John Jacuzzi, Sr. v. Enrique Pimienta

Case: 13-41111 Document: 00512722844 Page: 1 Date Filed: 08/05/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 13-41111 August 5, 2014
Lyle W. Cayce
Clerk
JOHN B. JACUZZI, SR.; MARGARITA JACUZZI; JOHN B. JACUZZI, JR.;
PATRICIA JACUZZI; JAMES JACUZZI,
Plaintiffs–Appellants
versus
ENRIQUE PIMIENTA,
Defendant–Appellee.
Appeal from the United States District Court
for the Southern District of Texas
Before DAVIS, SMITH, and BENAVIDES, Circuit Judges.
PER CURIAM:
The plaintiffs, members of the Jacuzzi family, launched a collateral
attack on a related bankruptcy proceeding in federal district court under the
Declaratory Judgment Act (“DJA”), claiming that they were never properly
served before the bankruptcy court entered judgment against them and held
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No. 13-41111
them in contempt. The district court initially granted them a summary judg-
ment, holding the bankruptcy proceedings were void. It afterward sua sponte
asked the parties to brief subject-matter jurisdiction, then dismissed the case
for want of federal-question or diversity jurisdiction. Because there is in fact
federal-question jurisdiction, we reverse and remand.
The Jacuzzis and defendant Enrique Pimienta are members of wealthy
Mexican families with ties to the United States. The underlying bankruptcy
dispute is ugly but mostly irrelevant. We are concerned with the Jacuzzis’
collateral attack on the bankruptcy proceedings in which Pimienta was the
debtor. The Jacuzzis claim they were never properly served before the bank-
ruptcy court held them in contempt, entered judgment against them, and
allowed Pimienta to proceed with execution on their real property. Pimienta
asks this court to rule that the bankruptcy court had personal jurisdiction over
the Jacuzzis and that its orders were lawful. But that is not at issue here.
Instead, the question is whether the district court had subject-matter jurisdic-
tion to hear the collateral challenge to the bankruptcy court’s exercise of per-
sonal jurisdiction.
The district court found no federal-question jurisdiction because (1) the
DJA does not provide an independent ground for jurisdiction, and (2) it
believed that the Jacuzzis’ claim would not meet the well-pleaded-complaint
rule in a hypothetical enforcement action filed by Pimienta. The court
explained that a proceeding in aid of a judgment or execution must follow state
procedural law, see FED. R. CIV. P. 69(a)(1), so no federal question is necessarily
raised. It is true, as the Jacuzzis acknowledge, that a plaintiff cannot bring a
declaratory judgment action that merely raises federal issues that would be
defenses to an underlying state cause of action; that would subvert the well-
pleaded complaint rule. See, e.g., New Orleans & Gulf Coast Ry. v. Barrois,
533 F.3d 321, 329 (5th Cir. 2008).
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But any judgment may be collaterally attacked if it is void for lack of
jurisdiction. “A defendant is always free to ignore the judicial proceedings, risk
a default judgment, and then challenge that judgment on jurisdictional
grounds in a collateral proceeding.” Ins. Corp. of Ireland, Ltd. v. Compagnie
des Bauxites de Guinee, 456 U.S. 694, 706 (1982). The other court’s determin-
ation of personal jurisdiction is res judicata only if the defendant submitted to
jurisdiction for the limited purpose of challenging jurisdiction and the issue
was fully and fairly litigated. Id.On what grounds that collateral attack is made determines whether
there is federal-question jurisdiction. Federal courts have federal-question
jurisdiction to entertain collateral attacks on military tribunals—which, like
bankruptcy courts, are Article I courts—for lack of jurisdiction. Schlesinger v.
Councilman, 420 U.S. 738, 747–48 (1975). In Rhoades v. Penfold, 694 F.2d
1043, 1047 (5th Cir. 1983), this court held that federal district courts have
federal-question jurisdiction over a collateral attack on a state-court judgment
based on the deprivation of the constitutional right to counsel. This court also
entertains collateral challenges to a district court’s exercise of personal juris-
diction and to lack of service. See Broad. Music, Inc. v. M.T.S. Enters., Inc.,
811 F.2d 278, 281 (5th Cir. 1987).
Although Schlesinger was an action for preliminary injunction, Rhoades
was a collateral attack under 42 U.S.C. § 1983, and Broadcast Music was a
collateral attack under Federal Rule of Civil Procedure 60(b); there is no prin-
cipled reason why the DJA would be any different as a matter of federal-
question jurisdiction. So long as the basis for the preliminary injunction or
declaratory judgment is federal law, there is federal-question jurisdiction.
That conclusion is required by Supreme Court law on the DJA:
Jurisdiction . . . was not altered by the [DJA]. Prior to that Act, a
federal court would entertain a suit on a contract only if the plaintiff
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asked for an immediately enforceable remedy like money damages or
an injunction, but such relief could only be given if the requisites of
jurisdiction, in the sense of a federal right or diversity, provided foun-
dation for resort to the federal courts. The [DJA] allowed relief to be
given by way of recognizing the plaintiff’s right even though no imme-
diate enforcement of it was asked.
Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671–72 (1950). In other
words, if federal courts have jurisdiction to entertain collateral attacks for
preliminary injunctions on the basis of lack of jurisdiction, then the DJA did
nothing to change that jurisdictional analysis.
Other circuits reach the same conclusion. The Fourth Circuit addressed
almost this exact situation: It heard, under the DJA, a collateral attack, based
on lack of notice, on an outside bankruptcy court’s proceedings, stating, “A
challenge for error may be directed to the ordering court or a higher court, as
rules provide, but it may not be made collaterally unless it is based on the
original court’s lack of jurisdiction.” Spartan Mills v. Bank of Am. Ill., 112 F.3d
1251, 1255 (4th Cir. 1997). That court proceeded to find no defect in notice.
Here the declaratory judgment action raises federal questions. The
Jacuzzis claim that the bankruptcy court’s judgment is void because of lack of
service, and thus the court did not have personal jurisdiction over them and
violated their due-process rights. Whether a federal court violated an individ-
ual’s federal due-process rights is a federal constitutional question. Whether
the bankruptcy court, which is a federal court, had jurisdiction is also a federal
question. Whether the federal rules for services of process were met is a federal
question.
No state-law questions are presented. The district court erred by looking
to the rule for proceedings in aid of executing a judgment in an imaginary
enforcement action brought by Pimienta. There were no proceedings left to be
had. Pimienta secured the judgment of the bankruptcy court and was already
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attempting to have the U.S. Marshals execute the judgment on the Jacuzzis’
properties.
Because one ground for subject-matter jurisdiction is sufficient, we do
not address diversity jurisdiction. The judgment of dismissal for want of
subject-matter jurisdiction is REVERSED, and the case is REMANDED for
further proceedings as needed. We express no view on what actions that court
should take on remand.
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