JOSH NORRIS; JILL NORRIS, Plaintiffs - Appellees Cross-Appellants v. KARRY CAUSEY, Defendant - Appellant Cross-Appellee GARRY CAUSEY, Defendant - Cross-Appellee consolidated with JOSH NORRIS; JILL NORRIS, Plaintiffs - Appellants v. GARRY CAUSEY; KARRY CAUSEY, Defendants - Appellees consolidated with JOSH NORRIS; JILL NORRIS, Plaintiffs - Appellees v. GARRY CAUSEY, Defendant - Appellant consolidated with JOSH NORRIS; JILL NORRIS, Plaintiffs - Appellants v. GARRY CAUSEY; KARRY CAUSEY, Defendants - Appellees
No. 16-30339 (Cons w/ Nos. 16-30942, 16-31068, 16-31069)
IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT
August 22, 2017
Appeals from the United States District Court for the Eastern District of Louisiana
United States Court of Appeals Fifth Circuit FILED August 22, 2017 Lyle W. Cayce Clerk
Appeals from the United States District Court for the Eastern District of Louisiana
Before REAVLEY, HAYNES, and COSTA, Circuit Judges.
This is yet another case that has its roots in the devastation Hurricane Katrina wreaked on New Orleans. Resilient as the city is, it swiftly began to rebuild. That effort presented attractive opportunities for investors and developers looking to turn a profit. This case involves one such opportunity that went sour.
This lawsuit that followed resulted in a bench trial. One of the defendants appeared at trial to fight the allegations; the other did not and whether he was properly served is an issue on appeal. The district court found that both defendants breached their agreement with plaintiffs to purchase, renovate, and sell Katrina-damaged properties. It held Karry Causey, the defendant who put up a defense, liable for $16,780. It found the defaulting defendant, Garry Causey, further liable for breach of fiduciary duty and responsible for $94,000. After that judgment issued, Garry finally appeared and sought to vacate the award alleging improper service. Both defendants sought to vacate the judgment on the additional ground that they believe the plaintiffs failed to adequately disclose the claim during their bankruptcy. The district court denied those postjudgment motions and also awarded attorneys’ fees and costs against the Causeys.
All these rulings are challenged as both sides appeal. Plaintiffs contend the district court should have required both defendants to pay the full $94,000 in damages. Defendants argue that the jurisdictional defects warrant vacating the judgment, that in any event Karry did not breach the contract, and that the fee award is excessive. We affirm the judgment in all respects as to Karry, but remand for additional factfinding about the attempts to serve Garry.
I.
Joshua Norris, a plumber from Michigan, traveled to New Orleans in early 2007 in search of work. There he met twin brothers Karry and Garry Causey. The Causeys proposed to Joshua and his wife, Jill, the following investment opportunity: the Norrises would supply funds to purchase
Garry reduced this plan to writing. He and the Norrises signed the joint venture agreement. Karry did not. The agreement divides responsibilities among the parties along the lines of the original understanding. The Norrises are to finance the project. Garry is responsible for, among other things, maintaining accounting records, identifying and facilitating the purchase of properties, and negotiating with contractors to obtain the best possible prices. Karry is the project manager.
To fulfill their end of the bargain, the Norrises obtained a home equity loan. From those funds, they wrote Garry one check for $48,000 and another for $45,000. This money was supposed to be used for construction on two separate properties. Garry wired Karry $15,780 of those funds. The Norrises gave Karry an additional $1,000 for architectural plans he said were needed.
Despite receiving these funds, the Causeys failed to move forward with the renovations. They instead spent the money on personal items. After a few months, they also stopped paying the Norrises the interest accumulating on their home equity loan.
