George T. Hawes v. Madison Ave. Media, Inc.

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CORRECTED [PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 12-14464
________________________
D.C. Docket No. 9:11-cv-81025-KLR
GEORGE T. HAWES,
Plaintiff-Appellee,
versus
MICHAEL J. GLEICHER,
Intervener-Appellant,
versus
MADISON AVE. MEDIA, INC.
Defendant
________________________
Appeal from the United States District Court
for the Southern District of Florida
________________________
Before TJOFLAT, WILSON, Circuit Judges, and PROCTOR,∗ District Judge.
TJOFLAT, Circuit Judge:
∗
The Honorable R. David Proctor, United States District Judge for the Northern District of
Alabama, sitting by designation.
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I.
On September 12, 2011, George T. Hawes (“Hawes”), a New York citizen,
brought this action against Madison Avenue Media, Inc. (“MAM”), a Delaware
corporation based in Boca Raton, Florida. 1 Hawes is a MAM secured creditor. He
holds two Convertible Promissory Notes: one executed on February 18, 2011, in
the principal amount of $500,000 and due on February 17, 2012, the other on July
29, 2011, in the principal of $500,000 and due on demand. Each note is secured by
a Security Agreement having a lien on certain items of MAM’s property. Hawes’s
complaint contains four “Claims for Relief.” Claim One alleges that the February
18, 2011 note is in default; Claim Three alleges that MAM has refused Hawes’s
demand for payment on the July 29, 2011 note. Both claims seek a judgment for
“actual and consequential damages, interest, attorneys’ fees, costs, and such other
relief as may be just and equitable in the circumstances.” Claims Two and Four
allege that MAM breached certain promises contained in the Security Agreements
and seek judgment for the same relief as Claims One and Three. 2
1
Hawes invoked the District Court’s diversity jurisdiction under 28 U.S.C. § 1332
(2006).
2
Neither Claim Two nor Claim Four seeks foreclosure on the property subject to the
Security Agreement liens. Thus, Hawes brought suit not as a secured creditor but as a general
creditor.
2
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MAM failed to respond to Hawes’s complaint, and on October 11, 2011,
Hawes obtained a Clerk’s Default. 3 Two weeks later Hawes moved the District
Court for entry of a Default Judgment against MAM. 4 Before the court ruled on
Hawes’s motion, however, Michael Gleicher moved to intervene in the case––
either as a matter of right 5 or in the alternative, permissively. 6 Gleicher sought
3
See Fed. R. Civ. P. 55(a) (“When a party against whom a judgment for affirmative relief
is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or
otherwise, the clerk must enter the party’s default.”).
4
See Fed. R. Civ. P. 55(b)(2). Rule 55(b) states:
(1) By the Clerk. If the plaintiff’s claim is for a sum certain or a sum that can be
made certain by computation, the clerk—on the plaintiff’s request, with an
affidavit showing the amount due—must enter judgment for that amount and
costs against a defendant who has been defaulted for not appearing and who is
neither a minor nor an incompetent person.
(2) By the Court. In all other cases, the party must apply to the court for a default
judgment. A default judgment may be entered against a minor or incompetent
person only if represented by a general guardian, conservator, or other like
fiduciary who has appeared. If the party against whom a default judgment is
sought has appeared personally or by a representative, that party or its
representative must be served with written notice of the application at least 7 days
before the hearing. The court may conduct hearings or make referrals—
preserving any federal statutory right to a jury trial—when, to enter or effectuate
judgment, it needs to:
(A) conduct an accounting;
(B) determine the amount of damages;
(C) establish the truth of any allegation by evidence; or
(D) investigate any other matter.
5
See Fed. R. Civ. P. 24(a)(2). Rule 24(a)(2) provides that:
On timely motion, the court must permit anyone to intervene who . . . claims an
interest relating to the property or transaction that is the subject of the action, and
is so situated that disposing of the action may as a practical matter impair or
impede the movant’s ability to protect its interest, unless existing parties
adequately represent that interest.
Under this rule “a party is entitled to intervention as a matter of right if the party’s
interest in the subject matter of the litigation is direct, substantial and legally protectable.” Mt.
3
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leave to intervene in two capacities: (1) as a MAM general creditor holding two
Convertible Promissory Notes, one for $88,000 due on June 1, 2011, and in
default, the other for $30,000 due on December 1, 2011; and (2) as a MAM
shareholder. He sought intervention for the purpose of standing in MAM’s shoes
and defeating Hawes’s claims. If successful, and MAM remained solvent (because
it wouldn’t have to pay Hawes), Gleicher represented that MAM would be able to
retire the two notes and his shares would retain value.
