-
USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
____________________
No. 95-2278
SUSAN D. LUNDBORG, ETC.,
Plaintiff, Appellant,
v.
PHOENIX LEASING, INC., ET AL.,
Defendants, Appellees.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. Gene Carter, U.S. District Judge] ___________________
____________________
Before
Boudin, Circuit Judge, _____________
Campbell, Senior Circuit Judge, ____________________
and Lynch, Circuit Judge. _____________
____________________
Ralph A. Dyer with whom Law Offices of Ralph A. Dyer, P.A. was on _____________ ___________________________________
briefs for appellant.
David M. Wiseblood with whom Robert B. Kaplan, Joseph N. Demko, ___________________ _________________ ________________
Frandzel & Share, Anthony Perkins and Bernstein, Shur, Sawyer & Nelson ________________ _______________ ________________________________
were on brief for appellees.
____________________
August 5, 1996
____________________
BOUDIN, Circuit Judge. In this case, the district court _____________
dismissed claims brought by Susan Lundborg against Phoenix
Leasing, Inc. ("Phoenix Leasing"), on the ground that they
were barred by res judicata. We affirm the district court's ____________
judgment of dismissal but are compelled to do so on a ground
that leaves open to Lundborg the opportunity to pursue a
central aspect of her claims by an independent action in
Maine state court. For reasons that will become apparent,
such a suit is not a promising venture.
I.
The facts of the case are complicated and its procedural
history involved; we offer a condensed version here. Because
the district court dismissed the claims at issue on a motion
to dismiss, the underlying "facts" described below are
primarily drawn from the allegations of the complaint,
Rockwell v. Cape Cod Hospital, 26 F.3d 254, 256 (1st Cir. ________ __________________
1994), supplemented by pleadings in related cases of which
the district court took judicial notice. In fact, there are
six other related cases. ___
Susan Lundborg, a resident of Florida, was the sole
shareholder of Community Cable Services of Maine, Inc.
("Community Cable"), which in 1988 became a general partner
in Merlin Cable Operators ("Merlin"), a Maine general
partnership. Soon after its formation, Merlin secured
franchises to construct and operate two cable television
-2- -2-
systems in Maine. The partnership sought to borrow $850,000
of the estimated $1,000,000 cost of these projects.
In early 1989, Phoenix Leasing, a California
corporation, agreed to loan Merlin that sum at an annual
interest rate of 18 percent. The terms of the loan also
required Merlin to pay Phoenix Leasing 25 percent of the
value of the projects up to $150,000, plus an additional
$50,000 for each year the loan was outstanding after 1990,
amounting to what Lundborg claims was an effective annual
interest rate in excess of 40 percent. The loan was secured
by the cable systems and by Lundborg's personal guaranty,
itself secured in part by a mortgage on her house in Suffolk
County, New York.
In 1990, two additional cable television operators owned
wholly or in part by Lundborg agreed to borrow money from
Phoenix Leasing. The loans to Cable One CATV ("Cable One"),
a New Hampshire limited partnership, and Sure Broadcasting,
Inc. ("Sure"), a Delaware corporation, also imposed high
rates of interest and demanding terms. Lundborg personally
guaranteed the loans to Cable One and Sure, again giving
Phoenix Leasing a mortgage on her Suffolk County house. The
total of the three loans exceeded $4 million.
By December 1990, all three borrowers had stopped making
payments to Phoenix Leasing and in April 1991, Phoenix
Leasing began court actions to recover upon the loan
-3- -3-
agreements and to foreclose on the various properties
securing the loans and Lundborg's personal guaranty. These
included state court actions in Maine (against Merlin,
Community Cable, and others) and New York (against Lundborg),
and federal suits in New Hampshire (against Cable One and
others) and Nevada (against Sure).1 Phoenix Leasing later
filed claims in Merlin's federal bankruptcy proceeding in
Maine and in Cable One's similar proceeding in New
Hampshire.2
Phoenix Leasing has prevailed in every case that has
reached decision. In May 1991, Phoenix Leasing began a Maine
state court action to recover on the original $850,000 loan.
