Petition for Writ of Certiorari — Transit Casualty Co. v. Security Trust Co.
Supreme Court brief1971
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IN THE
presen Court of the United States.
Oc TOBER TERM, 1971
No.
TRANSIT Casu ALTY Company, ET AL., Petitioners,
Vv.
Security Trust CoMPANY, ET AL., Respondents.
PETITION FOR A WRIT OF CERTIORARI TO THE
_ UNITED STATES COURT OF APPEALS F eel
THE FIFTH CIRCUIT
t
« #
FE. Barret? PRETTYMAN, JR.
Perer F. Rousse LOT
$815 Connecticut Avenue
W ashington, D. Cc. 20006
P : GEORGE P. Bowrr
901 Washington Avenue
St. Louis, Missouri 63178
SAMUEL J. Powers, JR.
First Federal Building
Miami, Florida 33132
- Attorneys for Petitioners
Press OF ByRoN S. ADAMS PRINTING, INC., WasuINGTON, D.C.
TABLE OF CONTENTS
Table of ‘Ludisacitine we : PETAR aN etd carlo =
Opinions Below ....... Bee EMER su tcp rcace 9
Jurisdiction ...ecc0r0e.e.. Setenlereeiiaens dis oe vane
Ocaatiain PN 5 oo eu eU a cen Gul vee b canuch 3
Rani IN Coc re ed oa Teer PTT er eT ee 23
Statement of the. Case . : Kieae eee as Sy Se ae kf ; 4
Reasons for Granting the Writ ai cueteek Rinduewes 15
: OMI oda iva teedkes Peeteer a ee wewake .
Appendix A—Opinion and Judgment of. the United
States District Court for the Southern Miatriet of
a ee eas nm Ate no” le Oe la
Appendix ‘B-—Opinion and Fudan of the United
States Court of Appeals for the Fifth Cireuit ... 4a
Appendix C—Opinion of the United States Court of
Appeals for the Fifth Ci&uit Denying Rehearing
and ae Peer er teseeresees +. dla
_TABLE-OF AUTHORITIES
CasEs: pees
_ Ackermamn y. United States, 340 U.S. 193 (1950) =<" 16°
- Barber v.. Turberyille, 94 U.S. App. D.C. 335, 218 F.2d
MR RE cree ccrewee sata ee, 20
' Bros., Tne. v. W. E. Grace Mfg. Co., 320 F.2d 594 (5th _
Cir, BOONE Snes ENCE RET ERECOLG LRT ERS eee ia ei?
Conley v. Gibson, 355 U.S. 41 (1957) .............. .. 2
Federal Trade Comm’ nv. Colgate Palmolive Co., 380 —
ak ONO COE cadence iai cee ees . 22
. en
- ee _ able of Contents Continued” .
Page
Fleming v. Huebsch — Corp., 159 F.2d 581 (7th
Cir, MN ae kavales CO Gn Renee Made Ne RLU G Keane 22
Griffin v. Kennedy, 120 us . App. D.C. 104, 344°F.2d 7
BOB (UGGS) choo onda cake cote cs eweeeasas Pe torre 22.
King v. Mordowanee, 46 F.R.D. 474 (D. R.T. 1969) . 17
Kinnear Corp. v. Crawford Door Sales Co., 49 F. RD.
3 (D. SC. 1970) 2... cece ccc dicctwesecs sects x ae
Klapprott v. United States,.335 U.S. 601 (1949) ...... 16
L. P. Steuart, Ine. v. Matthews, 117 U.S. AppwD.C. 279,
' 99 F.2d 234, cert. denied, 379 U.S: 824 (1964) + co, ae
Markert' v. Swift & Co., 173 F.2d 517 (2d Cir. 1949) . 2
' Patapoff v. Vollstedt’s, Ine., 267 F.2d 863 (9th is,
| hres errr errr rr re rr rrr rr 16, 20, 21 -
Rinieri v. News Syndicate Co., 385 F. 2d 818 (24 Cir. |
| ed Aenrary PE ETO CE TOT NTT OEE UTS 17
Robins v. Piteairn, 3° Fed. Rules Berv. 601 (N.D. Til.
1) ne ee ere 20
Russell v: Cunningham, 279 F.2d 797 (9th Cir. 1960) .. 22 -
Schramm v. Murdock- sisoy i Chev. Co., 312- F.2d 249
(10th Cir. 1962) ... 02... eee eee eee eee teens 22
Tozer v. Charles A. ia ‘Milling 5, 189 F.2d 242
(Bd Civ. 1951) 2... cece cece eee e decccccccccopes 20
Transit Casualty Co. v. Atkins, 372 F. a 441 (5th Cir.
iP merry rrr ry rr rre Tr err rrr. 10, 11 .
Transit Casualty Co. v. Security Trust Co., 396 F.2d
* 803 (5th Cir.), supplemental opinion on ‘rehearing, «
899 F.2d 665 (1968), cert. denied, 393 US. 1024
¢0])\:) SR oo -B
Transport Pool Div. ‘of Cont., Leas., Tne. v. dee Jones
Truck. Co., Ine., 319 F. Supp. 1308 (N.D. Ga. 1970). 17 es
United States v. Backofen, 176 F.2d 263 (3d Cir. 1949) 17
\gited States v. Erdoss, 440 F.2d 1221 (2d Cir. 1971),
pet. for cert. filed sub nom. Horvath v. United
- States, No. 71-2, June 30, 1971 (pending) ...... 16,17
United States v. Hongham, 364 1.S. 310° (1960) ...... 28
_ United States v. Miller, 9 F.R.D. 506 (M.D. Pa. 1949). 17
United States v. Williams, 109 F. nase 456 (W.D. ee
Ark. POURED ca oic cc taccscsocsgacaveqscas eee ee cee 20
Table of,Contents Gontinued 7 iii
| , | Page
STATUTES AND RULES: a 7 ;
UA AE os. hiss cian 2
Federal Rules of Civil Procedure : / i |
Rule" 23(a) ........... Pease ek tee aan aens 18
Rule. 41(b) ...... ere rr ory ee ere Seuueeis ror ra
ek Peery orn rer ein ey rae Choe mpere
Rule 60(b) ....... Pee oR eae passim
OTHER AUTHORITIES:
Comment, Equitable Power of a Federal Court To
Vacate a Final Judgment for ‘‘Any Other Reason
Justifying Relief’’—Rule 60(b) (6), 33 Mo. L. Rev.
«427 (1968) 2........ PEE EE Oe ROP Ee TPE err 15, 16
Report of the Advisory Committee on the Federal | .
Rules of. Civil Procedure (May, 1954) ....... jas oe
- Wham; Federal District Court Rule 60(b): A Humane
:
_ Rule Gone Wrong, 49 A.B.A. Journal 566 (1963) .. 20.
INTHE - \:
Supreme Curt nf the United States
Ov TE nk Tern, _—
"TRANSIT CASUALTY COMPANY, ET AL. Petitioners,
oe
—Seeunrry Trust Company, er an, Respondents.
«
-
PETITION. FOR A WRIT OF CERTIORARI TO THE.
