Wellness Wireless, Inc. v. Infopia America, L.L.C.

606 F. App'x 737
CourtCourt of Appeals for the Fifth Circuit
DecidedMarch 24, 2015
Docket14-20024
StatusUnpublished

This text of 606 F. App'x 737 (Wellness Wireless, Inc. v. Infopia America, L.L.C.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Wellness Wireless, Inc. v. Infopia America, L.L.C., 606 F. App'x 737 (5th Cir. 2015).

Opinion

PER CURIAM: *

Appellant Wellness Wireless challenges the district court’s dismissal of its contract claim for lack of jurisdiction, or, alternatively, dismissal under Federal Rule of Civil Procedure 19 for inability to join a necessary and indispensable party. Because we conclude that the district court has jurisdiction over this case and the third party is not a necessary party under Rule 19, we reverse and remand.

I.

This case originates from a dispute between two companies that are not parties to this case: Diabetes Center of America (“Diabetes America”) and HealthPia America (“HealthPia”). In 2006, Diabetes America sued HealthPia and its CEO because of a business dispute. In the hope of establishing a business relationship with HealthPia, Defendant Infopia agreed to pay Diabetes America $800,000 on behalf of HealthPia as part of a settlement agreement dismissing the suit (“2008 Settlement”). Pursuant to the 2008 Settlement, Infopia made a $500,000 lump-sum payment to Diabetes America, and agreed to execute a $300,000 promissory note payable in installments to Diabetes America. In exchange, Diabetes America agreed to release all claims against HealthPia. Info-pia defaulted on the promissory note following the first payment. This breached the 2008 Settlement and nullified the conditional release of claims against Health-Pia. In late 2008, a default judgment was entered for Diabetes America.

Later that same year, Diabetes America allegedly assigned Wellness Wireless all of Diabetes America’s rights under the promissory note. Subsequently, in 2010, Infopia and Diabetes America signed a settlement agreement for unpaid obligations under the 2008 promissory note (“2010 Settlement”). Infopia paid $300,000 to be released from all claims of Diabetes America. Shortly thereafter, Diabetes America declared bankruptcy. Diabetes America did not include a right to recovery against Infopia on its schedules of assets, nor has it pursued any claim against Infopia during its Chapter 11 case.

Wellness Wireless then began to attempt to collect money from Infopia under the promissory note. First, it filed a state court suit on the promissory note, which was dismissed for lack of jurisdiction. Second, Wellness Wireless unsuccessfully sought to collect on the default judgment in the original underlying case between HealthPia and Diabetes America.

*739 On this third try, Wellness ■ Wireless filed the instant suit against Infopia. The district court dismissed the case. The court concluded that it lacked subject matter jurisdiction because the case belonged in the bankruptcy court where Diabetes America was a current debtor. See 28 U.S.C. § 1334. 1 Alternatively, the district court held that Diabetes America, as the alleged assignor of the 2008 promissory note, was an indispensable party, requiring dismissal of the case pursuant to Fed. R.Civ.P. 19. Wellness Wireless appealed.

II.

The district court’s determination that it lacked jurisdiction is a legal determination that we review de novo. In re U.S. Brass Corp., 301 F.3d 296, 303 (5th Cir.2002). The district court’s decision to dismiss for failure to join an indispensable party pursuant to Rule 19 is properly reviewed under an abuse-of-discretion standard. Pulitzer-Polster v. Pulitzer, 784 F.2d 1305,1308 (5th Cir.1986).

III.

The district court’s brief order dismissing the case stated that “the bankruptcy court’s jurisdiction is implicated pursuant to 28 U.S.C. § 1334.” To support the court’s conclusion, Infopia argues either that (a) the bankruptcy court had “exclusive jurisdiction” over the dispute because Diabetes America never validly assigned the 2008 Promissory Note, or (b) if there is any doubt about the proper payee, then § 1334 divests a district court of jurisdiction because the case will have a “conceivable effect” on a bankruptcy estate or involves an asset of the bankrupt estate. These arguments are plainly wrong.

First, 28 U.S.C. § 1334(b) explicitly grants “the district courts ... original but not exclusive jurisdiction of all civil proceedings arising under Title 11, or arising in or related to cases under title 11.” 28 U.S.C. § 1334(b) (emphasis added). Under this framework, district courts have Article III jurisdiction over bankruptcy cases and proceedings. The bankruptcy courts are within the district courts’ purview, and eases are assigned to the bankruptcy courts by way of referral from a district court. See 28 U.S.C. § 157(a). Normally, eases are automatically so assigned pursuant to local court rules. Id. At most, the district court arguably could have referred this case to the bankruptcy court pursuant, to Local Rules • of the Southern District of Texas. S.D. Tex. General Order 2012-6. Any such failure to refer, however, is not raised before us and in any event is not jurisdictional.

Infopia mistakenly relies on In re Can-ion, 196 F.3d 579 (5th Cir.1999) and In re Tidewater Group, Inc., • 63 B.R. 670 (Bankr.N.D.Ga.1986), in contending that the district court lacks jurisdiction if a case will have a conceivable effect on a bankruptcy estate. In each case, the court found that because a dispute had some “conceivable effect” on, and was thus “related to” the bankruptcy, the bankruptcy court had jurisdiction. Neither case restricts, or even directly addresses, the jurisdiction of the district court, and neither dictates the outcome here. Infopia also mistakenly argues that In re Duval Cnty. Ranch Co., 167 B.R. 848, 849 (Bankr. S.D.Tex.1994), supports its argument that under 28 U.S.C. § 1334(e) the district court is divested of jurisdiction over the question whether an asset is property of *740 the debtor’s estate. 2 In Duval County, however, the issue concerned jurisdiction as between the bankruptcy court and a state court to adjudicate property of the estate. Id. The bankruptcy court concluded that it retained exclusive jurisdiction and refused to remand the case to state court. Nothing in Duval County

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606 F. App'x 737, Counsel Stack Legal Research, https://law.counselstack.com/opinion/wellness-wireless-inc-v-infopia-america-llc-ca5-2015.