Today the Perkins Coie LLP Political Law Group submitted comments on an advance notice of proposed rulemaking, initiated by the Federal Election Commission in response to the Supreme Court’s decision in McCutcheon v. FEC. The FEC asked whether it ought to change its earmarking, affiliation, joint fundraising and disclosure rules in response to McCutcheon, which struck down the caps on the total, combined amount of political contributions that an individual may make over a two-year election cycle.
Previously, this blog probed the justices’ command of the earmarking rules at oral argument, reviewed the majority’s discussion of these same rules after the decision came down, and gave a basic rundown of the McCutcheon decision.
Below are the comments, which the Political Law Group submitted on its own behalf.
On behalf of the Perkins Coie LLP Political Law Group, we submit these comments on the above-referenced advance notice of proposed rulemaking. Our comments are not on behalf of any particular client. However, as practitioners who work regularly with the Commission, we would like to offer some observations that the Commission may find useful. We would request the opportunity to discuss them further at the hearing on February 11, 2015.
First, the Commission should evaluate this proposed rulemaking versus other competing priorities. The Commission must, of course, conform its rules with changes in the statute and judicial orders. We appreciate that the Commission last year adopted a final rule to conform to the decision in McCutcheon v. FEC, 134 S. Ct. 1434 (2014), and took steps to conform its rules to the decision in Citizens United v. FEC, 558 U.S. 310 (2010).
The Commission has not yet revised its rules to account for so-called “Super PACs” in the wake of the decision of the United States Court of Appeals for the District of Columbia Circuit in SpeechNow.org v. FEC, 599 F.3d 686 (D.C. Cir. 2010) (en banc).
The Commission also has yet to revise its rules to account for so-called “hybrid PACs” following the United States District Court for the District of Columbia’s decision in Carey v. FEC, 791 F. Supp. 2d 121 (D.D.C. 2011).
In November 2014, the United States District Court for the District of Columbia vacated and remanded Commission rules governing the disclosure of electioneering communications in Van Hollen v. FEC, No. CV 11-0766, 2014 WL 6657240 (D.D.C. Nov. 25, 2014). While a private intervenor is appealing the court’s order, the Commission is not. And, however the case is decided on appeal, the rules governing disclosure of independent expenditures and electioneering communications by persons other than political committees will remain a confusing, asymmetrical tangle unless Congress or the Commission acts.
In December 2014, Congress enacted amendments to the Federal Election Campaign Act of 1971 that changed the contribution limits for national political party committees, partly so that they may finance presidential nominating conventions without public funds. See Consolidated and Further Continuing Appropriations Act, 2015, Pub. L. No. 113-235, § 101 (2014).In that same law, Congress also established building and recount accounts for the national parties. Commission rules will have to be revised and conformed to these developments in the law.
Thus, there are a number of subjects on which the Commission, rather than considering whether it is advisable to add rules, mustchange the rules to comply with court orders, or to avoid major gaps between the current rules and actual practice. Some of these subjects directly affect the “collection and presentation of campaign finance data.” Id. at 62,363. Sound administrative practice suggests that the Commission should turn to these subjects first.
Second, the areas addressed by the advance notice of proposed rulemaking all share certain attributes that should cause the Commission to act judiciously when proposing or making changes to the rules. In particular, the earmarking, affiliation and joint fundraising rules involve very complex areas of law that have developed over decades, and in which the politically active have a strong reliance interest, having organized themselves around them.
The earmarking rules affect not simply how political parties and PACs collect and forward contributions from their adherents to candidates, but also how candidates can motivate their adherents to support the parties and PACs. The litigation in EMILY’s List v. FEC,581 F.3d 1 (D.C. Cir. 2009)shows how over-eagerness to find support for a clearly identified candidate in a PAC’s fundraising appeal can result in a rule that is insufficiently tailored to meet First Amendment speech and association concerns. The affiliation rules affect not simply anti-circumvention interests, but also associational freedoms: for example, they provide the framework within which the Commission imputes candidate and officeholder soft money fundraising restrictions to non-party, non-candidate groups. Finally, the joint fundraising rules provide a transparent way for candidates and parties to solicit contributions together.
Wholesale changes in any one of these areas would require a substantial reordering of how candidates, parties and PACs now operate. We are inclined to doubt that the advance notice of proposed rulemaking will elicit anecdotal or statistical evidence of a problem caused by McCutcheon, for which the solution would justify the cost of such changes at the present time.
Finally, the Commission should consider the asymmetrical impact that a rulemaking would have among the politically active. After Citizens United, the world is divided even more sharply between entities which operate within FECA’s limits, restrictions and reporting requirements, and those which do not. Changes to the earmarking, affiliation and joint fundraising rules would inevitably impact the former disproportionately, while doing little to provide more transparency about the latter’s financing. Footnote 4 of the advance notice of proposed rulemaking neatly shows this: it states correctly that the earmarking rules and their “rationale do not apply to an independent expenditure-only political committee’s solicitations or any contributions it receives that are earmarked for specific independent expenditures.” 79 Fed. Reg. at 62,362 n.4 (brackets omitted). While the Commission must lend force and effect to the statutes it enforces, it should move cautiously before further burdening the activities of candidates and committees that are already hard-pressed to compete with Super PACs, corporations and unregistered nonprofits under the constitutional and regulatory standards now in place.
We appreciate the opportunity to comment on these matters.


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This appeal arose from the ruling and order of His Worship Karemani Jamson Karemera, sitting as the Grade I Magistrate at Mukono, in which he rejected the appellant’s plaint and struck out their suit with costs to the respondents. The facts which led to the suit and consequently the appeal can be summarised as follows.
