Rivet v. Regions Bnk of LA , 139 F.3d 512 ( 1997 )

REVISED
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
______________________________
No. 95-30524
______________________________
MARY ANNA RIVET, MINNA
LEE WINER, EDMOND G.
MIRANNE, and EDMOND G.
MIRANNE, JR.,
Plaintiffs-Appellants,
versus
REGIONS BANK, WALTER L.
BROWN, PERRY S. BROWN,
and FOUNTAINBLEAU STORAGE
ASSOCIATES,
Defendants-Appellees.
____________________________________________
Appeal From the United States District Court
for the Eastern District of Louisiana
____________________________________________
March 13, 1997
Before JONES and WIENER, Circuit Judges, and FURGESON,* District
Judge.
WIENER, Circuit Judge:
Plaintiffs-Appellants Mary Anna Rivet, Mina Lee Winer, Edmond
G. Miranne, and Edmond G. Miranne, Jr. (collectively, the
*
District Judge of the Western District of Texas, sitting by
designation.
1
Mirannes)2 appeal the district court’s order refusing to remand
their case to the Louisiana state court from which it had been
removed by Defendants-Appellees Regions Bank, Walter L. Brown,
Perry S. Brown, and Fountainbleau Storage Associates (FSA)
(collectively, the defendants). The Mirannes also appeal the
district court’s grant of the defendants’ motions for summary
judgment dismissing that action. Concluding that the district
court correctly denied remand under the “artful pleading” exception
to the well-pleaded complaint doctrine, we affirm the refusal to
remand the Mirannes’ suit to state court; and, agreeing that
summary judgment of dismissal was providently granted on the basis
of claim preclusion, we affirm.
I.
FACTS AND PROCEEDINGS
This action concerns the viability of a $5,000,000 second
mortgage on the interest of the lessee (leasehold estate)3 in a
parcel of immovable property (leased premises) located at the
intersection of Tulane and Carrolton Avenues in New Orleans,
2
Edmond G. Miranne and Mary Anna Rivet are husband and wife,
and Edmond G. Miranne, Jr. and Minna Lee Winer are husband and
wife.
3
“Leasehold estate” is a term unknown to the Civil Law, which
does not recognize estates in land. See A.N. Yiannopoulos,
2 Louisiana Civil Law Treatise § 226 at 422-23 (3d ed. 1991). In
Louisiana, a lease of immovable (real) property is a personal (in
personam) contract which does not create rights in rem; however,
under provisions of various statutes, both predial (real estate)
and mineral leases are afforded some of the attributes of rights in
rem, notably the protection of the public records doctrine,
including the susceptibility of the rights of the lessee to
conventional (real estate) mortgages and the ranking of such
encumbrances among themselves based on time of recordation. See
id., at 424-25, and also La. Rev. Stat. Ann. §§ 2721 & 2754-56
(West 1991).
Louisiana.4 In 1957, Lois Stern as lessor granted a ground lease
of the leased premises to Pelican State Hotel Corporation as
lessee. As a result of several subsequent assignments, the
leasehold estate was eventually acquired by Tulane Hotel Investors
Limited Partnership (THILP) on September 15, 1983. On the same
date, THILP granted a collateral mortgage (first mortgage)
encumbering the leasehold estate to secure a $15,000,000 collateral
mortgage note, which in turn was pledged as collateral on a loan
from First Financial Bank (FFB).5 In May of the following year,
THILP granted another collateral mortgage (second mortgage) on the
leasehold estate, this one to secure a $5,000,000 collateral
mortgage note pledged to and held by the Mirannes.6
In 1985, little more than a year after granting the second
mortgage, THILP filed for protection under Chapter 11 of the
Bankruptcy Code. The bankruptcy was later converted to a Chapter
7 proceeding and a trustee was appointed. In the spring of 1986,
the trustee applied for court approval to sell the leasehold estate
at public auction, free and clear of essentially all encumbrances,
4
The location of the leased premises is a legendary one to
many New Orleanians. For years the property was the site of
Pelican Stadium, the home field of the old New Orleans Pelicans
minor league baseball team.
5
See Max Nathan, Jr., The Collateral Mortgage, Logic and
Experience, 49 La. L. Rev. 39 (1988), for a discussion of the
collateral mortgage, that unique Louisiana “hybrid security device,
combining the elements of both pledge and mortgage.” Id. at 39-40.
6
One of the holders of the note, Edmond G. Miranne, Jr., also
appears to have been a partner of THILP.
3
specifically including the second mortgage.7 The bankruptcy court
issued an order advising all creditors and parties in interest who
might oppose the proposed sale to serve any objections to the sale
on the trustee and file such objections with the court by June 12,
1986. The court also set June 16, 1986 as the date for a hearing
on the trustee’s application. At the hearing, plaintiff Edmond G.
Miranne, Jr., an attorney-at-law, appeared on behalf of himself,
pro se, and his father, plaintiff Edmond G. Miranne, as holders of
the note secured by the second mortgage. Their respective wives,
plaintiffs Minna Lee Winer and Mary Anna Rivet, did not appear in
person; neither were they identified by name as being represented
by Miranne, Jr.
On the day after the hearing, the bankruptcy court granted the
sale application and ordered that the leasehold estate be sold free
and clear of virtually all liens and encumbrances, expressly
identifying the second mortgage held by the Mirannes as one of the
myriad encumbrances to be canceled. As no appeal was taken from
that order, the trustee proceeded with the public auction of the
leasehold estate. At the auction, FFB, the holder of the first
mortgage, submitted the only bid. Approximately two months later,
the bankruptcy court approved the auction results, directed that
the sale of the leasehold estate to FFB be consummated, and ordered
the Recorder of Mortgages for Orleans Parish to cancel the liens
and encumbrances listed, which expressly included the second
7
At this point, the leasehold estate consisted principally of
the Bayou Plaza Hotel, formerly known as the Fountainbleau Hotel.
4
mortgage held by the Mirannes. Despite the bankruptcy court’s
order, however, the second mortgage was, for some as yet
unexplained reason, never canceled and remained inscribed on the
public records of Orleans Parish.
Secor Bank eventually succeeded FFB as owner of the leasehold
estate. In December 1993, Defendants-Appellees Walter L. Brown and
Perry S. Brown, successors-in-interest to the original lessors,
sold the leased premises to Secor, thereby vesting Secor with
perfect ownership of the leased premises.8 Later the same day,
Secor in turn conveyed its newly acquired full ownership in the
leased premises to FSA, which remained the record owner as of the
commencement of the instant litigation. Secor was thereafter
succeeded by Regions.
A year later, the Mirannes filed this suit in Louisiana state
court against the defendants, alleging that the December 1993
transactions —— in which the Browns conveyed their interest in the
leased premises to Secor (which already owned the leasehold
estate), and Secor in turn conveyed the leased premises in full
ownership to FSA —— had the net effect of canceling the lease and
thereby abrogating the Mirannes’ purported rights under the second
mortgage which, they alleged, still encumbered the leasehold
8
Under Louisiana Civil Code Article 1903, an obligation may
be extinguished by “confusion” when the qualities of obligee and
obligor are united in the same person. Thus when a lessor’s
interest and a lessee’s interest in the same immovable property are
consolidated in the same person, the lease ceases to exist and the
person vested with both interests will hold perfect or full
ownership —— essentially the equivalent of “fee simple” title in
the common law. See Ranson v. Voiran, 146 So. 681, 682 (La. 1931).
5
estate. The Mirannes sought (1) to have the second mortgage
recognized and enforced, via ordinaria, against the immovable
property located on the leased premises, or (2) alternatively,
damages. In their complaint, the Mirannes assiduously avoided any
hint of the previous bankruptcy proceedings and orders affecting
the leased premises, the leasehold estate, and their second
mortgage against it.
