Opposition Brief — International Paper Co. v. Grassi

Supreme Court, US. |

ee SB.

SEP 10 1992

No. 92-291 OFFICE OF THE CLERK

In The

Supreme Court of the United States

October Term, 1992

INTERNATIONAL PAPER COMPANY,

Petitioner,

ALEXANDER GRASSI, SR., ET AL.,

Respondents.

Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Fifth Circuit

¢

BRIEF IN OPPOSITION

t _ ]

Neit E. NorQuesi

, J Law Orrice oF Neit E. NorQuesi

j 3700 Nerth 10th Street, Ste. 101

McAllen, Texas 78501

Ha j Telephone: (512) 682-3195

— Telecopier: (512) 682-6693

Attorney of Record

COCKLE LAW BRIEF PRINTING CO. (800) 225 6964

OR CALL COLLECT (402) 342 2831

Deer ew R

aos ots Sa ET - — eS

QUESTION PRESENTED FOR REVIEW

Where a court adheres strictly to the settled federal defi-

nition of the term “civil action” under 28 U.S.C. § 1441,

should it be prohibited from referring to state laws to

determine whether the remedies provided therein consti-

tute new and independent “civil actions” within the

accepted federal definition?

PARTIES TO THE PROCEEDING

Ciba-Geigy PLC (“PLC”) is the judgment debtor in

the underlying action. Petitioner, International Paper

Company (“IPC”), appellant below, is a named defendant

in a turnover proceeding brought to enforce the judg-

ment.

Respondents, appellees below, are Alexander Grassi,

Sr. and Karen S. Grassi (individually and as next friends

of Alexander Grassi, Jr., Wendy Lou Grassi, and Kristin

Susan Grassi, minors), and IRI Internacional Limitada.

ill

TABLE OF CONTENTS

Page

QUESTION PRESENTED FOR REVIEW ............

POReReeey OUP ENTE FROM EELS... ee ect ees ii

PS Ae EP Ay eS 2S | iv

REPLY TO THE STATEMENT OF THE CASE...... 2

ee ee a eee ewe 2

ee re UCCEIM MOP TOIW Es ou ce ceive cee danas 3

a re are a 6

[A] QUESTION PRESENTED FOR REVIEW. (Peti-

EMC Sie ena SRE Lk ASA ES es 6

{[B] RESPONSE TO THE REASONS ASSERTED

BY PETITIONER FOR THE GRANTING OF A

|) 6

[1] The Fifth Circuit’s Holding is Consistent

With the Holdings of This Court....... 6

[2] The Fifth Circuit’s Holding is Consistent

With the Holdings of the Second, Fourth,

Eighth and Ninth Circuits.............. 12

[3] The Fifth Circuit’s Holding Did Not Con-

flict With Prior Fifth Circuit Precedent . 13

Ey Ge cn ee 16

TABLE OF AUTHORITIES

CASES

Able v. Upjohn Co., Inc., 829 F.2d 1330 (4th Cir.

Action Auto Stores, Inc. v. United Insurance Com-

pany, No. 5:91-CV-32, 1992 WL 21203 .........

Adrianenssens v. Allstate Ins. Co., 258 F.2d 888...

American National Bank of Austin v. Mort-

gageamerica Corp., 714 F.2d 1266 (5th Cir. 1983)

Bado Equipment v. Bethlehem Steel, 814 S.W.2d 464

(Tex.App. — Houston [14th Dist.] 1991, no writ) ..

Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223 (Tex.

1991)

1989)

Brown v. Demco, Inc., 792 F.2d 478 (5th Cir. 1986)...

Butler v. Polk, 592 F.2d 1293 (5th Cir. 1979). .

Cantwell v. Wilson, 241 S.W.2d 366 (Tex.Civ.App

PE Eee, OO We hss nwa cen spas

Central of Georgia Ry. Co. v. Riegel Textile Corp., 426

Fdd 98S (Sth Cit, 1970)... cos cc cece ccs eans

Chicago R.I. and P.R. Co. v. Stude, 346 U.S. 574

PRE Seah ar Kren Ke Sie Re Le See eae

Childre v. Great Southwest Life Insurance Co., 700

S.W.2d 284 (Tex.App. - Dallas 1985, no writ)...

