Title: Andrew Krause, Et Al. v. Textron Financial Corporation

State: florida

Issuer: Florida Supreme Court

Document:

Supreme Court of Florida 
 
 
____________ 
 
No. SC09-881 
____________ 
 
ANDREW KRAUSE, et al., 
Petitioners, 
 
vs. 
 
TEXTRON FINANCIAL CORPORATION, 
Respondent. 
 
[February 3, 2011] 
 
LABARGA, J. 
In the case before us, Andrew Krause and David Bautsch (“Petitioners”) 
seek review of the decision of the Second District Court of Appeal in Krause v. 
Textron Financial Corp., 10 So. 3d 208 (Fla. 2d DCA 2009), on the ground that it 
expressly and directly conflicts with the decision of the Fourth District Court of 
Appeal in Scarfo v. Ginsberg, 817 So. 2d 919 (Fla. 4th DCA 2002).  We have 
jurisdiction.  See art. V, § 3(b)(3), Fla. Const.   
The issue presented for our determination is whether the federal 
supplemental jurisdiction statute, 28 U.S.C. § 1367(d) (2006), tolls a state statute 
of limitations after a state law claim is dismissed on the basis that the bankruptcy 
 
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court lacked subject matter jurisdiction.  As we explain below, we conclude that 
the applicable state statute of limitations in this case was tolled pursuant to section 
1367(d) of the federal supplemental jurisdiction statute.  Based on our reasoning 
below, we quash the decision of the Second District in Krause to the extent that it 
is inconsistent with this opinion, and approve the Fourth District‟s decision in 
Scarfo to the extent that it is consistent with our analysis and holding.     
FACTS AND PROCEDURAL BACKGROUND 
The Second District described the facts underlying its decision in Krause as 
follows: 
Appellants purchased separate memberships in the Twin Eagles 
Golf and Country Club in 1997.  The membership fee paid by each 
was $52,000.  The terms of the Twin Eagles‟ membership agreement 
provided that if a member resigned his or her membership, Twin 
Eagles would sell that membership to a third party and the resigning 
member would be entitled to ninety percent of the resale price. 
In July 1998, Textron provided financing to Twin Eagles and its 
affiliates.  As collateral for the loan, Textron received a security 
interest in Twin Eagles‟ assets, including the club‟s previously unsold 
new memberships.  Pursuant to the financing agreement between 
Textron and Twin Eagles, only one out of every three memberships 
sold by Twin Eagles could be a resale of a resigned membership. 
In the spring of 1999, Appellants resigned as members of Twin 
Eagles and returned their memberships for resale.  By the terms of 
their membership agreements, Appellants were entitled to ninety 
percent of the proceeds generated by the resale of their memberships 
as a reimbursement from Twin Eagles.  However, upon resale of 
Appellants‟ memberships, Twin Eagles paid all of the proceeds to 
Textron in partial satisfaction of its loan obligation, thereby denying 
Appellants the payments to which they were entitled.  Within months 
of these resales, Twin Eagles filed for relief under Chapter 11 of the 
 
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Bankruptcy Code in the United States Bankruptcy Court for the 
Middle District of Florida. 
Appellants filed an adversary proceeding in the bankruptcy 
case, alleging that Twin Eagles had improperly paid all of the 
proceeds from the resale of their resigned memberships to Textron 
prior to its filing of the petition for relief in the bankruptcy court.[n. 1]  
In count one, Appellants sought declaratory relief against Twin 
Eagles, and in count two, they asked for the imposition of a 
constructive trust against any of the remaining proceeds realized from 
the resale of golf memberships or, in the alternative, “in Textron‟s 
secured claim to the extent the membership sale proceeds [were] used 
by [Twin Eagles] or encumbered with [Twin Eagles‟] permission by 
Textron‟s secured claim.” 
[N. 1]  This was confirmed by deposition 
testimony taken during the discovery phase of the 
adversary proceeding. The trial court‟s order granting 
Textron‟s motion to dismiss made a finding that at the 
time of the filing of the complaint in bankruptcy court, 
Appellants did not know which entity had possession of 
the resale proceeds; however, the complaint alleged that 
“upon information and belief,” Twin Eagles had 
transferred the funds to Textron prior to the 
commencement of the Chapter 11 proceedings. 
On August 15, 2000, the bankruptcy court entered an order 
confirming the Chapter 11 plan filed by Twin Eagles.  The bankruptcy 
court also determined that Textron had a valid claim against Twin 
Eagles for an amount in excess of $17 million and that the claim had 
been fully satisfied by the proceeds of the sale of Twin Eagles‟ assets 
pursuant to the bankruptcy plan.  The order further concluded that 
Textron did not have any further claims against Twin Eagles or its 
affiliates. 
In 2002, Textron moved for summary judgment as to count two 
of Appellants‟ complaint.  The bankruptcy court granted the motion, 
and Appellants attempted to appeal; however, since count one 
remained pending, the appeal was dismissed.  Accordingly, on      
May 16, 2005, Appellants voluntarily dismissed with prejudice the 
remaining count of their complaint against Twin Eagles and pursued 
their appeal of the summary judgment of count two against Textron. 
 
