Opposition — Fidelity & Deposit Co. v. USAFORM Hail Pool, Inc.

Sup "8 Court, U. &

— klLED

| APR 1 1976

f

No. 75-1172

In The

Supreme Court of the United States

FIDELITY AND DEPOSIT COMPANY

OF MARYLAND,

Petitioner,

vs.

USAFORM HAIL POOL, INC., et al.,

Respondents.

BRIEF IN OPPOSITION TO PETITION FOR A

WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE FIFTH CIRCUIT

Tuomas T. Coss

Coss, Coie, Sicerson, McCoy,

Beti & Bonp

P. O. Box 191

Daytona Beach, Florida 32015

Counsel for Respondents

E. L. Menc ~ hall, Inc., 926 Cherry St., Kansas City, Mo. 64106, 816-421-3030

eos

oe

a

SUBJECT INDEX

OPINIONS BELOW ..............0cccceeeeeeeees

RESPONSE TO PETITIONER’S REASONS—

RESPONSE TO PETITIONER’S REASON I:

The Court of Appeals’ Decision That It Had

Jurisdiction of This Cause (A) Is an Applica-

tion of This Court’s Prior Decisions, (B) Does

Not Conflict With the Decision of Any Other

Court of Appeals Reported to Date, and (C)

Involves Such a Unique Set of Circumstances

That Review by This Court Is Unwarranted

RESPONSE TO PETITIONER’S REASON II:

Petitioner Is Complaining of an Irregularity

Which Caused No Prejudice to Petitioner,

Was Treated As Frivolous by the Court of

Appeals, and Deserves the Same Treatment

DE 5 c65e Gnas Aa eee be dos Wenge Caeeebkekeue

RESPONSE TO PETITIONER’S REASON

III: Petitioner's Complaints Are Predicated

Upon a Misinterpretation of the Decision

Below, and Are Therefore Fallacious ........

RESPONSE TO PETITIONER’S REASON IV:

The Court of Appeals Did Not Alter Its 1972

Decision, but Merely Clarified It, Although

It Had the Power to Alter It Through the

Use of Its Sound Discretion ...............

RESPONSE TO PETITIONER’S REASON V:

The Court of Appeals Found That Most of

the District Court’s Findings Violated the

Court’s Prior Mandate, Constituting Clear

BE cubeuscésebbh Vc cwbebe beeeeeesseseues

II

RESPONSE TO PETITIONER’S REASON VI:

The Court of Appeals Did Not Change the

Law to Be Applied and Therefore No New

We EE bo vaAcou sadeoudcccaccenes 26

CONCLUSION

Index of Authorities ss

CasEs

Brainerd v. Beal, 498 F. 2d 901 (7th Cir. 1974)

Brubaker v. Board of Education, School District

149, 502 F. 2d 973 (7th Cir. 1973)

Erie Railroad Company v. Tompkins, 1938, 304

U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 ....16, 20, 26

Expeditions Unlimited Aquatic Enterprises, Inc. v.

Smithsonian Institute, 500 F. 2d 808 (D.C. Cir.

SE sasduaniadunds SbdunWeddeesetuceeueeves 6, 12

Fidelity and Deposit Company v. Usaform Hail

Pool, Inc., 523 F. 2d 744 (5th Cir. 1975) ....4, 20, 21

Fidelity and Deposit Company v. Usaform Hail

Pool, Inc., 463 F. 2d 4 (5th Cir. 1972) ......... 15

Files v. City of Rockford, 440 F. 2d 811 (7th Cir.

SUE 09.95 0009 N Seb cus ensnneeiekeS6endds codes 8,9

Geddes v. Anaconda Copper Mining Company,

1920, 254 U.S. 590, 41 S. Ct. 209, 65 L. Ed. 425 20

Greater Boston Television Corporation v. FCC, 463

ff | | ' 8. S eee ee oro 25

Harris Truck Lines, Inc. v. Cherry Meat Packers,

Inc., 303 F. 2d 609 (7th Cir. 1962), rev'd 371

U.S. 125, 83 S. Ct. 283, 9 L. Ed. 2d 261 ....4, 9, 10

Hodgson v. United Mine Workers of America, 433

Je 8 fe ree 5, 6

In Re Morrow, 502 F. 2d 520 (5th Cir. 1974) ....10, 11

Jones v. Chaney and Janes, 399 F. 2d 84 (5th Cir.

ERG Sh Pee a Pe Org ae ey See ee 13

Knapp v. North American Rockwell Corp., 506 F.

iF & te | Srrrrrrrr rrr rire 23, 24

Knox Mutual Insurance Company v. Kallen, 376 F.

el BG GI, BD occ cccccccccvneusesecsces 8

Lathrop v. Oklahoma City Housing Authority, 438

P. 3d O14 (10th Cir. 1071)... cece cc ceees 10, 11

Lord v. Helmandollar, 384 F. 2d 780 (D.C. Cir.

BD: in. 6b oe ehbN Wd ow b de ewew ns Os nsbehentets cede 6

Messinger v. Anderson, 1912, 225 U.S. 436, 32 S.

s F Fe SB SeePerrrrrrrrir ir ri 24

Moss v. Ramey, 239 U.S. 538, 36 S. Ct. 183, 60

Sh Ce Oe ci ices eperslsdeadeeweeeeunodesss 25

Nichols-Morris Corp. v. Morris, 279 F. 2d 81 (2nd

es hawk bnkeds aed ekeee denne 7

Pepper v. Litton, 1939, 309 U.S. 295, 60 S. Ct.