Inability to repay that loan led the Norrises to file for Chapter 7 bankruptcy in 2009. The Norrises did not list their potential claim against the Causeys in their bankruptcy schedules. Before the issuance of the trustee‘s final report, however, the claim began to appear in interim reports by the trustee as “a potential lawsuit regarding LA property” with an estimated value of $1,000. The bankruptcy trustee‘s final report expressly abandons this claim to the Norrises. See
The Norrises subsequently filed this lawsuit against the Causeys. Garry failed to appear despite various efforts, described in more detail below, to serve him. The district court thus found Garry in default. Karry, on the other hand, appeared and actively defended against the Norrises allegations in a one-day bench trial. That trial resulted in the district court‘s entering default judgment against Garry on breach of contract and fiduciary duty claims and ordering him to pay $94,000 in damages. The district court also found Karry tacitly accepted the contract and likewise breached. But it held him liable for only $15,780—the amount Garry wired him that Karry used for his own benefit.
The Norrises subsequently filed a motion for attorneys’ fees and a motion to amend the final judgment. The district court awarded $58,736 in attorneys’ fees and costs, holding Garry and Karry solidarily liable for the full amount. And despite disagreeing with the Norrises’ arguments for holding Karry solidarily liable for the full damages award, it added $1,000 in damages to account for the check Karry received for architectural plans. Karry filed a notice of appeal. The Norrises filed a cross appeal.
Following the commencement of these appeals, the bankruptcy court in the Eastern District of Michigan reopened the Norrises’ case, stating “it appear[s] that Debtors may have intentionally [misled] the Court as to their assets and said asset appears to be an asset of the Debtor‘s Estate.”1
Both Causeys argued that the Norrises did not have standing as failure to disclose the claim in bankruptcy meant abandonment of the claim was improper and the trustee should be considered the real party in interest. Garry separately argued that he was not properly served.
The district court agreed with the Causeys that the Norrises were not the proper plaintiffs. But because real-party-in-interest is not a jurisdictional requirement, it denied relief, ordering instead that the trustee could substitute as the plaintiff. The district court further found that Garry was properly served.
II.
We start our review at the end of the district court litigation, with the denial of the Rule 60(b)(4) motions. We do so because if those motions should have been granted, then the judgment would be void and there would be no need to review the merits.
We first consider the Rule 60(b) ground that would vacate the judgment as to both defendants: the argument that the Norrises lack standing because they did not disclose this claim during their bankruptcy. The district court‘s ruling on this issue is subject to cross appeals. This is because, although the district court did not void the judgment, it held that the Norrises are not the real parties in interest and the bankruptcy trustee could substitute in. The Causeys argue that the district court did not go far enough; it recognized the real-party-in-interest problem but did not see that through to voiding the judgment. The Norrises contend the district court went too far; whether they or the trustee was the proper party is not a question the court should consider at all in a motion for postjudgment relief. They also argue that the Rule 60 motions were untimely.2
A.
For starters, there is no timeliness problem with the motions seeking relief from the judgment. Because a “void judgment cannot acquire validity” through the passage of time, Rule 60(b)(4) motions have no time limit.
Nor is it a problem that Karry‘s motion was brought after his having appealed the final judgment. A party may
B.
As the Rule 60(b)(4) motions were timely, we consider whether they established one of the rare defects that renders a judgment void. United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260, 270 (2010). The “exceedingly short” list of such “infirmities” includes only subject matter2 (cont) jurisdiction, personal jurisdiction, “or [ ] a violation of due process that deprives a party of notice or the opportunity to be heard.” Id. The Causeys try to fit their alleged error into the jurisdictional bucket, characterizing the question whether the Norrises or bankruptcy estate possess the claims against them as one of “standing.”
Standing of the constitutional variety—the well-known injury, causation, and redressability trifecta—is a question of subject matter jurisdiction. Sprint Commc‘ns. Co. v. APCC Servs. Inc., 554 U.S. 269, 273 (2008) (“Th[e] case-or-controversy requirement is satisfied only where a plaintiff has standing.“). But a lack of Article III standing is neither the challenge the Causeys bring nor one they would prevail on. The Norrises’ injury is clear: they lost thousands of dollars. They argue that Causeys’ diversion of funds caused that injury. And this litigation can redress the loss through damages, as the judgment demonstrates.
