Filed: Jul. 13, 2018
Latest Update: Mar. 03, 2020
Summary: Case: 17-10272 Document: 00514554535 Page: 1 Date Filed: 07/13/2018 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit No. 17-10272 FILED July 13, 2018 Lyle W. Cayce CAMPBELL HARRISON & DAGLEY, L.L.P., et al Clerk Plaintiffs v. PBL MULTI-STRATEGY FUND, L.P., Intervenor - Plaintiff - Appellee v. ALBERT G. HILL, III, individually, and as a Beneficiary of the Margaret Hunt Trust Estate, derivatively on behalf of the Margaret Hunt Trust Estate, i
Summary: Case: 17-10272 Document: 00514554535 Page: 1 Date Filed: 07/13/2018 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit No. 17-10272 FILED July 13, 2018 Lyle W. Cayce CAMPBELL HARRISON & DAGLEY, L.L.P., et al Clerk Plaintiffs v. PBL MULTI-STRATEGY FUND, L.P., Intervenor - Plaintiff - Appellee v. ALBERT G. HILL, III, individually, and as a Beneficiary of the Margaret Hunt Trust Estate, derivatively on behalf of the Margaret Hunt Trust Estate, in..
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Case: 17-10272 Document: 00514554535 Page: 1 Date Filed: 07/13/2018
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 17-10272 FILED
July 13, 2018
Lyle W. Cayce
CAMPBELL HARRISON & DAGLEY, L.L.P., et al Clerk
Plaintiffs
v.
PBL MULTI-STRATEGY FUND, L.P.,
Intervenor - Plaintiff - Appellee
v.
ALBERT G. HILL, III, individually, and as a Beneficiary of the Margaret
Hunt Trust Estate, derivatively on behalf of the Margaret Hunt Trust Estate,
individually, as a beneficiary of the Haroldson Lafayette Hunt Jr. Trust
Estate, and derivately on behalf of the Haroldson Lafayette Hunt Jr. Trust;
ERIN NANCE HILL,
Defendants - Appellants
AHTREY INVESTMENTS, L.L.C.
Intervenor Defendant - Appellant
Appeals from the United States District Court
for the Northern District of Texas
No. 3:10-CV-2269
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No. 17-10272
Before SMITH, WIENER, and WILLETT, Circuit Judges.
PER CURIAM:*
PBL Multi-Strategy Fund (“PBL”), one of the creditors of Albert Hill III,
intervened in this litigation, seeking a portion of Hill’s settlement proceeds
from other litigation. PBL claimed that Hill’s company had defaulted on a Note
that Hill had guaranteed. Hill counterclaimed for breach of contract. PBL and
Hill settled their claims against each other, contingent on the court’s allocating
some of the settlement proceeds to PBL. Years later, there were no proceeds
remaining, so PBL moved for summary judgment. The district court denied
Hill’s motion for a continuance to conduct discovery and his motion to strike
some of PBL’s evidence, then granted summary judgment to PBL on its claim
and Hill’s counterclaim. Hill appeals; we affirm.
I. FACTS AND PROCEEDINGS
Defendant-Appellant Albert Hill III has been involved in lengthy
litigation concerning the management of two family trusts. 1 After a final
judgment in that underlying case (the “2020 case” 2), the court severed a fee
dispute between Hill and his attorneys to create this separate case (the “2269
case”). The 2269 case now involves several of Hill’s creditors quarreling over
the 2020 settlement proceeds.
In February 2011, Appellee PBL filed a complaint in intervention in the
2269 case, claiming an interest in Hill’s 2020 case settlement proceeds. In its
complaint, PBL stated that it was “[formerly known as] Palm Beach Multi-
Strategy Fund, L.P.” PBL sought to enforce payment of a promissory note (the
* 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.
1See Hill v. Schilling, 495 F. App’x 480, 482–83 (5th Cir. 2012).
2This is a shorthand version of the case number for the underlying litigation, No.
3:07-CV-2020.
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No. 17-10272
“Note”) executed by Appellant Ahtrey Investments, a company owned by Hill.
The principal amount of the Note was $5 million, of which PBL had advanced
$2.6 million to fund Hill’s litigation costs in the 2020 case. 3 The holder of the
Note was “Palm Beach Multi-Strategy Fund.” Hill had personally guaranteed
the Note (the “Guaranty”). PBL alleged that Ahtrey had defaulted on the Note.
