The instant action is predicated on a previous lawsuit in which the Federal Trade Commission ("FTC") sued Andris Pukke for violating 15 U.S.C. § 45(a) when he used unlawful and unfair methods of competition in a fraudulent debt counseling scheme. FTC settled its claims with Pukke when both parties stipulated to the district court's ruling. Fed. Trade Comm’n v. Ameridebt, Inc., No. PJM 03-3317 (D.Md. May 16, 2006). The order designated REA as the equity receiver over Pukke's assets, giving REA full power to collect and receive all sums of money owed to the Receivorship. The order also permitted REA to bring legal action in any court to exercise its duties as Receivor. Moreover, the order stated that the district court retained jurisdiction over the matter for all purposes, including enforcement of the order.

One of Pukke's assets is an entity called Infinity; Infinity lent $1,340,000 to the defendant in the instant action, Jeffrey Holibaugh. When Holibaugh subsequently defaulted on the loan, REA filed this action in district court to collect the loan on FTC's behalf.

After the district court granted REA's Motion for Summary Judgment, Holibaugh appealed, alleging that the district court lacked subject matter jurisdiction to resolve the case. The Fourth Circuit relied on precedent that held district courts have ancillary jurisdiction over receiver actions when the court had federal question jurisdiction over the original action wherein the receiver was appointed. See Riehle v. Margolies, 279 U.S. 218, 223 (1923).

The district court had possessed federal subject matter jurisdiction when it appointed REA as FTC's receiver. Additionally, the district court had properly exercised its federal jurisdiction when it had authorized REA to take any legal action in securing the assets. Since REA's instant action against Holibugh was in furtherance of its receivership duties, the Fourth Circuit held that the proceedings fell within the district court's ancillary federal jurisdiction.

While the Court recognized that much of the ancillary jurisdiction doctrine was eliminated when Congress enacted 28 U.S.C. § 1367, it noted that § 1367 does not eliminate all ancillary jurisdiction. § 1367 governs ancillary claims, but not ancillary proceedings. See § 1367 (stating that district courts have supplemental jurisdiction over claims factually related to the original claim over which the court possessed federal subject matter jurisdiction). Because the statute is silent on proceedings, the Court ruled that the common law doctrine of ancillary jurisdiction applied. Therefore, on the basis of controlling precedent, the district court did not err in resolving the suit since it had proper subject matter jurisdiction to do so.

In an engaging dissent, Judge Shed argued that the district court lacked jurisdiction to hear the suit because he reasoned that § 1367 abrogated the entire common law doctrine of ancillary jurisdiction. Judge Shed noted jurisdiction did not exist under § 1367 since the underlying suit was resolved and the instant action was not factually related. Taking the position that the ancillary jurisdiction doctrine was "long-lost," he disagreed that the majority could revive it simply by categorizing the case as a mere "proceeding."

After analyzing the question of jurisdiction, the Court further held that the loan note was a negotiable instrument with a six-year statute of limitations. As such, summary judgment was proper since REA filed its claim within the given time period.

Lastly, the Court held summary judgment was also proper since there were no disputed facts regarding the parties' intention of who was responsible for the loan. The district court properly excluded evidence under the parol evidence rule that Pukke verbally stated he would not hold Holibaugh liable for the loan. The parol evidence rule states that such extrinsic testimony is inadmissible to contradict valid, plain, and unambiguous terms of a written contract. Since Holibough signed the loan note as a borrower and the terms were clear, the district court properly excluded any contrary extrinsic evidence.

Thus, the Court affirmed since the majority determined that the district court had jurisdiction to grant summary judgment in REA's favor.