Mitchell Law v. Bessie Jeanne, 8 F.4th 417

Bessie Worthy appointed her nephew Larry Hodge as power of attorney; after her death Larry became trustee of the Bessie Jeanne Worthy Revocable Trust and administrator of her estate.
Beneficiaries Rodney Hodge and Cheri Tye sued Larry in Texas probate for alleged mismanagement; a jury later found against Larry in that litigation.
The Mitchell Law Firm represented Larry in the probate litigation, then sued the Trust in federal court to recover attorney fees; Mitchell later added the Estate as a defendant (a Texas citizen) but omitted the Estate’s citizenship and mischaracterized service to obscure the lack of diversity jurisdiction.
Mitchell referred Larry to his officemate, Joyce Lindauer, to enter an agreed judgment in federal court awarding Mitchell fees; the district court entered judgment and the Trust paid.
A Texas court later removed Larry and appointed Rodney as successor trustee/administrator; Rodney moved under Rule 60(b)(4) to vacate the federal judgment for lack of subject-matter jurisdiction and sought return of the fees.
The district court vacated the judgment as void, granted summary judgment for the Trust and Estate, and ordered Mitchell to return fees; Mitchell appealed and the Fifth Circuit affirmed.

Issue	Plaintiff's Argument (Mitchell)	Defendant's Argument (Trust/Estate/Rodney)	Held
Whether the district court’s subject-matter-jurisdiction ruling is res judicata and thus not voidable under Rule 60(b)(4)	The judgment’s jurisdictional finding is res judicata and cannot be collaterally attacked	The federal judgment was void for lack of diversity (both Mitchell and the Estate were Texas citizens), so Rule 60(b)(4) relief is proper	Court: Judgment was void for lack of subject-matter jurisdiction; res judicata does not save a void judgment and Rule 60(b)(4) relief was proper
Whether Rodney (successor trustee/administrator) lacked standing/was not a proper party in interest to move under Rule 60(b)	Rodney is not a proper party in interest and thus cannot seek relief	Rodney, as successor trustee/administrator, had authority and timely sought relief	Court: Mitchell forfeited the standing argument by not raising it below; Rodney’s Rule 60(b) motion was permitted
Whether the district court had authority to order return of funds paid under the now-vacated judgment	District court lacked jurisdiction to order restitution of funds once judgment set aside	Courts have inherent power to undo and order restitution of what a void judgment produced	Court: A district court may direct return/restitution of funds obtained under a void judgment; order to return fees was proper

United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (2010) (Rule 60(b)(4) applies only in narrow, exceptional circumstances such as lack of jurisdiction or denial of due process)
Brumfield v. La. State Bd. of Educ., 806 F.3d 289 (5th Cir.) (2015) (vacating a district-court order that was void for lack of subject-matter jurisdiction)
Picco v. Global Marine Drilling Co., 900 F.2d 846 (5th Cir. 1990) (discussed limits of collateral attack and context for when preclusion applies to jurisdictional rulings)
Ins. Corp. of Ir. v. Compagnie des Bauxites de Guinee, 456 U.S. 694 (1982) (party consent or estoppel cannot confer subject-matter jurisdiction)
Ex parte McCardle, 74 U.S. 506 (1868) (when a court lacks jurisdiction the only function is to announce that fact and dismiss)
Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83 (1998) (subject-matter jurisdiction is a threshold requirement that cannot be waived)
Nw. Fuel Co. v. Brock, 139 U.S. 216 (1891) (courts possess inherent power to undo actions taken without authority, including directing restitution)