First City National Bank of Beaumont v. Phelan, 718

S.W.2d 402 (Tex.App. - Beaumont 1986, writ

ig Be A eigen teary iar ee ern 1]

Page

ae

1]

ea)

.14

13

, as

TABLE OF AUTHORITIES — Continued

Page

Grubbs v. General Electric Credit Corporation, 405

U.S GRE GIST SD odoin ecu scs sae eeancueaee 11, 14

Hallack v. Hawkins, 409 F.2d 627 (6th Cir. 1969)...... 10

Jones v. Roadway Exp., Inc., 931 F.2d 1086 (5th Cir.

| eee Nene ea nr yoann. 14

London v. Lancashire Indem. Co. v. Courtney, 106

P28 277 (1G Cle. TARR). onsen) eek ones 8

McCarthy Western Constructors, Inc. v. Phoenix

Resort Corp., 951 F.2d 1137 (Sth Cir. 1991)...:.52:. 13

Norsul Oil & Mining Ltd. v. Commercial Equipment

Leasing Co., 703 S.W.2d 345 (Tex.App. — San

Antotiio 1965, WO WED 3a<4 vss oan 505sesanne ane 9, 11

Paxton v. Weaver, 553 F.2d 936 (5th Cir. 1977)..... 14, 15

Randolph v. Employer’s Mutual Liability Ins. Co. of

Wisconsin, 260 F.2d 461 (8th Cir. 1958) .......... 8, 13

Road District v. St. Louis S.W. Ry. Co., 257 U.S. 547

(FOIE Ce ns nae Shaun nx ss endear eee nes 12

Schultz v. Fifth Judicial District Court of Appeals at

Dallas, 810 S.W.2d 740 (Tex. 1991)............... 9, 11

Shamrock Oil and Gas Corp. v. Sheets, 313 U.S. 100

(RPSRS a unka och vnccs ces tcsmen se eaee ae eee 12, 14

Stewart v. EGNEP (PTY) Ltd., 581 F.Supp. 788 (C.D.

8) eer cy eer ry eos 8, 9

Yonkers Racing Corp. v. City of Yonkers, 858 F.2d 855

yo 2, | re rr errr rey ee 13

28 USC. G14461.. «00.0565 ee eee

USC. GI4Q0D)... .. .00.66ras ace eee 4,6

No. 92-291

+

In The

Supreme Court of the United States

October Term, 1992

é a

INTERNATIONAL PAVvER COMPANY,

Petitioner,

ALEXANDER GRASSI, SR., ET AL.,

Respondents.

¢———_—_—_

Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Fifth Circuit

e

BRIEF IN OPPOSITION

¢

COME NOW ALEXANDER GRASSI, SR. and KAREN S.

GRASSI, Individually and as Next Friends of ALEX-

ANDER S. GRASSI, JR., WENDY LOU GRASSI, and

KRISTIN SUSAN GRASSI, minors, and IRI INTERNA-

CIONAL LIMITADA, and respectfully pray that Peti-

tioner’s request for issuance of a Writ of Certiorari herein

be denied. Petitioner will be referred to throughout as

“IPC”; Ciba-Geigy PLC, the judgment debtor, will be

referred to as “PLC”: Respondents will be referred to as

“Respondents”; Petitioner’s Petition for a Writ of Cer-

tiorari will be referred to as “Petition, at p. ” Of

]

“Appendix ”; and emphasis in all quotations will be

Respondents’ throughout, unless otherwise indicated.

REPLY TO THE STATEMENT OF THE CASE

A. Summary of Facts

An accurate Summary of Facts may be found in the

“BACKGROUND” section of the Court of Appeals’ Opin-

ion (Appendix A), at pp. 2a through 5a. Petitioner’s Sum-

mary of Facts contains the following inaccuracies, to-wit:

First, Petitioner incorrectly maintains that on three

occasions the Respondents attempted to prevent “the

exercise of the Defendant’s right of removal”, and thereby

attempts to portray as non-meritorious Respondents’

remand motions. In fact, however, it is the PLC/IIford/

IPC group! which has steadfastly sought to prevent the

proper exercise of state court jurisdiction in this matter.

The Ilford removal, which bought PLC the time necessary

to sell the Ilford stock before a turnover could be effected,

was itself improper. The propriety of IPC’s removal at the

instant stage of the turnover proceeding is, of course, the

subject of this appeal.

| The Court will note that, despite the facts that neither IPC

nor its property are at risk in the turnover proceeding and that

IPC has additionally been fully indemnified by PLC’s parent,

Ciba-Geigy, for any possible loss incurred as a result of the

turnover proceeding (Appendix “A”, p. 3a), IPC vigorously

assails not only the instant turnover proceeding, but also

Respondents’ prior attempts to collect their Judgment from

Ciba-Geigy and Ilford (Petition, at pp. 2, 3).

