Drexler v. Kozloff

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
APR 13 2000
FOR THE TENTH CIRCUIT
PATRICK FISHER
Clerk
STANLEY L. DREXLER; DREXLER,
WALD & ABRAMOVITZ, P.C.;
JOSEPH MARGARITE, also known as
Ray Poli,
No. 99-1230
Plaintiffs-Appellees, (D.C. No. 81-N-1917)
(D. Colo.)
v.
BURT KOZLOFF,
Defendant-Appellant.
ORDER AND JUDGMENT *
Before EBEL , KELLY , and BRISCOE , Circuit Judges.
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument.
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
Burt Kozloff appeals from the district court’s denial of his Fed. R. Civ. P.
60(b) motion to vacate a default judgment. We have jurisdiction pursuant to 28
U.S.C. § 1291, and reverse and remand with directions.
I. Background
The relevant facts in this case are undisputed. At the time of the actions
giving rise to the underlying lawsuit, Kozloff was a resident of New York, Joseph
Margarite was a resident of Pennsylvania, and Stanley Drexler was a resident of
Colorado. On March 8, 1982, appellees (Stanley Drexler; Drexler, Wald &
Abramovitz, P.C.; and Joseph Margarite) obtained a default judgment against
Kozloff in Colorado federal district court in the amount of 1.4 million dollars.
The judgment arose out of a loan received by Kozloff and a promissory note he
gave in return to Margarite in New York. Margarite assigned the note to Drexler
one day before Drexler filed suit. After obtaining the default judgment, Drexler
reassigned the note to Margarite, and the judgment was registered in the United
States District Court for the Southern District of New York in March 1982. See
28 U.S.C. § 1963 (providing for registration of federal judgments in other
districts for enforcement). In 1993, appellees registered their judgment in the
New York Supreme Court and filed a notice of intent to garnish Kozloff’s assets
that were in his wife’s possession. Soon thereafter, Kozloff petitioned the New
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York Supreme Court to vacate the Colorado judgment on grounds that it was void
for lack of personal jurisdiction over Kozloff.
After a hearing at which all parties presented evidence on the issue of
whether Colorado had personal jurisdiction under the long arm statute, the New
York Supreme Court concluded that “the record provides no evidentiary basis to
sustain a finding of in personam jurisdiction under the Colorado Long Arm
Statute over . . . Kozloff” under the test enunciated in International Shoe Co. v.
Washington , 326 U.S. 310 (1945). See Appellant’s App. at 102. The court found
Kozloff’s visits to Aspen, Colorado in 1980 and 1981 were vacation sojourns and
no business transactions were conducted that would bring him under the
jurisdiction of the Colorado courts. See id. at 97-98, 101. The court also found
the fact that the promissory note was payable at Drexler’s Denver law office,
standing alone, was not sufficient to sustain long-arm jurisdiction over Kozloff.
See id. at 98-99. Significantly, the court found the assignment of the note from
Margarite to Drexler was gratuitous and Drexler could not “bootstrap”
jurisdiction over Kozloff based on Drexler’s residency. See id. at 101-02. On
October 17, 1995, the court vacated “the registration in the Supreme Court of the
State of New York . . . of the judgment obtained in Colorado.” Id. at 81.
Appellees did not appeal from that final order.
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In 1998 Kozloff filed a motion requesting the Colorado district court to
vacate the default judgment, citing the New York judgment. See id. at 77.
Kozloff based his request on the principles of res judicata and full faith and
credit. See id. at 83-87, 130-33. The district court denied the motion, stating that
“no New York state judge is going to tell this court what judgment it ought to be
vacating.” Id. at 5 (Tr. of April 9, 1999 hearing). The court conducted an
independent jurisdictional inquiry and concluded that Colorado had long-arm
jurisdiction over Kozloff, noting the New York court had made a contrary
determination on the issue of personal jurisdiction. See id. at 17. The court
denied Kozloff’s motion to vacate the judgment, and this appeal followed.
II. Discussion
The denial of a Rule 60(b) motion generally will be set aside only upon a
showing of abuse of discretion. See V.T.A., Inc. v. Airco, Inc. , 597 F.2d 220, 223
n.7 (10th Cir. 1979). Where, however, Rule 60(b)(4) is properly invoked on the
basis that the underlying judgment is void, “relief is not a discretionary matter; it
is mandatory.” Id. at 224 n.8. Accordingly, our review is de novo. See, e.g.,
Wilmer v. Board of County Comm’rs , 69 F.3d 406, 409 (10th Cir. 1995).
