Rohm & Hass Texas, Inc. v. Ortiz Bros. Insulation, Inc., 93-2718
| Decision Date | 20 September 1994 |
| Docket Number | No. 93-2718,93-2718 |
| Parties | ROHM & HASS TEXAS, INC., Plaintiff-Counter Defendant-Appellee, v. ORTIZ BROTHERS INSULATION, INC., et al., Defendants, Ortiz Brothers Insulation, Inc., Defendant-Counter Plaintiff-Cross Plaintiff-Appellant. UNITED STATES of America, Defendant-Counter Plaintiff, v. THORPE PRODUCTS CO., Defendant-Counter Defendant-Cross Defendant-Appellee, and Metrobank, N.A., Intervenor-Defendant Appellee. |
| Court | U.S. Court of Appeals — Fifth Circuit |
David E. Arnold, Pohl, Bennett & Matthews, Houston, TX, for Rohm & Haas.
Robert William Blair, Bellaire, TX, pro hac vice, for Thorpe Products Co.
Kevin M. McCormick, Houston, TX, for Metrobank.
Appeal from the United States District Court for the Southern District of Texas.
Before JOLLY, WIENER and EMILIO M. GARZA, Circuit Judges.
In this appeal from an interpleader action, Defendant-Appellant Ortiz Brothers Insulation, Inc. ("Ortiz") seeks review of the district court's determination of the priority of payment to defendants from the interpleaded funds (the "Fund"). Although Ortiz itself continues to disavow any stake in the Fund, it urges that it was injured financially by the priority determined by the district court for distributing shares in the Fund to Ortiz's creditors. Ortiz insists that, as a result of the sequence of distribution decreed by the court, Ortiz will be exposed to greater liability if it should ever file for bankruptcy or have to indemnify its officers for any payments that they might be required to make personally to cover the company's unpaid federal tax obligations. We conclude that, as such injuries are merely conjectural and hypothetical, they are insufficient to establish constitutional standing. We therefore dismiss this appeal.
This case concerns the sequence or priority of payments to various creditors of Ortiz from $189,850.69, 1 which Plaintiff-Counter Defendant Rohm & Hass Texas, Inc. ("Rohm") deposited into the registry of the district court when Rohm convoked the instant interpleader action. The Fund represents money concededly owed by Rohm to Ortiz, one of Rohm's contractors, for labor and materials supplied to a maintenance and repair project at a Rohm facility in Deer Park, Texas.
After Rohm filed this suit, three of Ortiz's creditors made competing claims to the Fund: (1) the IRS, claiming that Ortiz owed a tax debt of $245,673.61; (2) Thorpe Products Co. ("Thorpe"), a materialman claiming that Ortiz owed it $98,290.09 for supplies used in performing the Rohm construction contract; and (3) MetroBank, N.A. ("MetroBank"), a creditor with a perfected security interest in $80,861.30 of Ortiz's collateral and accounts receivable. Ortiz claimed no stake in the Fund, but argued that the claim of the IRS was superior in rank to that of Thorpe. The district court disagreed.
Ruling on cross motions for summary judgment, the district court ranked the IRS' claim last among the competing creditors. As the Fund was insufficient to satisfy all superior claims (plus attorney's fees), 2 the IRS took nothing.
After judgment was entered, both the IRS and Ortiz filed notices of appeal; but subsequently the IRS successfully moved to dismiss its appeal and no longer asserts a claim against the Fund. Still asserting no claim to the Fund, Ortiz continues to argue that the IRS' claim should be superior in rank to Thorpe's. MetroBank and Thorpe have moved to dismiss Ortiz's appeal for lack of standing.
"In ruling on a motion to dismiss for want of standing, both the trial and reviewing courts must accept as true all material allegations of the complaint, and must construe the complaint in favor of the complaining party." 3 We conclude that, even when viewed in this most favorable light, Ortiz's asserted injuries are insufficient to give it standing to appeal the district court's judgment.
