Court Opinion

ID: 6343036
Source: CourtListenerOpinion
Date Created: 2022-05-23 16:00:42.78064+00
Date Added: 2024-06-11T14:21:23.744290
License: Public Domain

USCA11 Case: 20-14504    Date Filed: 05/20/2022   Page: 1 of 26

                                                   [PUBLISH]
                          In the
         United States Court of Appeals
               For the Eleventh Circuit

                 ____________________

                        No. 20-14504
                 ____________________

DIANE N. RESNICK,
PERRY A. RESNICK,
AMERICAN WELLNESS AND HEALTH CENTERS, INC.,
JONATHAN S. RESNICK,
                                          Plaintiffs-Appellants,
versus
KRUNCHCASH, LLC,
JEFFREY HACKMAN,

                                        Defendants-Appellees.

                 ____________________
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2                        Opinion of the Court                     20-14504

            Appeal from the United States District Court
                for the Southern District of Florida
               D.C. Docket No. 9:20-cv-80163-WPD
                     ____________________

Before NEWSOM, MARCUS, Circuit Judges, and STORY, District
Judge. *
MARCUS, Circuit Judge, delivered the opinion of the Court.
NEWSOM, Circuit Judge, filed a concurring opinion, in which
MARCUS, Circuit Judge, and STORY, District Judge, joined.

MARCUS, Circuit Judge:
       This case arises from a loan deal gone awry. Plaintiffs Jona-
than S. Resnick, Diane Resnick, Perry A. Resnick, The Law Offices
of Jonathan S. Resnick, LLC, The Law Office of Perry A. Resnick,
LLC (collectively, the “Resnicks”), and American Wellness and
Health Centers, Inc. (“American Wellness”) appeal the district
court’s dismissal of their constitutional and state law claims against
Defendants KrunchCash, LLC (“KrunchCash”) and Jeffrey Hack-
man (“Hackman”) for lack of subject matter jurisdiction.
      Plaintiffs claim that Defendants violated their right to due
process of law by freezing their assets in Maryland, obtaining writs

* Honorable Richard W. Story, United States District Judge, for the Northern
 District of Georgia, sitting by designation.
USCA11 Case: 20-14504        Date Filed: 05/20/2022     Page: 3 of 26

20-14504               Opinion of the Court                         3

of garnishment based on Maryland law without providing notice
and an opportunity to be heard. They also allege violations of state
law, including a charge of usury, breach of contract, and tortious
interference. The district court concluded, however, that it lacked
subject matter jurisdiction because, in its view, Plaintiffs’ federal
claim was so utterly frivolous that it robbed the court of federal
question jurisdiction.
       We disagree. Even if Plaintiffs’ federal claim ultimately fails
on the merits, the due process claim was not so wholly insubstan-
tial and frivolous as to deprive the district court of the power to
adjudicate. We therefore reverse and remand for further proceed-
ings consistent with this opinion.
                                  I.
                                 A.
       The discrete jurisdictional dispute before us begins with a
convoluted factual and procedural backdrop. Jonathan and Perry
Resnick are legal practitioners who reside in Florida and represent
clients in personal-injury cases. Diane Resnick is Jonathan’s wife,
and Perry is their son. American Wellness is a medical clinic that
treats patients injured in auto accidents. KrunchCash is a company
owned and run by Jeffrey Hackman, who resides in Florida.
       In connection with their professional practices, Plaintiffs en-
tered into five “Funding Agreements” and two “Guaranty and Se-
curity Agreements” (the “Guaranty Agreements”) -- all seven of
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4                          Opinion of the Court                      20-14504

which are referred to as “Loan Agreements” 1 with KrunchCash.
KrunchCash provided cash advances to Plaintiffs in return for a sig-
nificant “use fee,” or interest rate. The fee was four percent of the
loan per month. The Funding Agreements also required the Res-
nicks to pay at least six months’ worth of the monthly use fee (or
24 percent of the loan), and they required American Wellness to
pay at least five months (20 percent of the loan). Thus, each Fund-
ing Agreement charged a maximum rate of 48 percent per annum.
       All the Loan Agreements contemplated confessions of judg-
ment “without notice” to Plaintiffs, which Defendants could exer-
cise “in any court” and “IN THE SAME OR DIFFERENT
JURISDICTIONS AS OFTEN AS [KRUNCHCASH] SHALL
DEEM NECESSARY.” In addition, Plaintiffs agreed to the follow-
ing language in four separate Funding Agreements:
        THIS AGREEMENT CONTAINS A WARRANT OF
        ATTORNEY TO CONFESS JUDGMENT AGAINST
        LAW FIRM. IN GRANTING THIS WARRANT OF
        ATTORNEY TO CONFESS JUDGMENT, LAW
        FIRM HEREBY KNOWINGLY, INTENTIONALLY
       AND VOLUNTARILY, AND ON THE ADVICE OF
       SEPARATE COUNSEL, UNCONDITIONALLY
       WAIVES ANY AND ALL RIGHTS LAW FIRM HAS

1 The Resnicks maintain that their signatures were forged on the Guaranty
Agreements, so whether those Agreements even apply also remains contested.
See Am. Compl. at 15 n.12 (“Upon information and belief, the Resnicks’ sig-
natures on the Guaranties were forged. Plaintiffs will be further developing
this issue and will be pursuing an additional claim against Defendants and their
co-conspirators.”).
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20-14504               Opinion of the Court                        5