The appellants sued the respondents in Jinja High Court Civil Suit No. 125 of 2007. They claimed special, general and exemplary damages in respect of property that was destroyed when the respondents set the appellants homes on fire in the night of 13-14th July 2000. The respondents had prior to the suit been prosecuted and convicted of arson and malicious damage to property in Criminal Case No. M48 of 2000 at Mukono Chief Magistrates’ Court. The respondents who were found guilty on both counts charged were each sentenced to a fine of shs 200,000/= on the first count, and shs. 200,000/= each on the second count. In default thereof they were to be imprisoned for 48 months to run concurrently on both counts. The respondents failed to pay the fines and served their prison sentences as ordered.
On the 11/09/2007, the appellants filed H.C.C.S. 125 in this court. The file was subsequently transferred to Mukono court when the Magistrates Courts Act was amended to enhance the pecuniary jurisdiction of Magistrates Courts. The respondents then filed a written statement of defence in the suit on the 22/01/08 in which they indicated that they would raise a preliminary objection that the suit had no basis in law.
When the parties appeared before the trial magistrate on the 25/02/2009, Mr. Kamya for the respondents raised a preliminary objection that the suit was time barred because the acts complained of took place in the night of 13/07/2000. That the suit was filed in Jinja Court on the 11/09/2007 yet the Limitation Act provides that actions in tort shall be brought within the space of 6 years from the date the cause of action arises. Relying on the decision in the case of Iga v. Makerere University  E.A. 65, he prayed that the plaint be rejected with costs.
Mr. Nyakana who then represented the appellants argued that the cause of action in the matter arose at the time when the respondents were convicted. He advanced the argument that the time between charging and convicting the respondents let to delay which constituted a disability. He prayed that the court disregards technicalities and disposes of the matter substantively.
Mr. Kamya’s rejoinder was that criminal and civil matters based on the same facts could proceed concurrently. That as a result, the appellants did not have to wait for the respondents to be convicted before filing their suit in tort. He further argued that the fact that the respondents had been convicted did not necessarily mean that they were liable in tort. That in addition, the appellants did not in their plaint plead that the time when they were waiting for the respondents to be convicted was a hindrance to filing their suit. He thus reiterated his prayer that the suit be struck out.
The trial magistrate found that the cause of action arose on the 14th July 2000 and the suit based on that tort had been filed on the 11th September 2007. Further, that six years had elapsed since the cause of action arose and no disability was pleaded by the appellants as to why they could not file their action in time. He thus rejected the plaint and stuck it out with costs.
The learned trial magistrate erred in law and fact when he ruled that the suit was not based on the earlier judgment and orders against the Respondents in Mukono Criminal Case No. 48 of 2000.
The learned trial magistrate erred in law and fact when he failed to take into consideration the respondent’s disobedience of the said earlier court orders to compensate the appellants, culminating into the institution of the civil suit to recover the same.
The learned trial magistrate erred in law when he held that the suit was time barred and consequently rejecting (sic) the plaint with costs.
The appellants proposed that this court allows the appeal with costs in this court and the court below.
When the parties and their advocates appeared before me on the 24/06/2009 I ordered that their advocates file written submissions. The appellants’ advocates filed their submissions on 29/06/2006 after which the respondents’ advocates filed a reply on 6/07/2009. The appellants’ counsel filed a rejoinder on 16/07/2009.
In his rejoinder, counsel for the appellants prayed that the respondents’ submissions be struck out under Order 51 rule 6 CPR because the submissions were served on them on the date when appellants’ counsel was supposed to file a reply. He argued that this did not only constitute an abuse of court process but it was also an infringement of the appellants’ rights under Article 28 of the Constitution to make a suitable rejoinder. I will therefore first deal with that complaint.
When the parties and counsel hereto appeared before me on the 24/06/2009 I issued an order that counsel for the appellants file the appellants’ submissions on 01/07/2009. The respondents’ counsel was to file a reply by the 15/07/2009. If the appellants’ counsel wished to file a rejoinder, such was to be filed by the 22/07/2009. The guideline given by the court omitted to specify the time within which service was to be effected on the opposite party but it was implied that it should be before the timeline given for filing the next submission.
If the appellants’ counsel’s complaint is that respondent’s counsel served him with a reply on the 22/07/2009, this was not proved on evidence because there was no return of service ordered; none was filed either. I am unable to penalise the respondents’ counsel as prayed by appellants’ counsel for that reason. And although he protested against the respondent’s alleged late service of submissions on him, counsel for the appellants made a rejoinder to the submissions. By this he waived his right to relief because that implies that he agreed to the late service of the submissions on him. Suffice it to add that this court has a wide discretion under the provisions of Order 51 rule 6 to extend time within which an act is to be done. This is especially so where it is not prejudicial to the opposite party. No prejudice has been alluded to by counsel for the appellant and I have found none.
Finally, it is trite law that the rules of procedure are the handmaidens of justice; they are a guide to the orderly disposal of suits and a means of achieving justice between the parties. They should never be used to deny justice to a party entitled to a remedy (Allen Nassanga v. M. Nanyonga,  HCB 352). I am of the view that orders of court for taking certain actions in a suit are in the same category. Since no injustice has been proved in this case, the respondents’ submissions shall be retained.
In their written submissions, counsel for the appellants abandoned ground 2 and argued grounds 1 and 2 together. They reiterated the contents of the pleadings and stated that Civil Suit 125 of 2007 was filed on the basis of an arson that occurred in the night of 13-14th July 2000. Further, that the respondents herein were tried and convicted and in the judgment of the court in Criminal Case No. M.48 of 2000 the trial magistrate ordered that the appellants were entitled to commence civil proceedings against the respondents for recovery of damages for the property destroyed. That in compliance with this, the appellants filed the suit (now Mukono Civil Suit No. 34/08) which was struck out with costs. Counsel thus concluded that the trial magistrate erred when he rejected the plaint and struck it out.