The “standing” label is also sometimes placed on the real-party-in-interest challenge the Causeys do assert. See Wieburg v. GTE Southwest Inc., 272 F.3d 302, 306 (5th Cir. 2001) (“Because the claims are property of the bankruptcy estate, the Trustee is the real party in interest with exclusive standing to assert them.“); Rideau v. Keller Indep. Sch. Dist., 819 F.3d 155, 163 n.7 (5th Cir. 2016) (noting that “the intermingling of standing and capacity issues is not uncommon“) (citing William V. Dorsaneo III, The Enigma of Standing Doctrine in Texas Courts, 28 REV. LITIG. 35, 65 (2008)); In re Unger & Assocs. Inc., 292 B.R. 545, 550 (Bankr. E.D. Tex. 2003) (“Frequently, attorneys and courts confuse the concepts of standing with that of capacity to sue and with the real party in interest principle.“). Despite this cross labeling, there is a key jurisdictional distinction between a challenge that a plaintiff lacks Article III standing and one that she is not the real party in interest. The2 (cont) latter presents a merits question: “who, according to the governing substantive law, is entitled to enforce the right?”
Courts have recognized this distinction between Article III standing and real-party-in-interest/capacity issues in holding that an assignment does not erase constitutional injury, see Cranpark Inc. v. Rogers Group Inc., 821 F.3d 723, 730 (6th Cir. 2016) (concluding that “one who sells his interest in a cause of action is not deprived of Article III standing” but “is susceptible to a real-party-in-interest challenge“), and that parents can suffer a financial injury from their child‘s hardship even when they are not the proper party to sue in his name, see Rideau, 819 F.3d at 163 (recognizing that parents who had Article III standing to sue nonetheless lacked capacity to sue on their child‘s behalf because a different guardian had been appointed). More generally, that the Norrises may not ultimately be entitled to the damages awarded does not change that the relief sought redresses an injury they suffered. See Sprint, 554 U.S. at 287 (holding that it is irrelevant that the plaintiff would give all winnings to another party because the sole question is “whether the injury that a plaintiff alleges is likely to be redressed through the litigation“). This means that even if the Causeys are correct that the trustee should have brought this suit,3 that would not entitle them relief under Rule 60(b)(4). See Dunn, 556 F. App‘x at 789–90 (rejecting a Rule 60(b)(4) motion challenging real-party-in-interest status for the same reason).
The district court recognized as much in holding that this argument did not raise the jurisdictional defects that support vacating a judgment. Yet it also ruled that the trustee could replace the Norrises as plaintiffs at this late juncture. But the inapplicability of Rule 60(b)(4) means the Causeys have invoked no postjudgment vehicle that allows replacing the Norrises with the trustee. And as we have already explained, challenges to real-party-in-interest status can be forfeited even when raised prior to entry of judgment, such as when a defendant waits to raise the issue until the eve of trial. See In re Signal, 579 F.3d at 487–88; see also
the Causeys’ raising this challenge only after the court
C.
In contrast, Garry does raise an issue that goes to the power of the district court to enter a judgment against him: whether he was properly served. Thompson v. Deutsche Bank Nat‘l Trust Co., 775 F.3d 298, 306 (5th Cir. 2014). The Norrises contend this argument also falls outside Rule 60(b)(4) because technically deficient service may not rise to the level of a due process violation. But this argument need not fit in Rule 60(b)(4)‘s “due process” category. Deficient service means a court lacked personal jurisdiction over a defendant, and lack of personal jurisdiction is an independent basis for voiding a judgment. Harper Macleod Solicitors v. Keaty & Keaty, 260 F.3d 389, 393 (5th Cir. 2001) (“[A] district court must set aside a default judgment as void if it determines that it lacked personal jurisdiction over the defendant because of defective service of process.“).
