Inc. v. Murphy

          Appeals from the United States District Court for the Northern District of Georgia D.C. Docket No. 1:11-cv-00832-RWS

          Before TJOFLAT and WILLIAM PRYOR, Circuit Judges, and MURPHY, ^[*] District Judge.

          TJOFLAT, Circuit Judge.

         This fraudulent-transfer case, like many such cases, is a suit about a suit. In the first suit, Plaintiffs obtained a judgment in federal district court in Kentucky for breach of a partnership contract. But when Plaintiffs tried to collect, they discovered that the once-wealthy Defendant was figuratively penniless. The surprised Plaintiffs surmised that Defendant had colluded with his former wife to fraudulently transfer his assets to her (or to entities under her control) as part of their divorce settlement. So Plaintiffs sued-again-this time in federal district court in Georgia-to recover their judgment under Georgia's fraudulent-transfer statute. Agreeing with Plaintiffs that fraudulent transfers had occurred, a jury returned a verdict in their favor. The District Court entered judgment accordingly, and this appeal and cross-appeal followed.

         I.

         A.

         1.

         The run-up to this suit began when Plaintiffs, five entities that we collectively refer to as "Alliant, "^[1] lent Defendant M. Vincent Murphy, III investment capital to build low-income housing units that were never completed. So Alliant sued him and other guarantors of the debt in federal court in the Eastern District of Kentucky for breach of their partnership contract. Alliant was joined in that suit by Alliant Tax Credit Fund 31-A, Ltd. ("Alliant 31-A"), which also lent investment capital to Vincent.^[2] Alliant and Alliant 31-A prevailed, and the District Court for the Eastern District of Kentucky entered a judgment (the "Kentucky judgment") in their favor for $8, 946, 643. Vincent appealed, and the Court of Appeals for the Sixth Circuit affirmed. Alliant Tax Credit Fund 31-A, Ltd. v. Murphy, 494 Fed.Appx. 561, 563 (6th Cir. 2012).

         But the fraudulent activity that gave rise to this suit began before the Kentucky judgment was entered.

         Vincent and his wife, Marilyn Murphy, had earlier divorced in the Superior Court of Fulton County, Georgia. The divorce decree incorporated a settlement agreement between them. As part of the agreement, Marilyn received from Vincent several millions of dollars in cash and commercial paper, stock shares, a mountain cabin, household furnishings, and an apartment complex. These assets are the basis for the fraudulent-transfer action here. When Alliant sought to collect on the Kentucky judgment, it found that Vincent was judgment proof. So it sued Vincent for a second time.

         Alliant (but not Alliant 31-A) brought this action against Vincent, Marilyn, Multifamily Housing Developers, L.L.C. ("Multifamily Housing"), and Community Management Services, Inc. ("CMS"), ^[3] in the District Court for the Northern District of Georgia under the Uniform Fraudulent Transfers Act (the "UFTA"), O.C.G.A. §§ 18-2-70 to 80 (2010), amended by the Uniform Voidable Transactions Act (the "UVTA"), O.C.G.A. §§ 18-2-70 to 85 (2015).^[4] The UFTA, a quintessential fraudulent-transfer statute, allows creditors to void certain asset transfers made by a debtor with the purpose of immunizing itself from collection. See O.C.G.A. § 18-2-77 (2010). Alliant claimed that the Murphys' divorce settlement and Vincent's asset transfers to Defendants were ruses to evade Vincent's creditors and thus sought to void those transfers. The case proceeded to trial, and a jury returned an itemized verdict for Alliant after having found that twenty-three transfers from Vincent to Defendants were fraudulent. The jury also found that the Murphys were subject to punitive damages but that only Vincent had acted with the "specific intent to cause harm." It awarded $1, 000, 000 in punitive damages against him and $100, 000 in punitive damages against Marilyn.

         2.

         After the jury returned its verdict, the District Court for the Northern District of Georgia entered a final judgment (the "Georgia judgment") for Alliant. Before describing what the judgment provided, we pause momentarily to note the remedies available under the UFTA.

         The UFTA provides creditors with both equitable and legal remedies. The creditor may obtain, as an equitable remedy, "[a]voidance of the transfer . . . to the extent necessary to satisfy the creditor's claim." See id. § 18-2-77(a)(1). Or it may obtain, as a legal remedy, "judgment [against the transferee] for the value of the asset transferred . . . or the amount necessary to satisfy the creditor's claim, whichever is less." See id. § 18-2-78(b).