With regard to ground 1, relying on the decision in Badiru Mbazira v. Abisagi Nansubuga [1992-93] HCB 241, counsel for the appellant argued that the Limitation Act applies to all matters unless the Act itself makes an exception. It was thus argued for the appellants that s.3 of the Limitation Act foresaw the possibility of actions though rooted either in tort or contract, penalty or forfeiture and they were given wide latitude of enforceability to be brought not within the period of 6 years but within the period of 12 years. Counsel premised this argument on the fact that s.3 of the Limitation Act provides that an action shall not be brought upon any judgment after the expiration of 12 years from the date on which the judgment became enforceable.
Counsel for the appellant emphasised the fact that the suit before court was based on the judgment in Criminal Case M.48 of 2000 and that it was so pleaded in the plaint. He argued that the lower court should have confined itself to that plaint to establish whether there was a cause of action or not. That the judgment following which the respondents were convicted was delivered on the 1st August 2001; the same judgment contained an order that the appellants had a right to file a suit to claim damages for the loss sustained. That the respondents had never appealed against their conviction and sentence and as a result the appellants were entitled to file their civil action on the basis of the said judgment.
Counsel for the appellants further relied on 39 (2) (b) of the Evidence Act which in his view applied to this case. S. 39 (2) (b) provides that a judgment, order or decree of a competent court is conclusive proof that the legal character which it declares a person to be entitled to, accrues to that person when the judgment, decree or order declares it to accrue to that person. That as a result, the right to bring a civil action could not be dissected from the judgment of the criminal court. Further, that had the legislature intended to make a distinction between mere statements made by judicial officers from actual orders to be protected by the Limitation Act, it would have specifically provided so. He thus submitted that the lower court was wrong when it struck out the suit for being time barred.
With regard to ground 1, Mr. Kamya for the respondents contended that the suit that was struck out was not based on the judgment in the criminal case but on the facts that occurred in the night of 14th July 2000. Further that in her judgment in the criminal case the trial magistrate only advised the appellants to bring a civil suit to recover damages and this advice did not purport to be a basis for bringing a civil action. Regarding what constitutes a cause of action Mr. Kamya relied on Osborn’s Concise Law Dictionary Ed. 7th for its definition, i.e. the fact or combination of facts which give rise to a right of action. He further submitted that it was clear from the plaint that the facts that led to the cause of action occurred in the night of 13th to 14th July 2000 and not from the judgment in the criminal case. He proposed that ground 1 should fail.
With regard to ground 3, Mr.Kamya argued that the provisions of the Limitation Act are mandatory; thus actions founded in contract or tort shall not be brought after the expiry of 6 years from the date on which they arose. Relying on Iga v. Makerere University (supra), he submitted that a plaint that is barred by limitation is barred by law and it should be rejected. He relied on the decision in the case of Eridad Otabong v. Attorney General S.C.C.A No. 6/1990 where it was held that time begins to run from the date on which the cause of action accrues. That because the appellants had not pleaded any disability they were not entitled to any exemption from the provisions of the Limitation Act. He prayed that the appeal be dismissed with costs because the arguments made by counsel for the appellants were irrelevant and did not hold water.
Since counsel for the appellant abandoned ground 2 of their appeal I shall now address the two questions raised by grounds 1 and 3 of the appeal.
Whether the appellants’ suit was based on the earlier judgment and orders against the respondents in Mukono Criminal Case No. 48 of 2000.
Each accused is sentenced to a fine of 400,000/= on both count 1 and count 2 (each count 200,000/=) in default forty-eight months imprisonment to run concurrently on both counts.
2. Each accused person is sentenced to a suspended sentence of Ten years in case anyone of them is convicted of another offence involving violence, he shall serve the default sentence.
3. The police community liaison officer is hereby ordered to sensitise the local community of Nakawugu about the dangers of violence and ensure that the complainants are allowed to settle down in their homes without threats of violence and should report back to court within a month from today.
4. Since property worth a lot of money was destroyed, the complainants are also advised of their legal right to seek redress in the civil court.
5. The accused persons are warned that in case any harm befalls the complainants, the police will arrest them as the first suspects whether they are involved or not. Therefore they have a duty to ensure that nothing happens to the complainants.
It is by paragraph 5 of the plaint that the appellants contended that their action in Civil Suit No. 34 of 2005 was based on the orders of the magistrate in Criminal Case No. M.48 of 2000.
Mr. Kamya submitted that this section did not apply to the case at hand and I agree with him. I think that this provision applies in instances where the judgment debtor’s cause of action arises directly out of the judgment and orders of the court in a previous suit. In other words, it applies to cases where the judgment debtor had no right to bring a suit against the judgment creditor except after an order of the court declaring his rights. A case in point is one where the action before the court is one in which the plaintiff seeks the declaration of his interest in a piece of land so he can claim damages for trespass against an encroacher who is not a party to the suit. He/she would have no right to bring the action unless his/her interest in the land is first declared by court. Thereafter, he would have the right to bring his suit against the encroacher within 12 years. That right would abate after 12 years by virtue of the provisions of s. 3 (3) of the Limitation Act. The same would apply to any other declaratory judgment wherein a person’s right or interest in a chose of action is established by a court of law.