Hill and Ahtrey (“Defendants” 4) answered the complaint, denying the
material allegations, and raising fourteen affirmative defenses. Defendants
also counterclaimed, asserting that PBL had breached the terms of the Note
by failing to advance the full $5 million in principal. Defendants alleged that
as a result of this breach, “Hill was no longer able to pay his attorneys” in the
2020 case and was “forced to retain counsel who would charge him on a
contingency fee basis.” Defendants claimed that the size of these contingency
fees made the underlying litigation considerably more expensive than if Hill
had been able to use the Note proceeds to pay hourly fees to his attorneys.
Early in January 2012, the district court awarded one of the law firms in
the 2269 case over $21 million in fees against Hill (“2012 Judgment”). Later
that month, PBL and Defendants entered into a settlement agreement. That
agreement provided that Hill would pay PBL $3.2 million from the 2020
settlement funds, “pursuant to and contingent upon” a court order. The
settlement agreement also specified that if the district court refused to
disburse the 2020 settlement funds, the settlement agreement would become
void, and the parties could continue to pursue their claims. The parties jointly
requested that funds in the 2020 case be disbursed accordingly, but the district
court denied that motion pending the resolution of other creditors’ claims.
3That balance has accrued interest.
4Erin Hill is named as an Appellant on the cover of Defendants’ brief, but she was not
named in PBL’s complaint or as a counter-plaintiff, though she is a party in the overall 2269
case. She is therefore not a party to this appeal.
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Four years later, in January 2016, the district court disbursed all of the
2020 settlement funds to other creditors. In doing so, the court explained that
PBL’s interest was subordinate to those interests, so no funds remained in the
settlement registry to disburse to PBL.
One month later, PBL moved for summary judgment on its claim and
Defendants’ counterclaim. PBL’s evidence consisted primarily of a declaration
from Troy Phillips, the lead attorney representing PBL, who was also the
“Liquidator of PBL Holdings, LLC, the general partner of PBL Capital L.P.,
which is the general partner of [PBL].” Phillips declared that in his capacity as
liquidator, he had custody and control of the Note and Guaranty. He also
attested that PBL was the owner and holder of the Note, described the
disbursements that PBL had made, and calculated PBL’s damages.
Defendants responded with three filings. They first moved for a
continuance to conduct discovery, noting the discrepancy between the named
lender in the Note, “Palm Beach Multi-Strategy Fund, L.P.,” and PBL’s full
name, “PBL Multi-Strategy Fund, L.P.” Defendants asserted that “discovery
could show that PBL is not the successor in interest to the Note and Guaranty.”
Defendants also sought discovery with respect to Phillips’s role as “liquidator.”
Second, Defendants moved to strike Phillips’s declaration as hearsay and
lacking personal knowledge. Third, Defendants responded to the summary
judgment motion, insisting that PBL could not support summary judgment
without the Phillips declaration. They also contended that the 2012 Judgment
was a final judgment, precluding further action on PBL’s claim.
The court referred these motions to a magistrate judge, who denied in
relevant part Defendants’ motions for a continuance and to strike the Phillips
4
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declaration. 5 The magistrate judge recommended summary judgment in favor
of PBL and stated that Hill’s allegation that PBL’s failure to pay forced him to
retain attorneys on a contingency basis was false and made in bad faith.
Specifically, the magistrate judge concluded that (1) Hill’s prior attorneys were
disqualified, not terminated because of a lack of funds, and (2) Hill’s fee
arrangement with that prior attorney was also on a contingency basis.
Defendants objected to the magistrate judge’s denial of the motion to
strike (but not the motion for a continuance). Defendants also objected to the
magistrate judge’s recommendation of summary judgment on two additional
grounds: (1) PBL had abandoned its claim, and (2) Defendants had not acted
in bad faith. The district court overruled Defendants’ objections and granted
summary judgment to PBL. As for the Defendants’ counterclaim, the district
court explained that even if there was no bad faith, Defendants had not
presented sufficient evidence to support the damages from PBL’s alleged
breach of contract. Because Defendants had not established that element,
reasoned the court, they could not avoid summary judgment. Defendants
appealed.
