IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 99-30476
_____________________
UNITED STATES OF AMERICA;
Plaintiff - Appellee
STATE OF LOUISIANA, on behalf of
Department of Environmental Quality
Intervenor Plaintiff - Appellee
v.
ACADIANA TREATMENT SYSTEMS INC; ET AL
Defendants
MICHAEL M JOHNSON
Appellant
_________________________________________________________________
Appeal from the United States District Court
for the Western District of Louisiana
(98-CV-687)
_________________________________________________________________
May 3, 2000
Before KING, Chief Judge, and REAVLEY and STEWART, Circuit
Judges.
KING, Chief Judge:*
*
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that this opinion should not be published and is not precedent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.
Appellant Michael M. Johnson appeals from the district
court’s judgment appointing a receiver of Johnson Properties,
Inc. Appellant argues that the receivership constitutes a taking
of private property without just compensation, and that the
district court improperly granted the receivership control over
out-of-state subsidiaries of Johnson Properties, Inc. For the
reasons stated below, we DISMISS the appeal.
I. BACKGROUND AND PROCEDURAL HISTORY
Appellant Michael M. Johnson (“Johnson”) is the vice-
president and chairman of the board of Johnson Properties, Inc.
(“JPI”), a Mississippi corporation. Johnson is also the sole
shareholder of JPI. JPI has approximately sixty subsidiaries,
which are primarily engaged in the water and sewage treatment
industry and own approximately two hundred and thirty sewage
treatment plants (“STPs”) in Louisiana, North Carolina, South
Carolina, Tennessee, Pennsylvania, and Mississippi. At issue in
this case is one such subsidiary, Acadiana Treatment Systems,
Inc. (“ATS”). ATS, a Louisiana corporation, owns 116 STPs
located in Louisiana.
On January 16, 1998, the United States, acting at the
request of the United States Environmental Protection Agency (the
“EPA”), filed suit against JPI, ATS, and Darren K. Johnson (the
general manager of ATS) in the United States District Court for
the Middle District of Louisiana (the “enforcement action”). The
complaint alleged that ATS’ Louisiana STPs had violated Section
2
301(a) of the Clean Water Act (the “CWA”), see 33 U.S.C.
§ 1311(a), and certain terms, conditions, and limitations of the
National Pollutant Discharge Elimination Systems permits issued
to ATS pursuant to Section 402 of the CWA, see 33 U.S.C. § 1342.
On April 16, 1998, the district court transferred the action
sua sponte to the Western District of Louisiana. On May 15,
1998, the United States filed an amended complaint, which added
other JPI subsidiaries as defendants.1 On May 27, 1998, the
State of Louisiana, on behalf of the Department of Environmental
Quality, filed a motion to intervene as a plaintiff. The
district court granted the motion on May 29, 1998. The State of
Louisiana’s complaint in intervention alleged claims under the
Louisiana Environmental Quality Act, see LA. REV. STAT. ANN.
§ 30:2001 (West 1998), in addition to the federal claims
originally brought by the United States.
The parties entered into settlement negotiations, and
ultimately, a consent decree was entered by the district court on
July 31, 1998. The decree stated that the defendants, as well as
“their officers, agents, successors, assigns, and all persons
acting on their behalf,” were bound by its terms. The decree
1
The United States added as defendants Acadia Woods Add.
# 2 Sewer Co., ATS Utilities, Inc., Beaujolais Sewerage Service
Corp., Brandywine Sanitation Corp., Cedar Bend Villas Sewer Co.,
Inc., Community Sewerage Service, Inc., Green Briar Sewer Co.,
Inc., Hunstock Hills Sewer Co., Inc., Pointe Coupee Sewerage,
Inc., Rigolets Utilities, Inc., Seashore Utilities of Louisiana,
Inc., Tara Development Corp., Thoroughbred Park Service Corp.,
Timberley Terrace Sewerage, Inc., Tri-B Sanitation Corp., Twelve
Cedars Sanitation Corp., and Williams & Ingram Sewerage Co., Inc.
(together with JPI and ATI, “the defendants”).
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provided, inter alia, that the defendants were to comply with
“federal and state rules and regulations governing generation,
treatment, storage and disposal of pollutants, including sewage
treated at the STPs.”2 The decree specified that the defendants
were to immediately perform a number of compliance measures, and
established a time frame for the performance of additional
measures and for the completion of an audit. The decree also
stipulated certain penalties in the event that the defendants
violated the terms of the decree. It further provided that the
district court retained jurisdiction of the matter “until further
order of the Court or until termination of [the] Consent Decree.”
