Court Opinion

ID: 8484786
Source: CourtListenerOpinion
Date Created: 2022-11-18 01:00:25.820945+00
Date Added: 2024-06-11T16:49:57.021250
License: Public Domain

Case: 20-30072   Document: 00516549648     Page: 1     Date Filed: 11/17/2022

          United States Court of Appeals
               for the Fifth Circuit                           United States Court of Appeals
                                                                        Fifth Circuit

                                                                      FILED
                                                              November 17, 2022
                            No. 20-30072                         Lyle W. Cayce
                                                                      Clerk

   Cleartrac, L.L.C.; Russell Kent Moore,

                                                     Plaintiffs—Appellants,
                                versus
   Lanrick Contractors, L.L.C.; Lanrick Real Estate,
   L.L.C.; Southeast Dirt, L.L.C.; Hudson Holdings, L.L.C.;
   Hudson Holdings Equipment, L.L.C.; Thomas P.
   McKellar,

                                                 Defendants—Appellees,

                        consolidated with
                          _____________

                           No. 20-30076
                          _____________

   Cleartrac, L.L.C.; Russell Kent Moore,

                                                      Plaintiffs—Appellees,
                                versus
   Lanrick Contractors, L.L.C.; Lanrick Real Estate,
   L.L.C.; Southeast Dirt, L.L.C.; Hudson Holdings, L.L.C.;
   Hudson Holdings Equipment, L.L.C.; Thomas P.
   McKellar,

                                                Defendants—Appellants.
Case: 20-30072      Document: 00516549648          Page: 2   Date Filed: 11/17/2022

                                     No. 20-30072
                                   c/w No. 20-30076

                  Appeals from the United States District Court
                     for the Eastern District of Louisiana,
                            USDC No. 2:19-CV-12137

   Before Dennis, Higginson, and Willett, Circuit Judges.
   James L. Dennis, Circuit Judge:
          These consolidated appeals involve a dispute over the enforceability
   of a Texas state court judgment after it had been made executory by a
   Louisiana state court and the judgment creditors then sought to make it
   executory in the United States District Court for the Eastern District of
   Louisiana. That federal court dismissed the case on res judicata grounds, but
   we conclude instead that the district court lacked subject-matter jurisdiction
   over the case because Plaintiffs failed to satisfy 28 U.S.C. § 1332(a)’s
   amount-in-controversy requirement for diversity of citizenship jurisdiction.
   Accordingly, we VACATE and REMAND with instructions for the district
   court to dismiss the case for lack of jurisdiction.
          Section 1332(a) requires that “the matter in controversy exceed[] the
   sum or value of $75,000, exclusive of interest and costs.” While the statute
   as a general matter excludes interest and costs, under recognized exceptions,
   § 1332(a) does not prevent a plaintiff from using costs or interest that his
   principal claim includes at the time it arose, such as those accrued in a prior
   case. Here, however, Plaintiffs rely crucially on interest that had not yet
   accrued at the time their claim to enforce their prior judgment arose. Because
   that interest is excluded by § 1332(a), Plaintiffs failed to establish subject-
   matter jurisdiction over the present case.

                                           2
Case: 20-30072         Document: 00516549648               Page: 3       Date Filed: 11/17/2022

                                          No. 20-30072
                                        c/w No. 20-30076

                                                 I.
           On August 26, 2010, a Texas state court rendered a default judgment
   (the “Texas Judgment”) in favor of Cleartrac, LLC (“Cleartrac”) and
   against Lanrick Contractors Corp. (“Lanrick Contractors”). 1 The Texas
   Judgment provided the following awards to Cleartrac:
                    1. $51,519.47 in principal;
                    2. Pre-judgment interest at a per diem rate of $7.06
                       after February 22, 2010, when the original
                       complaint was filed through the date of judgment;
                    3. $3,000.00 for the filing and prosecution to trial of
                       this case in the 272nd Judicial District Court for the
                       County of Brazos, State of Texas;
                    4. $2,500.00 for post-judgment collection efforts;
                    5. $500.00 in court costs in the 272nd Judicial District
                       Court for the County of Brazos, State of Texas;
                    6. Post-judgment interest at a rate of 5.00% per annum
                       from the date of judgment until the judgment is
                       paid in full.
           On November 16, 2011, following entry of the Texas Judgment,
   Cleartrac filed a “Petition to Make Judgment Executory” against Lanrick
   Contractors in Louisiana state court, and, on November 21, 2011, that state
   court ordered that the Texas Judgment be made executory and made the
   judgment of the Louisiana court. On June 25, 2014, Cleartrac was dissolved. 2