The defendants removed the case to federal district court,
asserting federal question jurisdiction on the theory that the 1986
bankruptcy court orders expressly extinguished the Mirannes’ rights
under the second mortgage. Following removal, Regions and FSA
filed motions for summary judgment asserting, inter alia, claim
preclusion based on the bankruptcy court’s orders. The Browns also
filed for summary judgment adopting Regions and FSA’s claim
preclusion defense and asserting, as a separate and independent
basis for dismissal, the Mirannes’ failure to state a cause of
action against the Browns. More or less simultaneously, the
Mirannes sought remand, contending that the bankruptcy court orders
at most provided defendants with an affirmative defense and thus
could not confer removal jurisdiction. The district court denied
the Mirannes’ motion to remand, relying primarily on the principles
announced by this court in Carpenter v. Wichita Falls Independent
School District.9 At the same time, the court granted summary
judgment in favor of FSA and Regions on claim preclusion grounds,
and in favor of the Browns on their separate and independent
9
44 F.3d 362 (5th Cir. 1995).
6
grounds. The Mirannes timely filed a notice of appeal from these
rulings.
II.
ANALYSIS
A. Removal Jurisdiction —— Basic Principles
We have recently reviewed the well established principles
governing federal question removal jurisdiction.10 The denial of
a motion to remand an action removed from state to federal court
presents a question of federal subject matter jurisdiction and
statutory construction which we review de novo on appeal.11 As a
defendant’s use of the removal statute12 deprives a state court of
a case properly before it and thereby implicates concerns of
federalism, that statute must be strictly construed.13 It follows
that the defendant who seeks to sustain removal must also bear the
burden of establishing federal jurisdiction over the subject matter
of the state court suit.14
As a general proposition, removal hinges on whether a federal
district court could have asserted original jurisdiction over the
state court action had it initially been filed in federal court.15
10
See id. at 365-67.
11
Garrett v. Commonwealth Mortgage Corp. of America, 938 F.2d
591, 593 (5th Cir. 1991).
12
28 U.S.C. § 1441.
13
Carpenter, 44 F.3d at 365-66.
14
Id. at 365.
15
See 28 U.S.C. § 1441(a).
7
When a defendant seeks to remove a state court suit on the basis of
federal question jurisdiction, as was the case here, removal will
be appropriate only if the action is one “arising under the
Constitution, laws or treaties of the United States.”16 In most
cases, a defendant’s assertion of federal question removal
jurisdiction will rise or fall on the allegations in the
plaintiff’s “well-pleaded complaint,”17 that is, on whether “there
appears on the face of the complaint some substantial, disputed
question of federal law.”18 This means that the defendant must
predicate his assertion of federal jurisdiction on the allegations
of the plaintiff’s claim, not, for example, on the basis of an
anticipated or even an inevitable federal defense.19 As Justice
Cardozo succinctly put it, the defendant must show that a federal
right is “an element, and an essential one, of the plaintiff’s
cause of action.”20
B. Artful Pleading Exception ——
Federal Res Judicata
Federal courts have over the years created but a few narrow
exceptions to the fundamental precept of the well-pleaded complaint
16
28 U.S.C. §§ 1331 & 1441(b).
17
Carpenter, 44 F.3d at 366 (citing Louisville & Nashville R.
Co. v. Motley, 211 U.S. 149, 29 S. Ct. 42, 53 L. Ed. 126 (1908).
18
Carpenter, 44 F.3d at 366 (citing Franchise Tax Board v.
Construction Laborers Vacation Trust, 463 U.S. 1, 12, 103 S. Ct.
2841, 2848, 77 L. Ed. 2d 420 (1983)) (emphasis added).
19
Carpenter, 44 F.3d at 366.
20
Gully v. First Nat’l Bank, 299 U.S. 109, 112, 57 S. Ct. 96,
97, 81 L. Ed. 70 (1936).
8
doctrine that “[t]he plaintiff is master of her complaint.”21 The
common rationale for these jurisprudential exceptions ——
euphemistically known by the cynically sarcastic sobriquet of the
“artful pleading exception” —— is that when a plaintiff has
available “no legitimate or viable state cause of action, but only
a federal claim, he may not avoid removal by artfully casting his
federal suit as one arising exclusively under state law.”22
The first and best known specie of artful pleading is the one
that arises when the area of state law upon which a plaintiff’s
claim is based has been “completely pre-empted” by federal law;
i.e., when the “pre-emptive force of a statute is so
‘extraordinary’ that it ‘converts an ordinary state law complaint
into one stating a federal claim for purposes of the well-pleaded
complaint rule.’”23 Only a few types of claims have been held to
be “completely pre-empted,” though —— most notably those preempted
21
Carpenter, 44 F.3d at 366.
22
Id. We note that another jurisprudentially created
doctrine, more frankly labeled “fraudulent joinder,” supports the
assertion of removal jurisdiction on the basis of diversity of
citizenship when a plaintiff’s well-pleaded complaint would not
otherwise allow removal because of the joinder of a non-diverse
defendant. Even though we give great deference to the allegations
found in the plaintiff’s state court complaint, we will
nevertheless examine the questioned joinder of a non-diverse
defendant and hold it to be fraudulent under this doctrine when
there is no possibility of recovery against that party. See Dodson
v. Spillada Maritime Corp., 951 F.2d 40, 42 (5th Cir. 1992);
Carriere v. Sears Roebuck and Co., 893 F.2d 98, 100 (5th Cir.
1990). The parallel between the fraudulent joinder exception and
the artful pleading exception should be obvious.
23
Caterpillar, Inc. v. Williams, 482 U.S. 386, 393, 107 S. Ct.
2425, 96 L. Ed. 2d 318 (1987) (quoting Metropolitan Life Ins. Co. v.
Taylor, 481 U.S. 58, 65, 107 S. Ct. 1542, 95 L. Ed. 2d 55 (1987)).
9
by Section 302 of the Labor Management Relations Act of 1947 or by
Section 502 of the Employment Retirement Income Security Act of
1974.24
A second and somewhat rarer specie of artful pleading that
justifies an exception is the one exemplified by the case we
consider today, as illustrated in Federated Department Stores v.
Moitie25 —— claim preclusion or res judicata. In Moitie, seven
plaintiffs had filed and lost a consolidated antitrust suit in
federal court.26 Five of the seven plaintiffs appealed the district
court decision, but two (Brown and Moitie) elected to file almost
identical second suits (Brown II and Moitie II) in state court,
facially based exclusively on state law. After the defendants
removed these two state court suits, Brown and Moitie sought remand
to state court. The district court first denied Brown’s and
Moitie’s motions to remand, finding that their state court actions
“were properly removed to federal court because they raised
‘essentially federal law’ claims,” then dismissed the claims on res
24
See Avco Corp. v. Aero Lodge No. 735, Int’l Ass’n. of
Machinists, 390 U.S. 557, 559, 88 S. Ct. 1235, 1237, 20 L. Ed. 2d 126
(1968) (§ 302 of LMRA); Metropolitan Life, 481 U.S. at 65-66 (§ 502
of ERISA).
25
452 U.S. 394, 101 S. Ct. 2424, 69 L. Ed. 2d 103 (1981).
26
Six of the plaintiffs had originally filed their suits in
federal court, and one plaintiff who originally filed suit in state
court saw his action removed to federal court on federal question
and diversity jurisdiction grounds. The district court found that
all of the plaintiffs had failed to allege an “injury” to their
“property or business” within the meaning of §4 of the Clayton Act,
15 U.S.C. § 15. Id. at 395-96.
10
judicata grounds.27
In the meantime, the Ninth Circuit had ruled in favor of the
other original federal plaintiffs —— the five who had appealed
their district court losses —— based on a supervening Supreme Court
decision that had worked a substantive change in pertinent
antitrust law. Consequently, when the two state court plaintiffs,
Brown and Moitie, appealed the district court’s denial of their
motions to remand and its subsequent dismissals for res judicata,
the Ninth Circuit reversed the district court on the merits of its
res judicata determination, but —— importantly —— only after
affirming the district court’s assertion of removal jurisdiction
and denial of remand.28 The Supreme Court then granted certiorari
to consider, specifically, the preclusion issues raised by the
Ninth Circuit’s res judicata analysis.29
Although the Supreme Court’s decision was primarily focused on
the substantive preclusion issues thus presented, the Court, of
necessity, also affirmed the district courts’ original assertion of
removal jurisdiction over Brown II and Moitie II and the Ninth
Circuit’s affirmance of that jurisdiction. In a lengthy footnote,
the Court stated:
The Court of Appeals also affirmed the District Court’s
conclusion that Brown II was properly removed to federal
court, reasoning that the claims presented were “federal
27
Id. at 396-97.
