### IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

No. 14

- 20024

WELLNESS WIRELESS, INC ORPORATED,

Plaintiff

–

Appellant , v. INFOPIA AMERICA, L.L.C.

Defendant

– Appellee

.

Appeal from United States District Court For the Southern District of Texas USDC No. 4:12

- CV

- 2856

Before REAVLEY, JONES, and ELROD, C ircuit J udges

. PER CURIAM: * Appellant Wellness Wireless challenges the dis trict court’s dismissal of its contract claim for lack of jurisdiction, or, alternatively, dismissal under Federal Rule of Civil Procedure 19 for inability to join a necessary and indispensable party. Because we conclude that the district court has juri sdiction over this case and the third party is not a necessary party under Rule 19, we reverse and remand.

* Pursuant to F IFTH C IR

. R . 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in F IFTH C IR

. R . 47.5.4. United States Court of Appeals Fifth Circuit 

### FILED March 24, 2015 Lyle W. Cayce Clerk Case: 14-20024 Document: 00512980067 Page: 1 Date Filed: 03/24/2015No. 14

- 20024
I. This case originates from a dispute between two companies that are not parties to this case: Diabetes Center of America ( “ Diabetes America ” ) and HealthPia America ( “ HealthPia ” ). In 2006, Diab etes America sued HealthPia and its CEO because of a business dispute. In the hope of establishing a business relationship with HealthPia, Defendant Infopia agreed to pay Diabetes America $800,000 on behalf of HealthPia as part of a settlement agreement d ismissing the suit ( “ 2008 Settlement ” )

. Pursuant to the 2008 Settle ment, Infop ia made a $500,000 lump

- sum payment to Diabetes America, and agreed to execute a $300,000 promissor y note payable in installments to Diabetes America

. In exchange, Diabetes Am erica agreed to release all claims against HealthPia. Info p ia defaulted on the promissory note following the first payment. This breached the 2008 Settlement and nullifie d the conditional release of claims against HealthPia. In late 2008, a default judgment was entered for Diabetes America. Later that same year , Diabetes America allegedly assigned Wellness Wireless all of Diabetes America’s rights under the promissory note. Subsequently, i n 2010, Infop ia and Diabetes Amer ica signed a settlement agreement for unpaid obligations under the 2008 promissory note ( “ 2010 Settlement ” ). Info pia paid $300,000 to be released from all claims of Diabetes America. Shortly thereafter, Diabet es America declared bankruptcy. Diabetes Ame rica did not include a right to recovery against Info p ia on its schedules of assets, nor has it pursued any claim against Info p ia during its Chapter 11 case. Wellness Wireless then began to att empt to collect money from Infop ia under the promissory note. First, it filed a state court suit on the promissory
note , which w as dismis sed for lack of jurisdiction. Second, W ellness Wireless unsuccessfully sought to collect on the default judgment in the original underlying case between HealthPia and Diabetes Amer ica. 2 Case: 14-20024 Document: 00512980067 Page: 2 Date Filed: 03/24/2015No. 14

- 20024 On this third try , Wellness Wireless file d the instant suit against Infop ia. The district court dismissed the case. The court concluded that it lacked subject matter jurisdiction because the case belonged in the bankruptcy court where Diabetes Ame rica wa s a current debtor. See 28 U.S.C. § 1334

. 1 Alternatively, t he district court held that Diabetes America, as the alleged assignor of the 2008 promissory note, was an ind ispensable party , requiring dismissal of the case pursuant to Fed. R. Civ. P. 19. Wellness Wireless appealed.
II. The district court’s determination that it lacked jurisdiction is a legal
determination that we review de novo

. In re U.S. Brass Corp. , 301 F.3d 296 , 303 (5th Cir. 2002 ). The distr ict court’s decision to dismiss for failure to join an indispensable party pursuant to Rule 19 is properly reviewed under an abuse

- of

- discretion standard. Pulitzer

- Polster v. Pulitzer , 784 F.2d 1305, 1308 (5th Cir. 1986).
III. The district court’s brief order dismissing the case stated th at “the bankruptcy court’s jurisdiction is implicated pursuant to 28 U.S.C. § 1334.” To support the court’s conclusion, Infop ia argues either that (a) the bankruptcy court had “exclusive jurisdiction” over the dispute because Diabetes America
never validl y assigned the 2008 Promissory Note, or (b) if there is any doubt about the proper payee, then § 1334 divests a district court of jurisdiction because the case will have a “conceivable effect” on a bankruptcy estate or involves an asset of the bankrupt est ate

. These arguments are plainly wrong.