We thus must decide whether Garry was served in accordance with
service. Such service entails leaving a copy of the summons and complaint at the individual‘s usual place of abode with someone of suitable age and discretion.
1.
Garry first contends that service was improper because the address in New Mexico where the Norrises tried to serve him was not his place of abode at the time. The district court‘s factual finding to the contrary is reviewed for clear error. Goetz v. Synthesys Tech., Inc., 415 F.3d 481, 483 n.3 (5th Cir. 2005).
There is ample support for the district court‘s determination. The New Mexico address appears as Garry‘s residence in litigation documents, pay stubs, property tax forms, and affidavits. On top of all this, Karry testified that the New Mexico home is where Garry‘s wife lives, where Garry raised his kids, and Garry‘s address as far as he knows.
Garry responds by pointing to his and his wife‘s affidavits saying he has been living in Denver since 2010—five years prior to service being first attempted in New Mexico. He notes that a sign outside the home said Garry‘s mail should be forwarded. And he offers three bills from 2016 listing a Denver address.
But this effort fails for two reasons. First, the standard of review means that even if Garry has shown that the location of his place of abode was debatable, we defer to the district court‘s conclusion. Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 573 (1985). Garry‘s argument
2.
Even if the New Mexico residence is Garry‘s usual place of abode, another question remains: Was posting the complaint and summons on the door of that residence proper service under Rule 4? The district court held that it was. As support, it cited Vann Tool Co. v. Grace, 566 P.2d 93 (N.M. 1977). Van Tool says that posting a summons and complaint on a defendant‘s door is proper if no person is found willing to accept service. Id. at 94. That observation, however, relies on an outdated version of the New Mexico rules that allowed service in that manner. Id. That rule was revised in 2004 to eliminate “post and mail” service in favor of service at the place of employment.6 See UMG Recordings, Inc. v. Montoya, 2009 WL 1300361, at *2 n.1 (D.N.M. Jan. 30, 2009) (noting the change to
The Norrises’ failure to comply with New Mexico‘s requirements for service does not end our inquiry. Given the multiples sources that Rule 4 considers in determining if service is proper, we look to whether federal or Louisiana law allows service by posting on the door. The answer turns on what happened the day the complaint was posted on the New Mexico house.
The process server‘s affidavit says she attempted to serve Garry at his New Mexico residence numerous times. But, she
The district court‘s reliance on New Mexico‘s since-repealed service rule—the one allowing posting and mailing even without anyone being present or avoiding service—meant it did not believe it mattered whether Garry‘s wife yelling through the door and the posting of the documents happened on the same day. So the district court did not make a clear finding as to this timing question. The district court says, for example, that the “process server left a copy of the summons and complaint outside the Albuquerque residence after Garry Causey‘s wife refused to accept service” without detailing how soon after. It likewise later says that “Garry Causey‘s wife refused service, so the process server posted the summons and complaint on the front door“—again without clearly stating whether both events took place the same day.6 (cont)
It turns out that whether the yelling and posting happened the same day matters a great deal. Leaving a summons and complaint at a residence door, unaccompanied by a refusal to accept service, is not effective service under Rule 4. See German Am. Fin. Advisors & Trust Co. v. Rigsby, 623 F. App‘x 806, 808 (7th Cir. 2015) (“[L]eaving the papers on the defendant‘s door is not enough to constitute valid service . . . .“); Coffin v. Ingersoll, 1993 WL 208806, at *2 (E.D. Pa. June 11, 1993) (same). Louisiana law likewise does not allow service in that manner.
On the other hand, a defendant‘s refusal to accept service is not rewarded when the process server announces the nature of the documents and leaves them in close proximity to the defiant defendant.
Garry urges us to find that his wife‘s avoidance of service and the posting of the documents on the door were two separate incidents, rule service was improper, and void the judgment. His view of the timing may be the most natural reading of the process server‘s affidavit. But because both the affidavit and the district court‘s findings are susceptible to different interpretations and more evidence may be warranted on this question, the wiser route is to remand to allow the district court to make this finding in the first instance.
