USCA1 Opinion
United States Court of Appeals
For the First Circuit
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No. 96-2314
FRANK SIMON, II,
Plaintiff, Appellee,
v.
GERSHON NAVON,
Defendant, Appellant.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. Morton A. Brody, U.S. District Judge]
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Before
Selya, Circuit Judge,
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Coffin and Bownes, Senior Circuit Judges.
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James D. Poliquin for appellant.
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Philip P. Mancini for appellee.
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June 2, 1997
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COFFIN, Senior Circuit Judge. This appeal is a sequel to
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Simon v. Navon, 71 F.3d 9 (1st Cir. 1995), in which we affirmed a
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May 19, 1994 judgment for plaintiff Simon against Jonathan and
Gershon Navon on a breach of contract action, reversed a judgment
on an abuse of process claim, and vacated and remanded a
defamation claim. After the case was returned to the district
court, both Navons then being debtors in bankruptcy proceedings,
further action was suspended until the bankruptcy cases were
terminated, Jonathan's by a discharge in April and Gershon's by
dismissal in June of 1996.
Subsequently, defendant Gershon Navon, on the basis of newly
acquired information, on September 6, 1996, filed a motion for
relief from the breach of contract judgment under Fed. R. Civ. P.
60(b)(3) and (6),1 claiming that Simon had given false testimony
at trial and had withheld documents during discovery.
The district court, without granting further discovery or
hearing, denied the motion for relief, ruling as follows:
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1 In relevant part, Rules 60(b)(3) and (6) state:
On motion . . . the court may relieve a party . .
. from a final judgment . . . for the following
reasons: . . . (3) fraud . . . , misrepresentation, or
other misconduct of an adverse party; . . . or (6) any
other reason justifying relief from the operation of
the judgment. The motion shall be made within a
reasonable time, and for reasons (1), (2), and (3) not
more than one year after the judgment . . . . This
rule does not limit the power of a court to entertain
an independent action to relieve a party from a
judgment . . . or to set aside a judgment for fraud
upon the court.
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1. Defendant's motion is untimely in that it was not
filed within one year following judgment of this case,
in accordance with Rule 60(b)(3).
2. Even if timely filed, the defendant has failed to
make out a showing of fraud, in accordance with Rule
60(b)(6).
We are confronted with three questions. The first is
whether the court erred in ruling that the 60(b)(3) motion was
untimely filed, i.e., after the expiration of the maximum period
of one year. More precisely, we must consider the implicit
ruling that the pendency of bankruptcy proceedings did not toll
the running of the one year period. The second question is
whether the court erred in ruling that appellant failed to
demonstrate a 60(b)(6) claim for "any other reason justifying
relief," a claim not subject to a specific limitations period.
And finally, we address the subset of 60(b)(6), the denial of a
claim asserting fraud upon the court.
These questions turn out to raise purely legal issues, as to
which our standard of review is plenary. We take the facts "as
the moving party alleges, to see whether those facts, if proven,
would warrant relief." Teamsters, Chauffers Local No. 59 v.
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Superline Transportation Co., 953 F.2d 17, 18 (1st Cir. 1992)
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(citing United States v. Baus, 834 F.2d 1114, 1121 (1st Cir.
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1987)). We conclude that the district court did not err.
I. Timeliness of the Rule 60(b)(3) Filing
The motion for relief was filed on September 6, 1996, some
two years, three and a half months after the amended judgment of
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May 19, 1994. This, of course, exceeded the maximum period of
one year allowed by the rule for (b)(3) claims.
Appellant devotes one paragraph of his brief to the argument
that the one year period does not begin to run from the entry of
judgment following trial, but rather from November 27, 1995, the
date of our decision in the prior appeal. This is so, he
asserts, because we "substantially altered" the earlier judgment,
and he cites as support 11 Charles Alan Wright & Arthur R.
Miller, Federal Practice and Procedure, 2866, at 390-91 (2d ed.
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1995). But the breach of contract ruling, the only judgment
placed in issue by the motion for relief, was not altered in any
way. As the Supreme Court stated in a similar context:
The test is a practical one. The question is whether
the . . . court . . . has disturbed or revised legal
rights and obligations which, by [the] prior judgment,
had been plainly and properly settled with finality.