Article III standing implicates the federal judiciary's power to adjudicate disputes; it can be neither waived 4 nor assumed. 5 5] Merely because a party appears in the district court proceedings does not mean that the party automatically has standing to appeal the judgment rendered by that court. 6
Whether a party has standing to appeal "involves both constitutional limitations on federal-court jurisdiction and prudential limitations on its exercise." 7
In its constitutional dimension, standing imports justiciability: whether the plaintiff has made out a between himself and the defendant within the meaning of Article III.... The Article III judicial power exists only to redress or otherwise to protect against injury to the complaining party.... A federal court's jurisdiction therefore can be invoked only when the plaintiff himself has suffered 'some threatened or actual injury from the putatively illegal action.' 8
Accordingly, a party generally may not appeal a district court's order to champion the rights of another, 9 and even "[a]n indirect financial stake in another party's claims is insufficient to create standing on appeal." 10 In addition, "[t]he injury or threat of injury must be both 'real and immediate' not 'conjectural' or 'hypothetical,' " 11 and the putative appellant shoulders the burden of alleging facts sufficient to demonstrate that it is a proper party to appeal. 12
Conceding that it claims no interest in the Fund, Ortiz maintains that it nevertheless has standing to appeal the district court order because the priority of distribution of the Fund among Ortiz's creditors might affect Ortiz's liability should the company eventually (1) file for bankruptcy, or (2) have to indemnify its officers if they should ever be required personally to pay on the company's tax liability. 13
In particular, Ortiz explains that it is aggrieved by the district court judgment's assigning the priority in which its creditors are to be paid from the Fund, as Ortiz's debt to one creditor, Thorpe, is fully dischargeable in bankruptcy, 14 while its debt to another, the IRS, is not. 15 Moreover, Ortiz raises the inchoate possibility that the IRS could one day look to Ortiz's officers for payment of the tax debt. 16 And, according to Ortiz, under Texas law the company is required to indemnify its officers for personal liability for the company's taxes to the extent the officers incur such liability while executing their duties. Ortiz insists therefore that ultimately the company might have to shoulder responsibility by way of indemnification for any taxes collected from company officers by the IRS. It follows, Ortiz concludes, that the district court judgment injured Ortiz financially by assigning the IRS the lowest priority among claimants to the Fund, thereby injuring Ortiz sufficiently to confer standing to appeal. We consider each alleged injury in turn to determine whether either is sufficient to satisfy Article III standing.
At the outset, it is important to analyze the precise nature of the injury of which Ortiz complains. Ortiz does not state that it has filed, will file, or even anticipates filing for bankruptcy. Ortiz merely asserts that, as a result of the district court judgment's ranking the IRS last among Fund claimants, the company might be exposed to greater liability if it ever should elect to declare bankruptcy or be placed in bankruptcy involuntarily. We are convinced, however, that Article III pretermits consideration of such a conjectural and hypothetical injury on appeal--a conclusion we reach based in large part on analogous decisions by other federal courts of appeals.
In the first instance, it is not even clear whether, after disavowing a stake in the Fund, Ortiz could allege any injury sufficient to give it standing to appeal the sequence or priority for distributing the money to other defendants with recognized claims to shares of the Fund. In Nationwide Mutual Fire Insurance Co. v. Eason, 17 the Fourth Circuit held that a plaintiff -interpleader who claimed no stake in a fund interpleaded into bankruptcy court lacked standing to appeal the bankruptcy court's distribution of the fund. In Nationwide, the money was deposited into the registry of a bankruptcy court for the benefit of unpaid creditors of a grain dealer that had filed for bankruptcy. After thus depositing the funds, the plaintiff-interpleader asked to be dismissed from the action, but apparently never was. When six months elapsed without any defendant responding to the action, the court entered a default judgment against all defendants.
Subsequently, when the trustee of the bankrupt estate moved to intervene in the interpleader action, alleging that the funds were part of the estate, the plaintiff-interpleader asked that the funds be returned to it instead. The bankruptcy court denied the plaintiff-interpleader's request that the funds be returned, and the plaintiff-interpleader appealed.
The Fourth Circuit held that the plaintiff-interpleader lacked standing to appeal the distribution of the fund because it had previously disavowed any stake in the money. The court noted that "[a]ny challenge to the disposition ultimately made by the bankruptcy court must be by parties with the requisite stake in the outcome." 18 Here we need not go so far, however, because, even if we assume arguendo that Ortiz might be able to allege an indirect interest in the Fund sufficient to give it standing to appeal, it has failed to do so.
As Ortiz disavows a direct stake in the Fund, any interest that it asserts necessarily must be indirect. Indeed, injuries far more direct than those here alleged by Ortiz have been found to be too remote to satisfy standing for the purposes of Article III. For example, in Libby, McNeill, & Libby v. City National Bank, 19 the Ninth Circuit held that a defendant-app...
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