If the district court concludes the documents were not posted on the door the same day Garry‘s wife was home and refused service, it may also engage in additional factfinding about its alternative ruling
We therefore remand the service issue for additional factfinding.
III.
Because we do not find any Rule 60(b) basis to void the judgment entered against Karry, we consider the merits of the district court‘s rulings as to him. Karry asserts he could not have breached the joint venture agreement because he never accepted it.8 The Norrises contend they should have received more damages: lost profits as well as Karry being held liable for the full amount of their funds that were not invested or returned.
A.
The district court found that Karry tacitly accepted the joint venture agreement. Karry fails to show this finding is clearly erroneous. The trial testimony reveals Karry approached the Norrises about a possible joint venture; had discussions with them about the venture before the agreement was written; agreed to act as the project manager and share in any profits; knew Garry sent the written agreement to the Norrises to sign; and accepted and spent money given to him by Garry that he knew came from the Norrises. This is more than enough to support a conclusion that Karry tacitly consented.
B.
Although it held that Karry was liable for breaching the joint venture agreement, the district court declined to award lost profits as damages for that breach. Lost profits must be proved with reasonable certainty, meaning they8
may not rest on speculation. Al Smith‘s Plumbing & Heating Serv., Inc. v. River Crest, Inc., 365 So. 2d 1122, 1126 (La. App. 4 Cir. 1978). The district court is given considerable discretion in assessing the amount, if
Although the Norrises hoped the joint venture would result in profits, they did not adequately quantify those losses at trial. White Haute, LLC v. Mayo, 38 So. 3d 944, 953 (La. App. 5 Cir. 2010) (noting that an expectation that a venture would be profitable alone does not suffice to warrant a lost profits award). As the joint venture was a new enterprise, the Norrises point to Karry‘s testimony showing he earned profits from redeveloping other properties, and the later redevelopment of one of the properties that is the subject of this litigation. But that evidence, without more, fails to bridge the gap. That is because profiting from a redevelopment depends on many contingencies such as costs, timely construction, and market conditions. See Al Smith‘s, 365 So. 2d at 1125–26 (vacating an award of lost profits because the amount of losses attributable to a plumbing company that delayed a project were indeterminable given that other contingencies may have added to the delay). And the Norrises did not detail the similarity of those undertakings to the one envisaged by the joint venture agreement, let alone the finances of these purportedly comparable projects. As such, the district court did not abuse its discretion in refusing to award lost profits.
C.
The last of the contested breach of contract rulings is the district court‘s determination that Karry is liable for only $16,780 of the $94,000 it awarded in damages to the Norrises.
The Norrises cite two reasons Karry should be liable for the full damages award: (1) although Karry‘s and Garry‘s obligations under the agreement are separate, their respective breaches combined to cause the same loss: the failure of the joint venture; and (2) Karry conspired with Garry to breach the contract and conspirators are liable for all injuries resulting from the conspiracy. Neither argument supports reversal.
The Norrises correctly recite the Louisiana rule holding several obligors solidarily liable—meaning each is responsible for the entire loss—when their breaches combine to cause an item of damages for which each obligor would be entirely liable if she had acted alone. Stonecipher v. Mitchell, 655 So. 2d 1381, 1386 (La. App. 2 Cir. 1995). This rule is driven not by the source of the obligations or the nature of the ensuing harm but by the coextensiveness of liability—that is, it applies when each obligor would be independently liable for the entirety of the damages. See id. at 1386 (“It is the coextensiveness of the obligations for the same debt, and not the source of liability, which determines the solidarity of the obligation.“) (internal citations omitted); Rivnor Properties v. Herbert O‘Donnell, Inc., 633 So. 2d 735, 748 (La. App. 5 Cir. 1994) (same). The quintessential case involves subcontractors whose individual shortcomings lead to an entire project being scrapped. An example is two roofers who caused separate defects—one a leaky roof; the other a wrinkly roof—each of which on its own would have required a new roof. Standard Roofing Co. of New Orleans v. Elliot Constr. Co., 535 So. 2d 870, 882 (La. App. 1 Cir. 1988).