      OR MAY HAVE TO PRIOR NOTICE AND AN
      OPPORTUNITY FOR HEARING UNDER THE
      RESPECTIVE CONSTITUTIONS AND LAWS OF
      THE UNITED STATES, THE STATE OF FLORIDA,
      AND ANY OTHER STATE, PRIOR TO ENTRY OF
      JUDGMENT AND SEIZURE OF LAW FIRM’S
      PROPERTY.
(Emphasis added).
        KrunchCash was also given the right, “without [giving] no-
tice” or “warning” to Plaintiffs, to “empower any attorney of any
court of record” to obtain “confess[ed] judgment[s] . . . in favor of
[KrunchCash] for any and all amounts payable to [KrunchCash].”
The Guaranty Agreements also provide that the Resnicks “agree[]
that its guaranty is irrevocable, continuing, absolute and uncondi-
tional and shall not be discharged or impaired, and [the Resnicks]
hereby irrevocably waive[] any defenses to enforcement [they]
may have now or in the future.”
       Over time, the Resnicks’ and KrunchCash’s relationship
broke down. Plaintiffs claim that KrunchCash “wrangle[d] increas-
ing control over the computer systems that the Resnicks used to
run their law firms” and “extort[ed]” them into making payments
under the Funding Agreements. The Plaintiffs also claim that the
Defendants blocked their access to their clients’ records. In re-
sponse, the Resnicks sued KrunchCash on July 18, 2019, in Florida’s
Fifteenth Judicial Circuit in Palm Beach County and obtained a
temporary injunction, which required KrunchCash to relinquish
control over the Resnicks’ computer systems. KrunchCash re-
sponded by filing an action in the same court to recover $13.1 mil-
lion from Plaintiffs for breaching the Loan Agreements.
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6                        Opinion of the Court                   20-14504

       Purportedly without notifying Plaintiffs or the Florida Cir-
cuit Court, KrunchCash filed seven complaints for judgment by
confession in the Circuit Court for Baltimore County, Maryland
against Plaintiffs (the “Maryland Actions”) under Maryland Rule 2-
611. 2 Maryland Rule 2-611 provides:
       (b) Action by Court. If the court determines that
       (1) the complaint complies with the [procedural] re-
       quirements of section (a) of this Rule and (2) the
       pleadings and papers demonstrate a factual and legal
       basis for entitlement to a confessed judgment, the
       court shall direct the clerk to enter the judgment.
       Otherwise, it shall dismiss the complaint.
Md. R. Civ. P. Cir. Ct. 2-611. Because they purportedly did not
receive notice of these complaints, Plaintiffs did not initially appear
in the Maryland Actions.
        The Maryland Circuit Court entered judgment for
KrunchCash on December 4, 2019, and KrunchCash, in turn,
sought and obtained writs of garnishment in aid of the enforcement
of the judgment under Maryland Rules 2-645 and 2-645.1. Plaintiffs
moved to vacate those writs in the Maryland Circuit Court in

2 The seven cases pending in Baltimore County are: KrunchCash, LLC v. Di-
ane N. Resnick, C-03-CV-004422 (Md. Cir. Ct. November 26, 2019);
KrunchCash, LLC v. Am. Wellness and Health Ctrs., Inc., C-03-CV-004423
(Md. Cir. Ct. November 26, 2019); KrunchCash, LLC v. Perry Resnick, C-03-
CV-004425 (Md. Cir. Ct. November 26, 2019); and KrunchCash, LLC v. The
Law Offices of Jonathan Resnick, C-03-CV-004427 (Md. Cir. Ct. November 26,
2019)).
USCA11 Case: 20-14504          Date Filed: 05/20/2022      Page: 7 of 26

20-14504                 Opinion of the Court                           7

December 2019. 3 Plaintiffs alleged that these writs allowed
KrunchCash to freeze the personal and business accounts of the
Resnicks, and that their accounts remained frozen, at least as of the
operative date of their pleading (February 28, 2020).
        On March 2, 2020, the Maryland Circuit Court vacated all
confessed judgments and writs of garnishments, although it ap-
pointed a receiver over the properties and businesses of Plaintiffs
The Law Offices of Jonathan S. Resnick, LLC and The Law Offices
of Perry A. Resnick, LLC, as well as non-party The Law Offices of
Jonathan S. Resnick, PLLC. See KrunchCash, LLC v. The Law Of-
fices of Jonathan Resnick, C-03-CV-004427 (Md. Cir. Ct. March 17,
2020). The Maryland Actions are ongoing.
                                   B.
       While the Maryland Actions continued, Plaintiffs sued
KrunchCash and Hackman in the Southern District of Florida on
February 4, 2020. In their Amended Complaint, Plaintiffs allege,
among other state law claims, that the Funding Agreements be-
tween Plaintiffs and Defendants are usurious under Fla. Stat.
§§ 687.02 et seq., and that the Maryland rules used to obtain writs
of garnishment against Plaintiffs’ assets, without notice and the op-
portunity to be heard, violated their rights to due process under the
Fourteenth Amendment to the U.S. Constitution. Plaintiffs’ due