UNITED STATES COURT OF APPEALS FOR
THE FIFTH CIRCUIT :
—
Petitioners, Transit Casualty Company, ct al.,' prat
that a writ of certiorary issue to review the decision
and judgment of the Unite ¢ States Court'of Appe: us »
‘In addition to Transit Comuidly; Compeniy, the following par-.
ties are .petitioners: Charter National Insurance Company ;
Farmers Elevator Mutual Insurance Company ; Agway Insurance
Company ; LaSalle Casualty Company; Mid-America Fire & Marine
Insurance Company, and Mutual. Boiler and Mae hinery. Insurance
Company.
|
|
=
for the Fifth Cireuit in the above-entitled case entered
on April 1, 1971, in favor-of respondents, Security
Trust Company, ef al? : |
OPINIONS BELOW
The opinion and judgment of the United States Dis-
trict Court for the Southern District of Ftorida have
not been. officially reported and are printed as Ap-:
pendix A hereto. The opinion and judgment of the -
United States Court of Appeals for the Fifth Cireuit
affirming the judgment of the District Court have been
officially reported at 441 F.2d 788, and are printed as
Appendix B hereto. The opinion of the Fifth @ir-
euit denying both rehearing and rehearing en bane
has not been officially reported and is printed as Ap-
pendix C hereto.
- JURISDICTION
The United States District Court for the Southern
District of Florida denied petitioners’ Motion for Re-
lief of Judgment on November 19, 1969 (App. A). On.
April 1, 1971, the United States Court of Appeals for
the Fiftl, Cireuit issued an opinion affirming the Dis-
triet Court’s Judgment (App. B). Petitioners filed a
timely motion for rehearing and suggestion-for rehear-
ing en bane which was denied by the Fifth Cireuit: on
May 28, 1971 (App. ©). Jurisdiction of this Court is
invoked under 28 U.S.C. § 1254(1).
= In addition to Security. Trust Compahy, the following parties
are respondents:* the State'Treasurer and, ex officio, Insurance
Comniissioner of the State of Florida, as substitute Receiver of
MeKinley & Company, ahd the Deputy Insurance Commissioner
of the State of Florida, as Deputy Receiver of McKinley & Com-
pany.
.
3
QUESTIONS PRESENTED
l.(a) Should the view of the Ninth Circuit or the
conflicting view of the Fifth and Second Circuits pre-
vail on the issue of whe ‘ther Rules 60(b) (1) and 600b)
(6) of the Federal Rules of Civil Procedure ere mutu-
ally exclusive ? |
(b) Should a motion for relief of judgment ee
Rule 6GO0b) of the Federal Rules of Civil, Procedure, .
filed more than one year after the original judgment
was entered and yet within one year from a substan-
tinlly modified second judgment, and alleging a reason
for relief which has some characteristics similar to
those enumerated in Rule *G0(b) (1) and other char-
acteristics which are’ not specifically mentioned any-
where in Rule 600b), be considered inder the ‘‘any-
other-reason?’ provisions: of’ Rule 60(b)(6), or be
limited to consideration under Rule 60(b) (1) and
— therefore rejected as untimely ?
2, Despite the purpose and intent of Rule 60(b)
of ap Kederal Rules of Civil Procedure, may a class
comprising over 1,500 individual and corporate plain-
tiffs be barred forever from obtaining a_ hearing
on the merits of a $1,000,000 claim for gross negligence,
mismanagemeMt, and constructive fraud, because the
trial counsel for the named -plaintiffs;defendants’ trial
counsel, and an associate District Judge all misinter-
preted the legal significance of a procedural order
- entered by the Chief District Judge as part of what
the Fifth Circuit characterized as a ‘‘housekeeping
operation’? |
RULE INVOLVED
Rule 60(b) of the Federal Rules of € ‘ivil Procedure
provides in pertinent part:
On motion and upon such terms a as are just, the
court may relieve a party or his legal representa-
> 4
tive from a final judgment, order, or proceeding
for the following reasons: (1) mistake, inadvert-
ence, surprise, or excusable neglect; * * * or (6)
any other reason justifying relief from the oper:
tion of the judgment. The motion shall be Sain
within a reasonable time, and for reasons (1) * *.*
not more than one year after the judgment, order,
-, or proceeding was entered or taken. * * *
STATEMENT OF THE CASE
For over five years, petitioners have vigorously, un-
eeasingly, and thus far unsuccessfully attempted to
- obtain a hearing on the merits of two complaints seek-
ing more than $1,000,000. for gross negligence, mis-
management, and constructive fraud. They have been
denied that hearing on the merits because the Fifth .
Cjreuit below adopted a construction of Rule 60(b)
prevailing in the Second Circuit rather than the ad-_
mittedly’ conflicting and broader construction of that
rule adopted by the Ninth Circuit and numerous other
federal courts. Unless this Court grants certiorari to
resolve these conflicting interpretations of Rule 60(b),
petitioners’ cause of action will be oc per-
‘manently, |
On January 28 and February 11,.1966, petitioners
Transit Casualty Company (“Transit Casualty’’) and
Charter National Insurance Company (‘‘Charter Na-
tional’’) filed two related complaints int the United
States District Court for the Southern District of
Florida against respondent-Seeurity Trust Company
(‘*Security Trust’’) and respondents Insurance Com-
missioner of the State of Florida and his Deputy (R.
12-76, 261-283).° Both complaints were brought as
3 The designation ‘‘It.’’ refers to both the first volume (pp. 1-
319) and the second volume (pp. 320-467) of the printed record
below.
dD
class actions; Transit Casualty and Charter National
were the only named plaintiffs (R. 12, 261). The rest
of the class consisted of twenty-four other insurance
companies, all of whom were ‘listed in an exhibit -to
the complaints (R. 13, 59-60, 176, 262). Plaintiffs were
all ereditors of a Florida instirance company, McKinley
& Company (‘‘McKinley’’), which had become insol-
vent (R: 14-15, 23). Jurisdiction was based on diver-
sity of citizenship and the requisite jurisdictional
amount (R. 13-14,'261-262).
'. The complaints charged that Security Trust, in vari-
ous legal capacities including sole. stockholder and
trustee of McKinley (R. 16, 263), had engaged in a
series of acts and omissions constituting gross negli- -
gence, mismanagement and constructive fraud to, the
great damage of plaintiffs and their class (R. 16, 25,
263, 272). ae i |
Security Trust was charged with the following acts
and omissions,.among others: _
—maintaining McKinley’s books and accounts in a
manner which did not accurately reflect the com-
pany’s transactions in disregard of the advice of
an independent certified public accountant, con-
tained in a 99-page report (R. 16, 26).
—violating its duty and obligations as a trustee by .
permitting McKinley to commingle premium funds
which were required’ by contracts with petitioners
to be maintained in separate trust accounts (R.
18). a Ser
—failing to remove the president of McKinley from
office after receiving written notice from Lloyds of
London that the president was making false and
misleading statements concerning losses being suf-
fered by insurance companies on business being
written through McKinley (R. 19). |
—permitting McKinley to pay exorbitant and uncon-
scionable salaries and bonuses to executives and_
Ns BRIE Aa, RE FEIT OR SIS RS Ba ee FS SN Bl ENS NS IS ra Ha
6
employees .of the company, including certain
bonuses $88,000 in excess of the amounts authorized
by the McKinley Board of Directors (R. 20-21).
—permitting McKinley to make unsecured advances
‘and loans to its officers and employees totalling
over $125,000 (R. 21). .