It is my view that the case at hand is different from the circumstances envisaged by s.3 (3) of the Limitation Act; there was no judgment to enforce in Mukono Criminal Case M.48 of 2000 except the collection of fines ordered against the accused persons and in default thereof, their imprisonment. Both counsel in this matter agreed that a cause of action is a fact or the combination of facts that give rise to a right of action. This court also held so in Annebrit Aslund v. Attorney General [2001-2005] HCB 103. It is also trite law that a cause of action arises as soon as the facts or combination of facts that bring it about occur. The right to sue for damage to property in tort therefore accrues as soon as the act or omission from which the right arises occurs. There is no need for a declaration by the court that the right exists. Indeed the trial magistrate in Mukono Criminal Case No M.48 of 2000 did not purport to confer such a right. Although the magistrate’s statement came within the context of sentencing the accused persons, the magistrate’s words were very clear; in addition to the sentences awarded to the accused persons, the appellants were also advised of their legal right to seek redress in the civil court. The manner in which this advice was coached leaves no doubt as to its meaning. I therefore do not agree with the submission that the trial magistrate ordered that the appellants bring a civil action to recover damages because such an order would have amounted to suplusage; the civil right to bring an action in tort for the loss occasioned by the arson existed right from the night of 13th – 14th July 2000 when the arson occurred.
39. Relevancy of certain judgments in probate, etc. jurisdiction.
A final judgment, order or decree of a competent court, in the exercise of probate, matrimonial, admiralty or insolvency jurisdiction, which confers upon or takes away from any person any legal character, or which declares any person to be entitled to any such character, or to be entitled to any specific thing, not as against any specified person but absolutely, is relevant when the existence of any such legal character or the title of any such person to any such thing is relevant.
The provision above is very specific. It refers to judgments of the courts in the matters categorised, i.e. in the exercise of probate, matrimonial, admiralty or insolvency jurisdiction. Such jurisdiction is special jurisdiction where personal rights are declared. I am of the considered opinion that this provision should be strictly construed. Only judgments in probate, matrimonial proceedings, admiralty or insolvency jurisdiction would fall within the ambit of s. 39 (2) (b) of the Evidence Act. In the alternative, it could be construed ejusdem generis; only judgments that are of the same nature or genre as those named in the section, if any, would fall within its ambit. I have perused the judgment in Criminal Case No. M.48 of 2000. I did not find any declarations regarding the legal character of any of the appellants. I would therefore agree with Mr. Kamya that s. 39 (2) (b) was irrelevant to the facts in the instant suit and was cited out of context. In conclusion, Ground 1 of the appeal fails.
Whether the trial magistrate erred in law when he held that the appellant’s suit was time barred and consequently rejected the plaint with costs.
The trial magistrate relied on the decision in the case of Mugabi v. Nyanza Textile Industries Ltd. [1992-93] HCB 227, where it was held that a cause of action arises when a right of the plaintiff is affected by the defendant’s acts or omissions and such acts or omissions inflict damage upon the plaintiff. The trial magistrate found that the plaintiffs did not plead any disability in order to be exempted from the provisions of the Limitation Act. That as a result the court had no jurisdiction to entertain the suit. He thus rejected the plaint with costs.
The respondents were found to have participated in these act and they were convicted of arson and malicious damage to property. The appellants pleaded the same facts in summary in their plaint in the lower court, including the date when the actions that caused the damage occurred. They did not advance any reason why they did not bring their action within the space of 6 years from the night of 13-14th July 2000 but contented themselves with pleading that the trial magistrate advised them to file an action for damages in her judgment which was delivered on 31/07/2001. On the other hand, Mr. Kamya for the respondents relied on the same facts and cogent authorities and submitted that the action was time barred.
The respondents were convicted on 31/07/2001 to serve a sentence of 48 months if they defaulted in paying the fine of shs 400,000/= each, on both counts. They failed to do so and were imprisoned. It was not stated in the plaint when the respondents completed serving their sentence. Paragraph 6 thereof which stated the facts relating to the sentence was silent on this. The WSD filed by the respondents was also silent on when they completed their sentence. In the absence of those facts, I will assume, as is normally the case when one fails to pay a fine that imprisonment ensued immediately after sentence. A term of 48 months from the 31/07/2001 would ordinarily be completed on or around the 31/07/2005. Given the possibility of remission of 1/3 of the sentence which is credited to every prisoner on incarceration by virtue of the Prisons Act, about 16 months would have been credited to the respondents. Their sentences would have, under normal circumstances, been completed on or around 31/04/2004. If the appellants’ wish was to plead that they could not sue the respondents while in prison they could still have brought the action at its earliest, i.e. by the 2/05/2004. The appellants’ action would have still been within the period of 6 years provided for bringing actions in tort by the Limitation Act.
It is most unfortunate that the appellants’ advocates did not do this but instead filed their suit on the 11/09/2007. As found by the trial magistrate this date was more than six years after the cause of action arose in the night of 13-14th July 2000. The suit was also filed more than 6 years after the 31/07/2001 when judgment was pronounced against the respondents, i.e. about 2 months after the 6 years elapsed. Suffice it to add that the appellants did not have to wait for the respondents to serve their sentence before filing their action in tort for damages against them. An action in tort is not precluded by a criminal sentence even where it arises from the same facts that led to the criminal sentence.
In conclusion, I agree with the decision of the trial magistrate that the action was barred by the Limitation Act and the plaint should be rejected. Order 7 Rule 11 of the Civil Procedure Rules obliges court to reject a plaint in a number of circumstances, which include, “(d) where the suit appears from the statement in the plaint to be barred by any law.” The provisions of this rule are mandatory. In accordance with Order 7 Rule 11(d) of the Civil Procedure Rules, the plaint was properly rejected by the trial magistrate. Accordingly, this appeal is dismissed. The appellants shall pay the costs of the respondents in this court and in the court below.

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Alan S. Loewinsohn, Jennifer A. Haltom Doan, Figari & Davenport, Dallas, Tex., for defendants-appellants.
Michelle Kosse, Counsel, Arter & Hadden, F.D.I.C., Washington, D.C., William G. Compton, Neil M. Sukin, Arter & Hadden, Dallas, Tex., for F.D.I.C. as Receiver of Vernon Sav. & Loan Assoc.
