EGI-VSR, LLC v. Coderch Mitjans

Filing 287

Order on Report and Recommendations; granting in part and denying in part 182 Motion to Dismiss; granting 204 Motion to Dismiss for Lack of Jurisdiction; declining to adopt in part 251 Report and Recommendations. Certificate of Appealability: No Ruling Signed by Judge Robert N. Scola, Jr on 2/5/2020. See attached document for full details. (pcs)

United States District Court
for the
Southern District of Florida
EGI-VSR, LLC, Plaintiff,
v.
Juan Carlos Celestino Coderch
Mitjans and NA Topco Corp.,
Defendants.

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) Civil Action No. 15-20098-Civ-Scola
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Order on Report and Recommendations
This matter was referred to United States Magistrate Judge Alicia OtazoReyes for a report and recommendation on the Defendants’ motions to dismiss
the supplemental complaint. (ECF No. 188, 205.) Judge Otazo-Reyes issued a
Report and Recommendation regarding three motions to dismiss: (1) the
Defendant Juan Carlos Celestino Coderch’s motion to dismiss the supplemental
complaint (ECF No. 182), (2) the Defendant NA Topco Corp.’s (“Topco”) motion to
dismiss count one of the supplemental complaint (ECF No. 204), and (3)
Coderch’s supplement to motion to dismiss and joinder in Topco’s motion to
dismiss count one (ECF No. 206). She recommends that the Court deny all of the
motions. (“the report,” ECF No. 251.) Having conducted a de novo review of the
entire record and the applicable law, the Court adopts in part and declines to
adopt in part the report and recommendation (ECF No. 251) and grants in part
and denies in part the Defendants’ motions (ECF Nos. 182, 204).
The Defendants object to the report, primarily arguing (1) the report erred
in recommending not to dismiss the fraudulent transfer claims against Coderch
because he is not a proper party to them and (2) the report’s recommendation
that the Court exercise ancillary jurisdiction over the alter ego claim has been
explicitly rejected by the United States Supreme Court. (ECF No. 256, 257.) In
the Plaintiff’s omnibus response, the Plaintiff argues that the Court can exercise
jurisdiction over the alter ego claim under another theory—one that was
explicitly addressed and rejected by the Magistrate Judge. (ECF No. 270.) Then,
Coderch filed a reply stating that the Plaintiff’s alternative argument cannot be
considered because it was not filed as a timely objection to the report. (ECF No.
275.) The Plaintiff argued that their reply can be considered as an additional
ground to adopt the report. (ECF No. 284.) The Court addresses each argument
in turn.

1. Counts two and three for fraudulent transfer cannot be dismissed.
Coderch objects to the report on the basis that Coderch is not a proper
party to the fraudulent transfer claims. (ECF No. 257.) Specifically, Coderch
argues that the fraudulent transfer claims can only be brought against a
transferee and not a transferor of fraudulent assets. In its supplemental
complaint, the Plaintiff brings fraudulent transfer claims pursuant to the
proceedings supplementary statute (§ 56.29, Florida Statutes) and to Florida’s
Unfair Fraudulent Transfer Act (§§ 726.105(1), 726.108, 726.109, Florida
Statutes). As explained below, the Plaintiff correctly asserted these claims.
“Proceedings supplementary under section 56.29 are special statutory
proceedings subsequent to judgment to aid a judgment creditor in collecting his
judgment against the judgment debtor.” Sanchez v. Renda Broadcasting
Corp.,127 So. 3d 627, 628 (Fla. 5th DCA 2013). Proceedings supplementary are
often used “to implead a third party in cases where the judgment debtor has
made a fraudulent transfer to the third party.” Id. The proceedings
supplementary statute explicitly allows judgment creditors to bring FUFTA
claims in proceedings supplementary:
The court may entertain claims concerning the judgment debtor’s
assets brought under chapter 726 and enter any order or judgment,
including a money judgment against any initial or subsequent
transferee, in connection therewith, irrespective of whether the
transferee has retained the property.
Fla. Stat. § 56.29(9). Moreover, the Eleventh Circuit has allowed creditors to
initiate proceedings supplementary against a judgment debtor, and then implead
the transferees of allegedly fraudulently transferred assets. See, e.g., Forster v.
Nations Funding Source, Inc., 648 Fed. App’x 850, 851 (11th Cir. 2016) (“if the
party satisfies the statutory requirements and alleges that the judgment debtor
has transferred property to delay, hinder, or defraud creditors, Fla. Stat.
§ 56.29(6)(b), no other showing is necessary in order to implead the third party”).
2. The Court cannot exercise ancillary jurisdiction over the alter ego
claim because it is factually interdependent with the original suit.
The United States Supreme Court has “recognized that a federal court may
exercise ancillary jurisdiction (1) to permit disposition by a single court of claims
that are, in varying respects and degrees, factually interdependent; and (2) to
enable a court to function successfully, that is, to manage its proceedings,
vindicate its authority, and effectuate its decrees.” Peacock v. Thomas, 516 U.S.
349, 354 (1996) (internal citations omitted). The report finds that the Court can
exercise jurisdiction over the alter ego claim based on the first prong—or on its

