Lehman v. Bank

• Court: Court of Appeals for the First Circuit
• Decided: January 28, 1999
• Docket: 98-1709
• Status: Published

Opinion

USCA1 Opinion

                 United States Court of Appeals

                     For the First Circuit


No. 98-1709



                          BARRY LEHMAN,

                       Plaintiff, Appellee,



                                v.



                    REVOLUTION PORTFOLIO LLC,

                Defendant, Third-Party Plaintiff,

                            Appellee,



                                v.



                        STUART A. ROFFMAN,

                Third-Party Defendant, Appellant.


APPEAL FROM THE UNITED STATES DISTRICT COURT

                FOR THE DISTRICT OF MASSACHUSETTS



             [Hon. Mark L. Wolf, U.S. District Judge]


Before



                      Selya, Circuit Judge,

                Campbell, Senior Circuit Judge,

                   and Lynch, Circuit Judge.


David Berman, with whom Franklin H. Levy, Gina Dines Holness,

and Abrams, Roberts, Klickstein & Levy were on brief, for

appellant.

     Paul M. McDermott, with whom Jonathan W. Fitch, Suzanne Q.

Feldman and Sally & Fitch were on brief, for appellee.


January 27, 1999


SELYA, Circuit Judge.  This appeal grows out of a

triangular 1987 financial transaction that involved the Farm Street

Trust (the Trust), its beneficiaries (Barry Lehman and Stuart A.

Roffman), and First Mutual Bank for Savings (the Bank).  In the

ensuing eleven years, the transaction imploded, litigation

commenced, the Bank and Lehman became insolvent, parties came and

went, and the case was closed and partially reopened.  In the end,

only a third-party complaint proved ripe for adjudication.  Even

then, the district court dismissed two of its three counts, but

entered summary judgment on the remaining count.  The third-party

defendant, Roffman, now appeals.  After sorting through the muddled

record and the case's serpentine procedural history, we affirm. 

I.  BACKGROUND

  The historical facts are not seriously disputed.  On or

about October 19, 1987, the Trust, acting through its trustee,

executed a promissory note for $2,800,000 in favor of the Bank in

order to fund the purchase of property in Dover, Massachusetts. 

Lehman and Roffman, each of whom enjoyed a 50% beneficial interest

in the Trust, personally guaranteed the note, and Lehman proffered

two parcels of real estate as additional collateral.  In short

order, the Trust defaulted on the loan and the Bank foreclosed on

Lehman's properties.  Lehman responded by suing the Bank in a

Massachusetts state court seeking restraint or rescission of the

imminent sale of his real estate.  The gravamen of his suit was a

claim that Roffman had fraudulently introduced a sham investor to

the Bank in order to gull it into making the loan, and that the

Bank, in swallowing this spurious bait hook, line, and sinker, had

failed to exercise due diligence.

  Roughly one year after answering the complaint, the Bank

failed.  The Bank was a federally-insured financial institution. 

Consequently, the Federal Deposit Insurance Corporation (FDIC),

acting as receiver under 12 U.S.C.  1821(c)(3)(A), removed the

action to the federal district court and successfully asked to be

substituted as defendant.  Six months later, it moved for leave to

amend its answer to include a counterclaim against Lehman, quaguarantor, for the outstanding loan balance.  At the same time, it

moved for leave to serve a third-party complaint against Roffman. 

A magistrate judge granted the motion to amend on July 14, 1992,

and granted the impleader motion on January 21, 1993.

  The FDIC's third-party complaint contained three counts. 

The first two sought indemnification and contribution,

respectively, in regard to the claims advanced by Lehman.  The

third sought judgment against Roffman, qua guarantor, for the

outstanding loan balance.

  After Roffman answered the third-party complaint, the

FDIC moved for summary judgment.  Roffman not only objected, but

also moved to strike the third-party complaint in its entirety. 

The FDIC opposed that motion.  Meanwhile, Lehman entered bankruptcy

and requested a stay of proceedings in the civil suit.

