Gross v. Keen Group Solutions ( 2021 )

Case: 20-20594 Document: 00516114204 Page: 1 Date Filed: 12/02/2021
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
December 2, 2021
No. 20-20594
Lyle W. Cayce
Clerk
Barry Gross; BillCutterz, L.L.C.,
Plaintiffs—Appellees,
versus
Keen Group Solutions, L.L.C.,
Defendant—Appellant.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:18-CV-2632
Before Jones, Smith, and Haynes, Circuit Judges.
Edith H. Jones, Circuit Judge:
Keen Group Solutions, L.L.C. (“KGS”) appeals from an order
denying its motion for satisfaction of judgment pursuant to Fed. R. Civ.
Pro. 60(b)(5) and granting Appellees’ order to compel post-judgment
discovery. Because this court lacks appellate jurisdiction, we DISMISS.
BACKGROUND
BillCutterz, L.L.C. (“BillCutterz”) and Keen Group Solutions,
L.L.C. (“KGS”) are in the “bill reduction business.” Barry Gross is the
President and sole member of BillCutterz. In January 2015, KGS and
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BillCutterz entered into a License Agreement providing KGS with a license
to offer and sell BillCutterz’s services and intellectual property to KGS
clients.
Three features of the License Agreement are relevant here. The
parties agreed to arbitrate their disputes. The Agreement’s compensation
clause entitles BillCutterz to royalties and commissions calculated as a
percentage of KGS’s revenue. The third embodies the term of the
Agreement, providing that it automatically renews for successive five-year
periods until “terminated by either Party for ‘cause.’” The “for cause”
conditions are enumerated.
In 2017, a dispute arose regarding unpaid commissions and royalties.
BillCutterz won the dispute in arbitration. The arbitrator ordered KGS to
pay BillCutterz all unpaid commissions and royalties through December 31,
2017, and all royalties and commissions from January 1, 2018 “for the
duration of the License Agreement.” In other words, the arbitration award
provided both retrospective relief (relief through December 31, 2017) and
prospective relief (relief from January 1, 2018 “for the duration of the
License Agreement”).
BillCutterz filed suit in district court seeking confirmation of the
arbitration award. KGS moved to dismiss the petition and vacate or modify
the arbitration award. The district court denied both of KGS’s requests with
a reasoned opinion and entered a final judgment confirming the arbitration
award in all respects. KGS continued to resist this outcome by filing
numerous unsuccessful motions and an unsuccessful appeal to this court
pertaining to the arbitration award. After a long battle, KGS finally
acquiesced and paid the retrospective relief and at least part of the
prospective relief (through December 6, 2018).
The parties continued to disagree, however, whether this payment
satisfied KGS’s liability in full, or whether there was unsatisfied liability
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regarding the prospective relief—specifically, whether the arbitration
award’s order entitles BillCutterz to ongoing compensation under the
License Agreement and whether KGS incurred (and perhaps diverted)
revenue after December 6, 2018.
KGS filed a Rule 60(b)(5) motion seeking relief from the judgment on
the basis that it had satisfied the judgment in full. 1 KGS argued that it fully
satisfied all obligations under the License Agreement through December 6,
2018 and that it ceased operating on December 6, 2018. Further, with no
more revenue coming in, KGS had purported to terminate the License
Agreement by providing written notice to KGS. 2 KGS contended that its
conclusory assertions about ceasing operations and terminating the License
Agreement entitled it to an order of satisfaction of judgment.
KGS additionally sought “protection” from post-judgment discovery
under Rule 26(c). If granted, this request would have thwarted BillCutterz’s
repeated attempts to obtain discovery regarding the circumstances around
asset transfers made by KGS and whether, by virtue of such transfers, KGS
was functionally still in business.
BillCutterz vigorously opposed the Rule 60(b)(5) motion and moved
to compel discovery. It disagreed that KGS could unilaterally terminate the
License Agreement and argued that the judgment had not been satisfied
because no royalties were paid after December 6, 2018. BillCutterz denied
that KGS went out of business, expressing suspicion that KGS was
fraudulently attempting to circumvent its obligations under the License
1
Fed. R. Civ. Pro. 60 (b) states that, “On motion and just terms, the court may
relieve a party . . . from a final judgment . . . for the following reasons: . . . (5) the judgment
has been satisfied, released, or discharged . . . .”
2
In March 2020, over a year after KGS supposedly “ceased operating,” KGS sent
a letter to BillCutterz purporting to terminate the License Agreement. But the letter cited
none of the “for cause” grounds for termination provided in that Agreement.
