Omega Consulting v. Raymond International Company, No. 4:2009cv00976 - Document 22 (S.D. Tex. 2010)
Court Description: MEMORANDUM OPINION AND ORDER Omega is ordered to respond by 8/16/2010, with any agruments or evidence it can produce that establish that the court has subject matter jurisdition over this action.(Signed by Judge Sim Lake) Parties notified.(hcarr, )
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Omega Consulting v. Raymond International Company Doc. 22 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION OMEGA CONSULTING, as assignee of CHAMBERLAIN, HRDLICKA, WHITE, Plaintiff, RAYMOND INTERNATIONAL COMPANY, Defendant. § § § § § § § § § § § § CIVIL ACTION NO. H-09-0976 MEMORANDUM OPINION AND ORDER Plaintiff Omega Consulting ("Omega") brought this action on March 31, 2009, as an assignee of Chamberlain, Hrdlicka, White ("Chamberlain") against Raymond International Company ("Raymond") alleging breach of fiduciary duty, breach of contract, gross mismanagement, and waste (Docket Entry No. 1). On June 30, 2009, the court entered a default judgment for Omega No. 11). (Docket Entry Although there are no formal motions pending before the court, on March 31, 2010, the court received a letter from the Attorney General of Texas (Docket Entry No. 18) that the court construed as a motion to intervene on behalf of the Texas Comptroller of Public Accounts (Docket Entry No. 19). The court will not rule on the motion at this time, however, because the motion appears to be moot. Upon further consideration of the pleadings, the court has concluded that Omega never pleaded an Dockets.Justia.com amount in conflict sufficient to satisfy the jurisdictional requirement diversity Furthermore, facts of citizenship alleged Omega's jurisdiction. Complaint do not establish complete diversity of citizenship between the parties . The court concludes that it may have lacked original subject matter jurisdiction over the action, which would render the default judgment void. The court will therefore order Omega within twenty days with any arguments respond evidence it can present that would establish that subject matter jurisdiction existed. 1 . Factual and Procedural Background This action concerns an attempt by Omega to collect a twenty- year-old debt owed by Raymond Chamberlain, which Chamberlain assigned to Omega . Omega alleged in its March 31, 2009, Complaint : Upon information and belief, Assignor, Chamberlain, Hrdlicka, White, has been owed the principal amount of $34,630.03, based on a recognized scheduled and/or filed claims against said Defendant Raymond International since at least August 14, 1989, and neither that original debt , nor interest totaling $196,377.28 from August 14, 1989 through March 30, 2009 has been paid . Such total amount of $231,007.31 remains outstanding . That unpaid debt and claim s against Defendant Raymond International has been assigned to Omega Consulting by a duly executed assignment on March 25, 2009.1 Omega asserted that jurisdiction existed based diversity of citizenship , and claimed that the amount in controversy requ irement l comp laint, Docket Entry No . % for diversity jurisdiction was met by the demand for $231,007.31. 2 A. The Default Judgment Raymond, which is no longer Complaint. On June Entry No. 8) Judgment business, did not answer 2009, the Clerk entered a default ( Docket On June 2009, Omega filed ( Docket Entry Motion for Final The motion, which names the defendant as nRaymond International Builders Inc a/k/a Raymond International Incz' specifies a different measure of damages than was stated in the original Complaint : Plaintiff's comp laint is for a sum certain or for a sum which can by computation be made certain . Said debt was a listed as E sic) a scheduled claim in Raymond International Builders, Inc .'s bankruptcy, which was later dismissed. . . . Those damages total $105,444.31, which represents principle E sicq damages of $15,887.90, plus interest at the state of Texas' judgment interest rate at the time of the scheduled claim of 10% per annum totaling $89,556. from August 14, 1989 through June 18, 41 2009 .3 The motion also contains an exhibit showing against Raymond $15,831.65 its 1989 Chapter Chamberlain, Hrdlicka, scheduled bankruptcy filing for White and $56. 25 2Id . %% 5-7 . 3 Motion for Final Judgment , Docket Entry No . 9, % 9. - 3- claim s Chamberlain, Hrdlicka , White , Johnson .4 The sum of these amounts is Omega's claimed principal debt of $15,887.90. On June 3O, 2009, the court entered default judgment Omega ( Docket Entry No . July 24, 2009, Omega moved to have a receiver appointed to collect unclaimed p roperty from the Texas Comptroller's custody on Raymond's behalf ( Docket Entry No. An exhibit attached to the motion contained a schedule of claim s against Raymond from its 1989 bankruptcy showing claim s by Chamberlain , Hrdlicka, Chapter White for $10,755.13 and $62.507 the schedule of claims is preceded by the same Chapter Final Judgment .s discrepancy 2009, petition that accompanied Omega the amounts has offered Motion for explanation the listed claims . for the August court adopted the Order provided by Omega with one amendment ( Docket Entry The Order appointed Richard Parker as receiver for Raymond, and contained the statement, Any third party, financial institution, financial administrator, clerk that fails acknowledge 4 original Petition Under Chapter Final Judgment, Docket Entry No . 