FTC v. Minneapolis-Honeywell Regulator Co., 344 U.S. 206, 212
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(1952) (timeliness of petition for certiorari). The situation
here is legally indistinguishable from that in Transit Casualty
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Co. v. Security Trust Co., 441 F.2d 788, 790-91 (5th Cir. 1971),
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where an amended judgment merely changed a dismissal from "with
prejudice" to "without prejudice," and the court noted that in
the suit at issue, "plaintiffs stood in the exact position as
they did [after the original order]." See also Gegenheimer v.
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Galan, 920 F.2d 307, 309-310 (5th Cir. 1991). This argument is
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therefore unavailing.
Appellant's more labored argument focuses on the effect of
bankruptcy proceedings in extending time limits in non-bankruptcy
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cases involving the bankruptcy debtor. An involuntary petition
in bankruptcy was filed against Gershon Navon on May 14, 1994,
and was dismissed on June 11, 1996. Appellant makes a two-step
argument. He first invokes 11 U.S.C. 108(c) of the Bankruptcy
Code, which states in part:
[I]f applicable nonbankruptcy law . . . fixes a period
for commencing or continuing a civil action . . . on a
claim against the debtor, . . . and such period has not
expired before the date of the filing of the petition,
then such period does not expire until the later of --
(1) the end of such period, including any
suspension of such period occurring on or
after the commencement of the case; or
(2) 30 days after notice of the termination
or expiration of the stay under section 362 .
. .
This section is applicable, appellant argues, because his
motion for relief sought to continue the civil action on a claim
originally filed against the debtor. Then, relying on subsection
(1), he assumes, without citation of authority, that the
"suspension of such period" was triggered by the automatic stay
provision of the Bankruptcy Code, 11 U.S.C. 362(a)(1), which
states:
[A bankruptcy petition] . . . operates as a stay . . .
of . . . the commencement or continuation . . . of a
judicial . . . action or proceeding against the debtor
. . . .
Appellee counters with three arguments. He first urges
that, given the passage of 27 months from the date of final
judgment, the district court did not abuse its discretion. He
next argues that the automatic stay of 362 is inapplicable when
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a debtor in possession undertakes affirmative action for his own
benefit, citing Autoskill, Inc. v. National Educ. Support Sys.,
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994 F.2d 1476 (10th Cir. 1993). Finally, he asserts that 11
U.S.C. 108(c) is inapplicable to actions brought by the debtor.
Instead, he invokes 108(a), concerning the commencement of
actions by debtors, which in his view would impose an outside
limit of two years from the May 1994 judgment.
All of appellee's arguments misfire. To begin, the issue
being purely legal, abuse of discretion is not the appropriate
standard of review. Secondly, the fact that it was the debtor,
rather than a creditor, who took this particular step of filing a
motion, does not alter the fact that it constitutes a
"continuation" of an "action or proceeding against the debtor"
within the terms of 362. The Ninth Circuit, in Parker v. Bain,
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68 F.3d 1131, 1135-36 (9th Cir. 1995), dealt with the
applicability of 362 to an appeal by a debtor, raising the same
issue. It said that it did not need to "spill a great deal of
ink" on the assertion "that an appeal by the debtor cannot
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constitute the continuation of an action against the debtor." It
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observed that seven other circuits had rejected that rationale.
We now make the number nine.
Parker v. Bain also noted Autoskill, see 68 F.3d at 1136
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n.8, which had held that Bankruptcy Rule 6009, allowing a debtor
in possession "[w]ith or without court approval" to "prosecute
any action or proceeding in behalf of the estate," obviated any
need to obtain leave of court or release of stay before bringing
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an appeal. 994 F.2d at 1486. The Parker court was crystal clear
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that "Rule 6009 does not trump the code's automatic stay." It
relied on the analysis of Rule 6009's history and purpose by the
Bankruptcy Court in In re Capgro Leasing Assocs., 169 B.R. 305,
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309-313 (Bankr. E.D.N.Y. 1994), which held that a debtor in
possession may not proceed with an appeal of an action brought
against him "absent an order granting relief from the automatic
stay," id. at 313. The Bankruptcy Court concluded that, while
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Rule 6009 means that a trustee (or debtor in possession) is no
longer required to have the approval of the bankruptcy judge
before deciding to commence or defend an action on behalf of the
estate, the bankruptcy judge retains power under section 362 "to
decide when to let such action go forward." Id. The Ninth
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Circuit therefore parted company from Autoskill, and so do we.2
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As for the applicability of 108(a), our short answer is
that by its terms it refers only to periods within which a debtor
may "commence an action"; here, the action is one that was
commenced against the debtor.
