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Norris v. Causey

United States Court of Appeals, Fifth Circuit

August 22, 2017

JOSH NORRIS; JILL NORRIS, Plaintiffs - Appellees Cross-Appellants
v.
KARRY CAUSEY, Defendant-Appellant Cross-Appellee GARRY CAUSEY, Defendant - Cross-Appellee JOSH NORRIS; JILL NORRIS, Plaintiffs - Appellants
v.
GARRY CAUSEY; KARRY CAUSEY, Defendants - Appellees JOSH NORRIS; JILL NORRIS, Plaintiffs - Appellees
v.
GARRY CAUSEY, Defendant - Appellant JOSH NORRIS; JILL NORRIS, Plaintiffs - Appellants
v.
GARRY CAUSEY; KARRY CAUSEY, Defendants - Appellees

         Appeals from the United States District Court for the Eastern District of Louisiana

          Before REAVLEY, HAYNES, and COSTA, Circuit Judges.

          GREGG COSTA, CIRCUIT JUDGE:

         This is yet another case that has its roots in the devastation Hurricane Katrina wreaked on New Orleans. Resilient as the city is, it swiftly began to rebuild. That effort presented attractive opportunities for investors and developers looking to turn a profit. This case involves one such opportunity that went sour.

         This lawsuit that followed resulted in a bench trial. One of the defendants appeared at trial to fight the allegations; the other did not and whether he was properly served is an issue on appeal. The district court found that both defendants breached their agreement with plaintiffs to purchase, renovate, and sell Katrina-damaged properties. It held Karry Causey, the defendant who put up a defense, liable for $16, 780. It found the defaulting defendant, Garry Causey, further liable for breach of fiduciary duty and responsible for $94, 000. After that judgment issued, Garry finally appeared and sought to vacate the award alleging improper service. Both defendants sought to vacate the judgment on the additional ground that they believe the plaintiffs failed to adequately disclose the claim during their bankruptcy. The district court denied those postjudgment motions and also awarded attorneys' fees and costs against the Causeys.

         All these rulings are challenged as both sides appeal. Plaintiffs contend the district court should have required both defendants to pay the full $94, 000 in damages. Defendants argue that the jurisdictional defects warrant vacating the judgment, that in any event Karry did not breach the contract, and that the fee award is excessive. We affirm the judgment in all respects as to Karry, but remand for additional factfinding about the attempts to serve Garry.

         I.

         Joshua Norris, a plumber from Michigan, traveled to New Orleans in early 2007 in search of work. There he met twin brothers Karry and Garry Causey. The Causeys proposed to Joshua and his wife, Jill, the following investment opportunity: the Norrises would supply funds to purchase hurricane-damaged properties and the Causeys would renovate those properties and sell them at a profit. That profit would be evenly divided among them.

         Garry reduced this plan to writing. He and the Norrises signed the joint venture agreement. Karry did not.

         The agreement divides responsibilities among the parties along the lines of the original understanding. The Norrises are to finance the project. Garry is responsible for, among other things, maintaining accounting records, identifying and facilitating the purchase of properties, and negotiating with contractors to obtain the best possible prices. Karry is the project manager.

         To fulfill their end of the bargain, the Norrises obtained a home equity loan. From those funds, they wrote Garry one check for $48, 000 and another for $45, 000. This money was supposed to be used for construction on two separate properties. Garry wired Karry $15, 780 of those funds. The Norrises gave Karry an additional $1, 000 for architectural plans he said were needed.

         Despite receiving these funds, the Causeys failed to move forward with the renovations. They instead spent the money on personal items. After a few months, they also stopped paying the Norrises the interest accumulating on their home equity loan.

         Inability to repay that loan led the Norrises to file for Chapter 7 bankruptcy in 2009. The Norrises did not list their potential claim against the Causeys in their bankruptcy schedules. Before the issuance of the trustee's final report, however, the claim began to appear in interim reports by the trustee as "a potential lawsuit regarding LA property" with an estimated value of $1, 000. The bankruptcy trustee's final report expressly abandons this claim to the Norrises. See 11 U.S.C. § 554(c). That abandonment became final in 2012 when the bankruptcy court approved the final report and closed the case.

         The Norrises subsequently filed this lawsuit against the Causeys. Garry failed to appear despite various efforts, described in more detail below, to serve him. The district court thus found Garry in default. Karry, on the other hand, appeared and actively defended against the Norrises allegations in a one-day bench trial.

         That trial resulted in the district court's entering default judgment against Garry on breach of contract and fiduciary duty claims and ordering him to pay $94, 000 in damages. The district court also found Karry tacitly accepted the contract and likewise breached. But it held him liable for only $15, 780-the amount Garry wired him that Karry used for his own benefit.

         The Norrises subsequently filed a motion for attorneys' fees and a motion to amend the final judgment. The district court awarded $58, 736 in attorneys' fees and costs, holding Garry and Karry solidarily liable for the full amount. And despite disagreeing with the Norrises' arguments for holding Karry solidarily liable for the full damages award, it added $1, 000 in damages to account for the check Karry received for architectural plans. Karry filed a notice of appeal. The Norrises filed a cross appeal.

         Following the commencement of these appeals, the bankruptcy court in the Eastern District of Michigan reopened the Norrises' case, stating "it appear[s] that Debtors may have intentionally [misled] the Court as to their assets and said asset appears to be an asset of the Debtor's Estate."[1]

         After that bankruptcy court activity, and approximately four months after the New Orleans district court issued its final judgment, the Causeys filed separate motions under Rule 60(b)(4) seeking to set aside the judgment as void. This was the first time Garry appeared in the case.

         Both Causeys argued that the Norrises did not have standing as failure to disclose the claim in bankruptcy meant abandonment of the claim was improper and the trustee should be considered the real party in interest. Garry separately argued that he was not properly served.

         The district court agreed with the Causeys that the Norrises were not the proper plaintiffs. But because real-party-in-interest is not a jurisdictional requirement, it denied relief, ordering instead that the trustee could substitute as the plaintiff. The district court further found that Garry was properly served.

         II.

         We start our review at the end of the district court litigation, with the denial of the Rule 60(b)(4) motions. We do so because if those motions should have been granted, then the judgment would be void and there would be no need to review the merits.

         We first consider the Rule 60(b) ground that would vacate the judgment as to both defendants: the argument that the Norrises lack standing because they did not disclose this claim during their bankruptcy. The district court's ruling on this issue is subject to cross appeals. This is because, although the district court did not void the judgment, it held that the Norrises are not the real parties in interest and the bankruptcy trustee could substitute in. The Causeys argue that the district court did not go far enough; it recognized the real-party-in-interest problem but did not see that through to voiding the judgment. The Norrises contend the district court went too far; whether they or the trustee was the proper party is not a question the court should consider at all in a motion for postjudgment relief. They also argue that the Rule 60 motions were untimely. [2]

         A.

         For starters, there is no timeliness problem with the motions seeking relief from the judgment. Because a "void judgment cannot acquire validity" through the passage of time, Rule 60(b)(4) motions have no time limit. 11 Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane, Federal Practice & Procedure, ...


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