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Agreement. Specifically, it suspected that KGS was still operating and
earning revenue under another trade name.
Rather than simply providing the repeatedly requested discovery,
KGS asked the district court to assume KGS’s conclusions, reject
BillCutterz’s suspicions out of hand, and grant its Rule 60(b)(5) motion. The
district court refused KGS relief. 3 In a short order, the court denied KGS’s
motion for relief from judgment and granted BillCutterz’s motion to compel
discovery. KGS appealed.
DISCUSSION
Before this court may reach the merits of an appeal, it has an
independent duty to evaluate appellate jurisdiction. FW/PBS, Inc. v. City of
Dallas, 493 U.S. 215, 231, 110 S. Ct. 596, 607 (1990). Both parties argue that
the district court’s order is appealable, but they are incorrect. The district
court’s order is not a final judgment within the meaning of 28 U.S.C. § 1291.
3
It is worth noting the unwavering resistance to discovery that KGS has
demonstrated for a year and a half. In 2019, BillCutterz served KGS with a subpoena duces
tecum and notice of its intention to take a deposition. KGS objected to this discovery.
KGS’s counsel informed BillCutterz that “I am instructing my client to not appear at my
office on [the date provided in the notice of deposition]. Please do not show up with a court
reporter, videographer, etc. to attempt to set up a bogus sanctions motion.” BillCutterz’s
counsel responded that “we are willing to reschedule the deposition if your client will
provide convenient dates.” KGS responded: “If you want to send post judgment discovery
when the district court has jurisdiction that is your prerogative. And we will timely object
and respond to any such requests in accordance with the rules. However, we are not
required to respond to informal email requests.” Then again, on January 2, 2020,
BillCutterz’s attorney emailed KGS’s attorney and asked for “convenient dates for a post
judgment deposition of the corporate representative of Keen?” In response, KGS offered
to provide certain limited information, and noted that “there is no need for postjudgment
discovery.” BillCutterz’s attorney replied: “Since your client refuses to provide the
financial information required to calculate royalties and commissions, my client will not
agree to dispense with post judgment discovery, although I hope that it will not be
necessary.” Then, in the motion at issue on this appeal, KGS asked the district court to
“protect” it from post-judgment discovery. This request was denied.
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“For purposes of Section 1291 a decision is final only if it ‘ends the
litigation on the merits and leaves nothing for the court to do but execute the
judgment.’” Cook v. City of Tyler, Texas, 974 F.3d 537, 539 (5th Cir. 2020)
(quoting Sealed Appellant 1 v. Sealed Appellee, 199 F.3d 276, 278 (5th Cir.
2000)). The district court here still has a number of issues to resolve before
it can order or deny execution of judgment, as evidenced by the very order
challenged by KGS, which mandated further discovery. This appeal is
premature.
Most of the time, to be sure, Rule 60(b) orders denying relief are final
and appealable because “Rule 60(b) motions ordinarily are made only after
the district court has disposed completely of the subject litigation.” Kerwit
Med. Prod., Inc. v. N. & H. Instruments, Inc., 616 F.2d 833, 836 (5th Cir. 1980);
Woodham v. Am. Cystoscope Co. of Pelham, N.Y., 335 F.2d 551, 554 (5th Cir.
1964). But this is not so when unresolved matters remain pending in the
district court. Kerwit, 616 F.2d at 835–36 (holding that an ongoing contempt
proceeding rendered the denial of the Rule 60(b) motion non-final). Where
there is no “effective termination[] of district-court proceedings,” a denial
of a Rule 60(b) motion is not final for purposes of 28 U.S.C. § 1291. Id. at
835. 4 The same logic applies to grants of Rule 60(b) motions, which are also
considered interlocutory and non-appealable. See, e.g., Parks By & Through
Parks v. Collins, 761 F.2d 1101, 1104 (5th Cir. 1985) (recognizing that such an
order “merely vacates the judgment and leaves the case pending for further
4
The dissent attempts to distinguish Kerwit, but the factual and legal differences
are irrelevant to the finality or non-finality of an order denying a Rule 60(b) motion. There
is no case law cited to support the dissent’s view, perhaps because the overriding principle
is that “a decision is final only if it ‘ends the litigation on the merits and leaves nothing for
the court to do but execute the judgment.’” Cook v. City of Tyler, Texas, 974 F.3d 537, 539
(5th Cir. 2020) (emphasis added) (quoting Sealed Appellant 1 v. Sealed Appellee, 199 F.3d
276, 278 (5th Cir. 2000)).
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determination” and thus “the order is akin to an order granting a new trial
and is interlocutory and nonappealable” (internal quotations omitted)).