But while appellee has not come close to the target,
appellant's thrusts have also fallen short. As we have noted, he
has assumed that the mere existence of an automatic stay under
362 triggers the "suspension" referred to in 108(c). This may
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2 Indeed, the court in Capgro noted that eight of the twelve
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circuits at that time had held that the automatic stay prevents a
debtor from appealing the decision of a non-bankruptcy forum,
where that action was originally commenced against the debtor.
169 B.R. at 310.
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be a common sense reading, but it is not the law. Collier
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Bankruptcy Manual setsforth the vital caveatto "such suspension":
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Such a suspension may result from either state or
federal law. . . .
. . . In some jurisdictions state law may dictate
suspension of a statute of limitations when a
bankruptcy or another court proceeding has stayed the
initiation of an action. Such suspension would
presumably be included within the terms of section
108(c), adding the entire duration of the automatic
stay to the applicable time period. [Footnote omitted.]
However, absent such a provision in state law, a
statute of limitations or other deadline for an action
against a debtor . . . is extended for only the second
period set forth in section 108(c), 30 days after
notice of the termination or expiration of the
automatic stay . . . .
Lawrence P. King, ed., 1 Collier Bankruptcy Manual, 108.04 at
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108-14, 15 (3d ed. 1996).
This interpretation also accords with the contemporaneous
analysis of the section in the House Report accompanying the 1977
Bankruptcy Code revision. After stating that subsection (c) of
108 extends the statute of limitations for creditors (which, as
we have pointed out, it also does for debtors in possession), the
report states:
[I]f a creditor is stayed from commencing or continuing
an action against the debtor because of the bankruptcy
case, then the creditor is permitted an additional 30
days after notice of the event by which the stay is
terminated, whether that event be relief from the
automatic stay . . . , [or]the closing of the
bankruptcy case (which terminates the stay) . . . .
H.R. Rep. No. 95-595, at 318 (1977).
The only Maine statute we have found that bears on this
issue is Me. Rev. Stat. Ann. tit. 14, 5803, which mandates
continuance of actions for recovery of a debt provable in
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bankruptcy during bankruptcy proceedings, but only "on petition
of . . . creditors before or after the commencement of the
action." This is of no avail to appellant.
We have, however, conclusive evidence of the absence of any
suspension-extending provision of Maine law in a recent decision
of the Maine Supreme Judicial Court, Duprey v. Eagle Lake Water &
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Sewer Dist., 615 A.2d 600, 603-604 (Me. 1992). In that case, the
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court made known its views as to the meaning of the identical
"any suspension" language of 11 U.S.C. 108(b). It chose to
adopt the reasoning of the Bankruptcy Court for the District of
Maine that 362 "does not stay the running of any time period,"
but only prevents an entity from exercising a power, such as
enforcing a judgment. In re Thom, 95 B.R. 261, 262-63 (Bankr. D.
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Me. 1989).
The motion for relief having been filed more than 30 days
after notice of the termination of bankruptcy proceedings,3 and
there having been no suspension of the one year period of
limitations, we hold that the district court did not err in
declaring it untimely.
II. Viability of the Rule 60(b)(6) Claim
Appellant faces formidable hurdles in pursuing a 60(b)(6)
claim. There must exist "exceptional" circumstances that justify
"extraordinary" relief. Valley Citizens for a Safe Environment
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v. Aldridge, 969 F.2d 1315, 1317 (1st Cir. 1992).
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3 We discuss infra at page 11 our assumption of notice.
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We begin by accepting for purposes of our legal analysis
appellant's summary, in his reply brief, of his motion for
relief, which he contends describes both "exceptional
circumstances" and a "fraud upon the court":
For the purposes of this appeal, Simon has acknowledged
that he deceived not only Gershon Navon, but also the
judicial system, including both the bankruptcy court
and the federal district court, with respect to the
nature and extent of his interest in ACI's claim
against Maine Coast. Simon not only consciously failed
to reveal to Gershon Navon [a fellow stockholder in
Maine Coast], the creditors of Maine Coast, the Trustee
in the Maine Coast bankruptcy and the Bankruptcy Court
that he held 100% of the interest in ACI's claim
against Maine Coast while professing at all times that
his interest was indirect and negligible. He even
testified at the trial that ACI was still owed
considerable sums of money, when he previously had paid
to ACI the amount owed to the penny and took an
assignment of ACI's claim. No wonder Simon always took
the position Maine Coast had no defense or offset to
ACI's claim.