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Krause, 10 So. 3d at 209-10. 
The United States District Court for the Middle District of Florida, in its 
appellate capacity, directed the bankruptcy court to vacate its summary judgment 
entered in favor of Textron and dismiss the adversary proceeding as to Textron 
after determining that the bankruptcy court should have dismissed the constructive 
trust claim for lack of subject matter jurisdiction.   
Less than one month later, Petitioners filed suit against Textron in the 
Circuit Court for the Twentieth Judicial Circuit in and for Collier County, Florida, 
seeking declaratory relief and the imposition of a constructive trust on the funds 
that Textron allegedly received from Twin Eagles.  Petitioners‟ amended complaint 
contained two counts.  In count one, Petitioners sought the imposition of a 
constructive trust, and in count two, they sought a judgment against Textron on the 
theory of unjust enrichment.  Textron moved to dismiss the amended complaint, 
arguing that claims were time barred by the limitations period set forth in section 
95.11(2)(b), Florida Statutes (2005).1  Petitioners contended in the trial court that 
the statute of limitations was tolled by the federal tolling provision contained in 
section 1367(d) and that their claims were therefore timely.  The trial court 
                                          
 
 
1.  Textron also asserted that the Petitioners could not establish the elements 
of their constructive trust claim.  The trial court did not address this ground 
because it found that the claim was time barred.  Textron raises a similar claim 
before this Court; however, we decline to reach this issue. 
 
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concluded, however, that the claims were filed outside of the state statute of 
limitations and that the federal tolling provision did not apply.2  The Second 
District affirmed the lower court‟s decision on appeal, holding that section 1367(d) 
did not apply to toll Petitioners‟ constructive trust claim in state court because the 
federal district court had previously determined that the bankruptcy court lacked 
subject matter jurisdiction over the constructive trust claim.  See Krause, 10 So. 3d 
at 209-12.3 
Petitioners then sought review in this Court, alleging express and direct 
conflict with the Fourth District‟s decision in Scarfo v. Ginsberg, 817 So. 2d 919 
(Fla. 4th DCA 2002).  In Scarfo, the federal district court dismissed the plaintiff‟s 
federal claim for lack of federal subject matter jurisdiction.  Id. at 920.  Because of 
the disposition of the federal claim, the federal court dismissed the plaintiff‟s state 
law claims without prejudice to refiling them in state court.  Id.  When the plaintiff 
brought her claims in state court less than a month after the dismissal, the 
defendants moved for summary judgment, alleging that the claims were barred by 
the statute of limitations.  Id.  The trial court granted the motion, and the plaintiff 
                                          
 
 
2.  The trial court concluded further that it could not rely on the doctrine of 
equitable estoppel to preclude dismissal in the action. 
 
3.  The Second District also held that because Petitioners‟ claim for unjust 
enrichment was not part of the bankruptcy complaint, section 1367(d) did not 
apply to that claim.  Id. at 212.  We do not disturb the district court‟s holding with 
respect to the unjust enrichment claim. 
 