28
Id. at 397-98.
29
Id. at 398 (“We granted certiorari . . . to consider the
validity of the Court of Appeals’ novel exception to the doctrine
of res judicata.”).
11
in nature.” We agree that at least some of the claims
had a sufficient federal character to support removal.
As one treatise puts it, courts will not permit plaintiff
to use artful pleading to close off defendant’s right to
a federal forum . . . [and that] occasionally the removal
court will seek to determine whether the real nature of
the claim is federal, regardless of plaintiff’s
characterization. 14 C. Wright, A. Miller, & E. Cooper,
Federal Practice and Procedure § 3722, pp 564-566 (1976)
(citing cases) (footnote omitted). The District Court
applied that settled principle to the facts of this case.
. . . We will not question here that factual finding.30
Regrettably, the Supreme Court did not explain precisely what there
was about the plaintiffs’ state law claims that was so “federal in
nature” as to support removal under the artful pleading exception.
Even though at least one district court and one commentator
have suggested that Moitie should be disregarded either as an
aberration that has never been confirmed by the Supreme Court or as
an injudicious application of an already suspect doctrine,31 the
circuit courts have nevertheless attempted, as they must, to find
meaning in Moitie’s enigmatic footnote. As it happens, different
circuits have articulated one or the other of two distinct
rationales for the Supreme Court’s use of the artful pleading
exception in its approval of the district court’s denial of remand
in Moitie.
One rationale was offered in Travelers Indemnity Co. v.
30
Id. at 397 n. 2 (emphasis added).
31
See Magic Chef, Inc. v. Int’l Molders & Allied Workers
Union, 581 F. Supp. 772, 776 n. 4 (E.D. Tenn. 1983 (claiming that
Moitie’s value as authority regarding removal jurisdiction was
superseded by the Supreme Court’s opinion in Franchise Tax Bd.,
which was written by Justice Brennan, a vocal dissenter in Moitie,
and which does not cite Moitie at all); Robert A. Ragazzo,
Reconsidering the Artful Pleading Doctrine, 44 Hastings L.J. 273,
303-315 (1993).
12
Sarkisian,32 in which the Second Circuit interpreted Moitie to
permit removal whenever a plaintiff files a complaint based on
federal law in federal court and subsequently files an ostensible
state law claim in state court containing essentially the same
elements. Consistent with the well-pleaded complaint doctrine,
this “election of forums” or “consent” rationale recognizes in
essence that a plaintiff remains the master of his complaint, but
engrafts on this doctrine the limitation that the plaintiff is
allowed but one opportunity to characterize his claims.33
Reasoning that the Second Circuit’s “election of forums”
rationale would lead to an unwarranted and excessive expansion of
federal removal jurisdiction, the Ninth Circuit, in Sullivan v.
First Affiliated Securities, Inc.,34 concluded that Moitie is better
explained as permitting removal of only those subsequent state
court claims that are barred by the res judicata effect of a prior
federal judgment.35 As the Ninth Circuit later put it, a
plaintiff’s state law claim may be classified as “‘artfully
pleaded’ when it is drafted to avoid stating allegations or claims
32
794 F.2d 754, 760-61 (2nd Cir.), cert. denied, 479 U.S. 885,
107 S. Ct. 277, 93 L. Ed. 2d 253 (1986).
33
See Ragazzo, 44 Hastings L.J. at 307-308.
34
813 F.2d 1368, 1374-75 (9th Cir.), cert denied, 484 U.S.
850, 108 S. Ct. 150, 98 L. Ed. 2d 106 (1987) (critiquing the election
of forums rationale as applied in Sarkisian and as discussed in
dicta of an earlier Ninth Circuit decision, Salveson v. Western
States Bankcard Ass’n, 731 F.2d 1423 (9th Cir. 1984)).
35
Id. at 1376 (“We therefore construe Moitie as limited to
removal of state claims precluded by the res judicata effect of a
federal judgment.”).
13
already resolved by a prior federal judgment.”36 In a number of
subsequent cases, the Ninth Circuit, as well as other circuits,
have endorsed Sullivan’s articulation of this “federal res
judicata” rationale for Moitie and have applied Sullivan’s
principles, all the while recognizing that this additional branch
of the artful pleading exception must be used sparingly, in the
narrow and exceptional circumstances described by Sullivan and
Moitie.37
In Carpenter v. Wichita Falls Ind. School District,38 a panel
of this court squarely confronted the same interpretive issue
36
Ethridge v. Harbor House Restaurant, 861 F.2d 1389, 1403
(9th Cir. 1988); see also Clinton v. Acequi, Inc., 94 F.3d 568, 571
(9th Cir. 1996) (stating that Ninth Circuit has consistently “found
the artful pleading doctrine to support removal where a plaintiff
files his state law claims in state court in an attempt to
circumvent the res judicata effect of a prior federal claim that
has been reduced to judgment”).
37
See e.g., Ultramar American Limited v. Dwelle, 900 F.2d
1412, 1415 (9th Cir. 1990) (acknowledging that Sullivan recognized
a new basis for invoking the artful pleading doctrine but noting
that recharacterization of a state court claim under the res
judicata branch of the doctrine may only occur when prior federal
judgment resolved issues of federal not state law); Doe v. Allied-
Signal, Inc., 985 F.2d 908, 912 (7th Cir. 1993) (recognizing
Ultramar distinction but also finding that removal was improper
because no res judicata was present); Ethridge, 861 F.2d at 1403
(endorsing Sullivan but finding that removal was improper because
federal court lacked subject matter jurisdiction over complaint in
prior and allegedly preclusive federal action); Redwood Theaters,
Inc. v. Festival Enterprises, Inc., 908 F.2d 477, 480 (9th Cir.
1990) (applying Sullivan rule but holding that removal was improper
because plaintiff’s claim had never previously been before a
federal court and no res judicata defense was available to
defendants).
38
44 F.3d 362 (5th Cir. 1995).
14
presented to the Ninth Circuit by Sullivan.39 Explicitly rejecting
the Second Circuit’s expansive election of forums approach and
agreeing with the Ninth Circuit’s “narrower interpretation,”40 we
concluded in Carpenter that the “federal character” of the
plaintiffs’ claims justifying removal in Moitie must be found in
the federal law of preclusion.41 In so doing we were careful to
reiterate our continuing confidence that state courts would comply
with their Supremacy Clause obligation to apply federal rules of
res judicata.42
In addition, we emphasized our awareness that defendants in
state court suits frequently have the option of employing the
relitigation exception to the Anti-Injunction Act,43 as an
alternative approach to disposing of a state court suit that is
precluded by a prior federal judgment. The fact that a defendant
could seek to enjoin a state court action and thereby, if
successful, achieve the same result that he might have obtained had
39
In Carpenter, the plaintiff, a school administrator, filed
two separate suits against the school district she worked for ——
one in federal court alleging violations of her free speech rights
under the First Amendment to the United States Constitution and one
in state court stating a state contract claim and a free speech
claim exclusively under the Texas Constitution. 44 F.2d at 365.
