Chrysler Credit Corp. v. Country Chrysler, Inc.

Decision Date29 March 1991
Docket NumberNos. 89-6240,89-6280,s. 89-6240
Citation928 F.2d 1509
PartiesCHRYSLER CREDIT CORPORATION, a Delaware corporation, Plaintiff-Appellee, v. COUNTRY CHRYSLER, INC., an Oklahoma corporation; Max Pepper; Muriel S. Pepper; Cindy Joan Pepper Guterman, Defendants and Third-Party Plaintiffs-Appellants, v. CHRYSLER CORPORATION, Third-Party Defendant.
CourtU.S. Court of Appeals — Tenth Circuit

Louis W. Bullock (Patricia W. Bullock with him on the brief), of Bullock & Bullock, Tulsa, Okl., for defendants-appellants.

Eric S. Eissenstat (Terry W. Tippens with him on the brief), of Fellers, Snider, Blankenship, Bailey & Tippens, Oklahoma City, Okl., for plaintiff-appellee.

Before HOLLOWAY, Chief Judge, BALDOCK, Circuit Judge and GREENE, District Judge. *

BALDOCK, Circuit Judge.

Defendants-appellants Country Chrysler, Inc., Max Pepper, Muriel S. Pepper and Cindy Joan Pepper Guterman (the Peppers) appeal from the district court's 1) award of $255,000 actual and punitive damages, attorney's fees and costs to plaintiff-appellee Chrysler Credit Corporation and 2) imposition of $33,000 sanctions against them pursuant to Fed.R.Civ.P. 11. This action began in the federal district court for the Western District of Oklahoma. Judgment was granted to Chrysler Credit on its claim against the Peppers and the case subsequently transferred to the federal district court for the Eastern District of Michigan for resolution of the Peppers' counterclaims and third-party complaint. The Michigan court granted summary judgment against the Peppers on their counterclaims and third-party complaint, but declined to certify the Oklahoma judgment. Chrysler Credit then returned to the Oklahoma court seeking certification of its Oklahoma money judgment and Rule 11 sanctions. The Oklahoma court entered judgment against the Peppers on Chrysler Credit's claim and imposed Rule 11 sanctions against them.

Our jurisdiction over these consolidated appeals arises under 28 U.S.C. Sec. 1291. We hold that the Oklahoma court lost jurisdiction over this case when it transferred it to the Michigan court. The Oklahoma court thus lacked jurisdiction to enter judgment against the Peppers in June 1991 and to impose sanctions under Rule 11. We therefore reverse both the money judgment entered by the Oklahoma court in June 1989 and the sanction award. We remand with instructions to vacate both decisions for want of jurisdiction.


The labyrinthine history of this case involves parallel and simultaneous judicial proceedings in the Western District of Oklahoma and the Eastern District of Michigan. Despite the considerable overlap between the Oklahoma and Michigan proceedings, we discuss each seriatim.

A. Western District of Oklahoma

Chrysler Credit Corp. is a Delaware corporation with its principal place of business located in Troy, Michigan. Country Chrysler, Inc. was an automobile dealership located in Guthrie, Oklahoma which sold Chrysler automobiles. Defendant Max Pepper was president of Country Chrysler, Cindy Pepper Guterman, vice-president and Muriel Pepper, secretary. All three also were shareholders. From July 1983 until February 1986, Chrysler Credit provided wholesale vehicle inventory financing to Country Chrysler for the purchase of automobiles from Chrysler Corporation. Chrysler Credit advanced funds to Country Chrysler and retained a security interest in all purchased vehicles. Country Chrysler agreed to remit the outstanding balance to Chrysler Credit as each vehicle was sold at retail.

In May 1986, Chrysler Credit brought suit in the Western District of Oklahoma alleging that the Peppers sold vehicles "out of trust," i.e., sold vehicles in which Chrysler Credit held a security interest without remitting the proceeds. Chrysler Credit sought actual and punitive damages, an accounting of all proceeds, possession of all remaining vehicles or proceeds and satisfaction of personal guarantees executed by the individual defendants. The Peppers counterclaimed alleging eight causes of action against Chrysler Credit: (1) violation of the Automobile Dealers Day in Court Act, 15 U.S.C. Sec. 1222; (2) violation of the Oklahoma Motor Vehicle Commission Act, Okla.Stat.Ann. tit. 47 Sec. 565(9)(a) (West 1988); (3) intentional interference with prospective contractual relations; (4) violations of the Sherman and Clayton Acts, 15 U.S.C. Secs. 1 & 14; (5) violation of Sec. 2 of the Sherman Act, 15 U.S.C. Sec. 2; (6) violation of the Oklahoma Antitrust Statutes, Okla.Stat.Ann. tit. 15 Sec. 217 & tit. 79 Sec. 1 (West 1966 & 1990 Supp.); (7) common law fraud; and (8) breach of contract. The Peppers also joined Chrysler Corporation as a third-party defendant. Chrysler Corporation moved to sever the Peppers' counterclaim from the underlying cause of action pursuant to Fed.R.Civ.P. 21 and 42(b), and to dismiss or transfer the third-party claims to Michigan. Rec. vol. II, doc. 71 at 13. Chrysler Credit also sought to sever the Peppers' counterclaims from their action pursuant to Fed.R.Civ.P. 42(b). Rec. vol. II, doc. 72. The district court found that "the complexity of the issues, the substantive difference in the claims, the availability of a jury, the status of discovery, the separate nature of the proof and the real possibility of confusion render this a proper case for bifurcation under Rule 42." Rec. vol. II, doc. 74 at 1 (emphasis supplied). It therefore ordered that Chrysler Credit's claim be tried separately from the Peppers' counterclaim and third-party complaint. Id.

