ARLIN GEOPHYSICAL; Laura Olson, Plaintiffs, v. UNITED STATES of America, Defendant Counterclaimant-Appellee, v. John E. Worthen; Fujilyte Corporation, Counterclaim Defendants-Appellants.
No. 15-4166
United States Court of Appeals, Tenth Circuit.
Filed August 17, 2017
362, 363, 364, 365, 366, 367, 368, 369, 370, 371
So too here. Particularly in light of the dismissal without prejudice of the claims against Sheriff Glanz in his individual cаpacity, we think there are sufficient questions as to the merits of the state-law claims against the Board that those issues now belong in state court. We therefore direct the district court to remand the state-law claims against the Board back to state court. See Roe v. Cheyenne Mountain Conference Resort, Inc., 124 F.3d 1221, 1236-37 (10th Cir. 1997) (remanding state-law claim to district court to decline exercise of supplemental jurisdiction and remand claim to state court).
We REVERSE the district court’s dismissal of the state-law claims against the Board and REMAND those claims with instructions to further remand them to state court.
David E. Ross, II, Esq., David E. Ross II, LC, Park City, UT, for Counterclaim Defendants-Appellants
David E. Ross, II, Esq., David E. Ross II, LC, Park City, UT, for Plaintiffs
Before HOLMES, PHILLIPS, and MORITZ, Circuit Judges.
ORDER AND JUDGMENT*
Nancy L. Moritz Circuit Judge
*Nearly one decade ago, the Internal Revenue Service filed a notice of federal tax lien to recover over $12 million in unpaid taxes from John Worthen. In 2015, the district court granted final judgment for the government on its action to enforce the tax lien. To satisfy the judgment, the court also ordered the sale of two properties in Utah owned by Worthen’s company, Fujilyte Corporation (Fujilyte). Because the district court granted final judgment without providing Worthen and Fujilyte an adequate opportunity to respond to the government’s assertion that Fujilyte holds title to those properties as Worthen’s alter ego or nominee, we vacate the judgment and the order of sale and remand for further proceedings.
I
In February 2008, the IRS filed a notice of federal tax lien identifying Laura Olson, Arlin Geophysical Company (Arlin), and Fujilyte as Worthen’s alter egos or nominees.1 The lien encumbered 10 properties
The government filed an answer and counterclaim. In its Fifth Amended Counterclaim, the government asserted two claims; only the second claim is at issue in this appeal.2 In that claim, the government sought to enforce the lien as to all 15 properties and named over 30 counterclaim defendants with potential interests in those properties. See
The government alleged that (1) Fujilyte holds title to Properties 14 and 15, (2) Fujilyte granted Green a trust deed with respect to both properties in 1996, and (3) Homer was appointed as successor trustee under the trust deed in 1997. Worthen and Fujilyte admitted the truth of these allegations. The government further alleged that Fujilyte’s interests in Properties 14 and 15 arise from either (1) Fujilyte’s status as a nomineе or alter ego of Worthen, or (2) Worthen’s fraudulent transfer of the subject properties to Fujilyte. Worthen and Fujilyte denied the truth of these allegations.
In 2011, Homer filed a motion for partial summary judgment (the Homer motion) purportedly on behalf of himself and Green.3 Homer asserted that he and Green had “‘trust deed mortgage’ interests” in Properties 14 and 15, and that those interests had priority over any interests the government might have through its tax lien. R. vol. 1, 134.
In its response opposing the Homer motion, the government disputed or partially disputed all but one of Homer’s asserted material faсts, asserted several additional material facts, and urged the court to deny the motion for several reasons. As relevant to this appeal, the government argued that because the statute of limitations for foreclosing on the trust deed expired in 2003, Homer and the Green heirs4 had no enforceable interests in Properties 14 and 15.