Similarly, Sullivan involved a federal action under federal
securities law and another similar and simultaneous action in state
court under state securities law. 813 F.2d at 1370.
40
Carpenter, 44 F.3d 369 n. 6, 370 n. 12.
41
Id. at 370.
42
Id.
43
28 U.S.C. § 2283 (“A court of the United States may not
grant an injunction to stay proceedings in a state court except .
. . to protect or effectuate its judgments.”) (emphasis added).
15
he instead sought to remove and dismiss the suit under Moitie, does
not, Judge Garwood expressly observed in Carpenter, render Moitie
superfluous. Rather, Judge Garwood went on to explain, the co-
extensive nature of the relitigation exception to the Anti-
Injunction Act on the one hand and the artful pleading exception to
the well-pleaded complaint doctrine —— based on Moitie’s federal
res judicata grounds —— on the other hand simply suggests that “any
potential impact on federalism from removal [in Moitie] was not
significant.”44 In thus clearly setting forth the rule for this
circuit, the Carpenter panel concluded by stating that:
[w]e hold that Moitie should apply only where a plaintiff
files a state cause of action completely precluded by a
prior federal judgment on a question of federal law.45
Returning to the case now before us, we conclude that the
district court properly reasoned that Carpenter’s holding provides
the sole framework for analyzing the jurisdictional issues raised
by the Mirannes’ thinly veiled collateral attack on the bankruptcy
court’s prior orders. The fact that in Carpenter the federal res
judicata artful pleading rationale did not, in the end, support
removal under the specific circumstances of that case —— there was
no prior federal case and no prior federal judgment, just two
simultaneously filed suits, one based on federal law and one
scrupulously —— “artfully” —— based solely on state law —— does
not, as the Mirannes now contend, render Judge Garwood’s carefully
articulated holding in Carpenter dicta. To the contrary, and just
44
Id.
45
Id. (emphasis added).
16
as the district court here found, Carpenter controls. Accordingly,
if the defendants can show that the Mirannes’ state court suit,
purportedly brought to enforce their erstwhile second mortgage, is
in fact barred by the claim preclusive effects of the bankruptcy
court’s 1986 orders that authorized and approved the sale of the
leasehold estate free and clear of that mortgage and mandated its
cancellation, then the district court’s denial of the Mirannes’
motion to remand, and its dismissal of their suit for essentially
the same reason, must be affirmed.
C. The Bankruptcy Court’s 1986 Orders
Bar the Mirannes’ Present Suit
Under the “pure” res judicata or claim preclusion rubric as
developed in this circuit, a prior judgment will operate to
preclude a later filed suit if four elements are present: (1) The
parties in the later action are identical to, or at least in
privity with, the parties in the prior action; (2) the judgment in
the prior action was rendered by a court of competent jurisdiction;
(3) the prior action concluded with a final judgment on the merits;
and (4) the same claim or cause of action is involved in both
actions.46 As we find beyond peradventure that all four elements
subsist in the instant case, we conclude, just as did the district
court, that the claims presented by the Mirannes’ subsequent state
court action, ostensibly seeking to enforce their second mortgage,
are in fact precluded by the bankruptcy court’s 1986 orders.
46
United States v. Shanbaum, 10 F.3d 305, 310 (5th Cir. 1994).
17
1. Identity and Privity of the Parties
The bankruptcy court’s order authorizing the sale of the
leasehold estate reflects that Edmond G. Miranne Jr., an attorney-
at-law, appeared in court on the previous day, both pro se and as
counsel for his father, in connection with the pending sale
application by the trustee. The fact that the Mirannes’ wives,
Rivet and Winer,47 did not personally appear and were not expressly
identified by Miranne Jr. as parties that he represented, is of no
significance. We have previously held that one individual’s
participation in a bankruptcy proceeding may bind a non-party, such
as a spouse, whose interests are closely aligned with and
adequately represented by the person who did appear.48 Here, Rivet
and Winer had interests identical to those of their husbands in the
bankruptcy proceeding —— namely the preservation (more accurately
here, the resurrection) and protection of the second mortgage. In
fact, their subsequent state court complaint listed only the
husbands as owners of the collateral mortgage note, even though it
was presumptively community property under Louisiana law.49
Consequently, the husbands’ participation in the 1986 bankruptcy
47
In Louisiana, married women are entitled to retain and use
their maiden names, and frequently do so in legal documents, such
as deeds, mortgages, and pleadings, especially in New Orleans and
the “country parishes” of South Louisiana. See La. Civ. Code art.
100.
48
Eubanks v. F.D.I.C., 977 F.2d 166, 170 (5th Cir. 1992).
49
See La. Civ. Code art. 2340 (“Things in possession of a
spouse during the existence of a regime of community of acquets and
gains are presumed to be community, but either spouse may prove
that they are separate property.”).
18
proceedings by way of Edmond G. Miranne, Jr.’s appearance at the
sale application hearing served as adequate representation of the
interests of the spouses in community and was thus no less binding
on the wives for claim preclusion purposes than it was on their
husbands.50
With respect to the defendants, there is no dispute that FFB
was a party to the bankruptcy proceedings as holder of the first
mortgage and the eventual purchaser of the leasehold estate at the
public auction. Neither is there doubt that Regions and FSA are
successors-in-interest to FFB with respect to the property affected
by the bankruptcy court orders. Again, the rule is well
established that a judgment may have claim preclusive effect on a
non-party if the non-party is a successor-in-interest to a party’s
interest in property affected by the judgment.51 Consequently, both
Regions and FSA are bound by the bankruptcy court’s orders to the
same extent as is their predecessor, First Financial. Accordingly,
we conclude that the first element of claim preclusion is clearly
satisfied in this case with respect to all four plaintiffs and to
50
Under Louisiana’s community property laws, the rule of equal
management generally applies to community property; however, the
concurrence of both spouses is required for the alienation,
encumbrance or lease of community immovables and in other limited
situations specified by law. La. Civ. Code arts. 2346-47. As the
collateral mortgage note held by the Mirannes is classified as an
“incorporeal movable,” concurrence of the Mirannes’ spouses would
not have been required for the husbands to alienate whatever rights
flowed from their ownership of the note and the mortgage securing
it. See Nathan, 49 La. L. Rev. at 44.
51
Meza v. General Battery Corp., 908 F.2d 1262, 1266 (5th Cir.
1990); Howell Hydrocarbons, Inc. v. Adams, 897 F.2d 183, 188 (5th
Cir. 1990).
19
defendants Regions and FSA.52
2. A Court of Competent Jurisdiction and A Final Judgment
The second and third claim preclusion elements are also
present in the instant case. As a general proposition, district
courts have jurisdiction over cases or civil proceedings arising
under Title 11, or arising in or related to cases under Title 11.53
It follows that a district court has jurisdiction to authorize and
approve a trustee’s sale.54 Indeed, a proceeding to sell property
free and clear of liens pursuant to 11 U.S.C. § 363(b) and (f) is
a core proceeding in which the bankruptcy court has jurisdiction to
issue final orders and judgments.55 Here the proposed sale of the
leasehold interest arose under and was related to THILP’s chapter
7 bankruptcy case. Consequently, the bankruptcy court had
jurisdiction to consider the Trustee’s sale application and to
issue the ensuing orders (1) authorizing the sale of the leasehold
estate free and clear of specified junior liens, expressly
including the second mortgage held by the Mirannes, and
(2) approving that sale and directing the cancellation of those
specified inferior encumbrances.
52
We acknowledge that this first condition of claim preclusion
cannot be satisfied with respect to the Browns, but we dispose of
the jurisdictional wrinkle raised by this fact below. See infra
Part E.
53
28 U.S.C. § 1334(a),(b).
54
Southmark Properties v. Charles House Corp., 742 F.2d 862,
870 (5th Cir. 1984); In re Heine, 141 B.R. 185, 187 (Bank. D.S.D.
1992); see also Matter of Baudoin, 981 F.2d 736, 740 (5th Cir.