Merlin raised several affirmative defenses, including the
defense of usury, and brought several compulsory
counterclaims, see Me. R. Civ. P. 13(a), including claims for ___
fraud, breach of duty of good faith, negligence, and abuse of
process. The usury defense was cast in general terms and the
fraud claims related to alleged actions of Phoenix Leasing
quite different than the fraud charges that are now advanced.
____________________
1Phoenix Leasing Inc. v. Merlin Cable Partners, No. CV- _____________________ _____________________
91-343 (Me.Sup.Ct. York Cty.); Phoenix Leasing Inc. v. Susan ____________________ _____
Lundborg, No. 91-08094 (N.Y.Sup.Ct. Suffolk Cty.); Phoenix ________ _______
Leasing, Inc. v. Cable One CATV Limited Partnership, Civ. No. _____________ __________________________________
91-164-D (D.N.H.); Phoenix Leasing Inc. v. Sure Broadcasting, ____________________ __________________
Inc., No. CV-N-91-185-ECR (D.Nev.). ____
2In re Merlin Cable Partners, BK No. 93-10067 _________________________________
(Bankr.D.Me.); In re Cable One CATV Limited Partnership, BK __________________________________________
No. 91-12387-JEY (Bankr.D.N.H.).
-4- -4-
Phoenix Leasing's Maine state court suit against Merlin
was dismissed after Merlin filed for bankruptcy in August
1991. In September 1992, the Maine state court entered a
default judgment against Community Cable on Phoenix Leasing's
claims and Community Cable's counterclaims. In early 1994,
the federal bankruptcy court in Maine awarded Phoenix Leasing
cash and a promissory note on account of its claim against
Merlin.
Phoenix Leasing also prevailed in February 1992 in its
suit in New York state court against Lundborg to foreclose on
her mortgage. In New Hampshire, Cable One declared
bankruptcy after Phoenix Leasing brought suit in district
court; but in the ensuing bankruptcy proceeding in New
Hampshire, the court in December 1992 approved a settlement
in favor of Phoenix Leasing and in July 1993 confirmed the
plan of liquidation. In March 1995, Phoenix Leasing won its
suit in the federal district court in Nevada to recover on
the loan to Sure.
In February 1994, Lundborg learned that the loans to
Merlin, Cable One, and Sure were not funded by Phoenix
Leasing, but rather by two limited partnerships, in each of
which Phoenix Leasing was general partner. This fact emerged
during the deposition of Gary Martinez, Phoenix Leasing's
executive vice president, in the Sure litigation in district ____
court in Nevada. Lundborg alleges that these limited
-5- -5-
partnerships, and not Phoenix Leasing, were the "actual
lenders" in the loan transactions.
This is said to matter because Phoenix Leasing, as a
licensed personal property broker, was admittedly exempt from
California's usury laws which cap the interest rate that an
unlicensed lender may charge. The limited partnerships,
Lundborg claims, were not exempt and the loans were therefore
usurious and fraudulent. Moreover, Lundborg asserts that by
suing in its own name, Phoenix Leasing misrepresented its
standing to recover upon the loans in the various court
actions, and Lundborg says this amounted to additional fraud.
Based on the Martinez deposition, Lundborg in June 1994
moved in the New York state suit to set aside the judgment on
the ground that Phoenix Leasing lacked standing to foreclose
on the mortgage because it was not the true lender; the New
York court denied this motion and Lundborg did not appeal.
In the then pending Nevada federal action, Sure moved for
summary judgment on similar grounds; in December 1994, the
district court rejected this argument and in March 1995
entered judgment for Phoenix Leasing, a ruling later upheld
by the Ninth Circuit in an unpublished opinion.
