Chemlen v. Bank of Ireland

Opinion

USCA1 Opinion

November 3, 1993
                                [NOT FOR PUBLICATION]

                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT

                                 ___________________

No. 93-1592

LEON P. CHEMLEN,

                                Plaintiff, Appellant,

                                          v.

                    BANK OF IRELAND FIRST HOLDINGS, INC., ET AL.,

                                Defendants, Appellees.

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                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF MASSACHUSETTS

                   [Hon. Edward F. Harrington, U.S. District Judge]
                                               ___________________

                                 ___________________

                                        Before

                                 Breyer, Chief Judge,
                                         ___________
                         Torruella and Selya, Circuit Judges.
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                                 ___________________

               Leon P. Chemlen on brief pro se.
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               Alan R. Hoffman and Lynch, Brewer, Hoffman & Sands, on brief
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          for appellee.

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                                  __________________

Per Curiam. Appellant Leon Chemlen appeals the dismissal
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            of  his civil  action alleging  violations  of the  Racketeer

            Influenced and Corrupt  Organization Act [RICO], 18  U.S.C.  

            1961  et seq.,  the  Massachusetts Consumer  Protection  Act,
                  __ ___

            M.G.L.  ch. 93A, and state and  federal civil rights statutes

            by  appellees  Bank  of Ireland,  its  general  counsel, Joel

            Brickman, the law firm of  Sheehan, Phinney, Bass & Green and

            two  of its  employees,  and  Joseph  Schindler,  trustee  of

            appellee's bankruptcy estate.  We affirm the dismissal.

                                      Background
                                      Background

                 In October  1990, Chemlen  filed a  voluntary Chapter  7

            petition in  the United  States Bankruptcy  Court.   Appellee

            Joseph Schindler  was appointed  trustee of  the estate.   In

            October 1991,  Schindler sought  approval from  the court  to

            settle  two lawsuits  Chemlen had  brought against  Merchants

            National  Bank  and  other defendants.1    Each  suit alleged

            misconduct in  violation of the Fair Credit Reporting Act, 15

            U.S.C.   1681 et seq.  Alleging misconduct by counsel for the
                          __ ___

            bank and  collusion  between counsel  for  the bank  and  the

            trustee,  Chemlen  opposed  the   settlement  motion.     The

            bankruptcy court granted the trustee's motion and denied that

            of Chemlen. 

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            1.  Appellee  Bank of  Ireland  is the  parent  of First  New
            Hampshire Bank, the successor to Merchants National Bank.

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In  January 1992, Chemlen  moved to remove  Schindler as

            trustee of the estate.  He alleged that Schindler had engaged

            in various  improprieties in regard to the  settlement of the

            suits against the bank, including threatening appellant  with

            criminal prosecutions if he continued to oppose settlement of

            the suits, deceiving appellant, the court and creditors as to

            the  settlements, and giving the appearance of collusion with

            the bank in settlement negotiations.  This motion was denied.

            Chemlen  later moved to enjoin the trustee from "interfering"

            with his suits  against the bank and,  for a second  time, to

            remove the trustee.  These motions too were denied.  

                 Finally,  Chemlen  appealed  the  order authorizing  the

            trustee  to settle  the  suits against  the  bank, the  order

            denying  his request to enjoin the  settlement, and the order

            denying  his request  to remove  the trustee.    The district

            court dismissed his appeal on these issues on the ground that

            Chemlen lacked standing.  The court found that the settlement

            proceeds were  part of  the estate and  that Chemlen  had not

            shown  that a  successful appeal  would  create a  surplus of

            assets  over liabilities for  the estate.   Chemlen therefore

            lacked any direct  pecuniary interest in  the estate and  was

            not a  "person aggrieved" by  the contested orders.   Chemlen

            did not appeal the decision of the district court.

                 Meanwhile,  in January 1993,  Chemlen filed  the instant

            suit.  It repeats various factual allegations previously made

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before  the bankruptcy  court.   However,  Chemlen now  seeks

            relief  under  RICO,  federal  civil  rights  law  and  state

            consumer protection and  civil rights law.   The gravamen  of

            Chemlen's  complaint is that he suffered harm from appellees'

            illegal actions depriving him of his property in the proceeds

            of the  two lawsuits  settled by the  trustee.   The district

            court dismissed  the complaint on  the ground that it  was an

            improper attempt to relitigate issues already ruled on in the

            bankruptcy court.  In  the alternative, the court  found that

            the focus of  the complaint concerned communications  made in

            connection  with judicial  proceedings, which  communications

            were  absolutely privileged.    We  find  that the  case  was

            properly  dismissed  on  the  ground  of  res  judicata  and,
                                                      ___  ________

            therefore,  do  not  reach  the  district  court's  alternate

            ground.

