Burdo v. AC&S Inc

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 01-41327 THROUGH 01-41335
No. 01-41366 (CONSOLIDATED)
No. 01-11481 (CONSOLIDATED)
No. 01-51209 (CONSOLIDATED)
No. 01-51241 (CONSOLIDATED)
BILLY ARNOLD, JR., ET AL.,
Plaintiffs - Appellees,
VERSUS
GARLOCK INC.,
Defendant - Appellant.
Appeals from the United States District Court
For the Southern District of Texas, Corpus Christi
April 9, 2002
ON PETITION FOR REHEARING EN BANC
(opinion 12/28/01, 278 F.3d 426 (5th Cir. 2001))
Before DeMOSS, PARKER, and DENNIS, Circuit Judges
PER CURIAM:
Treating the petition for rehearing en banc as a petition for
panel rehearing, the petition for panel rehearing is DENIED. No
member of the panel or judge in regular active service having
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requested that the court be polled on rehearing en banc, see FED R.
APP. P. 35; 5TH CIR. R. 35; the petition for rehearing en banc is
DENIED.
In support of its petition for rehearing, Garlock asserts that
the holding of this court, Arnold v. Garlock, 278 F.3d 426 (5th
Cir. 2001), is in error regarding the law of contribution; that we
improperly adjudicated venue under 28 U.S.C. § 157(b)(5); and that
the automatic stay of 11 U.S.C. § 362 precludes the dismissal of a
bankruptcy-debtor co-defendant from an underlying tort lawsuit.
Garlock asserts that a conflict exists with our decision in
Pope v. Manville Forest Products Corp., 778 F.2d 238 (5th Cir.
1985) regarding application of the § 362 stay. There, we held that
a Louisiana district court erred in applying as res judicata a
judgment of $0 against a Title VII defendant in a New York
bankruptcy court so as to dismiss the plaintiff’s identical claim
in the Louisiana district court. Based on a statutory construction
of § 362, we reversed the district court and held that § 362(a)
stayed the dismissal. Id. at 239. A more-than cursory look,
however, reveals that we expressly limited the holding to the
specific facts of that case, “not wish[ing] unnecessarily, or with
technicality, to impede the district court in maintaining a current
docket. We simply h[e]ld that the entry of the particular order of
dismissal in the appeal before us was prohibited by the section 362
stay.” Id. In the instant cases, the issue was not protecting a
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plaintiff’s direct claim under Title VII from the preclusive effect
of another court’s ruling, but whether to permit a plaintiff to
voluntarily dismiss a claim under FED. R. CIV. P. 41(a) and a
district court’s interest in granting such a motion.
Most circuits hold that the district court has jurisdiction to
determine the applicability of the automatic stay under § 362(a) to
proceedings before it. See 2B Bankr. Service L. Ed. § 19:65 (2002)
(reporting that the Second, Third, Fifth, Sixth, Seventh, Eighth,
and Tenth Circuits so rule). Notwithstanding Pope, we have held
that the automatic stay does not divest all other courts of
jurisdiction to hear every claim that is in any way related to the
bankruptcy proceeding. Further, that district courts retain
jurisdiction to determine the applicability of the stay to
litigation pending before them, and to enter orders not
inconsistent with the terms of the stay. See Picco v. Global
Marine Drilling Co., 900 F.2d 846, 850 (5th Cir. 1990)(dismissal of
claim under forum non conveniens upheld regardless of § 362(a), in
part because the defendant’s Chapter 11 proceeding made it
unnecessary to keep the action on the court’s docket and because a
subsequent lifting of the stay by the bankruptcy court would cure
any defect, if one existed); Hunt v. Banker’s Trust Co., 799 F.2d
1060, 1069 (5th Cir. 1986); cf. In re National Gypsum Co., 118 F.3d
1056, 1070 n.24 (5th Cir. 1997)(restating the premise that a
district court may determine the applicability of the automatic
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stay and noting that such does not prevent a debtor from redressing
violations of the automatic stay through contempt proceedings in
the bankruptcy court nor limit a bankruptcy court from enforcing or
construing its own orders). Other circuits hold likewise. See,
e.g., Dennis v. A.H. Robins Co., Inc., 860 F.2d 871, 872 (8th Cir.