eS rr eerrry rT rer rrr TT 20

Radack v. Norwegian American Line Agency, Inc.,

318 F. 2d 538 (2nd Cir. 1963) ................. 6, 12

Smith v. Jackson Tool and Die, Inc., 426 F. 2d

SEE cv dev ce envnnnkeeeeuneess 10, 11, 12

Sonnenblick-Goldman Corp. v. Nowalk, 420 F. 2d

SD i cceueseeedeecsenctosenases 7-8

Thompson v. Immigration and Naturalization Ser-

vice, 1964, 375 U.S. 384, 84 S. Ct. 397, 11

SE ais i ne bh eRRERS GOAN ONE EE OK EN EOS 5, 8

Wolfsohn v. Hankin, 1964, 376 U.S. 203, 84 S.

ce Se SS FPP PereTerrrirrTrrr ree 4-5

Wright v. American Home Assurance Company, 488

7, Mt P,P 06 cece scecdtdcccececesses 13

IV

STATUTES

A oy a ee ee 2,3

FEDERAL RULES

en in Cee Res Be ars E 2

er ee 25, 26

Fed.R.Civ.P. 60(b)(6) ............. 2, 3, 5, 8, 10, 11, 12

I, Sd cee ee 2, 3, 11

MISCELLANEOUS

Moore’s Federal Practice (2d Ed. 1974), 4 0.404(1) 24

No. 75-1172

In The F

Supreme Court of the United States

FIDELITY AND DEPOSIT COMPANY

OF MARYLAND,

Petitioner,

vs.

USAFORM HAIL POOL, INC., et al.,

Hespondents.

BRIEF IN OPPOSITION TO PETITION FOR A

WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE FIFTH CIRCUIT

Respondents pray that the Petition be denied.

OPINIONS BELOW

The opinion of the Court of Appeals rendered on

November 20, 1975 is now officially reported at 523

F. 2d 744 (5th Cir. 1975). Respondents will refer to

the opinions below by reference to Petitioner's Ap-

pendices A thru H, as well as to the official citations

for those opinions which have been officially reported.

2

RESPONSE TO PETITIONER’S REASONS

RESPONSE TO PETITIONER’S REASON I:

The Court of Appeals’ Decision That It Had Jurisdic-

tion of This Cause {A) Is an Application of This Court’s

Prior Decisions, (B) Does Not Conflict With the Deci-

sion of Any Other Court of Appeals Reported to Date,

and (C) Involves Such a Unique Set of Circumstances

That Review by This Court Is Unwarranted.

A.

Petitioner launches its initial attack on the Court of

Appeals’ acceptance of jurisdiction of this cause on

grounds that the Court’s ruling violates the express pro-

visions of Rule 4(a), F.R.A.P., Rule 77(d), F.R.Civ.P.,

and 28 USCA. § 2107.

The ruling of the Court below violates neither of

the cited rules nor the statutory provision. Concisely

stated, the holding of the Court of Appeals was that

where there were unique circumstances present, in addi-

tion to the failure of the Clerk to discharge his duty

under Rule 77(d), F.R.Civ.P., the District Court prop-

erly used its broad discretion under Rule 60(b)(6),

F.R.Civ.P., in setting aside its judgment and re-enter-

ing it to preserve the right of appeal. This constitutes

neither an application of, nor a repudiation of the rules

and statute that Petitioner claims have been contra-

vened.

Rule 4(a), F.R.A.P., provides the time for filing a

notice of appeal after the entry of an appealable order

or judgment, and further provides that an extension of

thirty days in addition to the initial thirty days may

be granted where there is a showing of excusable ne-

glect.

3

Rule 77(d), F.R.Civ.P., states that the failure of

the clerk to notify parties of the entry of an appealable

order or judgment, standing alone, does not affect the

time for filing the notice of appeal.

28 USCA, § 2107, similarly to Rule 4(a), F.R.A.P.,

provides that a court may extend the initial time for

filing a notice of appeal for an additional thirty day

period.

None of these provisions deal with the question of

what the district court may or may not do under the

authority of Rule 60(b)(6), F.R.Civ.P. Each of these

provisions refers to the running of time from the entry

of a judgment or order. It cannot be disputed that a

district court has the authority, under some circum:

stances, to set aside a judgment based upon an appli-

cation of Rule 60(b)(6) F.R.Civ.P. To contend other-

wise is to contend that there is no sphere of applica-

tion for that rule. When the court sets aside a judg-

ment, that judgment becomes a nullity, to which the

provisions of the rules and statute cited by Petitioner

can have no application. If the district court prop-

erly uses its authority under Rule 60(b)(6) to set aside

a judgment, and subsequently enters a new judgment,

the provisions cited by Petitioner then have application

only to the new judgment, the previous judgment then

being void.

There can be no question that Respondents properly

perfected their appeal from the re-entered judgment of

the District Court dated January 14, 1974. The ques-

tion remaining is whether or not the District Court

properly used the provisions of Rule 60(b)(6) to set

aside its initial judgment. While the authority of the

district court under Rule 60(b}(6) should not be such

4

that it renders the rules and stetutory provision cited

by Petitioner inoperative, those rules and provision

contain no express or implicit prohibition against the

action taken by the District Court in this proceeding.

Petitioner has chosen to ignore most of the grounds

asserted by the Court of Appeals in support of its hold-

ing that it had jurisdiction of this cause, choosing in-

stead to represent the holding as being based upon the

mere failure of the Clerk to notify counsel of the entry

of the judgment. Respondents respectfully request this

Court to note the carefully reasoned opinion of the

Court of Appeals and consider the reasons given there

for its holding. Fidelity and Deposit Company v.

Usaform Hail Pool, Inc., 523 F. 2d 744, 747-51 (5th

Cir. 1975) (Pet.’s App. A., p. A-7 thru A-15). The

holding is clearly based upon a finding of unique cir-

cumstances including:

1) diligent inquiry by counsel for Respondents

until they were induced to cease by assurances of

the Court that further inquiry was unnecessary;

2) failure of both sides to learn of the entry of

the judgment;

3) the lack of prejudice to Petitioner;

4) the inevitability of appeal from any judgment

the District Court could possibly have rendered.