In December 1998, contractors employed by the EPA and by the
Louisiana Department of Environmental Quality inspected 73 of the
Louisiana STPs owned by the defendants. The inspectors found 661
violations of the consent decree, including the continued release
of raw sewage and sewage sludge into the environment. None of
the inspected STPs was found to be in compliance with the terms
of the consent decree. Consequently, on February 8, 1999, the
United States and the State of Louisiana filed a motion with the
district court requesting the appointment of a receiver to
operate the STPs.
On March 12, 1999, JPI filed a petition for Chapter 11
bankruptcy protection in the Middle District of Louisiana. JPI
also filed an application for a supplemental stay with regard to
2
The consent decree listed 179 Louisiana STPs owned by the
defendants.
4
itself and the other defendants in the enforcement action. The
bankruptcy court initially granted the stay. After a conference
with the parties to the enforcement action, however, the
bankruptcy judge concluded that 11 U.S.C. § 362(B)(4) exempted
the enforcement action from the automatic stay provision. The
defendants then noticed a joint motion for stay in the district
court on March 15, 1999. The district court denied the motion,
and the defendants subsequently petitioned this court for a writ
of mandamus. We denied the defendants’ petition on March 18,
1999. See In re Johnson Properties, Inc., No. 99-30264 (5th Cir.
1999) (order denying petition for writ of mandamus).
The district court conducted a hearing on the motion to
appoint a receiver from March 15, 1999 to March 19, 1999. On
March 22, 1999, the district court issued a memorandum ruling and
judgment. The judgment had several components. First, the
district court appointed Martin A. Schott as receiver of JPI, its
assets, and all its subsidiary corporations, including but not
limited to the subsidiaries that were defendants to the
enforcement action. The court also granted the receiver broad
powers to perform all acts necessary to achieve compliance with
the consent decree, including the authority to sell corporate
property and to manage, control, and deal with “all items,
assets, properties, contracts, and other matters incident to the
Receiver’s responsibilities.” Furthermore, the judgment ordered
that
Michael Johnson . . . [is] hereby enjoined, restrained
and prohibited from going onto property belonging to
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defendants or from having any contact with defendants’
employees or employees of any entity doing business
with, or performing maintenance or any remedial
measures to the facilities owned or operated by the
defendants, without the prior approval of the
Receiver, . . . or from interfering in any way with the
Receiver in the discharge of his duties. . . .
In addition, the district court ordered Michael Johnson to
“cooperate and assist the Receiver in any way that [the Receiver]
deems appropriate.”
The district court declared that its judgment constituted a
final judgment under Federal Rule of Civil Procedure 54(b), but
retained jurisdiction for the purposes of enforcing the
provisions of the judgment. Johnson timely appeals.
II. DISCUSSION
For the first time on appeal, Johnson claims that (1) the
order appointing a receiver confers powers of such scope as to
constitute a taking of private property without just
compensation; and (2) the district court abused its discretion by
granting the receiver control over out-of-state subsidiaries and
their assets.
Before addressing the merits of Johnson’s claims, however,
we must consider whether Johnson, the sole shareholder of JPI,
has standing to urge on appeal the issues set out in his brief.3
See Lang v. French, 154 F.3d 217, 222 & n.28 (5th Cir. 1998)
3
The United States maintains that Johnson has standing to
appeal because the district court’s order directly affected him.
Despite the apparent lack of dispute, we examine the basis of our
appellate jurisdiction sua sponte. See Borne v. A&P Boat
Rentals, 755 F.2d 1131, 1133 (5th Cir. 1985).
6
(citations omitted). “The inquiry as to whether a particular
[litigant] has standing has two components, involving ‘both
constitutional limitations on federal-court jurisdiction and
prudential limitations on its exercise.’” Association of
Community Orgs. v. Fowler, 178 F.3d 350, 356 (5th Cir. 1999)
(citing Warth v. Seldin, 422 U.S. 490, 498 (1975)).
To establish standing under Article III, § 2 of the
Constitution, Johnson must show (1) an injury in fact (2) that is
fairly traceable to the challenged act and (3) that is likely to
be redressed by the requested remedy. See Davis v. East Baton
Rouge Parish School Bd., 78 F.3d 920, 926 (5th Cir. 1996)
(citations omitted). In addition, federal courts have restricted
the exercise of their jurisdiction based on certain prudential
limitations, including the principle that “a litigant must assert
his or her own legal rights and interests, and cannot rest a
claim to relief on the legal rights or interests of third
parties.” Powers v. Ohio, 499 U.S. 400, 410 (1990). Closely
related to this principle is the equitable restriction against
shareholder suits to redress injuries to a corporation. See
Franchise Tax Bd. of Cal. v. Alcan Aluminum, 493 U.S. 331, 336
(1989) (citations omitted). A shareholder may only bring an
action to enforce the rights of a corporation when either (1)
“the corporation’s management has refused to pursue the same
action for reasons other than good-faith business judgment,” or
(2) the shareholder has a “direct, personal interest” in the
action, “independent of [his] status as shareholder[].” Id. at
7
336-37; see also Stevens v. Lowder, 643 F.2d 1078, 1080 (5th Cir.
