Warfield v. Byron, et al

United States Court of Appeals
Fifth Circuit
F I L E D
June 14, 2005
Charles R. Fulbruge III
Clerk
In the
United States Court of Appeals
for the Fifth Circuit
_______________
m 04-10795
_______________
LAWRENCE J. WARFIELD,
AS RECEIVER FOR RESOURCE DEVELOPMENT INTERNATIONAL, ET AL.,
Plaintiff-Appellee,
VERSUS
ROBERT L. BYRON, ET AL.,
Defendants,
KIRK V. EDWARDS, LARRY EDWARDS, ROBERT EDWARDS, SHERRI EDWARDS,
ROGER HETCHLER, SHARYN MEENDERINCK, JIM SMITH, AND KATHY THAUT,
Defendants-Appellant.
_________________________
Appeal from the United States District Court
for the Northern District of Texas
m 3:02-CV-1371-R
______________________________

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Before DAVIS, SMITH, and DENNIS,
Circuit Judges.
JERRY E. SMITH, Circuit Judge:*
This case is ancillary to the “Underlying
Lawsuit,”1 in which the SEC contends that a
number of business enterprises controlled and
operated an illegal Ponzi scheme. At the
SEC’s request, the district court appointed
Lawrence Warfield as Receiver for the busi-
ness entities, including Resource Development
International, LLC (“RDI”). The court
ordered Warfield to collect, receive, and take
exclusive custody, control, and possession of
the defendants’ assets in the Underlying Law-
suit.
As part of his investigation into the Under-
lying Lawsuit, the Receiver discovered that
Kirk Edwards, Larry Edwards, Robert Ed-
wards, Sherry Edwards, Roger Hetchler,
Sharyn Meenderinck, Jim Smith, and Kathy
Thaut (collectively, the “Edwards Defen-
dants”) either participated actively in facilitat-
ing investments in the scheme or received
assets belonging to the defrauded investors
without exchanging any value. The Receiver
then filed the instant case against the Edwards
Defendants.
The district court granted the Receiver’s
motion for partial summary judgment against
the Edwards Defendants and entered a final
judgment. The Edwards Defendants filed a
motion under rule 60(b)(4) of the Federal
Rules of Civil Procedure. This appeal ensued
after the district court had denied the motion.
I.
The Edwards Defendants do not dispute
their involvement in the Ponzi scheme. Pro-
ceeding pro se, they present a lengthy argu-
ment that is completely devoid of merit. They
contend that district courts of the United
States (“DCUS”) are the only federal courts
with jurisdiction to hear claims arising under
the Securities Act of 19332 (“Securities Act”)
and the Securities Exchange Act of 19343
(“Exchange Act”). DCUS are courts vested
with article III judicial power. The Edwards
Defendants contend that the portions of the
Act of June 25, 1948, codified at 28 U.S.C. §
1 et seq., create the mistaken impression that
DCUS are synonymous with United States
District Courts (“USDC”).
The argument continues as follows: Con-
gress promulgated title 28 ostensibly to allow
all prior violations of federal law to be prose-
cuted in USDC, which are not, the Edwards
Defendants argue, article III tribunals (but
DCUS are). For want of jurisdiction, there-
fore, claims arising under the Securities and
Exchange Acts may not constitutionally pro-
ceed in USDC. Finally, according to this
tortured reasoning, we would lack jurisdiction,
under 28 U.S.C. § 1291, to entertain appellate
review of all USDC decisions within the Fifth
Circuit (but we would retain jurisdiction over
DCUS decisions).
Ordinarily, we will not consider arguments
* Pursuant to 5TH CIR. R. 47.5, the court has de-
termined that this opinion should not be published
and is not precedent except under the limited cir-
cumstances set forth in 5TH CIR. R. 47.5.4.
1 SEC v. Res. Dev. Int’l, LLC, No. 02-0605
(N.D. Tex.).
2 15 U.S.C. §§ 77a et seq.
3 15 U.S.C. §§ 78a et seq.

