Alliant Tax Credit 31, Inc. v. Murphy
| Decision Date | 15 May 2019 |
| Docket Number | No. 15-14634,15-14634 |
| Citation | 924 F.3d 1134 |
| Parties | ALLIANT TAX CREDIT 31, INC, a Florida corporation, Alliant Tax Credit Fund XXVII, Ltd., a Florida limited partnership, Alliant Tax Credit Tax Credit XXVII, Inc, a Florida corporation, Alliant Tax Credit XI, Inc., a Florida corporation, Alliant Tax Credit XI, Ltd., a Florida limited partnership, Plaintiffs - Counter Defendants – Appellees - Cross Appellants, v. M. Vincent MURPHY, III, Multifamily Housing Developers, L.L.C., a Georgia limited liability company, Community Management Services, Inc., a Georgia corporation, Gazebo Park Apartments of Acworth, LLC, a Georgia limited liability company, Defendants - Appellants - Cross Appellees, Marilyn Murphy, Defendant - Counter Claimant - Appellant - Cross Appellee. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Evan Mark Tager, Brian David Netter, Mayer Brown, LLP, WASHINGTON, DC, Keith Jerrod Barnett, Eversheds Sutherland (US) LLP, ATLANTA, GA, W. H. Bundy, Jr., Michael Brent McDonald, Smith Bundy Bybee & Barnett, PC, MOUNT PLEASANT, SC, Edward D. Johnson, Mayer Brown, LLP, PALO ALTO, CA, for Plaintiffs - Appellees-Cross Appellants.
Shawn Michael Winterich, The Winterich Law Firm, LLC, MARIETTA, GA, Richard K. Hines, Mark Robert Nash, Nelson Mullins Riley & Scarborough, LLP, ATLANTA, GA, Stan Kreimer, Jr., Johnson & Ward, ATLANTA, GA, for Defendants - Appellants-Cross Appellees.
Before TJOFLAT and WILLIAM PRYOR, Circuit Judges, and MURPHY,* District Judge.
This fraudulent-transfer case, like many such cases, is a suit about a suit. In the first suit, Plaintiffs obtained a judgment in federal district court in Kentucky for breach of a partnership contract. But when Plaintiffs tried to collect, they discovered that the once-wealthy Defendant was figuratively penniless. The surprised Plaintiffs surmised that Defendant had colluded with his former wife to fraudulently transfer his assets to her (or to entities under her control) as part of their divorce settlement. So Plaintiffs sued—again—this time in federal district court in Georgia—to recover their judgment under Georgia’s fraudulent-transfer statute. Agreeing with Plaintiffs that fraudulent transfers had occurred, a jury returned a verdict in their favor. The District Court entered judgment accordingly, and this appeal and cross-appeal followed.
The run-up to this suit began when Plaintiffs, five entities that we collectively refer to as "Alliant,"1 lent Defendant M. Vincent Murphy, III investment capital to build low-income housing units that were never completed. So Alliant sued him and other guarantors of the debt in federal court in the Eastern District of Kentucky for breach of their partnership contract. Alliant was joined in that suit by Alliant Tax Credit Fund 31-A, Ltd. ("Alliant 31-A"), which also lent investment capital to Vincent.2 Alliant and Alliant 31-A prevailed, and the District Court for the Eastern District of Kentucky entered a judgment (the "Kentucky judgment") in their favor for $ 8,946,643. Vincent appealed, and the Court of Appeals for the Sixth Circuit affirmed. Alliant Tax Credit Fund 31-A, Ltd. v. Murphy , 494 F. App'x 561, 563 (6th Cir. 2012).
But the fraudulent activity that gave rise to this suit began before the Kentucky judgment was entered.
Vincent and his wife, Marilyn Murphy, had earlier divorced in the Superior Court of Fulton County, Georgia. The divorce decree incorporated a settlement agreement between them. As part of the agreement, Marilyn received from Vincent several millions of dollars in cash and commercial paper, stock shares, a mountain cabin, household furnishings, and an apartment complex. These assets are the basis for the fraudulent-transfer action here. When Alliant sought to collect on the Kentucky judgment, it found that Vincent was judgment proof. So it sued Vincent for a second time.
Alliant (but not Alliant 31-A) brought this action against Vincent, Marilyn, Multifamily Housing Developers, L.L.C. ("Multifamily Housing"), and Community Management Services, Inc. ("CMS"),3 in the District Court for the Northern District of Georgia under the Uniform Fraudulent Transfers Act (the "UFTA"), O.C.G.A. §§ 18-2-70 to 80 (2010), amended by the Uniform Voidable Transactions Act (the "UVTA"), O.C.G.A. §§ 18-2-70 to 85 (2015).4 The UFTA, a quintessential fraudulent-transfer statute, allows creditors to void certain asset transfers made by a debtor with the purpose of immunizing itself from collection. See O.C.G.A. § 18-2-77 (2010). Alliant claimed that the Murphys’ divorce settlement and Vincent’s asset transfers to Defendants were ruses to evade Vincent’s creditors and thus sought to void those transfers. The case proceeded to trial, and a jury returned an itemized verdict for Alliant after having found that twenty-three transfers from Vincent to Defendants were fraudulent. The jury also found that the Murphys were subject to punitive damages but that only Vincent had acted with the "specific intent to cause harm." It awarded $ 1,000,000 in punitive damages against him and $ 100,000 in punitive damages against Marilyn.
