Jones, David v. Infocure Corporation

In the
United States Court of Appeals
For the Seventh Circuit
____________
Nos. 01-3831, 01-4018
DAVID JONES and SUSAN JONES,
Plaintiffs-Appellants,
v.
INFOCURE CORPORATION, et al.,
Defendants-Appellees.
____________
Appeals from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. IP01-0670 C—John D. Tinder, Judge.
____________
ARGUED MAY 13, 2002—DECIDED NOVEMBER 8, 2002
____________
Before ROVNER, DIANE P. WOOD, and WILLIAMS, Circuit
Judges.
DIANE P. WOOD, Circuit Judge. David and Susan Jones,
former owners of PRISM Data Systems, Inc. (PRISM) en-
tered into a contract to sell PRISM to defendant InfoCure
Systems, Inc., in exchange for shares of InfoCure. Unfor-
tunately, the value of InfoCure stock took a nose-dive
after the closing date of the transaction. Believing that
they had been cheated, the Joneses filed suit for dam-
ages, rescission, and an injunction against InfoCure and
two of its officers (to whom we refer collectively as Info-
Cure), alleging breach of contract, common law fraud, and
2 Nos. 01-3831, 01-4018
violation of the Indiana securities laws. The district court
found that a clause in the agreement stipulating that it
would be governed by Georgia law was enforceable; it
therefore dismissed the claims based on Indiana securi-
ties law and denied the Joneses’ request for a prelimi-
nary injunction. It then transferred the remaining claims
to the Northern District of Georgia. On this appeal, the
Joneses have attempted to challenge the merits of the
district court’s choice of law decision, the transfer order,
and the court’s denial of their requested preliminary
injunction. We conclude that only the ruling on the pre-
liminary injunction request is properly before us, and
as to that, we conclude that the district court did not
abuse its discretion. The rest of the Joneses’ arguments
can be presented in due course to the district court in
Georgia.
I
David and Susan Jones started a successful Indiana
corporation, PRISM, that provided computer systems for
ophthalmologists and other medical practices. In October
1999, one of InfoCure’s officers approached Susan at a
trade show and told her that InfoCure was interested
in acquiring PRISM. The two sides began serious discus-
sions, which culminated in an Agreement and Plan of
Merger that the parties signed on December 28, 1999. Un-
der that agreement, InfoCure promised to pay $5,000,000
for PRISM in the form of InfoCure common stock. The
number of shares needed to meet the $5,000,000 price
tag was to be calculated using the average stock price
over the 20-day period prior to the closing. As it hap-
pened, during that time, the shares neared an all-time
high; not long afterward, their value plummeted.
Unhappy about the result of the deal, which left them
with shares representing a fraction of the $5,000,000 they
Nos. 01-3831, 01-4018 3
had expected to gain in exchange for their company, the
Joneses brought this action in the Boone County Supe-
rior Court, in Indiana. In it, they alleged among other
things that InfoCure violated Indiana securities laws.
Relying on the diversity jurisdiction of the federal court
(because the Joneses were both citizens of Indiana, Info-
Cure is a Delaware corporation with its principal place
of business in Georgia, the individual defendants were
citizens of Alabama and Connecticut, and the amount
alleged exceeded $75,000), InfoCure removed the case to
the federal district court for the Southern District of
Indiana. Once in federal court, InfoCure then moved to
dismiss the action, or in the alternative to have it trans-
ferred to the Northern District of Georgia under 28 U.S.C.
§ 1404(a). The Joneses moved for a preliminary injunc-
tion to prevent InfoCure from taking various actions
that were allegedly irreparably damaging PRISM, so that
the value of the company would be preserved if they
succeeded on their claim for rescission.
II
The jurisdictional posture of this case is convoluted, but
it is central to our disposition of this appeal. The district
court denied the Joneses’ request for a preliminary in-
junction and entered an order transferring the case to the
Northern District of Georgia on October 15, 2001. In the
order, it directed the clerk of the district court “to ad-
ministratively effectuate this transfer.” According to the
Southern District of Indiana’s docket, the case was
closed and transferred to Georgia on October 16, 2001.
The Joneses filed their notice of appeal ten days after
the transfer was effectuated. On November 8, 2001, the
record was returned from the Northern District of Geor-
gia to the Southern District of Indiana “for appeal pur-
poses.” The Joneses then filed an amended notice of ap-
4 Nos. 01-3831, 01-4018
peal, including a challenge to the “order of transfer,” on
November 13, 2001. A review of the docket sheet for the
Northern District of Georgia shows that the case is still
considered open there, although as of May 8, 2002, the
court appeared to be confining its actions to administra-
tive matters, mostly having to do with attorney appear-
ances.