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appealed.  Id.  The defendants in Scarfo contended that because the plaintiff‟s 
federal claim was dismissed for lack of federal subject matter jurisdiction, the 
tolling provision in section 1367(d) was inapplicable.  Id.  On appeal, the Fourth 
District concluded in Scarfo that the dismissal of the plaintiff‟s federal claim for 
lack of federal subject matter jurisdiction did not bar the application of section 
1367(d) to toll the plaintiff‟s state law claims.  Thus, the district court reversed, 
holding that section 1367(d) applied to toll the state law claims during the 
pendency of the federal action.  Id. at 921.  For reasons explained below, we agree 
with the Fourth District‟s decision in Scarfo on this issue.   
ANALYSIS 
 
Petitioners contend that the federal tolling provision of section 1367(d) 
applies to toll the state statute of limitations in the instant case where the federal 
court determined that the bankruptcy court lacked subject matter jurisdiction over 
their state law claim against Textron.  They allege that the decision of the Second 
District not to apply the federal tolling provision in the instant case expressly and 
directly conflicts with the decision of the Fourth District in Scarfo, which held that 
the federal tolling provision applied despite the lack of federal subject matter 
jurisdiction over a federal claim.  Textron contends that Scarfo is distinguishable 
and that the tolling provision does not apply in the instant case.  The conflict issue 
before this Court is whether the tolling provision of the federal statute on 
 
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supplemental jurisdiction tolls the applicable state limitations period after the state 
law claim was dismissed for lack of the bankruptcy court‟s subject matter 
jurisdiction.   
 
Because this case presents an issue of statutory interpretation, our review is 
de novo.  See Larimore v. State, 2 So. 3d 101, 106 (Fla. 2008).  “It is well settled 
that legislative intent is the polestar that guides a court‟s statutory construction 
analysis.”  Knowles v. Beverly Enterprises-Fla., Inc., 898 So. 2d 1, 5 (Fla. 2004).  
To discern legislative intent, we first look to the statute‟s plain language.  See 
Borden v. E. European Ins. Co., 921 So. 2d 587, 595 (Fla. 2006).  “When the 
statute is clear and unambiguous, „there is no occasion for resorting to the rules of 
statutory interpretation and construction; the statute must be given its plain and 
obvious meaning.‟ ”  Saleeby v. Rocky Elson Constr., Inc., 3 So. 3d 1078, 1082 
(Fla. 2009) (quoting Holly v. Auld, 450 So. 2d 217, 219 (Fla. 1984)).  “Further, we 
are „without power to construe an unambiguous statute in a way which would 
extend, modify, or limit, its express terms or its reasonable and obvious 
implications.‟ ”  Velez v. Miami-Dade County Police Dep‟t, 934 So. 2d 1162, 
1164-65 (Fla. 2006) (quoting McLaughlin v. State, 721 So. 2d 1170, 1172 (Fla. 
1998)).  Accordingly, we begin our analysis with the language of section 1367, the 
federal statute at issue here, to determine if any of its provisions prohibit 
 
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application of the tolling provision to state law claims dismissed for lack of federal 
jurisdiction. 
The federal supplemental jurisdiction statute, 28 U.S.C. § 1367, provides 
that a federal district court may exercise supplemental jurisdiction over certain 
claims, and it governs when the court may do so.  The statute provides in pertinent 
part: 
§ 1367.  Supplemental Jurisdiction 
(a) Except as provided in subsections (b) and (c) or as expressly 
provided otherwise by Federal statute, in any civil action of which the 
district courts have original jurisdiction, the district courts shall have 
supplemental jurisdiction over all other claims that are so related to 
claims in the action within such original jurisdiction that they form 
part of the same case or controversy under Article III of the United 
States Constitution.  Such supplemental jurisdiction shall include 
claims that involve the joinder or intervention of additional parties. 
. . . . 
(c) 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. 
(d) The period of limitations for any claim asserted under 
subsection (a), and for any other claim in the same action that is 
voluntarily dismissed at the same time as or after the dismissal of the 
claim under subsection (a), shall be tolled while the claim is pending 
and for a period of 30 days after it is dismissed unless State law 
provides for a longer tolling period. 
 