1981) (per curiam); Gregory v. Mitchell, 634 F.2d 199, 202 (5th
Cir. 1981).
Johnson has alleged two separate injuries. In connection
with his takings claim, he contends that he will be permanently
deprived of property because the receiver will sell some of JPI’s
subsidiaries’ assets in order to finance the process of bringing
the STPs into compliance with the terms of the consent decree.
Next, Johnson asserts that the public served by JPI’s water and
sewage facilities outside Louisiana will be placed “at undeserved
risk for irreparable harm” because the district court granted the
receiver authority over non-Louisiana JPI subsidiaries. Johnson
does not define the nature of this harm, but states in his reply
brief that non-Louisiana taxpayers will be unjustly forced to pay
for the cleanup of Louisiana STPs.
These purported injuries are insufficient to confer standing
to assert on appeal the issues that Johnson addresses in his
brief. Johnson cannot complain that he will be injured because
some of the subsidiaries’ assets may be sold by the receiver. It
is a well-established principle of corporate law that corporate
assets belong to the corporation, not to the shareholder. See
Sun Towers v. Heckler, 725 F.2d 315, 331 (5th Cir. 1984); Engel
v. Teleprompter Corp., 703 F.2d 127, 131 (5th Cir. 1983)
(subsidiary corporation is legal entity separate from its
shareholders). Thus, the injury asserted by Johnson actually
8
inheres in the corporation.4 We have held that, in general,
“diminution in value of the corporate assets is insufficient
direct harm to give the shareholder standing . . . in his own
right.” Stevens, 643 F.2d at 1080; see also Gregory, 634 F.2d at
202 (loss in value of stock is not a sufficiently direct injury
to confer standing). However, we have not addressed the question
whether a shareholder has standing to allege a taking of
corporate assets. The Federal Circuit, which has, has only
exercised jurisdiction over a derivative action asserting a
takings claim when the action could be construed “as filed by a
sole shareholder on behalf of a corporation alleging that
compensation to the corporation will result in a surplus in which
the shareholder possesses a direct interest.” California Housing
Sec., Inc. v. United States, 959 F.2d 955, 957 n.2 (Fed. Cir.
1992) (shareholders had right to post-liquidation surplus under
12 U.S.C. § 1821(d)(11)(B)); see also First Hartford Corp.
4
Because JPI has filed for bankruptcy, the bankruptcy
trustee alone has standing to pursue a cause of action to enforce
JPI’s rights. See 11 U.S.C. § 541(a). Although not before us,
we are deeply concerned about the fact that JPI has both a
trustee and a receiver appointed by and responsive to different
courts. We understand that, to some extent at least, that
situation is a result of the timing of the respective motions to
appoint a trustee and a receiver. Given the fact that the
bankruptcy court possesses exclusive jurisdiction of all the
debtor’s property and given the extremely broad powers of a
trustee in a Chapter 11 case, however, it is unclear why a
receiver continues to be necessary, and the possibility of
conflict in the two roles suggests that it may unduly complicate
matters. The fact that one person wears two hats, which
apparently gave some comfort to the district court, may not
prevent those complications. Our concerns as to whether both
these appointments were necessary or appropriate and should be
continued are, however, of no consequence to our standing
analysis.
9
Pension Plan & Trust v. United States, 194 F.3d 1279, 1288 (Fed.
Cir. 1999) (same); Branch v. United States, 69 F.3d 1571, 1574-75
(Fed. Cir. 1995) (trustee in bankruptcy had right to recover
assets). We are not persuaded that Johnson has alleged such an
interest here. As a result, we find that Johnson lacks standing
to bring a takings claim or to assert one on appeal.
Furthermore, Johnson’s conclusory assertions that the
receiver’s control over JPI’s non-Louisiana subsidiaries will
cause “irreparable harm” to the public utterly fail to meet the
requirements for Article III standing. See Lujan v. Defenders of
Wildlife, 504 U.S. 555, 560 (1992) (citations omitted) (stating
that Article III requires an “injury in fact,” defined as an
intrusion upon a legally protected interest that is (1) concrete
and particularized, and (2) actual or imminent, rather than
conjectural or hypothetical). Moreover, Johnson clearly lacks
standing to bring a claim on behalf of non-Louisiana taxpayers.
See Warth, 422 U.S. at 502. In short, Johnson has no standing to
bring either of the claims presented or to assert them on appeal.
We therefore have no jurisdiction to hear his appeal. See
Nevares v. San Marcos Consol. Indep. Sch. Dist., 111 F.3d 25, 26
(5th Cir. 1997).
III. CONCLUSION
For the foregoing reasons, we DISMISS the instant appeal.
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