The Joneses would like this court to review all three
matters we identified above: the decision of the Indiana
court to transfer the case to Georgia under § 1404(a), the
underlying choice of law issue that influenced the court
in its transfer decision, and its denial of preliminary in-
junctive relief. In general, appellate jurisdiction exists
over orders denying preliminary injunctive relief. See 28
U.S.C. § 1292(a)(1); Stewart v. Taylor, 104 F.3d 965, 970
(7th Cir. 1997). But one question that arises is which
court of appeals should exercise that jurisdiction? This
case is now functionally in the Northern District of Geor-
gia, within the Eleventh Circuit, but the order denying
the injunction was entered by the court for the South-
ern District of Indiana, from which appeals go to this
court. See 28 U.S.C. §§ 41, 1294. We discuss in a moment
the consequences for our appellate jurisdiction of this
sequence of events.
Jurisdiction over the transfer order and the choice of
law determination that motivated it is also questionable.
Normally, a decision to transfer a case from one district
to another under the statutory version of forum non con-
veniens that is found in § 1404(a) is a non-reviewable
interlocutory order. See In re Joint E. & S. Dists. Asbestos
Litig., 22 F.3d 755, 761-64 & n.14 (7th Cir. 1994). The
Joneses invite this court to take a form of pendent appel-
late jurisdiction over the transfer order, piggy-backing
on the undeniably proper appeal from the denial of the
preliminary injunction. InfoCure agrees that we have ju-
risdiction over the preliminary injunction ruling, but it ar-
Nos. 01-3831, 01-4018 5
gues that there is no basis for our review of the transfer or-
der or associated matters. (It has also made a perfunctory
challenge to the plaintiffs’ allegation of more than $75,000
in controversy, but we find that to be frivolous on these
facts.)
III
Generally speaking, a district court relinquishes all
jurisdiction over a case when it is transferred to an-
other district court. See In re Joint E. & S. Dists. Asbestos
Litig., 22 F.3d at 761-64 & n.14. The question for us is
whether, as the court of appeals with jurisdiction over
the transferor court, we similarly lose jurisdiction over
orders entered by the district court prior to or contempo-
raneous with the transfer. Most cases have implicitly held
that appeals from orders granting or denying preliminary
injunctions properly go to the court of appeals encom-
passing the transferor court’s district, distinguishing the
appealability of the injunction order from that of the
transfer order. See, e.g., United States Aluminum Corp. v.
Kawneer Co., Inc., 694 F.2d 193, 195 (9th Cir. 1982); Emer-
son Elec. Co. v. Black & Decker Mfg. Co., 606 F.2d 234, 237
(8th Cir. 1979); Codex Corp. v. Milgo Elec. Corp., 553 F.2d
735, 737 (1st Cir. 1977).
Some courts, however, have held that a § 1404(a) trans-
fer ends the jurisdiction of both the transferor court and
the corresponding appellate court at the moment when
the motion has been implemented and the case has been
docketed by the transferee court. See Lou v. Belzberg,
834 F.2d 730, 733 (9th Cir. 1987); In re Sosa, 712 F.2d
1479, 1480 (D.C. Cir. 1983); In re Nine Mile Ltd., 673 F.2d
242, 243 (8th Cir. 1982); In re Southwestern Mobile Homes,
Inc., 317 F.2d 65, 66 (5th Cir. 1963); Drabik v. Murphy, 246
F.2d 408, 409 (2d Cir. 1957). These courts, however, seem
more concerned with the review of the transfer order
6 Nos. 01-3831, 01-4018
itself, rather than with review of a different set of orders,
such as the denial of an injunction.
We are persuaded by the cases holding that an other-
wise appealable order remains appealable even if a trans-
fer is ordered at a later time. See TechnoSteel, LLC v.
Beers Constr. Co., 271 F.3d 151, 153 (4th Cir. 2001). In-
deed, given the language of 28 U.S.C. § 1294 it is doubtful
that the court of appeals in the transferee area could
exercise jurisdiction over an appealable interlocutory
order entered by a district court outside its region. See,
e.g., Roofing & Sheet Metal Servs., Inc. v. La Quinta
Motor Inns, Inc., 689 F.2d 982, 985-87 (11th Cir. 1982)
(refusing to exercise jurisdiction over a pre-transfer order
from a transferee district court). See also McGeorge v.
