United States Court of Appeals,
Fifth Circuit.
No. 93-2718
Summary Calendar.
ROHM & HASS TEXAS, INC., Plaintiff-Counter Defendant-Appellee,
v.
ORTIZ BROTHERS INSULATION, INC., et al., Defendants,
Ortiz Brothers Insulation, Inc., Defendant-Counter Plaintiff-
Cross Plaintiff-Appellant.
UNITED STATES of America, Defendant-Counter Plaintiff,
v.
THORPE PRODUCTS CO., Defendant-Counter Defendant-Cross Defendant-
Appellee,
and
Metrobank, N.A., Intervenor-Defendant Appellee.
Sept. 20, 1994.
Appeal from the United States District Court for the Southern
District of Texas.
Before JOLLY, WIENER and EMILIO M. GARZA, Circuit Judges.
WIENER, Circuit Judge:
In this appeal from an interpleader action, Defendant-
Appellant Ortiz Brothers Insulation, Inc. ("Ortiz") seeks review of
the district court's determination of the priority of payment to
defendants from the interpleaded funds (the "Fund"). Although
Ortiz itself continues to disavow any stake in the Fund, it urges
that it was injured financially by the priority determined by the
district court for distributing shares in the Fund to Ortiz's
creditors. Ortiz insists that, as a result of the sequence of
1
distribution decreed by the court, Ortiz will be exposed to greater
liability if it should ever file for bankruptcy or have to
indemnify its officers for any payments that they might be required
to make personally to cover the company's unpaid federal tax
obligations. We conclude that, as such injuries are merely
conjectural and hypothetical, they are insufficient to establish
constitutional standing. We therefore dismiss this appeal.
I
FACTS AND PROCEEDINGS
This case concerns the sequence or priority of payments to
various creditors of Ortiz from $189,850.69,1 which Plaintiff-
Counter Defendant Rohm & Hass Texas, Inc. ("Rohm") deposited into
the registry of the district court when Rohm convoked the instant
interpleader action. The Fund represents money concededly owed by
Rohm to Ortiz, one of Rohm's contractors, for labor and materials
supplied to a maintenance and repair project at a Rohm facility in
Deer Park, Texas.
After Rohm filed this suit, three of Ortiz's creditors made
competing claims to the Fund: (1) the IRS, claiming that Ortiz
owed a tax debt of $245,673.61; (2) Thorpe Products Co.
("Thorpe"), a materialman claiming that Ortiz owed it $98,290.09
for supplies used in performing the Rohm construction contract;
and (3) MetroBank, N.A. ("MetroBank"), a creditor with a perfected
security interest in $80,861.30 of Ortiz's collateral and accounts
1
As of July 23, 1993, the day judgment was entered, the Fund
contained $193,603.70, which included principal plus interest.
2
receivable. Ortiz claimed no stake in the Fund, but argued that
the claim of the IRS was superior in rank to that of Thorpe. The
district court disagreed.
Ruling on cross motions for summary judgment, the district
court ranked the IRS' claim last among the competing creditors. As
the Fund was insufficient to satisfy all superior claims (plus
attorney's fees),2 the IRS took nothing.
After judgment was entered, both the IRS and Ortiz filed
notices of appeal; but subsequently the IRS successfully moved to
dismiss its appeal and no longer asserts a claim against the Fund.
Still asserting no claim to the Fund, Ortiz continues to argue that
the IRS' claim should be superior in rank to Thorpe's. MetroBank
and Thorpe have moved to dismiss Ortiz's appeal for lack of
standing.
II
ANALYSIS
A. STANDARD OF REVIEW
"In ruling on a motion to dismiss for want of standing, both
the trial and reviewing courts must accept as true all material
allegations of the complaint, and must construe the complaint in
2
On August 26, 1993, the court ordered the Fund to be
distributed as follows: Thorpe's materialman's lien, $20,755.86
and $7,843.75 in attorney's fees; MetroBank's security interest,
$80,861.30, $1,300.00 in interest, and $7,756.52 in attorney's
fees; and the remainder of the fund, $75,086.27, was paid in
partial satisfaction of Thorpe's trust fund claim of $77,534.23.