IPC further incorrectly represents (Petition, p. 3), that

Respondents’ October 26, 1988 turnover proceeding seek-

ing recovery of the Ilford shares was merely a “stratagem

to defeat federal jurisdiction” culminating in the “volun-

tary [dismissal of] the action against Ilford Photo” on

August 29, 1990, id. In fact however, Ilford’s improper

removal was itself demonstrated to be but a “stratagem” to

defeat state jurisdiction — a stratagem which, while a legal

failure, was a tactical success in the sense that it gave PLC

time to sell the Ilford Photo stock before a turnover

thereof could be effected. Appendix A, at p. 3a.

Yet again, IPC incorrectly represents that the Respon-

dents have now brought a “fraudulent conveyance action

against IPC”, when in fact the turnover proceeding to

which IPC now finds itself a party is not brought “against

IPC.” See, post, at pp. 9-11. By misrepresenting the nature

of the relief sought by Respondents, Petitioner has con-

trived to make it appear that “Respondents have sought

to divest the federal courts of removal jurisdiction [over]

a new claim... against a new party, IPC ...”, when in fact

the only relief sought in the turnover proceeding is

against PLC and property (the Ilford shares) of which it

retains equitable ownership by having fraudulently

attempted to transfer same to IPC with full knowledge of

the Respondents’ rights thereto. See, Appendix A, p. 3a.

B. Proceedings Below

On August 29, 1990, Respondents amended their

Application for Turnover Relief, naming IPC as a party-

defendant and seeking to have the transfer to IPC

el

declared void. As in their Original Application, Respon-

dents sought to have the Ilford stock turned over to them

in satisfaction of their judgment against PLC. Appendix

A, p. 4a. Significantly, they did not seek to hold IPC liable

to satisfy their judgment against PLC.

Petitioner nevertheless again incorrectly represents

(Petition, p. 3 “Proceedings Below”) that Respondents

“filed a fraudulent conveyance action seeking relief against

IPC,” when in fact neither IPC nor its property are at risk,

the only relief sought being against PLC and its property

(the Ilford shares), and only then if same is proved to be

the property of PLC. See post, at pp. 8, 9.

Yet again, in representing that it “timely removed

this action on September 21, 1990” Petition at 3, 4, Peti-

tioner mischaracterizes as uncontested “facts” both the

proposition that its removal was “timely” (when that is

the precise, and undetermined, issue before the Court),

and that what it removed was a new and independent

“action” rather than an ancillary post-judgment proceed-

ing.

In remanding this matter to the federal district court,

the Fifth Circuit held that 28 U.S.C. § 1446(b)’s one-year

removal bar applied to prevent a removal of this case

unless the Respondents have stated a new and indepen-

dent civil action against the Petitioner in their Amended

Application for Turnover Relief, which would render the

one-year bar inapplicable.

That question, in turn, depends upon whether the

Texas Turnover Statute encompasses the precise relief

sought in the Amended Application (a determination of

whether property in the hands of the Petitioner actually

belongs to PLC, and is therefore subject to execution) -

not whether the Texas courts have “classified” or “charac-

terized” the proceeding as ancillary or independent. The

Fifth Circuit held that if the Texas Turnover Statute does

encompass such relief, then the instant proceeding cannot

be classified as a new and independent civil action under

the established federal definition of that term, but is

instead a mere continuation of the 1983 lawsuit against

PLL.

It was within this context that the Fifth Circuit held

that the district court must determine whether a Plaintiff

may seek, as a part of his application for turnover relief,

to prove that property in the hands of a third-party was

fraudulently conveyed and therefore actually belongs to

the Judgment-Debtor. If the Texas Turnover Statute is

found to comprehend such a determination, then, the

court held, the Respondents’ Amended Application is but

a mere continuation of the action filed in 1983, and not a

new and independent “civil action” within the meaning

of § 1441. See, Appendix A, at pp. 7a, 8a. The court did

not hold that the terms “civil action” or “new and inde-

pendent action” may be defined by reference to state

characterizations of the Texas Turnover Statute, or that

the State of Texas is competent to classify the relief

embraced by its turnover statute as either “independent”

or “ancillary”; rather, it held that the question of classi-

fication itself depends upon the nature of the relief

afforded by the statute. Said the court: “If the district

court determines that the Grassis can allege that Interna-

tional Paper is a fraudulent transferee as part of their claim

for turnover relief, then the Amended Application is an

extension of the 1983 suit and the district court must

remand this case to state court under the one-year rule of

§ 1446(b).” Appendix A, at p. 8a.