3 KrunchCash, LLC v. Diane N. Resnick, C-03-CV-004422 (Md. Cir. Ct. De-
cember 30, 2019); KrunchCash, LLC v. Am. Wellness and Health Ctrs., Inc.,
C-03-CV- 004423 (Md. Cir. Ct. December 31, 2019); KrunchCash, LLC v. Perry
Resnick, C-03-CV-004425 (Md. Cir. Ct. December 31, 2019); KrunchCash, LLC
v. The Law Offices of Jonathan Resnick, C-03-CV-004427 (Md. Cir. Ct. De-
cember 30, 2019).
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8                      Opinion of the Court                 20-14504

process claim was brought under 42 U.S.C. § 1983. They assert that
the district court has subject matter jurisdiction under its federal
question jurisdiction (28 U.S.C. § 1331), and their state law claims
of usury, breach of contract, and tortious interference all fall under
the court’s supplemental jurisdiction. 28 U.S.C. § 1367(a).
       Defendants responded by moving to dismiss, claiming,
among other things, that the district court lacked subject matter
jurisdiction. Defendants also moved to stay the action based on the
abstention doctrine the Supreme Court articulated in Colorado
River Water Conservation District v. United States. See 424 U.S.
800, 817 (1976).
       The district court agreed and dismissed Plaintiffs’ Amended
Complaint for lack of subject matter jurisdiction because it con-
cluded that Plaintiffs’ sole federal claim, arising under the Due Pro-
cess Clause, was so frivolous that it denuded the court of subject
matter jurisdiction. The district court reached this conclusion for
three reasons. First, the court questioned whether Plaintiffs were
even deprived of a constitutionally protected property interest be-
cause their assets were only temporarily frozen. Second, it con-
cluded that Plaintiffs’ claim of state action was “questionable at
best.” Finally, the court determined that the Supreme Court’s de-
cision in D.H. Overmyer v. Frick, 405 U.S. 174 (1972), foreclosed
Plaintiffs’ claim that they were deprived of a constitutionally suffi-
cient process. In the absence of any federal claim, the court ex-
plained that it could not exercise supplemental jurisdiction over
Plaintiffs’ state law claims. The district court also briefly touched
on the abstention issue, but never explicitly ruled on it.
       Plaintiffs timely appealed.
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20-14504                Opinion of the Court                         9

                                  II.
       The sole issue before us is whether the district court erred in
concluding that it lacked subject matter jurisdiction over Plaintiffs’
claims. We review the district court’s ruling on a motion to dismiss
for lack of subject matter jurisdiction de novo, “accepting the [ ]
allegations as true and construing them in the light most favorable
to [the plaintiff].” Isaiah v. JPMorgan Chase Bank, 960 F.3d 1296,
1301–02 (11th Cir. 2020).
        We begin with the basics. The statutory grant of federal
question jurisdiction provides the federal district courts with juris-
diction over “all civil actions arising under the Constitution, laws,
or treaties of the United States.” 28 U.S.C. § 1331. “The test ordi-
narily applied for determining whether a claim arises under federal
law is whether a federal question appears on the face of the plain-
tiff’s well-pleaded complaint.” Cmty. State Bank v. Strong, 651
F.3d 1241, 1251 (11th Cir. 2011) (citing Louisville & Nashville R.R.
v. Mottley, 211 U.S. 149, 152 (1908)). Furthermore, “the district
court ‘shall have’ supplemental jurisdiction over both additional
claims and additional parties when those claims ‘are so related to
claims in the action within [the] original jurisdiction [of the court]
that they form part of the same case or controversy under Article
III of the United States Constitution.’” Palmer v. Hosp. Auth., 22
F.3d 1559, 1563 (11th Cir. 1994) (quoting 28 U.S.C. § 1367(a)).
       KrunchCash and Hackman do not dispute that if the district
court has federal question jurisdiction, the court would also have
supplemental jurisdiction over the state law claims. They argue
instead that Plaintiffs’ due process claim does not “aris[e] under fed-
eral law” because, based on the facts alleged and binding precedent,
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10                       Opinion of the Court                    20-14504

the federal claim is so frivolous and insubstantial that it deprives
the court of subject matter jurisdiction. 4
        “In determining whether the district court ha[s] subject mat-
ter jurisdiction, we respect the important distinction between the
lack of subject matter jurisdiction and the failure to state a claim
upon which relief can be granted.” Blue Cross & Blue Shield v.
Sanders, 138 F.3d 1347, 1351–52 (11th Cir. 1998). Seventy-five
years ago, the Supreme Court explored this distinction in Bell v.
Hood. See 327 U.S. 678 (1946). The Court explained that a com-
plaint should not be dismissed for lack of subject matter jurisdiction
if “the right of the [plaintiffs] to recover under their complaint will
be sustained if the Constitution and laws of the United States are
given one construction and will be defeated if they are given an-
other.” Id. at 685. We explained this distinction in Blue Cross &
Blue Shield v. Sanders:
       A federal court may dismiss a federal question claim
       for lack of subject matter jurisdiction only if: (1) the
       alleged claim under the Constitution or federal stat-
       utes clearly appears to be immaterial and made solely
       for the purpose of obtaining jurisdiction; or (2) such a
       claim is wholly insubstantial and frivolous.
138 F.3d at 1352 (quoting Bell, 327 U.S. at 682–83) (quotation marks
omitted).
      As Sanders suggests, the category of claims that are “wholly
insubstantial and frivolous” is exceedingly narrow. See Delta Coal
Program v. Libman, 743 F.2d 852, 855 n. 4 (11th Cir. 1984)

4 They do not, however, argue in the alternative that the federal claim was
immaterial and made solely for the purpose of obtaining jurisdiction.
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20-14504                   Opinion of the Court                                11