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that were not presented to the district court.4
Where the argument involves subject matter
jurisdiction, however, waiver does not pre-
clude us from considering the matter on ap-
peal.5 We deem the Edwards Defendants’ ar-
gument without merit, and we decline to
invalidate much of the last sixty years of
securities litigation because the “D’s” and
“C’s” are capitalized differently in different
statutes. Both original jurisdiction and appel-
late jurisdiction are properly exercised in this
case.
II.
The Edwards Defendants argue that “there
were multiple flaws in the institution of the
underlying prosecution by the administrative
agency, due process [sic], which is a necessary
element of subject matter jurisdiction [sic]; and
subsequent orders and complaint of
[Warfield], which rendered them [sic] defec-
tive.” They contend specifically that (1) they
were not afforded notice and opportunity to be
heard at the administrative level; (2) no clerk’s
seal was originally placed on the summons as
to defendants; (3) the judgments have been
obtained by jurisdictionally fatal fraud; and (4)
the absence of final judgments in the Un-
derlying Lawsuit nullifies the district court’s
subject matter jurisdiction. These points are
without merit.
At the outset it is worth noting two things.
First, the Edwards Defendants lack standing to
raise many of the following claims stemming
from the Underlying Lawsuit, because none of
these arguments relates to the district court’s
subject matter jurisdiction over the SEC’s
complaint.6 Second, the dominant theme of
the Edwards Defendants’ opening brief is its
improper attempt to cast a variety of proce-
dural irregularities and substantive legal
disagreements as defects in subject matter
jurisdiction. Rule 60(b)(4) is the vehicle for
this chicanery: “On motion and upon such
terms as are just, the court may relieve a party
or a party’s legal representative from a final
judgment, order, or proceeding [because] the
judgment is void.”
A.
We review the district court’s decision on
a Rule 60(b)(4) motion de novo. See Carter v.
Fenner, 136 F.3d 1000, 1005 (1998). Where
the motion is based on a void judgment under
rule 60(b)(4), the district court has no discre-
tion; the judgment is either void or it is not.
See Recreational Props., Inc. v. Southwest
Mortg. Serv. Corp., 804 F.2d 311, 313-14 (5th
Cir.1986). As we explain below, however, we
do not apply a strict de novo review to every
procedural irregularity.7
4 See Little Liquid Air Corp., 37 F.3d 1069,
1071 n.1 (5th Cir. 1994) (en banc); Nissho-Iwai
Am. Corp. v. Kline, 845 F.2d 1300, 1307 (5th Cir.
1988).
5 See In re Canion, 196 F.3d 579, 585 (5th
Cir.1999) (“It is well settled . . . that the subject
matter jurisdiction of a federal court can be chal-
lenged at any stage of the litigation (including for
the first time on appeal), even by the party who
first invoked it.”).
6 Appointment of a receiver is generally subject
to collateral attack only in instances of fraud or on
appeal of the initial appointment. See Miller v.
Hockley, 80 F.2d 980, 983 (4th Cir. 1936) (“That
the action of the Court [appointing a temporary re-
ceiver] cannot be attacked collaterally is virtually
the unanimous holding in the decisions on this
point.”).
7 See infra notes 10-12.