—permitting certain executives of MelKinley to en--
gage ina conspiracy pursuant to which they agreed
to provide false: data’ on losses suffered—by Me-
Kinley in order to obtain renewal of *Metinley’s
eontracts with various London insurance ¢pm-
panies (R. 26-27). oC
—permitting the chairman of the Board of Directors
of McKinley to divert trust funds belonging to
petitioners in amounts in excess of $390,000 for
purposes completely disassociated from peti-
tioners’ affairs (R. 30).
—failing to act on reports received from London
insurance brokers advising that. McKinley’s re- .
ported losses were in error in various percentages
‘anging between 150 and 350 per cent (R. 30).
Plaintiffs asserted that the aforementioned actions and
omissions of Security Trust, and many other specified
actions and omissions, had damaged the class -repre-
sented by the named plaintiffs in an amount in excess
of $1,000,000 including interest and costs (R. 24, 29, |
39). uri
On June 30, 1966, after respondent Security Trust
had answered the complaints and the parties had begun’
various forms of discovery, petitioners’ attorneys
learned that Security Trust’s attorneys had written
. letters directly to certain of those class members who
had not been named as plaintiffs but whose names had.
been listed in the aforementioned exhibit to the com-
wd Dt Wb Red
ao :
plaints (R. 101-102).’- These letters contained the
following paragraph:
This letter is to inquire whether your company
has knowledge of this litigation or has given its
consent to be named as a meniber of [the] alleged
class, Unless I hear from you promptly that your
company does not have such knowledge and has
not given its’ consent, it will be necessary in the
near future to take the depositions of- your officers
and possibly your directors, [R. 104.] -
Petitioners’ attorneys considered these letters a breach
of ethics and immediately-sent a telegram to Security
Trust’s counsel which requested that ‘ you cease and
desist writing and communicating directly or indirectly
with clients represented by this firm’’ (R. 105).
In attempting to explain their conduct, Security
Trust’s lawyers wrote to petitioners’ lawyers that same
day, June’ 30, 1966, and sent a copy of their letter to
Chief District Judge Fulton (R. 105-106). In that
letter, Security Trust’s attorneys asserted:
Ordinarily, members. of a class claimed to be
represented by named plaintiffs are only quasi-
parties, and therefore may not be subject to the
discovery rules relating to the officers, directors
and managing agents of corporate parties.
If you will show me written authorizations from
the, members of: the class for the filing of these
suits or your own assurance of representation suf-
ficient to insure, that their officers, directors and
-managingrégents will submit to discovery without
service of subpoena, I will be glad to withdraw my
letters promptly. [R. 106.] | i
The next day, July 1, 1966, petitioners’ attorneys filed :
a motion ‘‘to enjoin and prohibit defendants’ TN ae
_
—~ ; g .
from communicating directly or indirectly with plain-
tiffs represented herein by counsel and from attempt-
ing to intimidate and threaten said plaintiffs and from
obstruetion of justice’? CR. 101-103). After this. mo-
tion was filed, the parties continued to engage in dlis-
covery. On September 6, 1966, Seeurity Trust an-
‘swered the motion (R. 172-175), denied any unethical
conduct, and stated in part: -
6. If the only basis for the claim of the. attorney-
client relationship arises by reason of the alleged
elass membership, the defendant submits that. it
and its counsel have the right and freedom to com-
municate directky with such non-parties * dite
173.] .
7. If. on the other hand, the firm of Blackwell,
Walker & Gray has by contract. the authority to
represent any or ;llof the alleged class members,
then as to those so represented, counsel for defend-
ant eoneede that there should be no communica-
tion. It is submitted that Blackwell, Walker &
Gray should, therefore, be required to disclose to
the Court and counsel the nature and basis of.
their claim of attoriey-client relationship with the
non-party elass members so_ that all, Court and
-eounsel, will be advised as to how to proceed in
tlfe litigation with regard to such non-parties.. [R.
ri 173-174.)
ight days later, on September 14, 1966, Chief Dis-
trict Judge Fulton entered an order ruling on several
eoutested motions between the parties, including peti-
tioners’ motion for an injunction (R- 176-181). This
erucial order provided : oe :
At the hearing upon the oregoing Motions it
was made to appear that counsel for Plaintiffs has
also been retained to represent. other parties who
constitute the alleged class.
9
Thereupon, it is,
Ordered and Adjudge das follows:
1. Plaintiffs shall within ten (10) days hereafter
amend their complaints so as to inelude as parties
Plaintiff all members of the alleged class who have
- retained counsel for the Plaintiffs to. represent
them * * *.° LR. 178-179.]
Two days after this order was enter ea. on Se wines
1G, 1966, the United States District Court for the South-
ern District of Florid: i, sua Spounte and without giving
any reasons, transferred the case from Chief Judge
Fulton to newly-appointed Judge Atkins (Kh. 181-182),
who heard all subsequent proceedings. As will be
shown bulow, this fact became vital in the ultimate
outcome, ; .
On September 19, 1966, petitioners moved to modify
Chief Judge Fulton’s September 14, 1966 order to per-
mit an interlocutory appeal, contending (1) that Chief
Judge Fulton’s order would require them to name as.
plaintiffs all the members of the class, and (2) that
-the naming of all class members would divest the Dis-
trict, Court of jurisdiction because several class meni-
bers were Florida corporations and thus diversity of
citizenship would be destroyed (R. 182-184).* As
shown below, this interjwretation of the legal require-
ments of this order was wrong, but it was shared at
the time by both defense counsel and Judge Atkins.
Petitioners’ requests for modification and for a stay
were denied on September 23, 1966 (R. 187).
‘Matinee Transit Casualty ae | Charter National, neither
of which was a Florida corporation, were particularly anxious
to maintain the case in the Federal District Court rather than in
a Florida state court’ to eliminate even the possibility that a re-
spondent Florida corporation, the Florida Insurance Commissioner,
or his Deputy might receive partial treatment (R. 418-419).
10 ad
On October 5, 1966, See a filed a new motion to
amend Chief Judge Fulton’ s September 14, 1966 order,
“a new request for a stay, and a motion to amend their
complaints (R.°190-198). ‘This new motion again
' alleged that the September 14 order required peti-
tioners to name as plaintiffs every class member and
that doing so would oust the court of jurisdiction. But
~ most importantly, the new motion pointed out that —
even if there had previously been any doubt about the |
practicality of naming every class member, it was now
clearly impractical in view of the amended complaints
- annexed to the motion, which showed that the class con-
sisted of 37 companies in addition to the-two named
plaintiffs and 1,621 individuals (R. 191). The newly ©
named class members were all English companies and
individuals—comprising a Lloyds of London syndi-
cate—who were also creditors of McKinley (R. 193- .
196). Without comment, Judge Atkins granted the
motion to amend the complaints but denied the re-.
newed motion to amend. Chief Judge Fulton’ s order
€R. 209-210).
Petitioners then’ sought a writ of prohibition and
mandamus from the Fifth Circuit seeking to set aside
that portion of “Chief Judge Fulton’s September 14
order which they felt unreasonably required them to
name every class member as a party and which they
felt would oust the District Court from its jurisdiction.
On February 9, 1967, the Fifth Circuit, in a two-page
per curiam opinion, declined to issue the requested |
writs, stating: 7
Irrespective of the _ correctness of the order
below, it is apparent that this case is. not in an
appropriate stage for appellate review. * * * It
is not clear what the precise effect of ‘the order
will be on the outcome of the litigation * * *.