  On September 30, 1994, the district court, presumably

acting in response to Lehman's stay request, issued a so-called

"procedural order of dismissal" that stated:

  In order to avoid the necessity for the

  counsel to appear at periodic status

  conferences, it is hereby ORDERED that the

  above-entitled action be and hereby is

  dismissed without prejudice to either party

  moving to restore it to the docket if any

  further action is required upon completion and

  termination of all bankruptcy or arbitration

  proceedings.



Upon receipt of this order, the clerk of court closed the file, but

did not enter a final judgment.  See Fed. R. Civ. P. 58.

  Eight months later, and periodically thereafter during

the next few years, the FDIC's counsel wrote to the district court

soliciting action in respect to its summary judgment motion. 

Although these letters were served upon Roffman's lawyer and

entered on the district court docket, Judge Wolf did not respond to

any of them until late 1997, when he set a motions hearing

(presumably encompassing both the FDIC's summary judgment motion

and Roffman's related motion to strike).  At that hearing,

rescheduled and eventually held on April 28, 1998, the court

entered an order reinstating the third-party complaint.  It

simultaneously denied Roffman's motion to strike, granted the

FDIC's motion for brevis disposition on count 3, and dismissed the

remainder of the third-party complaint without prejudice.  On June

1, 1998, Roffman filed a notice of appeal.

  Later the same month, the FDIC moved to substitute

Revolution Portfolio LLC (RP) as the real party in interest,

averring that it previously had assigned its interest in certain of

the Bank's assets (including the Trust's indebtedness and Roffman's

guaranty) to RP.  Roffman timely filed an opposition.  He also

moved for relief from the April 28 judgment, see Fed. R. Civ. P.

60(b), asserting that the district court, at the time it entered

summary judgment, did not have the real party in interest before

it.  The court granted the motion to substitute, see Fed. R. Civ.

P. 25(c), and denied the motion for relief from judgment.  Roffman

did not file a second notice of appeal at that juncture.

II.  DISCUSSION

     Roffman asseverates that the district court never should

have reopened the case in the first place; that, even if the court

appropriately reinstated the third party complaint, it erred in

entertaining the third-party complaint and granting summary

judgment on count 3; and that the court impermissibly permitted an

untimely substitution of parties.  We consider these arguments

seriatim.


A.  Reinstatement.

     Roffman contends that reinstatement of the claim for the

outstanding balance three years after the court's issuance of a

"procedural order of dismissal" violated the temporal strictures of

Fed. R. Civ. P. 60(b)(1) (which authorizes a court to relieve a

party from a final order or judgment on grounds of, among other

things, "mistake, inadvertence, surprise, or excusable neglect" if

a motion is made within one year following the entry of the order

or judgment).  Roffman arguably waived this point by not raising it

in the lower court after the court had notified him that it would

hear the FDIC's summary judgment motion.  After all, the opposition

that he filed in anticipation of the hearing merely replicated

arguments previously made, and did not question revivification of

the action.  We do not pursue the question of waiver, however,

because the argument against reinstatement is easily dispatched on

the merits.

     Roffman begins from the mistaken premise that the so-

called "procedural order of dismissal" entered by the district

court on September 30, 1994, constituted a final judgment, which

could be corrected only under Rule 60.  In fact, the September 30

order did no more than bring about an administrative closing of the

case.  Administrative closings comprise a familiar, albeit

essentially ad hoc, way in which courts remove cases from their

active files without making any final adjudication.  See Corion

Corp. v. Chen, 964 F.2d 55, 56-57 (1st Cir. 1992) (holding that an

order deeming a case "administratively closed" was not a final,

appealable order absent a separate document to signal the court's

"view that the case had concluded").  The method is used in various

districts throughout the nation in order to shelve pending, but

dormant, cases.  See, e.g., id.; In re Arbitration Between Phila.

Elec. Co. & Nuclear Elec. Ins. Ltd., 845 F. Supp. 1026, 1028

(S.D.N.Y. 1994); Mercer v. Allegheny Ludlum Corp., 132 F.R.D. 38,

38-39 (W.D. Pa. 1990), aff'd, 931 F.2d 50 (3d Cir. 1991).  We

endorse the judicious use of administrative closings by district

courts in circumstances in which a case, though not dead, is likely

to remain moribund for an appreciable period of time.