In a series of three docket text orders, the district court sought further input from Homer before resolving the Homer motion. First, on March 24, 2014, the district court notified Homer that he had until April 7, 2014, to file a reply to the government’s response. Homer didn’t file a reрly. Next, on July 11, 2014, the court notified Homer that it might grant summary judgment to the government based on the statute-of-limitations defense. And it gave Homer until August 1, 2014, to file a response. See
But Worthen and Fujilyte didn’t object to the denial of the Homer motion or the grant of summary judgment for the government based on the statute of limitations. Instead, they objected to the first 10 facts in the proposed order and the portion of the proposed order’s legal analysis resolving that “Fujilyte’s property is held by it under several theories of alter ego, constructive trust, nominee, etc. for the benefit of John Worthen.” R. vol. 5, 26. In support, they argued that (1) the legal analysis wasn’t necessary to resolve the statute-of-limitаtions issue; (2) the first 10 facts weren’t material to that issue; and (3) the government didn’t support those facts with evidence as required by
After receiving a response from the government, the district court overruled Worthen and Fujilyte’s objections. The court then entered a separate order largely adopting the government’s proposed order. In that order (the summary judgment order), the court denied the Homer motion and granted summary judgment to the government under
In June 2015, the government moved for final judgment and an ordеr of sale. The government asserted that all issues relating to Properties 14 and 15 had been resolved; that the summary judgment order resolved all claims against the properties
In a docket text order entered on June 30, 2015, the court provided a 10-day deadline for responses to the government’s motion and an additional six days for filing a reply to any such response. Fujilyte timely responded, disagreeing with the government’s assertion that all issues relating to the subject properties had been “fully litigated.” R. vol. 5, 71 (emphasis omitted) (quoting id. at 54). And it argued that because it wasn’t a party to the summary judgment proceeding, it lacked notice and an opportunity to respond to the government’s position on the nominee issue. Thus, Fujilyte asserted, the court couldn’t rely on its findings and conclusions from the summary judgment order regarding Fujilyte’s status as Worthen’s nominee to grant final judgment for the government against Fujilyte.
The government disagreed. In its reply, the government argued that Fujilyte (1) challenged the court’s factual findings in the summary judgment order when Worthen and Fujilyte objected to the government’s proposed order; (2) Fujilyte is bound by the court’s findings in the summary judgment order under the law-of-the-case doctrine; and (3) Worthen and Fujilyte tried but failed to refute the government’s facts in their response to thе motion for final judgment.
During a hearing on the government’s motion for final judgment, Worthen and Fujilyte primarily argued that they weren’t bound by the findings and conclusions from the court’s summary judgment order because they weren’t parties to the summary judgment proceeding. At one point during the hearing, the court asked, “What evidence—how would it be different—what procedure would you propose be required to be followed to adjudicate what you claim is unadjudicated?” R. vol. 5, 178. Counsel for Worthen and Fujilyte replied that the government should “file a motion for summary judgment if [it] want[s] to proceed that way or [lеt] the matter go to trial so [Worthen and Fujilyte] have an opportunity to defend [against the government’s position].” Id.
In September 2015, the court granted final judgment for the government. In doing so, the court reasoned that Fujilyte (1) “contest[ed] the [c]ourt’s findings and failed to refute the [c]ourt’s conclusions” in the summary judgment order by objecting to the government’s proposed order; (2) failed to appeal from the order overruling those objections or the summary judgment order; and (3) was barred by the law-of-the-case doctrine from “re-litigat[ing] Fujilyte’s status as Worthen’s nominee.” R. vol. 5, 150. That same day, in a separate order, the court ordered the sale of Properties 14 and 15. Worthen and Fujilyte appeal.
II
Before considering the merits of this appeal, we must resolve two questions implicating our jurisdiction: (1) whether the district court’s judgment is final, and (2) if so, whether the notice of appeal is deficient. We review these questions de novo. Montez v. Hickenlooper, 640 F.3d 1126, 1130 (10th Cir. 2011).
