Chingon International, LLC v. Florio et al

Filing 36

ORDER GRANTING 8 Motion to Remand to State Court; DENYING 11 Motion to Reopen Case; DISMISSING AS MOOT 21 Motion to Stay; DISMISSING AS MOOT 23 Motion to exclude. Signed by Judge Sam Sparks. (td)

FILED
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION

CHINGON INTERNATIONAL, LLC,
Plaintiff,
-vs-

7111

OCT

l4

AM

9:

oe

CAUSE NO.:
A-17-CA-00029-SS

JOSEPH FLORIO, and LAW OFFICES
OF JOSEPH FLORIO,
Defendants.

ORDER
12th
day of April 2017 and the 23rd day of May 2017, the
BE IT REMEMBERED on the

Court held hearings in the above-styled cause, and the parties appeared by and through counsel.
Before the Court is Plaintiff Chingon International, LLC (Chingon)'s Motion to Remand to State

Court [#8], and Defendants' Response [#101 in opposition; Defendants' Motion to Reopen Case
13-CV-00 194 and Consolidate [#11], Chingon's Response [#13] in opposition, and Defendants'

Reply [#14] thereto; and Chingon' s Letter Brief [#35], and Defendants' Letter Brief [#34].'

Having reviewed the documents, the governing law, the arguments of counsel at the hearings,
and the file as a whole, the Court now enters the following opinion and orders.

Background
Plaintiff Chingon filed this lawsuit in Texas state court, seeking a writ of garnishment
from Defendants Joseph Florio and Law Offices of Joseph Florio. See Notice Removal [#1] Ex.

A (Pet.). Defendant Florio represented several claimants in a civil forfeiture suit brought by the
Government in this Court to recover real property used in connection with a substantial heroin

trafficking operation (Forfeited Property). See United States

v.

Real Property Located and

The Court also considered Defendants' Motion to Stay Discovery [#21] and Chingon International's
Motion to Exclude Evidence [#23], which it hereby DENIES as moot in view of this opinion and orders.

Situated at 404

W.

Milton Street, et al., No. 1-13-CV-194-SS (W.D. Tex. filed Mar. 8, 2013).

The Government orchestrated a settlement agreement in the forfeiture case to resolve all claims
for interest in the Forfeited Property. This Court adopted the settlement agreement on March 19,
2015, thereby authorizing the United States Marshals Services (USMS) to seize and sell the

Forfeited Property to effect the terms of the settlement agreement. See Order of Mar. 19, 2015
[#141

II.

In February 2014, while the civil forfeiture suit was pending in this Court, Chingon

contracted to purchase the Forfeited Property from the Guzman Pardo Family Trust #2, Olivia
Ruiz, Trustee, Mayo Jovita's Inc., and Amanda Pardo. See Pl.'s Ex. List [#291 Ex.

3

(Contract).

The sale failed, and Chingon International sued for breach of contract in Texas state court on
June 16, 2014. See Pl.'s Ex. List [#29] Ex. 7 (Jun. 6, 2014 Pet.). The defendants removed the
case to this Court, which remanded it back to state court for lack of subject matter jurisdiction.
See Chingon International, LLC v. Guzman Pardo Family Trust #2 et al., No. 1-14-CV-632-SS

(W.D. Tex. filed Jul. 8, 2014). After remand, Chingon obtained an October 5, 2015 judgment in
state court against the Guzman Pardo Family Trust #2, Olivia Ruiz, Trustee, and Mayo Jovita's
Inc. (collectively, Judgment Debtors) for $143,946.00 in actual damages related to the failed sale

of the Forfeited Property. See Defs.' Am. Ex. List [#30-13] Ex.

13

(Final Judgment).

In the meantime, the USMS auctioned the Forfeited Property pursuant to this Court's

order in the civil forfeiture suit. Chingon purchased the Forfeited Property from the auction,
closing the sale on November 16, 2016. See Pl.'s Ex. List [#29] Ex. 17 (Purchaser's Statement).
The USMS wired $200,000.00 of the sale proceeds to Defendant Florio to be paid to seven

claimants pursuant to the following provision of this Court's order:
It is FURTHER ORDERED that after all outstanding ad valorem taxes, valid
outstanding liens, and expenses incurred by the USMS are satisfied from the sale
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proceeds of the commercial properties of 1615 S. 1st Street and 1619 S. 1st Street,
the USMS shall cause payment of TWO HUNDRED THOUSAND AND NOI100
DOLLARS ($200,000.00) from the net proceeds of said sale be made to the
Claimants Estate of Amado Pardo, Deceased; Guzman Pardo Family Trust #2;
Ismael Guzman; Sandra Guzman; Jovita Pardo; MP (a minor); and Mayo Jovita's
Inc. by electronic funds transfer via their attorney of record, Joseph A. Florio,
pursuant to the adopted Settlement Agreement.
See

Order of Mar. 19, 2015 [#141] at 8.