Before WISDOM, SMITH and EMILIO M. GARZA, Circuit Judges.
This action involves certain notes and guaranties executed for the purchase and construction of an apartment project known as the University Crossroads Condominiums. The defendants appeal the summary judgment granted against them in favor of the FDIC-Receiver, alleging that the FDIC-Receiver failed to establish that it was the owner and holder of the notes and guaranties. We affirm in part and reverse in part.
* Selaiden Builders, Inc. (Selaiden Builders) executed in favor of Vernon Savings & Loan Association (Old Vernon) one note in the amount of $343,000 (Vernon Note # 1--the secured loan)1 and another note in the amount of $232,000 (Vernon Note # 2--the unsecured loan). As part of the transaction involving the Vernon Notes, Robert Selaiden, Charles Selaiden, and Jack McJunkin each executed unconditional guaranties on both notes.2 The following year, Selaiden Builders renewed the Vernon Notes--to $509,800 and $433,000, respectively--and the maturity date for both notes was extended a year. The original guarantors also executed renewal agreements.3 After the notes became due, the defendants defaulted on their obligations.
The Federal Home Loan Bank Board (FHLBB) declared Old Vernon insolvent and appointed the FSLIC as receiver for Old Vernon. Simultaneously, the FHLBB created Vernon Savings and Loan Association, F.S.A. (Vernon, F.S.A.), and approved an acquisition agreement between the FSLIC as receiver for Old Vernon and Vernon, F.S.A., whereby Vernon, F.S.A. acquired substantially all the assets of Old Vernon. The FHLBB appointed the FSLIC as receiver for Vernon, F.S.A., which entity then succeeded to the assets of Vernon, F.S.A.
The FDIC as receiver for Vernon, F.S.A. (FDIC-Receiver)5 filed a motion to sever the defendants' counterclaim and claim of offset and also a motion for summary judgment on the notes and guaranties.6 Thereafter, the defendants moved to strike the affidavits of Robert St. John and Wilma Howl (the Affidavits)--which the FDIC-Receiver submitted in support of its motion for summary judgment. The district court denied this motion, and issued an order which (i) granted the FDIC-Receiver's motion to sever, ruling that " [t]he Court, in its discretion, is of the opinion that the counterclaim and claim of offset should be severed"; and (ii) granted the FDIC-Receiver's summary judgment motion only to the extent that "the defendants' affirmative defense/counterclaim of breach of good faith and fair dealing is barred as a matter of law." Record on Appeal, vol. 3, at 526.
Upon the FDIC-Receiver's motion for reconsideration of the partial denial of the summary judgment motion, the district court granted the FDIC-Receiver's motion for summary judgment. The district court denied defendants' motion to reconsider, and entered judgment in favor of the FDIC-Receiver. The defendants now appeal, contending that the district court erred by severing the defendants' claims arising out of the USJV Note and by granting the FDIC-Receiver's motion for summary judgment.
* The defendants contend that the district court erred in severing the claims arising out of the USJV Note.7 The defendants allege that the FDIC-Receiver did not sustain its burden of proving that a severance should be granted and none of the factors favoring severance was present in this case. The defendants also contend that the Vernon Notes and the USJV Note and USJV Guaranty are both liquidated claims, concerning the same transaction or occurrence.
The determination whether to grant a motion to sever a counterclaim rests with the broad discretion of the district court. See United States v. 499.472 Acres of Land More or Less, 701 F.2d 545, 549-50 (5th Cir. 1983). We will overrule a district court's decision to order a severance only upon a showing that the district court abused its discretion. Fidelity & Casualty Co. v. Mills, 319 F.2d 63 (5th Cir. 1963). A district court may order a severance when it determines that severance is "in furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition or economy." Fed. R. Civ. P. 42(b). A district court may sever a case upon its own motion. Mills, 319 F.2d at 63.
We find that the district court properly exercised its discretion in severing the defendants' claims arising out of the USJV Note from the FDIC-Receiver's action. First, the defendants' claims arising out of the USJV Note and its claims arising from the Vernon Notes and Guaranties are unrelated.8 Second, the University Crossroads Condominiums--which the defendants allege is the common collateral to both the USJV Note and the Vernon Notes--were sold and the lien released before this lawsuit was initiated and before Jack McJunkin bought the USJV Note.9 The defendants' claim on the deficiency on the USJV note did not arise at the same time as the plaintiff's claim on the Vernon Notes and Guaranties and does not involve the same parties. Indeed, the claim on the deficiency on the USJV Note has nothing in common with the FDIC-Receiver's claim on the Vernon Notes and Guaranties. Accordingly, we hold that the district court properly exercised its broad discretion in severing the defendants' claims based on the USJV note purchased by McJunkin.
Defendants assert that the district court erred in granting summary judgment in favor of the FDIC-Receiver. This court has noted that "suits on promissory notes provide fit grist for the summary judgment mill." FDIC v. Cardinal Oil Well Servicing Co., 837 F.2d 1369, 1371 (5th Cir. 1988). Summary judgment is appropriate if the movant demonstrates that there is an absence of genuine issues of material fact. Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir. 1992). " [T]he substantive law will identify which facts are material." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). Such a showing entitles the movant to judgment as a matter of law. Fed. R. Civ. P. 56(c). The movant accomplishes this by informing the court of the basis for its motion, and by identifying portions of the record which reveal that there are no genuine material fact issues. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 2553, 91 L. Ed. 2d 265 (1986). Once the movant produces such evidence, the nonmovant must then direct the court to evidence in the record sufficient to establish that there is a genuine issue of material fact for trial. See id. at 323-24, 106 S. Ct. at 2553. In considering the defendants' challenge to this summary judgment, we review the record de novo. See Topalian, 954 F.2d at 1131.