As the distribution accounted for interest accrued only as of
July 23, 1993, Thorpe and MetroBank were ordered to share the
interest earned after that date in the ratio of 54/46.
3
favor of the complaining party."3 We conclude that, even when
viewed in this most favorable light, Ortiz's asserted injuries are
insufficient to give it standing to appeal the district court's
judgment.
B. STANDING
Article III standing implicates the federal judiciary's power
to adjudicate disputes; it can be neither waived4 nor assumed.5
Merely because a party appears in the district court proceedings
does not mean that the party automatically has standing to appeal
the judgment rendered by that court.6
3
Warth v. Seldin, 422 U.S. 490, 501, 95 S.Ct. 2197, 2206, 45
L.Ed.2d 343 (1975).
4
See Boeing Co. v. Commissioner of Patents & Trademarks, 853
F.2d 878, 881 (Fed.Cir.1988) ("The issue of standing calls into
question the power of the court to hear and decide a case, and it
is impossible for a party to waive this requirement."); cf.
Bumberger v. Insurance Co. of North Am., 952 F.2d 764, 766 (3rd
Cir.1991) (stating that diversity jurisdiction of courts is not
subject to waiver).
5
See FW/PBS, Inc. v. Dallas, 493 U.S. 215, 231, 110 S.Ct.
596, 607, 107 L.Ed.2d 603 (1990) ("The federal courts are under
an independent obligation to examine their own jurisdiction, and
standing "is perhaps the most important of [the jurisdictional]
doctrines.' " (quoting Allen v. Wright, 468 U.S. 737, 750, 104
S.Ct. 3315, 3324, 82 L.Ed.2d 556 (1984) (alteration in
original)); Mansfield, Coldwater & Lake Mich. Ry. v. Swan, 111
U.S. 379, 382, 4 S.Ct. 510, 511, 28 L.Ed. 462 (1884) ("[T]he
first and fundamental question is that of jurisdiction, first of
this court, and then of the court from which the record comes.").
6
See Diamond v. Charles, 476 U.S. 54, 68, 106 S.Ct. 1697,
1706, 90 L.Ed.2d 48 (1986). In Diamond, the Court stated,
Diamond's status as an intervenor below, whether
permissive or as of right, does not confer standing
sufficient to keep the case alive in the absence of the
State on this Appeal. Although intervenors are
considered parties entitled, among other things, to
4
Whether a party has standing to appeal "involves both
constitutional limitations on federal-court jurisdiction and
prudential limitations on its exercise."7
In its constitutional dimension, standing imports
justiciability: whether the plaintiff has made out a "case or
controversy' between himself and the defendant within the
meaning of Article III.... The Article III judicial power
exists only to redress or otherwise to protect against injury
to the complaining party.... A federal court's jurisdiction
therefore can be invoked only when the plaintiff himself has
suffered "some threatened or actual injury from the putatively
illegal action.'8
Accordingly, a party generally may not appeal a district court's
order to champion the rights of another,9 and even "[a]n indirect
seek review by this Court, an intervenor's right to
continue a suit in the absence of the party on whose
side intervention was permitted is contingent upon a
showing by the intervenor that he fulfills the
requirements of Art. III.
Id. (citations omitted); see also Boeing Co., 853 F.2d at
881 (rejecting argument that as parties failed to object to
intervenors appearance below, the parties waived any
objection to intervenor's standing to pursue an independent
appeal); Nationwide Mut. Fire Ins. Co. v. Eason, 736 F.2d
130, 134 (4th Cir.1984) (plaintiff-interpleader that
disclaimed interest in fund lacked standing to appeal
ultimate disposition of fund); Libby, McNeill, & Libby v.
City Nat'l Bank, 592 F.2d 504, 512 (9th Cir.1978) (finding
that defendant in interpleader action lacked standing to
appeal judgment that indirectly affected its pecuniary
interests, but primarily impacted liability of another
party).
7
Warth v. Seldin, 422 U.S. 490, 498, 95 S.Ct. 2197, 2204, 45
L.Ed.2d 343 (1975). As we find that Ortiz lacks constitutional
standing to appeal, we do not reach—and therefore do not
consider—any prudential limitations.