But in its response to our show cause order, the government identifies a second potential jurisdictional issue. Relying on United States v. Simons, the government argues that the final, appealable order in this case is the order directing the sale of Properties 14 and 15, not the ordеr granting judgment for the government on its action to enforce the lien. See 419 Fed. Appx. 852, 855 (10th Cir. 2011) (unpublished) (“It has long been established that ‘a decree of sale in a foreclosure suit, which settles all the rights of the parties and leaves nothing to be done but to make the sale and pay out the proceeds, is a final decree for the purposes of an appeal.’” (quoting Grant v. Phoenix Mut. Life Ins. Co., 106 U.S. 429, 431 (1882))). Thus, the government reasons that the notice of appeal is jurisdictionally defective because it designates the order granting judgment, not the order of sale. See
“Rule 3(c)(1)(B)’s designation requirement is jurisdictional.” Williams v. Akers, 837 F.3d 1075, 1078 (10th Cir. 2016). But we construe that designation requirement liberally. Id. In fact, after pointing out this potential defect in the notice of appeal, the government urges us to overlook it because the record demonstrates Worthen and Fujilyte’s intent to appeal from the order of sale. See, e.g., Trotter v. Regents of Univ. of N.M., 219 F.3d 1179, 1184 (10th Cir. 2000) (rejecting challenge to adequacy of notice of appeal when docketing statement clearly set forth issues on appeal, appellees had notice of issues, and apрellants suffered no prejudice from appellant’s failure to reference specific order).
We agree that the notice of appeal is sufficient to confer jurisdiction. As the government points out, (1) the district court issued the judgment enforcing the tax lien and the order of sale on the same day; (2) the judgment expressly provides for the sale of the subject properties and references the separate order of sale; and (3) the docketing statement indicates that the judgment permits the sale of the properties to satisfy the judgment. Having cоnfirmed our jurisdiction, we turn to the merits.
III
Worthen and Fujilyte argue that the district court erred in granting the government’s motion for final judgment and ordering the sale of Properties 14 and 15. Specifically, they contend that the court committed reversible error when it relied on its findings and conclusions from the summary judgment order regarding Fujilyte’s purported status as Worthen’s nominee. They argue that those findings and conclusions cannot bind them because they weren’t parties to the summary judgment proceeding; thus, they assert that they never had a meaningful opportunity to de-
The government urges us to affirm the final judgment. It asks us to treat the final judgment as a sua sponte grant of summary judgment under
Both parties suggest that the appropriate standard of review is the de novo standard we apply in reviewing summary judgment rulings. But as the procedural history demonstrates, and as we discuss below, the district court issued only one summary judgment order: the order denying the Homer motion and granting summary judgment tо the government under
Instead, they argue the district court erred in relying on the findings and conclusions it made in that order when it subsequently granted final judgment to the government. Specifically, they argue that the district court deprived them of notice and a meaningful opportunity to be heard. This argument sounds in due process, see Mathews v. Eldridge, 424 U.S. 319, 333 (1976) (“The fundamental requirement of due process is the opportunity to be heard ‘at a meaningful time and in a meaningful manner.’” (quoting Armstrong v. Manzo, 380 U.S. 545, 552 (1965))), and presents a legal question that we review de novo, In re C.W. Mining Co., 625 F.3d 1240, 1244 (10th Cir. 2010).
A
While Worthen and Fujilyte don’t challenge the summary judgment order, a brief review of the summary judgment proceeding is helpful in understanding their challenge to the final judgment. As we’ve discussed, Homer moved for partial summary judgment against the government, asserting that Homer’s and the Green heirs’ interests in Properties 14 and 15 were superior to the government’s interests in those properties. The government opposed the Homer motion. In its response, the government disputed Homer’s asserted facts, asserted its own facts, and asserted a statute-of-limitations defense. But Homer didn’t reply to the government’s response even after the court thrice invited him to do so. Thus, thе court deemed the government’s facts undisputed for purposes of the Homer motion. See
The court then applied
Worthen and Fujilyte concede on appeal that it “was appropriate” for the district court to deny the Homer motion and grant summary judgment for the government and against Homer and the Green heirs
B
Several months after the court granted summary judgment for the government and against Homer and Green under
Four days after the government filed its motion for judgment, the district court issued a docket text entry, imposing a 10-day deadline for responses. Worthen and Fujilyte timely filed a response opposing the motion; the government filed a reply; and the court held a hearing on the motion. In granting final judgment for the government, the court accepted the government’s position that Worthen and Fujilyte were bound by the court’s findings and conclusions on the nominee issue from the summary judgment order. In doing so, the court specifically reasoned that Worthen and Fujilyte (1) objected to the government’s facts in the proposed summary judgment order, but failed to refute the court’s conclusions on the nominee issue; (2) failed to appeal the order overruling their objections or the summary judgment order; and (3) couldn’t relitigate the nominee issue because the law-of-the-case doctrinе barred them from doing so.