On July 29, 1987, the district court rendered findings of fact and conclusions of law on Chrysler Credit's claim. The court found that the Peppers had sold vehicles out of trust and entered judgment against them in the amount of $211,419. Rec. vol. II, doc. 136, ex. 3 & 4. On October 14, 1987, the court assessed $18,872 attorney's fees against the Peppers, but took no action on Chrysler Credit's claim for punitive damages. Rec. vol. II, doc. 125 at 2. That same day, acting pursuant to 28 U.S.C. Sec. 1404(a), the district court ordered the case transferred to the Eastern District of Michigan where an identical action between the parties was pending. 1 Rec. vol. II, doc. 124. The district court docket sheet indicates that the original pleadings or documents were shipped to the Michigan clerk the same day. On October 23, 1987, the transferred case was docketed in the Michigan court.

On November 24, 1987, Chrysler Credit filed a motion in the Oklahoma court seeking certification of its money judgment pursuant to Fed.R.Civ.P. 54(b). The district judge replied with the following letter:

November 25, 1987

The Court Clerk's Office inadvertently accepted for filing on November 24, 1987, your motion and brief for certification. As you are aware, this court transferred Case No. CIV-86-503-B to the Eastern District of Michigan on October 14, 1987. This court no longer has jurisdiction. As there no longer is a file for Case No. CIV-86-503-B in this court, your documents cannot be filed and should not have been accepted.

I have directed the Court Clerk to return your documents to you, along with this letter. If you wish to file any documents in CIV-86-503-B, such papers must be filed in Michigan.

Rec. vol. II, doc. 140, ex. C. A year later, the district court ordered that all of the exhibits from Chrysler Credit's claim be withdrawn from the clerk's office within fifteen days or be destroyed. Id., ex. D.

B. Eastern District of Michigan

In February 1986, Chrysler Corporation filed case No. 86-CV-70735 against the Peppers in the Eastern District of Michigan alleging that they failed to honor dealer capital loan agreements or pay monies owed. The Peppers filed an identical counterclaim and third-party complaint against Chrysler Credit as in the Oklahoma action. When the Michigan court received the transferred Oklahoma action, it was designated No. 87-CV-73875-DT and consolidated with No. 86-CV-70735. In April 1988, Chrysler Credit filed a motion in the Michigan court seeking certification of the Oklahoma money judgment. The Michigan court found that the Oklahoma money judgment was not final because it would be subject to an offset if defendants prevailed on their counterclaims; consequently, it denied Chrysler Credit's motion. On September 14, 1988, the Michigan court granted summary judgment to Chrysler Credit on all of the Peppers' counterclaims. Chrysler Motors Corp. v. Country Chrysler, Nos. 86-CV-70735-DT & 87-CV-73875-DT, unpub. order (E.D.Mich. Sept. 14, 1988). On February 9, 1989, the Michigan court granted judgment under Rule 54(b) to Chrysler Credit on the Pepper's third-party claims, but declined to certify the Oklahoma money judgment. Chrysler Motors Corp. v. Country Chrysler, Nos. 86-CV-70735-DT & 87-CV-73875-DT, unpub. order at 7-8 (S.D.Mich. Feb. 9, 1989). Chrysler Credit moved for reconsideration of this order on February 23, 1989, but withdrew the motion on March 22 and elected not to appeal. The Michigan court granted summary judgment to Chrysler Corporation on April 7, 1989 on its complaint and one of the Peppers' counterclaims; the Peppers' remaining claims were dismissed.

The Peppers appealed both the Michigan court's grant of summary judgment and the Oklahoma money judgment to the Sixth Circuit. The Sixth Circuit held that the Pepper's appeal from the summary judgment in favor of Chrysler Corporation was premature because damages had not yet been calculated. Chrysler Motors Corp. v. Country Chrysler, Inc., No. 89-1472, unpub. order (6th Cir. July 31, 1989 [884 F.2d 578 (table) ]. As appellee, Chrysler Credit reversed its arguments with respect to the Oklahoma judgment contending that jurisdiction over the Oklahoma judgment remained in Oklahoma. The Sixth Circuit concluded:

[Chrysler] Credit ... contends that the Pepper's appeal from orders entered by the Oklahoma district court is not within this Court's jurisdiction. The Oklahoma court bifurcated the case,...

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