The District Court granted Gleicher intervention 7 over Hawes’s objection,
though it was “not entirely convinced that Gleicher’s intervention as a defendant in
this action is the most appropriate or strategic course of action.” The court also
vacated the Clerk’s default.8 The District Court granted Gleicher intervention as
MAM’s codefendant even though Hawes’s claims were brought only against
Hawley Ins. Co. v. Sandy Lake Props., Inc., 425 F.3d 1308, 1311 (11th Cir. 2005) (citation
omitted) (internal quotation mark omitted).
6
See Fed. R. Civ. P. Rule 24(b). Rule 24(b) provides, in relevant part, that “the court
may permit anyone to intervene who . . . has a claim or defense that shares with the main action a
common question of law or fact” and that “[i]n exercising its discretion, the court must consider
whether the intervention will unduly delay or prejudice the adjudication of the original parties’
rights.”
7
The District Court was not explicit as to whether it was granting intervention as matter
of right or permissively. Based on the court’s language––“[t]he main issue raised by Gleicher’s
motion is whether his interests are being adequately represented”––we assume that it was
granted as a matter of right.
8
See Fed. R. Civ. P. 55(c) (“The court may set aside an entry of default for good cause,
and it may set aside a default judgment under Rule 60(b)”). Here, Gleicher’s intervention
provided the good cause to set aside the default judgment.
4
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MAM. As MAM’s codefendant, Gleicher filed an answer to Hawes’s complaint
denying its allegations on behalf of MAM.
On March 5, 2012, Hawes moved the District Court for summary judgment.
His motion briefly stated that
[t]he grounds for this motion are that there are no genuine issues of
material fact as to whether (1) the defendant, Madison Avenue Media,
Inc. (“MAM”), entered into the contracts with Hawes as alleged in
Hawes’ Complaint in this action; (2) MAM materially breached each
of those contracts; and (3) Hawes has been damaged by MAM’s
breaches.
At the same time, Hawes moved the court to appoint a receiver, without bond, to
represent the interest of MAM in the litigation. The motion stated that it was being
brought “pursuant to Federal Rule of Civil Procedure 66.” The memorandum
Hawes filed in support of the motion stated that “[t]he appointment of a receiver in
a civil case is authorized by 28 U.S.C. § 754 and Rule 66 of the Federal Rules of
Civil Procedure.” Neither Rule 66 9 nor § 754 10 provided Hawes with the right to
9
Federal Rule of Civil Procedure 66 provides:
These rules govern an action in which the appointment of a receiver is sought or a
receiver sues or is sued. But the practice in administering an estate by a receiver
or a similar court-appointed officer must accord with the historical practice in
federal courts or with a local rule. An action in which a receiver has been
appointed may be dismissed only by court order.
10
28 U.S.C. § 754 states:
A receiver appointed in any civil action or proceeding involving property, real,
personal or mixed, situated in different districts shall, upon giving bond as
required by the court, be vested with complete jurisdiction and control of all such
property with the right to take possession thereof.
5
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obtain the appointment of a receiver in this in personam case prejudgment. 11 The
District Court nonetheless granted Hawes’s motion. 12 In its order, the court
assumed exclusive jurisdiction and possession of MAM’S assets, and a person
recommended by Hawes and Gleicher was appointed receiver, without bond.
On May 23, 2012, the receiver filed a response to Hawes’s motion for
summary judgment on behalf of MAM. This response admitted that the Notes and
Security Agreements described in the four claims of Hawes’s complaint were
He shall have capacity to sue in any district without ancillary appointment, and
may be sued with respect thereto . . . .
Such receiver shall, within ten days after the entry of his order of appointment,
file copies of the complaint and such order of appointment in the district court for
each district in which property is located. The failure to file such copies in any
district shall divest the receiver of jurisdiction and control over all such property
in that district.
11
Wright, Miller, and Marcus have the following to say about a federal court’s
authority to appoint prejudgment a receiver in an action such as the one at hand in which
the plaintiff has a security interest in personal property—here a chattel mortgage—but
seeks a money judgment instead of foreclosing on the security interest:
The appointment of a receiver by a federal court may be sought by any person or
class having an interest in property that a statute or one of the general principles
of equity authorizes the court to protect by this remedy. Inasmuch as a
receivership may interfere seriously with [a] defendant’s property rights by
ousting him or her from control, and sometimes even possession, the party
seeking it must show that he or she has some legally recognized right in that
property that amounts to more than a mere claim against [a] defendant. Thus, a
receiver ordinarily will not be appointed at the inadequacy of his remedy at law,
because he has “no substantive right, legal or equitable, in or to the property of his
debtor.” Of course, a receiver may be appointed, even at the request of a contract
claimant, if the defendant admits the claim and consents to the appointment,
provided that there has been no collusion between the parties that would deprive
the court of jurisdiction under Section 1359 of Title 28.
12 Charles Alan Wright, Arthur R. Miller, & Richard L. Marcus, Federal Practice and Procedure
Civil § 2983 (2d ed. 1997) (emphasis added) (footnotes omitted).
12
Gleicher did not object to the appointment of a receiver.