To its credit, the government concedes that Worthen and Fujilyte weren’t actually parties to the summary judgment proceeding. But it defends the court’s first reason for granting final judgment by asserting that Worthen and Fujilyte nevertheless “participated in th[at] proceeding[ ] when they objected to the [g]overnment’s proposed order, which addressed the nominee issue.” Aplee. Br. 25. We reject the government’s position.
As Worthen and Fujilyte have consistently argued, they weren’t parties to the summary judgment proceeding. And as they argue on appeal, lodging an оbjection—as nonparties—to a proposed order resolving a motion involving other parties doesn’t have the same procedural impact as responding—as parties—to a motion seeking summary judgment against them on the nominee issue.
Worthen and Fujilyte’s status as nonparties to the summary judgment proceeding also requires us to reject the district court’s second stated reason for concluding they were bound by the summary judgment order. The court faulted Fujilyte for failing to appeal (1) the order overruling their objections to the proposed summary judgment ordеr and (2) the summary judgment order itself. But we can hardly blame Worthen and Fujilyte for not appealing from a summary judgment order that wasn’t entered against them. And in any event, neither order was final or certified as final for purposes of an appeal. See
Finally, and for similar reasons, we reject the district court’s third stated reason for granting final judgment to the government—nаmely, its application of the law-of-the-case doctrine. See Gage v. Gen. Motors Corp., 796 F.2d 345, 349 (10th Cir. 1986) (“The law of the case rule applies only when there has been a final decision.”); see also
Perhaps sensing the fragile underpinnings of the final judgment, the government invites us to treat it as a summary judgment order appropriately issued under
Relying on A.M., Scull, and other cases involving sua sponte grants of summary judgment, the government urges us to affirm the final judgment because, the government argues, Worthen and Fujilyte had notice and three opportunities to respond to the government’s position on the nominee issue before the court entered final judgment against them. First, the government points out that Worthen and Fujilyte “lodged an objection to the [g]overnment’s proposed order granting summary judgment.” Apleе. Br. 34. But we’ve already rejected the government’s attempt to equate these nonparty objections with an opportunity to defend against the government’s position on the nominee issue.
Second, the government argues that its motion for final judgment, and the court’s order for a response to that motion, put Worthen and Fujilyte on notice that the court might enter judgment against them on the nominee issue “based upon the facts as stated in the court’s order granting summary judgment.” Aplee. Br. 35. And, it argues, the court gave them reasonable time to respond to that motion. Finally, the govеrnment argues that the court gave Worthen and Fujilyte a third opportunity to address the nominee issue at the motion hearing when the court asked them what issues they believed were left to be adjudicated.
But we aren’t persuaded that we should treat the final judgment as a
Rather, we will treat the final judgment as it presents itself: as a final judgment entered for the government and against Worthen and Fujilyte on the basis of findings and conclusions that the court reached in resolving a dispute between different parties—i.e., the lien-priority dispute between the government and Homer and Green. And we conclude that because Worthen and Fujilyte lacked a meaningful opportunity to defend against the position the government advanced in that dispute, they can’t be bound by those findings and conclusions.
* * *
The district court erred in adopting the government’s position that all issues relating to Fujilyte’s purported status as Worthen’s nominee had been fully litigated. By relying on its findings and conclusions from the summary judgment order, the district court effectively (1) treated the government’s response in opposition to the Homer motion as a de facto motion for summary judgment against Worthen and Fujilyte on the nominee issue, and (2) granted final judgment for the government on that issue without providing Worthen and Fujilyte a meaningful opportunity to defend against the government’s position on that issue. Thus, we vacate the judgment and the order of sale and remand for further proceedings.