11
Without in any manner * * * wnderteking to de-
termine whether the order complained of was cor-
rectly or incorrectly entered * * * we deny the
relief prayed for * * *. [Transit Casualty Co. vy.
“Atkins, B72 BF, 2d 441, 442 (5th°Cir. 1967).]
On May 9, 1967, petitioners filed a further amend-
ment to their complaints adding seven named plaintiffs
to the original two named plaintiffs (R. 221-224), and
amending the enumerated class to consist of-1,554 ad-
ditional companies and individuals (R. 223). Respond-
ents then moved on May 18, 1967 to dismiss the.com-:
plaints for lack of federal subject matter jurisdiction
or, in the alternative, for failur e to comply with the
Sentenber 14, 1966 order. ‘In support of their motion,’
respondents referred to a portion of petitioners’ brief .—
in support of writs of mandamus and prohibition, in
which petitioners had stated that “it is undisputed”
that several of the companies whose joinder would be
réquired ander this ruling w exe Florida corporations
(R. 226). Referring to petitionérs’ latest amendment
to their complaints, respondents erroneously stated that
this aniendment did not comply with the September 14,
1966 order because the amendment did not join as ad-
ditional plaintiffs several Florida é¢ompanies ‘which
the plaintiffs had represented to [the court] and the -
Fifth Cireuit as having retained counsel for the plain-
tiffs in this suit’? (R. 226). Respondents agreed with
petitioners that joinder of tliese Florida companies
would.oust the court of jurisdiction (R. 226).
On July 13, 1967, Judge Atkins dismissed petitioners’ ;
complaints with prejudice for failure to comply with
| nee Judge Fulton’s order of a 14, 1966 (R.
9-231), holding, in part, as follow.
~The Amendment to the Complaj nt[s] filed « on May
9, 1967 in an effort to ey sen the order of
12
September 14, 1966, conspicuously fails to include
three Florida corporations which the plaintiffs
have represented th [the court] *-*.* to com-
prise members of the alleged class which must
be named pursuant to the Order of September 14,
1966, since they. were legally represented by eoun-
sel for the plaintiffs. . [R. 229-230.] Pie
On July 17, 1967, petitioners moved to vacate, or in
the alternative to amend, the order of dismissal, pur-
Suant to Rule 59 of the Federal Rules of Civil. Pro-
, cedure (R. 231-236). This motion again emphasized .
the unfairness of being required by the court to name’
every member of .the class as a party plaintiff and
‘to name.as parties plaintiff residents of Florida whe
would oust the District Court. of jurisdiction.
This Rule 59 motion came on-for oral argument
before the District Court on July 24, 1967 (R. 239-
259). At this argument, petitioners’ attorneys assured
the. court that their relationship with the Florida
companies. which were members of the class was no
different from their. relationship with all. other mem-
bers of the elass who. were not named plaintiffs: -
“The Court: 7 tae
_ You do represent those three Florida corpora-
tions, do you not? |
Mr. Larkin: re ie
As members of the class, definitely, Judge. I
mean, just as we represent the 1600 underwriters
-at Lloyds who haye said in response to the notice
that went out, *‘we want to be members of this |
elass, and we want this lawsuit\ brought, and we -
are content. to be bound by whatever the outcome -
is,’’? so, yes, we represent them. :
We are not retained by them. [R. 248.]
However, the court denied the Rule 59 motion (R; 236-
237, 259).
13. :
On June 28, 1968, the Fifth Circuit. affirmed ‘the
District Court’s dismissal in a ‘four-sentence per
- curiam opinion which stated simply, ‘‘we agree with ~
the order of dismissal by y the district court, but vacate
that part of the order making the dismissal with
_ ‘prejudice and remand with’ instructions to enter the
order without prejudice.’’ Transit Casualty Co. v.
Security Trust Co., 396 F.2d 803.2 At this juncture,
limitations had run against any new action which
might be brought between the parties. On August 29,
1968, the Fifth Circuit denied a petitfon for rehearing,
and issued another per curiam opinion. stating, ‘‘ap- °
pellants overlook that really the only issue on appeal
is the compliance vel non with the. District Court’s
order of September 14, 1966, and, haVing found a
failure of compliance on the part ‘of appellants, the
District Court’s judgment of dismissal was affirmed ~
** *. Transit Casualty Co. v. Security Trust Co.,.
399 F. 2d 665, This Court denied certiorari on Jan-
uary 13, 1969,. perhaps because of the interlocutory
nature of the Fifth Circuit ruling. 393 U.S. 1024.
On April 24, 1969, petitioners sought leave from | _
the Fifth Cireuit to file a motion in the Distriet Court
pursuant to Rule 60(b)(6) of the Federal Rules of
Civil Procedure for relief from the judgment dis-
missing ‘their complaints, and concurrently lodged
that motion with the District Court (R. 321, 340-347).
The Fifth Cireuit granted leaye to proceed (R. 338).
The central thrust of the Rule 60(b)(6) motion
was that plaintjffs’ counsel, defendants’ counsel, and ‘
. Judge Atkins had all misinterpreted Chief J udge Ful-
ts -:
- 5 A new order dismissing without prejudice was ‘eiheved by the ©
‘District Court in complianee with the Fifth Cireuit’s mandate -
on September 10, 1968 (R. 333-334).
Ss
\ :
\ le
~ ton’s September 14, 1966 order. Under this shared
erronequs interpretation, the order had been read to )
require the naming of the aforementioned Florida cor-
porations and perhaps some other parties as plain-
tiffs. ° Since the Florida companies had not been named
as plaintiffs, Judge Atkins had concluded that plain-
tiffs had disobeyed Chief Judge Fulton’s order,’ and
accordingly he dismissed the complaints. However,
petitioners now maintained that the order did not
require that the Florida corporations. or any other
particular parties. be named, but ‘only. that all parties
who had retained plaintiffs’ ie firm be named. Since,
in fact, all parties who had retained plaintiffs’ law
firm had at all times prior and subsequent to Septem-
ber 14, 1966 been named as plaintiffs, the September
14 order had been complied with continuously, albeit
unwittingly. Thus, the correct legal interpretation of
Chief Judge Fulton’s order distinguished betsaveen -
those ‘class members who were feprescnted by: plain-
tiffs’ law firm—the entire class—and those class mem-
hers who had retained that law firm—the named plain- :
tiffs. Since all parties and Judge Atkins had failed
to recognize this legal distinction in Chief Judge Ful-.
ton’s order, it would be unfair and inequitable not te
amend the netvly-entered judgment of ‘‘dismissal with-
out prejudice” so as to read, ‘* dismissal without preg
dice, and with leave to amend. the: complaints.” ee
the absence of such an amendment of the District
Court’s judgment, plaintiffs would have to institute
new lawsuits, and such new suits now would be barred
by the statute of limitations, which had run two years
previously (R. 340-345, 353-375).
Despite these arguments, the District Court denied
the request for relief in a short opinion and order.
entered on November 19, 1969 (Appendix A hereto).
