Court Opinion

ID: 4390024
Source: CourtListenerOpinion
Date Created: 2019-04-24 00:00:21.663615+00
Date Added: 2024-06-11T14:50:32.704719
License: Public Domain

Case: 18-10462      Document: 00514927335         Page: 1    Date Filed: 04/23/2019

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT
                                                                           United States Court of Appeals
                                                                                    Fifth Circuit

                                      No. 18-10462
                                                                                  FILED
                                                                              April 23, 2019
                                                                             Lyle W. Cayce
RPV, LIMITED, AS TRUSTEE FOR THE VILLAGE TRUST,                                   Clerk

              Plaintiff - Appellant

v.

NETSPHERE, INCORPORATED; MANILA INDUSTRIES,
INCORPORATED,

              Defendants - Appellees

                   Appeal from the United States District Court
                        for the Northern District of Texas
                             USDC No. 3:16-CV-02778

Before STEWART, Chief Judge, and DAVIS and ELROD, Circuit Judges.
PER CURIAM:*
       This dispute centers around a settlement agreement. Manila Industries,
Inc. and Netsphere, Inc. (collectively, “the Netsphere Parties”) sued Ondova
Limited Co., Jeffrey Baron, Equity Trust, and the Village Trust (collectively,
“the Baron Parties”) for breach of the settlement agreement. RPV, Ltd. is the
trustee for the Village Trust. In a separate lawsuit now before us on appeal,

       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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                                 No. 18-10462
RPV sued the Netsphere Parties for breach of the same settlement agreement.
The Netsphere Parties argued RPV’s claims were compulsory counterclaims
that needed to be brought in the original litigation and filed a motion to
dismiss. The district court agreed and granted the motion to dismiss. For the
reasons below, we AFFIRM.
                                       I.
      This case arises out of ongoing litigation that began in 2006. Manila is a
domain name registration business that utilizes Netsphere’s proprietary
computer software to identify and register Internet domain names. Manila, as
the owner of the domain’s web pages, granted an exclusive license to Netsphere
to operate the web pages and generate income through advertising links. A
dispute arose in 2006 between the Netsphere Parties and nonparties Ondova
and Baron. That dispute, which generated two separate lawsuits in California
and Texas, resulted in a global settlement agreement (hereinafter, the “First
Settlement Agreement”).
      In 2009, the Netsphere Parties filed suit against Ondova and Baron in
the Northern District of Texas for alleged breaches of the First Settlement
Agreement (“Netsphere I”). In that case, the parties entered into the Mutual
Settlement and Release Agreement (hereinafter, the “Second Settlement
Agreement”). The Netsphere Parties later filed an amended complaint alleging
several causes of action, including a breach of the Second Settlement
Agreement. The amended complaint included the Village Trust as a named
defendant. The plaintiff in this case, RPV, is the appointed trustee for the
Village Trust, which is a signatory to the Second Settlement Agreement.
      Netsphere I was administratively closed on March 27, 2015, due to one
of the Baron Parties filing for bankruptcy. In its order, the court stated
“[n]othing in this order shall be considered a dismissal or disposition of this

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                                  No. 18-10462
case. No motion to reopen the case or any other motion may be filed without
express written leave of the court.”
      RPV filed this lawsuit in 2016 over alleged breaches of the Second
Settlement Agreement by the Netsphere Parties. The Netsphere Parties
argued that RPV’s claims were compulsory counterclaims in Netsphere I under
Federal Rule of Civil Procedure 13(a) and filed a motion to dismiss. The district
court agreed and granted the motion to dismiss. RPV appeals.
                                        II.
      We review de novo a district court’s decision to bar a claim on the basis
that it was a compulsory counterclaim in another action. See Tank Insulation
Int’l, Inc. v. Insultherm, Inc., 104 F.3d 83, 86 (5th Cir. 1997).
                                        III.
      RPV asserts three independent bases that preclude dismissal under
Federal Rule of Civil Procedure 13(a): (1) the law, facts, evidence and witnesses
are not the same in this case and Netsphere I, which refutes the notion that a
logical relationship exists between the two lawsuits; (2) RPV was not a party
in Netsphere I; Netsphere sued the Village Trust and failed to sue or serve RPV
as the trustee; and (3) no answer was filed or required in Netsphere I.
      Federal Rule of Civil Procedure 13(a) designates as a compulsory
counterclaim:
      [A]ny claim that—at the time of its service—the pleader has
      against an opposing party if the claim: (A) arises out of the
      transaction or occurrence that is the subject matter of the opposing
      party’s claim; and (B) does not require adding another party over
      whom the court cannot acquire jurisdiction.

