Janvey v. Alguire et al
Filing
2861
MEMORANDUM OPINION AND ORDER granting #2191 Third Party Motion to Dismiss Third-Party Plaintiff Virgil Harris's Complaint. (Ordered by Judge David C Godbey on 9/13/2018) (axm)
IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
RALPH S. JANVEY,
Plaintiff,
v.
VIRGIL HARRIS, et al.,
Defendant/Third Party Plaintiff
v.
MARY T. HARRIS,
Third Party Defendant.
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Civil Action No. 3:09-CV-0724-N-BG
MEMORANDUM OPINION AND ORDER
This Order addresses Third Party Defendant Mary T. Harris’s Motion to Dismiss
Third Party Plaintiff Virgil Harris’s Third Party Complaint [2191]. For the reasons set forth
below, the Court grants the motion.
I. ORIGINS OF THE RECEIVER’S ASSET RECOVERY ACTION
This dispute arises out of the Securities and Exchange Commission’s (the “SEC”)
ongoing securities fraud action against R. Allen Stanford, his associates, and various entities
under Stanford’s control. As part of that litigation, this Court appointed a receiver (the
“Receiver”) and authorized him to commence any actions necessary to recover assets of the
Receivership Estate. See Second Am. Order Appointing Receiver, July 19, 2010 [1130] (the
“Receivership Order”), in SEC v. Stanford Int’l Bank Ltd., Civil Action No. 3:09-CV-0298-N
MEMORANDUM OPINION AND ORDER – PAGE 1
(rev. 1/08)
(N.D. Tex. filed Feb. 17, 2009). Pursuant to those powers, the Receiver filed this action to
recover approximately $760 million in alleged Stanford International Bank, Ltd. (“SIB”)
certificate of deposit (“CD”) proceeds paid to certain Stanford investors and Stanford
employees. First Am. Compl. Against Certain Stanford Investors (the “Investor Complaint”)
[128]; Investor Compl. App. [129]; Emp. Compl. (the “Employee Complaint”) [1532]; Emp.
Compl. App. [1533].
The Receiver alleges that Stanford made various transfers to Stanford employees to
perpetuate and conceal its fraudulent Ponzi scheme. Emp. Compl. at ¶ 34. Such transfers
took the form of payments of loans, SIB CD Commissions, SIB Quarterly Bonuses,
Performance Appreciation Rights Plan Payments, Branch Managing Director Quarterly
Compensation, Severance Payments, and payments to Stanford Employees of purported CD
interest and principal, redemptions, and/or loans from the Stanford Employees’ SIB CD
and/or other SIB accounts. Emp. Compl. at ¶ 3. The Receiver alleges that Stanford made
approximately $289 million in such transfers to the former Stanford employees named in the
Employee Complaint. Emp. Compl. at ¶ 68.
Virgil Harris, a former Stanford employee named in the Employee Complaint, filed
a Third Party Complaint (the “Complaint”) against his ex-wife Mary T. Harris. Mr. Harris
alleges that Ms. Harris is liable for contribution or indemnity because she received a portion
of the fraudulently transferred funds in their Agreed Final Decree of Divorce. Compl. at
¶ 11–12. Ms. Harris now moves to dismiss the Complaint under Federal Rules of Civil
Procedure 12(b)(1) and 12(b)(6).
MEMORANDUM OPINION AND ORDER – PAGE 2
(rev. 1/08)
II. THE COURT LACKS JURISDICTION OVER MR. HARRIS’S CLAIM
Third Party Defendant Ms. Harris moves to dismiss under Rule 12(b)(1), arguing that
the Court lacks subject matter jurisdiction over Mr. Harris’s contribution and indemnity
claim.
A. The Rule 12(b)(1) Legal Standard
“A case is properly dismissed for lack of subject matter jurisdiction when the court
lacks the statutory or constitutional power to adjudicate the case.” Home Builders Ass’n of
Miss., Inc. v. City of Madison, 143 F.3d 1006, 1010 (5th Cir. 1998) (citing Nowak v.
