Cathy Jackson-Platts v. General Electric Capital CorporationCathy Jackson-Platts v. General Electric Capital Corporation
At issue today are two basic questions: whether this cause of action—a supplementary proceeding under Florida Statutes section 56.29(6)—is an independent “civil action” removable to federal district court under
After thorough review, we reverse and remand for further proceedings. The supplementary proceeding here is an independent civil action because it seeks to impose new liability on new parties founded on wholly new legal theories and based on a completely different factual matrix. As for the Colorado River doctrine, Justice Brennan once said that federal courts have “the virtually unflagging obligation ... to exercise the jurisdiction given them,” Colorado River Water Conservation District v. United States, 424 U.S. 800, 817, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), and this case presents nothing so extraordinary as to eviscerate that obligation.
I.
The complex factual and procedural history surrounding this case began in 2003, when Juanita Amelia Jackson (“Jackson“) lived at the Auburndale Oaks Healthcare Center, a nursing home in Polk County, Florida, operated by Trans’ Healthcare, Inc. and Trans Health Management, Inc.1 Soon after, Jackson was released from the nursing home, and later died on July 6, 2003. About a year later, the Estate of Juanita Amelia Jackson (“Estate“), through Cathy Jackson-Platts, sued thirteen defendants, including Trans Healthcare and Trans Management, alleging that their negligence caused Jackson‘s. death.2 The Estate sued in the Tenth. Judicial Circuit Court of Florida. During the course of the initial litigation (the “underlying tort action“), the Estate dropped its suit against all but the Trans Health defendants.
While the Florida tort action was proceeding, Trans Healthcare filed in a Maryland circuit court a voluntary petition for the appointment of a receiver to preserve its assets and protect its creditors. The Maryland court agreed, appointed a receiver, and stayed all judicial actions against Trans Healthcare. With the Maryland court‘s order in hand, the Trans Health defendants moved the Florida circuit court to stay the underlying tort action; the Florida court denied the motion and, because a default judgment was entered against the Trans Health defendants, proceeded to a trial to determine damages. After some three days of trial, the jury returned a verdict for the Estate in the underlying tort action in the amount of $10 million in compensatory damages, and added $100 million in punitive damages. The state circuit court entered final judgment against Trans Healthcare and Trans Management, holding each liable to the Estate in the amount of $55 million. Notably, the Trans Health defendants never appealed from the Florida court‘s judgment.
In December 2010, the Estate commenced, again in Florida‘s Tenth Judicial Circuit Court, the action now pending on appeal, which we‘ll call the “first supplementary proceeding.” The Estate brought this supplementary proceeding under
The liability of GE and Schron supposedly arose out of a conspiracy between GE and Schron that was designed to strip the Trans Health defendants of all of their assets. According to the Estate, GE gained control over the Trans Health defendants. With Schron‘s aid, GE abused this control and syphoned off the Trans Health defendants’ assets. Allegedly to cover their tracks, GE and Schron had Trans Healthcare file the receivership petition in Maryland state court and then used the receivership order in a fraudulent, albeit failed attempt to stay the underlying tort action. GE and Schron purportedly undertook these actions to delay, hinder, and defraud creditors, including the Estate.
On December 30, 2010, GE timely removed the first supplementary proceeding to the United States District Court, for the Middle District of Florida. In its notice of removal, GE claimed that Jackson was a citizen of Florida, thereby making the Estate a citizen’ of Florida under
Soon after it had objected to the magistrate judge‘s recommendation in the first supplementary proceeding, the Estate initiated a second supplementary proceeding in Florida‘s Tenth Judicial Circuit Court (the “second supplementary proceeding“). Again the Estate alleged a conspiracy to strip the Trans Health defendants of their
The second supplementary proceeding followed the same track as the first one. It was removed by eleven of the defendants from the Florida circuit court to the United States District Court for the Middle District of Florida. Thereafter the .Estate moved to remand the second supplementary proceeding to state court, again arguing that the supplementary proceedings were merely ancillary proceedings to the underlying tort action and therefore were not removable to federal district court. Unlike in the first supplementary proceeding, the motion to remand was granted in the second one by a different federal judge. See Estate of Jackson v. Ventas Realty, Ltd. P‘ship, 812 F.Supp.2d 1306 (M.D.Fla.2011).
