Case: 14-51142 Document: 00513193305 Page: 1 Date Filed: 09/15/2015
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 14-51142 United States Court of Appeals
Summary Calendar Fifth Circuit
FILED
September 15, 2015
DTND SIERRA INVESTMENTS, L.L.C., Lyle W. Cayce
Clerk
Plaintiff - Appellant
v.
HSBC BANK USA, N.A.; WAYNE CREWS; MARTY LACOUTURE, As
Trustee,
Defendants - Appellees
Appeal from the United States District Court
for the Western District of Texas
USDC No. 5:13-CV-421
Before DAVIS, JONES, and GRAVES, Circuit Judges.
PER CURIAM:*
DTND Sierra Investments, LLC (“DTND”) appeals an order imposing
sanctions for filing a meritless lawsuit. For the reasons discussed herein, we
affirm.
* 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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.
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No. 14-51142
BACKGROUND
Sometime prior to 2011, Wayne Crews (“Crews”) purchased property at
9135 Dublin Moor, San Antonio, Texas, a parcel that belongs to the Hills of the
Shanfield Association, Inc. Homeowners Association (“Homeowners
Association”). Crews did so by securing a mortgage through a deed of trust
currently held by HSBC Bank USA (“HSBC”). Crews later defaulted on the
mortgage and homeowners association fees.
On April 7, 2011, the Homeowners Association commenced foreclosure
on the property; DTND purchased the property at the foreclosure sale. With
the mortgage still in default, HSBC also sought to foreclose on the property.
HSBC did not give an opportunity to DTND to cure the default before
attempting to foreclose.
DTND petitioned the 45th District Court of Bexar County in San
Antonio, Texas for a temporary restraining order to prevent the foreclosure.
DTND also sought damages for HSBC’s failure to give an opportunity to cure
the default under the Texas Deceptive Trade Practices – Consumer Protection
Act, TEX. BUS. & COM. CODE § 17.41, and the Texas Debt Collection Act, TEX.
FIN. CODE § 392.304(a). HSBC removed the case to federal court and
simultaneously filed motions to dismiss for failure to state a claim and seeking
sanctions, stating that the action was meritless and intended to harass or
delay.
The district court dismissed DTND’s claims, holding that HSBC did not
have a legal obligation to give DTNT an opportunity to cure the default because
it was a third party. It then identified DTND as a frequent litigator 1 with a
consistent scheme: petition in state court for a temporary restraining order and
DTND has been a party to fifty lawsuits removed to federal court since 2011,
1
seventeen of which were dismissed with prejudice, with thirty more voluntarily dismissed or
dismissed without prejudice.
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No. 14-51142
damages to halt foreclosure proceedings and continue collecting rent, then
voluntarily dismiss the claims upon removal. The court also found DTND was
a party in four previous actions with materially similar claims that were
dismissed on the merits.
Because of this litigation history, the district court determined that
DTND had knowledge that its claims were without merit and filed the lawsuits
for the purpose of harassment or delay. DTND was sanctioned $20,000 for the
meritless filing with the penalty to be allocated among reasonable attorneys’
fees and fair market rental value for the property with any remaining money
to be paid to the court.
DISCUSSION
DTND appeals, arguing that sanctions were improper because of lack of
jurisdiction and error by the district court. We start with jurisdiction.
I.
First, DTND avers that the district court lacked subject matter
jurisdiction to hear the underlying cause of action and as a result lacked
jurisdiction to issue sanctions. We need not determine if the district court
properly exercised jurisdiction over the merits, however, to determine the
district court’s jurisdiction to sanction.
It is well-settled that judicial authority to impose sanctions exists
through collateral jurisdiction and courts may properly impose sanctions even
if it is later found to lack subject matter jurisdiction over the underlying claims.