1983) (recognizing wide reach of jurisdiction under Title 11).
55
28 U.S.C. § 157(a),(b)(2)(N); Heine, 141 B.R. at 188.
20
Although they characterize the bankruptcy court’s sale orders
as actions beyond the “power” of the bankruptcy court under the
rules and provisions of the Bankruptcy Code,56 the Mirannes’
authority for this proposition does not comport with Congress’
jurisdictional grant to the district court —— and its adjunct, the
bankruptcy court —— to determine whether property of a debtor
should be sold free and clear of liens and encumbrances. The
Mirannes, of course, were entitled to question whether the
bankruptcy court properly exercised the powers granted to it by
11 U.S.C. § 363 in the particular circumstances of this case. This
kind of substantive —— but not jurisdictional —— objection to a
bankruptcy court’s orders, however, is one that had to have been
timely raised either in an appeal or a motion for reconsideration,
not eight years after the fact in a state court collateral attack
on those orders. We reject out of hand the Mirannes’ specious
contention that, for claim preclusion purposes, the bankruptcy
court lacked jurisdiction to issue the 1986 sale orders.
In addition, an order by a bankruptcy court authorizing or
approving the sale of an asset of the bankrupt estate is a final
judgment on the merits for res judicata purposes even if the order
neither closes the bankruptcy case nor disposes of any claim.57
56
Appellants principally contend that the bankruptcy court
order extinguishing the second mortgage was invalid because the
order did not result from an adversary proceeding as required by
Fed. R. Bank. Proc. 7001 and because the court did not satisfy the
provisions of § 363(f)(1)-(5).
57
Matter of Baudoin, 981 F.2d at 742; Hendrick v. Avent, 891
F.2d 583, 586 (5th Cir.), cert. denied, 498 U.S. 819, 111 S. Ct. 64,
112 L. Ed. 2d 39 (1990); Southmark Properties, 742 F.2d at 870.
21
Therefore, there can be no serious question that the bankruptcy
court’s 1986 orders authorizing and approving the sale of the
leasehold estate free and clear of essentially all liens and
encumbrances were final judgments capable of precluding the
Mirannes’ later filed state court collateral attack. It is equally
beyond serious question that these final judgments affected issues
of federal law: Bankruptcy is a quintessential federal question.
3. The Same Cause of Action
In conducting our search for the presence of the fourth
element required for the applicability of claim preclusion, we
employ the transactional test of Section 24 of the Restatement
(Second) of Judgments to determine whether the two suits in
question involve the same claim for purposes of claim preclusion.58
Under the “same claim” inquiry, the critical issue is whether the
two actions under consideration are based on the same nucleus of
operative facts.59
In the instant case, we find that both the bankruptcy court’s
1986 orders authorizing and approving the sale of the leasehold
estate free and clear of the Mirannes’ second mortgage and the
Mirannes’ claims in their state court action are unquestionably
based on, and in fact are entirely dependent on, the same nucleus
of operative facts —— namely, the viability, the validity, the
enforceability of the second mortgage. In “artfully” contending
58
Matter of Baudoin, 981 F.2d at 743; Southmark Properties,
742 F.2d at 870-71.
59
Matter of Baudoin, 981 F.2d at 743.
22
that their putative state cause of action arises solely out of the
December 1993 transaction involving the Browns, Secor and FSA, the
Mirannes studiously ignore the fact their claim relative to that
1993 transfer can go absolutely nowhere unless they can establish
that their second mortgage was alive and well at that time, despite
the 1986 bankruptcy court orders that expressly authorized and
approved the sale of the leasehold estate free and clear of that
mortgage and directed that it be canceled from the mortgage records
of Orleans Parish.
Without an extant enforceable mortgage, the Mirannes cannot
forthrightly plead either a right of action or a cause of action in
state court. Indeed, all of the acts of alleged wrongdoing in the
December 1993 transaction are so inextricably intertwined with and
dependent on the 1986 bankruptcy orders directing and approving the
sale of the leasehold estate free and clear of the second mortgage
that we would be hard pressed to conjure up a better hypothetical
example of two actions arising from the same nucleus of operative
facts. In this regard we remain ever mindful of the basic canon of
Louisiana law that the public records do not create rights; the
existence of the uncanceled inscription of the second mortgage on
the public records could not keep the mortgage itself legally
viable after the obligation it secured —— the collateral mortgage
note —— as well as the mortgage, were terminated in the bankruptcy
of the maker/mortgagor, THILP.
A review of relevant case law applying res judicata principles
in the bankruptcy context further confirms our analysis. On one
23
hand, our decisions have consistently held that under the
transactional test a final bankruptcy court sale bars any
subsequent claims that challenge the finality or integrity of the
transfer of title pursuant to that sale.60 On the other hand, the
Mirannes’ reliance on D-1 Enterprises, Inc. v. Commercial State
Bank,61 a case in which we held that res judicata does not apply to
claims that were largely unrelated to and which could not have been
raised in an earlier bankruptcy proceeding, is inapposite to the
instant case. Unlike the situation in D-1 Enterprises, here the
Mirannes had far more than a mere opportunity to object to the sale
of the leasehold estate in the bankruptcy court: They were invited
by the court to file their objections; they actually appeared in
court at the hearing scheduled for the airing of such objections;
and once the court issued its sale order, they could have timely
filed either a motion for reconsideration —— or a notice of
appeal —— but they did neither. Given their personal attendance,
together with these multiple waived or forfeited opportunities to
raise and litigate their objections (if any) to the sale, the
Mirannes cannot now contend —— at least not with a straight face ——
60
See Southmark Properties, 742 F.2d at 870-72 (debtor’s later
filed lender liability action barred by bankruptcy court’s order
authorizing sale of property in debtor’s estate “free and clear of
all . . . claims” to secured creditor as both involved “common
nucleus of operative facts”); Hendrick, 891 F.2d at 587 (trustee’s
actions under RICO and securities laws barred by bankruptcy court’s
sale order authorizing transfer of title of stock against which
trustee had launched his collateral action).
61
864 F.2d 36 (5th Cir. 1989).
24
as did the debtor in D-1 Enterprises,62 that claim preclusion should
not be applied because their claim could not have been effectively
litigated in the earlier proceeding.
Indisputably, all requisites of claim preclusion are present
here, vis-á-vis Regions and FSA. As to these two defendants,
therefore, we affirm the district court’s refusal to remand the
Mirannes’ previously removed action under the artful pleading
exception to the well-pleaded complaint doctrine.
D. The “Actually Litigated” Standard
As we noted above, and as this court previously observed in
Carpenter, the relitigation exception to the Anti-Injunction Act
provides another, entirely independent mechanism which defendants
(and the federal courts) may use to protect prior federal court
judgments.63 In Carpenter we reasoned that, as the relitigation
exception to the Anti-Injunction Act had “already realigned
federal-state relations in favor of the federal courts,” Moitie’s
use of the res judicata branch of the artful pleading exception
signified nothing more than that “any potential impact on
federalism from removal was not significant.”64 Thus two lessons
are to be gleaned from Carpenter: (1) Issues of federalism are not
62
In D-1 Enterprises, we found that the lender liability
claims that debtor sought to assert in the later action were not
“direct defenses” that the debtor could or should have litigated in
response to the creditor’s earlier motion for relief from stay.
Id. at 39. Furthermore, D-1 Enterprises also distinguished
Southmark in which preclusion was appropriate in the context of a
“court-ordered public cash auction.” Id.
63
See supra Part B, and 44 F.3d at 370.
64
Id.
25
implicated in this context; and (2) the relitigation exception to
the Anti-Injunction Act —— a route that parallels (but is not
identical to) removal via the res judicata iteration of the artful
pleading exception —— is not the exclusive path available for
squelching precluded sequential state court litigation of claims
previously litigated in federal court.