           1
             Lanrick Contractors, LLC is the successor to Lanrick Contractors Corp. All
   further references to “Lanrick Contractors” are to Lanrick Contractors, LLC.
           2
              Plaintiffs maintain that, under Texas Business Organization Code § 11.356(c), an
   entity like Cleartrac may survive for three years after dissolution for a limited purpose until
   judgments rendered in its favor have been fully executed. However, the parties contest
   that assertion. In fact, as explained below, the Louisiana state court ruled against Cleartrac
   on the issue, and when Cleartrac filed its complaint in the Louisiana federal court in this
   case, it was joined by its sole former member Russell Moore as a precaution. As we find the
   district court lacked subject-matter jurisdiction in this case, we take no position on the

                                                 3
Case: 20-30072         Document: 00516549648                Page: 4        Date Filed: 11/17/2022

                                           No. 20-30072
                                         c/w No. 20-30076

   Several years later, on August 3, 2017, Cleartrac filed a “Petition to Enforce
   Judgment” in Louisiana state court, seeking to enforce the Texas Judgment
   against Lanrick Contractors. On July 9, 2018, Cleartrac amended its state
   court petition, adding as defendants Lanrick Real Estate, LLC; Southeast
   Dirt, LLC; Hudson Holdings, LLC; Hudson Holdings Equipment, LLC;
   Thomas P. McKellar; and Lisa C. McKellar. On August 5, 2019, the
   Louisiana state district court granted defendants’ exception of no right of
   action, holding that, under Texas law, Cleartrac had no right to enforce the
   Texas Judgment. Two weeks later, on August 19, 2019, the Louisiana state
   court entered a judgment dismissing Cleartrac’s action. Cleartrac was
   initially granted a suspensive appeal to the Louisiana court of appeal on
   December 9, 2019, which delayed execution of the judgment pending appeal.
   As of August 6, 2020, Cleartrac no longer had a suspensive appeal pending,
   but only a devolutive appeal. Ultimately, on March 4, 2022, the Louisiana
   First Circuit Court of Appeal reversed the judgment of the Louisiana state
   district court due to lack of evidence of Cleatrac’s dissolution. Cleartrac,
   LLC v. Lanrick Contractors, LLC, 2021-0413 (La. App. 1 Cir. 3/4/22), 2022
   WL 630897. 3
           In the interval between the Louisiana state court’s grant of the
   exception of no right of action and its entry of judgment dismissing the case,
   Cleartrac and its sole member, Russell Kent Moore, (collectively,
   “Plaintiffs”) filed a complaint in the United States District Court for the
   Eastern District of Louisiana (“EDLA”) seeking to invoke the court’s
   diversity jurisdiction. Plaintiffs again sought to enforce the Texas Judgment

   ability of either Plaintiff to bring this action but merely note the issue to explain the posture
   of this case.
           3
             An initial appeal was dismissed for lack of appellate jurisdiction. Cleartrac, LLC
   v. Lanrick Contractors, LLC, 2020-0175 (La. App. 1 Cir. 11/6/20), 2020 WL 6536929.