Ironworkers Local 6 Pension Fund, 81 F.3d 1182, 1187 (2d Cir. 1996)). “The burden of
proof for a Rule 12(b)(1) motion to dismiss is on the party asserting jurisdiction.” Ramming
v. United States, 281 F.3d 158, 161 (5th Cir. 2001). “When a party files a Rule 12(b)(1)
motion in conjunction with other Rule 12 motions, the court should consider the Rule
12(b)(1) jurisdictional attack before addressing any attack on the merits.” Id. This
requirement prevents a court without jurisdiction from prematurely dismissing a case with
prejudice. Id. “The court’s dismissal of a plaintiff’s case because the plaintiff lacks subject
jurisdiction is not a determination of the merits and does not prevent the plaintiff from
pursuing a claim in a court that does have proper jurisdiction.” Id.
B. The Court Lacks Subject Matter Jurisdiction
The Court does not have original jurisdiction over Mr. Harris’s claim for contribution
or indemnity. Federal district courts “shall have original jurisdiction of all civil actions
arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. Mr.
MEMORANDUM OPINION AND ORDER – PAGE 3
(rev. 1/08)
Harris asserts that the Court has jurisdiction over his claim pursuant to: (1) Section 22(a) of
the Securities Act (15 U.S.C. § 77v(a)); (2) Section 27 of the Exchange Act (15 U.S.C. §
78aa); and (3) Chapter 49, Title 28 of Judiciary and Judicial Procedure (28 U.S.C. § 754).
Compl. at ¶ 3, . None of these statutes conveys jurisdiction over this dispute.
Section 22(a) of the Securities Act and Section 27 of the Exchange Act provide for
jurisdiction in federal courts “of all suits in equity and actions at law brought to enforce any
liability or duty created by” the respective Acts. 15 U.S.C. § 77v(a); 15 U.S.C. § 78aa(a).
As the party asserting jurisdiction, Mr. Harris has the burden of establishing that this Court
has jurisdiction. Ramming, 281 F.3d at 161. Mr. Harris, however, offers no facts showing
that this Court has jurisdiction under either statute. Mr. Harris merely asserts a claim for
contribution or indemnity, citing only to the Texas Civil Practice and Remedies Code.
Compl. at ¶ 15; Resp. at 8. Accordingly, Mr. Harris fails to allege facts establishing
jurisdiction under either of these statutes.
Mr. Harris further alleges that the Court has jurisdiction under 28 U.S.C. § 754
because a “receiver appointed in any civil action . . . shall . . . be vested with complete
jurisdiction and control of all such property with the right to take possession thereof.” 28
U.S.C. § 754. Section 754 grants jurisdiction to a district court to hear suits brought by
court-appointed receivers. And while this Court previously held that section 754 extends its
jurisdictional grant to claims brought by a creditor’s committee on behalf of a receiver, such
holding does not apply here. Stanford Inv'rs Comm. v. Am. Lebanese Syrian Associated
MEMORANDUM OPINION AND ORDER – PAGE 4
(rev. 1/08)
Charities, Inc., 3:11-CV-0303-N, 2015 WL 13739835, at *3 (N.D. Tex. July 22, 2015).
Section 754 therefore does not extend jurisdiction over Mr. Harris’s claim.
Accordingly, the Court does not have original jurisdiction over Mr. Harris’s claim for
contribution or indemnity.
B. The Court Declines to Exercise Supplemental Jurisdiction
The Court also declines to exercise supplemental jurisdiction over Mr. Harris’s claim
for contribution or indemnity because it would require the Court to embroil itself in family
law matters that are more appropriate for state court.
Under 28 U.S.C. § 1367(c), a district court “may decline to exercise supplemental
jurisdiction over a claim” if:
(1) the claim raises a novel or complex issue of State law, (2) the claim
substantially predominates over the claim or claims over which the district
court has original jurisdiction, (3) the district court has dismissed all claims
over which it has original jurisdiction, or (4) in exceptional circumstances,
there are other compelling reasons for declining jurisdiction.
Welch v. Jannereth, 496 F. App’x 411, 413 (5th Cir. 2012). These statutory factors guide the
district court, and no single factor is dispositive. Brookshire Bros. Holding, Inc. v. Dayco
Prods., Inc., 554 F.3d 595, 601–02 (5th Cir. 2009). In addition to these statutory factors, the
district court considers “judicial economy, convenience, fairness, and comity.” Smith v.
