Richard Dover v. United States

NOT RECOMMENDED FOR PUBLICATION
File Name: 10a0138n.06
No. 08-6196
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FILED
RICHARD E. DOVER, ) Mar 04, 2010
) LEONARD GREEN, Clerk
Plaintiff-Appellant, )
)
v. ) ON APPEAL FROM THE UNITED
) STATES DISTRICT COURT FOR THE
UNITED STATES OF AMERICA, ) EASTERN DISTRICT OF TENNESSEE
)
Defendant, )
)
and )
)
FEDERAL DEPOSIT INSURANCE )
CORPORATION, )
)
Defendant-Appellee. )
BEFORE: MERRITT, MOORE, and GIBBONS, Circuit Judges.
MERRITT, Circuit Judge. Richard Dover appeals the District Court’s dismissal of his
declaratory judgment action. Dover seeks to avoid the enforcement of a nineteen million dollar
criminal restitution order levied against him for defrauding a savings and loan institution – a debt
now owed to the Federal Depository Insurance Corporation (“FDIC”). He claims that the restitution
was discharged in his subsequent bankruptcy proceeding. Our Court ruled four years ago that Dover
still owes the debt to the FDIC. Fed. Depository Ins. Corp. v. Dover, 453 F.3d 710 (2006)
No. 08-6196
Dover v. United States
[hereinafter Dover I]. We agree with the District Court that Dover’s discharge defense is claim
precluded, based on our ruling in Dover I.
I. FACTUAL AND PROCEDURAL HISTORY
In 1991, Dover pled guilty to two counts of making a false statement to Sunbelt Federal
Savings – a savings and loan institution – in violation of 18 U.S.C. § 1014. In 1993, the United
States District Court for the Southern District of Texas sentenced Dover to two years probation on
each count to run concurrently. The District Court also ordered Dover to pay $19.6 million dollars
in criminal restitution as a “special condition of probation.” Restitution was to be paid to the District
Court Clerk for disbursement to the Resolution Trust Corporation as a receiver for Sunbelt. Later,
by statute, the Federal Deposit Insurance Corporation (“FDIC”) succeeded to the Resolution Trust
Corporation’s interest in restitution. See 12 U.S.C. § 1441a(m)(1).
In 1993, Dover filed a Chapter 7 voluntary petition in the United States Bankruptcy Court
for the Southern District of Texas. Instead of listing a governmental entity as the judgment creditor
on the schedules filed with the bankruptcy petition, Dover listed Sunbelt Savings in the amount of
$19.6 million. The schedules did not list the United States or the Resolution Trust Corporation as
creditors for this particular judgment.1 The bankruptcy court entered an order of discharge in March
1994 and a final decree closing the Chapter 7 case in February of 1996.2
1
The FDIC is listed as a judgment creditor on the schedules in the amount of $2,788,392.21.
It is unclear what judgment this is referring to, but it does not appear to have any relation to the
restitution order in dispute in this case.
2
The case was later reopened in 2004 on grounds wholly unrelated to the instant case. The
Bankruptcy Court again closed the case and issued a final order in 2007. See United States v.
-2-
No. 08-6196
Dover v. United States
As of October 2002, Dover had made no payments toward his criminal restitution.
Consequently, the United States Attorney’s Office in Knoxville, Tennessee, instituted an action to
enforce the restitution. In January 2003, the FDIC intervened in the action to enforce the same
criminal restitution order, and three months later, the FDIC filed a complaint with the District Court.
Thereafter, the Government withdrew, and the District Court allowed the FDIC to continue its action
against Dover. Dover defended the action by claiming that his responsibility to pay restitution was
terminated at the end of his probationary period. In the alternative, Dover claimed that settlement
of his civil liability foreclosed the FDIC’s ability to collect criminal restitution. This Court found
against Dover in the case previously cited on both claims and held that the FDIC was entitled to
collect the restitution.