In the bankruptcy courts in Maine and New Hampshire,
Lundborg made somewhat broader efforts to reopen the
judgments but with the same result. In January 1995, the
Maine bankruptcy court (in circumstances more fully described
-6- -6-
hereafter) rejected Lundborg's motion for relief from
judgment on account of fraud and based upon the Martinez
deposition. In November 1995, the New Hampshire bankruptcy
court rejected Cable One's effort to set aside the earlier
settlement of the case, ruling that the limited partnerships
involved in the Cable One loan in fact had licenses
permitting them to exceed the usual usury limit under
California law. At least one of the limited partnerships in
the Merlin transaction was evidently not involved with the
Cable One loan.
No comparable effort was made by Lundborg to reopen the
earlier Maine state court default judgment entered against
Community Cable in September 1992. Instead, in December
1994, Lundborg filed the present action against Phoenix
Leasing and others in the federal district court in Maine,
both on her own behalf and as successor in interest to Merlin
and Community Cable. The gravamen was the same set of fraud
allegations stemming from the Martinez deposition but the
complaint set forth a welter of claims.
Lundborg's complaint included nine counts: a statutory
claim for perjury arising under Maine law (count I); abuse of
process in connection with the litigation in New York (count
II); common law conversion, fraud, breach of duty of good
faith, and interference with economic opportunity (counts
III-VI); violation of California's usury statute (count VII);
-7- -7-
unjust enrichment (count VIII); and violation of the federal
civil RICO statute (count IX). Additional defendants were
the limited partnerships that allegedly funded the Merlin
loan, Gus Constantin (the chairman of Phoenix Leasing) and
Martinez.
All defendants in the Maine district court moved to
dismiss. Adopting the able recommended decision of the
magistrate judge, the district court granted this motion on
September 6, 1995, without a separate opinion. The district
court found that Lundborg had failed to articulate a RICO
claim; in the absence of that claim the court held that it
had no personal jurisdiction over the individual defendants
as to any of the counts. Lundborg does not appeal these
rulings.
The district court further held that the September 1992
judgment in Maine state court barred all of Lundborg's claims
on res judicata grounds and, further, that Lundborg was _____________
estopped by judgments in New York and in the Maine bankruptcy
court from relitigating the issue of Phoenix Leasing's fraud.
Lundborg appeals this ruling as to counts I, III, IV, V, VII
and VIII with respect to Phoenix Leasing and the limited
partnerships.
II.
As an initial matter, Lundborg argues as a matter of law
that her count I claim for perjury, pursuant to 14 Me. R.S.A.
-8- -8-
870, cannot be precluded by the earlier judgment in Maine
state court. Section 870 creates a cause of action "[w]hen a
judgment has been obtained against a party by the perjury of
a witness introduced at trial by the adverse party," and
provides that "the judgment in the former action is no bar"
to such a suit. Phoenix Leasing insists that Lundborg waived
this argument by failing to articulate it in the district
court.
We affirm the dismissal of the perjury count because
Lundborg has not stated a claim under the statute. Lundborg
alleges that pleadings and affidavits submitted in the Maine
state court action were perjurious. But section 870 applies
only to testimony "introduced at trial by the adverse party,"
and the Maine action was decided prior to trial. The Maine
Supreme Judicial Court has made clear that section 870 is to
be construed strictly, Spickler v. Greenberg, 644 A.2d 469, ________ _________
472 (Me. 1994); and we have no qualm in holding Lundborg to
"the terms of the statute." Id. (quoting Milner v. Hare, 135 ___ ______ ____
A. 522 (Me. 1926)).
This brings us to the heart of Lundborg's remaining
claims. California law, which governed the Merlin loan,
limits the amount of interest that can be charged on any
loan; the law exempts certain classes of loans and lenders
from its provisions. Cal. Const. Art. 15, 1. Phoenix
Leasing was a "personal property broker" and therefore exempt
-9- -9-
from the usury statute. Former Cal. Fin. Code 22009. (The
current version of the statute refers to lenders like Phoenix
Leasing as "finance lenders" but the change appears to be one
of name only.)