     Properly understood, an administrative closing has no

effect other than to remove a case from the court's active docket

and permit the transfer of records associated with the case to an

appropriate storage repository.  "In no event does such an order

bar a party from restoring the action to the Court's active

calendar upon an appropriate application."  In re Arbitration, 845

F. Supp. at 1028.  Nor is the power to resurrect reserved to the

parties.  The court, too, retains the authority to reinstate a case

if it concludes that the administrative closing was improvident or

if the circumstances that sparked the closing abate.  Consequently,

the September 30 order did not terminate the underlying case, but,

rather, placed it in inactive status until such time as the judge,

in his discretion or at the request of a party, chose either to

reactivate it or to dispose of it with finality.

     That ends this aspect of the matter.  Judge  Wolf opted

to reopen the case to permit litigation of the third-party

complaint after the FDIC's repeated correspondence brought the

matter to his attention and further study convinced him that he had

swept too broadly in closing the entire file.  This decision falls

comfortably within the realm of the court's discretion, and the

time parameters specified in Rule 60(b) do not apply.  Hence, we

uphold the district court's reinstatement order.

                           B.  Joinder.

     Resolution of the reinstatement question only begins the

work of disentangling the imbricated strands of Roffman's appeal. 

We next must answer the question whether the FDIC's deployment of

a third-party complaint against Roffman was proper.  In this

regard, Roffman asserts that the district court should not have

entertained the impleader, and that, therefore, the joined claim on

the guaranty should fall of its own weight.  We review a district

court's decision to permit the filing of a third-party complaint

under Fed. R. Civ. P. 14(a) for abuse of discretion.  See 6 Charles

Alan Wright, et al., Federal Practice & Procedure  1443 (2d ed.

1990) (explaining that "whether a third-party defendant may be

impleaded under Rule 14 continues to be a question addressed to the

sound discretion of the trial court").

     As previously explained, the FDIC impleaded Roffman as a

third-party defendant on theories of indemnification and

contribution (counts 1 and 2, respectively), maintaining, in

essence, that if it were found to be liable to Lehman, then Roffman

would in turn be liable to hold it harmless or, at least,

contribute to any damages assessed against it.  See Fed. R. Civ. P.

14(a) (contemplating the availability of third-party practice when

a non-party is or may be liable "for all or part of the plaintiff's

claim against" the defendant).  In the same pleading, the FDIC

asserted an independent claim for the outstanding loan balance,

premised on Roffman's guaranty (count 3).  RP (which now stands in

the FDIC's shoes) acknowledges that the FDIC could not have brought

count 3 as a stand-alone third-party claim under Rule 14(a), but

asserts that count 3 was validly joined with counts 1 and 2 under

Fed. R. Civ. P. 18(a) (providing for permissive joinder).  To parry

this thrust, Roffman contends that the FDIC's claims for

indemnification and contribution were not viable under state law,

and thus, since the use of Rule 14(a) admittedly hinged on the

propriety of those claims, the FDIC should not have been allowed to

implead him at all.

     We doubt that Roffman has preserved this argument

inasmuch as he did not raise it below in his opposition to the

FDIC's summary judgment motion.  See Teamsters, Chauffeurs,

Warehousemen & Helpers Union, Local No. 59 v. Superline Transp.

Co., 953 F.2d 17, 21 (1st Cir. 1992) ("If any principle is settled

in this circuit, it is that, absent the most extraordinary

circumstances, legal theories not raised squarely in the lower

court cannot be broached for the first time on appeal.").  We

prefer not to inquire into this apparent waiver, however, for we

conclude, without serious question, that the FDIC was entitled to

implead Roffman under Rule 14(a) and that it appropriately joined

the guaranty claim under Rule 18(a).