                                                  4
Case: 20-30072      Document: 00516549648          Page: 5   Date Filed: 11/17/2022

                                    No. 20-30072
                                  c/w No. 20-30076

   and make it executory. They named as defendants Lanrick Contractors;
   Lanrick Real Estate, LLC; Southeast Dirt, LLC; Hudson Holdings, LLC;
   Hudson Holdings Equipment, LLC; and Thomas P. McKellar (collectively,
   “Defendants”).
          Defendants filed two motions to dismiss. First, Defendants argued
   that the EDLA lacked subject-matter jurisdiction under 28 U.S.C. § 1332(a).
   Defendants did not challenge that there was complete diversity between the
   parties but instead contended that the diversity statute’s amount-in-
   controversy requirement was not met. Specifically, Defendants argued that
   28 U.S.C. § 1332(a) bars the inclusion of post-judgment interest in
   computing the jurisdictional amount and that, without post-judgment
   interest, the dispute involves less than $75,000. The EDLA, they argued,
   therefore lacked jurisdiction.    That district court rejected Defendants’
   argument and denied their motion.           Second, Defendants asserted in a
   separate motion that the doctrine of res judicata precluded the federal action
   because the Louisiana state district court in its August 19, 2019, judgment
   already decided Plaintiffs had no right to bring this action. Agreeing with
   Defendants, the EDLA granted their res judicata motion under Federal Rule
   of Civil Procedure 12(b)(6) and dismissed the case.
          Defendants timely appealed the district court’s ruling on subject-
   matter jurisdiction, while Plaintiffs timely appealed the court’s order
   dismissing on the basis of res judicata.
                                         II.
          “Federal courts are courts of limited jurisdiction.” Howery v. Allstate
   Ins. Co., 243 F.3d 912, 916 (5th Cir. 2001). “The burden of establishing
   federal jurisdiction rests on the party seeking the federal forum.” Id. at 919.
   This court, moreover, has “an independent obligation” to assure itself of its

                                          5
Case: 20-30072      Document: 00516549648         Page: 6    Date Filed: 11/17/2022

                                    No. 20-30072
                                  c/w No. 20-30076

   jurisdiction. MidCap Media Finance, L.L.C. v. Pathway Data, Inc., 929 F.3d
   310, 313 (5th Cir. 2019).
          Plaintiffs sought to invoke the district court’s diversity jurisdiction
   under 28 U.S.C. § 1332. Relevant here, § 1332(a) permits the exercise of
   federal jurisdiction only when (1) the dispute is between citizens of different
   states and (2) the amount in controversy “exceeds the sum or value of
   $75,000, exclusive of interests and costs.” 28 U.S.C. § 1332(a). Because we
   find that Plaintiffs have not met the amount-in-controversy requirement, we
   need not address whether there is diversity of citizenship. As to the amount
   in controversy, it “should be determined at the time of filing” of the
   complaint. White v. FCI USA, Inc., 319 F.3d 672, 674 (5th Cir. 2003).
           Plaintiffs argue that the amount in controversy is $85,180.97,
   consisting of the following awards from the Texas Judgment: $51,519.47 in
   principal; $1,313.16 in pre-judgment interest; $3,000 in attorneys’ fees for
   filing and prosecuting the case; $2,500 in post-judgment collection efforts;
   $500 in court costs; and 5.00% interest per annum from the date of the
   Judgment until paid in full. Because the $51,519.47 principal by itself is
   clearly insufficient, the question, then, is whether the other awards in the
   Texas Judgment must be included in calculating the amount in controversy
   or are excluded as interest or costs.
          We first address costs. By its language, § 1332(a) plainly excludes
   “costs” from the amount in controversy.               However, as leading
   commentators have noted, courts have considered costs in computing the
   amount in controversy “when the subject matter of the controversy happens
   to be or include the costs awarded in an earlier lawsuit.” 14AA Charles
   Alan Wright & Arthur R. Miller, Federal Practice and
   Procedure § 3712 & n.3 (4th ed.), Westlaw (database updated Aug. 2022)
   (citing Spann v. Compania Mexicana Radiodifusora Fronteriza, S. A., 131 F.2d