II. ANALYSIS
Defendants raise the following issues on appeal: (1) The district court
should have allowed them a continuance to conduct discovery; (2) it should
have stricken the Phillips declaration from the summary judgment record and
thereby denied summary judgment; (3) PBL lacked standing to bring its claim;
(4) the district court had already issued a final judgment and thus no longer
had jurisdiction over the case; and (5) PBL had defaulted. We address each
issue in turn.
5 The magistrate judge did strike a portion of the Phillips declaration concerning
attorney fees, which does not affect this appeal.
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A. Motion for a Continuance
Defendants did not object in the district court to the magistrate judge’s
denial of a continuance. When a party fails to object to the district court
regarding a magistrate judge’s order, an appeal from that order is usually
reviewed for plain error. 6 There is an exception to this rule, however, when the
magistrate judge does not warn the party of the consequences of failing to
object. 7 Here, the magistrate judge warned Defendants of the consequences of
failing to object to the summary judgment recommendation, but she did not do
so with respect to her order on the motion for a continuance. We therefore
review this ruling for abuse of discretion. 8
When a party requests a continuance of a summary judgment motion to
conduct discovery, the moving party must—among other requirements—(1)
“demonstrat[e] to the trial court specifically how the requested discovery
pertains to the pending motion,” and (2) “diligently pursue relevant
discovery.” 9 As to the first requirement, the party must explain “how the
additional discovery will create a genuine issue of material fact,” 10 and “may
not simply rely on vague assertions that additional discovery will produce
needed, but unspecified, facts.” 11 “If it reasonably appears that further
discovery would not produce evidence creating a genuine issue of material fact,
6 See Lawrence v. Fed. Home Loan Mortg. Corp., 808 F.3d 670, 675 (5th Cir. 2015).
7 Douglass v. United Servs. Auto. Ass’n, 79 F.3d 1415, 1428–29 (5th Cir. 1996) (en
banc), superseded on other grounds by 28 U.S.C. § 636(b)(1). It appears that this exception
applies to magistrate judge orders as well as reports and recommendations. See JM Walker
LLC v. Acadia Ins. Co., 356 F. App’x 744, 748 (5th Cir. 2009); cf.
Lawrence, 808 F.3d at 675
& n.7 (applying plain error when the party failed to object to a magistrate judge’s denial of a
motion for continuance, and suggesting that the magistrate judge had warned of the
consequences).
8 Smith v. Reg’l Transit Auth., 827 F.3d 412, 417 (5th Cir. 2016).
9 Wichita Falls Office Assocs. v. Banc One Corp., 978 F.2d 915, 919 (5th Cir. 1992).
10 Krim v. BancTexas Grp., Inc., 989 F.2d 1435, 1442 (5th Cir. 1993).
11 See Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi
Negara, 364 F.3d 274, 304–05 (5th Cir. 2004).
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the district court’s preclusion of further discovery prior to entering summary
judgment is not an abuse of discretion.” 12
Defendants highlight three types of evidence that they sought to obtain
through discovery: (1) expert testimony on how much Hill could have saved by
hiring an attorney on an hourly basis, which would support damages on the
counterclaim, 13 (2) evidence that “could show” PBL was not the same entity as
(or the successor to) Palm Beach Multi-Strategy Fund, and (3) evidence
supporting Phillips’s knowledge of the matters in his declaration.
The magistrate judge did not abuse her discretion. First, Defendants
brought their counterclaim nearly five years before PBL moved for summary
judgment. Defendants therefore had more than ample time to marshal the
expert testimony they now seek in support of their damages. 14 Also, evidence
concerning the difference between hourly fees and contingent fees (or a
combination of the two) would not have forestalled summary judgment. Beyond
his own speculation, Hill provided no evidence that he actually would have
hired attorneys on an hourly basis. For example, Hill could have described the
law firms that he sought to retain and what they would have charged him.
Instead, on this issue, Hill stated only “I believe that if had I continued to fund
the litigation with attorneys engaged on an hourly basis instead of a
contingency basis, then the cost of litigation would have been substantially
less.” In contrast, PBL showed that Hill retained law firms on a combination
12 Resolution Tr. Corp. v. Sharif-Munir-Davidson Dev. Corp., 992 F.2d 1398, 1401 (5th
Cir. 1993).
13 Defendants do not contest the district court’s finding that Ahtrey was not a party to
the 2020 case and thus did not suffer damages from PBL’s alleged breach.