8
Id. at 498-99, 95 S.Ct. at 2204-05 (quoting Linda R.S. v.
Richard D., 410 U.S. 614, 617, 93 S.Ct. 1146, 1148, 35 L.Ed.2d
536 (1973)).
9
See Morrison-Knudsen Co. v. Chg Int'l, Inc., 811 F.2d 1209,
1214 (9th Cir.1987) (noting that party may appeal to protect only
5
financial stake in another party's claims is insufficient to create
standing on appeal."10 In addition, "[t]he injury or threat of
injury must be both "real and immediate' not "conjectural' or
"hypothetical,' "11 and the putative appellant shoulders the burden
of alleging facts sufficient to demonstrate that it is a proper
party to appeal.12
C. ORTIZ'S ALLEGED INJURIES
Conceding that it claims no interest in the Fund, Ortiz
maintains that it nevertheless has standing to appeal the district
court order because the priority of distribution of the Fund among
Ortiz's creditors might affect Ortiz's liability should the company
eventually (1) file for bankruptcy, or (2) have to indemnify its
its own interests), cert. dismissed, 488 U.S. 935, 109 S.Ct. 358,
102 L.Ed.2d 349 (1988); see also Libby, McNeill, & Libby, 592
F.2d at 512 ("[A] party may only appeal to protect its own
interests, and not those of a coparty."); Estate of Bishop v.
Bechtel Power Corp., 905 F.2d 1272, 1276 (9th Cir.1990) (" "[A]
party may only appeal to protect its own interests, not those of
any other party.' " (quoting Bryant v. Technical Research Co.,
654 F.2d 1337, 1343 (9th Cir.1981) (alteration in original))).
10
Morrison-Knudsen Co., 811 F.2d at 1214; see Estate of
Bishop, 905 F.2d at 1276 (quoting Morrison-Knudsen Co.).
11
O'Shea v. Littleton, 414 U.S. 488, 494, 94 S.Ct. 669, 675,
38 L.Ed.2d 674 (1974) (quotations omitted); accord NLRB v.
Dredge Operators Inc., 19 F.3d 206, 213 (5th Cir.1994) (finding
"speculative" scenario not ripe for review).
12
FW/PBS, Inc. v. Dallas, 493 U.S. 215, 231, 110 S.Ct. 596,
607, 107 L.Ed.2d 603 (1990) (citing McNutt v. General Motors
Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 785, 80 L.Ed.
1135 (1936)); see Boeing Co. v. Commissioner of Patents &
Trademarks, 853 F.2d 878, 880 (Fed.Cir.1988) ("In order to
establish standing on appeal, [a putative appellant] must show
that it has suffered some actual or threatened injury." (citing
Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 99, 99
S.Ct. 1601, 1607, 60 L.Ed.2d 66 (1979); Warth, 422 U.S. at 498-
99, 95 S.Ct. at 2204-05)).
6
officers if they should ever be required personally to pay on the
company's tax liability.13
In particular, Ortiz explains that it is aggrieved by the
district court judgment's assigning the priority in which its
creditors are to be paid from the Fund, as Ortiz's debt to one
creditor, Thorpe, is fully dischargeable in bankruptcy,14 while its
debt to another, the IRS, is not.15 Moreover, Ortiz raises the
inchoate possibility that the IRS could one day look to Ortiz's
officers for payment of the tax debt.16 And, according to Ortiz,
under Texas law the company is required to indemnify its officers
for personal liability for the company's taxes to the extent the
officers incur such liability while executing their duties. Ortiz
insists therefore that ultimately the company might have to
shoulder responsibility by way of indemnification for any taxes
collected from company officers by the IRS. It follows, Ortiz
concludes, that the district court judgment injured Ortiz
financially by assigning the IRS the lowest priority among
claimants to the Fund, thereby injuring Ortiz sufficiently to
13
Although in its brief Ortiz argues that it might be
required to indemnify its "officers," we note that the Texas
statute to which Ortiz cites provides only for the
indemnification of "directors." See TEX.BUS.CORP. ACT ANN. art.