(explaining that “Bell limited such dismissals to occasions when the
federal claim ‘clearly appears to be immaterial and made solely for
the purpose of obtaining jurisdiction or where such a claim is
wholly insubstantial and frivolous’”); Davis v. Wells Fargo, 824
F.3d 333, 349–50 (3rd Cir. 2016) (concluding that “Rule 12(b)(1)
must not be expanded beyond its proper purpose,” and that Bell
applies “in only narrow categories of cases”); Carrier Corp. v. Ou-
tokumpu Oyj, 673 F.3d 430, 443 (6th Cir. 2012) (explaining that the
“rare exception created by Bell” is “quite narrow and ordinarily re-
served for extremely weak claims”). 5 To strip a district court of
subject matter jurisdiction, a plaintiff’s federal claim must have “no
plausible foundation, or [ ] the court [must] conclude[] that a prior
Supreme Court decision clearly forecloses the claim.” Barnett v.
Bailey, 956 F.2d 1036, 1041 (11th Cir. 1992) (quoting Olivares v.
Martin, 555 F.2d 1192, 1195 (5th Cir. 1977)); see also McGinnis v.
Ingram Equip. Co., 918 F.2d 1491, 1494 (11th Cir. 1990) (en banc)
(quotation marks and citations omitted) (“The test of federal juris-
diction is not whether the cause of action is one on which the claim-
ant can recover. Rather the test is whether the cause of action al-
leged is so patently without merit as to justify . . . the court’s dis-
missal for want of jurisdiction.”).
       We return then to Plaintiffs’ due process claim. To bring a
due process claim under section 1983, a plaintiff must establish
“(1) a deprivation of a constitutionally-protected liberty or

5 “Bell has been referred to as ‘a legal landmine’ and ‘one of the most cryptic
[cases] in the recent history of [the] [Supreme] Court’s jurisprudence.’” Marine
Coatings of Ala., Inc. v. United States, 792 F.2d 1565, 1569 n. 7 (11th Cir. 1986)
(quoting Yazoo Cnty. Indus. Dev. Corp. v. Suthoff, 454 U.S. 1157, 1159 (1982)
(Rehnquist, J., dissenting from denial of cert.)).
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12                      Opinion of the Court                   20-14504

property interest; (2) state action; and (3) constitutionally-inade-
quate process.” Grayden v. Rhodes, 345 F.3d 1225, 1232 (11th Cir.
2003). In order to deprive the district court of federal question ju-
risdiction over this claim, the Defendants must show that Plaintiffs’
factual or legal support for at least one of these elements lacks
“plausible foundation,” thus rendering the claim “wholly insub-
stantial and frivolous.” See Sanders, 138 F.3d at 1352 (quoting Bell,
327 U.S. at 682–83) (quotation marks omitted). We discuss each
element in turn.
                                   A.
        Plaintiffs first argue they were deprived of their constitution-
ally protected property interest in their personal and business bank
accounts when KrunchCash and Hackman, using Maryland’s gar-
nishment procedures, temporarily froze their funds. First, Plain-
tiffs assert that their interest in these funds and in the funds of their
clients is constitutionally protected. Second, they say that even a
temporary or partial deprivation of property without proper notice
or a hearing violates due process.
       Plaintiffs have, at the bare minimum, asserted a colorable
argument that they were deprived of a constitutionally protected
property interest. To begin with, Plaintiffs have a constitutionally
protected property interest in their own funds and in their clients’
funds. See Buxton v. Plant City, 871 F.2d 1037, 1042 (11th Cir.
1989) (“Property interests protected by procedural due process ex-
tend well beyond actual ownership of real estate, chattels, or
money.”). The Supreme Court has made clear that a temporary
deprivation of a constitutionally protected property interest is
enough to support a due process claim. Conn. v. Doehr, 501 U.S.
1, 12 (1991) (“[E]ven the temporary or partial impairments to
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20-14504                Opinion of the Court                         13

property rights that such encumbrances entail are sufficient to
merit due process protection.”); Fuentes v. Shevin, 407 U.S. 67, 86
(1972) (“The Fourteenth Amendment draws no bright lines around
three-day, 10-day or 50-day deprivations of property. Any signifi-
cant taking of property by the State is within the purview of the
Due Process Clause.”); N. Ga. Finishing v. Di-Chem, Inc., 419 U.S.
601, 606 (1975) (explaining that a state garnishment statute was vul-
nerable to constitutional attack under the Fourteenth Amendment
because the plaintiff’s “property[] was impounded and, absent a
bond, put totally beyond use during the pendency of the litigation
on the alleged debt”).
       Defendants do not quibble with Plaintiffs’ claim that they
have a protected interest in their own accounts. Instead, Defend-
ants say that a temporary freeze of those accounts cannot plausibly
amount to a deprivation of that interest. Specifically, Defendants
argue that the cases on which Plaintiffs rely -- Connecticut v.
Doehr, Fuentes v. Shevin, and Northern Georgia Finishing v. Di-
Chem, Incorporated -- are all inapposite because none of them in-
volved post-judgment writs of garnishment that froze assets.
        Although Defendants are correct about the factual circum-
stances surrounding those cases, the legal conclusion that they
draw from them is incorrect. Even though none of those cases in-
volved post-judgment writs of garnishment, it need not, and does
not, follow that Plaintiffs’ deprivation argument is so “clearly fore-
close[d]” under the caselaw as to defeat the district court’s subject
matter jurisdiction. As they do in their reply brief, Plaintiffs validly
claim that the distinction between pre- and post-judgment depriva-
tions is not relevant for a due process analysis because the relevant
point in the analysis is whether deprivation occurred before or after
notice and opportunity to be heard, not whether the deprivation
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14                     Opinion of the Court                 20-14504