Contrary to Petitioner’s inference that this Court

has not considered whether a district court in the exer-

cise of its equity jurisdiction may restore an otherwise

lost right to appeal, the ‘‘unique circumstances” doctrine

has its origin in prior decisions of this Court. Harris

Truck Lines, Inc. v. Cherry Meat Packers, Inc., 1962,

371 U.S. 125, 83 S. Ct. 283, 9 L. Ed. 2d 261. Wolfsohn

5

v. Hankin, 1964, 376 U.S. 203, 84 S. Ct. 699, 11

L. Ed. 2d 636, reh. den. 376 U.S. 973, 84 S. Ct. 1133,

12 L. Ed. 2d 87. Thompson v. Immigration and

Naturalization Service, 1964, 375 U.S. 384, 84 S. Ct.

397, 11 L. Ed. 2d 404.

The Thompson case involved the same element of

reliance on actions of the district court that was present

in this case. In that case, the district court assured

counsel that his post-judgment motions were timely and

therefore tolled the running of the time for filing the

notice of appeal. Counsel did not file a notice of ap-

peal in reliance on this assurance until the court dis-

posed of these motions. This Court concluded that

counsel's reliance on the district court’s statement that

his motions were timely was reasonable, and that this

constituted ‘‘unique circumstances’ justifying the ac-

ceptance of jurisdiction.

While the Thompson case was not a Rule 60(b)(6),

F.R.Civ.P., case, its rationale is identical to that ap-

plied by the Court below in holding that the District

Court properly exercised its broad discretion under

Rule 60(b)(6).

B.

Petitioner claims that conflict exists among the

Courts of Appeal on this question. When the decisions

cited by Petitioner as being in conflict with the deci-

sion of the Court below are closely analyzed, no con-

flict is found among the circuits on the narrow ground

upon which the Court below held that it had juris-

diction.

Petitioner places primary reliance on Hodgson v.

United Mine Workers of America, 433 F. 2d 118 (D.C.

6

Cir. 1972), and also cites the decision of the same Cir-

cuit in Lord v. Helmandollar, 384 F. 2d 780 (D.C. Cir.

1965), cert. den. 383 U.S. 928, 86 S. Ct. 929, 15 L.

Ed. 2d 874, as being in conflict with the decision below.

However, Petitioner has ignored the later decision of

that Court in Expeditions Unlimited Aquatic Enter-

prises, Inc. v. Smithsonian Institute, 500 F. 2d 808

(D.C. Cir. 1974), which was cited by the Court below

as being in accord with its decision in this case. 523

F. 2d at 750 (Pet.'’s App. A, p. A-13). The court in

Expeditions Unlimited distinguished both the Hodgson

and the Lord cases on the grounds that 1) in each of

those cases, counsel knew of the entry of the judgment

in the time to perfect their appeals, and 2) there was

no reliance on any action by the clerk or the district

court in these cases which caused the problem. These

elements are clearly present in this case, making it

accord with the most recent holding of the Court of

Appeals for the District of Columbia, and distinguish-

able from the prior decisions of that Court relied upon

by Petitioner for conflict.

The decision cited by Petitioner from the Court

of Appeals for the 2nd Circuit, Radack v. Norwegian

American Line Agency, Inc., 318 F. 2d 538 (2nd Cir.

1963), not only fails to conflict with the decision below,

but in fact supports Respondents’ position. Petitioner's

one sentence description of Radack is extremely mis-

leading, to the extent that it does not accurately

portray the meaning of the paragraph from which it

was taken, not to mention the holding of the case.

The rest of the paragraph is crucial to the court's

decision:

“The rule [Rule 60(b)(6)] cannot be used to cir-

cumvent the 1947 Amendment to Rule 77(d) dealing

7

with the effect of lack of notice on the running

of time for appeal [cite omitted] nor is 60(b)(6)

relief available for an unlimited time. The rule is

still subject to both the reasonable time limitation

and to the proper exercise of discretion by the dis-

trict court considering all the circumstances present

in a given case. The granting of such motion

should be considered only when lack of notice has

operated to prejudice a substantial right or remedy

that would otherwise have been available.’’ 318

F. 2d at 542-43.

The next to the last sentence of the opinion is also

vital:

“But if notice of the judgment was not sent, the

judge has the power, in the exercise of a sound

discretion, to grant relief under 60(b)(6)."" 318 F.

2d at 543.

This case is one of the few cases cited by the Peti-

tioner which involves the precise issue presented here,

and actually supports the decision below.

The second case cited from the Second Circuit,

Nichols-Morris Corp. v. Morris, 279 F. 2d 81 (2nd Cir.

1960), involved a denial of a motion to extend the time

for appeal which was filed after the expiration of the

initial 30 day period, and which stated no reasons which

justified a finding of excusable neglect. In that case,

counsel had notice of the judgment two days after it

was entered but simply did nothing. This case has no

bearing on the issue involved in the decision below

and therefore cannot be in conflict with it.

From the Third Circuit, Petitioner has cited the

case of Sonnenblick-Goldman Corp. v. Nowalk, 420 F.

8

2d 860 (3rd Cir. 1970). In that case, counsel filed an

untimely motion which would have tolled the time for

filing the notice of appeal had it been timely made.

Unlike the Thompson case, supra, counsel relied on no

action of the district court in failing to file the notice

of appeal, and did not even bother to file a motion to

extend the time for filing the notice based upon ex-

cusable neglect, although he had ample time to do so.

This case did not involve an application of Rule 60(b)(6)

F.R.Civ.P., and has no factual resemblance to the case

at bar.

Petitioner cites from the Sixth Circuit Knox Mutual

Insurance Company v. Kallen, 376 F. 2d 360 (6th Cir.