factual and logical dependence on the underlying suit. (ECF No. 251 at 10.) The
report states that EGI’s original petition contained an independent basis for
jurisdiction, the Federal Arbitration Act, and EGI’s alter ego claim in the
supplemental complaint is sufficiently factually connected to the original action
to enforce the petition. Therefore, the report reasons that the Court may exercise
ancillary jurisdiction. This application of ancillary jurisdiction has been rejected
by the United States Supreme Court. See Peacock, 516 U.S. at 355.
In Peacock v. Thomas, Thomas brought a successful ERISA suit against
Tru-Tech. 516 U.S. at 351. After unsuccessfully attempting to collect on the
judgment, Thomas brought claims in federal court for fraudulent conveyance
and piercing the corporate veil against Peacock, an officer and shareholder of
Tru-Tech. Id. at 352. The district court allowed Thomas to pierce the corporate
veil, and the court of appeals affirmed, holding that the district court had
ancillary jurisdiction over the subsequent suit. Id. The Supreme Court reversed,
holding that the district court could not exercise ancillary jurisdiction. Id. at 360.
The Court stated that subsequent claims, which lack an independent basis for
jurisdiction but are factually-intertwined with the original federal suit, must
have been asserted in the original suit and cannot be brought in a subsequent
one. Id. at 355.
The Supreme Court explained that “claims alleged to be factually
interdependent with and, hence, ancillary to claims brought in an earlier federal
lawsuit will not support federal jurisdiction over a subsequent suit.” The
Supreme Court further explained the reasoning for this limitation:
The basis of the doctrine of ancillary jurisdiction is the practical
need to protect legal rights or effectively to resolve an entire dispute,
logically entwined lawsuit. But once judgment was entered in the
original ERISA suit, the ability to resolve simultaneously factually
intertwined issues vanished. As in Kroger, neither the convenience
of the litigants nor considerations of judicial economy can justify the
extension of ancillary jurisdiction over Thomas’ claims in this
subsequent proceeding.
Id. In other words, “[i]n a subsequent lawsuit involving claims with no
independent basis of jurisdiction, a federal court lacks the threshold
jurisdictional power that exists when ancillary claims are asserted in the same
proceeding as the claims conferring federal jurisdiction.” Id; see also Nat’l City
Golf Finance v. Scott, 899 F.3d 412, 416 (5th Cir. 2018) (“This kind of ancillary
jurisdiction [factually interdependent claims] disappears, however, after the
original federal dispute is dismissed.”); Hudson v. Coleman, 347 F.3d 138, 143
(6th Cir. 2003) (The Court has “reserved the use of ancillary jurisdiction in
subsequent proceedings for the exercise of a federal court’s inherent power to

enforce its judgements.”); Nat’l Presto Indus. V. Dazey Corp., 107 F.3d 1576,
1580-81 (Fed. Cir. 1997) (“once the original federal dispute is dismissed, claims
that at one time might have been brought as ancillary to that dispute may no
longer be brought”).
3. The Court cannot exercise jurisdiction over the alter ego claim in
order to effectuate its decrees.
The Report explicitly rejects the exercise of jurisdiction based on the
second prong of ancillary jurisdiction—or the exercise of jurisdiction "to enable
a court to function successfully, that is, to manage its proceedings, vindicate its
authority, and effectuate its decrees.” (ECF No. 251 at 9.) The report found that
because EGI’s alter ego claim seeks to impose on Topco the obligation to pay for
the judgment entered in this case and because this obligation did not previously
exist, the Court cannot exercise ancillary jurisdiction on this basis.
Nevertheless, the Plaintiff argues in its response to the objections that the
report was incorrect in this conclusion. This argument is not proper because the
Plaintiff did not timely file objections to the portions of the report that it did not
want this Court to adopt. Fed. R. Civ. P. 72(b)(2); see also, Knezevich v. Ptomey,
761 Fed. App’x 904, 906 (11th Cir. 2019) (“When a party fails to raise a proper
objection to the magistrate judge’s report and recommendation, that party
waives its right to review findings of fact and legal conclusions on appeal unless
there was plain error”); Local Magistrate Rule 4(b) (“A District Judge shall make
a de novo determination of those portions of the report or specified proposed
findings or recommendations to which objection is made”).
In an abundance of caution, the Court will consider the Plaintiff’s
argument that ancillary jurisdiction is proper because “Congress explicitly
authorized federal courts, under their ancillary jurisdiction to use all procedures
available in the state in which the court is located to enforce judgments” and
because Florida law allows parties to bring these claims through proceedings
supplementary. (ECF No. 270 at 12-13.) This objection is meritless and does not
address the restriction articulated in Peacock. 516 U.S. at 357.
The second prong allowing courts to effectuate its decrees encompasses “a
broad range of supplementary proceedings involving third parties to assist in the
protection and enforcement of federal judgments—including attachment,
mandamus, garnishment, and prejudgment avoidance of fraudulent
conveyances.” Nat’l Maritime Services, Inc. v. Straub, 776 F.3d 783, 786-86 (11th
Cir. 2015). However, the exercise of ancillary jurisdiction over supplemental
proceedings is not appropriate where it “impose[s] an obligation to pay an
existing federal judgment on a person not already liable for that judgment.”
Peacock, 516 U.S. at 357. Therefore, the report correctly found that this prong

does not allow the Court to exercise jurisdiction over the alter ego claim because
EGI’s alter ego claim seeks to impose on Topco an obligation to pay the judgment
that was previously entered against Coderch. (ECF No. 173 at ¶ 1.) Topco is not
already liable for that judgment against Coderch. Id. Therefore, the Court cannot
exercise ancillary jurisdiction over this count.
4. Conclusion
In sum, the Court declines to adopt in part the Magistrate Judge’s Omnibus
Report and Recommendation (ECF No. 251.)
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The Court grants in part and denies in part the Defendant Coderch’s
motion to dismiss (ECF No. 182). The Court grants Coderch’s motion with
respect to count one and denies the motion with respect to counts two and
three.
The Court grants the Defendant Topco’s motion to dismiss count one of
the supplemental complaint (ECF No. 204).
The Court dismisses count one of the supplemental complaint without
prejudice and with leave to refile in Florida state court.
Done and ordered at Miami, Florida, on February 5, 2020.
________________________________
Robert N. Scola, Jr.
United States District Judge