occurred before or after judgment. Indeed, we have explicitly
noted that “the guarantee [of due process] extends to property
rights less substantial than full legal title” -- even though we ruled
for the creditor in that case. See Fed. Deposit Ins. Corp. v. Morri-
son, 747 F.2d 610, 614 (11th Cir. 1984).
        At bottom, Defendants have identified no caselaw suggest-
ing that a plaintiff does not have a constitutionally protected inter-
est in her property, even post-judgment.
                                 B.
       Next up, the Defendants say that the corollary state action
requirement is wanting here. Plaintiffs’ state action argument rests
largely on the Supreme Court’s decision in Lugar v. Edmondson
Oil Company. See 457 U.S. 922 (1982). In Lugar, the Court held
that private parties can be considered state actors when they use
state procedures to deprive a party of a constitutionally protected
interest. It reasoned this way:
      [T]he Court has consistently held that constitutional
      requirements of due process apply to garnishment
      and prejudgment attachment procedures whenever
      officers of the State act jointly with a creditor in se-
      curing the property in dispute. . . . In each of these
      cases state agents aided the creditor in securing the
      disputed property; . . . in each case the Court enter-
      tained and adjudicated the defendant-debtor's claim
      that the procedure under which the private creditor
      secured the disputed property violated federal consti-
      tutional standards of due process. Necessary to that
       conclusion is the holding that private use of the chal-
       lenged state procedures with the help of state officials
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20-14504                Opinion of the Court                        15

       constitutes state action for purposes of the Four-
       teenth Amendment.
Lugar, 457 U.S. at 932–33 (emphasis added) (citations omitted); see
also id. at 941 (quotation marks and citation omitted) (“To act un-
der color of law does not require the accused to be an officer of the
State. It is enough that he is a willful participant in joint activity
with the State or its agents.”). Lugar held that the plaintiff stated a
valid cause of action under section 1983 because the defendant
sought the sequestration of the plaintiff’s property by obtaining an
ex parte writ of attachment from a state court clerk. Id. at 942. This
was enough to establish state action. Id.
       Plaintiffs say that the garnishment procedures in Maryland
are much like the ones considered in Lugar. They allege that Mar-
yland Rule 2-645 allows a judgment creditor to obtain a writ of gar-
nishment by filing a request that simply contains (1) the caption of
the action, (2) the amount owed under the judgment, (3) the name
and last known address of each judgment debtor on whom a writ
is requested, and (4) the name and address of the garnishee. Ac-
cording to Plaintiffs, the process then requires the clerk, without
participation from the judge, to issue a writ of garnishment, which,
in turn, permits the creditor to hold the debtor’s property in her
possession. Because the garnishment process in Maryland allows a
debtor to use the power of the clerk of court to seize control over
a creditor’s property, Plaintiffs claim that the process constitutes
state action.
       Much like the previous element of their due process claim,
Plaintiffs’ state action claim is not so specious as to defeat federal
question jurisdiction. Maryland’s garnishment process is like the
process challenged in Lugar. Defendants here used the power of
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16                      Opinion of the Court                 20-14504

the clerk of court in Maryland to obtain writs of garnishment with-
out affording Plaintiffs notice or an opportunity to be heard.
       Defendants retort that Lugar requires Plaintiffs to directly
challenge the constitutionality of Maryland’s garnishment statute
to allege state action. Because Plaintiffs are not “per se” raising a
constitutional challenge against the statute, Defendants claim that
Plaintiffs’ state action claim cannot plausibly be sustained.
        Defendants’ argument fails for at least three reasons. First,
even if Defendants’ Lugar argument is correct, it improperly ad-
dresses the merits of Plaintiffs’ claim, rather than determining
simply whether it is “clearly foreclose[d].” See Sanders, 138 F.3d at
1352. Second, Defendants have impermissibly made this argument
for the first time on appeal. See Access Now, Inc. v. Sw. Airlines
Co., 385 F.3d 1324, 1331 (11th Cir. 2004) (holding that arguments
that were not raised at the district court on the first instance cannot
be raised on appeal). Third, Plaintiffs have plausibly raised an as-
applied challenge to the use of Maryland’s garnishment statute, as
opposed to a facial challenge, because they claim that the Maryland
rules were applied in a way that unconstitutionally deprived them
of their property. See Jordan v. Fox, Rothschild, O’Brien &
Frankel, 20 F.3d 1250, 1255 (3d Cir. 1994) (“[T]he entry of the [con-
fessed] judgment, when coupled with the seizure of the corpora-
tion’s bank account, without prior notice or opportunity to be
heard, does violate the Due Process Clause[.]”). While it is true the
Lugar Court concluded that a creditor’s “misuse or abuse” of a
state statute does not amount to state action, Lugar also held that
an allegation that “the deprivation of property resulted from a state
statute that was procedurally defective under the Due Process
Clause did state a cause of action under” section 1983. 457 U.S. at
923.
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20-14504                  Opinion of the Court                             17