Not surprisingly, after the second supplementary proceeding was remanded, the Estate moved the district court in the first supplementary proceeding for reconsideration. Relying on the order remanding the second supplementary proceeding, the Estate argued that the district court should remand the first supplementary proceeding too. This time, the. district court granted the Estate‘s motion for reconsideration, and remanded the first supplementary proceeding to the state circuit court, but not for any of the reasons offered by the Estate. Rather, the district court sua sponte decided to abstain under the Colorado River abstention doctrine. Because the second supplementary proceeding had been remanded, the district court reasoned, there was now a parallel state court proceeding. .Moreover, in the district court‘s view, four of the six Colorado River factors tipped in favor of abstention. GE timely appealed the district court‘s remand order to this Court.
II.
[REDACTED] An abstention-based remand order is appealable as a final order. Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 713-15, 116 S.Ct. 1712, 135 L.Ed.2d 1 (1996). Because the district court relied on the Colorado River abstention doctrine to remand this case, we may review the district court‘s decision. See id. We review de novo issues of subject matter jurisdiction. Univ. of S.Ala. v. Am. Tobacco Co., 168 F.3d 405, 408 (11th Cir.1999). “We review for abuse of discretion a district court‘s dismissal on Colorado River abstention grounds.” TranSouth Fin. Corp. v. Bell, 149 F.3d 1292, 1294 (11th Cir.1998). A district court will abuse its discretion if it makes an error of law or makes a clearly erroneous factual finding. See Doctors Health, Inc. v. Aetna (In re Managed Care Litig.), 605 F.3d 1146, 1150 (11th Cir.2010) (per curiam).
According to the Estate, the district court properly remanded the first supplementary proceeding for two independent reasons: both because supplementary proceedings under Florida Statutes section 56.29(6) are ancillary and therefore may not be removed to federal district court; and because even if section 56.29(6) supplementary proceedings are removable,
[REDACTED] Federal courts are courts of limited jurisdiction, and therefore “we are obliged to ‘scrupulously confíne [our] own jurisdiction to the precise limits which the statute has defined.‘” Underwriters at Lloyd‘s, London v. Osting-Schwinn, 613F.3d 1079, 1086 (11th Cir.2010) (alteration in original) (quoting Healy v. Ratta, 292 U.S. 263, 270, 54 S.Ct. 700, 78 L.Ed. 1248 (1934)). “Because matters of jurisdiction affect our authority to reach the merits of the appeal, we discuss first the subject-matter jurisdiction of the district court.” Romero v. Drummond Co., 552 F.3d 1303, 1314 (11th Cir.2008). Consequently, we begin with whether this section 56.29(6) proceeding is removable.
A.
[REDACTED] Under
[REDACTED] Whether litigation is properly characterized as an independent civil action “under
Undeniably, the Estate has sued new parties (GE and Schron) in the first supplementary proceeding. The Estate never sued, served, or summoned GE in the un
The structure of section 56.29(6) of Florida‘s Civil Practice and Procedure statutes and the Florida state courts’ interpretation of this statute further support our determination. Far from simply being a means to execute a judgment, section 56.29(6) supplementary proceedings afford judgment creditors independent substantive claims. The statute also affords parties stout procedural guarantees not generally found in ancillary proceedings. Section 56.29 provides a robust, diverse tool to a party, like the Estate, with an unsatisfied judgment. There may be many reasons why a judgment goes unsatisfied: the losing defendant might refuse to pay out of spite; the party may stash his wealth in a bank to avoid payment; or the party may transfer his money to a family member. Section 56.29 allows a judgment creditor—that is, a plaintiff with an unsatisfied judgment, like the Estate—to collect on a judgment in these situations. Under section 56.29, a judgment creditor may initiate a supplementary proceeding in the very court in which the judgment creditor obtained the unsatisfied judgment. The judgment creditor is required to file an affidavit stating that he has an unsatisfied judgment, identifying the court that issued the judgment and the unsatisfied amount of the judgment, and indicating that execution on the judgment is valid and outstanding.