The defendants contend that the district court erred in granting summary judgment because the FDIC-Receiver failed to establish that it is the owner and holder of the notes and guaranties. The defendants allege that the FDIC-Receiver did not establish that the notes and guaranties were transferred from (i) Old Vernon to the FSLIC as receiver for Old Vernon, then to (ii) Vernon, F.S.A., then to (iii) the FSLIC as receiver for Vernon, F.S.A., and then to (iv) the FDIC-Receiver. Specifically, according to the defendants, the FDIC did not prove that the notes and guaranties were transferred from Old Vernon to Vernon, F.S.A.10 At oral argument, the FDIC-Receiver conceded that the Purchase & Assumption Agreement verifying the transfer from the FSLIC as receiver for Old Vernon to Vernon, F.S.A. is not in the record, but asserted that there is nonetheless sufficient evidence to establish that the FDIC-Receiver is the owner and holder of the Notes and Guaranties.
In order to recover under the Vernon Notes and Guaranties, the FDIC-Receiver must establish that: (1) the defendants signed the notes and the guaranty agreements; (2) the FDIC-Receiver is the present owner or holder of the notes and the guaranty agreements; and (3) the notes are in default. See RTC v. Marshall, 939 F.2d 274, 276 (5th Cir. 1991); see also B.L. Nelson & Assocs. v. Sunbelt Sav., 733 F. Supp. 1106, 1109-10 (N.D. Tex. 1990); FSLIC v. Atkinson-Smith Univ. Park Joint Venture, 729 F. Supp. 1130, 1132 (N.D. Tex. 1989).
Recently, in RTC v. Camp, 965 F.2d 25 (5th Cir. 1992), this court addressed an appeal from a summary judgment on a note in favor of the RTC. In Camp, the RTC did not produce the original note upon which it sought recovery, but rather it submitted a copy of the note, along with several affidavits. One affiant testified that the photocopy was a true and correct copy of the note. The other affidavits submitted by the RTC contained statements that the RTC took possession and ownership of the failed institution's assets, including the note in question. In examining whether the RTC had met its summary judgment burden, the court initially "acknowledge [d] the fact that mere possession of the original of an unendorsed note payable to the order of another is not alone sufficient evidence under Texas law to prove that one is the owner and holder."11 The court, however, also acknowledged the jurisprudence of this circuit which seeks not to impose a standard so strict that summary judgment would be all but impossible for plaintiffs in cases such as these. Id. at 29. The court then remarked that it "would not hesitate to reverse summary judgment had Appellants pointed to evidence in the record to the effect that they had a legitimate fear that the RTC was not the owner and holder of the note in question and that some other entity might later approach them demanding payment." Id. In that event, affidavits attesting that the RTC had taken possession of the assets of the failed institution would be insufficient to support the summary judgment. Id. However, because the defendants in Camp failed to point to anything in the record to establish their legitimate fear that an entity other than the RTC owns and holds the note, summary judgment was appropriate. Id. at 29-30.
Applying the Camp standard to this case, we find that, with respect to one of the Vernon Notes, the defendants have pointed to some summary judgment evidence to establish their legitimate fear that the FDIC-Receiver is not the holder of the notes and guaranties. Robert St. John, an asset manager of the FDIC-Receiver, testified that the FDIC-Receiver is the owner and holder of both the Vernon Notes and Guaranties. Wilma Howl, a documentation supervisor for the FDIC-Receiver, testified that the FDIC-Receiver is the current owner of the Vernon Notes and Guaranties and that they were previously owned by the FSLIC as receiver, by Vernon, F.S.A., and by Old Vernon.12 Howl also testified that the copies of the Vernon Notes and Guaranties were true and correct copies of the originals.
The defendants contend that, although there are several indorsements on Vernon Note # 1, because none of those is to the FDIC-Receiver in the capacity in which it now sues, the defendants are at risk of multiple exposure on the same claim. The most recent indorsement on Vernon Note # 1 does contain the following language: "Pay to the order of Federal Deposit Insurance Corporation as Manager of the FSLIC Resolution Fund as Receiver of Vernon Savings & Loan" (Old Vernon). The FDIC-Receiver asserts, however, that all that is missing from this indorsement are the words "Association" and "F.S.A." The FDIC-Receiver also notes that the entity "the FDIC as Manager of the FSLIC Resolution Fund as Receiver for Vernon Savings & Loan" does not and never has existed. Appellee's Brief, at 17 n. 11, FDIC v. Selaiden Builders, Inc., No. 91-1815 (5th Cir. filed Nov. 27, 1991). However, there is no summary judgment evidence to support the FDIC's contention regarding the non-existence of this entity. We hold that the indorsement to the "Federal Deposit Insurance Corporation as Manager of the FSLIC Resolution Fund as Receiver of Vernon Savings & Loan" is the type of evidence contemplated by Camp which establishes a real question as to the identity of the owner and holder of Vernon Note # 1. See id. at 29 n. 1. Therefore, we reverse the grant of summary judgment on Vernon Note # 1.
Regarding Vernon Note # 2, however, the defendants failed to produce or point to any summary judgment proof to establish their legitimate fear that the FDIC-Receiver is not the owner and holder of Vernon Note # 2. Therefore, we find the affidavits are sufficient with respect to Vernon Note # 2 and we affirm the grant of summary judgment on Vernon Note # 2.
For the foregoing reasons, we AFFIRM in part and REVERSE in part and REMAND for further proceedings.
