Petrello v. Nath

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit

FILED
October 23, 2009

No.08-20718 Charles R. Fulbruge III
Clerk

ANTHONY G. PETRELLO

Plaintiff-Appellee
v.

RAHUL NATH; USHA NATH

Defendants-Appellants

Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:08-CV-1933

Before WIENER, GARZA, ELROD, Circuit Judges.

WIENER, Circuit Judge:*

Defendants-Appellants Dr. Rahul Nath and Usha Nath (singly and

collectively, “Nath”) appeal the grant of a preliminary injunction barring them

from making any changes to the residence that they recently purchased from

Matthew Prucka (“Prucka”) in Houston, Texas for $8.3 million. Following an

*
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not be published and is not precedent except under the limited circumstances set forth in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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October 2008 hearing, the district court granted that injunction without findings

of fact or conclusions of law. The injunction was granted in a suit that had been

filed in state court by Plaintiff-Appellant Anthony Petrello (“Petrello”) against

Prucka for breach of contract and was later amended to add, inter alia, a federal

housing discrimination claim relating to the sale of Prucka’s Houston home (“the

Home”) to Nath. As the Home’s purchaser, Nath subsequently intervened in the

pending lawsuit and is now a defendant. Petrello claims that Prucka refused to

sell the Home to him because Prucka did not want it to be altered to

accommodate Petrello’s disabled daughter. Petrello also claims that Nath

conspired with Prucka to achieve that end after Nath had signed the purchase

contract. Petrello sought the injunction to bar Nath from making any changes

to the home during the lawsuit’s pendency. After the injunction was granted,

Nath appealed. We vacate the injunction and remand to the district court.

I. FACTS AND PROCEEDINGS

Prucka owned the Home, which is located at 8 Remington Lane in

Houston, Texas. Petrello, who lives at 10 Remington Lane, was Prucka’s next-

door neighbor. Petrello has a young daughter, Carena, who suffers from cerebral

palsy and is severely disabled. Petrello maintains that he sought to buy the

Home next-door to his own to provide Carena a place to live with her caretakers

when she matured. When he discovered that Prucka was moving to Utah,

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Petrello called Prucka and offered $6.5 million for the Home. Petrello asserts

that, although Prucka declined the offer, he orally granted Petrello a right of

first refusal on the Home (the “Right of Refusal Agreement”). Petrello alleges

specifically that Prucka agreed to permit Petrello to meet or better any offer

Prucka received. Prucka disputes this, asserting instead that he agreed only to

keep Petrello informed so that he could make a equal of higher offer if he so

chose.

Some time after Petrello’s $6.5 million offer was declined, Prucka listed

the property for $8.299 million. The listing agreement contained a statement

that no person had a right of refusal to buy the property. Nath initially made

a $7.6 million offer that contained some contingencies. Prucka declined that

offer too, but he informed Petrello that an offer approaching the asking price had

been made. In response, Petrello increased his offer to $8.2 million, which

excluded a brokerage-fee and therefore would have netted Prucka more than a

full-price offer from any third-party. Prucka then called Nath, who agreed to

pay the full listed price of $8.299 million. Nath and Prucka signed a contract

(the “Purchase Contract”) on December 5, 2007 for the listed price, at which time

Nath paid Prucka $75,000 in earnest money. It is undisputed that at the time

the Purchase Contract was signed and the $75,000 was paid, Nath did not know

Petrello and had no knowledge of his offer to Prucka.

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 Petrello allegedly contacted Nath two days after the Purchase Contract

was signed, asking to buy the Home from him and otherwise attempting to

convince Nath not to go through with the purchase. Being unable to buy the

Home or interrupt its sale to Nath, Petrello sued Prucka in state court on

December 11, 2007, advancing various state law claims, including breach of

contract and unjust enrichment, for allegedly breaching the Right of Refusal

Agreement. He also filed a notice of lis pendens against the Home in the Harris

County, Texas, Clerk’s office. Nath was not named in original complaint.

Because of the pending lawsuit, Nath and Prucka signed a side agreement laying

out how the parties would address the Petrello litigation and what would happen

if Petrello prevailed. Nath closed on the Home on January 16, 2008.

Petrello initially sued only Prucka and sought only relief for state law

causes of action. Eight days after his purchase of the Home in January, Nath

intervened in the state court suit. In June, Petrello filed his Fourth Amended

Complaint alleging federal claims under the Fair Housing Act (“FHA”), 42 U.S.C.

