Court Opinion

ID: 57918
Source: CourtListenerOpinion
Date Created: 2010-04-26 02:20:16+00
Date Added: 2024-06-11T14:58:29.262101
License: Public Domain

[DO NOT PUBLISH]

              IN THE UNITED STATES COURT OF APPEALS

                       FOR THE ELEVENTH CIRCUIT            FILED
                         ________________________ U.S. COURT OF APPEALS
                                                             ELEVENTH CIRCUIT
                                                                DEC 18, 2007
                               No. 07-13407
                                                              THOMAS K. KAHN
                           Non-Argument Calendar
                                                                  CLERK
                         ________________________

                     D. C. Docket No. 06-81290-CV-KLR

ELIZABETH KANE,

                                                               Plaintiff-Appellant,

                                     versus

LANNY ROSE,

                                                             Defendant-Appellee.

                         ________________________

                  Appeal from the United States District Court
                      for the Southern District of Florida
                        _________________________

                             (December 18, 2007)

Before BARKETT, PRYOR and KRAVITCH, Circuit Judges.

PER CURIAM:

     Elizabeth Kane appeals the district court’s order dismissing with prejudice
her 11-count complaint against Lanny Rose alleging, inter alia, violation of federal

and Georgia securities laws and negligent misrepresentation. The claims arose

from the collapse of KL Group, a defunct Florida “hedge fund” currently in the

midst of SEC-initiated receivership proceedings in the Southern District of Florida.

Rose, a securities broker, allegedly acted as an agent or employee of KL in

advising Kane to invest in the fund.

       Kane, a Georgia resident, originally filed her complaint in Georgia state

court. Rose, a Florida resident, then removed to the Northern District of Georgia.

Kane’s counsel corresponded with the KL receiver and his attorney, who stated

that he believed Kane’s suit could proceed separately from the receivership case

rather than as an ancillary action to it. The first district court disagreed, and

dismissed the case without prejudice, believing it should have been filed as an

ancillary action to the receivership case in the Southern District of Florida. Kane

then re-filed her complaint in that district as an ancillary action. In addition to

damages, Kane also sought a declaratory judgment that her suit was not subject to

the anti-suit injunctions of the receivership case management orders, referred to

jointly hereinafter as “the stay.”1

       1
         The first such order, establishing the receivership itself, prohibits investors from
“disturbing the assets or proceeds of the receivership or from prosecuting any actions or
proceedings which involve the receiver or which affect the [receivership] property.” The second
order, addressing case management, enjoins “any party” with notice from “filing . . . in any court

                                                2
        On motion of the defendant, the district court dismissed the complaint

pursuant to Fed. R. Civ. P. 12(b)(6) and (7). In particular, the district court

concluded that (i) the suit was subject to the stay, and also (ii) that the Rose-Kane

case could not proceed because the stay rendered infeasible the joinder of the

entities in receivership, who were indispensible parties to the Rose-Kane action.2

The district court also noted that the equities favored dismissal, i.e. denying relief

from the stay, because permitting the litigation to proceed would cause significant

depletion of receivership assets, and because Kane was not deprived of a forum as

she could file a proof of claim against the receivership estate.

        On appeal, Kane does not argue that her suit is outside the stay. Rather,

Kane essentially argues that the district court abused its discretion in dismissing

the case with prejudice.

        The dismissal of a complaint for failure to state a claim is reviewed de novo.

See, e.g., Arthur v. King, 500 F.3d 1335, 1339 (11th Cir. 2007). But we review for

any proceeding, suit, or action that may diminish or usurp property of the Receiver or the
Receivership Entities including . . . any causes of action that may belong to any investors . . .
against . . . the Receivership entities, their former principals, professionals . . . service providers,
or other third parties” except as ancillary actions. Rose was alleged to have acted as a KL
employee or agent, and to have been paid for his referral by KL. It is also uncontested that the
defenses he planned to assert would require significant participation by the receiver in this case.
Thus, the suit against him is within the scope of the stay.
        2
        The district court also dismissed some counts for failure to state a claim. Those
dismissals are not on appeal.

                                                    3
abuse of discretion a dismissal for failure to join an indispensable party. Laker

Airways v. British Airways, PLC, 182 F.3d 843, 847 (11th Cir. 1999). Decisions

about whether dismissal should be prejudicial – that is, without leave to amend or

refile – are also reviewed for abuse of discretion. See, e.g., Bryant v. Dupree, 252
F.3d 1161, 1163 (11th Cir. 2001). Generally, discretion is abused when a court

applies an incorrect legal standard or applies a correct standard unreasonably, fails

to follow proper procedures, bases its determination on facts that are clearly

erroneous, or imposes a disadvantage on someone that is unnecessarily broad and

results in no offsetting gain to anyone else or society at large. Klay v. United

Healthgroup, Inc., 376 F.3d 1092, 1096 (11th Cir. 2004) (citations omitted).

      We conclude the district court abused its discretion in dismissing the entire

complaint with prejudice. The court concluded that some claims failed to state a

basis for relief, and that determination is not before us. Yet the court also

concluded, correctly, that all of Kane’s claims were currently enjoined by the stay

and that the stay rendered infeasible the joinder of necessary parties. The court

then dismissed with prejudice, concluding an amendment would be futile because

any amended complaint would also run afoul of the stay. It is apparent, however,

that the stay does not render the instant claims futile for all time. By their terms,

these anti-suit injunctions will last only for the duration of the receivership case.

                                            4
Kane is not, and will not be, enjoined from suing Rose thereafter. In particular, if

Kane cannot be made whole through a claim against the receivership, and can state

a cause of action against Rose individually after the receivership is wound up or

after obtaining relief from the stay, she should not be precluded from prosecuting

her claims against Rose by a judgment entered solely on account of an anti-suit

injunction that will no longer enjoin those claims.3

       For these reasons, we vacate the district court’s dismissal order except for

Part II.C, and remand for dismissal of the remaining counts without prejudice.

       VACATED AND REMANDED.

       3
         Kane raises two other issues. First, she argues the district court should have entered an
order specifically stating the statute of limitations was tolled on her action against Rose during
the pendency of the receivership. The district court was within its discretion in declining to do
so. Tolling should be addressed, if necessary, if Kane is not made whole by a claim against the
receivership estate and she asserts an amended claim against Rose thereafter. It was particularly
appropriate to defer consideration of equitable tolling because Kane may not be entitled to it if
she is not diligent in the receivership proceedings. Kane’s argument that the district court erred
by not ruling on her declaratory judgment claim also lacks merit; that claim was dismissed.

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