Milan Express v. Averitt Express

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
__________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
APR 07 2000
No. 98-7024
THOMAS K. KAHN
__________________________ CLERK
D.C. Docket No. 95-02721-CV-AR-S
MILAN EXPRESS, INC.,
Plaintiff-Appellant, Cross-Appellee,
versus
AVERITT EXPRESS, INC., UNITED
STATES FIDELITY AND GUARANTY CO.,
Defendants-Appellees, Cross-Appellants.
__________________________
Appeals from the United States District Court
for the Northern District of Alabama
__________________________
(April 7, 2000)
Before CARNES, BARKETT and WILSON, Circuit Judges.
BARKETT, Circuit Judge:
Milan Express, Inc. (“Milan”) appeals the district court’s order vacating in
part for lack of jurisdiction the jury’s award of damages. The district court vacated
the portion of the verdict awarding damages in excess of the amount of a Rule
56(c) bond posted to secure an injunction that had been wrongfully obtained by
Averitt Express, Inc. (“Averitt”).1 The court ruled that its jurisdiction was limited
only to Milan’s claim for the specific amount of the bond and entered a final
judgment upholding the jury’s verdict for this amount. Averitt and U.S. Fidelity
and Guaranty Co. (“USFG”) cross-appeal from this final judgment, arguing that
jurisdiction is likewise lacking over the claim on the bond. We affirm in part, and
reverse and remand in part.
BACKGROUND
Milan and Averitt are trucking companies that have been involved in
protracted litigation since the early 1990s when Averitt attempted to obtain
intrastate operating authority in Alabama by contracting with another trucking
company to transfer a portion of its operating authority to Averitt. When Averitt
petitioned the Interstate Commerce Commission (“ICC”) for approval of the
transfer, Milan (and others) formally opposed the transfer, arguing to the ICC that
“[t]he proposed interstate transaction . . . is merely a pretense for avoiding the
jurisdiction of the Alabama Public Service Commission.” The ICC nonetheless
1
This Court determined in North Alabama Express, Inc. v. ICC, 62 F.3d 361 (11th Cir. 1995),
that the injunction had been wrongfully obtained.
2
issued a final order affirming the transfer to Averitt. However, the Alabama Public
Service Commission (“APSC”) refused to honor the ICC’s order and rejected the
tariff filed by Averitt.
Averitt filed suit in federal district court, seeking to enjoin the APSC from
interfering with Averitt’s Alabama intrastate operations. The trial court issued a
preliminary injunction, and required Averitt to post a $50,000 bond “for the
payment of such costs and damages as may be incurred or suffered by the
defendants if this preliminary injunction is subsequently found to have erroneously
issued.” USFG posted the bond as Averitt’s surety. Ultimately, when Milan and
others sought review, this Court set aside the ICC order, holding that the ICC
lacked authority over matters solely concerned with intrastate commerce.
After prevailing in this Court, Milan filed its complaint in this case, seeking
to recover from Averitt and USFG the $50,000 bond connected with the previously
issued injunction and seeking damages in excess of the bond amount from Averitt.
A jury determined that: 1) the injunction had been wrongfully issued and Milan
was entitled to judgment against Averitt and USFG for $50,000 on the bond claim,
and 2) the injunctive relief had been obtained by Averitt in bad faith, and Milan
was entitled to total damages in the amount of $1,920,521.21.
3
After various post judgment motions and activity, the district court
ultimately determined that, while it had jurisdiction over the claim for the amount
of the injunction bond under 28 U.S.C. §1352, it lacked jurisdiction over Milan’s
claim for damages in excess of the bond amount and vacated the jury verdict of
$1,870,521.21 against Averitt. Milan appeals the district court’s refusal to enforce
the verdict for $1,870,521.21 in damages. Averitt and USFG cross-appeal both the
district court’s judgment on the jury’s verdict awarding the $50,000 bond amount
and the district court’s denial of judgment as a matter of law in their favor. We
review questions of subject matter jurisdiction de novo. McMillan v. FDIC, 81
F.3d 1041, 1045 (11th Cir. 1996).
DISCUSSION
1. Jurisdiction over the claim for the amount of the bond
In connection with the injunction issued by the district court in favor of
Averitt in the preceding lawsuit, Averitt was required to post a bond of $50,000.
See Fed. R. Civ. P. 65(c).2 As an initial matter, we reject Averitt’s claim that
Milan does not have standing to seek relief under the bond because the bond was
2
Federal Rule of Civil Procedure 65(c) provides:
No restraining order or preliminary injunction shall issue except upon the giving
of securities by the applicant, in such sum as the court deems proper, for the
payment of such costs and damages as may be incurred or suffered by any party
who is found to have been wrongfully enjoined or restrained.