9 . authority granted the Exh ibit A to Motion for s original Petition Under Chapter 11 , Exhib it B to Plaintiff's Unopposed Motion for Appointm ent of Receiver for Raymond International Company , Docket Entry No . l2 . - 4- receiver shall subject orders contempt, fines, and punishment .'6 ' Upon further consideration, court concludes that the language included in paragraph three of the Order was not necessary to grant Omega relief . It may not be necessary to amend the Order , however, because the Order void the court lacks subject matter jurisdiction. B. The Attorney General's Letter On October 2009, and January 2010, Parker filed reports to the court detailing his efforts as receiver obtain from the Texas State Comptroller's Office unclaimed p roperty that was allegedly owed to Raymond ( Docket Entry Nos. 16 and Parker stated that the Comptroller's Office had denied the requests on the grounds that Chamberlain's claims against Raymond had been discharged in bankruptcy . Parker further stated that he had filed suit on November 30, 2009, Travis County District Court appeal the Comptroller's decision . On March 31, 2010, the court received a letter from the Texas Attorney General detailing his objections to Omega's claims against the Comptroller, and requesting the court to amend its August 3, 2009, Order, which could be interp reted nto orders of contempt, fines, and punishment' ' 6order Appointing Receiver , Docket Entry No . 15, % refused to honor Parker's requests for the unclaimed property ( Docket Entry 18). action and Because the Attorney General therefore may have not standing party to move this for amendment, the court construed the letter as a motion to intervene ( Docket Entry No . 19). Omega responded in opposition to the motion on April 2010 ( Docket Entry No. 20). The Attorney General filed a Supp lement to Motion to Intervene on May 20, 2010, arguing that Omega did not properly serve Raymond , but making no response Omega's arguments that intervention is improper ( Docket Entry court w ill not consider the motion this time, however, because the motion is moot intervene at court lacks subject matter jurisdiction. II. Subject Matter Jurisdiction It appears that subject matter jurisdiction may never have existed in this action . nIf the court determines at any time that lacks subject-matter jurisdiction, the court must dismiss the action.' FED. R. ' 12 ( ( h) 3). Although the court has already entered a final judgment, Rule 12 ( ( makes it clear that a court h) 3) may inquire into subject matter lurisdiction 'at any time.' If the ' ' court concludes that subject matter jurisdiction was lacking this action, then the default judgment and any orders entered the action are void . See Charles Alan Wright, Arthur M iller, and Mary Kay Kane, Federal Practice and Procedure , 2695 Relief from Default Judgment ( ed. 1998) ( 3d nclearly, the lack of subject- matter jurisdiction renders a default judgment A. nullity.') ' The Jurisdictional Requirement Omega pleaded its Complaint that diversity of citizenship jurisdiction exists under 28 U.S. C. 1332 . The statute provides that district courts shall have original jurisdiction over civil actions where there is complete diversity of citizenship and where uthe matter controversy exceeds sum or value exclusive of interest and costs .' ' $75,000, U .S.C. $ 1332 ( a). The relevant phrase here is 'exclusive of interest,' which generally A ' excludes the consideration of interest when determining whether the amount in controversy meets the jurisdictional minimum . See Charles Alan W right r Arthur Millerr and Edward Cooper, Federal Practice and Procedure, Interests and Costs (' 'The cases make it clear that ed . 2009) jurisdiction statutes require exclusion not only of interest that accrues after the action brought but also interest that has accrued prior to the filing of the complaint .' '). calculating The apparent purpose of excluding interest jurisdictional amount is prevent the plaintiff from delaying suit until the claim , with accrued interest, exceeds the statutory minimum. Brainin v . Melikian, 396 F.2d 153, 155 ( 3d Cir. 1968); Roberts v. Chandaleur Homes, Incw ( S.D. Miss. 2002). Supp . 696, zd To count interest charges toward the jurisdictional minimum in this action, in which the plaintiff seeks interest on a deb t more than twenty years after it was incurred , would appear to fly in the face of the apparent rationale for the rule . Cou rts have included interest in the calculation of the amount in controversy under certain lim ited circumstances . Webster, S. Ct. In Brown v . ( 1895), the Supreme Court distinguished between ninterest as such and the use of an interest calculation as an instrumentality arriving the amount awarded on the principal demand .' ' damages be In Brown, interest purchase price of property was included the the calculation of the plaintiff's damages for eviction from the property, and was thus nan essential ingredient in the one principal claim' -- that ' the claim for eviction damages thereto .' ' Id . at 377-78 . considered an element rather than na mere accessory Courts have held that interest may be damages when the ninterest is owed as part of an underlying contractual obligation .' ' Transaero, Inc . v . La Fuerza Area Boliviana, 24 F.3d 457, 461 ( 2d 1994) Interest is deemed to be part of an underlying contractual ob ligation, example, when a plaintiff sues collect on a bond coupon . Edwards v . Bates Countv, interest on Kortrecht, 81 968 ( 1896). Post-maturity bond , however, excluded . 