuits. The Individual Plaintiffs also requested that the bankruptcy
court declare that “[a]s a matter of state and federal law, Boyd Veigel is not
entitled to receive any fee under its rejected and abandoned fee contracts with
the [State Plaintiffs].”
After the Individual Plaintiffs moved for summary judgment, the
Trustee moved to dismiss, arguing that the Adversary Action was not ripe. The
bankruptcy court granted in part and denied in part the motion for summary
judgment, concluding that:
[N]either the Trustee nor the Estate represents the
[State Plaintiffs] in the [Class Action Lawsuits], . . .
and therefore the Trustee has no reason to participate
in the [Class Action Lawsuits]. However, nothing
herein is intended to affect or limit the Trustee’s right
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to any recovery achieved by the [Individual Plaintiffs]
in the [Class Action Lawsuits].
The bankruptcy court also granted in part and denied in part the motion to
dismiss, concluding:
[T]he [Adversary Action] is ripe in regard to the
question of whether the Trustee is or can represent the
[Individual Plaintiffs] in the [Class Action Lawsuits] .
. . . The Court finds that the remaining issues raised
or which could be raised in the [Adversary Action] are
not ripe for determination. The [Adversary Action]
may be re-filed if and when a recovery is achieved in
the [Class Action Lawsuits], at which time such issues
will be ripe for determination.
The Individual Plaintiffs appealed to the United States District Court for the
Eastern District of Texas, Sherman Division, which affirmed. The Individual
Plaintiffs timely appealed.
II.

Standard of Review

This court “reviews the decision of a district court, sitting as an appellate
court in bankruptcy, by applying the same standards of review to the
bankruptcy court’s findings of fact and conclusions of law.” In re Tex. Pig
Stands, Inc., 610 F.3d 937, 941 (5th Cir. 2010) (citation omitted). As a general
matter, “a bankruptcy court’s findings of fact are reviewed for clear error and
conclusions of law are reviewed de novo.”

Id. (citation omitted).

The

“jurisdictional issue of ripeness is a legal question for which review is de novo.”
Choice Inc. of Tex. v. Greenstein, 691 F.3d 710, 714 (5th Cir. 2012).
III.

Discussion

The Individual Plaintiffs assert that the district court erred in affirming
the bankruptcy court’s orders. 1 Specifically, they contend that the bankruptcy

On appeal, the Trustee asserts that this court lacks jurisdiction to consider this
appeal because the denial of a motion for summary judgment does not constitute a final,
appealable order. This court has jurisdiction to hear “appeals from all final decisions,
1

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court incorrectly concluded that the issue of whether the Trustee is entitled to
recover a fee on behalf of Boyd Veigel in the Class Action Lawsuits was not
ripe, and erred in failing to enter summary judgment in favor of the Individual
Plaintiffs on that issue.
The Declaratory Judgment Act provides:
In a case of actual controversy within its
jurisdiction, . . . any court of the United States, upon
the filing of an appropriate pleading, may declare the
rights and other legal relations of any interested party
seeking such declaration, whether or not further relief
is or could be sought. Any such declaration shall have
the force and effect of a final judgment or decree and
shall be reviewable as such.
28 U.S.C. § 2201(a). Under the Declaratory Judgment Act, “[d]eclaratory
judgments are typically sought before a completed ‘injury-in-fact’ has occurred,
but still must be limited to the resolution of an ‘actual controversy.’” United
Transp. Union v. Foster, 205 F.3d 851, 857 (5th Cir. 2000) (citation omitted).
This is in accordance not only with the statutory language of the Declaratory
Judgment Act, but also with Article III of the United States Constitution,
which confines the federal courts to adjudicate actual “cases” and
“controversies.”

U.S. Const. art. III, § 2.

Thus, courts will not grant

declaratory judgments unless the suit is ripe for review. See Foster, 205 F.3d

judgments, orders, and decrees” in bankruptcy matters entered pursuant to 28 U.S.C.
§ 158(a). 28 U.S.C. § 158(d)(1). This court’s approach to determining whether an order is
appealable in a bankruptcy case is “flexible,” and we view “finality in bankruptcy
proceedings . . . in a practical, less technical light.” In re ASARCO, L.L.C., 650 F.3d 593, 599
(5th Cir. 2011) (citation omitted). We have long “rejected adoption of a rigid rule that a
bankruptcy case can only be appealed as a single judicial unit at the end of the entire
bankruptcy proceeding.” Id. at 600 (quotation marks omitted). Instead, “[a]n appealed
bankruptcy order will be considered final if it constitutes either a final determination of the
rights of the parties to secure the relief they seek, or a final disposition of a discrete dispute
within the larger bankruptcy case.” Id. (alteration in original). The bankruptcy court’s order
constitutes a final determination of the rights of the parties to secure the relief they seek,
and this court has jurisdiction to consider this appeal.