         Alliant did not seek avoidance of any of the transfers made. Nor realistically could it: Most of Vincent's transfers were in the form of cash that has since been turned into proceeds that are likely untraceable. Rather, it sought a money judgment for the value of the assets transferred. Said differently, it sought the legal remedy available under the UFTA.

         The Georgia judgment, which purported to implement the jury's verdict, provided that Alliant would receive the sum of $10, 137, 285.84, which consisted of the amount of the Kentucky judgment ($8, 946, 643), interest on that judgment ($90, 642.84), and the punitive-damages awards against Vincent and Marilyn ($1, 000, 000 and $100, 000, respectively). The District Court for the Northern District of Georgia also issued a writ of execution that directed the U.S. Marshal to seize Defendants' assets to satisfy the judgment.^[5]

         3.

         Following the entry of the Georgia judgment, Marilyn satisfied the judgment in full, and Alliant moved to alter or amend the judgment, see Fed. R. Civ. P. 60, to allow prejudgment interest under Georgia law. The District Court for the Northern District of Georgia denied this motion, reasoning that (1) Alliant's UFTA claim was unliquidated-that is, not reduced to a fixed sum-until the Georgia judgment was entered and (2) under Georgia law, entitlement to prejudgment interest for unliquidated claims requires compliance with the Unliquidated Damages Interest Act, O.C.G.A. § 51-12-14 (2018), whose procedures Alliant had not followed. Defendants appealed the judgment entered pursuant to the verdict, and Alliant cross-appealed the order denying prejudgment interest.

         B.

         This appeal and cross-appeal require us to decide numerous discrete issues. We first take up justiciability problems in Part II. We then turn to the merits, addressing Defendants' arguments on appeal in Parts III through V and Alliant's arguments on cross-appeal in Part VI. We conclude in Part VII.

         II.

         We begin by addressing two jurisdictional bars to the District Court's power to entertain this suit: mootness and subject-matter jurisdiction.^[6] We then address non-jurisdictional bars. Defendants challenge the Court's decision not to abstain from exercising its jurisdiction on three prudential grounds. First, that even if the parties are diverse of citizenship, this case falls within the domestic-relations exception to diversity jurisdiction. Second, that by entertaining this suit, the Court violated the Rooker-Feldman doctrine.^[7] And third, that Alliant is collaterally estopped from attacking the transfers as fraudulent.

         A.

         The first question, given Marilyn's full satisfaction of the Georgia judgment: Are this appeal and cross-appeal moot? After oral argument, we asked the parties to brief this question and having reviewed their responses, we are satisfied that the case remains a case or controversy within the meaning of Article III. See U.S. Const. art. III, § 2, cl. 1.

         "What matters [for mootness] is whether the parties' actions objectively manifest an intent to abandon the issues on appeal." RES-GA Cobblestone, LLC v. Blake Constr. & Dev., LLC, 718 F.3d 1308, 1315 (11th Cir. 2013). So payment moots an appeal "only if the parties mutually intended a final settlement of all the claims in dispute and a termination of the litigation." McGowan v. King, Inc., 616 F.2d 745, 747 (5th Cir. 1980) (per curiam).^[8]

         This case continues to breathe life. In Alvarez Perez v. Sanford-Orlando Kennel Club, Inc., 518 F.3d 1302 (11th Cir. 2008), we applied the Supreme Court's decision in United States v. Hougham, 364 U.S. 310, 81 S.Ct. 13 (1960), and held that an appeal and cross-appeal situated much like the ones before us today were not moot. There, the plaintiff's counsel signed satisfaction-of-judgment documents that were subsequently filed in the district court, but the plaintiff did not expressly reserve his right to appeal. 518 F.3d at 1305. But there, as here, the parties "continued to pursue their appeals." Id. at 1307. There, as here, the parties "filed supplemental letter briefs addressing the merits." Id. And there, as here, a party "inform[ed] us of a change in status involving one of the defendants." Id. In other words, "[i]nstead of filing a motion to dismiss the appeal as soon as a satisfaction was filed in the district court, both parties continued to litigate the case in this Court as though nothing had changed." Id. at 1308.

         In fact, Marilyn merely did the effective equivalent of posting a supersedeas bond-an act that by itself does not moot a case. See Fed. R. Civ. P. 62(b).