Lundborg alleges that the Merlin loan was funded by two
limited partnerships, Phoenix Leasing Cash Distribution Fund
III and Phoenix Leasing Income Fund 1975 ALP, and that these
partnerships were not then licensed as personal property
brokers. Lundborg insists that the partnerships were the
actual lenders in the Merlin transaction, that Phoenix either
assigned the loan to the partnerships or held it as their
agent and that the loan was therefore usurious. The
complaint seeks actual damages of over $6 million.
This set of allegations and arguments gives rise to
Lundborg's remaining claims. Counts III, IV, V, and VIII,
while variously styled, all charge that Phoenix Leasing
defrauded Merlin and Lundborg by failing to disclose the
identity of the "actual lenders" at the time the loan was
negotiated and thereafter, particularly when Phoenix Leasing
pursued legal claims against Merlin and Lundborg in its own
name. Count VII is a claim for treble damages under the
civil remedy provision of California's usury law. Cal. Civ.
Code 1916-3.
It is far from clear that the funding arrangement
alleged by Lundborg was illegal under California law. See, ____
-10- -10-
e.g., Strike v. Trans-West Discount Corp., 155 Cal. Rptr. ____ ______ __________________________
132, 139 (Cal.Ct.App.), appeal dismissed, 444 U.S. 948 _________________
(1979). Phoenix Leasing points out that a licensed lender
may assign a high-interest loan to an unlicensed third party;
elsewhere Phoenix Leasing has argued that despite the
internal accounting arrangements that it made, it remained
the holder of the Merlin note under California law. An
argument by Sure that challenged the funding arrangement of
its own loan was rejected by the Nevada district court in
Phoenix Leasing Inc. v. Sure Broadcasting, Inc., CV-N-91-185- ____________________ _______________________
ECR, slip op. at 8-9 (D. Nev. Dec. 18, 1994):
Phoenix's continued possession of the
promissory note appears to preclude any
negotiation of the promissory note.
Cal.Comm. 3201. Regardless of whether
Phoenix transferred ownership or the
right to receive monies under the note,
Phoenix may remain the holder of the
note. Cal. Comm 3201 & 3203. Phoenix
may also enforce the note even if it is
not the owner of the note. Cal.Comm.
3301.
But it is not certain that the facts surrounding the
Sure loan are identical to those respecting the earlier loan
to Merlin and the facts concerning the Merlin loan were not
developed in the district court. Indeed, in briefing this
case Phoenix Leasing has devoted relatively little attention
to California law, understandably relying primarily on the
res judicata rationale of the district court. Thus, the _____________
question for us is whether the district court's rationale can
-11- -11-
be sustained, a matter we review de novo. Apparel Art ________ ____________
Internat'l, Inc. v. Amertex Enterprises Ltd., 48 F.3d 576, _________________ _________________________
582 (1st Cir. 1995).
Were it not for Lundborg's allegations of fraud, the
application of res judicata doctrine to bar this present _____________
action would be straightforward. Under Maine law, which
governs the preclusive effect of the Maine state court
judgment, e.g., Diversified Foods, Inc. v. First Nat'l Bank ____ ________________________ _________________
of Boston, 985 F.2d 27, 30 (1st Cir.), cert. denied, 113 S. _________ ____________
Ct. 3001 (1993), a valid prior judgment in an action between
the same parties or their privies bars relitigation with
respect to the same claims of "all issues that were tried, or
may have been tried" in the prior action. Currier v. Cyr, _______ ___
570 A.2d 1205, 1208 (Me. 1990).
Functionally, this familiar doctrine--known in the past
as the merger and bar branch of res judicata and now as claim ____________
preclusion--prevents a plaintiff or counterclaimant from
splitting its related claims among several suits. Apparel _______
Art, 48 F.3d at 583. Such a policy responds to the parties' ___
interest in repose and the courts' desire to avoid needless
litigation. Maine follows the modern rule and defines the
claims that must be brought in one action by use of a
transactional test, so that
a subsequent suit that arises out of the same
aggregate of operative facts shall be barred even
though the second suit relies upon a legal theory
not advanced in the first case, seeks different
-12- -12-
relief than that sought in the first case, and
involves evidence different from the evidence
relevant to the first case.