Amedisys Inc., 298 F.3d 434, 477 (5th Cir. 2002). Federal courts, however, traditionally
abstain from cases involving domestic relations because of the strong state interest in
handling such issues. Chandler v. Commander, Army Fin. & Accounting Ctr., 863 F.2d 13,
15 (5th Cir. 1989).
MEMORANDUM OPINION AND ORDER – PAGE 5
(rev. 1/08)
1. Mr. Harris’s Claim Involves Family Law Issues — Mr. Harris’s claim implicates
a bevy of family law issues, including allocation of community property and interpretation
and enforcement of a divorce decree. Mr. Harris alleges that Ms. Harris is liable for
contribution or indemnity because she possesses a portion of fraudulently transferred funds.
Mr. Harris specifically avers that in their final divorce decree Ms. Harris “was awarded fifty
percent (50%) of the community property portion of the Performance Appreciation Rights,”
which Mr. Harris originally received from Stanford during “his tenure as an employee . . . .”
Compl. at ¶¶ 5, 12. Mr. Harris essentially asks the Court to exercise jurisdiction over his
claim so that in the event the Receiver prevails, Ms. Harris will be required to hand over her
share of the already allocated community property. See Resp. at 8–9. Such an action,
however, would effectively require the Court to upset the divorce decree by requiring
disgorgement of already allocated community property.
The former spouses also contest the interpretation and application of the divorce
decree. Mr. Harris, for example, cites multiple portions of the divorce decree, alleging that
the “clear intent of the divorce decree is for the former spouses to receive both the benefits
and the costs of their portions of the PARS payments” and that Ms. Harris misinterprets and
incorrectly relies on “the indemnification provision of the divorce decree.” Resp. at 12.
Conversely, Ms. Harris argues that “[r]egardless of [Mr. Harris’s] sentiments, he agreed . . .
to hold [Ms. Harris] harmless” and his interpretation of the divorce decree “would
completely vitiate the Indemnification Provision rendering it toothless.” Reply at 5–6. Thus,
exercising jurisdiction over Mr. Harris’s claim would require the Court to interpret and
MEMORANDUM OPINION AND ORDER – PAGE 6
(rev. 1/08)
enforce provisions of the state court divorce decree — a task more appropriately left to the
state court, which expressly “reserve[d] the right to make orders necessary to clarify and
enforce this Decree.” Compl. Ex. A at 17.
Accordingly, because of “the strong state interest in domestic relations matters, the
competence of state courts in settling family disputes, the possibility of incompatible federal
and state court decrees in cases of continuing judicial supervision by the state, and the
problem of congested dockets in federal courts,” the Court finds that there are exceptional
circumstances for declining to exercise supplemental jurisdiction over Mr. Harris’s claim for
contribution or indemnity. Crouch v. Crouch, 566 F.2d 486, 487 (5th Cir. 1978); see also
DuBroff v. DuBroff, 833 F.2d 557, 561–62 (5th Cir. 1987) (“[T]here is perhaps no state
administrative scheme in which federal court intrusions are less appropriate than domestic
relations law. ‘Even when a federal question is presented, federal courts decline to hear
disputes which would deeply involve them in domestic matters.’”) (citing Thompson v.
Thompson, 798 F.2d 1547, 1558 (9th Cir. 1986)).
CONCLUSION
In this action, Mr. Harris filed a third party complaint against his former spouse Ms.
Harris. The Court does not have original jurisdiction over Mr. Harris’s claim, and it declines
to exercise supplemental jurisdiction for the reasons discussed above. Because the Court
finds that it does not have jurisdiction, the Court grants Ms. Harris’s motion to dismiss
without prejudice and does not reach the parties’ additional arguments.
MEMORANDUM OPINION AND ORDER – PAGE 7
(rev. 1/08)
Signed September 13, 2018.
_________________________________
David C. Godbey
United States District Judge
MEMORANDUM OPINION AND ORDER – PAGE 8
(rev. 1/08)
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