15
The court held that plaintiffs were not entitled to
relief under Rule 60(b)(6) ‘because, in the court’s
opinion, plaintiffs’ claim for relief was based upon
the “typical case of mistake and nothing more’’—a
ground for relief exclusively dealt with by Rule 60
(b)(1). The court further held that relief under the
latter rule was barred as untimely because it had
been requested more than one year after the entry of
beh meee ane order of dismissal with prejudice on. July
12,1967. According to the District Court, the one-
wean -limitations period commenced to run from the
date of this original order, riot from the date of the
newly-entered, order dismissing without prejudice on
September 10, 1968.°
On. appeal, the Fifth Circuit affirmed the District
Court’s rulings, stating that:
{S]ome eulogy may be appropriate, inasmuch as
our decision will apparently deal a fatal blow
to a cause which set forth over four years ago
to recover damages in excess of $1,000,000 * * *
and has not onee been bi “ought to court on .the
merits.
»
. REASONS FOR GRANTING THE WRIT
This Court should grant certiorari to ree ‘tify what
has aptly been described as the ‘‘manifest *-* * eon-
fusion of opinion and muddled application” of Rules
60(b) (1) and 60(b)(6) of the Federal Rules of Civil
Procedure by the -lower federal courts.’
®In its opinion, the Distiiet, Court erroneously stated that:
Plaintiffs’ Rule 60(b) motion was filed on July 1, 1969.. In fact,
as noted above, the motion was filed on: April 24, 1969 (R. 321,
340-347).
7Comment, Equitable Power of a Federal Court To Vacate a
Final Judgment For “Any Other Reason Justifying Relief?’ —
Rule eee 33 Mo. L. Rev. 427, 437, 439 Stains
A 16
The confusion has stemmed largely from the ‘* pleth-
ara”’ of opinions (seven in all) issued by this _—
when it last construed these rules over. twenty year
ago in Ackermann v. United States, 340 U.S. 193 (1950)
(5 to 3 decision), and Klapprott v. United States, 335
U.S. 601 (1949) (5 to 4 decision). The opinions in
the instant case demonstrate why this Court should
address itself to a problem it has not discussed for
so long, ra as one commentator put it even three
years ago: .
‘
¢
The lack of clarification from the source of, the
confusion. shrouds Rule 60b in the same cloak of
mystery and uncertainty that obscured its eom-
-mon law antecessors, thereby frustrating thé very
purpose of its existence. This situation has pre-
railed for nearly twenty years, hopefully: it will
not persist mucli longer."
One result of the confusion over the meaning of
Rule 60(b) has been a conflict in circuits. The See-
ong Circuit observed as recently as April 2, 1971,
in a ease which is now pending before this Court,
that its construction of the relationship between Rules
60(b)(1) and 60(b)(6) was, in direct confliet with
‘that adopted in the Ninth Cireuit.® If the Fifth Cir-
cuit in the instant case had followed the Ninth Cir-
“Comment, supra note 7 at 441. Petitioners note that ‘they do
not necessarily agree with the methods of clarification of this
situation suggested by the commentator, but completely concur
with his conclusion that this Court should resolve the confusion
at the earliest possible moment.
® Compare United States v. Erdoss, 440 F.2d 1221, 1223 (2a Cir.
1971), pet. for cert. filed sub nom. Horvath v. United Slates, No.
71-2, June 30, 1971, with Patapoff v. Vollstedt’s, Inc., 267 F.2d
863 (9th Cir. 1959).
a : J
17
cuit rather than'the Second Circuit,” it would have
had to hold that petitioners’ motion could properly be
maintained under Rule 60(b)(6). However, on .the
‘authority of the Second Circuit construction .of these
rules, the -Fifth Circuit below held instead: that pe-
titioners’ motion could only: be consider ed under Rule
60(b)(1)."
This conflict in the federal courts has been particu-
larly apparent in those many instances in which a
party has moved under Rule 60(b) for relief from a
judgment more than one year after the.judgment was
entered, alleging a reason for relief which. has some
characteristics similar to those enumerated in Rule
60(b) (1), such as “‘mistake” or ‘“exeusable negtect,”’
~ but which has other characteristics which are sui
generis and therefore fall under Rule 60(b) (6). In
these circumstances, the Second and Fifth’ Circuits
would bar relief, bed many other federal courts have
granted relief? In the view of these latter courts,
The Fifth Circuit below expressly relied on the Second Cir-
~cuit’s opinion in Rinierit v. News Syndicate Co., 385 F.2d 818
(2d Cir. 1967), to support its holding that ‘‘the reason for re-
’ Hef set forth in Rule 60(b) (1) cannot be the basis for relief
under Rule 60(b)(6).’’ In United States v.’ Erdoes, supra, the
Second Circuit expressly reaffirmed its Rinieri ruling.
, The rationale of the Fifth Circuit in this case also conflicts
with the analysis of Rule 60(b)(6) contained in one of its own
prior opinions, Bros., Inc. v. W. E. Grace Mfg. Co., 320 F.2d
594, 609 (5th Cir. 1963). (‘While the circumstances Heflected by
all of these papers bear many of the earmarks of a mere plea
for reopening for newly discoyered evidence under (2) or fraud
under (3), it is something more’’), :
“E.g., L. P. Steuart, Inc. vy. Matthews, 117 U.S. App. D.C.
279, 329 F.2d 234, cert. denied, 379 U.S. 824 (1964); United
States v. Backofen, 176 F.2d 263 (3d Cir. 1949) ; Transport Pool
Div. of Cont. Leas., Ine. v. Joe Jones Truck. Co., Inc., 319 F. ”
Supp. 1308 (N.D. Ga. 1970) ; King v. Mordowanec, 46 F.R.D. 474
(D. R.I. 1969) ; Umted States v. Miller, 9 F.R.D. 506 (M.D. Pa:
' 1949).
(18
it. is only when the reason advanced falls completely
within the scope of those enumerated in Rule 60(b) (1)
that relief is barred as untimely, if the motion is filed
more than one‘year after judgment is entered: In
view of the over-all objective of the Federal Rules
to obtain at least some’ form of hearing on the merits
and of the basic purpose of Rule 60(b) in particular to
prevent injustice, we submit that the Ninth Cireuit
approach is clearly the better one, and we urge this
Court to adopt it. a
The District ‘Court, sustained by the Fifth Circuit,
asserted that petitioners’ request for reef here was
a “typical case of mistake and nothing more,’’? and
therefore that Rule 60(b) (6) was inapplicable. This
ruling is clearly incorrect. As indicated in our State-
ment, there is nothing whatever “typieal’? about the
situation in which petitioners became embroiled in this
ease. and much more than a mere ‘‘mistake’? was in-
volved. Petitioners’ trial counsel was required to
_ construe an ambiguous order of the Chief District
Judge’ who was replaced two days after he entered
that order by a newly-appointed associate District
Judge. The interpretation «* the order plaintiffs’
counsel adopted was so. plausible that both defense
counsel and the newly-appointed District Judge as-
signed to hear the case eoneurred in the interpreta-
tion. When the order was first entered, it was not
unreasonable to suppose that a District Judge might
require all members of a class to be named as plain-
tiffs when the class was alleged to eontain only 26
“members'—particularly when doing so might be a
13 FRCP Rule 23(a) requires that one of the prerequisites for
maintaining a class action is that the ‘‘class is so numerous that
joinder of all members is impracticable.’
gs 2 ig aR BUTS 5 SONA niin Wie Pee Soke aE TEES et ra NA: SAMUEL Ee 5 0S TERI OE
19°
convenient means to resolve the existing dispute be-
tween the parties over which members of the class
‘* could or could not be contacted directly by defend- .