In December of 2007, Dover again sought to stop the attempts to collect the restitution by
filing a Complaint for Declaratory Judgment against the FDIC and the United States. Dover claimed
this time that the criminal restitution was discharged in his bankruptcy proceedings – a question that
was not specifically adjudicated in 2006. The FDIC and the United States filed a Joint Motion to
Dismiss, or, in the alternative, Joint Motion for Summary Judgment. Dover failed to respond to the
motions. The District Court granted the Joint Motion for Summary Judgment. As to the United
States, the District Court concluded that Dover’s suit should be dismissed on sovereign immunity
grounds. As to the FDIC, the Court found that res judicata barred Dover’s action. Thereafter, Dover
claimed that he never received electronic notice of the motions and moved to set aside the District
Dover, No. H-91-044-01, 2007 WL 1452798 (S.D. Tex. May 17, 2007).
-3-
No. 08-6196
Dover v. United States
Court’s grants of summary judgment. The District Court denied this motion. Dover timely
appealed. Dover only appeals the District Court’s decision as it relates to the FDIC; Dover does not
appeal the dismissal of the suit against the United States.
II. ANALYSIS
This Court reviews a grant of summary judgment de novo. Hamby v. Neel, 368 F.3d 549,
556 (6th. Cir. 2004). Summary judgment is appropriate when there are no genuine issues of material
fact. Id.; Fed. R. Civ. P. 56(c).
In 2006, this Court decided Dover I and addressed the enforceability of this same restitution
order. At that time, Dover attempted to avoid the FDIC’s collection efforts with the following
arguments: (1) his responsibility to pay restitution was extinguished at the end of his probation
because it was a special condition of his probation, and (2) his settlement of the civil judgment
related to the same acts estopped the FDIC from collecting the criminal restitution levied against
him. This Court rejected both arguments and granted the FDIC summary judgment in the
enforcement action, thereby holding that the FDIC was entitled to execute on its nineteen million
dollar restitution order against Dover. See Dover, 453 F.3d 710.
Dover now argues that his criminal restitution was discharged in his bankruptcy proceeding.
The merits of Dover’s discharge defense are inconsequential if he is now precluded from bringing
that defense for failing to raise it during Dover I. There are four requirements for establishing res
judicata, or more precisely in this case, claim preclusion3: “(1) a final decision on the merits by a
3
Courts often use res judicata when referencing both claim and issue preclusion. As noted
by the Supreme Court, “[i]ssue preclusion refers to the effect of a judgment in foreclosing relitigation
-4-
No. 08-6196
Dover v. United States
court of competent jurisdiction; (2) a subsequent action between the same parties or their ‘privies’;
(3) an issue in the subsequent action which was litigated or which should have been litigated in the
prior action; and (4) an identity of the causes of action.” Bittinger v. Tecumseh Prods. Co., 123 F.3d
877, 880 (6th Cir. 1997). In this case, the first and second elements have been established and are
not in dispute.
As to the third element of res judicata, the FDIC argues that Dover should have raised his
discharge defense during Dover I. Dover contends that a new basis for his defense is this Court’s
holding in Hughes v. Sanders, 469 F.3d 475 (6th Cir. 2006) (finding that civil judgments are
dischargeable in bankruptcy). Hughes was published by this Court on November 13, 2006,
approximately three years after the FDIC instituted its enforcement action. Dover insists that he
could not have made the discharge argument prior to the Hughes decision because that defense was
not “viable” or “ripe.” He cites several cases in support of this ripeness theory. See, e.g., Rawe v.
Liberty Mutual Fire Ins. Co., 462 F.3d 521, 529-30 (6th Cir. 2006); Kane v. Magna Mixer Co., 71
F.3d 555, 560 (6th Cir. 1995); Katt v. Dykhouse, 983 F.2d 690, 694 (6th Cir. 1992). But each of
these cases concerned changes in the facts underpinning the suits. Consequently, the prior judgment
could not have been preclusive because the factual basis for those claims did not exist at the time of
the judgment.
of a matter that has been litigated and decided.... Claim preclusion refers to the effect of a judgment
in foreclosing litigation of a matter that never has been litigated, because of a determination that it
should have been advanced in an earlier suit.” Migra v. Warren City School District Board of
Education, 465 U.S. 75, 77 n. 1 (1984). This case involves only claim preclusion.