2.02-1(E) (West 1994). For the purposes of our discussion,
however, we will assume that Ortiz's officers also are directors
or that they otherwise would be entitled to the protection of the
statute.
14
See 11 U.S.C. § 727 (1988).
15
See id. § 523(a).
16
See 26 U.S.C. § 6672(a).
7
confer standing to appeal. We consider each alleged injury in turn
to determine whether either is sufficient to satisfy Article III
standing.
1. Liability in Bankruptcy
At the outset, it is important to analyze the precise nature
of the injury of which Ortiz complains. Ortiz does not state that
it has filed, will file, or even anticipates filing for bankruptcy.
Ortiz merely asserts that, as a result of the district court
judgment's ranking the IRS last among Fund claimants, the company
might be exposed to greater liability if it ever should elect to
declare bankruptcy or be placed in bankruptcy involuntarily. We
are convinced, however, that Article III pretermits consideration
of such a conjectural and hypothetical injury on appeal—a
conclusion we reach based in large part on analogous decisions by
other federal courts of appeals.
In the first instance, it is not even clear whether, after
disavowing a stake in the Fund, Ortiz could allege any injury
sufficient to give it standing to appeal the sequence or priority
for distributing the money to other defendants with recognized
claims to shares of the Fund. In Nationwide Mutual Fire Insurance
Co. v. Eason,17 the Fourth Circuit held that a plaintiff
-interpleader who claimed no stake in a fund interpleaded into
bankruptcy court lacked standing to appeal the bankruptcy court's
distribution of the fund. In Nationwide, the money was deposited
into the registry of a bankruptcy court for the benefit of unpaid
17
736 F.2d 130, 134 (4th Cir.1984).
8
creditors of a grain dealer that had filed for bankruptcy. After
thus depositing the funds, the plaintiff-interpleader asked to be
dismissed from the action, but apparently never was. When six
months elapsed without any defendant responding to the action, the
court entered a default judgment against all defendants.
Subsequently, when the trustee of the bankrupt estate moved to
intervene in the interpleader action, alleging that the funds were
part of the estate, the plaintiff-interpleader asked that the funds
be returned to it instead. The bankruptcy court denied the
plaintiff-interpleader's request that the funds be returned, and
the plaintiff-interpleader appealed.
The Fourth Circuit held that the plaintiff-interpleader lacked
standing to appeal the distribution of the fund because it had
previously disavowed any stake in the money. The court noted that
"[a]ny challenge to the disposition ultimately made by the
bankruptcy court must be by parties with the requisite stake in the
outcome."18 Here we need not go so far, however, because, even if
18
Id. As Article III is inapplicable to bankruptcy courts,
standing to appeal in a bankruptcy proceeding derived originally
from statute, granting the right to appeal only to "persons
aggrieved." In re El San Juan Hotel, 809 F.2d 151, 154 (1st
Cir.1987); In re Malmart Mortgage Co., 166 B.R. 499, 501
(D.Mass.1994). Although the applicable statute has since been
repealed, bankruptcy courts still limit appellate standing to
those "aggrieved." El San Juan Hotel, 809 F.2d at 154; Malmart
Mortgage Co., 166 B.R. at 501.
To determine Article III standing, courts also look to
whether the appellant was "aggrieved" by the district court
decision. See, e.g., ICC v. Holmes Transp., Inc., 983 F.2d
1122, 1125 n. 4 (1st Cir.1993) (" "To have standing to
appeal, an appellant ordinarily must have been a party to
the proceeding below, and have been aggrieved by the order
appealed from....' " (quoting United States v. Little Joe
9
we assume arguendo that Ortiz might be able to allege an indirect
interest in the Fund sufficient to give it standing to appeal, it
has failed to do so.
As Ortiz disavows a direct stake in the Fund, any interest
that it asserts necessarily must be indirect. Indeed, injuries far
more direct than those here alleged by Ortiz have been found to be
too remote to satisfy standing for the purposes of Article III.
For example, in Libby, McNeill, & Libby v. City National Bank,19 the
Ninth Circuit held that a defendant-appellant, City National Bank
("CNB"), lacked standing to appeal a district court's judgments
against a plaintiff-interpleader, Libby, McNeill, & Libby
("Libby"), even though those judgments reduced the amount of money
that CNB recovered from the interpleader fund.