                                           6
Case: 20-30072      Document: 00516549648         Page: 7    Date Filed: 11/17/2022

                                    No. 20-30072
                                  c/w No. 20-30076

   609 (5th Cir. 1942); Richard C. Young & Co. v. Leventhal, 389 F.3d 1 (1st Cir.
   2004)). One of the cases these commentators cite in support is our early case,
   Spann v. Compania Mexicana Radiodifusora Fronteriza, S. A., 131 F.2d 609
   (5th Cir. 1942). In that case, Spann sued for $50,000 in a Mexican court and
   lost both his lawsuit and appeals. Id. at 610. Under Mexican law, as the losing
   party, Spann was assessed the costs of the litigation; specifically, he was
   ordered by Mexican courts to pay the defendant 12% of the $50,000 sum
   requested—that is, $6,000—consisting of 8% to reimburse attorney fees and
   4% to reimburse appeal costs. Id. The prevailing party in the Mexican
   litigation sued Spann in U.S. federal court to enforce the Mexican judgment.
   Attempting to resist the federal court’s jurisdiction, Spann “insist[ed] that
   the suit was not for a sum or value in excess of $3,000.00”—the
   jurisdictional amount then in effect under § 1332—and thus the U.S. federal
   “court was without jurisdiction.” Id. The district court rejected Spann’s
   arguments, and this court affirmed, explaining that in accordance with
   Mexican law, judgment for costs had been entered against Spann in favor of
   the adverse party in the sum of $6,000, or its equivalent in National currency;
   that the judgment had been affirmed by the Mexican supreme court; and that
   no part of it had been paid. See id. at 610-11. Thus, the adverse party was
   entitled to rely on the $6,000 judgment for costs as costs awarded in the prior
   Mexican case before the litigation in the U.S. courts began, and, included as
   part of the amount in controversy, that amount clearly exceeded the
   jurisdictional amount of $3,000 at that time. See id.
          In the present case, the subject matter of the controversy includes
   costs awarded in an earlier lawsuit: the $500 in court costs and the $2,500 in
   post-judgment collection efforts awarded in the Texas Judgment. Guided by
   the commentators and Spann, these costs are thus included in determining
   the amount in controversy. Spann applied the same reasoning to attorneys’
   fees awarded in a prior judgment as well. See id. Accordingly, the $3,000 in

                                          7
Case: 20-30072       Document: 00516549648       Page: 8     Date Filed: 11/17/2022

                                    No. 20-30072
                                  c/w No. 20-30076

   attorneys’ fees for filing and prosecuting the case awarded in the Texas
   Judgment are also included. But these items do not add up to enough to
   exceed $75,000.
          So, we must turn to the subject of interest, which is critical. The
   purpose of § 1332(a)’s exclusion of interest is to prevent the plaintiff from
   delaying suit until the substantive claim, with the accrued interest, exceeds
   the jurisdictional amount. Brainin v. Melikian, 396 F.2d 153, 155 (3d Cir.
   1968); State Farm Mut. Auto. Ins. Co. v. Narvaez, 149 F.3d 1269, 1271 (10th
   Cir. 1998); Wright & Miller, supra, § 3712. The leading Supreme
   Court decision explaining what interest is excludable under § 1332(a) is
   Brown v. Webster, 156 U.S. 328 (1895). There, the plaintiff sued his vendor
   in warranty for damages for being evicted from land he had purchased from
   the defendant for $1,200. Id. at 328. Under the applicable state law, the
   damages in such an action were the return of the purchase price with interest,
   which plaintiff alleged to total $6,342.40. Id. at 329. The defendant objected
   to the court’s jurisdiction, contending that the then-prevailing $2,000
   jurisdictional amount was not met because, when the interest was excluded
   from the amount in controversy, the dispute concerned only the $1,200
   return of price. The Court disagreed, stating that the defendant’s argument
   “overlooks the elementary distinction between interest as such and the use
   of an interest calculation as an instrumentality in arriving at the amount of
   damages to be awarded on the principal demand.” Id. The recovery sought
   in that case was “not the price and interest thereon, but the sum of the
   damage resulting from eviction. All such damage was therefore the principal
   demand in controversy.” Id. at 329-30. The Court, then, drew a distinction
   “between a principal and an accessory demand. The sum of the principal
   demand determines the question of jurisdiction. The accessory or the
   interest demand cannot be computed for jurisdictional purposes.” Id. at 330.
   Because in Brown “the entire damage claimed . . . was predicated on a distinct