Discussion
                                      Discussion

                 We have  recently placed  the doctrine  of res  judicata
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            into workable perspective:

                 The doctrine of  res judicata bars all  parties and
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                 their privies from  relitigating issues which  were

                 raised  or could  have been  raised  in a  previous
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                 action, once a  court has entered a  final judgment

                 on  the  merits  in the  previous  action.   United
                                                              ______

                 States v.  Alky Enterprises, Inc.,  969 F.2d  1309,
                 ______     _____________________

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1314  (1st Cir. 1992).   The essential  elements of

                 res  judicata, or claim preclusion, are (1) a final
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                 judgment on the merits in an earlier action; (2) an

                 identity  of  the  parties or  privies  in  the two

                 suits;  and (3) an identity of  the cause of action

                 in  both  the earlier  and  later suits.    Kale v.
                                                             ____

                 Combined Insurance  Co. of America, 924  F.2d 1161,
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                 1165 (1st Cir.), cert. denied, 112 S.Ct. 69 (1991).
                                  ____  ______

F.D.I.C.  v. Shearson-American Express,  Inc., 996  F.2d 493,
            _______      _______________________________

            497 (1st  Cir. 1993)  (quoting Aunyx  Corp. v.  Canon U.S.A.,
                                           ___________      _____________

            Inc., 978 F.2d 3, 6 (1st Cir. 1992), cert. denied, 113  S.Ct.
            ___                                  ____  ______

            1416 (1993))  (emphasis in original).   "The normal  rules of

            res judicata and  collateral estoppel apply to  the decisions
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            of the bankruptcy  courts."  Id.  (quoting Katchen v.  Landy,
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            382  U.S. 323,  334 (1966)).    "Generally, a  court-approved

            settlement  receives  the  same  res  judicata  effect  as  a
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            litigated judgment."   In re Medomak  Canning, 922 F.2d  895,
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            900 (1st Cir. 1990).

                 We find  all the elements  of res judicata to  have been
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            met in this  case.  We consider the elements in reverse order

            for the sake of clarity.

                 First, the gravamen  of Chemlen's complaint both  in the

            bankruptcy proceedings and  in the instant  suit is that  the

            settlement of his suits against  the bank deprived him of his

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rightful property.2   In his  motions to prevent and  then to

            void the settlement,  Chemlen had the opportunity  to present

            his  factual  allegations  of  wrongdoing  to the  bankruptcy

            court.  Thus, even though the current suit is in the guise of

            an  action under  RICO  and other  laws, it  is  in effect  a

            collateral attack on  the judgment affirming the  validity of

            the trustee's settlement of the  suits against the bank  and,

            for purposes of res judicata, it  is the same cause of action
                            ___ ________

            as that  pursued in the  bankruptcy court.3  See  Hendrick v.
                                                         ___  ________

            Avent, 891 F.2d 583, 586-87 (5th Cir.), cert. denied 498 U.S.
            _____                                   ____  ______

            819  (1990) (appellant's RICO and securities claims which are

            "directly inconsistent  with the  crux"  of bankruptcy  court

            decision  are "same  cause  of action"  for  purposes of  res
                                                                      ___

            judicata); In  re Met-L-Wood Corp,  861 F.2d 1012,  1018 (7th
            ________   ______________________

            Cir. 1988), cert.  denied 490 U.S. 1006 (1989) (dismissing on
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            res  judicata grounds  a RICO  suit  because "the  suit is  a
            ___  ________

            thinly  disguised collateral attack  on the judgment"  of the

            bankruptcy court).

                 Second, even though  the bank may not have  been a party

            or a privy to a party in bankruptcy proceedings, it may still

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            2.  Chemlen's  motion  to  dismiss  the  trustee  was  simply
            another attempt to block the settlement.

