Mastrogiovanni Schorsch & Mersky, P.C., et al. v. Edward Mandel

The Fifth Circuit has ignored long standing rules of comity mandated by Federalism by invading the exclusive subject matter jurisdiction of a Texas state court to instruct and direct its receiver and to implement, interpret, define or enforce its own receiver orders. The Fifth Circuit imposed its own unsupportable interpretation of a non-appealable Texas receivership order, which had been previously affirmed by the Supreme Court of Texas, when it held that the mere filing of a bankruptcy case constitutes “new litigation” which, by operation of law, denied the state court receiver, her counsel, and the receivership estate the authority to pursue their claims against a debtor in bankruptcy. In doing so years after significant bankruptcy deadlines elapsed, the Fifth Circuit deprived these creditors of their state property rights without due process of law in that it left them without a remedy or a forum in which to protect their property rights. Is a federal court authorized to invade a state court’s exclusive province to appoint, instruct and control its own appointed receivers, by reinterpreting nonappealable state court receivership orders in contravention of Palmer v. Texas, 212 U.S. 118 (1909)? Does the Fifth Circuit’s decision result in a fundamental denial of due process of law to this group of creditors (a state court receiver, her counsel, and the receivership estate) without prior notice or an opportunity to be heard and leaving them with neither a remedy nor a forum in which to pursue one?