1988)(holding that a district court has the power to dismiss a case
for failure to comply with court rules, regardless of § 362(a), in
the interest of advancing a crowded docket and preserving respect
for the integrity of its internal procedures).
The district courts in the instant cases were similarly
entitled to dismiss the debtor on the plaintiffs’ motions as a
matter consistent with the terms of § 362(a) and the effective
management of their dockets.
Nevertheless, Garlock asserts that its contribution claim
survived the dismissal of the debtor in the underlying tort cases.
The essential prerequisites for a contribution claim are a
judgment finding the party seeking contribution to be a joint
tortfeasor and the payment by such party of a disproportionate
share of the common liability. See Beech Aircraft Corp. v.
Jinkins, 739 S.W.2d 19 (Tex. 1987); FDIC v. Niblo, 821 F. Supp.
441, 457 (N.D. Tex. 1993).
Under Texas law, for a claim to survive a plaintiff’s nonsuit,
it must be a claim for affirmative relief. Quanto Int’l Co. Inc.
v. Lloyd, 897 S.W.2d 482, 484-45 (Tex. App.--Houston [1st Div.]
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1995, no writ). There, a defendant’s counterclaim to enforce
arbitration survived the plaintiff’s nonsuit as a claim for
affirmative relief under TEX. R. CIV. P. 162. Id. at 487.
Regardless, a claim for contribution is not a claim for affirmative
relief, despite Garlock’s bare contention that it is.
Under Texas law, “[t]o qualify as a claim for affirmative
relief, a defensive pleading must allege that the defendant has a
cause of action, independent of the plaintiff’s claim, on which he
could recover benefits, compensation or relief, even though the
plaintiff may abandon his cause of action or fail to establish it.”
General Land Office v. OXY U.S.A., Inc., 789 S.W.2d 569, 570 (Tex.
1990). A cross action for contribution has no existence
independent of a plaintiff’s action. It does not amount to a claim
for affirmative relief under Texas law. See Pleasants v. Emmons,
871 S.W.2d 296, 298 (Tex. App.--Eastland 1994, no writ)
(defendants’ counterclaim for contribution and indemnity from third
party could not be established because plaintiff had abandoned her
claim); Gillman v. Davidson, 934 S.W.2d 803, 805 (Tex. App.--
Houston [1st Dist.] 1996) (en banc) (Hedges, J., dissenting); Nat’l
Advertising Co. v. Smith, No. 01-98-00121-CV, 1999 WL 681957, at *4
(Tex. App--Houston [1st Dist.] 1999) (unpublished opinion)
(“[c]ertain claims have been construed as not constituting
independent affirmative claims for relief because they expire as
soon as the plaintiff’s claims are extinguished,” citing, inter
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alia, Pleasants v. Emmons).
Under federal law, as the Texas courts have noted, FED. R. CIV.
P. 41 does not contemplate the “affirmative relief” requirement
essential to TEX. R. CIV. P. 162 regarding dismissal of an action.
Quanto, 897 S.W.2d at 486-87. Each of Garlock’s cases, however,
were removed under federal question jurisdiction, as a matter
purportedly “related to” federal bankruptcy proceedings. A claim
for contribution under federal question jurisdiction is governed by
federal procedural law, namely, FED. R. CIV. P. 8(c). See Niblo,
821 F. Supp. at 456. That court held that contribution was not an
affirmative defense within the purview of Rule 8(c) but an
affirmative claim which must be pled and proved. The court would
not read the defendants’ plea in avoidance as an affirmative
defense under the last sentence of Rule 8(c)1 because the necessary
prerequisites to establish a claim of contribution under Texas law
had not been met. Id. at 456-57 (citing Beech Aircraft Corp. v.
Jinkins, 739 S.W.2d 19, 21 (Tex. 1987), supra). First, there had
been no judgment against the defendants with respect to any claim,
nor one finding the defendants to be jointly and severally liable,
and, second, there had been no disproportionate payment, if any
occurred, of a judgment by the defendants. 821 F. Supp. at 456.