Finally, Petitioner is incorrect in stating that the Fifth

Circuit’s decision “contravened earlier rulings of the Fifth

Circuit and [this court]... ” As will be shown in more

detail, post, the Fifth Circuit’s holdings are completely

consistent with all relevant prior decisions. Accordingly,

the Fifth Circuit correctly denied Petitioner’s Petition for

Rehearing and Suggestion for Rehearing En Banc.

¢

ARGUMENT

[A] QUESTION PRESENTED FOR REVIEW.

(Petition, pp. i, 5)

Petitioner has misstated the question for review to be

whether a court may “decide whether a proceeding is an

independent and removable ‘civil action’ under 28 U.S.C.

§ 1441 by referring to state, rather than federal law”,

(Petition, at pp. i, 5), when in fact, the only question

presented here is whether courts are to be prohibited

from referring to state laws for the purpose of determin-

ing whether the remedies provided therein constitute

independent “civil actions” within the accepted federal

definition of that term.

[B]} RESPONSE TO THE REASONS ASSERTED

BY PETITIONER FOR THE GRANTING OF A

WRIT. (Petition, pp. 6-16).

[1] The Fifth Circuit’s Holding is Consistent

With the Holdings of This Court.

In holding that a federal district court may look to

state law to determine whether a particular remedy exists

for the purpose of classifying a proceeding as either

independent or ancillary, the Fifth Circuit did not deviate

from the principal that federal law controls the process of

classification. Indeed, it is precisely because the scope of

relief provided by a state statute is determinative of its

characterization under established federal standards that

federal courts can and do routinely look to the state laws

to determine what they encompass.

The case of Action Auto Stores, Inc. v. United Insurance

Company, No. 5:91-CV-32, available on Westlaw as 1992 WL

21203 (W.D. Mich. 1992), relied upon by Petitioner (Petition,

at p. 10), is a case in point. In Action Auto, the court looked to

the actual remedy provided, and found that “despite the label

placed upon the action, the proceedings are treated in many

ways as separate civil actions”. Appendix E, at 4. Were the

court to have been prohibited from referring to the laws of

Michigan to determine the nature of the remedies actually

embraced by the Ruies in question, as Petitioner demands, it

would have had no basis upon which to arrive at a correct

characterization of the garnishment proceeding in question.

Only by referring to the actual nature of the garnishment

remedy provided could the court arrive at an accurate charac-

terization of same under a uniform federal standard.

It is for this reason that in deciding the removability

of post-judgment proceedings, the courts invariably turn

to the nature of the relief afforded to determine whether a

proceeding brought thereunder is a new and independent

“civil action”, or merely a continuation of the underlying

lawsuit, the determining factor most often being whether

or not the proceeding involves “litigating the existence of

a new liability”, Butler v. Polk, 592 F.2d 1293, 1295 (5th Cir.

1979).2 It would stretch credulity to assert that a court

could successfully determine whether such a proceeding

was “independent” or “ancillary” without first determin-

ing the nature of the relief afforded by the statute or rule

in question.

In the instant case, the Respondents have sought

relief which is, by its very nature, ancillary rather than

independent. Unlike those instances wherein judgment

creditors seek to make garnishees liable for their judg-

ments, the Respondents here have not sought to impose

2 See, Adrianenssens v. Allstate Ins. Co., 258 F.2d 888, 890:

“(t]he issue between the parties was whether the insurer was

liable under its policy”; London v. Lancashire Indem. Co. v. Courtney,

106 F.2d 277, 283 (10th Cir. 1939): “any process ... which when

served upon [the defendant insurance company] as garnishee

would have the effect to authorize an order or judgment in per-

sonam against him... is to be regarded . . . as an independent

proceeding. The Motion for Writ of Garnishment under such

condition ...is in effect an independent and original action... ”;