14 Cf. Provost v. Nissen, 354 F. App’x 180, 182 (5th Cir. 2009) (“Because the ability to
produce this information was entirely within Provost’s control, he cannot show why he needed
additional discovery to oppose the motion for summary judgment.”); Reynolds v. New Orleans
City, 272 F. App’x 331, 341 (5th Cir. 2008) (“[I]n opposing summary judgment, the Plaintiffs
failed to even produce that evidence which was within their control[.]”).
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of hourly and contingent fees both before and after PBL allegedly stopped
making payments.
Second, Defendants’ suggestion that discovery could reveal that PBL is
not the same entity named in the Note is also speculative. PBL had claimed to
be this entity for the nearly five years since it intervened in the litigation. 15 In
their counterclaim, Defendants acknowledged that the entity named in the
Note (Palm Beach Multi-Strategy Fund) was “the predecessor in interest of
PBL.” Defendants also signed a settlement agreement stating that PBL was
formerly known as Palm Beach Multi-Strategy Fund and that the Note was
“between” PBL and Ahtrey. Defendants fail to explain why they no longer
believe that PBL is at least the successor to Palm Beach, so it was reasonable
for the magistrate judge to conclude that discovery would not yield any such
information.
Third, Defendants sought discovery concerning the basis for Phillips’s
knowledge of the matters in his declaration. As we explain below, the basis for
Phillips’s knowledge was evident on the face of the declaration. Because, as
with PBL’s succession, Defendants did not state what information they
expected to uncover, it is unlikely that discovery would have revealed any
genuine dispute about Phillips’s personal knowledge. The denial of the motion
for a continuance was not an abuse of discretion.
15 Defendants repeatedly use the word “successor” to describe the alleged relationship
between PBL and Palm Beach Multi-Strategy Fund, but PBL’s filings state that PBL is
“formerly known as” the entity named in the Note. The language “formerly known as”
typically describes the same entity that has simply changed its name, not a successor entity.
See Alley v. Miramon, 614 F.2d 1372, 1384 (5th Cir. 1980) (“The change of a corporation’s
name is not a change of the identity of a corporation and has no effect on the corporation’s
property, rights, or liabilities.”).
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B. Motion to Strike the Phillips Declaration
Defendants argue that the Phillips declaration should have been
stricken because it is not based on personal knowledge and because PBL’s
attorney should not be allowed to offer testimony. Denials of motions to strike
affidavits are reviewed for abuse of discretion. 16
Federal Rule of Civil Procedure 56(c) requires that summary judgment
affidavits be made on personal knowledge. 17 This requirement is satisfied
when the court can reasonably infer personal knowledge from the affidavit
itself. 18 Here, the court could infer Phillips’s personal knowledge of the matters
pertaining to PBL’s ownership of the Note and Guaranty and the payments
that PBL advanced. First, Phillips explained that he is the “liquidator” of PBL’s
general partner. Even though the specific duties of a liquidator are not
described, this nevertheless suggests that Phillips is PBL’s agent. Second,
Phillips explained that, in the course of his duties as liquidator, he has “custody
and control” of the Note and Guaranty and that these documents are kept in
the regular course of PBL’s business. This further supports the conclusion that
he is PBL’s agent in terms of enforcing the Note and Guaranty. Through these
statements, we can infer that Phillips has personal knowledge of the matters
in the affidavit. 19
Defendants’ second challenge to the Phillips declaration is based on the
fact that Phillips is PBL’s lead counsel, which Defendants assert bars Phillips
from testifying. Summary judgment may be supported only by declarations
that set out facts that would be admissible. 20 Defendants did not object to the
16 See D’Onofrio v. Vacation Publ’ns, Inc., 888 F.3d 197, 208 (5th Cir. 2018).
17 FED. R. CIV. P. 56(c)(4).
18 DIRECTV, Inc. v. Budden, 420 F.3d 521, 530 (5th Cir. 2005).
19 See DIRECTV, 420 F.3d at 530 (inferring personal knowledge of a corporate
investigation based on an affiant’s position within the company).