Appellant's first hurdle is the rule of mutual exclusivity,
that is, that a motion under Rule 60(b)(6) "is only appropriate
when none of the first five subsections pertain," Cotto v. United
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States, 993 F.2d 274, 278 (1st Cir. 1993); see also Liljeberg v.
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Health Services Acquisition Corp., 486 U.S. 847, 863 & n.11
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(1988); Wright & Miller, supra, 2864 at 357. One rationale of
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this rule is obvious and relevant here: were Rule 60(b)(6) to
allow a second out-of-time bite at the same apple, the stringent,
finality-enforcing limitation period of 60(b)(1)-(3) would be
eviscerated. This rule, however, does have a small escape hatch,
in the event of "extraordinary circumstances." Ackermann v.
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United States, 340 U.S. 193, 197-202 (1950); Cotto, 993 F.2d at
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278; Wright & Miller, supra, 2864 at 365.
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Here, however, nothing which could fall under that rubric
has been suggested. The 60(b)(6) claim is one solely for deceit
and fraud on the part of one party toward another, with nothing
to distinguish it from a timely 60(b)(3) claim except that it was
filed some two months beyond the 30 days after the termination of
bankruptcy proceedings allowed by 108(c).
The circumstances of this delay demonstrate rather
forcefully the absence of any special justification.
Commendably, appellant's counsel has candidly acknowledged by
affidavit that he first learned in December 1995 of leads to
information that Simon had misled defendants, and that over the
next couple of months he received documents and information
supportive of a motion for relief from judgment. His reasons for
not filing such a motion earlier were that (1) he anticipated
that more information would be forthcoming, and thought it
"prudent to collect as much information as possible before
filing"; (2) that he considered that all activity in the case was
stayed by the bankruptcy proceedings of the two Navons; and (3)
that he had no notice of the dismissal of his client's bankruptcy
proceedings until late July or early August when he was orally
informed by counsel for Simon.
On this state of the record, we must assume that appellant
received notice of the dismissal of his involuntary bankruptcy
case. Bankruptcy Rule 2002(f) requires that the clerk of the
bankruptcy court "or some other person as the Court may direct,
shall give the debtor . . . notice by mail of . . . (2) dismissal
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of the case . . . ." There is no suggestion that this was not
done.
In effect, appellant asks us to allow a tardy 60(b)(3)
motion to parade under the raiment of 60(b)(6), where the reasons
for the tardiness lay in counsel's strategic preference and
mistaken legal assumption concerning the effect of an automatic
stay, and the failure of communication between client and
counsel. These are not the kind of "extraordinary circumstances"
justifying departure from the normal maximum limitations period
required by Rule 60(b)(3).
III. Fraud Upon the Court
Rule 60(b), after delineating the six bases of a motion,
goes on to state that the power of a court to set aside a
judgment for fraud upon the court is not limited by the rule. It
is an explicit recognition of the traditional inherent power of a
court to protect its own essential functioning and integrity. It
is, however, a power rarely to be used.
We recently had occasion to review the scope of "fraud upon
the court" in connection with the parallel provision of the rule
allowing a court to entertain an independent action to relieve a
party from a judgment for fraud upon the court. Geo. P. Reintjes
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Co. v. Riley Stoker Corp., 71 F.3d 44, 46-49 (1st Cir. 1995). In
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that opinion, we noted the effect of Hazel-Atlas Glass Co. v.
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Hartford-Empire Co., 322 U.S. 238 (1944), overruled on other
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grounds, Standard Oil Co. of Cal. v. United States, 429 U.S. 17
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(1976), in expanding the range of fraud not subject to the one-
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year limitation to "include fraud committed by `officers of the
court.'" Id. at 47-48. We also characterized our concept of
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fraud upon the court in Aoude v. Mobil Oil Corp., 892 F.2d 1115,
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1118 (1st Cir. 1989), as consisting of an "`unconscionable scheme
calculated to interfere with the judicial system's ability
impartially to adjudicate a matter' involving an officer of the
court." Reintjes, 71 F.3d at 48 n.5. We noted a sharp
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demarcation, saying, "In sum, perjury alone, absent allegation of
involvement by an officer of the court . . . has never been
sufficient." Id. at 49.
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In the case at bar, nothing has been suggested or even
insinuated that takes this case beyond allegations of garden
variety deceit and fraud by a party. As a matter of law,
appellant's allegations do not rise to the level of a Rule
60(b)(6) claim or to fraud upon the court. The district court
did not err in denying the motion for relief.
Affirmed.
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