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B.
The Edwards Defendants attack the Re-
ceivership Order because the SEC allegedly
failed to comply with 5 U.S.C. § 557(c), a
provision of the Administrative Procedure Act
(“APA”). This argument is frivolous, because
the APA’s notice and hearing requirements do
not apply to trial de novo in court.8 The SEC
initiated the relevant legal action; it did not
adjudicate it (nor did it conduct a hearing of
the sort the APA contemplates).
C.
The Edwards Defendants contend that the
SEC Complaint failed to invoke the district
court’s subject matter jurisdiction because the
complaint lacked the court clerk’s seal. They
further argue that the absence of such a seal
invalidates the district court’s in personam
jurisdiction because copies mailed between
districts could not bear that seal. Finally, they
aver that the seal’s absence from the summons
invalidates the district court’s in personam
jurisdiction.
The claim that 28 U.S.C. § 1691, through
its reference to “process,” contemplates a
complaint is incorrect.9 Moreover, the Re-
ceiver properly secured the clerk’s signature
and seal for certified copies of the Complaint
and Receivership Order (“Order”) in both the
Eastern and Western Districts of Washington.
In each case then, the clerk signed and sealed
the documents.
The Northern District of Texas uses an
embossed seal on photocopying, meaning that
the absence of a visible seal on a photocopy
does not demonstrate that a seal was not on
the original. Moreover, each summons was
undeniably signed by the clerk. The presence
or absence of the clerk’s signature on the
summons may or may not be disputable, but
this is of no moment, for such defects are not
fatal if they do not prejudice the defendant.10
In the instant case, they do not.11 For many of
8 Section 556 applies to hearings required by §§
553-554.
9 That statute states: “All writs and process
issuing from a court of the United States shall be
under the seal of the court and signed by the clerk
thereof.” The supplemental notes in 28 U.S.C.A.
§ 1691 contain a cross reference to FED. R. CIV. P.
4. A close reading of the rule reveals that the seal
requirement applies only to the summons, not to the
complaint. None of the cases the Edwards Defen-
dants cite stands for the proposition for which it is
cited.
10 This circuit does not appear to have ruled on
the quantum of prejudice arising from a defective
seal necessary to create the type of jurisdictional
defect that would render the district court proceed-
ing void. The law in other circuits suggests that
defects that do not prejudice the defendant are
considered irregularities rather than jurisdictional
defects.
In United Food & Commercial Workers Union
v. Alpha Beta Co., 736 F.2d 1371, 1382 (9th Cir.
1984), the court held that the mere presence of an
incorrect responding time in a summons is not a
jurisdictional defect and does not warrant a dis-
missal. Another circuit ruled along those same
lines where the summons failed to state any re-
sponding time at all. See Sanderford v. Prudential
Ins. Co., 902 F.2d 897, 899-900 (11th Cir. 1990).
The absence of any showing of prejudice by the
defendant was, in each case, a key factor. More-
over, there is no analytic justification for a different
inquiry into prejudice with respect to court orders,
which fall within the purview of § 1691’s reference
to “process.”
11 We acknowledge that inquiry into prejudice
might be read in tension with the de novo review
(continued...)

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the same reasons, we reject the argument that
the absence of the seal on certified copies of
the Order nullifies the district court’s jurisdic-
tion.12
D.
The Edwards Defendants argued in their
rule 60(b)(4) motions that the Receiver’s
failure to identify all Receivership Assets13
within thirty days of his appointment, and to
submit to the district court a report about
those assets, created a jurisdictional defect
voiding the Receiver’s appointment. The
Edwards Defendants cite no authority on this
issue, but only cross-reference the record).
The Receivership Order, issued in March
2002, states:
11(...continued)
requirement for certain motions under rule
60(b)(4). We conclude that the circumstances
surrounding the absence of a seal on photocopies,
although a “jurisdictional defect” in some sense,
does not, without prejudice, rise to the level of de-
ficiency that would render a legal proceeding void
for want of in personam jurisdiction, the condition
that requires us to vacate the judgment.
Indeed, rule 60(b) sets forth no specific stan-
dard of review; that standard is located in the case-
law. Although that caselaw indeed indicates that
decisions under rule 60(b)(4) should be subject to
judicial review, those holdings, as we note above,
always seem premised on the rule 60(b)(4) error
rising to a level rendering the entire district court
proceeding void.
The parties provide little guidance on this issue
and concern themselves almost exclusively with the
merits of the procedural defect claim. If there is
any caselaw, published or unpublished, to the
contrary, the Edwards Defendants do not identify
it.
Alternately, the Receiver argues that factual de-
terminations, such as the presence or sufficiency of
a seal, require an abuse of discretion review. For
that proposition the Receiver cites McDonald v.
United States, 898 F.2d 466, 468 (5th Cir. 1990).
McDonald, however, involves a procedural irregu-
larity considered in the context of a FED. R. CIV. P.
4(j) motion to dismiss. Despite the obvious differ-
ences in legal authority for the two motions ( those
under rule4(j) and those under rule 60(b)(4)), we
see no reason to distinguish our review of the facts
surrounding a procedural irregularity in those two
contexts.
12 The Edwards Defendants argue that the
Receiver did not comply with 28 U.S.C. § 754 by
failing to affix a seal to the certified copies. Sec-
tion 754 does not, on its face, require certification
or the affixation of a seal:
A receiver appointed in any civil action or pro-
ceeding involving property, real, personal or
mixed, situated in a different district shall, upon
giving bond as required by the court, be vested
with complete jurisdiction and control of all
such property with the right to take possession
thereof . . . . Such receiver shall, within ten
days after the entry of his order of appointment,
file copies of the complaint and such order of
appointment in the district court for each dis-
trict in which property is located. The failure to
file such copies in any district shall divest the
receiver of jurisdiction and control over all such
property in that district.
28 U.S.C. § 754.
13 The district court’s Order Appointing Re-
ceiver defines “Receivership Assets” as “the assets,
monies, securities, [causes of] action, and prop-
erties, real and personal tangible and intangible, of
whatever kind and description, wherever situated
[the Edwards Defendants].”