28 U.S.C. § 1367 (2006). 
 
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The plain text of the federal statute does not, by its terms, bar the application 
of the tolling provision where a claim is dismissed for lack of federal subject 
matter jurisdiction.  Rather, the savings protection of section 1367(d) applies “for 
any claim asserted under subsection (a).”  The plain and unambiguous language of 
section 1367(d) thus permits the application of the tolling provision to claims 
commenced in federal court but later dismissed for lack of federal subject matter 
jurisdiction.   
Our precedent concerning statutory interpretation also supports the Fourth 
District‟s interpretation of section 1367(d) in Scarfo, where the court concluded 
that the dismissal of a federal claim for lack of subject matter jurisdiction did not 
bar the application of section 1367(d) to toll the state limitations period for claims 
refiled in state court.  The Fourth District noted that “[s]ection 1367(d) exactly fits 
the facts and circumstances of this case,” reasoning that the fact that the dismissal 
of the plaintiff‟s federal claim was based on jurisdictional grounds “does not 
change the text of section 1367.”  Id. at 921.4  We find that the same reasoning 
                                          
 
 
4.  Textron contends that the decision in Scarfo is distinguishable from the 
instant case, asserting that unlike Scarfo, the bankruptcy court never had original 
jurisdiction over Petitioners‟ claims.  However, the federal district court‟s order 
suggests otherwise, noting that the effect of its ruling that the bankruptcy court 
should dismiss for lack of jurisdiction over the constructive trust claim “is not that 
the bankruptcy court lacked jurisdiction from the inception.”  In re Section 20 
Land Group LTD., Case No. 205CV317FTM29DNF (M.D. Fla. order dated Jan. 
12, 2006) (Steele, J.).  
 
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applies to state law claims dismissed for lack of federal subject matter jurisdiction.  
We thus conclude that the fact that Petitioners‟ constructive trust claim was 
dismissed for lack of the bankruptcy court‟s subject matter jurisdiction does not 
preclude the applicability of the federal tolling provision in this case. 
Textron also contends that the Petitioners‟ constructive trust claim is not 
subject to the tolling provision of subsection (d), asserting that subsection (d) only 
applies to those supplemental claims asserted under section 1367(a) and dismissed 
by the federal district court under one of the four circumstances set forth in 
subsection (c) of the federal supplemental jurisdiction statute.  Textron further 
contends that the constructive trust claim was not dismissed under the criteria set 
forth in subsection (c) because there was never a decision by the bankruptcy court 
or the federal district court not to exercise supplemental jurisdiction over the state 
law claim.  We disagree with Textron‟s contentions.   
We note that a similar narrow reading of section 1367(d) was rejected by the 
First District Court of Appeal in Blinn v. Florida Department of Transportation, 
781 So. 2d 1103 (Fla. 1st DCA 2000).  There, the district court considered whether 
section 1367(d) tolls a state limitations period when the federal action was 
terminated by the plaintiff‟s voluntary dismissal of the case in federal court with 
the intention of refiling the same claims against the same parties in state court.  Id. 
at 1104.  Based on the text of the supplemental jurisdiction statute, the First 
 
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District concluded that the tolling provision was not limited to “dismissals 
predicated on a federal court‟s decision to decline supplemental jurisdiction, 
pursuant to the criteria set forth in section 1367(c)(1)-(4).”  Id. at 1108.  The court 
reasoned that “[a] policy of this nature would force a plaintiff to litigate the 
supplemental jurisdiction question in order to gain the savings protection of section 
1367(d),” and consequently held that the tolling provision was applicable.  Id.   
We agree with the reasoning of the First District in Blinn.  Moreover, the 
district court‟s holding in Blinn is consistent with the plain language of the 
supplemental jurisdiction statute, which was also the focus of the Fourth District‟s 
analysis in Scarfo.  We agree with this analysis and hold that the text of subsection 
(d) does not limit the applicability of the tolling provision solely to instances where 
the federal court declines to exercise supplemental jurisdiction under the 
circumstances set forth in subsection (c) of the statute.  In so holding, we 
recognize, as stated above, that we are “without power to construe an unambiguous 
statute in a way which would extend, modify, or limit, its express terms or its 
reasonable and obvious implications.”  McLaughlin, 721 So. 2d at 1172 (quoting 
Holly v. Auld, 450 So. 2d 217, 219 (Fla. 1984)).  
We note that the tolling provision serves to prevent the limitations period 
from expiring while a plaintiff unsuccessfully pursues state claims in federal court 
in conjunction with federal claims.  As we have explained above, the plain 
 