     A defendant, acting as a third-party plaintiff, may

implead any non-party "who is or may be liable to the third-party

plaintiff for all or part of the plaintiff's claim against the

third-party plaintiff."  Fed. R. Civ. P. 14(a) (emphasis supplied). 

If the defendant acts within ten days of submitting his answer, he

may bring a third party into the suit without leave of court. 

Otherwise, the court's permission must be obtained.  In that

event, the determination is left to the informed discretion of the

district court, which should allow impleader on any colorable claim

of derivative liability that will not unduly delay or otherwise

prejudice the ongoing proceedings.  See Highlands Ins. Co. v. Lewis

Rail Serv. Co., 10 F.3d 1247, 1251 (7th Cir. 1993); United Statesv. One 1977 Mercedes Benz, 708 F.2d 444, 452 (9th Cir. 1983). 

Under this liberal standard, a party accused of passive negligence

(here, the FDIC) assuredly is entitled to implead the party who

allegedly committed the relevant active conduct (here, Roffman) on

a theory of indemnification.  See Montaup Elec. Co. v. Ohio Brass

Corp., 561 F. Supp. 740, 748 (D.R.I. 1983) (stating that, under

Massachusetts law, tort-based indemnity arises if the indemnitee

"did not join in the [indemnitor's] negligent act but became liable

in consequence of it").

     The FDIC's third-party claim for contribution against

Roffman similarly passes muster because Roffman and the Bank (the

FDIC's predecessor in interest) were putative joint tortfeasors

(i.e., according to the complaint, Roffman's fraudulent acts

combined with the Bank's negligent omissions to create harm).  SeeMass. Gen. Laws ch. 231B,  1(a) (1986) (providing a right of

contribution among persons who are jointly liable in tort for the

same injury); see also Wolfe v. Ford Motor Co., 386 Mass. 95, 100

(1982) (allowing contribution even though the two joint tortfeasors

were liable under different theories of tort liability).

     To be sure, Roffman argues that because Lehman's

complaint sought only restraint or rescission of the property

sales, and not damages, a third-party claim for contribution should

not lie.  But this argument gains him no ground.  Even though

Lehman's complaint did not explicitly seek money damages, that

omission did not eliminate the possibility that damages might be

awarded to him.  See Fed. R. Civ. P. 54(c) (providing that "every

final judgment [except those by default] shall grant the relief to

which the party in whose favor it is rendered is entitled, even if

the party has not demanded such relief in the party's pleadings"). 

Rule 54(c) is particularly apt in this situation, for a party may

pray for rescission and be entitled to it, yet only receive

damages.  See, e.g., Coggins v. New England Patriots Football Club,

Inc., 397 Mass. 525, 536 (1986) (observing that "because rescission

is an equitable remedy, the circumstances of a particular case may

not favor its employment," and limiting the plaintiff's remedy to

damages).  As long as damages may be awarded in lieu of rescission,

impleader properly may be used to seek contribution toward those

potential damages.  See, e.g., Prudential Ins. Co. v. BMC Indus.,

Inc., 113 F.R.D. 100, 102-03 (S.D.N.Y. 1986).  It follows

inexorably that the district court did not err in denying Roffman's

motion to strike and allowing the FDIC's Rule 14(a) claims to

stand.

     Against this backdrop, the court properly assumed

jurisdiction over count 3 of the third-party complaint.  Rule 18(a)

authorizes a third-party plaintiff to "join, either as independent

or as alternative claims, as many claims, legal, equitable, or

maritime, as the [third-party plaintiff] has against an opposing

party."  This authorization is subject only to the usual

requirements of jurisdiction and venue (none of which are

implicated here) and the district court's discretionary power to

"direct an appropriate procedure for trying the claims."  Schwab v.

Erie Lackawanna R.R. Co., 438 F.2d 62, 68-72 (3d Cir. 1971).  Given

Rule 18(a)'s broad expanse, misjoinder of claims has become an

anachronism in federal civil practice.  See 6A Wright, et al.,

supra,  1582 (suggesting that, under Rule 18(a), there no longer

"can be [a] misjoinder of claims"). 