Continental Airlines, Inc., 871 F.2d 952, 954 (10th Cir.
1989). But see, e.g., EEOC v. Northwest Airlines, Inc., 188
F.3d 695, 700 (6th Cir. 1999) (reviewing pre-transfer
order of an out-of-circuit district court granting sum-
mary judgment on one claim and dismissing other claims);
Chaiken v. VV Publ’g Corp., 119 F.3d 1018, 1025 n.2 (2d
Cir. 1997) (same for dismissal of two defendants for lack
of personal jurisdiction); Tel-Phonic Servs., Inc. v. TBS
Int’l, Inc., 975 F.2d 1134, 1138 (5th Cir. 1992) (same for
dismissal of plaintiff’s RICO claims); Carteret Sav. Bank,
F.A. v. Shushan, 919 F.2d 225, 228 (3d Cir. 1990) (noting
that a transfer order based on a finding by the trans-
feror court that it lacked personal jurisdiction could be
appealed at the conclusion of the case in the transferee
circuit).
In our view, the answer turns on whether the order
entered by the transferor court prior to transfer qualifies
for an immediate appeal, or if it is a more conventional
order that may be appealed only after final judgment. If
it is the former, then any appeal must be taken to the
court of appeals covering the transferor district; if it is
the latter, then the appeal after final judgment will go to
Nos. 01-3831, 01-4018 7
the court of appeals for the district in which the final
judgment was entered. Here, that means that we are
the proper court of appeals to review the decision of the
district court for the Southern District of Indiana to deny
preliminary injunctive relief, even though the case was
transferred to Georgia a short time later.
IV
We move to the denial of the injunction. The Joneses
show an astonishing lack of interest in that ruling in
their briefs. Indeed, one is left with the impression that
they are using the fortuity of the denial of the injunction
to obtain what they really want, which (at least by page
count) is immediate appellate review over the correct-
ness of the district court’s decision with respect to the
contractual choice of law provision and the subsequent
transfer to Georgia. Nowhere in their brief do they review
the standards for granting preliminary injunctions, nor
do they explain how the district court abused its discre-
tion in applying those standards. Appellate briefs must
contain an argument that does more than assert general
error. FED. R. APP. P. 28(a)(9)(A); see also Anderson v.
Hardman, 241 F.3d 544, 545 (7th Cir. 2001); Mathis v.
New York Life Ins. Co., 133 F.3d 546, 548 (7th Cir. 1998)
(per curiam). Claims not properly articulated in a brief
are generally deemed waived. InfoCure, however, has
addressed the injunction explicitly in one section of its
brief (Brief of Appellees at 41-50). Because of this, and
because under a generous interpretation of the Joneses’
brief they might be arguing that the injunction would
have been granted had the court not made these other
alleged errors, we will address the court’s denial of the
preliminary injunction. We review the district court’s
findings of fact for clear error, its balancing of the fac-
tors under an abuse of discretion standard, and its legal
8 Nos. 01-3831, 01-4018
conclusions de novo. Anderson v. U.S.F. Logistics (IMC),
Inc., 274 F.3d 470, 474 (7th Cir. 2001).
In considering a motion for a preliminary injunction, a
district court evaluates whether the moving party has
shown (1) a reasonable likelihood of success on the merits
of the underlying claim; (2) no adequate remedy at law;
and (3) irreparable harm if the injunction is not granted.
Ty, Inc. v. Jones Group, Inc., 237 F.3d 891, 895 (7th Cir.
2001). If an evaluation of these three points indicates that
an injunction might be proper, the court then weighs the
potential harms to the parties and takes into account
public interest considerations. PepsiCo., Inc. v. Redmond,
54 F.3d 1262, 1267 n.3 (7th Cir. 1995).
The district court, after holding a hearing on the Joneses’
motion for a preliminary injunction, found that the mo-
tion was grounded solely on Count I of the complaint,
which charged violations of Indiana’s securities law. The
other counts requested only money damages by way of
relief. Having found that Count I could not survive the
motion to dismiss, it accordingly denied the injunction.
The question whether the court correctly dismissed
Count I technically goes beyond the scope of this appeal,
except insofar as it certainly indicated that the district
court thought that the Joneses had a non-existent like-
lihood of success on the merits of that claim. But we pre-
fer to resolve the question about the injunction on other
grounds, and to express no opinion about the applicabil-
ity of the Indiana securities laws to this case or whether
the Joneses had enforceable rights under those laws. Once
all claims of all parties have been resolved in Georgia, the
parties will have an opportunity to test the correctness
of the disposition of Count I on appeal. It is important to
recall, in this connection, that under the rule of Van
Dusen v. Barrack, 376 U.S. 612, 639 (1964), the district
court in the Northern District of Georgia will be obliged
Nos. 01-3831, 01-4018 9
to follow the same choice of law rules that would have
obtained in Indiana, because the basis of this transfer was
§ 1404(a).
