Desjardins v. Van Buren Hospital

• Court: Court of Appeals for the First Circuit
• Decided: October 13, 1994
• Docket: 93-1993
• Status: Published

Opinion

USCA1 Opinion

UNITED STATES COURT OF APPEALS
                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                FOR THE FIRST CIRCUIT
                                 ____________________

        No. 93-1993

                                  EUGENE DESJARDINS,

                                Plaintiff, Appellant,

                                          v.

                            VAN BUREN COMMUNITY HOSPITAL,

                                 Defendant, Appellee.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                              FOR THE DISTRICT OF MAINE

                     [Hon. Morton A. Brody, U.S. District Judge]
                                            ___________________

                                 ____________________

                                        Before

                                 Breyer,* Chief Judge,
                                          ___________

                        Torruella and Boudin, Circuit Judges.
                                              ______________

                                 ____________________

            Paul F. Macri  with whom Berman & Simmons,  P.A. was on brief  for
            _____________            _______________________
        appellant.
            June A.  Jackson with whom Paul  W. Chaiken and  Rudman & Winchell
            ________________           ________________      _________________
        were on brief for appellee.

____________________
                                   October 12, 1994
                                 ____________________

____________________

        *Chief  Judge Stephen Breyer heard  oral argument in  this matter, but
        did not  participate in  the drafting or  the issuance of  the panel's
        opinion.   The remaining  two panelists  therefore issue  this opinion
        pursuant to 28 U.S.C.   46(d).

BOUDIN,  Circuit  Judge.    In 1989,  Eugene  Desjardins
                          ______________

            brought suit against Van Buren Community Hospital, Inc. ("the

            Hospital"), a Maine Corporation, for federal and state claims

            arising from Desjardins' discharge from the Hospital in 1988.

            After  trial, the  jury found  that the  Hospital was  liable

            under  Federal Rehabilitation Act of 1973, 29 U.S.C.   794 et
                                                                       __

            seq., two  Maine statutes,  and a  pair of common-law  counts
            ____

            under  Maine law.   Desjardins was awarded  almost $18,000 in

            damages,  $5,000 in "front  pay," and  substantial attorney's

            fees.  

                 The  Hospital  appealed to  this  court  but during  the

            course  of  the appeal,  the  Hospital  ceased operation  for

            financial reasons.  Further,  the Van Buren Hospital District

            ("the  District"), a  municipal  entity  authorized by  Maine

            statute to provide medical services in the Town of Van Buren,

            Maine,  filed for  bankruptcy.   The District,  technically a

            separate legal  entity with taxation powers,  owned the land,

            building  and  equipment  used  by  the  Hospital.    In  the

            bankruptcy  pleadings,  the  District styled  itself  as "Van

            Buren Hospital District, d/b/a Van Buren Community Hospital."

The   District's  chapter  11  petition  was  eventually

            dismissed  by the  bankruptcy court  on the  ground that  the

            District  was a government entity not  entitled to chapter 11

            protection.    However, before  the  dismissal, the  Hospital

-2-
                                         -2-

secured  a temporary stay of its own appeal in the Desjardins

            case  on  the   ground  that  the  Hospital  had   filed  for

            bankruptcy;  in fact, it was  the District that  had so filed

            for  bankruptcy.  Ultimately, the stay was lifted and in July

            1992, this court upheld judgment in favor of Desjardins.  

                 Since  the  Hospital  took  the  position  that  it  was

            virtually without assets,  Desjardins requested a  disclosure

            hearing before the magistrate judge.  The hearing was held in

            December 1992.  After hearing testimony, the magistrate judge

            assigned  the Hospital's  checking-account  balance  and  its

            accounts receivable to  Desjardins, but the  magistrate judge

            refused  Desjardins'  request  to hold  the  District legally

            responsible  for  the Hospital's  debt  to  Desjardins.   The

            district court upheld the  magistrate judge and also declined

            to approve further discovery.  Desjardins now appeals to this

            court.

                 On  appeal,  Desjardins  argues  that  several different

            doctrines allow him to hold the District liable for the debts

            of  the  Hospital.   The  magistrate judge  rejected  such an

            attempt on two grounds:  that the District was not a party to

            the disclosure proceeding and,  further, that in the original

            action  the   claims  against  the  Hospital   had  not  been

            separately  asserted against the  District, a  distinct legal

            entity.  These threshold objections are not without force but

            for  various reasons we prefer  to track the district court's

-3-
                                         -3-

disposition,   which  addresses  the  merits  of  Desjardins'

            attempts to impute liability to the District.