Once the supplementary proceeding is underway, a judgment creditor has several options. If he believes the defendant who has not satisfied the judgment (ie., the judgment debtor) has enough assets to pay, the judgment creditor may request that the trial court require the judgment debtor to appear in court for an examination.
Lastly, section 56.29(6) gives judgment creditors detailed means by which to void fraudulent transfers from a judgment debtor to another party.6 Under 56.29(6), when a judgment debtor gifts, transfers, assigns, or somehow conveys personal property to another person in order to delay, hinder, or defraud the judgment creditor, a court shall void the transfer in a supplementary proceeding.
In the first supplementary proceeding the Estate traveled under section 56.29(6): the Estate alleged that the Trans Health defendants gifted, transferred, assigned, or otherwise conveyed their assets to GE and Schron precisely in order to delay, hinder, or defraud the Estate as judgment creditor. The Estate‘s cause of action added new parties to the lawsuit, squarely raised new questions of intent to defraud creditors, and introduced new issues about bona fide purchases. These additional issues are wholly unrelated to the underlying tort action and make section 56.29(6) sharply different from an ancillary action to enforce an existing judgment.
Since section 56.29(6) requires an intent to delay, hinder, or defraud creditors, a proceeding under that section involves an issue of substantive law that is independent of the underlying action. In fact, Florida‘s courts have acknowledged this, using their interpretation of Florida‘s Uniform Fraudulent Transfer Act,
Thus, the substance of the Estate‘s legal claims is governed by Florida‘s Uniform Fraudulent Transfer Act, which is undoubtedly a substantive statute that imposes liability. See
Indeed, had the Estate sued GE and Schron in state court under the Uniform Fraudulent Transfer Act, the lawsuit plainly would have been a “civil action” under
[REDACTED] What‘s more, Florida‘s courts have provided substantial procedural safeguards in section 56.29(6) supplementary proceedings that also suggest the proceedings are not merely, ancillary.. When a third party, like GE, is brought into a section 56.29(6) supplementary proceeding, the third party has an opportunity to raise defenses and protect its interests in a manner wholly consonant with genuine due process. See Mejia, 985 So.2d at 1112. And while a court may enter a new, final
Nevertheless, the Estate disputes GE‘s and Schron‘s right to a jury trial in a supplementary proceeding. It argues that the parties “are meant to have a swift summary proceeding without a right to a jury trial.” The Estate relies on the fact that, while the third party has the right to defend itself, a court may conclude that a transfer was fraudulent in an expedited proceeding, which does not require a jury trial. See Ferguson v. State Exch. Bank, 264 So.2d 867, 867-68 (Fla. 1st Dist.Ct.App.1972) (per curiam). But the supplementary proceeding does not end there. After the expedited proceeding, the court may order the sheriff to seize the third party‘s property,
Quite simply, Florida‘s courts have treated a section 56.29(6) supplementary proceeding as a substantive, independent action.7 They‘ve done so by incorporating
Although the answer here is clear, we find further support in our precedent. Thus, for example, we have concluded that “garnishment actions against third-parties are generally construed as independent suits, at least in relation to the primary action.” Butler, 592 F.2d at 1295. As a result, we have twice allowed removal of such garnishment actions. See Webb v. Zurich Ins. Co., 200 F.3d 759, 760 (11th Cir.2000); Butler, 592 F.2d at 1296. We have done so because these garnishment actions were “in effect suits involving a new party litigating the existence of new liability.” Butler, 592 F.2d at 1296 (emphases added). We are not alone in this determination. See, e.g., Swanson v. Liberty Nat‘l Ins. Co., 353 F.2d 12, 13 (9th Cir.1965) (holding that garnishment is independent civil action for purposes of
In a number of ways, garnishment actions and supplementary proceedings under section 56.29(6) are similar. Both supplementary proceedings and garnishment actions seek to collect on unsatisfied judgments. Compare
We are, therefore, fully satisfied that the first supplementary proceeding was a “civil action” under
B.