- ants’ attorneys.
Later, the second District Judge permitted an amend-
ment to the. complaints wlittk showed that the class
in reality’ contained over 1,500 members, but never-
theless entered: an order dismissing the complaints
with prejudice for failure to comply With the earlier
order. He adhered to the order of dismissal despite
the assurances of plaintiffs’ counsel on oral argument
that ail cliss*members who had formally retained his
law firm were named as plaintiffs. Thus, plaintiffs’
counsel réasonably concluded that the District Judge
still felt that the order had not been complied with,
because that judge coristrued the order ‘to require the
naming as ean of at least some additional mem-
bers of the class (including the Florida companies)
Which had not yet been so named. Having immedi-
ately challenged the effect of this order as being
grossly unfair after dismissal was entered, and having
obtained no redress from the District Judge, plain-
tiffs appealed, but were met with a ruling by the Fifth
Circuit that thee only issue on appeal was whether the
trial court properly: dismissed under FRCP Rule 41(b)
for failure to abide by ‘an aioe that the trial court
felt. had not been compli ith. When that appeal
failed, and this Cowt d. fo certiorari, plaintiffs
were eed with ‘the question of whether there were
any other: conceivable means to obtain a trial on the
merits. of their $1,000,000 damage claim. |
Since Rule 60(b) then. appeared to be the proper
and only vehicle to correct a manifestly unfair and
inequitable result, counsel applied to the District Court
”
20
for relief under that rule, anticipating that the court
would apply the rule in the humane spirit its drafters
had envisioned" and other courts had chosen to do.”
Neither the District Court nor the Fifth Circuit did
so, thus reinforcing the conclusion expressed by an
experienced state trial judge that in interpreting Rule
60(b), ‘‘some courts have mistakenly adopted a rule
of strict construction contrary to the intent of the
authors of this ‘humane’ rule.’’ ** a
The District Court and the Fifth Cireuit also of-
fered dicta in transitu to the effect that relief under
Rule 60(b)(6) would have been denied even had it
been available. These dicta ednitot be‘reconciled with
holdings by many other courts that’ relief under Rule
60(b) (6) should be granted under circumstances even
less compelling than those here.” | For example, in
Pata poff v. Vollstedt’s, Inc., supra, a petition for m-
voluntary bankruptey was filed against Mrs. Patapoff.
‘Her attorney advised both her and her husband to
file an ‘‘Admission or Confession of Bankruptey,”’
14 Report of the Advisory Committee on the Federal Rules of
Civil Procedure, May, 1954, page 55. ‘‘We suggest that it may
be fairly concluded that the intent in adopting Rule 60(b) «was
to avoid the technicalities surrounding the ‘ancient’? common law
and equitable remedies * * *.’? Wham, Federal District Court
Rule 60(b): A Humane Rule Gone Wrong, 49 A.B.A. Journal 566
(1963). . ;
E.g., Barber vy. Turberville, 94 U.S. App. D.C. 335, 218 F.2d
34 (1954); Tazer v. Charles A. Krause Milling Co., 189 F.2d 242
(3d Cir. 1951) ; United States v. Williams, 109 F. Supp. 456 (W.D.
Ark. 1952). = > ;
16 Wham, supra note 14 at 567.
7 EB... Patapoff v. Vollstedt’s, Inc., supra; Kinnear Corp. v.
_ Crawford Door Sales Co., 49 F.R.D. 3 (D. S.C. 1970). See also
the other cases cited in note 12, supra. Cf. Robins v. Pitcairn, 3
Fed. Rules Serv. 601 (N.D. Ill. 1940).
>
ee
21.
assuring her that she and her husband ‘‘would be given
an opportunity to be heard before the referee for the
purpose of finally determining whether or not they
were in fact bankrupts.’’* This legal advice proved
incorrect, and Mrs. Patapoff was adjudicated a bank-
rupt on the basis of her ‘‘Admission.”’ She moved
to set the judgment aside under Rule 60(b). The trial
court denied the motion, but the Ninth Circuit reversed
and directed that the judgment be vacated: —
Rule 60(b) is clearly designed to permit a de-
sirable legal objective: that cases be’ tried: on
their merits. :
We need not here be concerned with whether the
mistake under which appellant acted was a mis- —
take of law, induced by the erroneous advice
given her by the attorney. If we assume that the
‘‘mistake, inadvertence, surprise, or excusable
neglect’’, listed in subdivision (1) of Rule 60(b)
does not ordinarily apply where the mistake, in:
~advertence, ete. relates to a mistake of law, yet
subdivision (6) provides that relief can be granted
for ‘‘any other reason justifying relief from the
’ operation of the judgment.” °[267 F.2d at 865.]
Although the Ninth Circuit had no difficulty granting
relief to Mrs. Patapoff on these relatively simple facts,
the Fifth Circuit would have us believe that the per- -
‘manent loss of a $1,000,000 damage claim under the
extraordinary circumstances of this case is not suffi-
ciently ‘‘exceptional’’ to warrant relief under Rule
’ 60(b) (6). | |
The District“ Court and the Fifth Circuit finally
held that relief under Rule 60(b)(1) was barred as
untimely. All parties concede that this holding is.cor-
rect if the one-year limitations period of Rule 60(b) (1)
began to run on the date of entry of the original order
22
_ dismissing with prejudice—July 13, 1967. The Dis-
’ trict Court conceded that the.second order dismissing
without prejudice ‘substantially’? modified the- first
order, but nevertheless ruled that limitations: began
to run from the date of the first order. © ae
Petitioners’ research has disclosed no cases dealing
with this question under Rule 60(b), other than. the
opinions below, and therefore it appears to be one
of first impression and of obvious importance in. this
Court. Petitioners did cite to the courts below several
cases holding that the time within which to appeal runs
from the date of entry-of a substantially modified order,
not the date of entry of the original order.“ But
‘the District Court stated simply that. these cases were
“not authoritative since they deal with the time limit
for appeals.’? We submit, that our construction is
more in keeping with the broad equitable purposes of
Rule 60(b), and therefore that relief is warranted un-
der Rule 60(b).(1).” - | _
CONCLUSION:
‘This Court has repeatedly emphasized that the Fed-
eral Rules are not a game—¢especially one designed to
prévent a case from being heard. It has said, ‘for
example: me
The Federal Rules reject the approach that-plead-
ing is 4 game of skill in which one misstep by
18 B.g., Federal Trade Comm’n vy. Colgate: Palmolive Co., 380
U.S. 374 (1965) ; Schramm v. Murdock-Salyer Chev. Co., 312 F.2d
249 (10th Cir. 1962).
- 19 Many cases have granted relief under Rule 60(b) (1) on less -
compelling facts than those here. E.g.; Griffin v. Kennedy, 120
U.S. App. D.C. 104, 344 F.2d 198 (1965) ; Russell v. Cunningham,
979 F.2d 797 (9th Cir. 1960); ef. Fleming v. Huebsch Laundry
,Corp., 159 F.2d 581 (7th’Cir. 1947). \
23
counsel may be ‘decisive of the outcome and accept
the principle that the purpose of [pleading is to
facilitate a proper decision on the merits. [Conley
v. Gibson, 355'U.S. 41, 48 (1957) ; accord: United
States Vv. Hougham, 364 U.S. 310, 317 (1960).]