                 Desjardins' first  claim on appeal is  that the doctrine

            of judicial estoppel prevented the District from denying that

            it and the Hospital were one and the same.  Judicial estoppel

            may apply  to bar a  litigant from  engaging in  "intentional

            self-contradiction  .  . .  as  a means  of  obtaining unfair

            advantage . . . ."  Patriot  Cinemas, Inc. v. General  Cinema
                                ______________________    _______________

            Corp.,  834 F.2d 208, 212 (1st Cir. 1987) (quoting Scarano v.
            _____                                              _______

            Central  R. Co., 203 F.2d  510, 513 (3rd  Cir. 1953)).  Here,
            _______________

            Desjardins  says that  the  Hospital and  District have  been

            engaged in such self-contradiction in three respects:  at the

            outset, the Hospital asserted a governmental immunity defense

            applicable only to the  District; the District's petition for

            bankruptcy styled the District  as "d/b/a Van Buren Community

            Hospital"  and  listed  Desjardins  as a  creditor;  and  the

            Hospital requested and obtained a stay of its appeal from the

            Desjardins   verdict   during   the   District's   bankruptcy

            proceedings.   

                 Since the district court rejected this judicial estoppel

            claim,  the  Hospital argues  that  the  rejection should  be

            affirmed because not clearly erroneous.   Desjardins responds

            that  judicial estoppel  presents a  matter of  the law  that

            should be reviewed de novo.  In reality, judicial estoppel is
                               __ ____

            not  extrinsically a matter of  fact or law;  the issues that

-4-
                                         -4-

arise  may turn out to be ones  of raw fact, abstract law, or

            something  in between,  e.g.,  the application  of a  general
                                    ____

            standard  to a known set  of facts.   Here, fine distinctions

            make no difference  because we would  affirm on the  judicial

            estoppel issue  even if  every aspect of  it were open  to de
                                                                       __

            novo review.
            ____

                 The phrases "self-contradiction" and  "unfair advantage"

            used  in Patriot Cinemas  are not self-executing.   There are
                     _______________

            many situations,  especially  at the  outset  of  litigation,

            where  a party  is free  to assert a  position from  which it

            later withdraws--or  even to assert, in  the alternative, two

            inconsistent positions of its  potential claims or  defenses.

            Of  course, what is legitimate pleading in one context may be

            negligent or even fraudulent in  another.  Lawyers and judges

            are not beyond making the necessary distinctions.

                 Here, the  relationship  between the  Hospital  and  the

            District is surely one  open to different interpretations and

            susceptible  to argument.  We  do not see  any wrongful self-

            contradiction, let  alone unfair advantage, in  the fact that

            the  Hospital  initially  asserted  a  governmental  immunity

            defense that was thereafter  abandoned or that the District's

            bankruptcy petition  used a  d/b/a reference to  the Hospital

            and  mentioned  Desjardins as  a  creditor,  even though  the

            District now presumably rejects both these implications.  

-5-
                                         -5-

One could be more critical of the Hospital's request for

            a  stay  of   its  own  appeal  because  of   the  District's

            bankruptcy.   The  request not  only implied  an identity  of

            entities but it also led a court to take action,  namely, the

            grant of a temporary stay.  But again, there is no indication

            of  deliberate  dishonesty  by   the  Hospital  nor  has  the

            temporary  stay  been  shown   to  have  caused  any  serious

            prejudice  to judicial  proceedings  or the  position of  the

            opposing  party.   Cf.  Wang  Laboratories,  Inc. v.  Applied
                               ___  _________________________     _______

            Computer  Sciences,  Inc., 958  F.2d  355,  358-59 (1st  Cir.
            _________________________

            1992).  We do not think this is a proper case for estoppel.