            3.  Allowing   a  collateral  attack  on  a  trustee's  court
            approved  settlement  agreement   would  also  undermine  the
            efficient administration of bankruptcy  estates which depend,
            in part,  on the finality  of such agreements. In  re Medomak
                                                           ______________
            Canning, 922 F.2d at 901.
            _______

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estop  Chemlen   from  relitigating  his  challenge   to  the

            settlements.    See  Blonder-Tongue  Laboratories,  Inc.   v.
                            ___  __________________________________

            University  of  Illinois  Foundation,  402  U.S.  313  (1971)
            ____________________________________

            (defendant  may invoke estoppel against plaintiff who lost on

            same issue to  earlier defendant); Lynch  v. Merrell-National
                                               _____     ________________

            Laboratories,  Div.  of  Richardson-Merrell,  Inc., 830  F.2d
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            1190, 1192 (1st Cir. 1987) (same).

                 Third, the order  approving the settlement of  the suits

            is  a  final  order  within  the context  of  the  bankruptcy

            proceedings.   In  bankruptcy proceedings,  "an  order  which

            disposes of a 'discrete dispute  within the larger case' [is]

            considered  final and appealable."   In re  American Colonial
                                                 ________________________

            Broadcasting  Corp.,  758  F.2d  794,  801  (1st  Cir.  1985)
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            (quoting In  re Saco Local  Development Corp., 711  F.2d 441,
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            444 (1st Cir. 1983)).  For purposes of this rule:

                      A  final judgment is one which disposes of the

                 whole  subject,  gives  all  the  relief  that  was

                 contemplated, provides with reasonable completeness

                 for  giving  effect  to  the  judgment  and  leaves

                 nothing to be  done in the cause  save superintend,

                 ministerially, the execution of the decrees.

            Id. (quoting City of  Louisa v. Levi, 140 F.2d 512,  514 (6th
            __           _______________    ____

            Cir. 1944)).  The court order approving the settlement of the

            suits fits this definition.   See In re Patel, 43 Bankr. 500,
                                          ___ ___________

            503 (N.D.  Ill. 1984)  ("bankruptcy court  order approving  a

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settlement  is final  and  appealable  under  [28  U.S.C.]   

            1334(a) because  it determines the  rights of the  parties to

            the settlement").

                 Finally,  Chemlen  asserts  that  he  falls  within   an

            exception  to the  usual  rules of  res judicata  because his
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            appeal was dismissed for lack of standing and thus was not an

            appeal on the merits of  the bankruptcy court decision.  See,
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            e.g.,  18  Wright,  Miller, &  Cooper,  Federal  Practice and
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            Procedure:  Jurisdiction      4433,  at  316  ("If   ordinary
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            opportunities  to appeal are thwarted by the circumstances of

            a  particular case  .  . .  preclusion  may prove  unwise.");

            McCarney  v. Ford  Motor, Co.,  657 F.2d  230, 234  (8th Cir.
            ________     _______________

            1981)  (dismissal based upon  lack of standing  is ordinarily

            not "on the merits" of the underlying substantive claims).   

                 The exception cited by Chemlen is not applicable in this

            case.   Chemlen's  appeal of  the  settlement orders  to  the

            district court  was dismissed  because the  court found  that

            Chemlen did not meet  the standard for appellate  standing in

            bankruptcy cases.  In this circuit, only "persons aggrieved,"

            i.e.,  only  "those  persons whose  rights  or  interests are
            ___

            'directly and adversely affected pecuniarily'" by a contested

            order in bankruptcy may appeal that order.  In re El San Juan
                                                        _________________

            Hotel,  809 F.2d  151, 154  (1st  Cir. 1987)  (quoting In  re
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            Fondiller, 707 F.2d 441, 442  (9th Cir. 1983)).  The district
            _________

            court  found that  the rights  to the  two lawsuits  were the

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property of the estate, not  of Chemlen, and that Chemlen had

            failed to show that a  successful appeal would produce assets

            for the estate in excess of its liabilities.  In other words,

            the district  court's decision on  the issue of  standing was

            predicated on  a factual finding  that Chemlen had  not shown

            that he  had any property  interest in the settlement  of the

            suits.   See  id. at  155 n.3  (whether appellant  is "person
                     ___  __

            aggrieved"  is finding  of fact  for district court).   Since

            Chemlen's underlying claims  were predicated on his  property

            interest in the settlement, this factual finding, even though

            made in the context of  determining Chemlen's standing, was a

            determination  of  the  merits of  those  claims.   Moreover,

            Chemlen made no  attempt to appeal that finding  to the Court

            of Appeals.  Chemlen was thus not deprived of the opportunity

            to  appeal the determination of  the merits of the settlement

            decision and does  not fall within an exception  to the usual

            rules of res judicata.
                     ___ ________

                 The dismissal of appellant's claim is affirmed.
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