1967). In that case, the Court dismissed a cross appeal

as untimely filed. The initial appeal was timely only

by reason of an extension of time granted by the dis-

trict court for excusable neglect. Without securing a

similar extension, cross-appellant merely filed his cross

appeal assuming that he was entitled to the benefit of

the extension given to the appellant. This case does

not involve failure to receive notice of a judgment, or

reliance upon any action of the clerk or court, and does

not involve an application of Rule 60(b)(6). In fact,

it does not even involve a review of a denial for an

extension of time based upon excusable neglect, since

no such extension was requested by the cross-appellant.

As the court there pointed out, there was no issue

involved regarding whether the appellant had notice of

the order, since the appellant had prepared the order he

sought to appeal, and had submitted it to the court for

signature. 376 F. 2d at 364.

Two cases are cited for conflict from the 7th Cir-

cuit, Files v. City of Rockford, 440 F. 2d 811 (7th Cir.

1971), and Brainerd v. Beal, 498 F. 2d 901 (7th Cir.

9

1974). It takes but a brief quotation to show the lack

of conflict between the Files case and the decision

below:

“The order dismissing the complaint in this cause

was entered October 6, 1969 in open court. All

parties were present in court by counsel. There

is no contention that the clerk failed to give notice

of the entry of said order to attorneys for all

parties. See Rule 77(d) F.R.Civ.P.”’ 440 F. 2d at

813.

The court further noted that the lower court had

merely purported to extend the time for filing the

appeal and neither the motion requesting the exten-

sion, nor the order granting it, recited any grounds for

finding excusable neglect. The court also independently

reviewed the record and determined that no such grounds

were present even if appellant had sought the extension

on this basis. The court acknowledged the “unique

circumstances”’ exception, but held that none were present

in that case.

In Brainerd, supra, the notice of appeal was filed

more than thirty days beyond the entering of the judg-

ment, and no request for extension based upon ex-

cusable neglect was made. There was no contention

that counsel did not have notice of the entry of the

judgment, and the court in independently reviewing the

record, found no facts to support a finding of excusable

neglect had counsel sought an extension on that ground.

Although this case does not present conflict, it is in-

teresting to note that the court cited its previous opin-

ion in Harris Truck Lines, Inc. v. Cherry Meat Packers,

Inc., 303 F. 2d 609 (7th Cir. 1962) in support of its

ruling. This is the case, which on appeal to this Court,

10

was reversed resulting in the creation of the ‘‘unique

circumstances” doctrine. Harris Truck Lines, Inc. v.

Cherry Meat Packers, Inc., 1962, 371 U.S. 125, 83

S. Ct. 283, 9 L. Ed. 2d 261.

Finally, from the 10th Circuit, Petitioner has cited

the case of Lathrop v. Oklahoma City Housing Author-

ity, 438 F. 2d 914 (10th Cir. 1971), cert. den. 404 U.S.

940, 92 S. Ct. 132, 30 L. Ed. 2d 73. In Lathrop,

there was a simple failure to file the notice of appeal

on time, which appellant tried to overcome by the sole

allegation that notice of the judgment had not been

received. Nothing was cited in the opinion regarding

whether or not counsel had attempted to learn of the

judgment prior to the running of the appeal time, and

no reliance on any action taken by the clerk or the

court was cited. While Petitioner would like this Court

to believe that this is the factual setting of the present

case, both the order of the District Court setting aside

its first judgment (Pet.’s App. C, p. C-1 thru C-5) and

the decision of the Court below demonstrate that it is

not.

Further evidence of the lack of conflict of the

decision below with Lathrop, supra, is found in the

Fifth Circuit’s analysis of its own prior decisions in

Smith v. Jackson Tool and Die, Inc., 426 F. 2d 5 (5th

Cir. 1970), and Jn Re Morrow, 502 F. 2d 520 (5th Cir.

1974). In Smith, counsel for appellant had requested

the court to delay entering its judgment, and opposing

counsel agreed to the delay. Without notifying counsel

for appellant, the court entered judgment, and neither

side was informed of its action. In that case, the

Fifth Circuit held that there were unique circumstances

in addition to the failure of the clerk to notify the

parties of the judgment which justified setting aside

the judgment under 60(b)(6).

11

In Morrow, supra, there was nothing in addition to

the failure of the clerk to notify the parties. In that

case, just as the Tenth Circuit did in Lathrop, supra,

the Fifth Circuit refused to uphold the setting aside of

the judgement to preserve the right of appeal. A read-

ing of the decision of the Court of Appeals in this case

will show that the Court carefully considered its prior

decisions in Smith and Morrow, and found that in the

case at bar, just as in Smith, there were additional

unique circumstances over and above the failure of the

clerk to give notice. Accordingly, the Lathrop case

does not present a conflict with the decision of the

Court below, and is in accord with the similar decision

of the Fifth Circuit in Morrow.

Respondents regret that Petitioner's mere listing of

cases claimed to be in conflict with the decision below

necessitated this lengthy analysis of largely inap-

posite cases, but the analysis demonstrates that there

is no conflict among the circuits on the narrow

issue raised by the Fifth Circuit’s holding that it had

jurisdiction of this cause.

C.

Petitioner's contention that the jurisdictional issue

involved here is of equal importance to those instances

where this Court has granted certiorari to determine

the question of when a judgment becomes final is a

gross exaggeration. Resolution of the jurisdictional

issue involved in this appeal by this Court would only

affect those extremely rare instances in which the clerk

of the district court fails to discharge his simplest and

most clearly mandated duty under Rule 77(d), and in

which there are additional unique circumstances justi-

fying the exercise of the court’s discretion under Rule

60(b) (6).

12

The resolution of the true issue involved in the

Court of Appeals’ holding relating to jurisdiction would

not have any effect whatsoever on the decisions cited

by Petitioner for conflict, except Radack, supra, since

all of them are distinguishable on their facts. The only

decisions which could possibly be affected by a review

by this Court are the decisions in Expeditions Un-

limited, Radack, and Smith, supra, all of which support

the Fifth Circuit’s decision. These cases represent an

infinitesimal percentage of the cases reaching the ap-

pellate level of the Federal court system.