                 Desjardins's next argument is  that he should be allowed

            to  "pierce  the  corporate  veil" to  reach  the  District's

            assets.  Desjardins  brought out that the  District owned the

            land,  building and equipment of the  Hospital; that the five

            trustees  of the District  automatically became  directors of

            the Hospital (although not the only ones);  and--based on the

            testimony   of  one  current  trustee  of  the  District--the

            Hospital was the "operating  entity" and the meetings  of the

            District  trustees were only a "formality."  "I guess I would

            have to say", said  the testifying trustee, "that we  kind of

            wear two hats."

                 This testimony shows a considerable overlap  between the

            two entities but hardly  an identity so complete as  to merge

            automatically   what   are  formally   two   different  legal

-6-
                                         -6-

organizations.  That  one entity holds  property used by  the

            other  is hardly unique, and  obviously one who  is a trustee

            and  a director  wears  "two hats."    The reference  to  the

            trustees' meetings as a "formality" might be sinister in some

            contexts but here there is  nothing surprising in the thought

            that an  operating hospital  should be the  busy organization

            and  that meetings  of  the titleholding  District should  be

            routine.  "Formality" is not quite the same as "subterfuge."

                 Equally  important, Maine  law  requires something  more

            than overlap for  an adversary of  one corporation to  pierce

            the veil and reach  another.  Maine's highest court  has said

            that  its  courts "pierce  the  corporate  veil only  if  the

            corporate form  is used fraudulently or  illegally."  LaBelle
                                                                  _______

            v. Crepeau, 593  A.2d 653, 655 (Me. 1991).   Maine courts may
               _______

            also disregard  separate corporate identities  where separate

            treatment would  "justify  a wrong",  Bonnar-Vawter, Inc.  v.
                                                  ___________________

            Johnson, 173 A.2d 141 (Me. 1961), or would defeat legislative
            _______

            policy or  statutory aims.  See Brennan v. Saco Construction,
                                        ___ _______    __________________

            Inc.,  381 A.2d 656, 662 (Me. 1978).   But it is difficult to
            ____

            see a "wrong" here, and no legislation is at issue.

                 Desjardins is in substance seeking to impose liabilities

            of one entity  on a closely related entity, the  two of which

            have   close  connections,  including   a  number  of  common

            directors, but is in  other respects distinct.  In  Curtis v.
                                                                ______

            Lehigh Footwear, Inc.,  516 A.2d 558  (Me. 1986), the  former
            _____________________

-7-
                                         -7-

employees of  a bankrupt  subsidiary company sued  the parent

            corporation for  severance pay.   Even though  the subsidiary

            parent shared several common directors, and corporate parents

            can   usually  determine  the  ultimate  direction  of  their

            subsidiaries,  the  Maine  court held  that  corporate entity

            would not be disregarded in the absence  of bad faith.  There

            is no showing of bad faith here.

                 Finally,  Desjardins  protested  the   district  court's

            treatment of possible further  discovery.  Desjardins reads a

            comment of  the district judge as  precluding Desjardins from

            engaging in any further discovery.  The Hospital replies that

            a law permits the debtor to be summoned for  a new disclosure

            hearing after six  months, six months  have passed since  the

            last  hearing, and  Desjardins is  now free  to subpoena  the

            Hospital again.  The parties appear to agree  that Desjardins

            can now summon and  interrogate the Hospital again as  to its

            assets.

                 Even  with the  aid of  the district court  decision and

            three briefs, we are not able to tell what exactly remains of

            the  dispute between  the  parties as  to further  discovery.

            Desjardins does say that he used the Maine procedures for the

            post-judgment investigation,  as permitted by Fed  R. Civ. P.

            69,  but  might now  like to  use  Federal Rule  methods; the

            district judge  did express some disagreement  on this point.

            But instead  of pursuing this issue,  Desjardins' reply brief

-8-
                                         -8-

refers  instead  to  the  possibility  of  seeking  discovery

            against nonparties, as well as attachment, trustee process or

            other liens.

                 We  think that we do not have an adequately framed issue

            before us on  the discovery question.   Desjardins' effort to

            impose  liability on  the  District or  obtain its  assets or

            utilize its taxing authority has now been resolved.  We think

            that further discovery addressed to  this issue is barred  on
                                                 ____

            the  ground that the matter has already been adjudicated.  As

            to Desjardins' use  of any  type of discovery  for any  other

            purpose,  we make  no  pronouncements and  will address  such

            issues if and when presented by a specific controversy.

                 Affirmed.
                 ________

-9-
                                         -9-