Case: 17-13279 Date Filed: 05/24/2018 Page: 1 of 7
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT ________________________
No. 17-13279 Non-Argument Calendar ________________________
D.C. Docket No. 9:16-cv-81342-KAM
BRUCE C. ROSETTO, ROXANNE ROSETTO, Plaintiff,
Plaintiffs - Appellants,
versus
CHARLES MURPHY, CLARK HILL, PLC,
Defendants - Appellees.
________________________
Appeal from the United States District Court for the Southern District of Florida ________________________
(May 24, 2018)
Before TJOFLAT, NEWSOM, and EDMONDSON, Circuit Judges. Case: 17-13279 Date Filed: 05/24/2018 Page: 2 of 7
PER CURIAM:
Plaintiffs Bruce Rosetto and Roxanne Rosetto appeal the district court’s
dismissal of their civil action against Defendants Charles Murphy and Clark Hill
PLC. The district court -- under the doctrine established in Barton v. Barbour, 104
U.S. 126 (1881) -- concluded that it lacked subject matter jurisdiction. No
reversible error has been shown; we affirm.
This appeal arises out of events that occurred in connection with an
enforcement action filed by the Securities and Exchange Commission against
Legisi Marketing, Inc. (“SEC Enforcement Action”). As part of those proceedings,
the United States District Court of the Eastern District of Michigan appointed
Robert Gordon as receiver (“Receiver”). The Receiver then retained Defendants
Murphy and Clark Hill PLC as court-approved counsel to represent the Receiver
and to assist in his duties.
In 2009, the Receiver -- through Defendants -- filed suit against Plaintiffs in
the Eastern District of Michigan, alleging violations of federal securities laws (the
“Michigan Action”). Briefly stated, the complaint alleged that Mr. Rosetto
controlled the day-to-day activities and management of an investment fund in
which Legisi invested millions of dollars and that Mr. Rosetto knew or should have
known that Legisi was operating a Ponzi scheme.
2 Case: 17-13279 Date Filed: 05/24/2018 Page: 3 of 7
In 2014, Murphy -- acting as counsel for and with prior express
authorization from the Receiver -- made statements to the media about the
Michigan Action. The published article quoted Murphy as having made this
statement: “The investigation that we conducted to date has confirmed that Mr.
Rosetto participated in securities fraud with respect to the Royal Palm Real Estate
Investment Fund.”
Based on Murphy’s alleged statement, Plaintiffs filed a complaint in state
court purporting to assert claims for libel per se and for loss of consortium.
Defendants removed the case to federal court based on diversity of citizenship.
The district court then granted Defendants’ motion to dismiss, concluding that the
court, under Barton, lacked subject matter jurisdiction.
“When evaluating a district court’s conclusions on a Rule 12(b)(1) motion,
we review the district court’s legal conclusions de novo and its factual findings for
clear error.” Odyssey Marine Exploration, Inc. v. Unidentified Shipwrecked
Vessel, 657 F.3d 1159, 1169 (11th Cir. 2011) (quotations and alteration omitted).
“It is a general rule that before suit is brought against a receiver leave of the
court by which he was appointed must be obtained.” Barton, 104 U.S. at 128.
Without such leave, a court lacks jurisdiction over a suit filed against a receiver
“based on his negligence or that of his servants in the performance of their duty in
respect of [the property administered by the receiver.]” Id. at 136-37. The Barton
3 Case: 17-13279 Date Filed: 05/24/2018 Page: 4 of 7
doctrine also extends to court-approved lawyers retained by the receiver.
Lawrence v. Goldberg, 573 F.3d 1265, 1270 (11th Cir. 2009).
That Plaintiffs failed to obtain leave of the appointing court before filing this
civil action against Defendants is undisputed. Because Plaintiffs have not shown
that this case falls outside the scope of the Barton doctrine, the district court
concluded correctly that it lacked subject matter jurisdiction over Plaintiffs’ claims.
First, we reject Plaintiffs’ contention that the Barton doctrine is inapplicable
because the Michigan Action was administratively closed when Murphy made his
alleged statement to the media. The status of the Michigan Action is not the
pertinent inquiry. Instead, we look to the action in which the Receiver was
appointed: the SEC Enforcement Action. The parties do not dispute that the SEC
Enforcement Action was still open and ongoing when Murphy made the alleged
statement and when Plaintiffs filed suit against Defendants. Thus, Plaintiffs were
obligated to first obtain leave from the appointing court before filing this civil
action.
We also reject Plaintiffs’ argument that the jurisdictional issue in this case is
“intertwined with the merits” of their claims for defamation and for loss of
consortium. “[J]urisdiction becomes intertwined with the merits of a cause of
action when a statute provides the basis for both the subject matter jurisdiction of
the federal court and the plaintiff’s substantive claim for relief.” Morrison v.