§ 3601 et seq., and under 42 U.S.C. § 1985(3) and 28 U.S.C. § 1343. Almost

immediately thereafter, the Defendant-Appellants removed the entire case to the

U.S. District Court for the Southern District of Texas. 1

1
The record does not reflect that any party ever questioned federal jurisdiction. There is
no question about the jurisdictional appropriateness of the district court adjudicating the federal
law claims in this suit. And there is no question that we have federal jurisdiction over the matter

4
 Petrello alleges, inter alia, that Prucka refused to sell the Home to him

(Petrello) because Prucka did not want the home altered in any way, including

any alterations necessary to accommodate Petrello’s handicapped daughter.

Petrello argues that this is so because Prucka did not want anyone to modify the

home that he and his wife had worked hard to restore, and that Prucka found

distasteful the idea of a handicapped girl moving into it. To this end, Petrello

claims that Prucka violated both the FHA and the Right of Refusal Agreement,

which Petrello insists is a binding oral contract.

Petrello asserts further that, after Nath signed the Purchase Contract for

the Home, he then conspired with and assisted Prucka in discriminating against

Carena. This alleged conspiracy and assistance are the sole bases for Petrello’s

before us, namely the district court’s grant of injunctive relief under FED . R. CIV . P. 52(a).
However, our review of the record raises a serious question under 28 U.S.C. § 1367(a) whether
federal supplemental jurisdiction over the plaintiff’s state law claims is appropriate. First, it is
not clear that the district court automatically takes jurisdiction over all state law claims under 28
U.S.C. § 1367(a) if the defendant who seeks removal under 28 U.S.C. § 1441 only does so under
that authority and is otherwise silent as to the state law claims. Second, 28 U.S.C. § 1367(a)
allows supplemental jurisdiction over related claims that form part of the “same case and
controversy.” If these claims are not so related to form part of the same constitutional case ))
and here it is not clear that Petrello’s state law claims are so related )) the district court may not
take jurisdiction over them. See City of Chicago v. Int’l Coll. of Surgeons, 522 U.S. 156, 165
(1997). Because our jurisdiction over the instant appeal is proper, we need not examine federal
jurisdiction over the state law claims in the first instance.

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claims against Nath. Petrello also seeks rescission of the Purchase Contract on

the ground that such relief is available because Nath is not a bona fide

purchaser. Petrello claims that Nath cannot have purchased the Home in good

faith because, when Nath closed on the Home, he knew of Petrello’s interest in

the property, the related lawsuit, and the lis pendens.

Petrello’s Fifth Amended Complaint filed in July 2008 included a petition

for injunctive relief. Following removal, the district court held an injunction

hearing. After listening to the arguments of the parties, the court orally granted

a preliminary injunction without stating any independent factual findings or any

legal reasons for its ruling. Neither did the court issue a written order — other

than a minute entry notation — memorializing reasons for granting the

preliminary injunction. The injunction simply bars Nath from making “any

improvements or major changes to the house pending trial.”

Nath timely appealed the grant of the preliminary injunction.

II. ANALYSIS

A. Standard of Review

The grant of a preliminary injunction is immediately appealable. We have

appellate jurisdiction pursuant to 28 U.S.C. § 1292(a)(1),2 and we review the

2
See, e.g., Lake Charles Diesel, Inc. v. Gen. Motors Corp., 328 F.3d 192, 195 (5th Cir.
2003).

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district court’s grant of such an injunction for abuse of discretion.3 We review

any underlying findings of fact for clear error and review conclusions of law de

novo.4

B. Applicable Law

The party seeking a preliminary injunction must demonstrate that (1) he

has a substantial likelihood of success on the merits of his underlying claim, (2)

there is a substantial threat that he will suffer irreparable injury if the

injunction does not issue, (3) such injury outweighs any potential harm to the

defendant, and (4) an injunction would not disserve the public interest.5

When granting a preliminary injunction, the district court “the court must

similarly state the findings and conclusions that support its action. ” 6 “Failure

to meet the technical requirements of Rule 52 does not warrant reversal or

remand so long as the purposes behind the rule are effectuated.” 7 Yet, even

though Rule 52 does not require “punctilious detail nor slavish tracing of the

3
Id.
4
Affiliated Prof’l Home Health Care Agency v. Shalala, 164 F.3d 282, 284-85 (5th
Cir. 1999).
5
Women’s Med. Ctr. of Nw. Houston v. Bell, 248 F.3d 411, 419 n.15 (5th Cir. 2001)
(citation omitted).
6
Fed. R. Civ. P. 52(a)(2); see also Chandler v. City of Dallas, 958 F.2d 85, 88-89 (5th
Cir. 1992) (per curiam).
7
Chandler, 958 F.2d at 89 (internal punctuation and citations removed).