                                         8
Case: 20-30072      Document: 00516549648           Page: 9     Date Filed: 11/17/2022

                                      No. 20-30072
                                    c/w No. 20-30076

   cause of action[]—eviction from the property bought”—the interest could
   be included. Id. In short, the interest “was an essential ingredient in the one
   principal claim” and could not be “segregated therefrom, and be considered
   as a mere accessory thereto.” Id. Also, although the Court did not explicitly
   so state, the interest sued for was not post-judgment interest but interest that
   accrued within the plaintiff’s state-law cause of action for eviction.
          Our Court has summarized the rule in Brown as follows: “Interest is
   only considered for jurisdictional purposes where it is a basis for the suit
   itself.” Danial v. Daniels, 162 F. App’x 288, 290 (5th Cir. 2006) (citing
   Brown, 156 U.S. 328; Greene County v. Kortrecht, 81 F. 241 (5th Cir. 1897)).
   We have applied the holding in Brown only once in a published decision. In
   Greene County v. Kortrecht, 81 F. 241, 241 (5th Cir. 1897), the plaintiff sought
   to collect on negotiable bonds and their coupons, seeking the principal as well
   as interest that accrued after the date of their maturity. The court drew a
   distinction between coupons, which “represent interest on the bond accruing
   and made payable at stated times before the maturity of the bond,” and
   interest on the bonds and coupons “accruing after maturity.” Id. A coupon,
   the court noted, “is an independent contract stipulating for the payment of
   the installment of interest at the time named in each, respectively, and, after
   its maturity, bears interest, will support an action, and is subject to the statute
   of limitations, as a separable contract.” Id. Thus, the Supreme Court has
   held that a claim on a coupon is included in the amount in controversy as a
   “principal and primary” claim, “in no just sense accessory to any other
   demand.” Edwards v. Bates Cnty., 163 U.S. 269, 272 (1896), cited in Kortrecht,
   81 F. at 241. On the other hand, the court in Kortrecht reasoned, “[t]he
   interest on the bonds accruing after maturity, and the interest on each coupon
   accruing after its maturity, has an accessory relation to the principal of the
   bond and of each coupon” and thus “is excluded from the calculation of the

                                           9
Case: 20-30072        Document: 00516549648               Page: 10       Date Filed: 11/17/2022

                                          No. 20-30072
                                        c/w No. 20-30076

   amount declared on, in determining the jurisdiction of the circuit court.” 81
   F. at 241.
           Making a similar distinction to the one in Kortrecht, the First Circuit
   has explained that, under Brown, interest is included in calculating the
   jurisdictional amount when “the principal claim itself, at the time it arose,
   was made up in part of interest,” while interest is excluded when it “aris[es]
   solely by virtue of a delay in payment.” Regan v. Marshall, 309 F.2d 677, 678
   (1st Cir. 1962). 4 Neither we nor our sister circuits, however, have addressed
   the precise question presented in this case. There are two components of
   interest in the unpaid Texas Judgment which we must determine whether to
   include in calculating the jurisdictional amount. First, there is the “pre-
   judgment interest.” That is the interest that accrued from the filing of the
   initial Texas complaint until the Texas Judgment was rendered. That
   interest is no longer accruing. Second, there is the “post-judgment interest,”
   which is the interest accruing from the time the Texas Judgment was entered
   until paid. That interest is continuously accruing.
          Several district courts have explored the issues presented in this case.
   The majority of district courts appear to distinguish between pre-judgment
   interest and post-judgment interest, including the former in the amount in
   controversy but excluding the latter. See, e.g., Reynolds v. Reynolds, 65 F.
   Supp. 916, 918-19 (W.D. Ark. 1946) (excluding post-judgment interest);
   Colonia Ins. Co. v. Williams, No. 1:95CV288–S–D, 1995 WL 1945464, at *2
   (N.D. Miss. Oct. 11, 1995) (same); Phoenix Scotts-Sports v. Kadish, 321 F.
   Supp. 556, 557 (D. Alaska 1971) (including pre-judgment interest but

           4
                Indeed, “interest uniformly is excluded under the rule of Brown v. Webster, if it
   . . . arises solely by virtue of a delay in payment of an obligation.” Wright & Miller,
   supra, § 3712; see, e.g., Howard v. Off. Of Special Deputy Receiver, No. 22-10240, 2022 WL
   2255708, at *1 (5th Cir. June 23, 2022); Principal Mut. Life Ins. Co. v. Juntunen, 838 F.2d
   942, 943 (7th Cir. 1988); Whisenant v. Sheridan Prod. Co., 627 F. App’x 706, 709 (10th Cir.
   2015); cf. Brainin, 396 F.2d at 155.