20 FED. R. CIV. P. 56(c)(4).
9
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declaration on these grounds before the magistrate judge or the district judge,
so we review this issue for plain error only. 21 To succeed under that standard,
Defendants must show (1) an error, that (2) is clear or obvious, and (3) affected
Defendants’ substantial rights; and even then we may opt whether to exercise
our discretion to correct the error. 22
In support of their contention that Phillips’s testimony is inadmissible,
Defendants point to the Texas Rules of Professional Conduct, which prohibit a
lawyer from both representing a party and testifying on behalf of that party. 23
But PBL notes two exceptions to that prohibition: (1) testimony on an
uncontested issue, and (2) testimony that is “a matter of formality and there is
no reason to believe that substantial evidence will be offered in opposition.” 24
Defendants do not respond to PBL’s contention that these exceptions apply.
Phillips’s declaration is offered to support (1) the existence of the Note and
Guaranty, (2) the parties to those agreements, and (3) the amount of damages.
Defendants nominally contest some of these elements, but they offer no
evidence, much less substantial evidence, in opposition. The second exception,
if not both exceptions, thus appears to apply, indicating that there is no error.
And, even though attorney declarations are generally disfavored, we have
never explicitly prohibited them. 25 Texas courts too have held that a violation
of this rule can be waived by the opposing party, 26 indicating that the rule does
21 See Rushing v. Kansas City S. Ry. Co., 185 F.3d 496, 506 (5th Cir. 1999), superseded
on other grounds by FED. R. EVID. 103(a); FED. R. EVID. 103(e).
22 Lawrence, 808 F.3d at 675.
23 TEX. DISCIPLINARY R. PROF’L CONDUCT 3.08(a).
24 Id.
25 Cf. Eguia v. Tompkins,
756 F.2d 1130, 1136 (5th Cir. 1985) (refusing to “condone”
affidavit where attorney appeared to lack personal knowledge); Inglett & Co. v. Everglades
Fertilizer Co.,
255 F.2d 342, 349–50 (5th Cir. 1958) (describing the practice as “unsound”).
26 BP Am. Prod. Co. v. Zaffirini, 419 S.W.3d 485, 514 (Tex. App.—San Antonio 2013,
rev. denied).
10
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not affect a substantial right. All told, allowing Phillips’s declaration was not
plain error.
The district court did not err in considering the Phillips declaration as
part of the record. We thus do not need to reach Defendants’ assertion that the
declaration’s exclusion renders summary judgment inappropriate.
C. PBL’s Standing
Defendants also argue that summary judgment was improper because
PBL lacked standing, thereby depriving the district court of subject-matter
jurisdiction over its claim. Specifically, Defendants contend that PBL did not
prove that it had any interest in the Note; it therefore had no standing to bring
a claim for recovery on that Note. Standing is an issue that the cognizant court
examines de novo. 27 To have standing, a plaintiff must be “the proper party to
assert any cause of action.” 28 The court may consider “the complaint
supplemented by undisputed facts evidenced in the record.” 29
As noted above, Defendants admitted in their counterclaim and the
settlement agreement that PBL was the successor to Palm Beach Multi-
Strategy Fund. Parties cannot stipulate to jurisdiction when none exists, but
they may admit to facts that support jurisdiction and thereby be prohibited
from subsequently attacking jurisdiction on that basis. 30 Defendants claim
that these admissions simply amount to Defendants’ taking the facts in PBL’s
claim as true until proven otherwise. But Defendants made these admissions
in their own counterclaim and in the settlement agreement, and they had no
27 Rivera v. Wyeth-Ayerst Labs., 283 F.3d 315, 319 (5th Cir. 2002). Although
Defendants did not contest standing below, “standing is essential to the exercise of
jurisdiction, and . . . lack of standing can be raised at any time.” Sommers Drug Stores Co.
Emp. Profit Sharing Tr. v. Corrigan,
883 F.2d 345, 348 (5th Cir. 1989).
28 Thomas v. N.A. Chase Manhattan Bank, 994 F.2d 236, 242 (5th Cir. 1993).
29 Carroll v. Abide, 788 F.3d 502, 504 (5th Cir. 2015).
30 See City of Brady, Tex. v. Finklea, 400 F.2d 352, 357–58 (5th Cir. 1968).
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qualms in denying PBL’s alleged facts in their answer. As Defendants admit
that PBL has an interest in the Note, PBL has standing.