Bridges v. Bentley, 716 F.Supp. 1389, 1392 (D. Kansas 1989): “The

garnishment action is a suit involving a new party litigating the

existence of a new liability [because] [t]he garnishment petition is

couched in terms of individual liability on the part of Farmer’s

Casualty Company Mutual”; Stewart v. EGNEP (PTY) Ltd., 581

F.Supp. 788, 790 (C.D. Illinois 1983): “Even though [the gar-

nishee] submitted itself to the state court's jurisdiction, it is now

faced with a substantially new and different cause of

action, . . . For the first time, [the garnishee] is faced with

$56,000,000 of personal liability, instead of an order to turn over one

of its depositor’s assets.” In Randolph v. Employer's Mutual Liability

Ins. Co. of Wisconsin, 260 F.2d 461 (8th Cir. 1958) relief upon by

Petitioner, the court held that “the only issue [in a garnishment

action against a defendant's insurance carrier] is the liability of

the garnishee on its insurance contract...”

any personal liability upon IPC or to place IPC’s property

at risk. (The only property sought herein are the shares of

Ilford, and only then if they are found to be the property

of PLC).

Significantly, the courts have been invariably careful

to distinguish actions instituted for the purpose of impos-

ing liabilities upon new parties from proceedings such as

the instant one which are instituted for the sole purpose

of identifying and seizing property of the judgment debtor

which may be found in the hands of third parties. This

distinction has been repeatedly recognized and empha-

sized by both federal and state courts in the context of

fraudulent transfer, turnover and garnishment proceed-

ings. See.e.g., American National Bank of Austin v. Mort-

gageamerica Corp., 714 F.2d 1266, 1272, 1273, 1275 (5th Cir.

1983), and Bado Equipment v. Bethlehem Steel, 814 S.W.2d

464, 474 (Tex.App. — Houston [14th Dist.] 1991, no writ)

(construing the Fraudulent Transfer Act), Schultz v. Fifth

Judicial District Court of Appeals at Dallas, 810 S.W.2d 740

(Tex. 1991), Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223,

227 (Tex. 1991), Norsul Oil & Mining Ltd. v. Commercial

Equipment Leasing Co., 703 S.W.2d 345, 349 (Tex.App. -

San Antonio 1985, no writ), and Childre v. Great Southwest

Life Insurance Co., 700 S.W.2d 284, 288 (Tex.App. — Dallas

1985, no writ) (construing the Turnover Statute), and

Stewart v. EGNED Ltd., supra, wherein the court distin-

guished between situations in which garnishees are mere

stakeholders and those in which they are sought to be

made personaily liable for the indebtedness of the judg-

ment debtor.

In American National Bank of Austin v. Mon-

teageamerica, supra, for example the Fifth Circuit correctly

10

identified the process of recovering property pursuant to

the Fraudulent Transfer Act as follows:

[T]he remedy afforded a successful claimant [in

a fraudulent transfer action] relates entirely to

the debtor’s fraudulently transferred property

and entails no personal liability on the part of those

responsible for the transfer, see, e.g., Cantwell v.

Wilson, 241 S.W.2d 366 (Tex.Civ.App. — Austin

1951, no writ) (construing predecessor statute).

A suite under the Texas [Fraudulent Transfers]

Act, in other words, pursues the debtor’s prop-

erty. ...

The basic principle of a fraudulent transfers

act,... is that ‘[a]s to the creditors, the property

continues in the debtor, and it or its proceeds are

liable to the creditor’s demands.’ Hallack v.

Hawkins, 409 F.2d 627, 630 (6th Cir. 1969) (con-

Sstruing the Uniform Fraudulent Conveyance

Act). at pp. 1271, 1273.

Later in the same opinion, the Fifth Circuit again

identified the process as:

[e]ssentially [an attempt to recover] property

which properly belongs to the debtor and which the

debtor has fraudulently transferred in an effort

to put it out of the reach of creditors ... the

transferee may have colorable title to the prop-

erty, but the equitable interest at least as far as

the creditors (but not the debtor) are concerned

— is considered to remain in the debtor so that

creditors may . . . execute judgment upon it as

though the debtor had never transferred it.

(Emphasis supplied), at p. 1275.

In Bado Equipment v. Bethlehem Steel, supra, the court

put it more succinctly, to wit: “[A] cause of action [brought

11

pursuant to the Fraudulent Transfer Act] is against the

party making the transfer, not against the party accepiing the

transfer”, Id., at 474.

The Texas Turnover Statute likewise exists only to

better permit the assets of judgment debtors to be reached,

it is mot used as a vehicle to impose liability upon third

parties, viz: “[T]exas courts do not apply the turnover stat-

ute to [i.e., do not impose personal liability upon] mon-

judgment debtors”, Beaumont Bank, N.A. v. Buller, supra, at

227.