4
issued in favor of “U.S. District Court for the Northern District of Alabama,
Southern Division,” not in favor of Milan. The district court ordered Averitt to
“mak[e] bond in the amount of Fifty Thousand Dollars ($50,000.00) for the
payment of such costs and damages as may be incurred or suffered by the
defendants if this preliminary injunction is subsequently found to have been
erroneously issued.” Milan was at that point a defendant-intervener and was
specifically listed in the injunction as a party that must comply with its provisions.
Moreover, Rule 65(c), under which the bond was ordered, specifically states that
the bond is to be used “for the payment of such costs and damages as may be
incurred or suffered by any party who is found to have been wrongfully enjoined
or restrained.” Milan is certainly such a party and is thus entitled to sue for the
value of the bond.
Milan relies on several provisions as the basis for the district court’s alleged
jurisdiction over the suit on the bond. We agree with Averitt that neither Federal
Rule of Civil Procedure 65.1 nor 49 U.S.C. § 14707 gives the district court
jurisdiction over a claim to recover on the bond. A federal rule cannot be the basis
of original jurisdiction. Rather, Rule 65.1 provides a permissive mechanism
whereby parties aggrieved by a wrongfully issued injunction may summarily seek
to recover on an injunction bond by filing a motion in the original suit rather than
5
by bringing a separate action. Fed. R. Civ. P. 65.1; see also Wright, Miller, &
Kane, Federal Practice & Procedure: Civil 2d § 297 (“The importance of Rule
65.1 is that it permits the liability of a surety to be enforced through an expeditious,
summary procedure without the necessity of an independent action. On the other
hand, the rule is permissive and does not prohibit the bringing of an independent
action against the surety, which may be commenced either in a state or federal
court.”). Milan did in fact make a Rule 65.1 motion in the original suit; the district
court judge declined to act on that motion, reserving the issues for a separate
action. Because this case is an independent action for damages resulting from a
wrongfully issued injunction, Rule 65.1 is not a basis for jurisdiction.
Nor does 49 U.S.C. § 11708, recodified at 49 U.S.C. § 14707, provide
subject matter jurisdiction. Section 11708, as written at the time the complaint in
this case was filed, provided that a person injured by another person providing
“transportation by motor vehicle or service of a household goods freight forwarder
in clear violation of”certain provisions of Title 49 was entitled to “bring a civil
action to enforce” the violated section of the Code. The district court could not
“find anything which Averitt is alleged to have done or which was supported by
evidence at trial, that arguably constituted a ‘clear violation,’ of any of these code
sections or which would call for this action as a means to ‘enforce any such
6
section.’” This case is a claim for damages suffered as a result of a wrongfully
issued injunction, not a suit brought to enforce any of the covered provisions of the
Code. Section 11708 cannot, therefore, serve as a basis for jurisdiction over this
claim.
We do conclude, however, that 28 U.S.C. § 1352 provides a basis for
jurisdiction over Milan’s injunction bond claim. Section 1352 provides that
“district courts shall have original jurisdiction, concurrent with State courts, of any
action on a bond executed under any law of the United States . . . .” Averitt
contends that this case does not fall within the ambit of Section 1352 because
considering this injunction bond as “a bond executed under any law of the United
States” would run counter to the intent of Congress. In support of its argument,
Averitt relies on the 1948 Code reviser’s notes, which indicate that Section 1352
was enacted for the purpose of allowing suits on “any bond authorized by the law
of the United States” that would not otherwise have met the amount in controversy
jurisdictional requirement. Averitt concludes from this limited indication of
purpose that the statute was originally intended to cover only bonds issued under
Title 6 of the U.S. Code, which has since been repealed. Averitt does not point to
any authoritative source, however, to support this theory or its contention that we
7
should construe “any bond authorized by the law of the United States” to exclude
injunction bonds.
This Circuit has not yet had occasion to decide whether an injunction bond is
the type of bond contemplated by Section 1352. At least two other circuits,
however, have implicitly held that parties aggrieved by a wrongfully issued
injunction may sue to recover on an injunction bond under Section 1352. See
Buddy Systems, Inc. v. Exer-Genie, Inc., 545 F.2d 1164, 1166 (9th Cir. 1976)
(holding that there was no jurisdiction under Section 1352, but only because the
bond had been dissolved); Atomic Oil Co. v. Bardahl Oil Co., 419 F.2d 1097, 1099
(10th Cir. 1969) (implicitly finding federal court jurisdiction over a collateral
action to recover on an injunction bond); see also Alabama ex rel. Siegelman v.
EPA, 925 F.2d 385, 388-90 (11th Cir. 1991) (adopting the reasoning of Atomic Oil
Co.). Given the plain meaning of the language employed in Section 1352, we now
join our sister circuits in concluding that an injunction bond, issued pursuant to
Rule 65(c) to secure a federal court injunction, is in fact a “bond executed under
any law of the United States.” Averitt has offered no argument that persuades us
that we should read any sort of restriction into the clear language in the statute.