D. PBL’s Alleged Abandonment of Claim
Defendants also contend that the district court lacked jurisdiction
because the 2012 Judgment was a final judgment. Whether a district court has
jurisdiction is a legal question that we review de novo. 31
Once a judgment is final, district courts lack jurisdiction to take further
action. 32 “A ‘final decision’ generally is one which ends the litigation on the
merits and leaves nothing for the court to do but execute the judgment.” 33
“There are at least two exceptions to the rule that a district court must dispose
of all issues for its decision to be final, however.” 34 First, “a decision that does
not specifically refer to all pending claims will be deemed final if it is clear that
the district court intended, by the decision, to dispose of all claims.” 35 Second,
“a decision is final if the only claims not disposed of by the district court were
abandoned.” 36
The fact that this court may have had jurisdiction over Hill’s appeal from
the 2012 Judgment 37 does not necessarily make it final. Federal Rule of Civil
Procedure 54(b) allows a district court to enter a final judgment as to fewer
than all of the parties when “there is no just reason for delay.” 38 The court need
not expressly invoke Rule 54(b), but the court’s intention to enter final
31 McLaughlin v. Miss. Power Co., 376 F.3d 344, 353 (5th Cir. 2004).
32 See Vaughn v. Mobil Oil Expl. & Producing Se., Inc., 891 F.2d 1195, 1197–98 (5th
Cir. 1990); Escamilla v. Santos,
591 F.2d 1086, 1088 (5th Cir. 1979).
33 McLaughlin, 376 F.3d at 350 (quoting Catlin v. United States,
324 U.S. 229, 233
(1945)).
34 McLaughlin, 376 F.3d at 350.
35 Id. at 351; see
Vaughn, 891 F.2d at 1197.
36 McLaughlin, 376 F.3d at 350; see Nat’l Ass’n of Gov’t Emps. v. City Pub. Serv. Bd.
of San Antonio,
40 F.3d 698, 705 (5th Cir. 1994).
37 The court dismissed the portion of the appeal concerning the 2012 Judgment
pursuant to an appeal waiver. Hill, 495 F. App’x at 483, 487.
38 FED. R. CIV. P. 54(b).
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judgment as to fewer than all of the parties must “appear from the order or
from documents referenced in the order.” 39
On its face, the 2012 Judgment does not dispose of all issues and all
parties. It makes no mention of PBL’s claim, and it only disposes of claims
brought by one of the law firms seeking a portion of Hill’s settlement funds.
Defendants concede that PBL was “absent” from that judgment. The next
question, therefore, is whether the district court intended to dispose of PBL’s
claim in that judgment or to enter a Rule 54(b) partial final judgment.
Defendants contend that the district court’s intent was evident from (1)
the fact that the court administratively closed the case and (2) a June 2014
order which explained that two other orders from May 2014 “disposed of all
pending motions in this case, which was closed on January 10, 2012.” That
order also required all parties to seek the court’s permission to file any further
motions.
The fact that a court lists a case as administratively closed does not
indicate that it has entered a final judgment. 40 Here, the May 2014 orders, like
the 2012 Judgment, do not mention PBL. These orders pertain to enforcement
of the 2012 Judgment, suggesting that enforcement litigation had been ongoing
for more than two years. In that context, the June 2014 order appears to be
directed at preventing the parties that were subject to the 2012 Judgment from
prolonging the litigation, not to disposing of other unidentified claims.
39 Briargrove Shopping Ctr. Joint Venture v. Pilgrim Enters., Inc., 170 F.3d 536, 539
(5th Cir. 1999); see Kelly v. Lee’s Old Fashioned Hamburgers, Inc.,
908 F.2d 1218, 1220 (5th
Cir. 1990) (en banc) (per curiam) (“Where . . . language in the order either independently or
together with related parts of the record reflects the trial judge’s clear intent to enter a partial
final judgment under Rule 54(b), we consider the order appealable.”).
40 Mire v. Full Spectrum Lending Inc., 389 F.3d 163, 167 (5th Cir. 2004) (“The effect
of an administrative closure is no different from a simple stay, except that it affects the count
of active cases pending on the court’s docket[.]”). In that case, this court determined that the
district court did not enter a final judgment, even though the case was “closed.”
Id.
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Defendants also point to a 2015 order in the 2020 case, dismissing another
intervenor’s claim for lack of subject matter jurisdiction, when the court
referred to the 2012 Judgment as a final judgment. 41 But, the court referred
only to the claim by Hill’s former attorney, suggesting that the 2012 Judgment
was final as to that claim, but not necessarily as to all other claims. At best,
this is tenuous evidence of the court’s intent to dispose of PBL’s claim.