Nevertheless, the Turnover Statute can and does

serve as a vehicle to identify and recover the property of

a judgment debtor which is in the hands of third parties.

Schultz, supra, at 740, Norsul Oil & Mining Ltd., supra, at

349, Childre, supra, at 288, First City National Bank of

Beaumont v. Phelan, 718 S.W.2d 402 (Tex.App. - Beaumont

1986, writ ref’d n.r.e.).

Despite this settled law, IPC argued in the courts

below that the question of whether the Ilford stock

belongs to PLC is not one which can be raised in a

turnover proceeding. Pretermitting that question, the

Fifth Circuit merely held that if the Turnover Statute

properly comprehends a determination of that issue, then

the relief sought by Respondents herein is clearly ancil-

lary, and not independent. Appendix A, p. 8a. Such hold-

ing manifestly does not conflict with prior decisions of

this Court.

For example, this Court’s holding in Grubbs v. General

Electric Credit Corporation, 405 U.S. 697, 705 (1972) that

state laws may not pre-empt federal criteria for determin-

ing removal jurisdiction is in no manner contravened by

7

12

the Fifth Circuit’s holding herein that state law may be

referred to for the purpose of determining whether the

federal criteria have been met.

Similarly, this Honorable Court’s holdings in Sham-

rock Oil and Gas Corp. v. Sheets, 313 U.S. 100, 104 (1941),

Chicago R.I. and P.R. Co. v. Stude, 346 U.S. 574, 580 (1954),

and Road District v. St. Louts S.W. Ry. Co., 257 U.S. 547, 551

(1922), that state laws cannot pre-empt federal character-

izations which are determinative of federal jurisdiction,

are not contravened by the Fifth Circuit’s holding herein

that state laws may be looked to for the purpose of

determining whether the federal characterizations are

applicable in each of the disparate circumstances under

which their application is sought.

The uniformity of a standard is not jeopardized by

the process of identifying the variegated circumstances

under which its application may be sought. The Fifth

Circuit in the instant case did not hold that state charac-

terizations may be relied upon to determine whether a

proceeding is “ancillary” or “independent”, but rather

that the nature of the state remedies afforded the Respon-

dents must be looked to in determining whether estab-

lished federal criteria have been met. Such a holding

manifestly does not contravene the prior holdings of this

Court.

[2] The Fifth Circuit’s Holding is Consistent

With the Holdings of the Second, Fourth,

Eighth, and Ninth Circuits.

Just as it did not contravene the holdings of this

Honorable Court, the Fifth Circuit’s holding in the instant

13

case does not conflict with the holdings of the various

Circuit Courts of Appeals. The Fifth Circuit herein did

not hold that the law of Texas could “supersede the

privilege of removal granted by a federal statute”, Yonkers

Racing Corp. v. City of Yonkers, 858 F.2d 855, 862 (2d Cir.

1988), or that the construction of the removal statutes is

not “purely a matter of federal law”, Able v. Upjohn Co.,

Inc., 829 F.2d 1330, 1333 n.2 (4th Cir. 1987), or that courts

need not “look to federal criteria”, Randolph v. Employer's

Mutual Liability Ins. Co. of Wisconsin, supra, at 463, or that

“the classification which [state] courts give [post-judg-

ment] proceedings” is somehow binding upon federal

Courts, Randolph, 265 F.2d at 464, or that federal law

should not be looked to to determine whether the “ele-

ments of removal jurisdiction have been established

under the statutes”, McCarthy Western Constructors, Inc. v.

Phoenix Resort Corp., 951 F.2d 1137, 1140 (9th Cir. 1991).

Rather, the Fifth Circuit held that the district court

must ascertain the extent of the relief afforded by the

Texas Turnover Statute and, if it embraces the determina-

tion sought by Respondents, remand the turnover pro-

ceeding as one which is ancillary to the underlying (non-

removable) claim.

[3] The Fifth Circuit’s Holding Did Not Con-

flict With Prior Fifth Circuit Precedent.