                                                10
Case: 20-30072     Document: 00516549648         Page: 11    Date Filed: 11/17/2022

                                    No. 20-30072
                                  c/w No. 20-30076

   excluding post-judgment interest); Richie v. Richie, 186 F. Supp. 592, 593
   (E.D.N.Y. 1960) (same). However, some district courts have taken a broader
   view and included post-judgment interest in the amount in controversy. See,
   e.g., Snider v. State Farm Mutual Automobile Insurance Co., 360 F. Supp. 929,
   931 (S.D.W. Va. 1973); Gambino v. Am Guarantee & Liab, Ins. Co., No. 3:09–
   CV–00304(CFD), 2009 WL 3158151, at *1 n.1 (D. Conn. Sept. 28, 2009).
          We conclude that the pre-judgment interest that accrued prior to the
   Texas Judgment is included in determining the amount in controversy in an
   action to enforce that Judgment. As pre-judgment interest has completely
   accrued during the prior case, this sum can be precisely calculated and does
   not vary depending on the other awards and when the plaintiff files suit.
   Because pre-judgment interest is an accrued component of the judgment
   sued upon at the time the claim to enforce the judgment arose, and because
   pre-judgment interest’s value does not depend on the passage of time after
   entry of the state court judgment, pre-judgment interest can be fairly said to
   constitute an “essential ingredient in the . . . principal claim.” See Brown,
   156 U.S. at 330; Regan, 309 F.2d at 678.
          As to the post-judgment interest accruing after entry of the Texas
   Judgment, however, we conclude that it may not be included in determining
   the amount in controversy in an action to enforce that Judgment. Excluding
   post-judgment interest from the calculation furthers § 1332(a)’s statutory
   purpose of preventing plaintiffs from delaying in filing suit until sufficient
   interest has accrued such that they can reach the jurisdictional amount. See
   Brainin, 396 F.2d at 155; State Farm, 149 F.3d at 1271. Permitting otherwise
   would approve the anomalous situation where a judgment-creditor who seeks
   to invoke a federal court’s diversity jurisdiction but is unable to meet the
   amount-in-controversy requirement on the day his substantive claim first
   accrues can simply wait until sufficient time has passed—and sufficient
   interest has accumulated on his claim—such that he can meet the

                                         11
Case: 20-30072     Document: 00516549648          Page: 12     Date Filed: 11/17/2022

                                     No. 20-30072
                                   c/w No. 20-30076

   jurisdictional amount set forth in § 1332(a). See Regan, 309 F.2d at 678;
   Reynolds, 65 F. Supp. 918; Kadish, 321 F. Supp. at 557.
          Plaintiffs argue that the post-judgment interest on the Texas
   Judgment forms part of an “essential ingredient” in the “principal demand”
   for enforcement of the Texas Judgment under Brown. However, unlike pre-
   judgment interest, no part of the post-judgment interest has accrued at the
   time the claim to enforce the judgment arose; rather, post-judgment interest
   increases thereafter solely due to delay in paying the other awards in the
   judgment. In that sense, post-judgment interest is “accessory” to the other
   awards. See Kortrecht, 81 F. at 241; Regan, 309 F.2d at 678; Reynolds, 65 F.
   Supp. at 918; Colonia Ins. Co., 1995 WL 1945464, at *2.
          Turning again to the allegations in this case, the $1,313.16 in pre-
   judgment interest awarded in the Texas Judgment is included in determining
   the amount in controversy. However, the 5.00% interest from the date of the
   Judgment until paid in full is not. The total amount in controversy thus
   comes to $58,832.63. Because the amount in controversy does not exceed
   the sum or value of $75,000, exclusive of interests and costs, the district court
   lacked subject-matter jurisdiction under § 1332(a).
                                         III.
          For these reasons, we VACATE the district court’s judgment
   dismissing Plaintiffs’ complaint on the basis of res judicata and REMAND
   with instructions that the district court dismiss this case without prejudice
   for lack of subject-matter jurisdiction.

                                          12