     In this instance, Roffman signed an unconditional

personal guaranty of a loan, and the borrower later defaulted.  As

a holder in due course of the note, the FDIC had an independent

claim for the outstanding balance against Roffman.  There is

absolutely no reason why the FDIC could not append its independent

claim on the guaranty to its other claims against Roffman.

     As a fallback position, Roffman suggests that the third-

party complaint against him should have been dismissed because the

FDIC had a complete defense under 12 U.S.C.  1823(e) (1994) to the

claims brought by Lehman.  We do not agree.  Even if section

1823(e) offered the FDIC a potentially strong defense against

Lehman's claims, the record fails to show that the mere existence

of that statute rendered Lehman's complaint a nullity.

     There is, moreover, a broader point.  A district court

must oversee third-party practice with the core purpose of Rule

14(a) in mind:  avoiding unnecessary duplication and circuity of

action.  See 6 Wright, et al., supra,  1443.  Requiring a district

court to determine the merits of all defenses potentially available

to the original defendant as a precondition to allowing that

defendant to file a third-party complaint would frustrate this

purpose and countervail the efficient allocation of judicial

resources.  Thus, as long as a third-party action falls within the

general contours limned by Rule 14(a), does not contravene

customary jurisdictional and venue requirements, and will not work

unfair prejudice, a district court should not preclude its

prosecution.  So here.

                         C.  The Merits.

     To warrant summary judgment, a movant must show that a

controversy presents "no genuine issue as to any material fact and

that the moving party is entitled to a judgment as a matter of

law."  Fed. R. Civ. P. 56(c).  We review summary judgment orders de

novo, considering the record and all reasonable inferences to be

drawn therefrom in the light most favorable to the party opposing

summary judgment.  See National Amusements, Inc. v. Town of Dedham,

43 F.3d 731, 735 (1st Cir. 1995).

     In this case, Roffman does not contest the key facts

(e.g., the default on the note, the validity of the guaranty, and

the amount of the unpaid balance on the defaulted loan, net of

foreclosure proceeds).  Instead, he pegs his opposition to summary

judgment on whether the third-party complaint was properly before

the district court.  Having rejected the arguments that he raises

in that vein, see supra Part II(B), we now must affirm the district

court's grant of summary judgment.

                   D.  Substitution of Parties.

     Finally, Roffman seeks to challenge the order

substituting RP for the FDIC.  This challenge is not properly

before us.  We explain briefly.

     Roffman filed his notice of appeal on June 1, 1998.  In

terms, it purported to appeal from the district court's April 28

order   nothing more.  The motion to substitute postdated the

filing of the notice of appeal.  The order allowing substitution

was entered on August 12, 1998.  Roffman neither amended his

original notice of appeal to reflect his displeasure with the

substitution order nor filed a new notice of appeal addressed to

that order within the time allowed by law.  See Fed. R. App. P.

4(a).

     It is black-letter law that a notice of appeal must

specify the order or judgment to which the appeal is addressed. 

See Fed. R. App. P. 3(c).  Failure to make a sufficient

specification ordinarily debars the appellant from arguing the

propriety of an unspecified ruling on appeal.  See Smith v. Barry,

502 U.S. 244, 248 (1992); United States v. Velez Carrero, 140 F.3d

327, 330 (1st Cir. 1998); Kotler v. American Tobacco Co., 981 F.2d

7, 10-11 (1st Cir. 1992).  Roffman runs afoul of this tenet in

respect to the substitution order   an order that eventuated after

he filed his notice of appeal.  We are, therefore, without

jurisdiction to consider the issue.

III.  CONCLUSION

     We need go no further.  The district court committed no

error in administratively closing the case and then reinstating a

portion of it.  By the same token, the court did not err either in

permitting the maintenance of the third-party complaint against

Roffman or in permitting the joinder of an independent claim

against him within the contours of that third-party complaint.  To

close the circle, the court acted appropriately in granting summary

judgment to the FDIC on that independent claim.



Affirmed.  Costs in favor of Revolution Portfolio LLC.