For now, it is enough for us to consider whether the
Joneses can show irreparable harm, which is another
essential prerequisite for a preliminary injunction. In our
view, they cannot. It is now too late in the day for them to
seek rescission of the contract, and the only reason they
gave for wanting the injunction was to ensure that PRISM
remained as valuable as possible should rescission be
ordered. Rescission involves a judicial termination of a
party’s contractual obligations; it is a court-ordered “un-
winding” of a contract, with the goal of returning the
parties to their positions prior to contracting. This remedy
is possible only if such a status quo ante can be re-estab-
lished. How could this be achieved in this case, years
after the fact? Rescission is “simply not feasible.” Potomac
Elec. Power Co. v. Electric Motor & Supply, Inc., 262 F.3d
260, 267 (4th Cir. 2001).
No matter which law applies to this case, the Joneses
are in an equally bad position to obtain rescission. Both
Georgia and Indiana require that a party seeking rescis-
sion promptly request it and behave in a manner consistent
with the desired relief. See, e.g., Owens v. Union City
Chrysler-Plymouth, Inc., 436 S.E.2d 94, 96 (Ga. Ct. App.
1993); Griffin v. Axsom, 525 N.E.2d 346, 347 (Ind. Ct. App.
1988). The record shows that the Joneses did not meet
this standard. Shortly after the consummation of the
sale, they claimed to have discovered evidence of Info-
Cure’s fraud and wrongdoing in the transaction. It was
not until April 2001, some fifteen months after the deal
was closed and long after the stock prices collapsed,
that they first advanced their request for rescission. It
is impossible now even to conceive of what a return to
the status quo would entail. PRISM has been merged
into the operations of InfoCure; InfoCure has invested in
10 Nos. 01-3831, 01-4018
the development of products compatible with and alter-
native to those acquired through PRISM. It is unclear
whether the Joneses still own all the InfoCure shares
they received in the exchange—which they would have
to return if rescission were granted. In a word, it is sim-
ply not practical or feasible to undo the sale of this par-
ticular company almost three years after the close of the
deal. And if rescission is unavailable, then there is no
ground to enjoin any conduct of InfoCure with respect to
PRISM. Money damages, should the Joneses be able to
prove that they are entitled to any, will be an adequate
remedy.
Because the result with respect to the feasibility of
rescission would be the same under Georgia or Indiana
law, we see no need to delve into the Joneses’ contention
that Georgia law ought not to be applied to this case. This
also means of course that there is no need to certify any
questions to the Indiana Supreme Court, as the Joneses
have asked us to do with respect to the choice of law issue.
V
Recognizing that transfer orders are not ordinarily
appealable, the Joneses urge us to review this particular
order anyway, by exercising “pendent appellate jurisdic-
tion” over it. Such a jurisdictional doctrine has been
recognized in the past; when it is proper to invoke it, it al-
lows a court of appeals to review an otherwise unappeal-
able interlocutory order if it is inextricably intertwined
with an appealable one. See Swint v. Chambers County
Comm’n, 514 U.S. 35, 50-51 (1995); see also 15 CHARLES
A. WRIGHT ET AL., FEDERAL PRACTICE & PROCEDURE § 3855,
at 474 (2d ed. 1986) (“[I]f there is an interlocutory ap-
peal from the grant or denial of a preliminary injunc-
tion, the appellate court has power, if it sees fit, to consider
at that time a ruling on a transfer motion.”). The Joneses
Nos. 01-3831, 01-4018 11
claim that the issue of transfer was so closely related to
the denial of the injunction as to warrant our invocation
of this jurisdiction here.
The problem is that the Supreme Court has signaled
that the doctrine of pendent appellate jurisdiction rests
on shaky grounds. In fact, the Court questioned its very
existence in Swint, 514 U.S. at 43-51. This court subse-
quently described it as a “controversial and embattled
doctrine” in United States v. Board of School Comm’rs, 128
F.3d 507, 510 (7th Cir. 1997), but we have invoked it
at least once since Swint was decided. In Greenwell v. Aztar
Indiana Gaming Corp., 268 F.3d 486, 491 (7th Cir. 2001),
we held that the Supreme Court had revived the doctrine
in Clinton v. Jones, 520 U.S. 681 (1997), where the Court
said that “the Court of Appeals correctly found that pen-
dent appellate jurisdiction over this issue was proper.”