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Full faith and credit
Kozloff argues that the Colorado district court failed to give full faith and
credit to the New York judgment under Migra v. Warren City Sch. Dist. Bd. of
Educ. , 465 U.S. 75, 80-81 (1984). The Migra court concluded that a federal court
must give the same preclusive effect to a state court judgment as would be given
that judgment under the law of the state in which the judgment was rendered.
Although Kozloff had requested that the New York court vacate the Colorado
judgment, the New York judgment simply vacated the registration of the
Colorado judgment in New York, making it unenforceable in New York. If the
Colorado court were to give preclusive effect to the New York judgment, the
Colorado court would likewise be required to acknowledge vacation of the New
York registration. We conclude that the Colorado district court properly refused
to grant Kozloff’s motion to vacate its default judgment based solely on the
existence of the New York order vacating that judgment’s registration in New
York. However, that does not end our inquiry.
Estoppel
On appeal, Kozloff argues that the doctrine of collateral estoppel barred
relitigation of the jurisdiction issue. We first address appellees’ argument that
Kozloff did not preserve this issue because he did not use the term “collateral
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estoppel” in his briefs or arguments to the district court. While it is true that
Kozloff only used the term “res judicata,” it is clear that he specifically referred
to issue preclusion on the question of personal jurisdiction. The district court
clearly understood that Kozloff was attempting to preclude further inquiry into the
jurisdiction issue. In fact, appellees admit that the “main thrust” of Kozloff’s
argument before the district court was the “issue of personal jurisdiction.”
Appellees’ Br. at 23.
Issue preclusion bars the relitigation of specific issues decided in a prior
proceeding between the same parties. “Under collateral estoppel, once a court has
decided an issue of fact or law necessary to its judgment, that decision may
preclude relitigation of the issue in a suit on a different cause of action involving
a party to the first case.” Allen v. McCurry , 449 U.S. 90, 95 (1980) (emphasis
added). “Direct estoppel” applies the same principle, but governs the preclusive
effect of a litigated issue in a separate proceeding within a single suit . See 18
C HARLES A. W RIGHT , A RTHUR R. M ILLER , & E DWARD H. C OOPER , F EDERAL
P RACTICE AND P ROCEDURE § 4418 (1981); cf. United States v. Shenberg , 89 F.3d
1461, 1478-79 (11th Cir. 1996) (discussing the difference between “direct” and
“collateral” estoppel, noting that issue preclusion principles are the same under
both, and using the term “collateral estoppel” in a case involving direct estoppel
to avoid confusion). Thus, in this case we are concerned with application of
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direct estoppel. Although it would have been preferable for Kozloff to have used
the correct term, his failure to do so under these circumstances did not constitute
failure to raise and preserve the issue on appeal. See Allen , 449 U.S. 90, 94 n.5
(1980) (noting that “[s]ome courts and commentators use ‘res judicata’ as
generally meaning both [issue and claim] preclusion”). We reject appellees’
assertion that, because only one cause of action between the parties actually
existed, collateral estoppel does not apply. As noted, the doctrine of direct
estoppel requires applying preclusive effect to issues decided in different
proceedings in the same cause of action.
The statute that requires a federal court to give the same full faith and
credit to a state court judgment as it would have in the courts of the state from
which it came, see 28 U.S.C. § 1738, in conjunction with the common law
principle of estoppel, also requires the federal court to accord preclusive effect to
issues that were actually litigated and necessarily decided in the earlier
proceeding. See Allen , 449 U.S. at 99 (holding that, under the principle of
collateral estoppel and application of § 1783, plaintiff could not relitigate in a
federal § 1983 action the issue of unconstitutional search and seizure because that
issue had been litigated and decided in favor of the state in the state-court
criminal proceeding).
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The doctrine of issue preclusion applies “if the issue is identical to an issue
actually litigated and necessarily decided in the prior action, the plaintiff was a
party or was in privity with a party in the prior action, there was a final merits
judgment in the prior action, and the plaintiff had a full and fair opportunity to
litigate the issue in the prior action.” Wilkinson v. Pitkin County Bd. of County
Comm'rs , 142 F.3d 1319, 1322 (10th Cir. 1998) (applying Colorado law); accord
Parker v. Blauvelt Volunteer Fire Co., Inc. , 93 N.Y.2d 343, 349 (1999) (applying
New York law).