         When a judgment is appealed, both the winning and losing parties face risk in the period between the time judgment is entered and the time it is affirmed or reversed. The winning party seeks immediate satisfaction of the judgment because assets available at the time judgment is entered might disappear by the time it is affirmed. And the losing party seeks delayed satisfaction of judgment for a parallel reason: Assets available at the time judgment is entered might disappear by the time it is reversed. A supersedeas bond insures both parties against these respective risks. It permits a judgment debtor to "avoid the risk of satisfying the judgment only to find that restitution is impossible after reversal on appeal" and "secures the prevailing party against any loss sustained as a result of being forced to forgo execution on a judgment during the course of an ineffectual appeal." Poplar Grove Planting & Ref. Co. v. Bache Halsey Stuart, Inc., 600 F.2d 1189, 1191 (5th Cir. 1979).

         But posting a supersedeas bond does not moot an appeal. See Dale M. ex rel. Alice M. v. Bd. of Educ. of Bradley-Bourbonnais High Sch. Dist. No. 307, 237 F.3d 813, 815 (7th Cir. 2001) (Posner, J.) ("A judgment creditor who pays the judgment pending appeal instead of posting a supersedeas bond (which would automatically stay collection) is entitled to the return of its money if the decision is reversed, and so the payment does not moot the appeal unless the appellant has relinquished his right to seek repayment if he wins." (citation omitted)).

         Marilyn's choice to pay the judgment does not render this case moot any more than would her decision to post a supersedeas bond; she simply waived the protection a bond would provide. Cf. 11 Charles Alan Wright et al., Federal Practice and Procedure § 2905, at 724-25 (3d ed. 2012) ("[A] person who cannot furnish a supersedeas bond does not lose the right to appeal, although he does assume the risk of getting his money back again if the judgment is reversed.").

         In short, the "objective manifestations of both parties clearly indicate that they intended to pursue their positions in the appeal and cross-appeal." Alvarez Perez, 518 F.3d at 1308. We turn now to subject-matter jurisdiction.

         B.

         Defendants maintain that the District Court lacked jurisdiction to entertain the dispute because the parties were not diverse of citizenship.

         The District Court's subject-matter jurisdiction has continued to present difficulties in this case. Defendants appealed the Georgia judgment, and two months later, this Court sua sponte asked the parties to address subject-matter jurisdiction because diversity jurisdiction was not evident from the pleadings. In response, Alliant moved to amend its complaint to simply allege the citizenships of all relevant entities. Defendants, in turn, moved to remand the case to the District Court for a factual determination of subject-matter jurisdiction in the first instance. After reviewing the parties' responses and motions, we remanded the case to the District Court so that it might "fully resolve the question of the court's subject-matter jurisdiction over this action." Alliant Tax Credit Fund 31-A, Ltd. v. Murphy, No. 15-14634-GG, slip op. at 1 (11th Cir. Apr. 10, 2017) (per curiam).

         On remand, Alliant filed a memorandum on Plaintiffs' citizenships. Plaintiffs are a mixture of limited-liability companies and limited partnerships.^[9]Some of Plaintiffs' members and partners are natural persons, but some are other limited-liability companies, other partnerships, corporations, banks, and trusts. Alliant traced these entities' citizenships, too. It included with its memorandum to the District Court affidavits, declarations, and authenticated documents. Defendants responded that Alliant's submissions were insufficient to confirm that all relevant entities were accounted for, as well as to confirm those entities' citizenships. The Court observed that though Alliant had initially claimed that the sole citizenship of all five Plaintiffs was Florida, Alliant conceded in its memorandum that Plaintiffs were also citizens of California, Delaware, the District of Columbia, Illinois, Nebraska, New York, Ohio, and Texas. So the Court required further documentary evidence of citizenship. For natural persons, it asked for drivers licenses; for corporations, it asked for annual reports and articles of incorporation or governance documents; for limited partnerships and limited- liability companies, it asked for agreements; for banks, it asked for articles of association; and for trusts, it asked for organizational documents.

         After this jurisdictional discovery was complete, the District Court set out its findings as to the parties' citizenships:

         Plaintiffs

• Alliant 31 was a citizen of Florida, California, and Illinois.

• Alliant XXVII, Ltd. was a citizen of Florida, California, Illinois, and the District of Columbia.

• Alliant XXVII, L.L.C. was a citizen of Florida, California, and Illinois.

• Alliant XI, L.L.C. was a citizen of Florida, California, and Illinois.

• Alliant XI, Ltd. was a citizen of Florida, California, Illinois, Delaware, New York, ...