Nevertheless, in reliance on the above-quoted limited
discussion of how the Anti-Injunction Act co-exists with the
federal res judicata interpretation of Moitie, the Mirannes
imaginatively contend that the court in Carpenter implicitly
incorporated the specific restraints of the relitigation exception
into its res judicata artful pleading exception based on Moitie.
In particular, they contend that removal under Carpenter is somehow
limited by the anti-injunction holding in Chick Kam Choo v. Exxon
Corp.65 The Mirannes argue that Chick Kam Choo stands for the
proposition that injunctions may be issued under the relitigation
exception to §2283 only with respect to issues that were “actually
litigated” in the prior proceeding —— that is, only in
circumstances in which issue —— but not claim —— preclusion would
apply in a successive proceeding; and that such a limitation must
per force restrict the artful pleading exception to issue
preclusion. This stretch by the Mirannes, in attempting to
incorporate an “actually litigated” restriction into Carpenter, is
fatally flawed, however.
First, we note that nowhere in Carpenter did we even mention,
65
486 U.S. 140, 106 S. Ct. 1684, 100 L. Ed. 2d 127 (1988).
26
much less impose, an “actually litigated” standard for removal
under the res judicata branch of the artful pleading exception;
neither did we so much as refer to Chick Kam Choo, much less cite
it as authority. Second, we are aware of no other court that, when
applying the federal res judicata manifestation of the artful
pleading exception following Sullivan, has seen fit to apply —— or
even mention —— this standard.
But even if we assume, solely for the sake of argument, that
an “actually litigated” requirement was imported through Carpenter,
we would still find that removal is proper under the circumstances
of this case. In Chick Kam Choo, the Supreme Court, relying on
Atlantic Coast Line R. Co. v. Locomotive Engineers,66 stressed that:
an essential prerequisite for applying the relitigation
exception is that the claims or issues which the federal
injunction insulates from litigation in state proceedings
actually have been decided by the federal court.
Moreover, Atlantic Coast Line illustrates that this
prerequisite is strict and narrow. The court assessed
the precise state of the record and what the earlier
federal order actually said; it did not permit the
District Court to render a post hoc judgment as to what
the order was intended to say.67
For the bankruptcy court in the instant case to authorize and
approve the sale of the leasehold estate free and clear of
essentially all liens and encumbrances, that court necessarily had
to decide whether the Mirannes’ inferior second mortgage could
survive as an encumbrance against the leasehold estate after that
estate was sold at public auction by the THILP trustee’s
66
398 U.S. 281, 286-287, 90 S. Ct. 1739, 26 L. Ed. 234 (1970).
67
Chick Kam Choo, 486 U.S. at 148 (emphasis in original).
27
foreclosure on the superior first mortgage. Indeed, the bankruptcy
court’s order authorizing sale of the leasehold estate “actually
said,” inter alia, that (1) Edmond G. Miranne, Jr. appeared on his
and his father’s behalf, (2) all creditors were given notice and an
opportunity to object and be heard, and (3) the sale of the
leasehold estate would be free and clear of “all . . . liens,
mortgages and encumbrances,” including, specifically, the Mirannes’
second mortgage. Given Chick Kam Choo’s admonition to focus on
“what the earlier federal order actually said,” not what “the order
intended to say” (albeit likely the same thing in this case), it is
indisputable that in the 1986 bankruptcy court proceedings the
continuing validity of the Mirannes’ inferior mortgage was
“actually litigated and decided.”68
E. Response to Dissent
Although our colleague, Judge Jones, in her thoughtful dissent
agrees with our essential holding that Moitie permits removal of
state court claims that are barred by the preclusive res judicata
effect of a prior federal judgment, she would further limit
application of Moitie’s res judicata removal avenue to cases in
which (1) “the prior judgment . . . involved a claim made under
federal law,” and (2) “the claim being removed represented a
plaintiff’s attempt to seek relief in state court by
recharacterizing an ‘essentially federal’ claim they [sic] had
unsuccessfully pursued first in federal court.”69 We acknowledge
68
Id. at 149.
69
Dissent, infra, at 1-2 (emphasis added).
28
the overarching federalism concerns that inform Judge Jones’
critique, but we nevertheless find her additional suggested
restrictions to our already narrow holdings in Carpenter and in the
instant case to be unwarranted. First, the Ninth Circuit decision
that Judge Jones cites in support of her additional restrictions,
Ultramar American Unlimited v. Dwelle,70 limits Moitie
recharacterization (i.e., removal) to situations “when the prior
federal judgment resolved questions of federal law,” or “when the
prior federal judgment sounded in federal law.”71 It does not, as
far as we can discern, purport to constrain Moitie removal to
instances in which the prior federal judgment arose out of a case
that a plaintiff himself had first brought in federal court. True,
that is what happened in Moitie and that may prove to be the most
common circumstance in which Moitie removal will occur. But
Moitie’s sanctioning of removal, as we explained in Carpenter72 and
as the Ninth Circuit has suggested,73 hinges on the preclusive
70
900 F.2d 1412 (9th Cir. 1990).
71
Id. at 1415-16 (emphasis added).
72
44 F.3d at 370 (“If there was any federal character at all
to the plaintiffs’ state law claims in Moitie, it must be the
federal law of preclusion.”)
73
In Ultramar, the Ninth Circuit observed that:
The Moitie doctrine seems based on a court divining a
litigant’s motives for bringing suit. When a litigant
suffered a final defeat on a federal claim yet thereafter
files a similar-although-not-preempted state claim in
state court, the sequence of events gives rise to an
inference that the litigant is not interested in the
state cause of action per se, but is instead attempting
to circumvent the effects of the federal question
judgment. In this limited instance, removal is allowed.
900 F.3d at 1417 (emphasis added).
29
effects of a prior federal judgment and a state court litigant’s
attempts to circumvent them artfully, not on the manner in which
the case giving rise to the preclusive federal judgment reached
federal court in the first place.
Indeed, we emphasize that the reasons Judge Garwood found in
Carpenter that Moitie did not apply to the facts before his panel
there were (1) there was no prior federal judgment to protect, (2)
there was no federal preclusion law to apply, and (3) the plaintiff
in Carpenter, unlike the plaintiffs in Moitie, was “taking
preclusion risks in order to have her state law claim heard in its
preferred forum” and thus was “not attempting to avoid the effect
of a prior judgment.”74 As we have strived to make clear in this
opinion, however, in this case we do have a prior federal judgment,
we do have federal preclusion law to apply, and we have plaintiffs
who have not taken any preclusion risks, but, to the contrary, are
clearly seeking by collateral attack to avoid the preclusive effect
of a prior federal judgment, long since in repose, that concluded
a case in which these plaintiffs had ample opportunity to assert
their interests and in fact did assert them. It follows, then,
that removal of the plaintiffs’ state court collateral attack on
the bankruptcy court’s final judgment is entirely appropriate in
this case, even though the preclusive —— and thus essentially
federal —— nature of that federal court judgment derived from the
underlying bankruptcy case. Here, the plaintiffs were interested
creditors who were invited to assert their rights based on their
74
Carpenter, 44 F.3d at 371.
30
second mortgage; there simply was no lawsuit initially filed by
these plaintiffs in federal court. Therefore, in spite of Judge
Jones’ objections, we remain firmly convinced that the Mirannes are
not entitled to have their faux foreclosure suit remanded to state
court under the well-pleaded complaint doctrine. To do so would
make a mockery of that doctrine; the very kind of untoward result
that the artful pleading exception —— like the fraudulent joinder
doctrine —— is designed to prevent.