The plaintiff filed this action in January, 1989, seeking recovery on two promissory notes. Jack McJunkin, Charles Selaiden and Robert Selaiden filed their answers, and as well asserted a counterclaim and claim of offset against the Federal Savings and Loan Insurance Corporation, the predecessor to the plaintiff. The plaintiff has moved to sever the counterclaim and claim of offset of the three defendants which arises out of a RepublicBank/Dallas promissory note [USJV Note], other than the two upon which the plaintiff seeks recovery. The Court, in its discretion, is of the opinion that the counterclaim and claim of offset should be severed. Such counterclaim and claim of offset raised by Jack McJunkin, Charles Selaiden and Robert Selaiden is hereby severed from the above-captioned action for separate disposition.
Record Excerpts, tab 2, at 2, FDIC v. Selaiden Builders, Inc., No. 91-1815 (5th Cir. filed Sept. 20, 1991) (emphasis added).
The defendants read this language such that the recoupment claim survives the severance ordered by the district court. We do not read this language so narrowly. The district court explicitly refers to claims which arise out of the USJV Note--other than the Vernon Notes upon which the plaintiff seeks recovery. We read this language as severing all claims arising out of the USJV Note and Guaranty. This necessarily encompasses the defendants' claim of recoupment, and we therefore find that this claim was severed from the FDIC-Receiver's main action.

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A company in a broad sense is a group of persons who have come together or who have contributed money for some common purpose and have incorporated themselves into distinct legal entity. Company is the amalgamation of two distinct words- “com” and “pain”, the former meaning with/together and the later meaning “bread”.  The whole scheme of the Companies Act, 1956 is to ensure proper conduct of the affairs of the company in public interest and preservation of image of country in public interest.
Majority rule is hallmark of democracy. It equally applies to corporate democracy and is not free from pitfalls and abuse. Corporate democracy is more vulnerable to it because it is reckoned with the number of shares and not with number of individuals involved. The rule of majority  has been made applicable to the management of the affairs of the company. The members pass resolution on various subjects either by simple or three-fourth majority. Once resolution is passed by majority it is binding on all members. As a resultant corollary, court will not ordinarily intervene to protect the minority interest affected by resolution. However there are exceptions to this rule- Prevention of Oppression and mismanagement being one such ground.
With a view to check abuse of majority power, the Companies Act contains special provisions for Prevention of Oppression and Mismanagement. Chapter VI of the Companies Act deals with this. The chapter is in two parts- Part ‘A’ deals with Powers of Company Law Board (Sec 397-407) and Part ‘B’ deals with Powers of Central Government (Sec 408-409). By 1988 Amendment power under Sec409 are transferred to CLB. Further powers of Central Government are exercisable only if directed by the CLB. There can also be a composite petition under Sec 397/398 and under Sec 433(f) [winding up of company for just and equitable reasons] for relief against oppression and mismanagement. This was valid when the jurisdiction for both was exercisable by court. Presently, jurisdiction under section 397/398 the CLB can order winding up. With the amendment of 2002, powers of the CLB and of court are transferred to Tribunal. Tribunal is yet to be established. Upon its establishment, it may hold good to say that powers under sec 397/398 and under sec 433(f) are exercisable by the Tribunal.
In case of Company having share capital: 100 members or 1/10th of total number of its members, whichever is less or member/s holding not less that 1/10th issued capital. The applicants should have paid all calls and other sum due on their shares.
In case of Company not having a share capital: not less than 1/5th of total number of the members. In case of joint shareholding they will be counted as only one member.
The meaning of the term “oppression” as explained by Lord Cooper in the Scottish case of Elder v. Elder & Watson Ltd.  , was cited with approval by Wanchoo J. of the Supreme Court of India in Shanti Prasad Jain v. Kalinga Tubes  . He said that the conduct complained of should, at least, involve a visible departure from the standards of their dealing, and violations of conditions of fair play on which every shareholder who entrusts his money to Company is entitled to rely. The complaining member must show that he is suffering from oppression in his capacity as a member and not in any other capacity.
That the oppression complained off must affect a person in his capacity or character as a member of the company; harsh or unfair treatment in other capacity, e.g., as a director or a creditor is outside the purview of the section.
There must be continuous acts constituting oppression up to the date of the petition.
The events have to be considered not in isolation but as a part of a continuous story.
It must be shown as a preliminary to the application of section 397 that there is just and equitable ground for winding up the company.
It is not necessary to establish any personal prejudice for any relief under the section.  Tribunal has been given the powers to impose upon the parties whatever solution the Tribunal considers just and equitable.
An attempt to deprive a member of his ordinary membership rights is “oppression”, as in the case of Mohan Lal Chandumall v. Punjab Co. Ltd  . In the instant case, a public company doing forward contract business amended its articles of association under statutory directions, so as to deprive its non-trading members their right to vote, to call meetings, to elect directors and receive dividends. Court held that “the company in doing so trampled upon valuable rights of such members by unjust exercise of its authority and power, and this amounted to oppression within Section 377.
Continuous refusal by company to register shares with an ulterior motive of retaining control over the affairs of the company. Though the refusal once by the company may not be oppressive, but a continuous refusal by the company to register the shares with an ulterior motive of retaining the control over the affairs of the company where CLB will have to grant relief under Sec 397.- Kumar Exporters (P) Ltd v. Naini Oxygen and Acetylene Gas Ltd.
Failure to distribute the amount of compensation received on nationalization of business of company among members, where requires to be distributed. Hindustan Co-op Insurance Society Ltd, In re  – Here, the insurance business of the company was nationalized and compensation was received. The directors did not call any AGM. After three years the board resolved to call a GM and pass a resolution to continue the company and carry on other businesses authorized by memorandum with compensation money received. Sec 39 of the Life Insurance Act envisaged distribution of compensation to shareholders and dissolution of the company. The court held that the resolution and persistent conduct of the respondent in the affairs of the company shows that they never intended to distribute the compensation money amongst the shareholders, who were entitled thereto. This conduct was held to be oppressive to the company and the applicant’s minority shareholding company.