[REDACTED] The district court sua sponte remanded the case to Florida‘s circuit court
[REDACTED] In Colorado River Water Conservation District v. United States, the Supreme Court held that a federal court could abstain from a case if (1) a parallel lawsuit was proceeding in state court, and (2) judicial-administration reasons so demanded abstention. 424 U.S. 800, 818-20, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976). Since the general rule is that “the pendency of an action in the state court is no - bar to proceedings concerning the same matter” in federal court, and since the federal courts have a virtually unflagging obligation to exercise their jurisdiction, Colorado River abstention applies in exceptional circumstances. Id. at 817-18, 96 S.Ct. 1236 (internal quotation marks omitted). “Only the clearest of justifications” merits abstention. Id. at 819, 96 S.Ct. 1236. As the Supreme Court explained, and as this Court has repeatedly cautioned, abstention “is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it.” Id. at 813, 96 S.Ct. 1236 (quoting Cnty. of Allegheny v. Frank Mashuda Co., 360 U.S. 185, 188-89, 79 S.Ct. 1060, 3 L.Ed.2d 1163 (1959)); Ambrosia Coal & Constr. Co. v. Pages Morales, 368 F.3d 1320, 1331 (11th Cir.2004); see also Met. Life v. Lockette, 155 F.3d 1339, 1341 (11th Cir.1998) (“Abstention from thé exercise of federal jurisdiction is the exception, not the rule.“). And while abstention as a general matter is rare, Colorado <River abstention is particularly rare, “permissible in fewer circumstances than are the other abstention doctrines.” Ambrosia Coal, 368 F.3d at 1331. Thus, we have cautioned that “dismissal of an action in deference to parallel state proceedings is an extraordinary step that should not be undertaken absent a danger of a serious waste of judicial resources.” Noonan S., Inc. v. Cnty. of Volusia, 841 F.2d 380, 383 (11th Cir.1988); see also First Franklin Fin. Corp. v. McCollum, 144 F.3d 1362, 1364 (11th Cir.1998) (per curiam) (“[D]ismissal is warranted in light of a concurrent state court action only when a balancing of relevant factors, heavily weighted in favor of the exercise of jurisdiction, shows the case to be-exceptional.” (internal quotation marks omitted)).
[REDACTED] “[A]s a threshold matter,” a federal court may abstain under the Colorado River doctrine only if there is a parallel state action, which is one involving “substantially the same parties and substantially the same issues.” Ambrosia Coal, 368 F.3d at 1330. GE contends this prerequisite for the application of Colorado River abstention has not been met, because the first and second supplementary proceedings were brought against wholly different sets of defendants and involve issues unique to each defendant and each allegedly fraudulent transfer. The Estate counters that an exact identity of parties is not required, see id. at 1329-30, and that the allegations in both proceedings relate to one massive conspiracy to strip the assets of the Trans Health defendants in an effort to delay, hinder, or defraud the Estate in collecting the $110 million judgment in the underlying tort suit. While GE has presented a substantial claim that the first and second supplementary proceedings are not sufficiently parallel because the parties are different and the claims raise distinct
[REDACTED] Where there are parallel federal and state proceedings, abstention under the Colorado River doctrine is still only warranted in exceptional circumstances. Federal courts must consider six factors in determining whether Colorado River abstention is appropriate:
(1) the order in which the courts assumed jurisdiction over property; (2) the relative inconvenience of the fora; (3) the order in which jurisdiction was obtained and the relative progress of the two actions; (4) the desire to avoid piecemeal litigation; (5) whether federal law provides the rule of decision; and (6) whether the state court will adequately protect the rights of all parties.