7
claims,” 8 “the record must nevertheless support the district court’s decision.” 9

C. Merits

Nath contends that (1) the district court abused its discretion in granting

Petrello’s preliminary injunction without articulating any findings of fact or

stating any legal conclusions or reasons, and, (2) even if the injunctive grant was

procedurally proper, the district court abused its discretion in granting the

injunction on the merits. Petrello responds that, because proceedings for

preliminary injunctions are “less formal,” we should overlook the district court’s

failure to conduct fact-finding or state legal conclusions and review the record

and draw our own conclusions.

The most pertinent authority in this circuit for interpreting Rule 52(a)(2)’s

requirement in the present context is Sierra Club v. FDIC.10 In that case, the

plaintiffs sought a mandatory preliminary injunction preventing the FDIC from

approving a sale of environmentally sensitive land in which it had acquired an

interest through its receivership of a failed bank.11 The district court granted

8
Cox v. City of Dallas, 430 F.3d 734, 747 (5th Cir. 2005) (internal punctuation and
citation omitted).
9
Sierra Club, Lone Star Chapter v. FDIC, 992 F.2d 545, 551 (5th Cir. 1993).
10
See id.
11
Id. at 547.

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the injunction without receiving any evidence or entering findings of fact.12 We

vacated the injunction, holding that, because the district court had entered no

findings of fact or legal conclusions as required by Rule 52, the plaintiff had not

shown it was entitled to injunctive relief.13 We reasoned:

We have held that a district court may issue a preliminary
injunction without an evidentiary hearing when the facts are not
disputed.

....

Although the district court may employ informal procedures and rely on
generally inadmissable evidence, the record must nevertheless support the
district court’s decision. Indeed, Rule 52 of the Federal Rules of Civil
Procedure provides that “in granting or refusing interlocutory injunctions
the court shall similarly set forth findings of fact and conclusions of law
which constitute the grounds for its decisions.” (Emphasis added.) In the
absence of findings of fact and conclusions of law, we will only review the
district court’s injunction decision “when the record is exceptionally clear
and remand would serve no useful purpose.”14

In the instant case, the district court’s grant of the preliminary injunction

is not the product of an “exceptionally clear record” that warrants relaxing Rule

52’s strictures. The facts themselves and their legal implications are hotly

disputed, and the record of the proceedings are wholly devoid of any basis for the

12
Id.
13
Id.
14
Id. at 551 (internal citations omitted); see also Davis v. United States, 422 F.2d
1139, 1142 (5th Cir. 1970) (reviewing an injunctive grant and declining to “overlook” the
failure of the magistrate to make factual findings because the facts in the case were hotly
disputed).

9
district court’s decision. That court did not issue an opinion or explain its

reasoning during the hearing or elsewhere. Neither did it identify the elements

required for a preliminary injunction, either during the hearing or at any other

time, and it made no statement as to whether it had considered those elements

or how it found them to have been satisfied. The court never discussed the scope

of the injunction or defined what would constitute “any improvements or major

changes” to the Home. The entire decision consists of the utterance of but a

single sentence during the course of the injunction hearing, viz,; “The Naths are

enjoined from any improvements or major changes to the [Home] pending trial.”

Permitting the district court to conduct “less formal” proceedings does not

mean that a district court is free to abandon all substance and procedure, which

is essentially what happened here. Certainly, neither Sierra Club nor any other

authority of which we are aware makes such allowance; rather that case

admonishes that “[a]lthough the district court may employ informal procedures

and rely on generally inadmissible evidence, the record must nevertheless

support the district court’s decision.” 15 We are completely satisfied that the

district court abused its discretion by granting the preliminary injunction

without developing the factual and legal issues as required under Rule 52(a)(2).

As the record is not “exceptionally clear,” remand is required in the absence of

15
Sierra Club, 992 F.2d at 551 (5th Cir. 1993).

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findings of fact and conclusions of law. Finally, because we conclude that the

district court did not adequately comply with Rule 52’s requirements, we do not

address the merits of the grant of the instant injunction.

III. CONCLUSION

For the forgoing reasons, we VACATE the district court’s injunction and

REMAND for further proceedings consistent with this opinion. On remand,

however, the district court should determine both whether supplemental

jurisdiction for the state law claims has been properly asserted and whether it

should continue exercising such jurisdiction in this case.

VACATED and REMANDED.

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