Surely this Court need not spend its valuable time

ruling on a question which only arises as a result of

a rare failure on the part of both a District Court and

its Clerk, and which has as its basic premise the prop-

osition that the district courts cannot fairly discharge

their duty under Rule 60(b)(6) in these very limited in-

stances, and that the courts of appeal cannot fairly

review such decisions.

RESPONSE TO PETITIONER’S REASON II:

Petitioner Is Complaining of an Irregularity Which

Caused No Prejudice to Petitioner, Was Treated As

Frivolous by the Court of Appeals, and Deserves the

Same Treatment Here.

Petitioner's reason I] also grossly overstates the

import of the Court of Appeals’ decision. Reason II

claims that the Court of Appeals has attempted to

revolutionize appellate procedure by dispensing with

the requirement of filing a notice of appeal.

The minor irregularity that gives rise to Petitoner’s

complaint is not fatal to the claims of Usaform Pan

American Limited (‘Pan Am’’), and can be easily ex-

plained.

13

Petitioner’s complaint is that Pan Am did not file

a notice of appeal from the judgment of the District

Court. In truth, what happened is that Pan Am’s

name did not appear in the listing of appellants con-

tained in the notice of appeal. When one examines

the first page of the District Court’s ‘‘Findings of Fact

and Conclusions of Law” and ‘‘Finai Judgment’’, both

as entered on August 2, 1973 (Pet.’s App. D, p. D-1

and D-26) and as re-entered on January 14, 1974 (Pet.’s

App. B, p. B-1 and B-26), the source of the irregularity

is easily seen. The listing of the parties defendant in

the style of those documents lists all of the Respondents

except Pan Am, although Pan Am’s claims are adjudi-

cated therein. Respondents were understandably hasty

in filing their notice of appeal from the re-entered judg-

ment of the District Court, and the error is easily ex-

plained as resulting from taking the listing of appellants

from the District Court’s listing in the judgment being

appealed. The error is obviously clerical and one of

mere oversight.

It should be noted that this point was raised in

the court below, albeit half-heartedly, and the Court of

Appeals apparently thought it frivolous to the point of

not deserving mention, there being not one sentence on

this point in the Court of Appeals’ lengthy opinion.

It is the filing of a notice of appeal which rea-

sonably apprises the opposing party that an appeal is

being taken that is required by the rules. It has been

held on numerous occasions that irregularities in the

notice will not be considered fatal where no prejudice

to the opposing party occurs. Jones v. Chaney and

Janes, 399 F. 2d 84 (5th Cir. 1968), Wright v. Ameri-

can Home Assurance Company, 488 F. 2d (10th Cir.

1974).

14

In Brubaker v. Board of Education, School District

149, 502 F. 2d 973 (7th Cir. 1973), cert. den. 419 U.S.

1039, 95 S. Ct. 1953, the court found no trouble in

overlooking the absence of a party’s name in the notice

of appeal, where the intent of the notice was apparent

and no prejudice could have occurred to the opposing

party.

It is not surprising that Petitioner has not at-

tempted to allege that it was prejudiced by the irregu-

larity. It had been engaged in litigation with Pan Am

along with the other Respondents for eleven years when

the notice of appeal was filed (including two previous

appeals to the Fifth Circuit); the last proceeding before

the District Court had involved no new facts and in-

volved an application of the same legal principles be-

tween Petitioner and all Respondents including Pan Am;

the notice of appeal accurately referred to the findings,

conclusions and final judgment which were entered

against all Respondents including Pan Am in the same

documents and on the same legal grounds. In fact,

Petitioner could have made no other conclusion on re-

ceipt of the notice of appeal than that Pan Am’s name

did not appear due to a clerical error. This was the

case beyond question.

RESPONSE TO PETITIONER’S REASON III:

Petitioner's Complaints Are Predicated Upon a Mis-

interpretation of the Decision Below, and Are There-

fore Fallacious.

Petitioner's reason III is predicated upon a serious

misinterpretation of the decision of the Court of Ap-

peals.

Petitioner seeks to attribute to the decision of the

Court of Appeals an intention to ignore or misapply

15

state law in a diversity suit, to create new presump-

tions never before known, and to place a burden of

proof on Petitioner that it should not be required to

bear.

Petitioner gets off on the wrong foot immediately

by attributing to the Court of Appeals a quotation

which was in fact the language of the District Court

in its first opinion (Pet., p. 28). It is true that the

Court of Appeals adopted as controlling the quoted

language to the effect that Petitioner, in issuing the

bond, walked into the loss with its eyes wide open.

However, the reason that the Court of Appeals adopted

this language as controlling was that the Court’s 1972

opinion in this case specifically affirmed that District

Court finding, and not because of any preconceived in-

tention of the Court of Appeals to ignore the language

of the bond, nor because of any prejudice against Peti-

tioner by the author of the opinion. (Petitioner insists

on insinuating the existence of such prejudice through-

out the Petition, without foundation.)

Unfortunately, the extent of the confusion generated

by Petitioner in its reason III requires going back to

the previous decision of the Court of Appeals (referred

to as the 1972 opinion) for clarification. Fidelity and

Deposit Company of Maryland vy. Usaform Hail Pool,

Inc., 463 F. 2d 4 (5th Cir. 1972) (Pet.’s App. E). That

decision, while not carefully defining the sole legal prin-

ciple to be applied on remand in the District Court,

nevertheless limited remand to one narrow issue—

whether or not monies diverted from premium accounts

of an insured corporation were used for legitimate cor-

porate obligations of that corporation. With respect

to the remaining issues, the Court stated:

16

“We have carefully reviewed all other grounds as-

serted by appellant and affirm the District Court

in all other respects.”” 463 F. 2d at 7 (Pet.’s App.

E, p. E-6),

thereby eliminating these issues on remand.