Pursuant to a lending agreement, CNB had obtained a security
interest in the accounts receivable of Shanghai Instant Foods, Inc.
("Shanghai"), a company that produced packaged frozen meals for
Libby. The contract between Shanghai and Libby provided that
Trawlers, Inc., 780 F.2d 158, 161 (1st Cir.1986)); Great
Am. Audio Corp. v. Metacom, Inc., 938 F.2d 16, 19 (2d
Cir.1991) (per curiam) ("In order to have standing to
appeal, a party must be aggrieved by the judicial action
from which it appeals."); HCA Health Servs. v. Metropolitan
Life Ins. Co., 957 F.2d 120, 124 (4th Cir.1992) ("An injury
in fact is required for a party to be aggrieved for purposes
of being able to appeal...."); Goldstein v. Andresen & Co.,
465 F.2d 972, 973 n. 1 (5th Cir.1972) (per curiam) ("[O]nly
a party aggrieved by a final judgment may appeal from it.");
Estate of Bishop v. Bechtel Power Corp., 905 F.2d 1272, 1276
(9th Cir.1990) (" "To have standing to appeal, a party must
be aggrieved by the district court's order.' " (quoting
Bryant v. Technical Research Co., 654 F.2d 1337, 1343 (9th
Cir.1981)).
19
592 F.2d 504, 512 (9th Cir.1978).
10
Shanghai would produce meals according to Libby's specifications
and obtain ingredients and materials from suppliers either
recommended or approved by Libby.
Subsequent to entering into this contract, some suppliers
notified Libby that Shanghai had stopped paying for its deliveries,
and shortly thereafter, Shanghai filed for bankruptcy. While the
bankruptcy proceedings were pending, Libby commenced an
interpleader action in district court, depositing into the court's
registry the net sum it owed Shanghai and naming as defendants the
trustee in bankruptcy, various unpaid suppliers, and CNB.
CNB was the only defendant to allege an interest in the fund,
but some unpaid suppliers counterclaimed, alleging that Libby was
liable to them in contract for deliveries provided to Shanghai.
The district court found for the suppliers on their counterclaims,
but permitted Libby to offset the amount of these judgments against
Libby's obligation to Shanghai. As a result, the amount of money
in the interpleader fund was reduced by the sum of these offsets.
Libby did not appeal these adverse judgments.
As the sole beneficiary of the interpleaded fund, CNB sought
to appeal, inter alia, the suppliers' judgments against Libby. The
Ninth Circuit, however, held that CNB lacked standing to appeal
these adverse judgments, even though the amount of CNB's recovery
from the fund was reduced by the amount of these judgments. The
court expressly recognized that "this is not the simple case where
the outcome of the appeal can have absolutely no effect on the
interests of the appellant," but noted that CNB nevertheless had
11
"no direct interest in the counterclaims of [other defendants]."20
Recognizing that an appellant's interest "must be immediate and
pecuniary and not a remote consequence of the judgment,"21 the court
held that CNB lacked an appealable interest in the judgments
against Libby. In the instant case, Ortiz's asserted
injury—greater potential liability should it ever file for
bankruptcy—is far more attenuated than the injury claimed by CNB in
Libby.22
2. Indemnification of Ortiz's Officers
Ortiz's other alleged injury is similarly speculative and
remote. Ortiz claims injury as a consequence of the court's
rankings because the company's federal tax debt was not reduced by
the amount in the Fund, given the court's assignment of the lowest
priority to the IRS. Ortiz does not dispute the existence or
amount of its debt to the IRS. Rather, Ortiz merely complains
20
Id. at 511 (emphasis added); see also Principal Mut. Life
Ins. Co. v. Cincinnati TV 64 Ltd. Partnership, 845 F.2d 674, 677
n. 1 (7th Cir.1988) ("The general rule is that a party may only
appeal to protect its own interests, and not those of a nonparty
or another party, unless the appellant has a direct financial
stake in the appeal.").
21
Libby, McNeill, & Libby, 592 F.2d at 511 (quotations
omitted).
