Dexia Credit Local v. Rogan

• Decision Date: 26 April 2010
• Docket Number: No. 08-3500.,08-3500.
• Citation: 602 F.3d 879
• Parties: DEXIA CRÉDIT LOCAL, Plaintiff-Appellee, v. Peter G. ROGAN, et al., Defendants, and Judith K. Rogan, Citation Respondent-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

602 F.3d 879

DEXIA CRÉDIT LOCAL, Plaintiff-Appellee, v. Peter G. ROGAN, et al., Defendants, and Judith K. Rogan, Citation Respondent-Appellant.

No. 08-3500.

United States Court of Appeals, Seventh Circuit.

Argued June 3, 2009.

Decided April 26, 2010.

COPYRIGHT MATERIAL OMITTED

Scott T. Mendeloff, Attorney (argued), Howrey LLP, Chicago, IL, for Plaintiff-Appellee.

Michael J. O'Rourke, Attorney (argued), O'Rourke & Moody, Chicago, IL, for Citation Respondent-Appellant.

Howard M. Pearl, Attorney, Winston & Strawn LLP, Phillip S. Reed, Attorney, Mayer Brown LLP, Chicago, IL, for Defendants.

Before EASTERBROOK, Chief Judge, and ROVNER and SYKES, Circuit Judges.

ROVNER, Circuit Judge.

In a supplementary proceeding to enforce a judgment against Peter Rogan and related partnerships, Dexia Crédit Local obtained a preliminary injunction barring Judith Rogan, Peter's wife, from continuing to transfer certain assets. On appeal, Judith asserts that the district court lacked subject-matter jurisdiction and that the preliminary injunction was improper. We conclude otherwise and affirm.

I.

This appeal has its genesis in the longstanding Medicare and Medicaid fraud scheme that Peter Rogan carried out through Edgewater Medical Center from 1993 to 2001. See United States v. Rogan, 517 F.3d 449, 451 (7th Cir.2008). In 1998 Peter and one of his related partnerships sought to refinance Edgewater's bond debt to get a lower interest rate. Concealing the fraud scheme, they arranged for Dexia to guarantee Edgewater's repayment of the bonds.

Dexia brought this diversity action against Peter and his related partnerships for fraud, conspiracy, and other torts relating to this longstanding scheme. See 28 U.S.C. § 1332. But Peter abandoned his defense of this suit by absconding to Canada, and Dexia obtained a default judgment for $124 million against him and some of his partnerships. To satisfy its judgment, Dexia served Judith Rogan with a citation to discover assets. See FED.R.CIV.P. 69; 735 ILCS § 5/2-1402.

Next, Dexia filed an ex parte motion for a temporary restraining order ("TRO") to freeze certain of Judith's assets. Dexia asserted in an affidavit that it would sustain irreparable harm if the Rogans had advance notice of the freeze-order. See FED.R.CIV.P. 65(b). Dexia also appended documentation to show that Judith was helping her husband conceal assets by placing his assets in accounts under her name, opening offshore accounts, and sending money to him or his creditors from these accounts. According to Dexia's motion, she even helped him flee to Canada by opening new bank accounts there and transferring several million dollars from other offshore accounts into these Canadian accounts.

The district court granted the TRO without notice to the Rogans, concluding that there was good cause to believe that Judith acted as the alter ego of her husband and disposed of his assets for his benefit. Under the terms of the TRO, Judith was prohibited from transferring, concealing, or dissipating any assets owned or controlled by Peter and certain defined entities, including trusts purportedly owned by the Rogans' children, pending the court's determination of Dexia's request to extend the TRO into a preliminary injunction under the same terms.

Judith promptly moved to dissolve the TRO on grounds that it was based solely on Dexia's affidavit, which was improper hearsay; that the TRO was vague and overly broad; and that the district court lacked subject-matter jurisdiction over her, a non-party. The court denied Judith's motion as moot, explaining that it would address all arguments at a hearing three days later to determine whether the TRO should be converted into a preliminary injunction. Dexia's and Judith's counsel did not object.

But Judith could not point to any evidence in the record to contest Dexia's assertion that she acted as the alter ego of her husband. Although before the preliminary injunction hearing she submitted an affidavit disputing her control over various bank accounts, and at the hearing her former attorney and a former employee testified that Peter had no interest in some of her assets, she later withdrew all this evidence. When the hearing resumed in the afternoon, Judith's counsel informed the court that Judith had filed for bankruptcy that morning and that she was withdrawing her affidavit and the offered testimony. The next day, however, Dexia informed the court that Judith's bankruptcy petition had been declared a "nullity from its inception" because she failed to comply with minimum filing requirements.

The court granted the preliminary injunction under the same terms as the TRO, and Judith's counsel did not object. At a later hearing, the court explained its decision by noting that Judith had withdrawn her evidence in opposition to the injunction and she did not object to its terms.