TranSouth Fin., 149 F.3d at 1294-95. No single factor is dispositive, and we are required to weigh the factors with a heavy bias favoring the federal courts’ obligation to exercise the jurisdiction that Congress has given them. See Loekette, 155F.3d at 1341; Am. Bankers Ins. Co. of Fla. v. First State Ins. Co., 891 F.2d 882, 884-85 (11th Cir.1990). Finally, we apply these factors flexibly and pragmatically, not mechanically. Ambrosia Coal, 368 F.3d at 1332.
[REDACTED] The first Colorado River factor asks if one court assumed jurisdiction over property before the other court. See Am. Bankers Ins., 891 F.2d at 884. In its order, the district court rightly concluded that neither the district court nor the state circuit court had assumed jurisdiction over any property. (Doc. 114 at 18). On appeal, the Estate maintains that the judgment in the underlying tort action constitutes “property” and that the state court had jurisdiction over this “property.” The Estate‘s argument is unpersuasive because this factor applies only where there is a proceeding in rem. See Ambrosia Coal, 368 F.3d at 1332. Put differently, where “there is no real property at issue,” this factor does not favor abstention. See Maharaj v. Sec‘y Dep‘t of Corr., 432 F.3d 1292, 1306 (11th Cir.2005) (emphasis added). It is undeniable that this is not an in rem proceeding, and a “judgment,” which is a “court‘s final determination of the rights and obligations of the parties in a case,” is not real property. Black‘s Law Dictionary 918 (9th ed.2009). Thus, this factor cannot favor abstention.
[REDACTED] The second factor concerns the inconvenience of the federal forum and focuses “primarily on the physical proximity of the federal forum to the evidence and witnesses.” Ambrosia Coal, 368 F.3d at 1332. The district court concluded that the federal forum was just as convenient as the state forum, both the Estate and GE agree, and so do we. The federal forum neighbors Polk County, Florida, where the state forum is located. Hence, the federal forum and the state forum are equally convenient; this factor thus cuts against abstention. See Niagara Mohawk Power Corp. v. Hudson River-Black River Regulating Dist., 673 F.3d 84, 101 (2d Cir.2012);.Stewart v. W. Heritage Ins. Co., 438 F.3d 488, 492 (5th Cir.2006); PaineWebber, Inc. v. Cohen, 276 F.3d 197, 207 (6th Cir.2001).
The district court concluded that this factor favored abstention, because both supplementary proceedings were at equal stages of litigation. Even if this were so, however, that would not favor abstention. See Noonan S., 841 F.2d at 382 (holding that “this factor does not counsel in favor of dismissal” where the “state court action is no further along than” the federal case). But in fact, at the time the district court entered its order, the first supplementary proceeding was further along than the second supplementary proceeding. Discovery had progressed in the first supplementary proceeding: five witnesses had been deposed, an expert report exchanged, and a request for production served. In contrast, the second supplementary proceeding had barely progressed. The parties to the second supplementary proceeding filed a case-management report forty-six days before the second supplementary proceeding was remanded. According to the case-management report, the parties had not, at the time, even made their initial discovery disclosures under
[REDACTED] The fourth Colorado River factor monitors the potential for piecemeal litigation. Run of the mill piecemeal litigation will not do: this factor “does not favor abstention unless the circumstances enveloping those cases will likely lead to piecemeal litigation that is abnormally excessive or deleterious.” Ambrosia Coal, 368 F.3d at 1333. And this factor does not favor abstention when litigation is “inevitably piecemeal.” Am. Mfrs. Mut. Ins. Co. v. Edward D. Stone, Jr. & Assoc., 743 F.2d 1519, 1525 (11th Cir.1984). Although the district court concluded that this factor heavily favored abstention, the litigation here will be inevitably piecemeal. According to the district court, the first supplementary proceeding was continuing in federal court while the second supplementary proceeding pushed forward in the