22
See also Brown v. Ferro Corp., 763 F.2d 798, 803 (6th
Cir.) (stating that stockholder lacked standing to file
derivative suit challenging officer's severance agreement program
as payments were contingent on change of control and change of
control was not presently foreseeable), cert. denied, 474 U.S.
947, 106 S.Ct. 344, 88 L.Ed.2d 291 (1985); Solo Cup Co. v.
Federal Ins. Co., 619 F.2d 1178, 1189 (7th Cir.) (finding mere
possibility that insurer might commence proceedings to contest
coverage of insured is insufficient to create "controversy"
within meaning of Article III), cert. denied, 449 U.S. 1033, 101
S.Ct. 608, 66 L.Ed.2d 495 (1980).
12
that, should the IRS ever look past the company to its officers for
satisfaction of this tax debt, then these officers will be liable
for a larger amount; and, as Ortiz posits that Texas law requires
it to indemnify its officers under such circumstances, the company
will ultimately have to pay more in indemnification.
First, Ortiz misstates Texas law: Corporations are not
required to indemnify officers from such liability—they are merely
permitted to do so.23 As Ortiz has not alleged that it took the
steps necessary to indemnify its officers, the record is devoid of
facts showing that the company would be legally responsible to
indemnify its officers for any ultimate liability they incur for
the corporation's tax debts.24
Second, as with its allegations of liability in bankruptcy,
even if we assume arguendo that Ortiz would owe indemnity to its
officers, its argument is completely speculative. Ortiz presents
no evidence that the IRS has looked, anticipates looking, or even
could look to the corporation's officers to satisfy Ortiz's tax
debt.25 In short, Ortiz has failed utterly to demonstrate that any
23
TEX.BUS.CORP. ACT ANN. art. 2.02-1(E) (West 1994) ("A person
may be indemnified ... against ... penalties (including excise
and similar taxes)...." (emphasis added)).
24
See FW/PBS, Inc. v. Dallas, 493 U.S. 215, 231, 110 S.Ct.
596, 607, 107 L.Ed.2d 603 (1990) ("It is a long-settled principle
that standing cannot be "inferred argumentatively from averments
in the pleadings,' but rather "must affirmatively appear in the
record.' " (quotations omitted)); Mansfield, C. & L.M. Ry. Co.
v. Swan, 111 U.S. 379, 382, 4 S.Ct. 510, 511, 28 L.Ed. 462 (1884)
(facts supporting Article III jurisdiction must "appea[r]
affirmatively from the record").
25
See In re Malmart Mortgage Co., 166 B.R. 499, 502
(D.Mass.1994) (finding shareholder/officer of bankrupt company
13
action by the IRS against company officers is a real or immediate
likelihood or how such an action would adversely affect the company
in the least. Finally, we must note that Ortiz's concern regarding
indemnification rings hollow when even this remote possibility of
indemnification could not arise unless the company should fail to
pay its own tax debt in the first place.26
III
CONCLUSION
As we find that Defendant-Appellant Ortiz has failed to allege
an injury sufficiently real and immediate to satisfy the
requirements for standing under Article III, this appeal is
DISMISSED.
lacked standing to appeal bankruptcy court's award of attorney's
fees from company's estate as excessive, because (1) there was no
evidence that shareholder/officer was a "responsible party" with
potential tax liability and (2) the IRS had not yet made demand
for payment under § 6672). Cash v. United States, 961 F.2d 562,
565-66 (5th Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 492,
121 L.Ed.2d 430 (1992), is not to the contrary. In Cash, we
found that shareholders/officers of a corporation had standing to
appeal the method by which the IRS levied the assets of their
corporation. In that case—unlike here—the IRS already had looked
to the shareholders/officers for payment, had determined them to
be "responsible persons" who willfully failed to pay over
withholding taxes, and had taken steps to collect the unpaid tax
debt.
26
As our decision that Ortiz lacks standing to pursue this
appeal is conclusive, "there is an end of the matter" and we do
not consider the merits of the appeal. International
Longshoremen's & Warehousemen's Union v. Boyd, 347 U.S. 222, 223,
74 S.Ct. 447, 448, 98 L.Ed. 650 (1954).
14