We therefore conclude that the district court had jurisdiction over the claim on the
bond under 28 U.S.C. § 1352.
8
We also conclude, however, that the district court erred in submitting the
claim on the injunction bond to the jury. This Court held in Siegelman that the
decision whether to award “damages pursuant to an injunction bond rests in the
sound discretion of the court’s equity jurisdiction.” 925 F.2d at 389 (quoting H &
R Block, Inc. v. McCaslin, 541 F.2d 1098, 1099 (5th Cir. 1976)). Thus, although
we find that the district court had jurisdiction to hear Milan’s claim for the amount
of the injunction bond, we are unclear as to whether, in reinstating the verdict on
that claim, the court independently determined that Milan was entitled to recover
on the injunction bond. Thus, on remand, the court shall consider, in light of the
equities of the case, whether to exercise its discretion to award the amount of the
injunction bond to Milan.
2. Jurisdiction over the claim for damages in excess of the bond amount
Having decided that the district court had initial jurisdiction to resolve
Milan’s claim on the bond, we turn to the question of whether jurisdiction
extended to Milan’s excess damages claim. Under 28 U.S.C. § 1367, a district
court may exercise supplemental jurisdiction over claims where the court would
otherwise lack jurisdiction. Section 1367 provides that, unless the case falls into
one of several enumerated exceptions, the district court “shall have supplemental
jurisdiction over all other claims that are so related to claims in the action within
9
[the court’s] original jurisdiction that they form part of the same case or
controversy under Article III of the United States Constitution.” We find no merit
in Averitt’s contention that Milan’s excess damages claim does not arise out of the
same case or controversy as their bond claim. Although it is true that Milan was
required to prove more (e.g., that Averitt acted in bad faith) in order to prevail on
the excess damages claim than it did in order to prevail on the bond claim, both
claims clearly arise from the same set of facts. This is sufficient to bring the excess
damages claim under the purview of Section 1367 because the excess damages
claim “arise[s] out of a common nucleus of operative fact with a substantial federal
claim.” Lucero v. Trosch, 121 F.3d 591, 597 (11th Cir. 1997).
In analyzing Section 1367, this Court has found that it “reflects a dichotomy
between a federal court’s power to exercise supplemental jurisdiction, § 1367(a),
and its discretion not to exercise such jurisdiction, § 1367(c).” Lucero, 121 F.3d at
597. We have held that, once a district court determines “that it has power to
exercise supplemental jurisdiction under § 1367(a), then the court should exercise
that jurisdiction, unless § 1367(b) or (c) applies to limit the exercise.” Baggett v.
First Nat’l Bank of Gainsville, 117 F.3d 1342, 1352 (11th Cir. 1997). Milan
claims that the district court abused its discretion in failing to exercise
10
supplemental jurisdiction over the excess damages claim.3 Milan suggests that,
because the district court did not mention supplemental jurisdiction in the order in
which the court asserted jurisdiction over the bond claim, we should consider this
issue de novo. Averitt, on the other hand, contends that the district court properly
decided not to exercise its supplemental jurisdiction because two of the factors in
Section 1367(c) applied.4 We consider the district court’s failure to address the
question of supplemental jurisdiction to be an oversight rather than an affirmative
choice. Thus, because the district court did not analyze whether it should exercise
its discretion to assume supplemental jurisdiction under the factors laid out in
Section 1367 over the excess damages claim after that claim had been fully tried
and determined by a jury, we remand this case so that the court may consider
whether to do so.
3
We review a district court’s decision not to exercise supplemental jurisdiction for abuse of
discretion. See Engelhardt v. Paul Revere Life Ins. Co., 139 F.3d 1346, 1351 n.4 (11th Cir.
1998).
4
Section 1367(c) provides that:
The district courts may decline to exercise supplemental jurisdiction over a claim
under subsection (a) if–
(1) the claim raises a novel or complex issue of State law,
(2) the claim substantially predominates over the claim or claims
over which the district court has original jurisdiction,
(3) the district court has dismissed all claims over which it has
original jurisdiction, or
(4) in exceptional circumstances, there are other compelling
reasons for declining jurisdiction.
11
Finally, Averitt urges this Court to find that the district court erred in
denying Averitt’s motion for judgment as a matter of law or alternatively for a new
trial. This Court has already held that the ICC’s order, which the injunction was
issued to protect, was erroneous. North Alabama Express, Inc. v. ICC, 62 F.3d 361(11th Cir. 1995). Thus, we cannot now say that the injunction was appropriately
issued. The district court did not err in denying Averitt’s motion. Because the
district court did not rule on Averitt’s motions regarding the excess damages claim,
we will not consider those claims herein, but will leave that consideration to the
district court on remand.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
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