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The Receiver is hereby directed to file with
this Court and serve upon the parties,
within 30 days after this Order, a prelimi-
nary report setting out the identity, location
and value of the Receivership Assets, and
any liabilities pertaining thereto. Further, .
. . he shall recommend . . . whether . . .
claims against [various defendants] should
be adjudged in the Bankruptcy Court.
The Order clearly contemplates a preliminary
report sufficient to give guidance as to the
appropriate forum in which to pursue certain
claims arising from the Ponzi scheme. The
Receiver satisfied this burden. Moreover,
there is no cited authority for the proposition
that a failure to meet the terms of the order
would create a jurisdictional defect.
E.
Finally, the Edwards Defendants urge that,
because no final judgments have been entered
in the Underlying Lawsuit, the Receiver’s
authority to seize assets cannot “relate back”
to the authority derived from the Underlying
Lawsuit.14 The Edwards Defendants cite no
authority and make no argument for how the
“relation back doctrine” should apply here.
Divining the Edwards Defendants’ precise
legal theory on this issue is unnecessary,
because the assumption that there have been
no final judgments in the Underlying Lawsuit
is incorrect. Permanent Injunctive relief has
issued against every defendant in the Underly-
ing Lawsuit except William Whalen. The
Interlocutory Default Judgment entered
against these defendants leaves only the
amount of disgorgement against each defen-
dant for final determination. The Edwards
Defendants’ argument that the resolution to
the Underlying Lawsuit somehow violated due
process is pure speculation and, even if it did
violate due process, it would not bear on the
subject matter jurisdiction in this case.
F.
The Edwards Defendants advance several
other theories in their pro se briefs.15 Al-
though the arguments discussed in the previ-
ous subsections are confused and poorly
supported, these other issues, as briefed, are
utterly unintelligible. We consider them
waived for inadequate briefing.16
AFFIRMED.
14 The Edwards Defendants state that the “re-
lation back doctrine” controls government interest
in private property where a claim arises out of an
obligation imposed by law. The relation-back doc-
trine actually refers generally to a broad set of
principles, each of which operates differently de-
pending on the legal context in which they appear.
15 Specifically, they argue that “absent notice
[a] preliminary injunction may not be imposed” and
that the “Receiver lacks venue.”
16 See FED. R. APP. P. 28(a)(9)(A); United
States v. Martinez, 263 F.3d 436, 438 (5th Cir.
2001) (noting the rule); United States v. Beau-
mont, 972 F.2d 553, 563 (5th Cir. 1992) (invoking
the rule where a litigant failed adequately to argue
the issue).

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