This is not true of the liability here. Karry‘s misconduct—using the $15,780 and $1,000 checks for his own benefit—did not cause all the funds to be misappropriated. Stonecipher, 655 So. 2d at 1386 (explaining that the focal point of the solidary liability inquiry is whether the parties’ conduct “combined and contributed to cause the same item of damages“); see also Rivnor, 633 So. 2d at 748 (same);
The Norrises are also right that Louisiana makes one “who conspires with another to commit an intentional or willful act [] answerable, in solido, with that person, for the damages caused by such act.”
IV.
We lastly address the challenge to the award of attorneys’ fees and costs. We review such an award for abuse of discretion, evaluating underlying legal determinations de novo and factual determinations for clear error. HDRE Bus. Partners Ltd. Grp. v. RARE Hosp. Int‘l, 834 F.3d 537, 539–40 (5th Cir. 2016). And this being a diversity case involving Louisiana law, we are governed by that state‘s law on attorneys’ fees. Id. at 539.
The joint venture agreement provides that “the prevailing party” in any action arising out of the agreement “shall be awarded . . . costs . . . [and] reasonable attorneys’ fees.” See Cajun Concrete Servs, Inc. v. J. Caldarera & Co., 759 So. 2d 237, 240 (La. App. 5 Cir. 2000) (allowing recovery of attorneys’ fees when they are authorized by contract). As the parties who obtained affirmative relief—at least as to Karry whose liability we have affirmed9—the Norrises are the prevailing party. Farrar v. Hobby, 506 U.S. 103, 111–12 (1992).
Karry argues that even if this is the case, the district court erred in making him liable for the full amount of fees and costs incurred. His arguments on this point are largely conclusory and difficult to decipher. He essentially contends the award is either excessive or unreasonable as to him.10
uphold awards exceeding the amount recovered. Garden Lakes Condo. Homeowners Ass‘n v. Perrier, 66 So. 3d 1147, 1148–49 (La. App. 5 Cir. 2011); South Texas Pioneer Millwork v. Favalora Constructors, Inc., 90 So. 3d 1092, 1097 (La. App. 5 Cir. 2012); Health Educ. & Welfare Fed. Credit Union v. Peoples State Bank, 83 So. 3d 1055, 1065 (La. App. 3 Cir. 2011). These awards are upheld when the “amount of time and effort to collect the amount due from defendant warranted the [awards].” Perrier, 66 So. 3d at 1149. That is also the case here. The overall amount, well below $100,000, is not on its face excessive for a federal lawsuit that results in a trial (albeit a brief bench trial) and involves some of the challenging legal questions with which this opinion grapples. And the result obtained is only one of ten factors Louisiana courts consider in assessing the reasonableness of a fee award. State, Dept. of Transp. and Dev. v. Williamson, 597 So. 2d 439, 442 (1992). Other factors include the amount of money at stake (much more than the amount Karry was ordered to pay given the colorable arguments for lost profits and holding Karry responsible for the full amount misappropriated), the extent and character of the work done, and the number of appearances. Id. Just about all of the work the Norrises’ attorneys undertook was devoted to the case against Karry as Garry did not appear to defend at trial.11 All things considered, the district court did not abuse its discretion in awarding the fees and costs.
*
As to Karry Causey, we AFFIRM the judgment and posttrial order awarding attorneys’ fees and costs. As to Garry Causey, we REMAND for the district court to engage in additional findings concerning the propriety of service. We leave it to the sound judgment of the district court to decide whether to allow additional evidence on that issue. Because this is a limited remand, we retain jurisdiction of this appeal and will conduct any additional appellate review that is needed. See United States v. Cessa, 861 F.3d 121, 143 (5th Cir. 2017).