Currier, 570 A.2d at 1208; see Beegan v. Schmidt, 451 A.2d _______ ___ ______ _______
642, 645 (Me. 1982) (citing Restatement (Second), Judgments _______________________________
24 (1982)).
Lundborg's claims at issue here all arise out of the
alleged wrongdoing of Phoenix Leasing and the limited
partnerships in connection with the making and enforcement of
the Merlin loan. But Merlin and Community Cable previously
brought claims against Phoenix Leasing arising out of that
same loan as counterclaims in the Maine state court action. _____________
Although Merlin was dismissed from the action when it filed
for bankruptcy, a default judgment was entered against
Community Cable in that action, and a default judgment has
the same claim-preclusive effect as a judgment on the merits.
Irving Pulp & Paper Ltd. v. Kelly, 654 A.2d 416, 418 (Me. _________________________ _____
1995).
Lundborg asserts in conclusory fashion that the default
judgment was never made final but offers no argument in
support of this claim, nor do we detect any basis for it.
Nor can Lundborg seriously deny that she and Merlin are in
privity with Community Cable, which was wholly owned by
Lundborg and was a general partner of Merlin. Restatement, ___________
supra, 59(3), 60(2). Under the circumstances, Lundborg's _____
present claims arise out of the same transaction as the
-13- -13-
counterclaims in the earlier action and are barred by res ___
judicata, absent some exception to the general rule. ________
III.
Thus far our view is the same as that of the district
court. Where we part company--with some reluctance for the
issue is very close--concerns a possible escape hatch from
res judicata invoked by Lundborg in this case. It is _____________
Lundborg's position that the 1992 default judgment against
Community Cable in the Maine state court cannot be considered
a valid judgment for purposes of res judicata because it was _____ ____________
tainted by an aspect of the same fraud that is the basis of
Lundborg's present claims, namely, the alleged fraud in the
litigation to enforce the original loan to Merlin.
Otherwise, claim preclusion applies to underlying fraud
charges no less than to other tort theories.
This contention takes us to a body of doctrine that has
few peers in the common law as a source of confusion for
lawyers and judges alike, namely, the rules that govern
independent actions that collaterally attack a prior
judgment. Partly, the problem is one of confusing
terminology, see Restatement, supra, ch. 5 intro. note, and, ___ ___________ _____
in addition, the law in this area is neither uniform nor
stable. But so far as the law permits collateral attacks,
the rules are effectively a set of exceptions to claim
preclusion.
-14- -14-
In the past some courts have been unwilling to treat
all litigation fraud as an exception to res judicata; it has ___ ____________
sometimes been said that only special categories of fraud,
such as bribery of a judge, would permit a collateral attack.
See Restatement, supra, 68 cmt. a, 70 cmt. c. The modern ___ ___________ _____
approach has been to lower the substantive bar to collateral
attack while insisting on severe conditions to the assertion
of such a claim, due diligence in the discovery of the fraud
in the original action and clear and convincing evidence of
fraud in the collateral one. Id. 70 cmt. d.; cf. Spickler ___ ___ ________
v. Greenberg, 644 A.2d 469, 471 (Me. 1994). _________
In considering Lundborg's claim to a fraud exception,
our concern is with Maine law because a federal district
court in Maine has been asked to permit a collateral attack
on a Maine state court judgment. 7 Moore, Federal Practice, ________________
60.37[3], at 60-395 (2d ed. 1995). Maine law, in accord
with the Restatement, no longer rigidly adheres to the ___________
traditional labels of extrinsic and intrinsic fraud in
determining which circumstances justify overturning a prior
judgment. Society of Lloyd's v. Baker, 673 A.2d 1336, 1339 ___________________ _____
(Me. 1996). We read Kradoska v. Kipp, 397 A.2d 568-69 (Me. ________ ____
1979), to suggest that Maine is more interested in whether
the fraud claim was known or should have been known at the
time of the earlier action. See 11 Wright, Miller & Kane, ___
Federal Practice and Procedure, 2868, at 400-01 (2d ed. _______________________________
-15- -15-
1995).