The original complaint contained no allegations regarding personal
jurisdiction over Kozloff. The allegation in the complaint that “[v]enue of this
action lies in this court because . . . a significant portion of the business activity,
out of which the indebtedness underlying the note arose, took place in the State of
Colorado,” Appellant’s Supp. App. at 21, was a venue allegation, not one
asserting personal jurisdiction. It is uncontroverted that Drexler was not present
in Aspen and thus had no personal knowledge of Kozloff having conducted any
business transactions there underlying the note. Only Drexler testified at the
default hearing. Under these facts, contrary to appellees’ assertion, it is not
implicit in the court’s statement that the court had heard testimony on “each of
the allegations of the complaint,” Appellant’s App. at 42, that it had also heard
any testimony on the issue of personal jurisdiction. It certainly cannot be said on
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the record before us that the court “specifically inquired into the issue of long-
arm jurisdiction,” Appellees’ Br. at 1, before entering the default judgment. The
court made no finding on personal jurisdiction.
Since the Colorado court did not resolve the issue of personal jurisdiction,
the New York court had no duty to give full faith and credit to enforce the
Colorado default judgment after it determined that the Colorado court did not
have personal jurisdiction over Kozloff. Once the issue of personal jurisdiction
had been fully and fairly litigated between the parties, and appellees did not
appeal from the New York court’s ruling, its ruling on that issue became binding
upon the parties. See Parsons Steel, Inc. v. First Alabama Bank , 474 U.S. 518,
525 (1986) (holding that “[c]hallenges to the correctness of a state court’s
determination as to the conclusive effect of a federal judgment must be pursued
by way of appeal through the state-court system and certiorari from this Court”).
Consequently, the Colorado federal district court had a duty to give preclusive
effect to the New York state court’s personal jurisdiction ruling under the
doctrine of direct estoppel in the subsequent proceeding and to vacate the default
judgment upon Kozloff’s request. Cf. Cotton v. Heyman , 63 F.3d 1115, 1118
(D.C. Cir. 1995) (holding that under the doctrine of direct estoppel the defendant
could not relitigate in a separate proceeding an unappealed ultimate factual
finding in favor of the plaintiff in a prior proceeding); Deckert v. Wachovia
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Student Fin. Servs., Inc. , 963 F.2d 816, 818-19 (5th Cir. 1992) (holding that a
federal court must give preclusive effect to a personal jurisdiction issue decided
in a prior proceeding in state court between the same parties under the doctrine of
collateral estoppel).
“[I]ssue preclusion may be applied against a party only if the issue was
litigated in the previous action under the same or a less rigorous standard of proof
in the present action.” 18 J AMES W M . M OORE ET AL ., M OORE ’ S F EDERAL
P RACTICE § 132.02(4)(b) (3d ed. 1999). Appellees argue that because they “faced
a more rigorous standard of proof in the New York enforcement process than they
did on [Kozloff’s] motion to vacate judgment” in Colorado, Appellees’ Br. at 12,
the doctrine of collateral estoppel does not apply. Appellees have confused
“burden of persuasion” with “standard of proof.” The rule prohibiting application
of the doctrine applies absolutely only when the party bearing the burden of
persuasion was under a different standard of proof in the earlier proceeding, such
as occurs when the same issue is raised in civil and criminal trials. See, e.g.,
Helvering v. Mitchell , 303 U.S. 391, 397-98 (1938). The standard of proof in
both the New York and Colorado proceedings was preponderance of the evidence.
Thus, the language quoted by appellees does not apply to bar application of issue
preclusion in this case. Additionally, although the New York court placed the
initial burden of producing evidence of personal jurisdiction on appellees,
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Kozloff bore the ultimate burden of proof that he was entitled to vacation of the
registration of the judgment. Kozloff bore the same burden in his motion to
vacate the default judgment in Colorado 1
. Thus, there was no shift in the burden
of persuasion to warrant not applying direct estoppel.
The Colorado federal district court had before it conclusive evidence that
the parties had fully and fairly litigated the issue of personal jurisdiction and
proof that a state court with authority to decide the issue had finally ruled in favor
of Kozloff. Kozloff thus satisfied his burden under Rule 60(b)(4) to show
entitlement to mandatory relief from the default judgment. The judgment of the
court is REVERSED and REMANDED with directions to vacate its March 1982
default judgment.
Entered for the Court
Mary Beck Briscoe
Circuit Judge
1
Kozloff did not appeal from the district court’s ruling that he also bore the
burden of establishing lack of jurisdiction. Thus, we do not here decide the
question of who bears the burden of establishing whether in personam jurisdiction
existed over a defendant in a proceeding brought pursuant to Rule 60(b)(4) to set
aside a default judgment on the ground that it is void for lack of such jurisdiction.
See Theresa L. Kruk, Annotation, Who Has Burden of Proof in Proceeding Under
Rule 60(b)(4) of Federal Rules of Civil Procedure to Have Default Judgment Set
Aside on Ground That It Is Void for Lack of Jurisdiction , 102 A.L.R. Fed. 811(1991 & Supp. 1999) (noting split in circuits).
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