Esteva v. UBS Fin. Servs. (In re Esteva)
| Decision Date | 16 February 2023 |
| Docket Number | 21-13580 |
| Parties | In re: LORENZO ESTEVA, Debtor. v. UBS FINANCIAL SERVICES INC., UBS CREDIT CORP, Defendants-Appellants. LORENZO ESTEVA, a Florida resident, DENISE OTERO VILARINO, a Florida resident, Plaintiffs-Appellees, |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Appeal from the United States District Court for the Southern District of Florida D.C. Docket No. 1:20-cv-23183-MGC
Before WILLIAM PRYOR, Chief Judge, and ROSENBAUM and MARCUS, Circuit Judges.
This case raises the question whether we have jurisdiction over an appeal taken from a bankruptcy court order granting summary judgment on some, but not all of the claims brought in an adversary proceeding prior to the entry of final judgment. Because the bankruptcy court order is not final, and despite the parties' effort to create jurisdiction by stipulating to the voluntary dismissal of the sole remaining claim during the pendency of this appeal, we hold that we do not.
Lorenzo Esteva and his wife, Denise Otero Vilarino ("Otero") (together, "Plaintiffs") commenced this adversary proceeding in the United States Bankruptcy Court for the Southern District of Florida against UBS Financial Services Inc. and UBS Credit Corp. (together "UBS"), to recover funds UBS had frozen in one of its accounts to satisfy debts owed by Esteva. After the bankruptcy court granted partial summary judgment in favor of Esteva and his wife on all of the claims but one -- Esteva's unjust enrichment claim -- UBS appealed to the district court, which affirmed. Then, even though we only have appellate jurisdiction over final decisions of the bankruptcy court in the normal course of events, UBS appealed to this Court, urging us to apply a more "flexible" interpretation of finality in the bankruptcy arena.
Although the parties agree that we have jurisdiction, we are bound to dismiss this appeal because the same concepts of finality apply in appeals taken from adversary proceedings as in appeals taken from standard civil actions. The bankruptcy court left Es-teva's unjust enrichment claim open and awaiting trial, so we cannot assert jurisdiction based on the finality of the bankruptcy court's order. Nor, on this record, can we find that any of three recognized exceptions to the final judgment rule -- the collateral order doctrine the practical finality doctrine, or the marginal finality doctrine -- allows us to reach the merits of UBS's appeal.
In a last-ditch effort to breathe jurisdictional life into this appeal, the parties filed a stipulation for voluntary dismissal in the bankruptcy court on the eve of oral argument. While, under the doctrine of cumulative finality, the subsequent entry of final judgment may cure a premature notice of appeal, the parties' effort to finally resolve the underlying proceeding in this case falls flat. Federal Rule of Civil Procedure 41(a)(1)(A) unambiguously requires that a voluntary dismissal dismiss the entire action -- not just an individual claim. But the parties' stipulated dismissal only sought to dismiss one of Plaintiffs' claims. The stipulation was therefore invalid upon filing, and failed to confer on us the power to decide this case.
UBS hired Esteva as a financial advisor in the International Division of its Miami office in November 2015. As part of the bank's recruitment strategy, UBS entered into a series of agreements (the "Promissory Notes") with Esteva, in which it agreed to loan him approximately $2 million, to be paid back over the first ten years of Esteva's employment using annual bonuses tied to his performance. The Promissory Notes stated that any outstanding principle would be immediately due and payable with interest if Esteva were ever fired.
Esteva deposited the loan proceeds into a UBS account (the "Account") that he opened with Otero, shortly after he started working for UBS. Esteva and Otero also transferred $500,000 of their savings into the Account.
When they opened the Account, Esteva and Otero signed a Client Relationship Agreement -- a form agreement signed by anyone who opens an account with UBS. The Agreement granted UBS a security interest in the Account's funds to secure payment of any debt incurred "under this or any other agreement between you and any UBS Entity, including but not limited to any loans or promissory notes.
Things came to a head in 2017, when UBS fired Esteva for allegedly sending falsified account statements to clients and improperly "journaling" funds between clients' accounts without permission. Following Esteva's termination, UBS restricted and froze the Account to secure repayment of the Promissory Notes. UBS asserted that the Client Relationship Agreement granted it an interest in the Account's funds to secure Esteva's debts under the Notes.