- Even a cursory reading of the opinions below, in light
of the record facts, indicates that-these liberal rules
have been contorted.- ‘‘Though the case: has been
shunted back and forth between the trial and appel- °
late courts, it has not yet progressed beyond an ex-
ercise. in pleading niceties.’’ Markert v.. Swift & Co.,
173 F.2d 517, 518 .(2d Cir. 1949). Under these cir--_
cumstances, ‘‘plaintiffs cannot properly be denied 2 :
- portunity to present the case — believe they have.
Ibid. — ,
This is wees a case eheee plaintiffs have slept on their
rights and now belatedly seek assistance. ‘Plaintiffs .
have vigorously and unceasingly been - attempting to
secure a trial on the merits of their claims for more
than five years, by:
—amending their complaints,
. —seeking reconsideration of or ‘der s at the trial cunt
‘level,
—seeking review by w ay of ‘writ of pr ohibition and
mandamus,
—appealing;
—requesting rehearings, .
' —requesting certiorari, and
-—moving to amend the. judgment.
- If this Court denies certiorari, ‘plaintiffs? final oppor-
tunity to litigate their $1,000,000 damage claim on the °
merits will have been extinguished.
24
Accordingly, this Court should grant certiorari, re-
verse the opinion and judgment of the United States
Court of Appeals for the Fifth Circuit, and remand
this ease to that court with directions’ to order the
District Court to amend its judgment to permit peti-
tioners to file amended complaints in the District
Court. ) . :
Respectfully submitted,
' B. Barrett PrerryMan, JR.
Peter F. Rovsseior
815 Connecticut Avenue
Washington, D. C. 20006 |
Grorcr P. Bowe
901 Washington Avenue |
St. Louis, Missouri 63178-
SAMUEL J. POWERS, Jr.
First Federal . Building
- Miami, Florida 33132
“Attorneys for Petitioners
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-
as APPENDIX A
Order
Filed Nov. 19, 1969.
(Tifle Omitted.)
This Cause is before the Court on the Joint Motion of .
Plaintiffs and Class Members. for Relief of Judgments
pursuant to Rule 60(b)(6) of the Federal Rules of Civil
Procedure, The Court has heard argument of cotinsel
and received: Supplemental Memoranda of -Law. as re-
quested by the Court.
~The judg rent. that Plaintiffs seek relief ‘from is an
Order dismissing the Complaint dated July 12, 1967. The
Complaint was dismissed pursuant to Rule 41(b) for’
failure to comply with an order dated September 14, 1966.
The September Order was an attempt by this Court to
perform a ‘housekeeping’? operation with a view to de-|
termining whether the action was maintainable as a class
action pursuant to Rule 23, as Amended. The July Order
explicitly found that Plaintiffs had failed to ae, with
the September Order.
On appeal the Fifth Cireuit reversed that part of the
July Order that dismissed the cause with prejudice but
vffirmed as to the correctiess of the dismissal. Transit
Casualty.Company, et al. v. Security Trust Company, et al.
396 F.2d 808 (5th | Cir. 1968). Rehearing was denied,
with a Per Curiam opinion. 399 F.2d 665 (5th Cir. 1968).
Therefore the case stands dismissed without the Court
ver having had the opportunity to decide the maintain-
vbility of this suit as a class action.
. Plaintiffs now: seek to have the case reopened on the
otis that they misunderstood the import of the Sep-
ember Order. The misunderst anding arose from the use’
f the terms ‘‘retained’’ and ‘‘represented.?’ However,
f paragr aph (1) of the September Order directing Plain.
2a
tiffs to amend their Complaints is read in conjunction with
the paragraph immediately before it, it becomes difficult
to envision how Plaintiffs could have been confused. “The
Court, for the purpose of this motion, will accept without
so finding, that Plaintiffs were indeed confused.
This motion was brought under Rule 60(b)(6) on the
ground of ‘‘other reasons justifying relief.’’ The cases
and legislative history hold that Rule 60(b)(6) is ‘‘mu-
tually exclusive’? of the other subdivisions of Rule 60(b) —
* andin particular Rule 60(b) (1). Renieri [sie] v. News Syn-
dieate Co., 385 F.2d 818 (2nd Cir. 1967). However, it seems
that some Courts have invoked the broad equitable power
of Rule 60(b)(6) so ‘as to prevent ‘‘extreme hardship
or injustice.’ Barron & Holtzoff (Wright Edition § 1330,
p. 426. The situation here is not the type that. justifies
such an extreme exercise of diseretion. /
- If Plaintiffs are entitled to relief it must come by virtue
of Rule 60(b)(1). The pleadings indieate the typical case
of mistake and nothing more. There is no allegation that
the misunderstanding was created by either the Court, the
Defendants or some other cause. It is purely and simply
the mistake of Plaintiffs.
Rule 60(b)(1) must ‘he brought within a reasonable time
not to exceed one year from the date of the order from
which relief is sought. Plaintiff feels that the time should
run from the Order on Mandate dated September 10, 1968.
It is asserted that the time runs from a substantive change
in the order. The cases cited by Plaintiffs are not au-
thoritative since they deal with the time limit for appeals.
In fact, the case most strenuously urged by Plaintiff argues
to the contrary result. Federal Trade Commission v. Min-
neapolis-Honeywell Regulater Company, 344 U.S. 206
(1952). .The decision of the ‘Fifth Circuit in the present
case did cause a substantive change in that it reversed
the dismissal ‘‘with préjudice.’? However, the aspect of
the order that was so vitally important to Plaintiffs was
ae
the dismissal itself. The complaint remained dismissed.
As far as Plaintiffs stood they remained as they were at
the time of the July Dismissal Order. It cannot be said
that in context this was a substantial modification. The
Court is compelled’ to the conclusion that it is the July
Dismissal Order that Plaintiff seeks relief from and the
time limit must run’ from that date unaffected by . the
~ Order on Mandate.
A. reasonable time is usually eonatr aoa as the time al-
lowed for appeal. McDowell v. Celebrezze, 310 F.2d, 43 (5th
Cir. 1962); 7 Moores [sie] Federal Practice, Para. 60. 22[3]
(2nd ed. 1955). However, the prosecution of ‘an appeal
does not bar the siication to the District Court for .
‘relief pursuant to Rule 60(b). Ferrell v. Trailmobile, Inc.,
223 F.2d 697 (Sth Cir. 1955). Plaintiff should have sought
relief in this Court within‘ one year of the Order of July
12, 1967. An appeal does not toll the one year time limit.
Although the Petition for Rehearing had not been denied,
the decision of the Fifth Cireuit had been rendered leav-
- ing sufficient time to file the motion here under considera-
‘tion which was filed July 1, 1969. It is therefore
Ordered and Adjudged that Plaintiffs’ Motion for Relief —
Pursuant to Rule 60(b)(6) be treated as a motion pur-
suant to 60(b)(1) and as such be denied as being un-
timely filed.
Done and Ordered at Miami, Florida this 18th day of ©
November, 1969. i
C. Ciype ATKINS,
United States District Judge.
3
4a
APPENDIX.B
UNITED STATES COURT OF APPEALS.
FIFTH CIRCUIT
Nos. 29145, 29146
TRANSIT CASUALTY COMPANY, ‘ETC., ET AL.,
Plaintiff s-A ppellants,
‘ V.
Security Trust ‘CoMPANY, ETC., ET AL.,
Defendants-A ppellees.