If a party fails to bring a compulsory counterclaim in the original action, it is
barred from asserting the claim in a later suit. See Baker v. Gold Seal Liquors,
Inc., 417 U.S. 467, 469 n.1 (1974); McDaniel v. Anheuser-Busch, Inc., 987 F.2d

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298, 304 (5th Cir. 1993) (quoting Baker). A counterclaim is compulsory if any
of the following questions can be answered affirmatively:
       (1) whether the issues of fact and law raised by the claim and
       counterclaim largely are the same;

       (2) whether res judicata would bar a subsequent suit on
       defendant’s claim absent the compulsory counterclaim rule;

       (3) whether substantially the same evidence will support or refute
       plaintiff’s claim as well as defendant’s counterclaim; and

       (4) whether there is any logical relationship between the claim and
       the counterclaim.

Park Club, Inc. v. Resolution Tr. Corp., 967 F.2d 1053, 1058 (5th Cir. 1992)
(citation omitted). A logical relationship exists “when the counterclaim arises
from the same ‘aggregate of operative facts’ in that the same operative facts
serve[] as the basis of both claims[.]” Plant v. Blazer Fin. Servs., Inc. of Ga.,
598 F.2d 1357, 1361 (5th Cir. 1979).
       RPV first asserts that the law, facts, evidence and witnesses are separate
and distinct between its claims and the Netsphere Parties’ claims. RPV’s
assertion is without merit and borders on frivolous. 1 The claims in this case
revolve around the parties’ compliance with the same settlement agreement

       1  In discussing the entities affiliated with RPV in the Netsphere I proceedings, the
district court remarked:

       The multiple filings by different lawyers, whether in the name of Baron, the
       LLCs, the Village Trust, or other offshore entities connected to the trust and
       Baron has been an ongoing tactic conveniently employed to delay, confuse,
       manipulate, and disrupt the proceedings in this case, the bankruptcies, and
       related cases, and the court strongly suspects, based on its familiarity with the
       record in this, the bankruptcies, and other related cases, that Baron and those
       acting on his behalf are the source of this disruptive conduct.

Netsphere, Inc. et al v. Baron et al, 3:09-cv-00988-L, ECF No. 1447 at 21, n.9 (N.D. Tex., Mar.
27, 2015).

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                                     No. 18-10462
disputed in Netsphere I. As such, they are compulsory counterclaims under
Federal Rule of Civil Procedure 13(a). See Park Club, 967 F.2d at 1058 (claims
are compulsory counterclaims when “[b]oth regard the same instruments and
transactions, and a jury would hear substantially the same facts in regard to
both.”); see also Songcharoen v. Plastic & Hand Surgery Assocs., P.L.L.C., 561
F. App’x 327, 341 (5th Cir. 2014) (per curiam) (unpublished) (holding a logical
relationship existed where claims arose out of the same agreement).
      Next, RPV repeats its argument that it was not a party to Netsphere I.
Instead, the Netsphere Parties included the Village Trust as a defendant in
their Netsphere I amended complaint. Under Texas law, “suits against a trust
must be brought against its legal representative, the trustee, and not against
the trust itself as a separate legal entity.” In re Bradley, 501 F.3d 421, 433 (5th
Cir. 2007) (citation omitted). But where the trustee makes an appearance on
behalf of the trust and does not object to the capacity in which the trust is sued,
it waives its objection. See Ray Malooly Tr. v. Juhl, 186 S.W.3d 568, 571 (Tex.
2006) (“By failing to raise a timely objection to capacity, [the trustee] waived
any objection that judgment had to be rendered against the Trust rather than
himself as trustee.”). A review of the record for Netsphere I confirms the district
court’s finding that RPV made several appearances in its capacity as trustee
for the Village Trust, thereby waiving any argument that it was not on notice
as to the claims against the trust. 2 RPV’s assertion that these appearances
occurred during proceedings unrelated to the Netsphere I litigation is
erroneous.
      RPV also contends that it was not required to file compulsory
counterclaims in Netsphere I because that case was administratively closed

      2  See ECF No. 1411 (objection filed by RPV as trustee of the Village Trust); ECF No.
1418 (supplemental document filed by RPV as trustee of the Village Trust); ECF No. 1451
(notice of appeal from RPV as trustee of the Village Trust).
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                                  No. 18-10462
before it was required to file an answer. However, the district court held that
this argument was waived because it was not raised until after summary
judgment had been rendered and was only raised in RPV’s motion for
reconsideration. A review of the record confirms that RPV did not raise this
argument prior to its motion for reconsideration, so we consider it waived on
appeal. See Lincoln Gen. Ins. Co. v. De La Luz Garcia, 501 F.3d 436, 442 (5th
Cir. 2007) (“[G]enerally speaking, we will not consider an issue raised [in the
district court] for the first time in a Motion for Reconsideration.”).
                                       IV.
      The district court’s judgment is AFFIRMED.

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