The District Court's decision following remand

sought to go back and alter many of the findings and

conclusions which had been foreclosed by the above-

quoted language of the 1972 decision of the Court of

Appeals. The action of the Court of Appeals in dis-

regarding the findings and conclusions of the District

Court on issues which were not open to it on remand

therefore does not constitute a violation of the doctrine

of Erie Railroad Company v. Tompkins, 1938, 304 U.S.

64, 58 S. Ct. 817, 82 L. Ed. 1188, as Petitioner would

have this Court believe. It is a simple application of

the doctrine of the law of the case and the superiority

of the Court of Appeals over the District Court. Once

the Court of Appeals had previously considered, and

specifically affirmed, the findings of the District Court,

they were no longer open for further consideration by

the District Court.

The fact that this was the rationale of the decision

of the Court of Appeals in this case is easily illustrated

by reference to the opinion. Citing the first decision

of the District Court, the Court below stated:

“The trial court rendered a carefully considered

opinion and made findings of facts, many of which

govern the present appeal.’’ (Emphasis supplied)

523 F. 2d at 751 (Pet.’s App. A, p. A-16).

Later, again referring to the first District Court

decision, the Court said:

17

“The [District] Court did not address the issue of

whether the uses to which the wrongfully trans-

ferred funds were put were ‘legitimate’ or ‘proper’

corporate purposes. This turned out to be the

only issue upon which we remanded the case to

the District Court in our 1972 opinion.”’ 523 F. 2d

at 754 (Pet’s. App. A, p. A-21).

Further along, the Court said:

“The District Court in its first opinion had care-

fully analyzed the claimants’ position on a com-

pany-by-company basis. 318 F. Supp. 1301. That

approach was in no way challenged by this Court;

rather, we took care to state that the District

Court’s determination was affirmed in all other

respects. 463 F. 2d at 7.” 523 F. 2d at 756

(Pet’s. App. A, p. A-26).

Additional examples are:

“The findings of fraud and dishonesty were clear

and pervasive in the District Court’s first opinion,

and t’ ey were affirmed in our 1972 opinion. The

issue on remand was loss—whether the wrongfully

appropriated monies went to pay legitimate corpo-

rate obligations (in which case there would be no

‘loss’) er whether they were made for any other

purpose (in which case there would be a ‘loss’).”’

523 F. 2d at 757 (Pet.’s App. A, p. A-26).

“The District Court in its earlier opinion found

that ‘the named insureds were all insolvent at all

times when the . . . illegal transfers were being

made. . .. 318 F. Supp. at 1308 (emphasis added).

Because the only issue on remand from our 1972

18

decision was whether the wrongfully appropriated

funds were used to pay legitimate corporate obliga-

tions, this finding—indeed, all findings and con-

clusions of the District Court in its first opinion not

germane to the issue on remand—were binding upon

the District Court.” [Cites omitted] 523 F. 2d

at 759 (Pet’s. App. A, p. A-30, 31).

“We repeat that the Court’s earlier findings of

fraud and dishonesty were affirmed by this Court

in its 1972 opinion and were not open to recon-

sideration on remand.”’ 523 F. 2d at 762 (Pet’s.

App. A, p. A-38).

“The District Court has acted conscientiously and

has taken great pains throughout the course of this

litigation. Our examination of record leaves us to

conclude, however, that the Court misapprehended

the mandate of the 1972 opinion of this Court.”’

523 F. 2d at 767 (Pet’s. App. A, p. A-48, 49).

With this analysis of the decision of the Court of

Appeals in mind, Petitioner’s contentions fall like a

house of cards.

Petitioner contends that the Court of Appeals elimi-

nated the requirement of showing that loss under the

bond was caused by fraud and dishonesty. What the

Court said was that the requirement of proving fraud

and dishonesty to the extent necessary for recovery

under the bond had already been proven by Respon-

dents, and was no longer an issue in the case. The

status of the case following the prior appeal was that

fraud and dishonesty as a causative element had been

19

proven, and the sole and critical question remaining was

where the fraudulently diverted money went. The en-

tire meaning of the 1972 opinion was that it is possible

to have fraud and dishonesty on creditors of the insured

corporation without a loss to the insured corporation,

but where the fraud and dishonesty in a continuous

sequence of events results in an expenditure for non-

legitimate reasons, viewed from the perspective of the

insured corporation, a loss occurs as defined in the

bond. Accordingly, while the issue on remand was

broadly referred to as “‘loss’’, it was really whether or

not only one of the many elements of loss was present,

all of the other necessary elements for proving loss

having already been proven.

Petitioner's argument that the Court of Appeals

shifted the burden of proof of loss also collapses under

analysis. The Court of Appeals first noted that the

vast bulk of the burden to be carried by Respondents

has been carried. The one issue remaining to be de-

cided on remand affects the whole question of whether

there will be any recovery and was thus broadly referred

to by the Court as the question of whether there was

a ‘loss’’. The real issue is whether the diverted funds

were expended for ‘legitimate’ corporate purposes,

which constitutes but one small part of the many-

faceted issue of “‘loss’’. The .vast majority of the ex-

penditures claimed by Respondents not to be legitimate

expenditures were intercorporate transfers among cor-

porations with common ownership, directors and offi-

cers, and transfers between these corporations and their

officers and employees. Where such transfers occur, the

general rule of law in America is that the burden of

showing legitimacy of such transfers is on the parties

intending to uphold them (or on the parties relying

20

upon the legitimacy of such transfers, such as Peti-

tioner). The burden of proving all of the other elements

of loss has always been rightfully placed upon Respon-

dents, as claimants under the bond, and has been

carried by them. The single remaining element in-

volved being ‘“‘legitimacy’’, and Respondents having

carried the burden of showing the necessary interlocking

and fiduciary relationships of the transferors and trans-

ferees, the burden of proving legitimacy under these un-

disputed factual circumstances shifts to Petitioner.