       In short, Plaintiffs have sufficiently alleged the requisite state
action.
                                     C.
       The final issue is whether Plaintiffs have made a non-frivo-
lous case that they were denied constitutionally sufficient process.
This issue turns on whether Overmyer forecloses Plaintiffs’ claim.
         In Overmyer, the Supreme Court considered whether a
cognovit note, 6 authorized by an Ohio statute, violated the plain-
tiff’s right to due process under the Fourteenth Amendment. 405
U.S. at 175. That statute authorized an attorney to obtain a con-
fessed judgment without the debtor’s prior knowledge and regard-
less of the debtor’s claims against the creditor. Id. at 175 n.1 (citing
Ohio Rev. Code § 2323.13(D)). The plaintiff contracted with the
defendant to perform a construction subcontract; the plaintiff be-
came delinquent in payments; the defendant eventually renegoti-
ated terms with the plaintiff and included a confession-of-judgment
clause; the plaintiff eventually ceased making monthly payments;
and the defendant obtained a judgment against the plaintiff with-
out service or notice. Id. at 182–83.
       The Court concluded that the plaintiff’s due process claim
was meritless because the plaintiff contractually waived its rights
to notice and a hearing. Id. at 187. First, the Court reiterated that
both notice and a hearing were subject to waiver. Id. at 185. Sec-
ond, it concluded, based on the record, that the plaintiff knowingly

6 “The cognovit is the ancient legal device by which the debtor consents in
advance to the holder’s obtaining a judgment without notice or hearing, and
possibly even with the appearance, on the debtor’s behalf, of an attorney des-
ignated by the holder.” Overmyer, 405 U.S. at 176.
USCA11 Case: 20-14504        Date Filed: 05/20/2022     Page: 18 of 26

18                      Opinion of the Court                 20-14504

and voluntarily waived its right to notice and a hearing. Id. at 186.
Third, the Court concluded that “a cognovit clause is not, per se,
violative of Fourteenth Amendment due process.” Id. at 187. But
the Supreme Court explicitly cautioned that its decision in Over-
myer “is not controlling precedent for other facts of other cases.”
Id. at 188 (emphasis added).
       Plaintiffs argue that their Fourteenth Amendment claim is
not “clearly foreclosed” by Overmyer for two reasons. First, they
claim that they are challenging “the use of Maryland’s garnishment
procedure to satisfy judgments obtained by confession” under the
Fourteenth Amendment’s Due Process Clause. Plaintiffs say that
their claim is distinguishable from Overmyer because in that case,
the Court held only that a cognovit clause is not per se constitu-
tional under the Due Process Clause. Second, Plaintiffs argue that
Overmyer is also distinguishable because Plaintiffs here allege that
the Loan Agreements are void under the state’s usury laws.
        Plaintiffs are correct on both counts. First, Plaintiffs do not
challenge the same kind of statute at issue in Overmyer. In Over-
myer, the plaintiff challenged an Ohio statute that allowed a party
to seek a confessed judgment without notice or a hearing based on
a legally valid cognovit clause. Plaintiffs here challenge the next
procedural step that a party would use to satisfy the confessed judg-
ment: Maryland’s garnishment procedure. It is Plaintiffs’ conten-
tion that Maryland’s garnishment procedure must afford notice
and the opportunity to contest judgment. In fact, at least one cir-
cuit court has found a similar argument persuasive. See Jordan, 20
F.3d at 1255 (emphasis added) (“We then conclude, as did the dis-
trict court, that entry of the judgment, when coupled with seizure
of the [plaintiff’s] bank account, without prior notice or oppor-
tunity to be heard, does violate the Due Process Clause of the
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20-14504                   Opinion of the Court                               19

Fourteenth Amendment to the Constitution.”). But even if that
argument ultimately proves unpersuasive under Overmyer, it is
not “clearly foreclose[d],” which is the exacting requirement of fri-
volity a federal claim must reach before a federal court is deprived
of subject matter jurisdiction over a federal question. 7 See Sanders,
138 F.3d at 1352 (emphasis added).
       Second, Plaintiffs’ claim is also distinguishable because
Overmyer made it crystal clear that its holding was not controlling
in cases that presented different factual circumstances. Plaintiffs
argue that the Loan Agreements here are criminally usurious, and
thus unenforceable under Florida law, which would mean that the
underlying Agreements are void ab initio. See Local No. 234 of
United Ass’n of Journeyman & Apprentices of Plumbing & Pipefit-
ting Indus. of U.S. & Canada v. Henley & Beckwith, Inc., 66 So. 2d
818, 821 (Fla. 1953) (“[C]ourts have no right to ignore or set aside a
public policy established by the legislature or the people. Indeed,
there rests upon the courts the affirmative duty of refusing to sus-
tain that which by the valid statutes of the jurisdiction . . . has been
declared repugnant to public policy.”). In Overmyer, by contrast,

7 Defendants argue in the alternative that Plaintiffs’ due process claim is fore-
closed by the Maryland Supreme Court’s decision in Billingsley v. Lincoln Na-
tional Bank, where the court, relying on Overmyer, held that Maryland’s con-
fessed judgment statute, when measured against the U.S. Constitution, is
“constitutional on its face.” 320 A.2d 34, 39 (Md. 1974). Defendants’ counter
is unpersuasive: Billingsley is not controlling because it is neither a decision
from the U.S. Supreme Court or this Court. Moreover, the Maryland court
had no occasion to, and did not determine whether the constitutional claim
was wholly insubstantial and frivolous.
USCA11 Case: 20-14504       Date Filed: 05/20/2022     Page: 20 of 26