F. The Final Removal Twist -- Supplemental Jurisdiction
Over the Mirannes’ Claims Against the Browns
To complete our analysis of the jurisdictional questions
presented by this case, we address one final, relatively minor
issue. The Mirannes insist that, even if the district court
properly asserted removal jurisdiction as to Regions and FSA and
properly denied remand as to those two defendants under the
Moitie/Carpenter res judicata artful pleading exception, that court
still could not exercise removal jurisdiction over the Mirannes’
claims against the Browns. This is so, they urge, because the
Browns were not parties to the 1986 bankruptcy proceedings that
underlie the preclusion of the Mirannes’ subsequent state court
suit against FSA and Regions. We disagree. Although we do agree
that the Moitie/Carpenter rationale is inapplicable to the Browns,
the district court —— having properly exercised removal
jurisdiction as to the Mirannes’ claims against Regions and FSA ——
could therefore exercise supplemental jurisdiction over the
Mirannes’ claims against the Browns. These claims clearly formed
part of the “same case or controversy” as those against Regions and
31
FSA.75 Indeed, we have so found in a similar case involving the
complete preemption branch of the artful pleading exception.76
Accordingly, we hold that the district court did not err in
asserting jurisdiction over each defendant named in the Mirannes’
state court complaint, including the Browns. Neither did that
court err in refusing to remand any of those claims to state court.
G. Motions for Summary Judgment
In the foregoing analysis, we determined that the Mirannes’
removed state court suit, “artfully” styled as an action to enforce
the second mortgage, was in truth nothing but a transparent,
“second bite” collateral attack on the bankruptcy court’s 1986
orders. It was a blatant attempt at a “gotcha,” grounded
exclusively in the purely fortuitous and inadvertent failure of
some person or persons unknown to follow-up on the court ordered
cancellation of the second mortgage from the public records. As a
result, we concluded that the well-pleaded complaint doctrine did
not immunize that second suit from removal.
In like manner, we now hold that the district court properly
granted summary judgment in favor of Regions and FSA on the basis
of claim preclusion. Despite its intentionally deceitful garb, the
core issue of the Mirannes’ subsequent state court complaint was
75
See 28 U.S.C. § 1367.
76
See Kramer v. Smith Barney, 80 F.3d 1080, 1086 & 1083 n. 1
(5th Cir. 1996) (observing that if plaintiff’s state law fiduciary
duty claims relating to ERISA governed pension accounts were
removable under complete preemption theory, plaintiff’s other
related, non-ERISA, state law claims were removable as supplemental
claims under § 1367).
32
the efficacy of the final, executory, non-appealable orders of the
bankruptcy court that had freed the leased premises from, inter
alia, the Mirannes’ second mortgage. As that issue was and remains
res judicata, we affirm the district court’s summary judgment in
favor of Regions and FSA.
We also affirm the district court’s grant of summary judgment
in favor of the Browns albeit we do so on the separate and
independent ground that the Mirannes failed to establish any legal
basis or triable issue of fact to support a claim against the
Browns. As the district court observed, the Mirannes first
acknowledged that the Browns did not participate in the prior
bankruptcy proceedings, thereby casting doubt on whether the Browns
could be held responsible for the Mirannes’ loss of rights as a
result of those proceedings. In addition, the Mirannes also
characterized their action as one in rem, i.e., a claim to a right
in the property, not one in personam against its former owners,
thus precluding any personal liability on the Browns’ part.77 In
sum, as the Browns had no contractual relationship at all with the
Mirannes and had long since ceased to have any interest in the
property which the Mirannes doggedly contend is still encumbered by
their second mortgage, the Browns can have no personal liability to
the Mirannes whatsoever. The district court properly granted the
77
See Louisiana Nat. Bank of Baton Rouge v. O’Brien, 439 So. 2d
552, 556-58 (La. Ct. App. 1st Cir. 1983), writ denied, 443 So. 2d
590 (La. 1983) (holding that note marked “in rem” gave maker no
liability at all beyond property itself and that creditor was
unable to maintain any action against maker to reach any of maker’s
other assets).
33
Browns’ motion for summary judgment.
III
CONCLUSION
As should now be apparent from the foregoing analysis, we
conclude that the district court correctly held that the Mirannes
are not entitled to have their previously removed state court suit
remanded to state court under the well-pleaded complaint doctrine.
The claim preclusion or res judicata branch of the artful pleading
exception to that doctrine demonstrates beyond cavil that their
state court suit, filed subsequent to the final judgments of the
bankruptcy court on issues of federal law, need not be remanded.
For essentially the same reasons, our de novo review of the
district court’s summary judgment dismissal of the Mirannes’ claims
against Regions and FSA satisfies us that the Mirannes’ subsequent
state court action, as removed to federal district court, is barred
by res judicata. In like manner the court’s exercise of
supplemental jurisdiction over the claims against the Browns, and
its dismissal of those claims, were not erroneous. Therefore, the
district court’s orders and judgment from which the Mirannes appeal
are, in all respects,
AFFIRMED.
My brethren, conscientiously attempting to follow the
guidance of dicta in a Fifth Circuit case78 and a mystifying
78
Carpenter v. Wichita Falls Independent School Dist., 44 F.3d
362 (5th Cir. 1995).
34
footnote by the Supreme Court,79 have concluded that the federal
district court possessed removal jurisdiction over a state court
claim principally seeking foreclosure of a second mortgage. Were
it not for the ambiguities in the two preceding cases, Carpenter
and Moitie, this result would fly in the face of the well-pleaded
complaint limit on removal jurisdiction. I respectfully dissent
because I believe the majority’s unusual result is not compelled by
the authorities. Briefly, Moitie means less than the majority
asserts, and the Carpenter dicta explaining Moitie do not require
the result here reached. I fear that the majority’s result further
confuses an already complex byway of federal jurisdiction.
Without repeating the majority’s analysis, I agree in
part with their holding that -- until the Supreme Court clarifies
Moitie -- Moitie is “better explained as permitting removal of only
those subsequent state court claims that are barred by the res
judicata effect of a prior federal judgment.” Critically, I would
add that the prior judgment should have involved a claim made under
federal law. Ultramar American Limited v. Dwelle, 900 F.2d 1412,
1415 (9th Cir. 1990).80 I would also emphasize that Moitie
79
Federated Dept. Stores, Inc. v. Moitie, 452 U.S. 394, 101
S. Ct. 2424 (1981).
80
The majority argues that the Ultramar decision does not
“purport to constrain Moitie removal to instances in which the
prior federal judgment arose out of a case that a plaintiff himself
had first brought in federal court.” Maj. Op. at 28 (emphasis in
original). However, Ultramar did involve a plaintiff who had
asserted a prior claim, and the majority has cited no case where
Moitie removal has been allowed where the plaintiff had not brought
a prior suit grounded in federal law. The majority implicitly
acknowledges that while it is not “constrain[ed]” from allowing
Moitie removal where the plaintiff has not brought a prior claim,
35
permitted removal only where the claim being removed represented a
plaintiff’s attempt to seek relief in state court by
recharacterizing an “essentially federal” claim that they had
unsuccessfully pursued first in federal court. Moitie thus is a
species of the artful pleading doctrine, a doctrine that permits a
federal court to pierce the pleadings of a complaint which,
although cloaked in terms of state law, actually falls within
federal jurisdiction because of the applicability of federal
principles. Moitie, 452 U.S. at 398, n.2. While the circuit
courts have split in interpreting Moitie,81 this narrow
understanding is accepted by the majority here and the Fifth
Circuit and is well-grounded.82
it is broadening the scope of Moitie removal beyond what has been
allowed in other circuits.
81
Compare Travelers Indemnity Co. v. Sarkisian, 794 F.2d 754
(2d Cir. 1986) (using plaintiff’s choice of forum analysis to apply
Moitie) and Sullivan v. First Affiliated Securities, Inc., 813 F.2d
1368 (9th Cir. 1987) (using res judicata analysis).