As for the second exception, the fact that the settlement was contingent
on the court’s disbursement of funds from the 2020 case undermines
Defendants’ contention that PBL abandoned its claim. If the 2012 Judgment
was final as to PBL, then PBL had no claim to settle. Defendants contend that
the district court “had no jurisdiction over” the settlement agreement and did
not “ratify” it. But the settlement agreement explains why PBL did not pursue
its claim; that is, it could not hasten the court’s disbursement of the 2020
settlement funds. The court retained jurisdiction over the claim because PBL
had not moved to dismiss the case voluntarily; per the terms of the settlement,
it would not do so until the district court had allowed disbursement of the
funds. The court denied the disbursement request because “[t]he funds in the
Court’s registry are only to be distributed after the [other creditors’] claims
have been resolved.” PBL moved for summary judgment shortly after the court
ruled that no funds remained: PBL could not have acted earlier. 42
41 The claim at issue in that order was very similar to this case: that intervenor
(“BFS”) sought to recover a debt secured by a note executed by Ahtrey; the funds on the note
had been used to pay Hill’s attorney fees in the 2020 case. The court determined that it did
not have supplemental jurisdiction over the claim, even though Defendants argued in the
alternative that BFS was “assert[ing] the same claims [as] PBL.” BFS later refiled in a
separate case, and the court granted summary judgment.
42 Defendants do not dispute that the settlement agreement was contingent on the
district court’s action. Cf. Baccus v. Parrish, 45 F.3d 958, 959 (5th Cir. 1995) (describing a
settlement that was contingent on action by a state legislature).
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The cases that Defendants cite are distinguishable. In Vaughn v. Mobil
Oil Exploration and Producing Southeast, Inc., the court had ordered
defendant Mobil and cross-defendant EBI to submit their cross-claims “to the
court for a determination of the merits on the briefs and the evidence in the
record.” 43 Mobil accordingly moved for summary judgment on its cross-claim
against EBI; although EBI opposed the motion, it did not move for summary
judgment on its own cross-claim. 44 The court at first denied Mobil’s motion, but
when EBI failed to appear for a pre-trial conference, it granted judgment in
favor of Mobil and against EBI. 45 This court held that the district court had
intended the judgment to be final and that EBI had abandoned its claim. 46
Similarly, in DIRECTV, Inc. v. Budden, the plaintiff brought several claims,
but moved for summary judgment, which the district court granted, as to only
one of them. 47 This court ruled that the plaintiff had abandoned its other
claims by addressing only the single claim and stating that it intended to
abandon the others. 48 The district court also labeled its judgment “final,”
suggesting it intended to “treat[] the claims it disposed of as the only live
claims,” although the word “final” is not dispositive of that intent. 49
Here, the court did not label its 2012 Judgment “final”—it only used that
label in later filings. In addition, DIRECTV and Vaughn both involved parties
who either (1) sought summary judgment on less than all claims or (2)
responded to a motion on less than all claims, indicating the other neglected
43 891 F.2d at 1196.
44 Id.
45 Id.
46
Id. at 1197–98 (“The fact that the December judgment did not mention appellee’s
cross-claim is neither here nor there; appellee’s own behavior caused its claim to lapse. It is
clear to us that the district court believed itself entirely quit of the case.”).
47 420 F.3d at 525.
48 Id. at 525–56.
49
Id. at 526.
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claims were abandoned. Here, however, PBL did not pursue some claims while
neglecting others. Instead, it took no action until it was certain that it would
not receive funds pursuant to the settlement.
This case more closely resembles McLaughlin v. Mississippi Power Co.
There, the court dismissed the plaintiff’s complaint, but declined to rule on
three counterclaims and a third-party complaint. 50 This court held that even
though “the order did purport to dismiss the entire case,” “the district court
continued to exercise jurisdiction over the case,” indicating that the district
court did not intend the order to be a final judgment. 51
PBL promptly pursued its claim after learning that it would not receive
funds and did not pursue other claims while neglecting this one; and the
district court continued to exercise jurisdiction over this case for years after
the 2012 Judgment. PBL thus did not abandon its claim and the 2012
Judgment was not final with respect to PBL. The district court had
jurisdiction.