20                     Opinion of the Court                 20-14504

the plaintiff did not contest that it knowingly and voluntarily signed
the cognovit clause.
       The Third Circuit heeded this exact caution from Overmyer
in considering whether a plaintiff had waived its right to notice and
a hearing before the seizure of its assets:
       Overmyer plainly decide[d] [that] a debtor can waive
      its due process rights to a pre-deprivation hearing and
      notice when it voluntarily and intelligently consents
      to an agreement containing a cognovit clause. Never-
      theless, [ ] Overmyer also indicate[d] [that] waiver is
      usually a question of fact. . . . The constitutional va-
      lidity of any particular confession of judgment proce-
      dure depends on the validity of the debtor’s waiver[.]
      . . . Accordingly, a court faced with a due process chal-
      lenge to a confessed judgment should always inquire
      whether the judgment debtor’s execution of a docu-
      ment permitting judgment by confession is a valid
      waiver of his constitutional right to pre-deprivation
      notice and hearing.
Jordan, 20 F.3d at 1272 (3rd Cir. 1994). Overmyer stated that the
facts of a case matter a whole lot. We will not ignore that instruc-
tion today.
       Defendants seize upon Plaintiffs’ efforts to factually distin-
guish Overmyer in an effort to substantively attack Plaintiffs’ usury
claims. Defendants argue that the Resnicks lack standing to assert
usury because Jonathan and Perry Resnick claim that their names
were forged on the Guaranty Agreements. Defendants also assert
that American Wellness waived its ability to claim usury three
times, citing to one of the Funding Agreements and a decision by
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20-14504                Opinion of the Court                         21

the bankruptcy judge in the bankruptcy proceedings involving
Plaintiffs. This waiver, according to Defendants, forecloses Plain-
tiffs’ ability to allege usury under Florida law.
       Again, we remain unpersuaded. Defendants’ substantive at-
tack on Plaintiffs’ factual allegations and legal arguments only un-
derscores the fact that Plaintiffs’ claim is not “clearly foreclose[d]”
under federal law. To be sure, it is possible that Plaintiffs have
waived their due process rights in a way that forecloses their claim
that the Loan Agreements are void under Florida law. But that
question goes to the merits -- not jurisdiction.
      Plaintiffs have sufficiently pled that they were denied consti-
tutionally sufficient process to establish subject matter jurisdiction.
                                  III.
        The district court also raised, but ultimately did not rule on,
whether it should abstain under Colorado River from deciding the
case while the dispute in Maryland proceeds. Defendants agree
that the district court’s abstention analysis is dicta in their opening
brief, but still they ask us alternatively to dismiss Plaintiffs’ claims
on abstention grounds.
       We decline Defendants’ invitation to reach the question.
The district court did not specifically rule on the abstention issue
in the first instance, and so we will not reach it either. Cf. Schu-
mann v. Collier Anesthesia, P.A., 803 F.3d 1199, 1203, 1213 (11th
Cir. 2015) (remanding to the district court to give it the first oppor-
tunity to apply a newly adopted legal rule); Danley v. Allen, 480
F.3d 1090, 1092 (11th Cir. 2007) (per curiam) (“While this Court
certainly could review the record and applicable case law and ren-
der a reasoned decision on the qualified immunity issue, this is the
responsibility of the district court in the first instance.”); Nyland v.
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22                       Opinion of the Court                   20-14504

Moore, 216 F.3d 1264, 1266 (11th Cir. 2000) (per curiam) (observ-
ing, in the context of a petition brought under 28 U.S.C. § 2254,
that “[i]f there is an issue that the district court did not decide in the
first instance, it is not properly before this Court and we remand
for the district court’s consideration”). Like the merits of Plaintiffs’
due process claim, the district court can address abstention on re-
mand.
                                   ***
       Congress has given the federal courts original jurisdiction
over claims that “aris[e] under” federal law, see 28 U.S.C. § 1331,
and Plaintiffs have filed such a claim -- one that does not fall under
the exceedingly narrow realm of claims that are “wholly insubstan-
tial and frivolous.” See Sanders, 138 F.3d at 1352 (quoting Bell, 327
U.S. at 682–83) (quotation marks omitted). Because of this, and
because “we respect the important distinction between the lack of
subject matter jurisdiction and the failure to state a claim upon
which relief can be granted,” we conclude that the district court
erred in holding it lacked subject matter jurisdiction over Plaintiffs’
claims. See id. at 1351–52.
       REVERSED and REMANDED.
USCA11 Case: 20-14504        Date Filed: 05/20/2022     Page: 23 of 26

20-14504              NEWSOM, J., Concurring                         1

NEWSOM, Circuit Judge, joined by MARCUS, Circuit Judge, and
STORY, District Judge, Concurring:
        I concur in the Court’s judgment and join its opinion in full.
I write separately simply to flag an issue that has bothered me since
law school. In particular, I wish to express my skepticism of the
rule, which underlies our resolution of this appeal, that a plaintiff’s
lawsuit “may sometimes be dismissed for want of jurisdiction”—
i.e., on the ground that the court lacks the authority even to con-
sider it—where the claim it alleges under the Constitution or fed-
eral law is “wholly insubstantial and frivolous.” Bell v. Hood, 327
U.S. 678, 682–83 (1946) (emphasis added).
        The Court here is of course bound by Bell, and it dutifully—
and correctly—applies Bell’s “wholly insubstantial and frivolous”
standard in holding that the district court erroneously dismissed
the plaintiffs’ complaint for lack of jurisdiction. See Maj. Op. at 9–
21. With respect to the wisdom of Bell, the Court goes about as far
as it can, echoing then-Justice Rehnquist’s critique of Bell as “‘a le-
gal landmine’ and ‘one of the most cryptic [cases] in the recent his-
tory of [the] [Supreme] Court’s jurisprudence,’” and emphasizing
just how “narrow” the “wholly insubstantial and frivolous” cate-
gory must be. Id. at 11 & n.5 (quoting Yazoo Cnty. Indus. Dev.
Corp. v. Suthoff, 454 U.S. 1157, 1159 (1982) (Rehnquist, J., dissent-
ing from the denial of certiorari)). Speaking for myself, I’ll say what
the Court—which speaks for all of us and is hemmed in by vertical
stare decisis—really can’t: To the extent that the Supreme Court
in Bell preserved the understanding that a “wholly insubstantial
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2                       NEWSOM, J., Concurring                    20-14504

