Wuxi Taihu Tractor Co. v. the York Group Inc.

• Decision Date: 07 February 2011
• Docket Number: Civil Action No. H–09–14.
• Citation: 766 F.Supp.2d 803
• Parties: WUXI TAIHU TRACTOR COMPANY, LTD., Plaintiff,v.The YORK GROUP, INC., Defendant.
• Court: U.S. District Court — Southern District of Texas

766 F.Supp.2d 803

WUXI TAIHU TRACTOR COMPANY, LTD., Plaintiff,

v.The YORK GROUP, INC., Defendant.

Civil Action No. H–09–14.

United States District Court, S.D. Texas.

Feb. 7, 2011.

Chris Lee Gilbert, Thomas James Adair, Bryan Cave LLP, Dallas, TX, Edward John Jack O'Neill, Jr., Dla Piper US LLP, Houston, TX, for Plaintiff.David Alan Walton, Beirne Maynard et al., Houston, TX, for Defendant.

Opinion on Summary Judgment

LYNN N. HUGHES, District Judge.1. Background.

The York Group, Inc., an American casket company, sued Wuxi Taihu Tractor Company, Ltd., a Chinese casket company, in Texas state court in July of 2006. The following July, that court entered a final judgment enjoining Tractor from copying York's designs and distributing caskets with those designs in the United States. A year later, concluding that Tractor was violating the injunction, York sued in state court to enforce the judgment.

Tractor promptly removed the enforcement action to this court. Four-and-a-half months after Tractor removed the suit, it petitioned the state court for a bill of review. York removed that petition to this court and then moved to dismiss it. The motion to dismiss has been converted to a motion for summary judgment. Also, Tractor seeks remand and leave to amend its petition.

2. Remand.

York and Tractor are residents of two different places other than Texas; they are constitutionally diverse. Both Tractor's removal of the suit on judgment and York's removal of the bill of review were proper.

Although Tractor brought the suit on judgment to this court, it insists that its petition for a bill of review can only be heard in the court where the judgment was rendered-the 165th Judicial District of Harris County, Texas-and that this action must be remanded. Its argument would be correct had it not brought the suit on judgment to this court. By removing the enforcement suit, the state court judgment has become the judgment of this court. This court can modify its own orders. Federal courts also have the authority to equitably relieve a party from a state judgment. Simon v. S. Ry. Co., 236 U.S. 115, 125, 35 S.Ct. 255, 59 L.Ed. 492 (1915); Wells Fargo & Co. v. Taylor, 254 U.S. 175, 183–84, 41 S.Ct. 93, 65 L.Ed. 205 (1920). A defense to the enforcement of a judgment can be heard here, whether it is framed as a compulsory counterclaim or petition for a bill of review.

A. Barrow v. Hunton.

The Supreme Court has examined the boundaries of removal in an action seeking to set aside a state judgment. In Barrow v. Hunton, Hunton obtained a default judgment against Goodrich in state court. Goodrich then sued Hunton in state court, petitioning for a decree of nullity because he said that he was not served correctly. Hunton removed the petition to the federal circuit court. The federal court nullified the judgment against Goodrich, and Hunton appealed. Goodrich died and was succeeded by Barrow, his administrator. The Supreme Court said that the federal circuit court did not have jurisdiction to hear the case and remanded it.

To reach its conclusion, the Court developed a dichotomy unsupported by the removal statute—as it was then or as it is now. It discovered that a suit to void a judgment because of a procedural error or misapplication of the law must be brought in the same court that rendered the judgment because it is a continuation of the underlying suit. It said that a suit to void a judgment can be removed to federal court only if new facts were discovered that affected the judgment's validity—a legal invention that is extraneous to the text of the removal statute. Goodrich argued for nullity because of a service error—a procedural defect. Having just announced that this category of error could not be removed to federal court, the Court found that the case must be remanded. Barrow v. Hunton, 99 U.S. 80, 83, 25 L.Ed. 407 (1878). The source of the court's incompetence to hear the case is unexplained; there is no textual support in the Constitution or the Code. The court then recedes from its holding when it notes that “the character of the cases themselves is always open to examination for the purposes of determining whether ... the courts of the United States are incompetent to take jurisdiction ... State rules on the subject cannot deprive them of it.” Id. at 85.

The holding in Barrow does not vitiate jurisdiction here. The facts of this case are different. In Barrow, Goodrich never appeared and the court entered a true default judgment. Here, Tractor defaulted post-answer. It appeared but then did not defend itself at trial, resulting in a judgment for York. Before tinkering with terms, this was called a judgment nil dicit—he says nothing.