In the present case, the district court assumed, as we
do, that fraud in the course of the earlier Maine state court
litigation might give rise to an exception to claim
preclusion. But it held that the issue whether fraud had _______
occurred had itself been resolved on the merits, adversely to
Lundborg, in the New York state court and the Maine
bankruptcy court. As already noted, after the Martinez
deposition, Lundborg sought in 1994 to reopen the judgments
in both of those courts based on some of the same assertions
that are the bases for Lundborg's affirmative claims in the
district court.
The district court's ruling that the fraud issue had
earlier been resolved rested upon the other branch of res ___
judicata known as collateral estoppel or issue preclusion. ________
This doctrine bars the relitigation between the same parties
of any issue of fact or law that was actually litigated
between them, was determined and was necessary to a final,
valid judgment in a prior case. Restatement, supra, 27; ___________ _____
Spickler v. York, 505 A.2d 87, 88 (Me. 1986). Unlike claim ________ ____
preclusion, this doctrine requires an actual determination of
the issue.
We do not share the district court's view that the
decision of the New York state court that Phoenix Leasing had
standing to enforce Lundborg's loan guaranties precludes
-16- -16-
Lundborg's claims here. As far as we can tell from the
papers submitted to us, Lundborg did not raise her usury
claims and the related fraud claims in seeking to reopen the
New York action; and a holding that Phoenix Leasing had
standing to enforce the loan is not necessarily inconsistent
with the possibility that the loans' terms were originally
made by the partnerships and were usurious under California
law, and that Phoenix Leasing concealed this information from
the Lundborg entities in prior litigation.
The Maine bankruptcy decision is a closer call. Merlin
filed for bankruptcy in August 1991; a plan of reorganization
was confirmed in May 1994, awarding Phoenix Leasing $900,000.
In November 1994, Lundborg filed a motion under Fed. R. Civ.
P. Rule 60(b) for relief from the judgment based on the
February 1994 deposition, arguing that the deposition
testimony revealed that the Merlin loan was fraudulent,
usurious, and not enforceable by Phoenix Leasing. Lundborg's
Rule 60(b) motion thus raised the same factual and legal
arguments that she asserts in this case.
Phoenix Leasing opposed the motion on two grounds:
first, that the motion was untimely under the one-year
limitation on Rule 60(b) motions grounded in fraud; and
second, that on the merits the loan was not fraudulent or
usurious and could be collected by Phoenix Leasing. In
denying Lundborg's Rule 60(b) motion, the bankruptcy court
-17- -17-
found tersely that Lundborg had stated "no basis" for
granting the motion. The result is that we cannot tell
whether the bankruptcy court rested on lack of timeliness or
on the merits in denying the motion to reopen.
Thus Phoenix Leasing cannot carry its burden, as the
party claiming the benefit of issue preclusion, to show that
the fraud issue was actually decided in the prior case by the
Maine bankruptcy court. See Dowling v. United States, 493 ___ _______ ______________
U.S. 342, 350 (1990). Lundborg may therefore be free under
Maine law to press her collateral attack on the earlier Maine
state judgment, assuming that she can prove her charge of
fraud in the prior proceeding and meet the other requirements
for such an attack. At least, this possibility is not
foreclosed by issue preclusion.
IV.
To say that the claims may survive a res judicata ____________
defense is not to say that the district court was wrong in
dismissing the case. In order to reach the merits on the
counts in question (e.g., fraud, conversion), Lundborg must ____
first succeed in her collateral attack on the Maine state
court judgment. Although in form she does not ask for a
declaration or injunction, in substance this is a collateral
attack because the relief sought would undo the Maine
judgment and because res judicata bars the claims unless the ____________
Maine judgment is held to be vitiated by fraud. See Griffith ___ ________
-18- -18-
v. Bank of New York, 147 F.2d 899, 901 (2d Cir. 1945). ________________
But "[t]he principle" is that, where possible in
collateral attacks, "relief should ordinarily be sought in
the court that rendered the judgment" being thus challenged.