Willy v. Coastal Corp., 503 U.S. 131, 139 (1992); Fleming & Assocs. v. Newby
& Tittle, 529 F.3d 631, 637-38 (5th Cir. 2008). 2 As a result, regardless of a
2 DTND alternatively argues that the court lacked the power to issue sanctions
because they voluntarily dismissed the lawsuit. This argument fails because the claims were
not voluntarily dismissed. But, even if they were, DTND would still be subject to sanctions
because “[a] district court may impose sanctions after a party . . . voluntarily dismiss[es] their
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court’s ability to hear the merits of a suit, it possesses the power to sanction a
noncompliant party that stands before it. Id. The district court was deciding
motions filed following removal of DTND’s petition. The court therefore
properly exercised its authority to sanction DTND—a party appearing before
it—for what it determined was noncompliant conduct.
II.
DTND next challenges the district court’s application of Texas sanctions
rules.
The Federal Rules of Civil Procedure may not be retroactively applied to
“aspects of a case that occurred in state court prior to removal to federal court.”
Taylor v. Bailey Tool & Mfg. Co., 744 F.3d 944, 946 (5th Cir. 2014). As a result,
we “appl[y] state sanctions rules to pleadings filed in state court before
removal” to federal court. Tompkins v. Cyr, 202 F.3d 770, 787 (5th Cir. 2000);
See also Doss v. NPC Int’l, Inc., 460 Fed.Appx. 362, 369 (5th Cir. 2012).
DTND’s alleged noncompliant act was the filing in the Texas courts; the
district court thus properly applied Texas sanction rules.
III.
Having addressed DTND’s jurisdictional arguments, we now move to the
sanction award. We review the imposition of sanctions for abuse of discretion.
Ratliff v. Stewart, 508 F.3d 225, 229 (5th Cir. 2007). “[A]n abuse of discretion
only occurs where no reasonable person could take the view adopted by the
trial court.” Friends for Am. Free Enter. Ass’n v. Wal-Mart Stores, Inc., 284
F.3d 575, 578 (5th Cir. 2002). “We review the facts underlying the district
court’s decision to sanction for clear error.” FDIC v. Maxxam, Inc., 523 F.3d
566, 576-577 (5th Cir. 2008).
claims.” Cooter & Gell v. Hartmax Corp., 496 U.S. 384, 395 (1990); FDIC v. Maxxam, Inc.,
523 F.3d 566, 577 (5th Cir. 2008).
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Texas Rule of Civil Procedure 13 provides that “the signatures of
attorneys or parties constitute a certificat[ion] . . . [that] the instrument is not
groundless and brought in bad faith or . . . for the purpose of harassment.”
Violations of Rule 13 may result in a penalty of expenses incurred as a result
of the meritless filing, including attorneys’ fees. Tex. R. Civ. P. 215.2.
Attorneys or parties to actions may also be sanctioned under the Texas
Civil Practice and Remedial Code for frivolous actions filed for the purposes of
harassment. TEX. CIV. PRAC. & REM. CODE § 10.001. Violations of Section
10.001 may result in a penalty “sufficient to deter repetition of the conduct”
including expenses incurred as a result of the violation, attorneys’ fees, and a
penalty to be paid to the court. TEX CIV. PRAC. & REM. CODE § 10.004.
DTND engaged in a scheme to delay foreclosures by petitioning for
temporary restraining orders in state court and dismissing those claims upon
removal. DTND was also party to four materially identical actions that were
dismissed on the merits. This shows that DTND had knowledge its claims
were meritless but nevertheless filed to delay foreclosure. The district court’s
findings that DTND’s claims were meritless and intended to harass or delay
were reasonable and proper.
Having found that DTND was noncompliant with Texas sanction rules,
the district court properly assessed a $20,000 penalty that it determined to be
sufficient to prevent repetition of the misconduct. The court also properly
ordered, as allowed by Rule 215 and Section 10.004, that the penalty be
allocated to cover the reasonable expenses of HSBC in defending against the
noncompliant action, including attorneys’ fees, with any excess funds being
paid to the court as a penalty.
For these reasons, we AFFIRM the decision of the district court.
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