In an attempt to collect on its earlier state court judgment, Chingon obtained a turnover

order on June 13, 2016 for proceeds from the sale of the Forfeited Property. The state court
ordered the Judgment

Debtorstwo of which

were claimants in the Court's forfeiture order

aboveto instruct the USMS and Defendant Florio "to turn over to the Travis County Constable
for Precinct 5, any and all money received up to the amount of $143,946.00, from any money or
funds to be paid to Judgment Debtors from the sale of [the Forfeited Property]."
Ex. List [#30-29] Ex. 29 (Turnover Order).

See

Defs.' Am.

On September 23, 2016, Chingon emailed the

USMS and Florio to inform them of the turnover order.

See

Pl.'s

Ex. List [#29] Ex. 16 (Bressi

E-mail). Chingon repeatedly requested Florio send any proceeds received from the sale of the

Forfeited Property to the Travis County Constable in compliance with the state turnover order.
See

Defs.' Am. Ex. List [#30-14] Ex. 14 (Attorney E-mails).
After receiving $200,000.00 in proceeds from the USMS, Florio paid himself $67,247.47

in legal fees, and split the remaining money between four claimants: Ismael Guzman, Sandra
Guzman, Jovita Pardo, and Mayo Pardo.

See

Defs.' Am. Ex. List [#30-6-9] Ex. 6-9

(Memoranda to Claimants). Florio distributed checks to the four claimants on December 7, 8,
and 16, 2016. Id.

As stated above, Chingon filed this lawsuit in Texas state court on December 6, 2016,
seeking a writ of garnishment from Defendants Florio and Law Offices of Joseph Florio.

See

Pet. Chingon alleges it is entitled to a portion of the $200,000.00 in settlement funds Defendants
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held in trust to satisfy its earlier state court judgment against Judgment Debtors.
Defendants removed the case to this Court on January 17, 2017.

See

See

Pet.

Notice Removal [#1].

Chingon filed the instant motion for remand on February 13, 2017.

See

Mot. Remand

[#81. Defendants filed a combined motion to reopen the civil forfeiture case and to consolidate

the civil forfeiture case with this case.

See

Mot. Reopen [#111. The Court conducted hearings

on the pending motions on April 12, 2017 and May 23, 2017.
supplemental briefing as requested by the Court.

See

The parties submitted

Chingon Br. [#35]; Defs.' Br. [#34].

The parties' motions are fully briefed and now ripe for consideration.

Analysis

Legal Standard

I.

"[T]he burden of establishing federal jurisdiction is placed upon the party seeking
removal." Willy

v.

Coastal Corp., 855 F.2d 1160, 1164 (5th Cir. 1988). Moreover, because

removal jurisdiction raises significant federalism concerns, courts must strictly construe removal

jurisdiction. Id. District courts have federal question jurisdiction over "all civil actions arising
under the Constitution, laws, or treaties of the United States." 28 U.S.C.

§

1331.

Upon the

existence of original jurisdiction, district courts also have "supplemental jurisdiction over all
other claims that are so related to claims in the action within such original jurisdiction." 28
1367(a).

U.S.C.

§

II.

Application
Defendants contend this Court has jurisdiction of this case because of original and

supplemental jurisdiction. Specifically, Defendants assert original jurisdiction under 28 U.S.C.
§

1331 because federal law preempts state law, and supplemental jurisdiction under 28 U.S.C.

§

1367(a) because federal courts have jurisdiction over related claims. Defendants argue they

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acted in compliance with this Court's order in the civil forfeiture suit, and Chingon is attempting
to circumvent that order.

The Court lacks jurisdiction to consider this case. This case raises a purely state-law

claim for a writ of garnishment stemming from Chingon's state court judgment and turnover
order. The fact that federal law preempts state law does not confer original jurisdiction for this

Court to resolve state law claims.

Also, no factual-interrelatedness to the previous civil

forfeiture case in this Court can establish supplemental jurisdiction under 28 U.S.C.

Peacock

v.