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language of section 1367 leads us to conclude that the dismissal of a claim in 
federal court or, as here, in a bankruptcy court which is a unit of the federal district 
court, for lack of subject matter jurisdiction, does not bar the applicability of the 
federal tolling provision in the subsequent state court action.   
CONCLUSION 
Based on the foregoing, we quash the decision of the Second District in 
Krause v. Textron Financial Corp., 10 So. 3d 208 (Fla. 2d DCA 2009), to the 
extent that it is inconsistent with our decision, and we approve the decision of the 
Fourth District in Scarfo v. Ginsberg, 817 So. 2d 919 (Fla. 4th DCA 2002).  We 
remand to the Second District for further proceedings consistent with this opinion.  
It is so ordered. 
PARIENTE, LEWIS, QUINCE, POLSTON, and PERRY, JJ., concur. 
CANADY, C.J., dissents with an opinion. 
 
NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION, AND 
IF FILED, DETERMINED. 
 
 
CANADY, C.J., dissenting. 
Because I conclude that there is no express and direct conflict warranting the 
exercise of our jurisdiction under article V, section 3(b)(3), Florida Constitution, I 
dissent. 
 
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The holding in the Second District Court of Appeal‟s decision in Krause v. 
Textron Financial Corp., 10 So. 3d 208, 212 (Fla. 2d DCA 2009), was as follows: 
“Because this [constructive trust] claim against Textron was not „related to‟ the 
claim against Twin Eagles, it is not entitled to the federal court‟s supplemental 
jurisdiction and the tolling provision found in 28 U.S.C. § 1367(d) does not apply.”  
The decision in Krause thus turned on whether the state claim at issue fell within 
the scope of the section 1367(a) provision for supplemental jurisdiction over 
“claims that are so related to claims in the action within [a district court‟s] original 
jurisdiction that they form part of the same case or controversy.” 
In Scarfo v. Ginsburg, 817 So. 2d 919, 920 (Fla. 4th DCA 2002), however, 
the court addressed an argument by the defendant that the “plaintiff‟s federal claim 
was dismissed for lack of federal subject matter jurisdiction and therefore the 
tolling provision in section 1367(d) is inapplicable.”  The Scarfo court rejected this 
argument and held that the tolling provision applied.  The Scarfo decision makes 
no mention of any argument that the state law claim at issue was not related to the 
federal law claim.  Instead, Scarfo assumes—without expressly deciding—that the 
state law claims were related to the federal claims. 
The question at issue in Scarfo—that is, the impact on the operation of the 
tolling provision of the lack of federal subject matter jurisdiction over the 
plaintiff‟s federal claim—was not a question at issue in Krause.  Indeed, the 
 
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Krause court specifically recognized that the “complaint in the bankruptcy case did 
allege a claim cognizable in bankruptcy court.”  10 So. 3d at 211. 
In sum, the application of the “related to” requirement of section 1367(a) 
was dispositive in Krause but was not at issue in Scarfo.  There is thus no express 
and direct conflict between Krause and Scarfo. 
Express and direct conflict is similarly lacking with respect to Blinn v. 
Florida Department of Transportation, 781 So. 2d 1103, 1104-05 (Fla. 1st DCA 
2000), a decision which turned on whether the tolling provision of section 1367(d) 
is operative where “the plaintiff voluntarily dismisses the case” or is instead 
limited to circumstances where “a federal district court dismisses a claim after 
declining to exercise supplemental jurisdiction.”  The Blinn court held that the 
tolling provision applied even though the federal case had been voluntarily 
dismissed.  Id. at 1108.  Once again, unlike Krause, there was no issue in Blinn 
concerning whether the state claims were related to the federal claims as required 
by section 1367(a).  And, although the federal claim in Krause had been 
voluntarily dismissed, that circumstance was not relied on as a basis for the 
decision of the Second District in Krause rejecting application of the tolling 
provision. 
Since there is no basis for the exercise of jurisdiction, this case should be 
dismissed. 
 
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Application for Review of the Decision of the District Court of Appeal - Direct 
Conflict of Decisions 
 
 
Second District - Case No. 2D07-4060 
 
 
(Collier County) 
 
William A. Donovan, Naples, Florida, 
 
 
for Petitioners 
 
Paul A. Avron and Jordi Guso of Berger Singerman, P.A., Miami, Florida, 
 
 
for Respondent