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at 857. Ripeness “separates those matters that are premature because the
injury is speculative and may never occur from those that are appropriate for
judicial review.” Id.; see also United Pub. Workers v. Mitchell, 330 U.S. 75, 89
(1947) (“[F]ederal courts . . . do not render advisory opinions. For adjudication
of constitutional issues, concrete legal issues, presented in actual cases, not
abstractions are requisite. This is as true of declaratory judgment as any other
field.”) (quotation marks omitted).
In the declaratory judgment context, “the question in each case is
whether the facts alleged, under all the circumstances, show that there is a
substantial controversy, between parties having adverse legal interests, of
sufficient immediacy and reality to warrant the issuance of a declaratory
judgment.” Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941)
(citation omitted). A court should dismiss the case for lack of ripeness when
“the case is abstract or hypothetical.” New Orleans Pub. Serv., Inc. v. Council
of City of New Orleans, 833 F.2d 583, 586 (5th Cir. 1987) (citation omitted).
The key considerations are “the fitness of the issues for judicial decision and
the hardship to the parties of withholding court consideration.” Id. (quotation
marks omitted). “A case is generally ripe if any remaining questions are purely
legal ones; conversely, a case is not ripe if further factual development is
required.” Id. at 587 (citation omitted); see also Opulent Life Church v. City of
Holly Springs, Miss., 697 F.3d 279, 287 (5th Cir. 2012). Whether particular
facts are sufficiently immediate to establish an actual controversy must be
evaluated on a “case-by-case basis.” Orix Credit Alliance, Inc. v. Wolfe, 212
F.3d 891, 896 (5th Cir. 2000) (citation omitted).
The district court did not err in concluding that the issue of whether the
Trustee is entitled to recover a fee on behalf of Boyd Veigel in the Class Action
Lawsuits is not ripe. It is undisputed that the Class Action Lawsuits remain
pending, that no recovery has been made, and that there may never be a
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recovery, which would preclude any contingent fee award as to which Boyd
Veigel (through the Trustee) may or may not be entitled to a share. 2 Moreover,
the Trustee has not yet demanded a fee, or threatened legal action to recover
a fee. Thus, several factual issues remain unresolved, and require further
development. See New Orleans Pub. Serv., 833 F.2d at 587 (“[A] case is not
ripe if further factual development is required.”) (citation omitted).

A

declaratory judgment cannot be based on a possible future factual situation
that may never develop. See id. at 587–88; see also Orix Credit Alliance, 212
F.3d at 896; Brown & Root, Inc. v. Big Rock Corp., 383 F.2d 662, 665 (5th Cir.
1967) (“A controversy, to be justiciable, must be such that it can presently be
litigated and decided and not hypothetical, conjectural, conditional or based
upon the possibility of a factual situation that may never develop.”). As a
result, the district court properly concluded that this issue is not yet ripe. 3

Indeed, the Individual Plaintiffs acknowledge in their appellate brief that the Class
Action Lawsuits “will not be resolved for several more year[s],” that the State Plaintiffs “have
not yet obtained a recovery,” and that “a fee is not yet owed.”
2

Each of the cases cited by the Individual Plaintiffs for the proposition that this issue
is ripe is distinguishable. In Sydow v. Acheson & Co., 81 F. Supp. 2d 758 (S.D. Tex. 2000),
the district court concluded that a contingency fee claim was ripe for adjudication where a
class action lawsuit had been settled and a $6,000,000 contingency fee was “likely to be
awarded,” but the parties disputed whether the defendants were obligated to split any
portion of those fees with the plaintiffs. Id. at 762–63. Similarly, Person v. Lemelson, No. 90
Civ. 1242, 1990 WL 144208 (S.D.N.Y. 1990) involved an attorney fee dispute that arose after
a jury trial had already resulted in an award of $71,000,000. See id. at *1. Here, this action
has not been resolved, no recovery has been made, and no contingency fee is yet likely to be
awarded. Moreover, as the Individual Plaintiffs acknowledge, it is likely to remain pending
for several more years. In Certain Underwriters at Lloyd’s London v. A & D Interests, Inc.,
197 F. Supp. 2d 741 (S.D. Tex. 2002), the district court concluded that a dispute between an
insurer and an insured over misrepresentations made by the insured in procuring insurance
coverage was ripe for adjudication. Id. at 749–50. However, in that case, the insurer had
already incurred costs in defending the insured in a related action under the terms of the
insurance policy, at the time that case was brought. Id. Hardware Mutual Casualty Co. v.
Schantz, 178 F.2d 779 (5th Cir. 1949) involved a similar insurance coverage dispute, in which
the insured demanded that the insurer defend it in a related action under the terms of the
insurance policy, and the insurer refused. Id. at 780. Here, the Individual Plaintiffs have
3

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AFFIRMED.

incurred no costs, nor has the Trustee made any demand that would impose costs on the
Individual Plaintiffs.

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