82
The Supreme Court’s statement in Moitie that “at least some
of the claims had a sufficient character to support removal” should
be interpreted in light of the authority and examples cited in
support of that proposition. 452 U.S. at 397, n.2; 101 S. Ct. at
2427, n.2. After citing Professor Wright’s treatise for the
proposition that federal courts may determine the “real nature” of
a plaintiff’s claim, the Court cited three cases in which courts
did just that. Two were antitrust cases in which plaintiffs had
pleaded antitrust claims under a South Carolina statute and the
South Carolina courts had held that the statute only applied to
conduct in intrastate commerce, while the defendants’ challenged
conduct actually involved interstate commerce. See In re: Wiring
Device Antitrust Litigation, 498 F. Supp. 79, 82-83 (E.D.N.Y. 1980)
and Three J Farms, Inc. v. Alton Boxboard Company, 1979 -- 1. Trade
Cases. ¶ 62,423 (S.C. 1978), rev’d on other grounds, 609 F.2d 112
(4th Cir. 1979), cert. denied, 445 U.S. 911, 100 S. Ct. 1090
(1980). In the third case, the plaintiff filed only state
conspiracy claims, but the district court held that the claims
implicated federal antitrust laws and labor issues governed by the
36
But accepting this explanation of Moitie, that case
cannot confer federal jurisdiction here, because the plaintiffs
have no “essentially federal” claim to recharacterize. Their claim
rests on purported rights under a second mortgage and on transfers
of property interests that allegedly abrogated those rights. This
is a state law claim. The only federal element that plaintiffs
could have pleaded is an anticipatory defense based upon the prior
bankruptcy proceeding. To fall within footnote 2 of Moitie, the
subsequent state claim must be “merely the same . . . claim in
disguise.” Salveson v. Western States Bank Card Ass’n., 731 F.2d
1423, 1427 (9th Cir. 1984) (characterizing lower court’s finding in
Moitie). The plaintiffs here are not recharacterizing any federal
claim. Instead, the second mortgage they seek to enforce was never
expunged from the local deed records after a bankruptcy court
judgment commanded sale free and clear of all liens and
encumbrances. Moreover, the plaintiffs are suing a successor in
interest to the bankruptcy sale, not simply the original party to
the proceeding in bankruptcy court. Also unlike Moitie, the
plaintiffs here were not unsuccessful plaintiffs in the prior
bankruptcy proceeding, but were defendants there. In every
respect, these characteristics represent a more complex procedural
scenario than did the Moitie plaintiff’s copycat pleadings in
federal and then state court.
Given my druthers, I would hold that the instant case is
Labor Management Relations Act. See Prospect Dairy, Inc. v.
Dellwood Dairy Co., 237 F. Supp. 176, 178-79 (N.D.N.Y. 1964).
37
distinguishable from a narrow reading of Moitie. If, however,
Moitie compels the result reached by the majority, then it appears
significantly to have intruded into previously well-settled removal
jurisprudence, whose anchor is the well-pleaded complaint rule.
Consider this hypothetical: A sues B in federal court on a federal
securities claim and wins a judgment. B then sues A in state court
on a contract claim that was arguably a compulsory counterclaim in
the preceding litigation. Following Moitie as interpreted by
Rivet, does the federal court have removal jurisdiction? If so,
hasn’t Rivet moved the boundaries of removal jurisdiction far away
from Moitie’s self-description as an “artful pleading” case?
The majority relies heavily on Judge Garwood’s
description of Moitie in the Carpenter decision. Notwithstanding
Carpenter’s statement that “we hold that Moitie should apply only
where a plaintiff files a state cause of action completely
precluded by a prior federal judgment on a question of federal
law,” 44 F.3d at 370 (emphasis added), Carpenter’s statement is
more dicta than holding. Carpenter was a very different case from
Moitie. The defendants in Carpenter sought to rely on Moitie to
prevent simultaneous litigation by a plaintiff in federal and state
courts over the same grievance. Judge Garwood’s extended,
scholarly discussion of Moitie refused to adopt the proffered broad
interpretation of Moitie that arguably would have prevented
parallel litigation. As Judge Garwood put it, “whatever Moitie
does mean, we are confident it does not mean so much.” 44 F.3d at
368. The bulk of Carpenter’s discussion explains why some circuit
38
court cases have incorrectly construed Moitie to govern parallel
litigation.83 The Carpenter panel was not faced with anything like
a plaintiff whose suit was in fact “completely precluded by a prior
federal judgment on a question of federal law.” This “holding” was
merely a way to distinguish the cryptic Moitie footnote without
“empty[ing] footnote 2 of all substantive content,” and was surely
not meant to broaden the Moitie decision’s fleeting reference to
the “federal character” of the plaintiff’s claims into a completely
new exception to the well-pleaded complaint rule. See id. at 370,
n.11.
In attempting to demonstrate that the factors relied upon
by Judge Garwood in Carpenter to allow remand are not present here,
the majority contends that “in this case we do have a prior federal
judgment, we do have federal preclusion law to apply, and we have
plaintiffs who have not taken any preclusion risks ... but ... are
clearly seeking by collateral attack to avoid the preclusive effect
of a prior federal judgment ... .” Maj. Op. at 29. I would hasten
to add to that list what we also do not have in this case, but was
essential in Moitie and obviously present in Carpenter: a
conceivable federal claim that could be asserted by the plaintiff.
The majority essentially holds that a conceivable federal claim is
not necessary for removal, as long as there is a federal defense of
res judicata based on a federal judgment. To say that a
plaintiff’s claim can be removed to federal court when he has
83
See 44 F.3d at 368-70, n.6, n.12 (disagreeing with the second
circuit decision in Travelers, supra, n.4)
39
alleged no conceivable federal claim is true mockery of the well-
pleaded complaint rule and the artful pleading doctrine. How can
the artful pleading doctrine apply if the plaintiff’s claims can
not be recharacterized into an essentially federal claim that has
been omitted by artful pleading? See Ultramar, 900 F.2d at 1415
(“... recharacterization of purported state-law claims into federal
claims was essential before removal could occur.”).
Moreover, Carpenter expresses a fear of extending federal
court removal jurisdiction that is realized in this case.
Referring to the fact that plaintiff Carpenter could pursue
litigation under theories of both federal and state constitutional
law, Judge Garwood pithily observes, “we cannot say that the
failure to make a state claim pendent makes it federal.” Id. at
369. Here, whether we like it or not, and whether the plaintiffs
proceeded in good faith or not, they have filed a claim that is
based purely and solely on state law. It is not amenable to
recharacterization as an “artful pleading” of a federal claim. In
my view, Carpenter expressly decries the implication that this
state-law claim must be removed to federal court according to a
broad interpretation of Moitie.
Any reader who has followed the majority opinion and this
dissent thus far ought to appreciate that our dispute, while
technical, is not trivial.84 The principles of limited federal
84
The majority’s holding has another unfortunate consequence.
Allowing federal jurisdiction to turn on whether the plaintiff’s
claims are barred by res judicata allows the defendant two bites at
the apple: if upon the plaintiff’s motion to remand the defendant
loses the res judicata issue and the case is remanded, the
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court jurisdiction and the relative clarity of jurisdictional rules
are at issue. Moitie and Carpenter can be read to authorize
removal of this state-law-based case simply because it is subject
to a federal preclusion defense. But to do so, as I have shown,
intrudes on the scope of the well-pleaded complaint rule, expanding
federal removal jurisdiction while engendering complexity and
uncertainty in the future. I do not believe such results were
intended by the Supreme Court in Moitie or by the Carpenter panel;
the best way to effectuate those decisions’ narrowly tailored goals
is to apply them narrowly and specifically. Because the majority
opinion does not do so, I respectfully dissent.
defendant can relitigate the res judicata issue again in state
court. The prior federal determination of the res judicata issue
will not bind the state court, because, by virtue of the federal
court’s resolution of the res judicata issue, the federal court was
not a court of proper jurisdiction. See Robert A. Ragazzo,
Reconsidering the Artful Pleading Doctrine, 44 HASTINGS L.J. 273, 311
(January 1993).
41