6
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valid, that the notes were in default, and that Hawes was due the sum of
$3,302,783.33. Gleicher also filed a separate response to Hawes’s motion for
summary judgment, arguing that it “should be denied because no disclosure or
discovery has occurred, and the motion is therefore premature.”
On July 24, 2012, the District Court granted Hawes’s motion for summary
judgment finding that the “matter [was] ripe for adjudication” and that there were
“no issues of material fact with respect to [Hawes’s] claims against MAM.”
Hawes v. Madison Ave. Media, Inc., No. 11-cv-81025, slip op. at 1, 5 (S.D. Fla.
July 24, 2012). The court also noted that “Gleicher [was] not authorized to speak
on behalf of MAM,” and that he lacked “standing to challenge the Receiver’s
findings (or Plaintiff’s claims, for that matter).” Id. at 5. Following the entry of
final judgment for Hawes, Gleicher lodged this appeal. He asks that we vacate the
District Court’s judgment and remand the case for further proceedings on the
grounds that the court erred (1) in refusing to allow discovery before ruling on
Hawes’s motion for summary judgment; and (2) in concluding that Hawes was
entitled to judgment as a matter of law.
II.
Reduced to its bare bones, this case is simple, yet bizarre. We consider first
Gleicher’s status as a general creditor of MAM. Hawes, a general creditor, 13 sues
13
See supra note 2.
7
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MAM, his debtor. Another general creditor, Gleicher, intervenes to prevent Hawes
from recovering. Gleicher cites no source––either in common law or in a state
statute––giving a general creditor the right to defend his debtor from another
general creditor for the sole purpose of defeating the latter’s claim. Presumably,
Gleicher would have us assume that the general creditor who brought suit owed a
duty to the intervening general creditor (and all of the debtor’s general creditors)
not to sue to the debtor. Hardly.
Consider Gleicher’s status as a MAM shareholder. Again, Gleicher cites no
source––either in common law or in a state statute––giving a corporation’s
shareholder the right to intervene in a suit brought against the corporation by one
of its creditors for the sole purpose of defeating the creditor’s claim. It requires no
subtle analysis to conclude that a corporation’s shareholder possesses no right to
intervene in a lawsuit such as the one Hawes brought.
III.
Once this case is stripped to these bare bones the question becomes whether
Gleicher has standing to appeal the District Court’s final judgment, based on his
capacities as a creditor and shareholder.
“Article III of the Constitution confines the reach of federal jurisdiction to
‘Cases’ and ‘Controversies.’” Alabama-Tombigbee Rivers Coal. v. Norton, 338
F.3d 1244, 1252 (11th Cir. 2003) (quoting U.S. Const. art. III, § 2); see also, Lujan
8
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v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S. Ct. 2130, 2136, 119 L. Ed. 2d
351 (1992) (“[S]tanding is an essential and unchanging part of the case-or-
controversy requirement of Article III.”). At an irreducible constitutional
minimum, a plaintiff must show an injury-in-fact, a causal connection between the
injury and the defendant’s conduct, and a likelihood that the injury will be
redressed by a favorable decision from the court. Lujan, 504 U.S. at 560, 112 S.
Ct. at 2136. “In addition to these three constitutional requirements, the Supreme
Court has held that prudential requirements pose additional limitations on
standing.” Wolff v. Cash 4 Titles, 351 F.3d 1348, 1353 (11th Cir. 2003). For
example, a party “generally must assert his own legal rights and interests, and
cannot rest his claim to relief on the legal rights or interests of third parties.”
Warth v. Seldin, 422 U.S. 490, 499, 95 S. Ct. 2197, 2205, 45 L. Ed. 2d 343 (1975).
“The standing Article III requires must be met by persons seeking appellate
review, just as it must be met by persons appearing in courts of first instance.”
Arizonans for Official English v. Arizona, 520 U.S. 43, 64, 117 S. Ct. 1055, 1067,
137 L. Ed. 2d 170 (1997). A party’s ability “to appeal a trial court judgment is
governed by a body of doctrine distinct from that which controls standing to bring
suit as a plaintiff, although there is a significant overlap between the two.” Knight
v. Alabama., 14 F.3d 1534, 1556 (11th Cir. 1994). One aspect of this overlap is
9
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“the general rule that a party may not appeal to protect the rights of others.” Id.
(citation omitted) (internal quotation marks omitted).
Gleicher has not established, nor could he, that he suffered an injury-in-fact
as a result of Hawes’s filing of this lawsuit. Therefore, he lacked standing to
intervene and he lacks standing to appeal the District Court’s final judgment. On
appeal, he is not asserting his own rights; 14 rather, he is asserting, albeit indirectly,
MAM’s rights. This appeal is accordingly dismissed.
SO ORDERED.
14
The District Court’s decision allowing Gleicher to intervene did not at once give him
the injury-in-fact needed to intervene in the first place.
10