Robb Evans & Assoc.s LLC v. Holibaugh

• Decision Date: 29 June 2010
• Docket Number: No. 09-1429.,09-1429.
• Citation: 609 F.3d 359
• Parties: ROBB EVANS & ASSOCIATES, LLC, as Receiver over the Assets of Andris Pukke and DebtWorks, Inc., Plaintiff-Appellee,v.Jeffrey HOLIBAUGH, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

609 F.3d 359

ROBB EVANS & ASSOCIATES, LLC, as Receiver over the Assets of Andris Pukke and DebtWorks, Inc., Plaintiff-Appellee,v.Jeffrey HOLIBAUGH, Defendant-Appellant.

No. 09-1429.

United States Court of Appeals Fourth Circuit.

Argued May 11, 2010.

Decided June 29, 2010.

ARGUED: Mitchell Jay Rotbert, Rotbert Law Group, LLC, Rockville, Maryland, for Appellant. Gary Owen Caris, McKenna, Long & Aldridge, LLP, Los Angeles, California, for Appellee. ON BRIEF: Lesley Anne Hawes, McKenna, Long & Aldridge, LLP, Los Angeles, California, for Appellee.

Before GREGORY and SHEDD, Circuit Judges, and Arthur L. ALARCÓN, Senior Circuit Judge of the United States Court of Appeals for the Ninth Circuit, sitting by designation.

Affirmed by published opinion. Judge SHEDD wrote the majority opinion, in which Senior Judge ALARCÓN joined. Judge GREGORY wrote a dissenting opinion.

OPINION

SHEDD, Circuit Judge:

After Robb Evans & Associates, LLC (“REA”) was appointed receiver over the assets of Andris Pukke, it brought this action against Jeffrey Holibaugh to recover receivership property-specifically, payment on a promissory note. The district court granted summary judgment in favor of REA and denied Holibaugh's post-judgment motion to set aside the judgment and dismiss. Holibaugh now appeals the summary judgment and post-judgment orders. For the following reasons, we affirm.

I.

The Federal Trade Commission (“FTC”) filed a civil enforcement action charging Ameridebt, Inc., DebtWorks, Inc., and Pukke with violations of 15 U.S.C. § 45(a) in connection with a fraudulent debt counseling scheme. The FTC and Pukke entered into a stipulation for judgment by the district court settling the FTC claims. Fed. Trade Comm'n v. Ameridebt, Inc., et al., No. PJM 03-3317 (D.Md. May 16, 2006). In its order effecting this judgment, the district court appointed REA as the equity receiver over Pukke's assets to “maintain custody, control, and possession of all Assets, including ... all sums of money now or hereafter due or owing to the Receivership, with full power to: collect, receive, and take possession of all Assets....” J.A. 57.

The order authorized REA to “[b]ring such legal actions based on law or equity in any state, federal, or foreign court as it deems necessary or appropriate in discharging its duties as Receiver relating to the location, marshaling, and management of Assets constituting Receivership property.” J.A. 58. Additionally, the order provided that the district court “shall retain jurisdiction of this matter for all purposes, including construction, modification, and enforcement of this Order.” J.A. 69.

One of the receivership assets is Infinity, an entity owned by Pukke that made loans to Pukke's friends, family members, and business associates. Through a series of loans, Infinity loaned approximately $1,340,000 to Holibaugh and his business associate to capitalize a restaurant venture, and Holibaugh executed a note (“the Note”) in favor of Infinity for $1,330,116.75, representing the outstanding balance of these loans. Holibaugh defaulted, and REA filed this action in the district court as receiver to collect on the Note.

REA moved for summary judgment, arguing that there is no genuine issue of material fact in dispute and that it is entitled to judgment as a matter of law on its claim for payment on the Note. Holibaugh then filed a cross-motion for summary judgment alleging that (1) the statute of limitations barred REA's claims and (2) based on various oral promises made by Pukke, Holibaugh was not personally liable on the Note. The district court granted REA's motion for summary judgment, denied Holibaugh's cross-motion for summary judgment, and awarded REA $1,435,686.04. In doing so, the court first found that the action was not barred by the statute of limitations. The court also applied the parol evidence rule and found that there is no genuine issue of material fact that Holibaugh executed the Note and is bound thereby.

Holibaugh then moved under Fed.R.Civ.P. 60(b)(4) and 12(h)(3) to set aside the judgment and dismiss for lack of subject matter jurisdiction. He argued that (1) there is no diversity of citizenship; (2) there is no federal question because REA filed this suit solely pursuant to Maryland state law; and (3) REA cannot establish a basis for supplemental jurisdiction under 28 U.S.C. § 1367 or common law ancillary jurisdiction. The court denied the motion. Holibaugh now appeals both the order granting summary judgment to REA and the order denying his post-judgment motion.

II.

A.

