Receivership Supersession as a Mootness Rule: Weslease 2018 v. Behan

Introduction

In Weslease 2018 Operating, L.P. v. Behan, the Fifth Circuit addressed the interplay between turnover orders under Texas law and the appointment of a receiver after appeals had been docketed. The primary question was whether appeals from a district court’s turnover and enforcement orders became moot once the district court appointed a receiver with exclusive custody of the same assets. The litigants were Weslease 2018 Operating, L.P., the judgment creditor and appellee, versus Linda and Dale Behan, the judgment debtors and appellants. The underlying disputes involved the Behans’ stock in a third‐party corporation (River North Farms, Inc.) and access to real property owned by that corporation. The Fifth Circuit ultimately dismissed the appeals as moot, except for preserved awards of attorneys’ fees and sanctions.

Summary of the Judgment

• After obtaining money judgments against the Behans under two prior loan agreements, Weslease filed three turnover applications under Texas Civil Practice & Remedies Code § 31.002 seeking:

• Real property owned by River North Farms, Inc. (denied because River North was a non‐debtor).
• The Behans’ stock interest in River North and a schedule of all assets (granted in the “Turnover Order”).

• Following the Turnover Order, the Behans refused Weslease access to real estate and filed state‐court suits on River North’s behalf. Weslease secured four “Enforcement Orders” compelling the Behans to cooperate and imposing attorneys’ fees and sanctions. • The Behans appealed the Turnover Order and each Enforcement Order. • While the appeals were pending, the district court appointed a receiver to take exclusive possession of “all non‐exempt property” of the Behans and their entities, expressly superseding the prior turnover and enforcement orders (except the fee and sanction portions). • The Fifth Circuit held that the receivership order rendered all pending appeals moot because the court could no longer grant any effective relief. The appeals of the Turnover and Enforcement Orders were dismissed as moot, but the awards of attorneys’ fees and sanctions remained intact for future proceedings.

Analysis

Precedents Cited

1. Federal Rule of Civil Procedure 69(a)(1) – authorizes federal courts to execute judgments under the law of the state in which the court sits (here, Texas).

2. Tex. Civ. Prac. & Rem. Code § 31.002 – provides for turnover of “nonexempt property” from judgment debtors, including attorneys’ fees and sanctions.

3. Pool v. City of Houston, 978 F.3d 307 (5th Cir. 2020) – articulates the mootness doctrine: an appeal is moot when “intervening circumstances” render it impossible to grant any effectual relief.

4. Securities & Exchange Comm’n v. Barton, No. 22-11242, 2024 WL 1087366 (5th Cir. Mar. 13, 2024) – dismissed an appeal as moot when a post-appeal receivership order superseded the challenged order and became the operative ruling.

5. In re Ondova Ltd. Co., 619 F. App’x 362 (5th Cir. 2015) – dismissed an appeal where the district and bankruptcy courts effectively vacated the underlying order.

Legal Reasoning

• Threshold Jurisdictional Inquiry: The court first determined that mootness is a threshold question; if no live controversy remains, the court lacks jurisdiction.

• Mootness Standard: Under Article III, a live “case or controversy” must exist at all stages. If post-appeal events deprive the court of power to grant relief requested, the appeal must be dismissed.

• Effect of Receivership Order: By appointing a receiver with exclusive custody, the district court “supersede[d] and/or amend[ed]” its prior turnover and enforcement orders. All assets previously ordered turned over to Weslease were now in the receiver’s hands, making any direct relief to the Behans ineffective.

• Preservation of Fees and Sanctions: The court distinguished the fee and sanction awards because the receivership order explicitly left those awards intact. Those monetary obligations remain subject to later challenge in the receivership proceedings.

Impact

1. Clarifies that a post-appeal receivership appointment that supersedes prior orders can moot appeals of turnover and enforcement orders under Texas law.

2. Reinforces the principle that appellate courts cannot grant “advisory” relief when intervening orders eliminate any effective remedy.

3. Signals to litigants that they must challenge a receivership order directly if they wish to preserve appellate rights as to superseded orders.

4. Leaves open the possibility of fee and sanction disputes in subsequent receivership‐court proceedings, providing a procedural roadmap for litigants to seek reimbursement or relief.

Complex Concepts Simplified

• “Turnover Order”: A court order compelling a judgment debtor to hand over nonexempt property to satisfy a money judgment.

• “Receivership”: An equitable remedy where the court appoints a neutral officer (receiver) to take control of a party’s assets to preserve or administer them.

• “Mootness”: A doctrine stemming from Article III’s “case or controversy” requirement; if circumstances change so that the court can no longer affect the rights of the parties, the appeal must be dismissed.

• “Effectual Relief”: Relief that would have a direct impact on the appellant’s rights or obligations; if none remains possible, the dispute is moot.

Conclusion

Weslease 2018 v. Behan establishes that when a district court appoints a receiver—expressly superseding turnover and enforcement orders—a pending appeal of those orders becomes moot because the appellate court cannot provide any effectual relief. However, awards of attorneys’ fees and sanctions survive if the receivership order leaves them intact. The decision underscores the necessity of timely challenging receivership orders when appellate rights are at stake and clarifies the boundaries of the mootness doctrine in post-appeal asset disputes.