After Judith appealed the preliminary injunction, we ordered her to supplement her jurisdictional statement to address the citizenship of the named partnership-defendants. At this point, she discovered that complete diversity was lacking in Dexia's original action against Peter because diversity jurisdiction does not exist where the party on one side of a case is foreign and the party on the other side includes both domestic and foreign parties. See Salton, Inc. v. Philips Domestic Appliances & Pers. Care B.V., 391 F.3d 871, 875 (7th Cir.2004); Allendale Mut. Ins. Co. v. Bull Data Sys., Inc., 10 F.3d 425, 428 (7th Cir.1993). Judith discovered that Dexia was a French company and two of the named partnership-defendants had partners who were Belizean corporations. She then supplemented her jurisdictional statement on appeal and identified the citizenship of these partners. In the district court, she also moved to dismiss Dexia's citation to discover her assets.

While this appeal was pending, the district court denied her motion and dismissed the two nondiverse parties, concluding that they were unnecessary and dispensable. The court further stated that under Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 109 S.Ct. 2218, 104 L.Ed.2d 893 (1989), the dismissal of the dispensable nondiverse parties acted retroactively to validate any acts occurring before dismissal. Thus, the court concluded that the judgment in the underlying action was final and that the Rogans could no longer challenge Dexia's citation to discover her assets on jurisdictional grounds.

II.

Judith presents two issues on appeal: (1) whether the district court had subject-matter jurisdiction over the case; and (2) whether the district court abused its discretion when it entered the preliminary injunction.

A. Subject-Matter Jurisdiction

Dexia first asserts that Judith's subject-matter jurisdiction argument is waived because she never raised it at the hearing on the preliminary injunction. But we have an independent duty to ensure subject-matter jurisdiction, see Büchel-Ruegsegger v. Büchel, 576 F.3d 451, 453 (7th Cir.2009); EEOC v. The Chi. Club, 86 F.3d 1423, 1428 (7th Cir.1996), and neither the parties nor their lawyers may waive arguments that the court lacks jurisdiction. United States v. Tittjung, 235 F.3d 330, 335 (7th Cir.2000); see also Dave v. Ashcroft, 363 F.3d 649, 652 (7th Cir.2004).

Judith argues that the district court lacked subject-matter jurisdiction over Dexia's original action against Peter and his related partnerships because the presence of foreign parties on both sides of the case spoiled diversity jurisdiction. And if Dexia's original judgment was void for lack of jurisdiction, she continues, the court lacked jurisdiction over Dexia's citation to discover her assets. Judith's jurisdictional challenges, however, come too late. The judgment against Peter is final. She might have mounted an attack on subject-matter jurisdiction before a final decision was entered in Dexia's original action, but she did not. "Subject-matter jurisdiction may not be attacked collaterally." Travelers Indem. Co. v. Bailey, ___ U.S. ___, 129 S.Ct. 2195, 2205, 174 L.Ed.2d 99 (2009) (quotation and internal citation omitted); Kontrick v. Ryan, 540 U.S. 443, 455 n. 9, 124 S.Ct. 906, 157 L.Ed.2d 867 (2004). In any event, the parties have not discussed the difference between direct and collateral challenges to a judgment. And even if we could entertain Judith's collateral attack, we would conclude that the district court properly dismissed the nondiverse parties under Federal Rule of Civil Procedure 21 and preserved its jurisdiction. See Newman-Green, Inc., 490 U.S. at 832, 109 S.Ct. 2218; Jass v. Prudential Health Care Plan, Inc., 88 F.3d 1482, 1492 (7th Cir. 1996). Under Rule 21, a district court can dismiss dispensable, nondiverse parties either before or after a final judgment. Newman-Green, Inc., 490 U.S. at 827, 832 n. 6, 109 S.Ct. 2218; see also Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 572-73, 124 S.Ct. 1920, 158 L.Ed.2d 866 (2004); Caisse Nationale de Credit Agricole v. CBI Indus., Inc., 90 F.3d 1264, 1271 (7th Cir.1996).

B. The Preliminary Injunction

Judith next makes a host of challenges to the district court's entry of the preliminary injunction. She asserts, for instance, that the district court failed to make findings of fact and conclusions of law in violation of Federal Rule of Civil Procedure 52; that the court failed to specify its reasons for the injunction, to state its terms specifically, and to describe in reasonable detail the acts restrained in violation of Federal Rule of Civil Procedure 65(d); that the injunction was overly broad; and that the injunction could not be issued against her, a non-party. Dexia responds that these arguments are waived because they were not renewed when the court entered the preliminary injunction.

We decline to find waiver here. Although arguments not raised before the district court may not be raised for the first time on appeal, Bus. Sys. Eng'g, Inc. v. Int'l Bus. Machs. Corp., ...