The district court’s order denying relief under Rule 60(b)(5) and
compelling discovery impliedly acknowledged a number of factual and legal
contentions yet to be decided. These include the effectiveness of KGS’s
purported termination of the License Agreement; whether KGS did in fact
cease operating, and, if so, when; and whether KGS transferred assets into
other entities to avoid this judgment. KGS asks us to decide these issues on
a record that is barren because KGS has consistently avoided discovery of
disputed facts. It is not our role to find facts on appeal, especially under the
circumstances presented here.
The parties suggest that the district court’s challenged order is
“final” because it issued another order stating that “[t]he case is on appeal
and has been closed.” But this order indicates nothing more than an
administrative closure. It is well established that administrative closures
cannot serve as the basis for appellate jurisdiction. See Psara Energy, Ltd. v.
Advantage Arrow Shipping, L.L.C., 946 F.3d 803, 808 (5th Cir. 2020) (“The
effect of an administrative closure is no different from a simple stay, which
district courts often use to remove from their pending cases suits which are
temporarily active elsewhere . . . . The court’s order staying and
administratively closing the case . . . was nonfinal for purposes of appellate
review.” (quotations omitted)); Mire v. Full Spectrum Lending Inc., 389 F.3d
163, 167 (5th Cir. 2004); S. Louisiana Cement, Inc. v. Van Aalst Bulk Handling,
B.V., 383 F.3d 297, 302 (5th Cir. 2004). 5
5
For the first time on appeal, BillCutterz urged that the pending issues should be
submitted to arbitration pursuant to the License Agreement. This untimely argument is
forfeited. We take no position on whether its request can be renewed in the district court.
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In sum, pending discovery and adjudication based on such discovery
of whether KGS has fully satisfied the arbitration award, there is no final
judgment for this court to consider. Indeed, this is the type of
“piecemeal . . . appeal[]” that “undermines efficient judicial administration
and encroaches upon the prerogatives of district court judges, who play a
special role in managing ongoing litigation.” Mohawk Indus., Inc. v.
Carpenter, 558 U.S. 100, 106, 130 S. Ct. 599, 605 (2009).
For the foregoing reasons, we DISMISS.
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Haynes, Circuit Judge, dissenting:
I respectfully dissent. The majority opinion concludes that we lack
appellate jurisdiction to decide this case because the district court’s order
was not a final judgment under 28 U.S.C. § 1291. 1 However, the district
court obviously thought it had sufficient information to deny the Rule 60(b)
motion, therefore it must have concluded that KGS had not satisfied the
judgment. That determination itself is a final judgment. 2 The mere fact that
additional discovery may be ordered does not, without more explanation,
1
Relying on our decision in Kerwit Medical Products, Inc. v. N. & H. Instruments,
Inc., 616 F.2d 833 (5th Cir. 1980), the majority opinion reasons that there is no finality due
to “unresolved matters” still pending in the district court.
The majority opinion overstates the reasoning of Kerwit and incorrectly applies it
to the case at hand. In Kerwit, we concluded that the denial of a Rule 60(b) motion to vacate
a consent decree was not final for the purposes of § 1291 (although we ultimately decided
the merits of the case under § 1292). We reached that conclusion because the consent
decree had been violated prior to the Rule 60(b) motion, and the district court still needed
to decide the appropriate relief for an alleged violation of the underlying judgment in a
contempt proceeding. See id. at 835. The present case is different in several material
respects: (1) Kerwit involved injunctive relief, not money damages; (2) in Kerwit, the
district court had concluded that the decree had been violated before the filing of the Rule
60(b) motion, which is not the case here; and (3) Kerwit did not involve a Rule 69 motion
for discovery related to the execution of the judgment. Based on these facts, these two
cases are readily distinguishable: Kerwitt in no way suggests that post-judgment discovery
bars an appeal of the underlying judgment. Perhaps that is why both sides in this case have
asserted that this court has jurisdiction over the district court’s denial of the Rule 60(b)
motion, both in their original briefs and in supplemental briefing filed in response to our
request.
2
Notably, this is not a situation where the district court orders discovery but waits
to grant Rule 60(b) relief based on that discovery. Here, the district court denied the Rule
60(b) motion and granted post-judgment discovery. The discovery order, therefore, does
not affect the finality of the Rule 60(b) denial.
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undermine or impair this final judgment. 3 Because the majority opinion
reaches a contrary conclusion, I respectfully dissent.
3
Indeed, additional discovery would not be necessary if the district court
determined that the judgment had, in fact, been satisfied.
9