520 U.S. at 707 n.41. Cf. Vermont Agency of Natural Res.
v. United States ex rel. Stevens, 529 U.S. 765, 770 n.2
(2000). In Greenwell, we upheld pendent appellate juris-
diction over a malpractice claim because it was “entwined”
with an indemnity claim that was properly before the
court. 268 F.3d at 491. On those facts, the exercise of pen-
dent jurisdiction served broader purposes of efficiency and
consistent resolution of the case. The Greenwell court
explained that “since we must decide the latter [indemnity
claim], we might as well decide the former at the same
time and head off a second appeal—so this is one of
those cases in which allowing an interlocutory appeal pre-
vents rather than produces piecemeal appeals, while if
the liability and indemnity issues did not overlap there
would be only a limited economy from deciding them in
one rather than two appeals.” Id.
The Federal Circuit also exercised pendent appellate
jurisdiction in a recent case. In Helifix Ltd. v. Blok-Lok,
Ltd., 208 F.3d 1339, 1345 (Fed. Cir. 2000), that court
exercised “discretion to invoke pendent appellate juris-
12 Nos. 01-3831, 01-4018
diction over the interlocutory grant of summary judgment
because it is closely interrelated factually to the prelimi-
nary injunction.” Id. (citations and quotations omitted). It
chose to do so because “the district court based its denial
of the preliminary injunction request on its summary judg-
ment ruling.” Id. So here, the Joneses argue, this court
should review the dismissal of Count I, because that is
really what prompted the denial of the injunction. See
also Midwest Motor Express, Inc. v. Central States, South-
east & Southwest Areas Pension Fund, 70 F.3d 1014, 1016
(8th Cir. 1995) (finding the transfer order and the denial
of the injunction “inextricably bound up with each other”).
See also Ukiah Adventist Hosp. v. F.T.C., 981 F.2d 543,
548 (D.C. Cir. 1992) (review of transfer order available
discretionarily when closely related to the injunction).
In our view, however, the Joneses’ situation differs sig-
nificantly from either Greenwell or Helifix. Practically the
entire case is awaiting development before the district
court in Georgia. That court will have the power to make
all necessary rulings in the case, including (subject to law
of the case considerations) entertaining motions to re-
consider earlier orders made on the merits. In so doing,
as we noted above, it must follow the same substantive
law that the Indiana federal court would have used.
The only thing our intervention now would accomplish
would be the avoidance of general restrictions on inter-
locutory review of orders disposing of single claims or or-
ders transferring cases under § 1404(a). It would be quite
inappropriate for us to open the door to an end-run around
these jurisdictional limitations for every case in which a
ruling on injunctive relief is subject to interlocutory re-
view. In any event, as Helifix acknowledged, pendent ap-
pellate jurisdiction is a discretionary doctrine, like its
cousin supplemental jurisdiction. See 28 U.S.C. § 1367(c).
Even on the assumption that it would be possible to
assert jurisdiction here, we would choose not to do so. In
Nos. 01-3831, 01-4018 13
our view, the preliminary injunction is not sufficiently
closely related to the transfer order to warrant the exer-
cise of pendent appellate jurisdiction. While the district
court considered the contractual choice of law provision
in both of its decisions, the two issues were quite distinct:
the transfer hinged on whether a different forum would
be better suited to hear the case; the preliminary injunc-
tion issue, as discussed above, dealt with the propriety of
such an extreme remedy as rescission. The two issues
can be resolved without reference to each other.
VI
The Joneses brought a proper appeal under § 1292(a)(1)
from the district court’s denial of their requested pre-
liminary injunction, but then they all but abandoned this
aspect of the case on appeal and focused instead on the
allegedly pendent issues. We find no abuse of discretion
in the district court’s ruling with respect to the injunction.
As for the other issues, we conclude that they are not
so closely related to the injunction that they would bene-
fit from review here and now; even if we could review
them, we conclude that such review would undermine the
general policies forbidding interlocutory review. We are
confident that the district court in the Northern District
of Georgia will be able to handle the merits of this case,
including any remaining choice of law issues or argu-
ments about the applicability of the Indiana securities
laws. We therefore AFFIRM the denial of the preliminary
injunction, and DISMISS the remainder of the appeal.
14 Nos. 01-3831, 01-4018
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—11-8-02