4 Case: 17-13279 Date Filed: 05/24/2018 Page: 5 of 7
Amway Corp., 323 F.3d 920, 926 (11th Cir. 2003) (quotations omitted)
(determining that the issue of “eligible employee” status under the Family Medical
Leave Act implicated both the court’s jurisdiction and the underlying merits of the
plaintiff’s claim). Here, the statute that serves as the basis for subject matter
jurisdiction over Plaintiffs’ diversity action (28 U.S.C. § 1332) is unrelated to
Plaintiffs’ substantive claims, which are governed by state law. Cf. Odyssey
Marine Exploration, Inc., 657 F.3d at 1170 (jurisdiction was not intertwined with
the merits of the claim where the statute providing subject matter jurisdiction did
not also govern plaintiff’s substantive claims).
Because no intertwining of the jurisdictional issue and the merits of
Plaintiffs’ claims existed, the district court applied properly the standard under
Fed. R. Civ. P. 12(b)(1) for factual challenges to subject matter jurisdiction. See
id.; see also Lawrence v. Dunbar, 919 F.2d 1525, 1529 (11th Cir. 1990) (when
considering a factual attack to subject matter jurisdiction under Rule 12(b)(1), “the
trial court is free to weigh the evidence and satisfy itself as to the existence of its
power to hear the case. . . . [N]o presumptive truthfulness attaches to the plaintiff’s
allegations . . . .”).
Plaintiffs also contend that Murphy’s statement constituted defamation per
se and, thus, falls under the ultra vires exception to the Barton doctrine. We are
not persuaded that Murphy acted outside the scope of his lawful authority. As an
5 Case: 17-13279 Date Filed: 05/24/2018 Page: 6 of 7
initial matter, we have said that a receiver’s release of defamatory reports to the
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Case: 17-13279 Date Filed: 05/24/2018 Page: 1 of 7
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT ________________________
No. 17-13279 Non-Argument Calendar ________________________
D.C. Docket No. 9:16-cv-81342-KAM
BRUCE C. ROSETTO, ROXANNE ROSETTO, Plaintiff,
Plaintiffs - Appellants,
versus
CHARLES MURPHY, CLARK HILL, PLC,
Defendants - Appellees.
________________________
Appeal from the United States District Court for the Southern District of Florida ________________________
(May 24, 2018)
Before TJOFLAT, NEWSOM, and EDMONDSON, Circuit Judges. Case: 17-13279 Date Filed: 05/24/2018 Page: 2 of 7
PER CURIAM:
Plaintiffs Bruce Rosetto and Roxanne Rosetto appeal the district court’s
dismissal of their civil action against Defendants Charles Murphy and Clark Hill
PLC. The district court -- under the doctrine established in Barton v. Barbour, 104
U.S. 126 (1881) -- concluded that it lacked subject matter jurisdiction. No
reversible error has been shown; we affirm.
This appeal arises out of events that occurred in connection with an
enforcement action filed by the Securities and Exchange Commission against
Legisi Marketing, Inc. (“SEC Enforcement Action”). As part of those proceedings,
the United States District Court of the Eastern District of Michigan appointed
Robert Gordon as receiver (“Receiver”). The Receiver then retained Defendants
Murphy and Clark Hill PLC as court-approved counsel to represent the Receiver
and to assist in his duties.
In 2009, the Receiver -- through Defendants -- filed suit against Plaintiffs in
the Eastern District of Michigan, alleging violations of federal securities laws (the
“Michigan Action”). Briefly stated, the complaint alleged that Mr. Rosetto
controlled the day-to-day activities and management of an investment fund in
which Legisi invested millions of dollars and that Mr. Rosetto knew or should have
known that Legisi was operating a Ponzi scheme.
2 Case: 17-13279 Date Filed: 05/24/2018 Page: 3 of 7
In 2014, Murphy -- acting as counsel for and with prior express
authorization from the Receiver -- made statements to the media about the
Michigan Action. The published article quoted Murphy as having made this
statement: “The investigation that we conducted to date has confirmed that Mr.
Rosetto participated in securities fraud with respect to the Royal Palm Real Estate
Investment Fund.”
Based on Murphy’s alleged statement, Plaintiffs filed a complaint in state
court purporting to assert claims for libel per se and for loss of consortium.
Defendants removed the case to federal court based on diversity of citizenship.
The district court then granted Defendants’ motion to dismiss, concluding that the
court, under Barton, lacked subject matter jurisdiction.
“When evaluating a district court’s conclusions on a Rule 12(b)(1) motion,
we review the district court’s legal conclusions de novo and its factual findings for
clear error.” Odyssey Marine Exploration, Inc. v. Unidentified Shipwrecked
Vessel, 657 F.3d 1159, 1169 (11th Cir. 2011) (quotations and alteration omitted).
“It is a general rule that before suit is brought against a receiver leave of the
court by which he was appointed must be obtained.” Barton, 104 U.S. at 128.