Petitioner complains that the Court of Appeals did

not apply state law and relied upon a pre-Erie case in

placing the burden of proof of legitimacy of the inter-

corporate transfers on Petitioners. However, Petitioners

cite no authority for the proposition that this is not the

law of the respective states whose law controls under

the circumstances. The Court of Appeals chided Peti-

tioner for this same failure. The Court below, in re-

ferring to the pre-Erie case of Geddes v. Anaconda

Copper Mining Company, 1920, 254 U.S. 590, 41 S. Ct.

209, 65 L. Ed. 425 stated:

“| . Fidelity [Petitioner] has not countered the

claimants’ assertion that the Anaconda principles

apply to the corporations involved in this case.

The full implications of applying those principles

to the present case may be further developed on

remand.” 523 F. 2d at 760 (Pet’s. App. A, p.

A-31).

Therefore, while the Court assumed that Respon-

dents were correct in claiming that Anaconda and the

case of Pepper v. Litton, 1939, 308 U.S. 295, 60 S. Ct.

238, 84 L. Ed. 281 control the burden of proof issue,

it left room for the District Court om remand to further

explore that issue.

21

Petitioner also paints with a broad brush in claim-

ing that the Court has ignored state law in this diver-

sity suit on the issue of construing an unambiguous

contract. However, Petitioner cites only vague and

general Florida law that courts cannot ignore the lan-

guage of unambiguous contracts. The question of am-

biguity is one of fact, depending upon the circumstances

of the transaction. The Court of Appeals agreed with

the Petitioner that the contract was not ambiguous un-

der the circumstances—it simply did not agree with

Petitioner's view of what the contract clearly says. If

the Court had found that there was ambiguity, it would

have resolved it against Petitioner, the bond having

been drafted and issued by Petitioner with full knowl-

edge of the factual context existing with respect to the

insureds. 523 F. 2d at 755 (Pet’s. App. A, p. A-22).

Careful analysis of the Court of Appeals’ decision

shows that it is guilty of none of the offenses charged

in Petitioner's reason III, and further affirmatively

shows that it followed the essential requirements of law

in holding the District Court to the mandate of the

1972 opinion.

RESPONSE TO PETITIONER’S REASON IV:

The Court of Appeals Did Not Alter [ts 1972 Decision,

but Merely Clarified It, Although It Had the Power to

Alter It Through the Use of Its Sound Discretion.

Petitioner’s contention that the Court of Appeals

altered its 1972 decision in the 1975 decision, which the

Petition seeks to have reviewed, is afflicted with the

same misapprehension of the decision below that per-

vades the other points Petitioner attempts to raise.

22

Petitioner's argument begins:

“In violation of both the contract and that opinion

[1972 opinion}, the Court relied solely on the dis-

trict court’s earlier vacated findings of fraud and

dishonesty as to the invasion of the so-called trust

funds. . .”’ (Pet., p. 33).

The excerpts cited above under Respondents’ re-

sponse to reason III catalogue the Court of Appeals’ re-

peated statements that the previous findings relating to

fraud and dishonesty were not vacated, but rather were

specifically affirmed by the 1972 opinion.

The Court of Appeals did not undertake to modify

the 1972 opinion, but simply sought to clarify it for the

benefit of the District Court, whose decision had shown

that it was obviously confused by the 1972 decision.

All of the Court’s references to its 1972 decision are

stated in terms of clarification of points on which con-

fusion may have arisen. Not once did the Court of Ap-

peals indicate an intention to deviate from its prior

opinion, and it cannot be said that the decision below

is clearly inconsistent with the 1972 decision.

Petitioner contends that there was some support in

the 1972 opinion for its lately contrived theory that any

legitimate corporate purpose of any of the joint insureds

is necessarily a legitimate purpose of the others. The

Court of Appeals took pains in its recent decision to

point out the clear and simple language of the 1972

opinion which should have laid this phony argument to

rest, to wit:

“The reference to ‘wash transactions’ . . . might be

taken to imply that in a case involving a group of

corporations related by common ownerships, trans-

ae estneremeet se eee ees. oe

a Nt eR ee ee

23

actions among corporations are not pr ected by the

bond unless the net financial condition of all of the

corporations considered together as one were im-

paired. Our holding in the earlier appeal . . . dis-

pels any such notion when carefully read. It fairly

indicates that each corporate tub must stand upon

its own bottom. This follows from the reference to

‘the taking of money from the premium accounts of

an insured company to pay other legitimate obliga-

tions of that company.’ 463 F. 2d at 7.” (Em-

phasis is the Court’s) 523 F. 2d at 756 (Pet’s.

App. A, p. A-25).

While vigorously opposing any contention that the

Court of Appeals, with or without intending to do so,

altered its 1972 opinion in the decision below, Respon-

dents ask the Court to note that if this were the case,

the Court of Appeals had complete power to do so, in

the exercise of its discretion, if it determined that its

prior decision was erroneous.

It is not surprising that the only case cited by Pe-

titioner for the proposition that the Court acted out-

side its authority is weak, inapposite, and is probably

erroneous in its holding. In that case, Knapp v. North

American Rockwell Corp., 506 F. 2d 361 (3rd Cir. 1974),

the Court made the observation in a footnote that since

a different panel of the same Court had previously

denied a motion to dismiss for lack of jurisidiction, the

panel hearing the merits of the case had no power to

reconsider that issue. The first distinction to be made

is that the Court there was referring to a ruling on an

issue which had already been decided by another panel

on the same appeal, whereas the present case involves a

consideration of a prior decision of the Court in the

same case rendered three years earlier, in light of an in-

24

tervening decision of the District Court on remand.

Accordingly, the vision that Petitioner seeks to impart

of panels of the same Court of Appeals endlessly feud-

ing over an issue is a mirage.