On May 31, 2018, Esteva voluntarily petitioned for Chapter 7 bankruptcy (later converted to Chapter 11). In his bankruptcy petition, Esteva listed the Account as "exempt" from property of the estate due to his interest in the property as a tenant by the entirety, see 11 U.S.C. § 522(b)(3)(B), and alleged that UBS held an unsecured claim against the estate worth $1,950,000. UBS contested this characterization of its claim as unsecured, and, in March 2019, filed a proof of secured claim for indebtedness in the amount of $2,034,662.28 under the Promissory Notes.
On March 4, 2019, Esteva and Otero commenced an adversary proceeding against UBS to confirm the exempt status of the Account and the unsecured nature of UBS's proof of claim. The adversary complaint set forth four separate counts seeking: (1) declaratory relief that the Account is exempt as a tenancy-by-the-en-tirety property; (2) declaratory relief that UBS does not hold a valid security interest in or any other encumbrance against the Account; (3) turnover of the funds in the Account to Esteva and Otero under 11 U.S.C. § 542; and (4) restitution on a theory of unjust enrichment, based on the fact that UBS kept Esteva's book of business without compensation following his termination. Count 4 further sought disallowance of UBS's proof of claim to the extent it failed to set off against Esteva's unjust enrichment claim. UBS answered and in turn brought four counterclaims of its own seeking: (1) a declaration of UBS's perfected security interest in the Account; (2) avoidance of Esteva's deposits of the Promissory Notes' proceeds into the Account as fraudulent transfers under the Florida Uniform Fraudulent Transfer Act, Fla. Stat. §§ 726.105, 726.106; (3) contractual setoff against the Account's funds under 11 U.S.C. § 553(a); and (4) common-law setoff against the Account's funds.
Plaintiffs moved for summary judgment on the first three counts of their adversary complaint and all four of UBS's counterclaims, and partial summary judgment on Count 4 of their complaint. (Because Count 4 sought disallowance of UBS's proof of claim, Plaintiffs asked the bankruptcy court to find that the proof of claim was unsecured.) Over UBS's opposition, the bankruptcy court granted the motion in its entirety. The bankruptcy court issued a "partial final judgment" fully resolving all claims in the action except, notably, Plaintiffs' Count 4, which, the judgment said, would be set for trial later by separate order. The judgment directed UBS to transfer the remaining funds in the Account to a joint securities account designated by Plaintiffs within ten days of receiving the account information from Plaintiffs' counsel. UBS did not seek, nor did the bankruptcy court grant certification for immediate appeal under Federal Rule of Bankruptcy Procedure 7054. Nevertheless, without waiting for trial on Plaintiffs' remaining count, UBS appealed the partial final judgment to the district court. Following briefing by the parties, the district court affirmed the judgment and dismissed UBS's appeal with prejudice.
UBS then appealed to this Court. Since Plaintiffs' unjust enrichment claim was still pending in the bankruptcy court, we directed the parties to brief the basis for our jurisdiction. The parties agreed that we had jurisdiction because, they claimed, the partial final judgment could be considered "final" for purposes of appeal, at least in the bankruptcy arena. We carried the jurisdictional issue with the case, and scheduled oral argument for December 9, 2022.
We review issues of subject-matter jurisdiction de novo. S.F. Residence Club, Inc. v. 7027 Old Madison Pike, LLC, 583 F.3d 750, 754 (11th Cir. 2009). Even when the parties agree that jurisdiction is proper, we are "obligated to inquire into subject matter jurisdiction sua sponte whenever it may be lacking." Univ. of S. Ala. v. Am. Tobacco Co., 168 F.3d 405, 410 (11th Cir. 1999). "Because we are a court of limited jurisdiction, adjudicating an appeal without jurisdiction would 'offend[] fundamental principles of separation of powers.'" Corley v. Long-Lewis, Inc., 965 F.3d 1222, 1227 (11th Cir. 2020) (alteration in original) (quoting Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94 (1998)).
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