Other instances of oppression may include- issue of further shares benefiting a section of the shareholders; registration of transfers in violation of articles; irregularity in allotment and transfer of shares; denial of inspection of books to shareholder etc.
The burden of satisfying Tribunal that Company shall be wound up is not in Sec 398.
The word “likely” is used in Sec398 (1) (b). So this section can be invoked not only when there is mis-management but also when it is likely that affairs of company will be conducted prejudicial to public interest or interest of Company on account of material change in management or control of Company.
Sec 398(1) (a) will not only take into account acts or conduct of company leading to mismanagement but also non- conduct of the affairs of the company which leads to prejudice caused to the company.
A very clear illustration of mismanagement under Section 398 appears in Rajahmundary Electric Corporation v. Nageshwara Rao  . Here, a petition was brought against a company by certain shareholders on the ground of mismanagement by directors. Court found that vice-chairman grossly mismanaged the affairs of the company and had drawn considerable amounts for his personal purposes, the shareholders outside the group of chairman were powerless to set matters right. This was held to be sufficient evidence of mismanagement. The court accordingly appointed two administrators for management of company for period of 6 months vesting in them all the powers of the directorate.
Where bank account was operated by unauthorized person. Kuldip Singh Dhillon v. Paragon Utility Financers Ltd. In this case, a certified copy of a resolution had been sent to the bank authorizing certain persons to operate the account. No such resolution was found recorded in the minutes book; rather the resolutions passed on the particular date and recorded in the minutes book; rather the resolutions passed on the particular date and recorded in the minutes book were different.
Other instances include Gross neglect of interest of the company by sale of its only assets and total inattention thereafter to the affairs of the company  ; Violation of conditions of company’s memorandum etc.
Effect of Arbitration Clause  – Provisions in the Articles of Association of a company for reference of disputes between Company and director, or between directors or between members cannot oust the jurisdiction of the Court to try petition by member for winding up or petition against oppression and mismanagement.
Under Sec 408, the Central Government can appoint additional directors/ directors on board of the company if so directed by CLB. The Central government also has powers to issue directions to directors appointed by it and call for the report from them about the affairs of the company. It is more or less a takeover of the management. Under proviso to section 408(1) the CLB has exclusive power to direct the amendment of articles providing for proportionate representation for appointment of directors.
Under Sec 409, CLB has power to direct that no resolution or action having effect of change in board of directors shall be given effect unless confirmed by CLB.
Sec 397-402, 408-409 are discussed above. Sec 403 provides for interim orders by CLB, sec 404 provides for effect of alteration of memorandum and articles of association by order of CLB and Sec 405 provides for addition of respondents.
The regulation of affairs of company in the future.
Purchase of shares or interest of any members of the company by other members or company itself.
Any other persons not mentioned above. In case of any other persons notice shall be given to party concerned. Further, no agreement with any other person shall be modified except after obtaining consent of the party.
Setting aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by company or against company within three months before date of application.
The Tribunal shall set aside the above acts provided they will be deemed to be fraudulent preference if done by an individual before he is adjudged an insolvent.
Before Sec 397 & 398 an aggrieved person had ust one remedy- to apply for winding up under ‘just and equitable’ clause of sec 433(f). However now, Sec 397 & 398 are intended to avoid winding up of company and keep it going while at the same time relieving the minority shareholders from acts of oppression & mis management. Relief under these sections is perhaps a better alternative to the winding up.
b)there is some material change brought about, not in the interests of, any creditors, debenture holders or any class of shareholders of the company, or has taken place in the management or control of the company, by alteration in the Board of Directors, manager, or in the ownership of the company’s shares, or in any other manner, and such change, will result in the affairs of the company being conducted in a manner prejudicial to its interests or its members or any class of members, then any member of the may apply to the Tribunal, provided such member has a right to apply under section 215 for an order.
Clause 212(2) of the Bill also empowers Central Government to apply to the Tribunal for an order if it thinks that affairs of the company are being conducted in manner prejudicial to public interest.
Powers of the Tribunal originally under Sec 402 of the Act is provided in Clause 213 of the Bil, widening the ambit and conferring more powers to the Tribunal.
Sec 399 of the Act dealing with Right to apply under Sec 397 (oppression) and Sec 398 (mismanagement) and has been replaced by Clause 215 of the Bill which talks about right to apply under Clause 212.
Clause 216 has introduced a provision for class action which was not available in the previous Act in the Chapter of prevention of Oppression and Mismanagement. It provides : Any one or more members or one or more creditors or any class of creditors may, if they are of the opinion that the management or control of the affairs of the company are being conducted in a manner prejudicial to the interests of the company or its members or creditors, can file an application before the Tribunal on behalf of the members and creditors.
"Prevention of Oppression and Mismanagement." LawTeacher.net. 11 2013. All Answers Ltd. 04 2019 <https://www.lawteacher.net/free-law-essays/business-law/prevention-of-oppression-and-mismanagement-business-law-essay.php?vref=1>.
"Prevention of Oppression and Mismanagement." LawTeacher. LawTeacher.net, November 2013. Web. 19 April 2019. <https://www.lawteacher.net/free-law-essays/business-law/prevention-of-oppression-and-mismanagement-business-law-essay.php?vref=1>.
LawTeacher. November 2013. Prevention of Oppression and Mismanagement. [online]. Available from: https://www.lawteacher.net/free-law-essays/business-law/prevention-of-oppression-and-mismanagement-business-law-essay.php?vref=1 [Accessed 19 April 2019].
LawTeacher. Prevention of Oppression and Mismanagement [Internet]. November 2013. [Accessed 19 April 2019]; Available from: https://www.lawteacher.net/free-law-essays/business-law/prevention-of-oppression-and-mismanagement-business-law-essay.php?vref=1.

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