Tenth Judicial Circuit, creating piecemeal litigation. The district court determined that it could resolve the piecemeal litigation through a remand. But this is not so. As the Estate explicitly concedes on appeal, it has chosen to litigate the supplementary proceedings separately anyway: “the Estate has chosen to separate out the evidentiary hearings against the sixteen impled parties” —the two in this action and the fourteen in the second supplementary proceeding—and to offer separate “law, evidence, and testimony” at each hearing. This is unsurprising, because the separate hearings will involve distinct issues of law and fact specific to the alleged fraudulent conduct of each party. Thus, among other things, the proofs will differ concerning the nature and circumstances surrounding the transfer of distinct assets at distinct times; and the method of proof surrounding the mens rea of the sixteen named
[REDACTED] The fifth factor requires us to determine whether federal law or state law provides the rule of decision. TranSouth Fin., 149 F.3d at 1295. The district court concluded that state law applied and that the fifth factor therefore favored abstention. But this factor favors abstention only where the applicable state law is particularly complex or best left for state courts to resolve. See, e.g., Am. Bankers, 891 F.2d at 886 (“There is no federal issue in this case, but this does not counsel in favor of dismissal.... This action does not ... involve complex questions of state law that would best be resolved by a state court.“); Noonan S., 841 F.2d at 382 (giving little weight to this factor where state law was not complex). Nothing suggests that Florida‘s UFTA is the kind of complex law that raises thorny and difficult state law questions; federal courts are regularly called upon to resolve state law claims of fraud, including claims arising under Florida‘s UFTA. See, e.g., Gen. Trading Inc. v. Yale Materials Handling Corp., 119 F.3d 1485, 1497-1501 (11th Cir.1997); In re Ormond Beach Assocs., 184 F.3d 143, 156 (2d Cir.1999).8
[REDACTED] The sixth and final factor concerns whether the state court can adequately protect the parties’ rights. The district court found that the state court could protect GE‘s, Schron‘s, and the Estate‘s rights and determined that this factor favored abstention. We agree with the general observation about the adequacy of the state forum, but “[t]he fact that both forums are adequate to protect the parties’ rights merely renders this factor neutral.” Noonan S., 841 F.2d at 383 (emphasis added); accord Ambrosia Coal, 368 F.3d at 1334 (“This factor will only weigh in favor or against abstention when one of the fora is inadequate to protect a party‘s rights.“). Indeed, the Estate itself concedes that “the final factor is neutral.” In short, none of the six Colorado River factors compel abstention. If anything, most tip in the opposite direction. In the face of the district court‘s duty to exercise the jurisdiction Congress has given, under the circumstances of this case we conclude that the district court abused its discretion in abstaining under Colorado River.
III.
In sum, this is a “civil action” under
REVERSED AND REMANDED.
[REDACTED]Notes
(a) When, within 1 year before the service of process on him or her, defendant has had title to, or paid the purchase price of, any personal property to which the defendant‘s spouse, any relative, or any person on confidential terms with defendant claims title and right of possession at the time of examination, the defendant has the burden of proof to establish that such transfer or gift from him or her was not made to delay, hinder, or defraud creditors.
(b) When any gift, transfer, assignment or other conveyance of personal property has been made or contrived by defendant to delay, hinder or defraud creditors, the court shall order the gift, transfer, assignment or other conveyance to be void and direct the sheriff to take the property to satisfy the execution. This does not authorize seizure of property exempted from levy and sale under execution or property which has passed to a bona fide purchaser for value and without notice. Any person aggrieved by the levy may proceed under §§ 56.16-56.20.