First, we consider Holibaugh's argument that the district court erred in denying his post-judgment motion alleging lack of subject matter jurisdiction. Specifically, he contends that the district court erroneously held that it has ancillary subject matter jurisdiction over this action based on REA's appointment as receiver in the FTC enforcement action. We review de novo the district court's decision finding that it had subject matter jurisdiction. New Horizon of NY, LLC v. Jacobs, 231 F.3d 143, 150 (4th Cir.2000).

“Federal courts are courts of limited jurisdiction. They possess only that power authorized by Constitution and statute.” Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). The burden of establishing subject matter jurisdiction is on REA, the party asserting jurisdiction. Id.

The Supreme Court has held that a district court has ancillary subject matter jurisdiction over an action brought by a receiver in furtherance of its appointment where the district court had federal question jurisdiction over the original action in which it appointed the receiver. See Riehle v. Margolies, 279 U.S. 218, 223, 49 S.Ct. 310, 73 L.Ed. 669 (1929) (“The appointment of a receiver of a debtor's property by a federal court confers upon it, regardless of citizenship and of the amount in controversy, federal jurisdiction to decide all questions incident to the preservation, collection, and distribution of the assets. It may do this either in the original suit ... or by ancillary proceedings.”) (citations omitted); Pope v. Louisville, N.A. & C. Ry. Co., 173 U.S. 573, 577, 19 S.Ct. 500, 43 L.Ed. 814 (1899) (noting that a court of appointment has ancillary subject matter jurisdiction over a suit brought by a receiver for recovery of receivership property); White v. Ewing, 159 U.S. 36, 38-39, 15 S.Ct. 1018, 40 L.Ed. 67 (1895) (holding that a court that appoints a receiver for an insolvent corporation retains jurisdiction over claims brought by the receiver against debtors of the corporation). See also Alexander v. Hillman, 75 F.2d 451, 453 (4th Cir.1935) (“[I]t is well settled that the courts of the United States have jurisdiction to entertain, either in equity or at law as may be appropriate, ancillary proceedings in aid of a receivership suit pending in a federal court, even though other elements of federal jurisdiction ... may be lacking.”). More recently, the Sixth Circuit has explained this concept:

[T]he initial suit which results in the appointment of the receiver is the primary action and ... any suit which the receiver thereafter brings in the appointment court in order to execute his duties is ancillary to the main suit. As such, the district court has ancillary subject matter jurisdiction of every such suit irrespective of diversity, amount in controversy or any other factor which would normally determine jurisdiction.

Haile v. Henderson Nat'l Bank, 657 F.2d 816, 822 (6th Cir.1981) (holding that a district court that appointed a receiver over a church had jurisdiction over the receiver's actions against a Bank to collect receivership funds).

Here, the district court appointed REA as receiver to locate and collect the various assets of Pukke on behalf of the FTC. It specifically authorized REA to take necessary and appropriate legal action to collect receivership assets. Because REA was appointed by the district court in an action over which the district court had federal subject matter jurisdiction, and REA's action against Holibaugh is in furtherance of its duty to marshal Pukke's assets, this action is within the district court's ancillary jurisdiction recognized by the Supreme Court for over a century.

Notwithstanding this precedent, Holibaugh contends that when Congress enacted 28 U.S.C. § 1367 in 1990, thereby codifying the concept of supplemental jurisdiction, it eliminated common law ancillary jurisdiction as applied to this case. He further argues that REA's action here does not qualify for supplemental jurisdiction under § 1367.

We disagree with Holibaugh's argument. “Congress codified much of the common-law doctrine of ancillary jurisdiction as part of ‘supplemental jurisdiction’ in 28 U.S.C. § 1367.” Peacock v. Thomas, 516 U.S. 349, 356, 116 S.Ct. 862, 867 n. 5, 133 L.Ed.2d 817 (1996); see also Shanaghan v. Cahill, 58 F.3d 106, 109 n. 1 (4th Cir.1995) (“[S]upplemental jurisdiction also incorporates the doctrine of ancillary jurisdiction.”).¹ However, it did not codify all of common law ancillary jurisdiction.

Although § 1367 governs ancillary jurisdiction over claims asserted in a case over which the district court has federal subject matter jurisdiction, it does not affect common law ancillary jurisdiction “over related proceedings that are technically separate from the initial case that invoked federal subject matter jurisdiction,” which remains governed by case law. 13 Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice & Procedure § 3523.2 (3d ed.2010) (emphasis in original).² See also United States v. Texas, 507 U.S. 529, 534, 113 S.Ct. 1631, 123 L.Ed.2d 245 (1993) (“ ‘[C]ourts may take it as a given that Congress has legislated with an expectation that [a] common law principle will apply except when a statutory purpose to the contrary is evident.’ ”) (internal citations omitted). The Supreme Court has acknowledged the continued existence of...