E. Summary Judgment on Defendants’ Counterclaim
Finally, Defendants contend that the district court erred in granting
summary judgment to PBL on Defendants’ breach-of-contract counterclaim.
The district court did so because it determined that the Defendants had not
proved their damages. 52 Defendants do not explicitly contest that conclusion,
contending instead that PBL had defaulted on the counterclaim because it
50 McLaughlin, 376 F.3d at 350.
51 Id. at 351.
52 Defendants spent much of oral argument attacking the magistrate judge’s bad faith
finding. But we need not address that finding here because (1) the district court explicitly
stated it would reach the same conclusion even if there was no bad faith, and (2) Defendants
failed to address the bad faith finding in their opening brief.
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never filed an answer. Defendants did not raise this argument before the
magistrate judge or the district court, so we review it for plain error only. 53
The only effect of failing to answer is that the allegations in the
complaint (or counterclaim) are deemed admitted. 54 It does not automatically
result in either an entry of default or a default judgment. 55 In Trotter v. Jack
Anderson Enterprises, Inc., this court declined to reverse a grant of summary
judgment solely because the moving party failed to deny an allegation in an
answer. 56 We explained in Trotter that the purpose of this rule is “to avoid
unfair surprise by the party who failed to file a responsive pleading.” 57 But
“[the defendant’s] motion for summary judgment, while not a pleading
responsive to a complaint, gave [the plaintiff] plain notice that the [allegation]
was a matter to be litigated.” 58 We stated that “[the defendant’s] failure to file
an answer, therefore, had no effect on the rights of [the plaintiff] and cannot
serve as a ground for reversal.” 59 PBL’s summary judgment motion notified
Defendants that damages was an issue to be litigated, so the district court’s
53 See Rushing, 185 F.3d at 506.
54 FED. R. CIV. P. 8(b)(6); cf. FED. R. CIV. P. 12(a)(1)(B) (a party must answer a
counterclaim). Moreover, allegations relating to the amount of damages are an exception to
this rule, though it is unclear whether this exception also applies to the existence of damages.
See FED. R. CIV. P. 8(b)(6); see also CHARLES ALAN WRIGHT & ARTHUR MILLER ET AL., 5 FED.
PRAC. & PROC. CIV. § 1279 (3d ed.) (“[A]verments of damages specifically are exempted from
the effect of Rule 8(b)(6) and are not admitted by a failure to deny.”).
55 New York Life Ins. Co. v. Brown, 84 F.3d 137, 141 (5th Cir. 1996) (“Because it is
important to keep straight default language, a review of the terms regarding defaults is
appropriate. A default occurs when a defendant has failed to plead or otherwise respond to
the complaint within the time required by the Federal Rules. An entry of default is what the
clerk enters when the default is established by affidavit or otherwise. After defendant’s
default has been entered, plaintiff may apply for a judgment based on such default. This is
a default judgment.” (citation omitted)); see FED. R. CIV. P. 55(a) & (b).
56 818 F.2d 431, 436 (5th Cir. 1987).
57 Id.
58 Id. (citations omitted).
59 Id. (citation omitted).
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grant of summary judgment was not error, let alone plain error. We therefore
affirm summary judgment for PBL on the Defendants’ counterclaim. 60
III. CONCLUSION
We AFFIRM the district court’s ruling for the reasons stated above.
60Defendants do not contest the merits of the summary judgment ruling, i.e., whether
there was a genuine dispute as to a material fact. See FED. R. CIV. P. 56(a). As a result, we
need not address the apparent uncertainty about which state’s law to apply: The Note and
Guaranty state that New York law governs those contracts, but the magistrate judge applied
Texas law when granting summary judgment, which the parties do not contest in their briefs.
Moreover, the elements of the claims are substantially similar under each state’s law.
Compare Haggard v. Bank of Ozarks Inc., 668 F.3d 196, 199 (5th Cir. 2012) (citing Texas
law), and UMLIC VP LLC v. T & M Sales & Envtl. Sys., Inc.,
176 S.W.3d 595, 611 (Tex.
App.—Corpus Christi-Edinburg 2005, rev. denied), with Superior Fid. Assurance, Ltd. v.
Schwartz,
893 N.Y.S.2d 256, 258 (N.Y. App. Div. 2010), and Chamberlain v. Amato,
688
N.Y.S.2d 345, 346 (N.Y. App. Div. 1999).
18
