Leroy Rowser v. Samuel Miller, Receiver

631 F.2d 433, 1980 U.S. App. LEXIS 13670, 24 Empl. Prac. Dec. (CCH) 31,261

• Court: Court of Appeals for the Sixth Circuit
• Decided: September 26, 1980
• Docket: 78-3212
• Status: Published

Opinions

MERRITT, Circuit Judge.

This is an appeal from the sua sponte dismissal by District Judge Green of the plaintiff’s racial discrimination complaint five days after it was filed. The ten plaintiffs were black supervisory employees of the Cleveland Sheraton Hotel while the hotel was under the receivership of the defendant. Their complaint, brought under 42 U.S.C. § 1981, alleges that the receiver discriminatorily refused to give them the same accumulated vacation pay and other benefits as he gave to the white supervisory employees. The plaintiffs admit that they eventually received their withheld pay and benefits. As compensatory damages, then, they seek only a total of $46.87, which is the amount of interest that accrued on the withheld pay and benefits. The complaint additionally seeks injunctive relief and $250,000 in punitive damages. The District Court summarily dismissed the complaint as frivolous.

The District Court erred in dismissing the complaint on the ground that it was frivolous. In pecuniary terms, of course, this is a fairly minor lawsuit; the plaintiffs each seek only $4.68 as compensatory damages. Yet a serious moral question is presented by this case. The complaint alleges that the hotel receiver divided up the employees into two classes. Into one class he placed the black employees. Into another class he placed the ,white employees. He paid the white employees their fringe benefits and vacation and termination pay. He did not pay the black employees until several months later when they complained. We do not know whether the plaintiffs will be able to prove the set of facts that they have alleged. The conduct alleged by the complaint, however, is a clear and reprehensible violation of federal law. It is to the federal courts-and sometimes to the federal courts alone-that plaintiffs with this sort of complaint must look to find redress. This case thus is anything but frivolous.

The defendant urged for the first time at oral argument that this Court nonetheless should affirm the dismissal on grounds of mootness. The argument runs that in the interim between dismissal of the complaint and argument of this appeal, the Cuyahoga County, Ohio, Court of Common Pleas terminated the receivership and discharged the receiver. An accounting was filed, so we are told, and the receiver was discharged on September 18, 1978. This was six months after the notice of appeal was filed in this case. The record does not disclose whether the receiver advised the state court that this case was pending at the time he sought discharge or whether arrangements were made to satisfy any judgment that might be rendered in the case. Yet counsel claims that under these circumstances the dissolution of the receivership has rendered this controversy moot.

The controversy between the parties is not genuinely moot in the sense that the dispute has been resolved either by settlement or by a set of events that makes the plaintiffs’ claim no longer a live issue or controversy. In short, the plaintiffs still want their money and their moral satisfaction, and have not gotten either. A receiver cannot render moot civil rights claims against him by simply dissolving the receivership in an effort to avoid liability.

It is not clear, however, whether the termination of a receivership altogether precludes further recourse on claims arising during the receivership. The Supreme Court faced a somewhat similar situation in Texas & Pacific Railway Co. v. Johnson, 151 U.S. 81, 14 S.Ct. 250, 38 L.Ed. 81 (1894). There, the plaintiffs had a tort claim against the receiver of the railroad, who ultimately turned the railroad properties back over to the railroad. The Court held that the plaintiffs could pursue their claim against the successor in interest to the receiver. See generally 66 Am.Jur.2d, Receivers § 488. In the Johnson case, it is true, the company that owned the railroad prior to the receivership got the railroad property back after the reorganization by the receiver. In our case, by contrast, the hotel properties apparently were sold to a third party purchaser. It is also unclear whether the receiver should be held personally liable for compensatory and punitive damages and attorneys’ fees should plaintiffs prove that the receiver discriminated against them on grounds of race.

Because the receivership in the present case was terminated after the appeal was filed, the District Court never has had an opportunity to rule on these questions. We therefore remand the case to the District Court for rulings on the merits as well as on the following issues arising from the dissolution of the receivership: (1) whether the third party purchaser of the hotel took the assets subject to the outstanding claims against the receiver on the assets; (2) whether the final report filed by the receiver in state court set forth with the requisite sufficiency and accuracy the receiver’s duties to the plaintiffs; (3) whether the receiver owes any fiduciary responsibilities to claimants whose claims are pending at the time of his discharge, and whether the receiver is personally liable for the discharge of such duties; (4) whether the receiver acted in good faith in seeking a dissolution of the receivership while this case was still pending; and (5) whether, in light of the resolution of the above issues, it is appropriate to allow the plaintiffs to amend their complaint to add or substitute the third party purchaser of the hotel as defendant.

The judgment of the District Court dismissing the complaint therefore is reversed, and the case is remanded for further proceedings in accordance with this opinion. Costs are taxed against the defendant-ap-pellee.