Restatement, supra, 79, cmt. b: see also id. 79 cmt. d. ___________ _____ ________ ___
This preference is not merely a matter of comity but also
reflects practical considerations: here, the Maine state
court has the advantage over all other courts, both in
deciding whether fraud occurred in its own prior proceedings
and in determining whether Lundborg adequately pursued
discovery efforts in that case.
Maine's own Rule 60, like the federal rule, recognizes
that an independent collateral attack based on litigation
fraud may be brought even after the one-year period for a
motion to reopen has passed. Me. R. Civ. P. 60(b); Lewien v. ______
Cohen, 432 A.2d 800 (Me. 1981). Quite apart from _____
administrative reasons for this distinction between reopening
and collateral attack, the conditions on relief are more
severe when it is made by independent action. Restatement, ___________
supra, 78 cmt. c. The Maine state courts are thus an _____
available forum.
The Supreme Court has warned that federal courts are not
lightly to relinquish jurisdiction, and that even a difficult
issue of state law or parallel pending state litigation is
not automatically a warrant to abstain. See Wright, Federal ___ _______
-19- -19-
Courts 52 (5th ed. 1994)(collecting the pertinent cases). ______
Yet the Court has said that its own abstention decisions are
not "rigid pigeonholes," Pennzoil v. Texaco, Inc., 481 U.S. ________ ____________
1, 11 n.9, 107 S. Ct. 1519, 1526 n.9 (1987), but reflect a
skein of considerations that vary with the facts of each
case. See Moses H. Cone Hospital v. Mercury Construc. Corp., ___ ______________________ _______________________
460 U.S. 1, 19-26 (1983). And no Supreme Court decision
deals directly with a case such as ours involving a
collateral attack under state law upon a prior state court
judgment.3
Here, we think that in the peculiar circumstances of
this case, abstention is appropriate. There is a complete
assurance that relief, if available at all, is fully
available in the Maine state court; indeed, Maine's own law
controls on this issue. Conversely, and of great importance,
there is no direct federal interest nor any issue of federal
law presented either by the collateral attack or by the
underlying claims in the complaint. Compare Cone, 460 U.S at _______ ____
23, 26 (noting the pertinence of an available state remedy
(or lack thereof) and of federal issues) with Colorado River ____ ______________
Water Cons. Dist. v. United States, 424 U.S. 800, 819 (1976) _________________ ______________
____________________
3Similarly, federal appellate decisions in this area are
sparse and the few cases we have found are divided. Compare _______
Lapin v. Shulton, Inc., 333 F.2d 169 (9th Cir.), cert. _____ ______________ _____
denied, 379 U.S. 904 (1964), and Carr v. District of ______ ____ ____________
Columbia, 543 F.2d 917, 927 (D.C. Cir. 1976), with Locklin v. ________ ____ _______
Switzer Bros., Inc., 335 F.2d 331, 334-35 (7th Cir. 1964), ____________________
and Wohl v. Keene, 476 F.2d 171 (4th Cir. 1973). ____ _____
-20- -20-
(emphasizing the existence of a state remedy).
Further, this suit is effectively an attempt to undo a
preexisting, final judgment of a state court based upon
matters pertaining solely to the conduct of prior litigation
in that court. While there is no flat bar to conducting this
autopsy in a federal court, the considerations of "comity and
orderly administration of justice" that point toward the
rendering court as the preferable forum, Lapin, 333 F.2d at _____
172, may have special weight where the latter is a state
court. Cf. Younger v. Harris, 401 U.S. 37, 43-45 (1971); 28 ___ _______ ______
U.S.C. 2283 (ordinarily barring federal courts from
enjoining state proceedings).
In addition, the Maine state court is obviously the
forum that can most readily determine whether in fact fraud _______
occurred in its own prior proceedings and whether diligent
discovery by the plaintiff in those proceedings would have
uncovered in a more timely fashion the information now
claimed to be vital. This appraisal is likely to be informed
not only by the records possessed by the Maine state court
but also by that court's superior knowledge of how its
proceedings are customarily conducted and what discovery is
available.