After the jury returned its verdict, the District Court for the Northern District of Georgia entered a final judgment (the "Georgia judgment") for Alliant. Before describing what the judgment provided, we pause momentarily to note the remedies available under the UFTA.
The UFTA provides creditors with both equitable and legal remedies. The creditor may obtain, as an equitable remedy, "[a]voidance of the transfer ... to the extent necessary to satisfy the creditor’s claim." See id. § 18-2-77(a)(1). Or it may obtain, as a legal remedy, "judgment [against the transferee] for the value of the asset transferred ... or the amount necessary to satisfy the creditor’s claim, whichever is less." See id. § 18-2-78(b).
Alliant did not seek avoidance of any of the transfers made. Nor realistically could it: Most of Vincent’s transfers were in the form of cash that has since been turned into proceeds that are likely untraceable. Rather, it sought a money judgment for the value of the assets transferred. Said differently, it sought the legal remedy available under the UFTA.
The Georgia judgment, which purported to implement the jury’s verdict, provided that Alliant would receive the sum of $ 10,137,285.84, which consisted of the amount of the Kentucky judgment ($ 8,946,643), interest on that judgment ($ 90,642.84), and the punitive-damages awards against Vincent and Marilyn ($ 1,000,000 and $ 100,000, respectively). The District Court for the Northern District of Georgia also issued a writ of execution that directed the U.S. Marshal to seize Defendants’ assets to satisfy the judgment.5
Following the entry of the Georgia judgment, Marilyn satisfied the judgment in full, and Alliant moved to alter or amend the judgment, see Fed. R. Civ. P. 60, to allow prejudgment interest under Georgia law. The District Court for the Northern District of Georgia denied this motion, reasoning that (1) Alliant’s UFTA claim was unliquidated—that is, not reduced to a fixed sum—until the Georgia judgment was entered and (2) under Georgia law, entitlement to prejudgment interest for unliquidated claims requires compliance with the Unliquidated Damages Interest Act, O.C.G.A. § 51-12-14 (2018), whose procedures Alliant had not followed. Defendants appealed the judgment entered pursuant to the verdict, and Alliant cross-appealed the order denying prejudgment interest.
This appeal and cross-appeal require us to decide numerous discrete issues. We first take up justiciability problems in Part II. We then turn to the merits, addressing Defendants’ arguments on appeal in Parts III through V and Alliant’s arguments on cross-appeal in Part VI. We conclude in Part VII.
We begin by addressing two jurisdictional bars to the District Court’s power to entertain this suit: mootness and subject-matter jurisdiction.6 We then address non-jurisdictional bars. Defendants challenge the Court’s decision not to abstain from exercising its jurisdiction on three prudential grounds. First, that even if the parties are diverse of citizenship, this case falls within the domestic-relations exception to diversity jurisdiction. Second, that by entertaining this suit, the Court violated the Rooker - Feldman doctrine.7 And third, that Alliant is collaterally estopped from attacking the transfers as fraudulent.
The first question, given Marilyn’s full satisfaction of the Georgia judgment: Are this appeal and cross-appeal moot? After oral argument, we asked the parties to brief this question and having reviewed their responses, we are satisfied that the case remains a case or controversy within the meaning of Article III. See U.S. Const. art. III, § 2, cl. 1.
"What matters [for mootness] is whether the parties’ actions objectively manifest an intent to abandon the issues on appeal." RES-GA Cobblestone, LLC v. Blake Constr. & Dev., LLC , 718 F.3d 1308, 1315 (11th Cir. 2013). So payment moots an appeal "only if the parties mutually intended a final settlement of all the claims in dispute and a termination of the litigation." McGowan v. King, Inc. , 616 F.2d 745, 747 (5th Cir. 1980) (per curiam).8
This case continues to breathe life. In Alvarez Perez v. Sanford-Orlando Kennel Club, Inc. , 518 F.3d 1302 (11th Cir. 2008), we applied the Supreme Court’s decision in United States v. Hougham , 364 U.S. 310, 81 S. Ct. 13, 5 L.Ed.2d 8 (1960), and held that an appeal and cross-appeal situated much like the ones before us today were not moot. There, the plaintiff’s counsel signed satisfaction-of-judgment documents that were subsequently filed in the district court, but the plaintiff did not expressly reserve his right to appeal. 518 F.3d at 1305. But there, as here, the parties "continued to pursue their appeals." Id. at 1307. There, as here, the parties "filed supplemental letter briefs addressing the merits." Id. And there, as here, a party "inform[ed] us of a change in...
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