The distinction between accepting a characterization

and making an independent determination has, of course,

been consistently recognized and applied by the Fifth

Circuit. In Butler v. Polk, 592 F.2d 1293 (5th Cir. 1979), for

example, the Fifth Circuit recognized that while “the

14

proper characterization [of a post-judgment garnishment

proceeding] under §1441 is essentially a matter of federal

law... ”, the cases which construe garnishment actions

“reflect the recognition that [such actions] are in effect

suits involving a new party litigating the existence of a new

liability”, Id., at 1296. The court thus acknowledged the

necessity of referring to federal criteria and to the nature of

the state remedy in arriving at a proper characterization

thereot. It further recognized the distinction which exists

between independent actions which seek to impose new

liabilities and ancillary proceedings which do not. Id., at

1296. In Jones v. Roadway Exp., Inc., 931 F.2d 1086, 1092

(Sth Cir. 1991), the Fifth Circuit again turned to state law

(Title 130 of the Revised Civil Statutes of Texas, including

art. 8307c) to determine whether it was the intent of the

Texas Legislature that art. 8307c remain an integral part

of the Texas Workers’ Compensation scheme, even while

applying the applicable federal criteria in making the

appropriate classification. [d., at 1092.

Yet again, in Brown v. Demco, Inc., 792 F.2d 478 (5th

Cir. 1986), the court merely applied the rule laid down by

this Court in Shamrock, supra, that the removal statute is

“unaffected by local law definition or characterization of the

subject matter to which it is to be applied... ”; it did not

destroy the very process by which such characterizations

are made by holding that a court may not refer to state

law for the purpose of determining the nature of the

remedy afforded thereby. Id., at 480. Yet again, in neither

Paxton v. Weaver, 553 F.2d 936 (5th Cir. 1977) nor Central of

Georgia Ry. Co. v. Riegel Textile Corp., 426 F.2d 935 (5th Cir.

1970) did the Fifth Circuit construe this Court’s holding

in cases such as Grubbs, supra, and Shamrock, supra in the

15

manner advocated by Petitioner. Indeed, in Paxton, the

court once again referred to the remedies afforded by the

law of Mississippi in arriving at its own characterization.

Paxton, supra, at 939, fn.2. “We only need to decide

whether, under a liberal review of Mississippi law or what

it might be, arguable grounds exist for a recovery under

appellants’ theories.”

There thus exists no “irreconcilable conflict” between

the Fifth Circuit’s prior holdings and its holding in the

instant case. On the contrary, its holding herein is entirely

consistent with all such prior decisions.

Petitioner’s contention that “Congress could not and

did not intend that the right of removal should depend

upon state law”, Petition, at p. 10, is thus simply not true

in the sense intended by Petitioner. References to state

laws and the remedies provided therein are in may cases

absolutely essential to a proper application of the federal

removal standards.

Because the Fifth Circuit’s holding in the instant case

did not contravene, but was fully consistent with, all

relevant prior decisions, the Fifth Circuit correctly denied

Petitioner’s Petition for Rehearing and Suggestion for

* Petitioner’s attempts to create conflicts between state

court interpretations of the Texas Turnover Statute and that

statute’s proper “characterization” under appropriate federal

criteria are, to paraphrase Petitioner “flawed both in their rea-

soning and in their result”. Petition, at p. 10. The proposition

that a party’s removal “rights” would ve lost by a “broad”

construction of the removal statute to embrace the relief

requested by Respondents is totally irrelevant to the issue of

whether such a remedy, if it exists, provides for “independent”

or “ancillary” relief under the appropriate federal standards.

16

Rehearing En Banc, and its Petition herein should also be,

in all things, denied.

CONCLUSION

Wherefore, Respondents respectfully pray that the

request of Peiitioner that a Writ of Certiorari issue herein

be in all things denied.

Respectfully submitted,

Neit E. NorQuest

State Bar No. 15088500

LAw Orrice oF Neit E. NorQuest

3700 North Tenth St., Suite 101

McAllen, Texas 78501

Telephone: (512) 682-3195

Telecopier: (512) 630-5199

Attorney for Respondents

GorDON L. Briscoe

State Bar No. 03010000

Law OFFICE OF GORDON L. BriIscoE

Rt. 6, Box 748

Harlingen, Texas 78550

Telephone: (512) 423-2255

Fax: (512) 423-0758

Of Counsel for Respondents Grassi

Norton A. Co vin, Jr.

State Bar No. 04632100

RopriGuez, Coivin & CHANEY

P.O. Box 2155

Brownsville, Texas 78523

Telephone: (512) 542-7441

Telecopier: (512) 541-2170

Of Counsel for Respondent 1.R.1.