and frivolous” claim somehow fails even to invoke the federal
courts’ subject-matter jurisdiction, it was wrong.
        The federal-question statute gives federal courts jurisdiction
over “all civil actions arising under the Constitution, laws, or trea-
ties of the United States.” 28 U.S.C. § 1331 (emphasis added). As
the Supreme Court acknowledged in Bell itself, a district court has
“arising under” federal-question jurisdiction within the meaning of
§ 1331 if the plaintiff’s right to recover under his complaint “will be
sustained if the Constitution and laws of the United States are given
one construction and will be defeated if they are given another.”
327 U.S. at 685. And as the Bell Court further acknowledged,
“[j]urisdiction . . . is not defeated . . . by the possibility that the aver-
ments [in a plaintiff’s complaint] might fail to state a cause of action
on which [he] could actually recover.” Id. at 682. The reason, the
Court explained, is that there is an important difference between
the merits of a plaintiff’s claim and a court’s jurisdiction to entertain
that claim: “[I]t is well settled that the failure to state a proper cause
of action calls for a judgment on the merits and not for a dismissal
for want of jurisdiction.” Id.
      Even while recognizing this fundamental distinction be-
tween jurisdiction and the merits, though, the Bell Court pro-
ceeded, in the same breath, to acknowledge two “previously
carved out exceptions” in which the demerits of a plaintiff’s claim
could trigger a jurisdictional failure—including, as relevant here,
where the plaintiff’s claim “is wholly insubstantial and frivolous.”
USCA11 Case: 20-14504        Date Filed: 05/20/2022      Page: 25 of 26

20-14504              NEWSOM, J., Concurring                          3

Id. at 682–83. In so doing, the Court obliterated the very distinction
that it had purported to recognize. That was a mistake.
        In fairness, the Bell Court seemed to do what it did with
some reservation, saying that “[t]he accuracy of calling these dis-
missals jurisdictional”—i.e., dismissals for insubstantiality and friv-
olousness—“has been questioned.” Id. at 683. And in the interven-
ing years, the Supreme Court has continued to indicate some doubt
about the propriety of the “wholly insubstantial and frivolous”
standard as a jurisdictional rule. See Hagans v. Lavine, 415 U.S.
528, 538 (1974) (calling “[t]he substantiality doctrine as a statement
of jurisdictional principles” affecting a court’s authority to entertain
a case “‘more ancient than analytically sound’” (quoting Rosado v.
Wyman, 397 U.S. 397, 404 (1970))); cf. Shapiro v. McManus, 577
U.S. 39, 45–46 (2015) (similar). Commentators have likewise criti-
cized the notion that a court’s subject-matter jurisdiction should
turn on a merits-based substantiality inquiry. See, e.g., Richard
Matasar, Rediscovering “One Constitutional Case”: Procedural
Rules and the Rejection of the Gibbs Test for Supplemental Juris-
diction, 71 Calif. L. Rev. 1399, 1417–25 (1983).
       The Supreme Court should bury the “wholly insubstantial
and frivolous” gloss once and for all. Not only does it blur what
should be a clear line between a court’s jurisdiction—i.e., its
power—to entertain a plaintiff’s claim and the merits of that claim,
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4                        NEWSOM, J., Concurring                       20-14504

it is analytically unsustainable. 1 Under it, courts must draw razor-
fine distinctions between claims that are really weak and those that
are really, really weak—between those that are meritless, and thus
sufficiently un-nonserious to invoke the court’s jurisdiction and to
withstand a Rule 12(b)(1) motion (even if a Rule 12(b)(6) dismissal
is immediately around the corner), and those that are frivolous, and
thus fail even to implicate the judicial power. Needless to say, that
distinction is so slippery as to border on illusory. See, e.g., Frivo-
lous, Black’s Law Dictionary (11th ed. 2019) (defining “frivolous”
to mean “[l]acking a legal basis or legal merit”).
       In my view, a plaintiff’s complaint either pleads a federal
claim on its face—in which case § 1331 “arising under” jurisdiction
exists—or it doesn’t. Courts should get out of the business of peer-
ing through a plaintiff’s allegations to test their bona fides as a
means of assessing subject-matter jurisdiction. If it turns out, as it
sometimes will, that a plaintiff’s contention is a loser—even an ob-
vious loser—then the court should simply take jurisdiction and dis-
miss it on the merits for failure to state a claim.

1 It also contradicts the Supreme Court’s more recent teaching that courts
should avoid “jurisdictionalizing” issues that are more properly understood as
running to the merits. See, e.g., Boechler, P.C. v. Comm’r, 142 S. Ct. 1493,
1497 (2022) (“[W]e have endeavored to bring some discipline to use of the ju-
risdictional label.” (quotation omitted)); cf. also Target Media Partners v. Spe-
cialty Mktg. Corp., 881 F.3d 1279, 1292 (11th Cir. 2018) (Newsom, J., concur-
ring) (observing that the Rooker-Feldman doctrine tends to unduly “jurisdic-
tionalize” ordinary preclusion rules).