Second, the Barrow rule applies “only when an action in federal court seeks to nullify or enforce the judgment of a prior state court suit.” Beighley v. FDIC, 868 F.2d 776, 781 (5th Cir.1989) (superceded by statute on other grounds, Tedford v. Warner–Lambert Co., 327 F.3d 423, 428 n. 14 (5th Cir.1989)). Here, Tractor has willingly brought the suit on judgment to federal court. Once a case is removed, it is treated as if it had commenced in federal court. 28 U.S.C. § 1450 (2006); Savell v. S. Ry., 93 F.2d 377, 379 (5th Cir.1937). Tractor's petition seeks to nullify a judgment that has become the judgement of this court. Its attack on the judgment must stay here.

Third, federal courts also have the equitable power to relieve a party from a state judgment by enjoining its enforcement. See Wells Fargo & Co. v. Taylor, 254 U.S. 175, 184–85, 41 S.Ct. 93, 65 L.Ed. 205 (1920). Tractor forgoes no remedy by having its evasive attack adjudicated in the forum where it brought York's enforcing attack.

B. Rooker–Feldman.

Tractor also says that this court lacks jurisdiction over its petition for a bill of review because it is a separate state court action that seeks to set aside a state court judgment. The Rooker–Feldman “doctrine,” which says that federal courts cannot sit in direct review of state court decisions without congressional authorization, has endured widely varying interpretations by federal courts and has recently been severely circumscribed by the Supreme Court.

In Rooker, the state trial court entered a judgment against the Rookers. They appealed to the state supreme court and lost. The Rookers then filed suit in federal district court to overturn the state supreme court judgment, arguing that the state supreme court judgment enforced a statute that violated the U.S. Constitution. The federal district court dismissed the suit for lack of jurisdiction. The Rookers appealed that dismissal to the Supreme Court. The court affirmed the dismissal, reasoning that district courts cannot serve as appellate courts for those who are unhappy with a state court judgment. Rooker v. Fidelity Trust Co., 263 U.S. 413, 415–16, 44 S.Ct. 149, 68 L.Ed. 362 (1923).

Feldman was a lawyer who tried to join the D.C. bar without examination because of his membership elsewhere. He did not meet the District's requirement that he have had graduated from an accredited law school. The admissions committee denied his request, so he wrote a letter protesting its decision to the D.C. Court of Appeals. The court issued an opinion affirming his denial. Feldman then sued in district court, saying that the denial violated his 5th amendment right and requesting an injunction requiring that the District either grant his admission to the bar or allow him to sit for the examination.

Hickey, a graduate from an unaccredited law school, sued with Feldman. For the three years before Hickey graduated, the D.C. Court of Appeals had waived the accreditation requirement for graduates of his school. In Hickey's final year of school, the court stopped that practice and denied Hickey's request for a waiver. Though the allegations were identical to Feldman's, Hickey only requested an order that he be permitted to sit for the bar exam.

The federal district court dismissed Feldman's and Hickey's cases on the grounds that it could not hear an appeal from a final decision of a state court. The Supreme Court agreed with the district court, saying that the D.C. Court of Appeal's determination was a judicial, not administrative, and could only be appealed to it, not to a district court. District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 476, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983).

In both Rooker and Feldman, the state-court losers sued in federal district court seeking relief from a state court judgment. The preclusive effect of Rooker–Feldman extended only to claims that, while not raised in state court, were “inextricably intertwined” in those proceedings. See Feldman, 460 U.S. at 482 n. 16, 103 S.Ct. 1303.

Since then, the Supreme Court has clarified that the scope of Rooker–Feldman is narrow. It applies only to “cases brought by state-court losers complaining of injuries caused by state court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments.” Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284, 125 S.Ct. 1517, 161 L.Ed.2d 454 (2005). In Exxon, the parties were simultaneously litigating in state and federal court. The state suit was filed first, followed by the federal suit two weeks later. The federal defendants moved to dismiss the federal suit and the court denied it. Taking an interlocutory appeal, the third circuit reversed the district court, hypothesizing that if an appeal from the state-court judgment succeeded, the federal suit would then become one to invalidate a state-court judgment. Reversing the Third Circuit, the Supreme Court stressed that Rooker–Feldman was not triggered by the entry of judgment in state court during parallel litigation. The state court judgment may preclude claims or issues, but does not terminate federal jurisdiction over the case. Id. at 293, 125 S.Ct. 1517.

Two important distinctions,...