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“When a party has mistakenly designated a defense as a
counterclaim or a counterclaim as a defense, the court on terms, if
justice so requires, shall treat the pleading as if there had been
a proper designation.”
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Here, similarly, there have been no judgments as to Garlock in
any of the previously-removed cases, nor has Garlock been subject
to payment of any amount by judgment. On those bases, Garlock has
merely pleaded contribution in avoidance. Because the district
courts in the instant cases properly dismissed the debtor in the
face of § 362(a), Garlock’s purported claims did not survive the
dismissals. Garlock also cites Koonce v. Quaker Safety Products &
Mfg. Co., 798 F.2d 700 (5th Cir. 1986) for the proposition that the
expiration of a statute of limitations for a plaintiff’s claim
against a third party does not preclude a defendant’s claim of
contribution against that third party. There, a judgment had been
entered and a jury had apportioned fault among the plaintiff,
defendant, and third party. Id. at 705. Here, again, there has
been no judgment or apportionment of fault. Garlock has not
satisfied the requirements for maintaining a claim for contribution
and further, as we noted, Arnold, 278 F.3d at 440, Garlock lacks
the relationship or unity of identity with the debtor that
characterized, for example, In re Dow Corning, 86 F.3d 482 (6th
Cir. 1996). There is no presently-cognizable claim under either
Texas state or federal law upon which Garlock can found a claim of
“related-to” jurisdiction under 28 U.S.C. § 1334.
On these bases, Garlock’s contribution claims are
unsupportable.
Garlock also contends that we exceeded our jurisdiction by
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determining “on the merits” under § 157(b)(5) the venue of the tort
claims against it. As Garlock correctly points out, such an
analysis belongs only in the “Home” district court with bankruptcy
jurisdiction. Our analysis, however, did not purport to determine
the venue in which to proceed. Instead, it was limited to
determining whether Garlock could make a showing on appeal
sufficient to justify issuing a stay pending appeal on its motion
to transfer under the circumstances presented. As such, the focus
was on an analysis in this court, not in the “Home” district court.
Rather than ruling on the appropriate venue for a valid claim
within the § 157(b)(5) scheme, we simply conducted a threshold
analysis to determine whether Garlock had such a valid claim under
which to invoke “related-to” bankruptcy jurisdiction under § 1334
and so implicate § 157(b)(5) at all. Finding that it did not, we
implicitly upheld the determinations of the district courts and
denied Garlock’s motion for stay pending appeal on the basis that
Garlock was unable to show a likelihood of success on such appeal.
Effectively, that denied a motion to transfer, not a motion to
determine venue under § 157(b)(5).
Garlock apparently believes that such a transfer should have
been automatic upon application to the court in which the tort
action arose when the debtor entered bankruptcy proceedings. In
this, Garlock fails to apprehend the difference between reviewing
a party’s eligibility for “related-to” bankruptcy jurisdiction and
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determining in law or equity the most appropriate venue in which to
proceed once such jurisdiction is established.
Of greater concern is whether the court in which a tort action
arises, if different from the bankruptcy jurisdiction, is the
appropriate place to bring a transfer motion under § 157(b)(5).
Although the language of § 157(b)(5) seems to permit it, such a
determination is subject to an in-depth examination under the rules
of statutory construction. Because our determination in this case
revolved around Garlock’s lack of a valid cross-claim against the
debtor and Garlock’s inability to show a likelihood of success on
appeal, we did not determine with finality whether § 157(b)(5),
alone, enables a district court outside of the bankruptcy
jurisdiction to effect such a transfer. The point may be a minor
one, given that under the general transfer statute, 28 U.S.C. §
1404(a), “[f]or the convenience of parties and witnesses, in the
interest of justice, a district court may transfer any civil action
to any other district or division where it might have been
brought.” Whether transfer would have been predicated on §
157(b)(5) or on a district court’s broad discretion under §
1404(a), however, Garlock’s claim did not create “related-to”
bankruptcy jurisdiction.
Garlock’s petition for rehearing en banc is therefore DENIED.
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