§

1367. See

Thomas, 516 U.S. 349, 355 (1996) ("Consequently, 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 lawsuit."); see also Energy Mgmt. Services, LLC v.
City of Alexandria, 739 F.3d 255, 260 (5th Cir. 2014). In narrow circumstances, a district court

may exercise ancillary jurisdiction to enforce its own judgments. See Peacock v. Thomas, 516
U.S. at 356. However, this case involves enforcement of Chingon's state court judgment for a

breach of contract, not a judgment of this Court. Thus, there is no basis for this Court to exercise

jurisdiction over Chingon's state law cause of action.
None of the cases cited by Defendants warrant a different conclusion. In Sw. Airlines Co.
v.

Texas Intern. Airlines, Inc., the Fifth Circuit affirmed the district court's jurisdiction to

effectuate its prior decree in response to a party's attempt to re-litigate in state court "questions
identical with those decided" previously resolved by the district court. See 546 F.2d 84, 88 (5th
Cir. 1977). By contrast, this case involves a writ of garnishment to collect on a state court

judgement, a different issue than that addressed by this Court in the previous civil forfeiture case.
In re Chiron Equities, LLC is inapplicable as it involved application of a federal statute

conferring jurisdiction to the federal bankruptcy court. See 552 B.R. 674, 685 (Bankr. S.D. Tex.

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2016). That bankruptcy statute is not at issue in this case. Finally, in Marshall v. Local Union
No. 639, Intern. Broth.

of Teamsters,

Chauffeurs, Warehousemen & Helpers

of Am., Inc., the

District of Columbia Circuit explained a district court has jurisdiction to determine whether a

party is in violation of its ordered injunction. See 593 F.2d 1297, 1303 (D.C. Cir. 1979). Again,
the facts of the case at hand are

differentthere is no injunction or alleged violation of the same.

In an attempt to maintain this case in federal court, Defendants have moved to reopen the
civil forfeiture lawsuit and consolidate this case with that earlier suit. However, as explained
above, the Court lacks subject matter jurisdiction over Chingon's state claim. For that reason
alone, the Court declines to reopen the civil forfeiture case to resolve this state law dispute.

Further, none of the parties in this case were parties in the civil forfeiture lawsuit Defendants
seek to reopen, and the issues are different between the cases. The breach of contract claim

underlying Chingon's writ of garnishment action was not at issue in the civil forfeiture lawsuit.
Defendants have failed to identify any legal basis for reopening a closed civil forfeiture lawsuit

to resolve a dispute involving non-overlapping parties and distinct legal issues.
Finally, the Court addresses Defendants' arguments related to Florio's alleged
compliance with this Court's earlier order in the civil forfeiture case. The Court's order plainly
stated $200,000.00 from the net proceeds of the sale of the Forfeited Property were to be paid to
seven claimants in trust of Florio. See Order of Mar. 19, 2015 [#141] at 8. At the hearing before

this order, Florio expressed concern regarding distributing funds to all seven claimants listed in

the Court's order. See Feb. 25, 2017 Hr'g Tr. 6:3-7:6. The Court instructed Florio to come back
to this Court after the sale of the Forfeited Property to resolve any questions or concerns

regarding disbursement of the funds.

See id

at 7:16-8:12.

Florio did not heed the Court's

advice, but instead deducted his legal fees and distributed the remaining funds to four claimants.

In light of Chingon's collection efforts, Florio could have sought clarification, intervention,

and/or protection from this Court or the state court before acting on the proceeds from the
USMS. He did not. The Court has no jurisdiction to intervene now, but Defendants may rely on

this Court's orders as defense in state court.

Conclusion
The Court lacks subject-matter jurisdiction over the claims made in this case, and remand
is therefore required.

Accordingly,
IT IS ORDERED that Plaintiff Chingon International, LLC's Motion to Remand
[#9] is GRANTED;

IT IS FURTHER ORDERED that Defendants Motion to Reopen Case 13-CV00194 and Consolidate [#111 is DENIED;

IT IS FURTHER ORDERED that all other pending motions are DISMISSED as
moot;
IT IS FURTHER ORDERED that this case is REMANDED to the 98th Judicial

District Court of Travis County, Texas, where it originated as Cause Number D- 1 -GN16-005907; and

IT IS FINALLY ORDERED that the Clerk of Court shall provide the Travis
County District Court with a certified copy of this order.
SIGNED this the

3

day of October 2017.

SA
UNITED STATES DISTRICT JUDGE

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