Keybank National Ass'n v. Perkins Rowe Associates, L.L.C.
539 F. App'x 414
5th Cir.2013Background
- KeyBank (Ohio) made a $170 million loan in 2006 to Perkins Rowe (Louisiana) to develop property; KeyBank retained $35 million and acted as agent for other participating banks; Spinosa provided a personal guaranty.
- Perkins Rowe defaulted in 2008; KeyBank sued to foreclose and enforce guaranty.
- During discovery, the district court found repeated discovery abuses by Perkins Rowe, issued multiple orders and cost sanctions, and ultimately struck Perkins Rowe’s defenses and counterclaims as a Rule 37 sanction.
- After dismissal of defenses and counterclaims, the district court granted KeyBank summary judgment on the foreclosure and debt amount.
- Perkins Rowe appealed the jurisdictional basis (diversity), the dismissal-as-sanction order, and the grant of summary judgment. The Fifth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument (KeyBank) | Defendant's Argument (Perkins Rowe) | Held |
|---|---|---|---|
| Subject-matter jurisdiction (diversity) | Only KeyBank's citizenship counts because it is the sole plaintiff with a real interest and agent authority under the loan agreement. | Court must consider citizenship of non-party participating banks (e.g., Bank of New Orleans) because they have interests in the loan; absence of complete diversity. | Affirmed: consider only the citizenship of real parties before the court; KeyBank is diverse from Perkins Rowe, so jurisdiction proper. |
| Whether non-party lenders are necessary parties under Rule 19 | KeyBank not a nominal party; non-parties not necessary for adjudication (not argued on appeal). | Non-party banks' interests make them necessary and joinder would destroy diversity. | Not considered on appeal (issue not briefed); district court previously found non-parties not necessary. |
| Dismissal of defenses/counterclaims as discovery sanction (Rule 37) | Sanction appropriate given repeated discovery violations, misrepresentations, withheld documents, prior lesser sanctions and costs. | Conduct was not willful/contumacious; dismissal was too severe and lacked adequate warning; due process violated. | Affirmed: district court did not abuse discretion; willfulness found from repeated violations and lesser sanctions had proved insufficient; adequate notice existed. |
| Summary judgment on amount owed | Evidence (including expert affidavits) establishes principal, late charges, and proper interest rate (no reduced rate after default); project cash held in reserve consistent with loan and not required to be applied to debt first. | Dispute remains over interest rate reduction and application of project cash flow to debt; needed further discovery. | Affirmed: no genuine dispute on principal/late charges; interest-rate reduction unavailable after default; no contractual duty to apply reserve cash to debt; discovery argument inadequately briefed. |
Key Cases Cited
- McKee v. Kansas City S. Ry. Co., 358 F.3d 329 (5th Cir.) (standard of review for diversity jurisdiction)
- Lincoln Property Co. v. Roche, 546 U.S. 81 (U.S.) (complete diversity required between plaintiffs and defendants)
- Navarro Savings Ass'n v. Lee, 446 U.S. 458 (U.S.) (disregard nominal/formal parties; focus on real parties in interest)
- Corfield v. Dallas Glen Hills LP, 355 F.3d 853 (5th Cir.) (non-parties with an interest are not always considered for diversity)
- Carden v. Arkoma Assocs., 494 U.S. 185 (U.S.) (determining citizenship of unincorporated associations by members' citizenship)
- Smith v. Smith, 145 F.3d 335 (5th Cir.) (dismissal as discovery sanction authorized only for willfulness/bad faith and when lesser sanctions insufficient)
- Hornbuckle v. Arco Oil & Gas Co., 732 F.2d 1233 (5th Cir.) (district court may dismiss when lesser sanctions proved futile)
- Ins. Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694 (U.S.) (due-process standards for preclusion/discovery sanctions must be just and related to the claim)
- ACE Am. Ins. Co. v. M-I, L.L.C., 699 F.3d 826 (5th Cir.) (standard of review for summary judgment)