Finally, in deciding to defer to the Maine state courts,
it is significant, see Quackenbush v. Allstate Ins. Co., 116 ___ ___________ _________________
S. Ct. 1712, 1721-22 (1996), that the implicit threshold
-21- -21-
relief required to entertain Lundborg's claims--the
collateral attack on the Maine judgment--is itself an
equitable remedy within the sound discretion of the court.
Despite some limited common law antecedents, equity has been
the main source of collateral relief from judgments, and the
independent action is treated as equitable in character.
Wright, Miller & Kane, supra, 2868, at 396 (citing cases); _____
see, e.g., Lewien v. Cohen, 432 A.2d at 805. ___ ____ ______ _____
This appraisal leads us to affirm the dismissal of count
I on the merits but to affirm the dismissal of counts III,
IV, V, VII and VIII on a ground different than that adopted
by the district court and with different consequences. In
principle, Lundborg may pursue these counts by filing suit in
Maine state court and by persuading the state court that a
collateral attack on the 1992 Maine state court judgment
should be allowed.
V.
It may be of help to the parties, and to any Maine state
court that may grapple with this matter, to explain our
concerns about Lundborg's collateral attack. Our problem is
not with Lundborg's attempt to avoid on technical grounds the
loan obligations that she or her companies took on in a
commercial venture. Technical defenses are sometimes
narrowly read, but Lundborg is as free to argue for them as
she would be to invoke a statute of limitations to avoid an
-22- -22-
otherwise just debt.
Rather, our concern is primarily with the timing of this
defense. It is uncertain whether the news that the
partnerships were involved came as a complete surprise to
Lundborg in 1994. Cf. In re Cable One CATV Limited ___ _________________________________
Partnership, BK No. 91-12387-JEY, slip op. at 6 (Bankr. ___________
D.N.H., Nov. 29, 1995) ("[I]t is difficult to find any
misrepresentation since the principal [Lundborg] had the
checks involved and was on notice as to who was advancing the
monies."). But assuming surprise, it is doubtful whether
Lundborg can be excused for not discovering this possible
defense in the course of lawsuits brought in 1992.
This is not a case of forged documents or bribery of
jurors or other kinds of litigation fraud uniquely hard to
imagine or uncover. Phoenix Leasing was licensed to exceed
the usury restriction and it is a fair guess that, if the
Merlin loan ran afoul of the restriction because of the
limited partnerships, which is far from clear, it was due to
routine planning decisions made for tax or similar reasons.
Lundborg knew full well of the usury laws--a boilerplate
defense bearing this label was actually asserted--and she was
free in the Maine state court action to explore the
underpinnings of the loan.
It is possible, but we think unlikely, that a potential
usury claim based on the role of the limited partnerships was
-23- -23-
so substantial but at the same time so thoroughly concealed
that it would have escaped even a diligent effort at
discovery. Under the Restatement, the failure to exercise ___________
due diligence to unearth such a claim in the earlier case
would itself bar a later collateral attack. Restatement, ___________
supra, 70 cmt. d. In sum, even assuming that there was a _____
usury defense, we are very doubtful that the possible usury
defense was diligently pursued or that fraud can be said to
infect the Maine state judgment.
Our substantial doubts are not a legal defense against a
new state court action. But given the sanctions available
for unfounded lawsuits, Lundborg ought to give careful
consideration to her own position--and to her succession of
seven straight litigation defeats in related cases--before
she embarks upon an eighth lawsuit bearing a strong family
resemblance. "The law abhors fraud and perjury. It also
abhors interminable litigation." Cole v. Chellis, 119 A.2d ____ _______
623, 625 (Me. 1923).
Affirmed. ________
-24- -24-
Document Info
Docket Number： 95-2278
Filed Date： 8/5/1996
Precedential Status： Precedential
Modified Date： 9/21/2015