-5-
No. 08-6196
Dover v. United States
Here, the facts have not changed. Dover is instead using these cases to argue that a
clarification in the law is the same as a change in facts. But a change in the law is not a sufficient
justification to avoid the res judicata effect of the earlier judgment. See 18 C. Wright, A. Miller, &
E. Cooper, Federal Practice and Procedure § 4415 (2d ed. 2009) (“[c]hange in the controlling
principles of law ordinarily does not warrant denial of claim preclusion.”)
Though never raised during briefing, Dover’s counsel at oral argument claimed that this
Court’s holding in Overbee v. Van Waters & Rogers stands for the proposition that a change in the
law is sufficient justification to overcome the preclusive effect of an earlier judgment. See Overbee
v. Van Waters &Rogers, 765 F.2d 578 (6th Cir. 1985). Dover’s reliance on Overbee is misplaced.
The plaintiff in Overbee filed a motion under Federal Rule of Civil Procedure 60(b)(6), which seeks
to relieve a party from a final judgment in an extraordinary situation. The basis of the plaintiff’s
motion was the fact that the Ohio Supreme Court reversed itself – and the precedent relied on by
this court in the plaintiff’s first appeal – less than a year after reaching the previous contrary decision.
Overbee’s appeal was on remand in the District Court at the time of the Ohio Supreme Court’s
reversal. Here, Dover did not file a Rule 60(b)(6) motion and has instead attempted to collaterally
attack a final judgment. In Overbee, we acknowledged that the facts were extraordinary while stating
that normally a “mere showing of a change in the law is not enough to demonstrate such an
extraordinary situation when the judgment has become final.” Id. at 580. Dover has not shown a
similar extraordinary situation.
Moreover, alternatively, the law has not changed. At most, Hughes fills a small gap in the
law regarding federal restitution orders left by the Supreme Court decision in Kelly v. Robinson,
-6-
No. 08-6196
Dover v. United States
479 U.S. 36, 39-40 (1986), which held that state criminal restitution orders are not dischargeable in
federal bankruptcy. Dover himself acknowledges that Hughes is “an interpretation and application”
of the Kelly decision.
Additionally, the Kelly decision was handed down years before Dover defended against the
FDIC enforcement action, as were the other Courts of Appeals cases cited by Dover on this point.
See In re: Rashid 210 F.3d 201 (3rd Cir. 2001); In re Towers, 162 F.3d 952 (7th Cir. 1998).
Consequently, Dover had a full and fair opportunity to litigate his discharge defense at that time. The
Hughes decision does not excuse Dover’s failure to make this argument in Dover I.
With regards to the fourth element required for res judicata, Dover contends that there is no
identity between Dover I and the instant case. Despite acknowledging that “both causes of action
relate to the criminal restitution order,” Dover asserts that because he is arguing under what he
believes to be new case law, there is no identity between the actions. Identity of claims means “an
identity of the facts and events creating the right of action and of the evidence necessary to sustain
each action.” Sanders Confectionary Prods., Inc. v. Heller Fin., Inc., 973 F.2d 474, 484 (6th Cir.
1992). Both actions concern Dover’s failure to pay the restitution order. They both are based on the
same core facts. There are no new facts, and instead, Dover is only attempting to argue a different
theory of defense against the same claim. The finality of judgments would be seriously impaired if
a judgment debtor could, seriatim, raise new defenses that were available to be tried at the time of
the original litigation. This debt to the government is now 17 years old without any payment, and
this defense is not available any longer. The identity of the causes of action is the same.
-7-
No. 08-6196
Dover v. United States
Consequently, Dover’s declaratory judgment action is barred by res judicata, and the District
Court’s judgment is AFFIRMED.
-8-