24 1, 2 41 1897) Greene Countv v . Courts have held interest to be an essential component of the principal claim when plaintiff sued damages and injunctive relief under usury law, Parris v . Meqo Mortq . Corp . , - 8- Fed . Appx . state 397 n.2 ( 6th Cir. 2001), and when a plaintiff sued for rescission of a loan agreement, Chandaleur Homes, Supp .zd at 698 . When interest sought merely as an accessory to an underlying injury and not as part of the p rincipal demand, however, it should not be included the amount in controversy . Danial v. Daniels, Brown, 15 S . Ct . at Fed . Appx. 288, 290 See also ( 5th 2006) ( nlnterest is only considered for jurisdictional purposes where it a basis B. the suit itself.' ') Omega's Principal Claim Upon reviewing Omega's p leadings, the court concludes that Omega never p leaded an amount in controversy that 'exceeds the sum ' value of $75,000, exclusive stated costs .' ' Omega Complaint that the noriginal debt' was $34,630.03. ' 7 Motion In interest Final Judgment Omega stated that the debt was $15,887.90,8 and it provided the schedule of claim s from Raymond 's Chapter Petition In Motion for Appointment of Receiver Raymond provided a different schedule of claims, apparently from same petition, showing Chamberlain's total claim as $10,817.63. omega provides no explanation for the 9 different figures rep resenting Chamberlain's claim . What is clear 7 complaint, Docket Entry No . 8 Motion for Final Judgment , Docket Entry No . 9, g original Petition Under Chapter 11 , Exhibit B to Plaintiff's Unopposed Motion for Appointment of Receiver for Raymond International Company , Docket Entry No . l2 . - 9- is that none of the individual figures even a11 three the original debt , or them combined, exceeds the sum of $75,000. Omega has provided no ev idence that the interest charges seeks on the debt are ' basis for the suit itself' or are 'part of 'a ' ' an underlying contractual obligation .' ' the contrary , Omega states that the interest payments are calculated uat the state of Texas' judgment interest rate at the time of the scheduled claim of per annum ,'lo which suggests that there is no contractual basis ' for the interest claims. appears that the interest charges are merely an accessory to the princip al claim . Unless Omega can prove otherwise, the court will conclude that Omega's claims fail to meet the jurisdictional requirement specified in C. U.S. 5 1332( C. a). Diversity of Citizenship It further appears that subject matter jurisdiction may be lacking because there may not be comp lete diversity of citizenship . Diversity jurisdiction only exists when there is complete diversity of citizenship between the parties. Stiftunc v . Plains Marketing, L .P ., 2010). 28 5 1332 ( a) F .3d In determining the citizenship of corporation shall be deemed to be a citizen has been incorporated and corporation , ua any State by which the State where principal place of business.' 28 U.S. ' C. 1332 ( c) l Motion for Final Judgment, Docket Entry No . 9, % o - 10- has It appears that b0th Raymond and Omega are citizens of Texas. Complaint Omega asserts that sole proprietorship existing under the laws of the State of Texas and has a principal p lace business 78230./11 ' Pinebrook Drive; San Antonio , Texas Omega 's Complaint states that Raymond is a Delaware corporation, but the allegations concerning venue Omega states, %the defendant's principal address is ' Southern District business Texas), and the District .'l /z allegation the district g ew i. has transacted substantial The logical interp retation of this that Raymond's principal place business Texas. Furthermore, the Chapter 11 Petition Omega attached to its Motion for Final Judgment states, Post Oak Blvd w Petitioner's address is 2801 Houston Texas 77056. Petitioner has had principal place of business or principal assets w ith in the District for the 180 days Petition .'1 ,3 immediately proceeding the filing of this Thus , Omega's pleadings and the supporting evidence 50th strongly suggest that Raymond's principal p lace of bu siness was in Texas, and therefore that Raymond was considered a citizen of Texas for purposes of 28 5 1332 . Unless Om ega can demonstrate otherwise , the court will conclude that the court ll complaint, Docket Entry No . 1. w zd . : Horiginal Petition Under Chapter 11, Exhibit B to Plaintiff's Unopposed Motion for Appointment of Receiver for Raymond International Company, Docket Entry No . 12 . lacked subject matter jurisdiction over this action because the parties were not diverse . 111 . Conclusion and Order For the reasons explained above, the court concludes that the facts alleged in Omega's Complaint do not satisfy the requirements of 28 1332( a) for either the amount complete diversity of citizenship . controversy Unless Omega can demonstrate otherwise, the court will conclude that it never had subject matter jurisdiction over this action, and accordingly will declare the Default Judgment ( Docket Entry No. to be void . Omega ORDERED respond by August 2010, with any arguments evidence can produce that establish that the court has subject matter jurisdiction over this action. Given the age of this action and the importance of determining whether jurisdiction exists, is unlikely that this date will be extended . SIGNED at Houston , Texas, on this 29th day of July, 2010. f r SIM LAKE UNITED STATES DISTRICT JUDGE - 12-
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