Without such leave, a court lacks jurisdiction over a suit filed against a receiver
“based on his negligence or that of his servants in the performance of their duty in
respect of [the property administered by the receiver.]” Id. at 136-37. The Barton
3 Case: 17-13279 Date Filed: 05/24/2018 Page: 4 of 7
doctrine also extends to court-approved lawyers retained by the receiver.
Lawrence v. Goldberg, 573 F.3d 1265, 1270 (11th Cir. 2009).
That Plaintiffs failed to obtain leave of the appointing court before filing this
civil action against Defendants is undisputed. Because Plaintiffs have not shown
that this case falls outside the scope of the Barton doctrine, the district court
concluded correctly that it lacked subject matter jurisdiction over Plaintiffs’ claims.
First, we reject Plaintiffs’ contention that the Barton doctrine is inapplicable
because the Michigan Action was administratively closed when Murphy made his
alleged statement to the media. The status of the Michigan Action is not the
pertinent inquiry. Instead, we look to the action in which the Receiver was
appointed: the SEC Enforcement Action. The parties do not dispute that the SEC
Enforcement Action was still open and ongoing when Murphy made the alleged
statement and when Plaintiffs filed suit against Defendants. Thus, Plaintiffs were
obligated to first obtain leave from the appointing court before filing this civil
action.
We also reject Plaintiffs’ argument that the jurisdictional issue in this case is
“intertwined with the merits” of their claims for defamation and for loss of
consortium. “[J]urisdiction becomes intertwined with the merits of a cause of
action when a statute provides the basis for both the subject matter jurisdiction of
the federal court and the plaintiff’s substantive claim for relief.” Morrison v.
4 Case: 17-13279 Date Filed: 05/24/2018 Page: 5 of 7
Amway Corp., 323 F.3d 920, 926 (11th Cir. 2003) (quotations omitted)
(determining that the issue of “eligible employee” status under the Family Medical
Leave Act implicated both the court’s jurisdiction and the underlying merits of the
plaintiff’s claim). Here, the statute that serves as the basis for subject matter
jurisdiction over Plaintiffs’ diversity action (28 U.S.C. § 1332) is unrelated to
Plaintiffs’ substantive claims, which are governed by state law. Cf. Odyssey
Marine Exploration, Inc., 657 F.3d at 1170 (jurisdiction was not intertwined with
the merits of the claim where the statute providing subject matter jurisdiction did
not also govern plaintiff’s substantive claims).
Because no intertwining of the jurisdictional issue and the merits of
Plaintiffs’ claims existed, the district court applied properly the standard under
Fed. R. Civ. P. 12(b)(1) for factual challenges to subject matter jurisdiction. See
id.; see also Lawrence v. Dunbar, 919 F.2d 1525, 1529 (11th Cir. 1990) (when
considering a factual attack to subject matter jurisdiction under Rule 12(b)(1), “the
trial court is free to weigh the evidence and satisfy itself as to the existence of its
power to hear the case. . . . [N]o presumptive truthfulness attaches to the plaintiff’s
allegations . . . .”).
Plaintiffs also contend that Murphy’s statement constituted defamation per
se and, thus, falls under the ultra vires exception to the Barton doctrine. We are
not persuaded that Murphy acted outside the scope of his lawful authority. As an
5 Case: 17-13279 Date Filed: 05/24/2018 Page: 6 of 7
initial matter, we have said that a receiver’s release of defamatory reports to the
media is insufficient to demonstrate that the receiver “engaged in activities prima
facie beyond the scope of the official function of a state court receiver.” Property
Mgmt. & Invest., Inc. v. Lewis, 752 F.2d 599, 603 (11th Cir. 1985) (affirming the
dismissal of claims against a receiver on judicial immunity grounds).
About the Receiver’s authority in this case, the Order Appointing Receiver
authorized the Receiver “to communicate with all such persons as he deems
appropriate to inform them of the status of this matter and the financial condition
of the Receiver Estates.” The Receiver testified (1) that he considered the media to
be among the people appropriate to inform about the status of the proceedings; and
(2) that he authorized Murphy to speak with the media about the Michigan Action
and about a subpoena served on Mr. Rosetto’s employer.
In the complaint filed in the Michigan Action, the Receiver alleged that Mr.
Rosetto knew or should have known about the Ponzi scheme. In response to a
motion to quash the subpoena served on Mr. Rosetto’s employer, the Receiver
alleged further that “Bruce Rosetto was not only an attorney for the Respondents,
but also participated directly in the fraud by creating the Royal Palm Fund
specifically for the purpose of soliciting the funds of McKnight and Legisi
Marketing.” On this record, the district court committed no clear error in
determining that Murphy’s alleged statement “originate[d] from the Receiver’s
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court filings” and constituted “a reiteration of the position asserted by the Receiver
in the pending litigation.” Because Murphy acted within the scope of the authority
given him by the Receiver, Plaintiffs have failed to show that his conduct falls
within an exception to the Barton doctrine.
The district court dismissed properly Plaintiffs’ complaint for lack of subject
matter jurisdiction.
AFFIRMED.