1 The debtor’s Chapter 11 reorganization plan was confirmed in late 2011, but the bank ruptcy case was not closed until June 2014. 3 Case: 14-20024 Document: 00512980067 Page: 3 Date Filed: 03/24/2015No. 14

- 20024 First, 28 U.S.C. § 1334(b) explicitly grants “the district courts . . . original but not exclusive jurisdiction of all civil proceedings arising under T itle 11, or arising in or related to cases under title 11.” 28 U.S.C. § 1334(b) (emphasis added). Under this framework, district courts have Article III jurisdiction over bankruptcy cases and proceedings. T he bankruptcy courts are within the district courts’ purview , and cases are assigned to the bankruptcy court s by way of referral from a district court. See 28 U.S.C. § 157(a). Normally, cases are automatically so assigned pursuant to local court rules. Id

. At most, the district court arguably could have referred this case to the bankruptcy court pursuant to Local Rules of the Southern District of Texas. S.D. Tex. General Order 2012

- 6. A ny such failure to refer , however, is not raised before us and in any event is not jurisdictional. Infopia mistakenly relies on In re Canion , 196 F.3d 579 (5th Cir. 1999) and In re Tidewater Group, Inc. , 63 B.R. 670 (Bankr. N.D. Ga. 1986) , in contending that the district court lacks jurisdiction if a case will have a conceivable effect on a bankruptcy estate. In each case, the court found that because a dispute had some “conc eivable effect” on, and was thus “related to” the bankruptcy , the bankruptcy court had jurisdiction. Neither case restricts, or even directly addresses, the jurisdiction of the district court , and neither dictates the outcome here

. Infopia also mistakenl y argues that In re Duval Cnty. Ranch Co. , 167 B.R. 848, 849 (Bankr. S.D. Tex. 1994), supports its argument that under 28 U.S.C. § 1334(e) the district court i s divested of jurisdiction over the question whether an asset is property of the debtor’s
estate

. 2 In Duval County , however, the issue concerned jurisdiction as between

2 Section 1334(e) states that “ [t]he district court in which a case under T itle 11 is commenced or pending shall h ave exclusive jurisdiction: (1) of all the property, wherever located, of the debtor as of the co mmencement of such case, and of property of the estate. . .” § 1334(e)(1) (emphasis added)

. 4 Case: 14-20024 Document: 00512980067 Page: 4 Date Filed: 03/24/2015No. 14

- 20024 the bankruptcy court and a state court to adjudicate property of the e state. Id

. The bankruptcy court concluded that it retained exclusive jurisdiction and refused to remand t he cas e to state court. Nothing in Duval County compels the conclusion that a federal district court lacks jurisdiction over these types of cases. Consequently, the district court had jurisdiction over this case.
IV. Wellness Wireless next argu es that the di strict court abused its discretion when it conclu d ed that under Federal Rule of Civil Procedure 19, Diabetes America was a necessary and indispensable party that could not be joined because it was in bankruptcy. Rule 19(a) governs joinder of necessary pa rties and states in part: (a) Persons required to be joined if feasible. (1) Required Party . A person who is subject to service of process and whose joinder will not deprive the court of subject

matter jurisdiction must be joined as a party if:

. . . (B) that person claims an interest relating to the subject of the action and is so situated that disposing of the actio n in the person’s absence may:

. . . (ii) leave an existing party subject to a substantial risk of incurring double, multiple, or other wise inconsistent obligations because of the interest.
Fed. R. Civ. P. 19(a)(1)(B)(ii). The district court’s ruling implied its concern that failure to join Diabetes America could subject Infopia to the risk of multiple or inconsistent liabilities. The undisputed facts , however, establish that Diabetes America has no further claim based upon the promissory note. After receiving the $3 00,000 settlement payment in 2010 from Infopia, Diabetes America neither listed such a claim on its bankruptcy schedules nor retained any claim to recovery on the promissory note in its reorganization plan. Further, when asked explicitly by the district court

5 Case: 14-20024 Document: 00512980067 Page: 5 Date Filed: 03/24/2015No. 14

- 20024 in late 2013 whether the debtor’s estate retained any right to collect under the promissory note, the representativ e of the bankruptcy plan’s agent stated to the district court that he did not believe the debtor had any rights under the promissory note. Diabetes America has no i nterest in the promissory note , and Infopia cannot be subject to additional liability to Di abetes America or the purchaser of its assets

. Moreover, to the extent Infopia urges joinder of Diabetes America to prevent Infopia’s inconsistent, additional lia bility to Wellness Wireless, its position is misplaced. If the court below concludes that the promissory note was not validly assigned to Wellness Wireless, or if the court upholds Infopia’s other defenses, Infopia will prevail. If the court, however, concludes that the assignment was valid, and that Infopia was on prior notice of the assignment, then Infopia may have knowingly paid the wrong party to begin with. Holloway

- Houston, Inc. v. Gulf Coast Bank & Trust Co. , 224 S.W.3d 353, 361 (Tex. App.

— Houston [1st Dist.] 2006). Infopia’s dual liability would be self

- inflicted. Joinder of Diabetes
A merica is irrelevant to the ultimate outcome, although that company’s representative must be considered a likely witness.
V. That this dispute has persisted for nearly five years in three court

cases seems to make little sense. Perhaps the district cour t can bring the present case to a speedy conclusion. For the foregoing reasons, we must, unfortunately, REVERSE and REMAND for further proceedings. REVERSED and REMANDED.

6 Case: 14-20024 Document: 00512980067 Page: 6 Date Filed: 03/24/2015