Secondly, it is generally held that the issue of ju-

risdiction, which was involved in the Knapp case, is

always open to reconsideration. Brainerd v. Beal, 498

F. 2d 901 (7th Cir. 1974) (footnote 2, at 902), and thus,

Knapp was probably erroneous.

Petitioner's argument appears to be that the “law

of the case’’ doctrine prevents the Court below from al-

tering its 1972 opinion. While the “law of the case”’

doctrine and the superiority of courts of appeals over

district courts required the District Court below to ad-

‘here to the portions of its first decision affirmed by the

1972 opinion of the Court of Appeals, that doctrine does

not prohibit the Court of Appeals from reconsidering its

own decisions, even those rendered on prior appeals in

the same case. This Court has held that the “law of

the case’ doctrine is a rule of general application, but

does not constitute a limitation on the power of an ap-

pellate court, acting within its sound discretion, to re-

consider its prior rulings in a case. Messinger v.

Anderson, 1912, 225 U.S. 436, 32 S. Ct. 739, 56 L.

Ed. 1152.

Consider also the following excerpt from Moore's

Federal Practice:

‘While there is considerable authority in federal

cases, usually the older ones, to the effect that the

law of the case has the effect of res judicata, the

present federal view is contra and the doctrine of

the law of the case does not carry the same conse-

quences as the rule of res judicata.” Moore’s Fed-

eral Practice (2d Ed. 1974), ¢ 0.404(1), p. 405-406.

25

See also Greater Boston Television Corporation v.

FCC, 463 F. 2d 268 (D.C. Cir. 1971).

This Court has also held that due process does not

compel an appellate court to follow its previous ruling

in the same case on subsequent appeals to the same

court. Moss v. Ramey, 1920, 239 U.S. 538, 546-47,

36 S. Ct. 183, 60 L. Ed. 425.

Petitioner has failed to demonstrate any reason why

the Court of Appeals abused its discretion, even if it

could be demonstrated that any alteration of the 1972

opinion occurred in the recent opinion. No such altera-

tion occurred, and Petitioner has not shown any valid

reason why the decision of the Court of Appeals should

be reviewed on this issue.

RESPONSE TO PETITIONER” REASON V:

The Court of Appeals Found That Most of the District

Court’s Findings Violated the Court’s Prior Mandate,

Constituting Clear Error.

Petitioner’s reliance on the “clearly erroneous” doc-

trine of Rule 52(a), F.R.Civ.P., contains the same basic

fallacy as Petitioner’s other contentions.

Petitioner begins its attack by stating that the

opinion of the Court of Appeals is “wholly devoid of

any finding of evidentiary inadequacy of the elaborate

findings prepared and filed by the District Court” (Pet.,

p. 35).

Petitioner fails to give any weight to the basic

premise of the Court of Appeal’s decision that the Dis-

trict Court was not authorized to make most of the

findings of fact that it purported to make. What could

be more clearly erroneous in the actions of a district

court than entering findings which it is not allowed to

make? The unauthorized findings pervaded the Dis-

26

trict Court’s decision (constituting more than half of the

total findings), which would have merited reversal

standing alone. Nevertheless, the Court of Appeals, in

the hope of providing guidance for subsequent proceed-

ings, went ahead and examined additional findings

which the District Court was arguably authorized to

make, pointing out in each instance why these findings

were irrelevant to the issue before the Court, and why

others were clearly erroneous in light of the evidence.

There is no Rule 52(a) issue present here, and

therefore no need for Respondents to discuss the cases

Petitioner contends are in conflict with the decision of

the Court of Appeals.

RESPONSE TO PETITIONER’S REASON VI:

The Court of Appeals Did Not Change the Law to Be

Applied and Therefore No New Trial Is Required.

Petitioner again raises an issue which would be ap-

pealing but for the lack of a predicate in the previous

proceedings to support its contentions.

Petitioner's reason III had contended that the Court

of Appeals changed the law applicable to this case, or

ignored the applicable law, contrary to the Erie doc-

trine. Petitioner now claims in its reason IV that if

the change in the law was properly made, Petitioner

should be allowed to retry this cause under the “new’’

principles. Perhaps Petitioner’s ulterior motive is to try

to wriggle out of what now appear to have been inad-

visable stipulations and to send Respondents back to

prove events which happened more than thirteen years

ago, prior to commencement of this litigation.

It would probably come as a surprise to the Court

of Appeals to learn that it broke new ground in its de-

LL EG es te tt tt

27

cision regarding the issue of burden of proof. The

Court of Appeals merely applied the general American

rule regarding transactions between | y related cor-

porations which was urged by Respondents to be the

applicable law in this case, and the Court further noted

the absence of any showing by Petitioner that such was

not the law to be applied. In addition, the Court left

applying these principles on remand.

It remains the duty of the District Court on re-

mand to apply the applicable law in effect at the per-

tinent times to determine the legitimacy of the corpo-

rate transfers. The decision of the Court of Appeals

recognizes that the full factual context of these transfers

is covered by the record of the trial, primarily by stip-

ulations as to indisputable facts. 523 F. 2d at 751-

52 (Pet.’s App. A, p. A-16).

Petitioner, a professional surety which received a

premium for the protection it has doggedly fought to

avoid for thirteen years, now claims at this late date

the right to re-try this case, underscoring its determina-

tion to avoid to the bitter end the payment of just

claims of Respondents which are amply supported in the

trial record.

CONCLUSION

Respondents have demonstrated that Petitioner’s rea-

sons for requesting review by this Court are based on

erroneous predicates not supported by the prior pro-

ceedings in this cause nor by the authorities it cites,

and it is respectfully requested that the Court deny the

Petition in order that this cause, which has been too

long pending, may reach its just resolution.

Respectfully submitted,

Tuomas T. Coss

Coss, Core, Sicerson, McCoy,

Bett & Bonp

P. O. Box 191

Daytona Beach, Florida 32015

Counsel for Respondents