April‘ 1, 1971
Before Bett, Dyer and Roney, Cireuit Judges.
Roney, Cireuit Judge:
This is an appeal from an order of the District Godin
denying motions of plaintiffs for relief under Rule 60(b)
of the Federal Rules of Civil Procedure. *Finding no error
‘in the District Court’s holding that: the motions were not
timely filed, we affirm.
Although the point for review is narrow, some eulogy
may be appropriate, inasmuch as our decision will ap-
parently deal a fatal blow to a cause which set forth
over four years ago to recover damages in excess of
41,000,000, haS thrice visited this Court, knocked once on
the door of the United States Supreme Court, had the -
‘attention of-two experienced trial judges, and has not once
been brought to court on the merits.
I.
In January, 1966, Transit Casualty Company, a Mis- -
Pe ] ’ : b]
souri corporation, and. Charter National Insurance Com-
pany, an Arkansas corporation, filed two class actions
seeking to recover trust funds which were allegedly dis-
sipated by defendant, Security Trust Company, a on
5a
corporation, through acts of negligence and constructive .
fraud in the management and operation of another Florida
corporation, McKinley and Company. Defendant Security
was executor and trustee of the estate of John E. Me-
Kinley, Jr., deceased, and as such was sole stockholder
of McKinley and Company.'. The thrust of the claim con-
cerned alleged misappropriation of insurance premium
trust funds. The complaints were filed -for plaintiffs’ own
use and for the use of some twenty-four other named in-
surance companies, who were alleged to constitute a class.
On September 14, 1966, the District Court: ordered. the
plaintiffs to ‘amend their complaints so as to include
as parties plaintiff all members of the alleged class’ who
havé retained counsel for the plaintiffs to represent them
in these two eases.’?? This Order has een the source
of plaintiffs’? problems throughout: this case.
Tnitially troubled by the September Order, plaintiffs
sought to set it aside by an application ‘to this Court
‘for a writ in the nature of prohibition and mandamus,
whieh was denied on the ground that the District, Court’s
-
* McKinley and Company was in state court receivership. The
receiver and deputy receiver were named defendants in the suit.
2In June, 1966, defendant’s attorney wrote letters to the insur-
ance companies who were named plaintiffs as members of the celass..
The letters*stated that the defendant a information that some
members of the class had been named. withbut their knowledge and
consent, and inquired whether the respective company had given
its consent to be so named, Plaintiffs’ counsel, thereupon, sent a
telegram to defendant’s attorneys requesting them to stop com-
municating ‘‘with clients represented by their frm” in the law-
suit. The defendant’s attorneys responded that they would do
so if plaintiffs’ attorneys would show them written authorizations
from the.class members or give assurances of: representation: suf-
ficient to permit discovery from the corporate officials without
service of a subpoena.. The plaintiffs then. filed a motion to enjoin
and prohibit the defendant’s attorneys from communicating with
plaintiffs represented by plaintiffs’ eovinsel. It was in this factual
setting that the Order of September 14, 1966, was entered.
@
6a
ruling was merely a ‘housekeeping’? order, and was not
subject to review at that stage of the proceeding. Transit
Casualty Co. v. Atkins, 372 F.2d 441 (5th Cir. 1967). The
_ plaintiffs then filed amended complaints naming a number
of additional plaintiffs. On. March 22, 1967, on ‘defend-
ant’s motion the Court entered another order requiring
the plaintiffs and their counsel to comply with the Court’s
September Order within 20 days. After extending the
time an additional 30 days..by stipulation, the defendant
fled a motion to dismiss for failure to comply. with the
Order, on the ground that the attorneys for .plaintiffs
had claimed to represent three Florida corporations and
they were not joined as plaintiffs. On July 13, 1967, the
District Court dismissed the’comp aints with prejudice find-
ing that plaintiffs had not complied with the Order of
September 14, 1966. The dismissal was affirmed on appeal, .
with the modification that it be without prejudice. Transit
Casualty Co. v. Seeurity Trust Co., 396 F.2d 803 (5th Cir.
1968), reh. den. 399 F.2d: 665 (1968), cert. den. 393 U.S.
1024, 89 S.Ct. 685, 21 L.Ed. 568 (1969). *Pursuant to the
mandate, the District Court entered an order dismissing
the cases without prejudice on September 10, 1968.
IT.
On April 24, 1969, the plaintiffs served motions** for
relief under Rule 60(b)(6), F.R.Civ.P., asking the court
to vacate its dismissal without prejudice and re-enter the
judgments: with leave to file amended complaints.* The
* ‘ .
-% Although motions: were filed in ‘each ease, for the sake of
clarity they will be discussed hereafter as a single motion and our
discussion is equally applicable to both Cases. } ‘
2 The records of the District Court show the motion as being
filed on July 1, 1969, and the District Court in its Order denying
the motion recognized that date as the filing date. The plaintiffs
contend that the date is erroneous and point to the date of service,
April 24, 1969, as being correct. The discrepancy in the dates is
immaterial to our decision in this nvatter. . ;
Ta 7
motion was based on an alleged misunderstanding of the -
import. of the Order of September, 1966, with respect to
the phrase ‘‘to include as parties plaintiff all members -
‘of the alleged class who have retained ecouhsel for the
- plaintiffs to. represent them in these two cases.’’ The
plaintiffs contend that the Order had actually been com-
plied with at the time that the court dismissed the case
for lack of compliance, that the court would not have
entered the dismissal had it known the true facts con-
tained in the. record, and that it should relieve the plain-
tiffs from the error by granting them leave to file amended
pleadings and thus further maintain this action.
_ This appeal deals exclusively with the alleged error -
of the District Court in dismissing the- motion as being ney
untimely.
IIT. -
The first question is thé determination of the date from
which to measure the timeliness of plaintiffs’ motion.
The original order of dismissal was entered on July 12,
1967. Clearly the time for relieving the plaintiffs from
that dismissal was the date of its entry, unless some rule
. of law or procedure extended the time.
[1-4] Aldsongh plaintiffs appealed bieid: the order of
_ dismissal, such appeal does not toll ‘the time for making
a 60(b) motion. This is because such motion can be made
even ‘though an appeal . has been taken and is pending.
Corn v. Guam Coral Co., 318 F.2d 622 (9th Cir. 1963);
Ferrell v. Trailmobile, Ine., 223 F.2d 697 (5th Cir. 1955) ;
7 Moore, Federal Practica, § 60.28[2] (2d Ed. 1970). - If
the appeal results in a substantive change, then the time’
would run from the substantially modified order entered
on mandate of the appellate court. Federal Trade Com-
mission v. Minneapolis- Honeywell Co., 344 U.S. 206, 73
S.Ct. 245, 97 L.Ed. 245 (1952). The decision of our Court
on the appeal did not cause a substantive change in. that
/ . -e
8a
the dismissal was merely: changed to be without prejudice.
As far as this suit was concerned, after-the entry of the
order on the mandate on September 10, 1968, the plaintiffs
stood in the exact position as they did on July 12, 1967.
’ As far as their claim was concerned, the appeal determined
‘that the dismissal would not act as a bar to another suit:
in this or another forum, but as to pursuing the cause of
‘netion in this suit, the complaint. remained ‘dismissed.
Changing a dismissal with prejudice to a dismissal with-
eut prejudice is not such a ‘substantial substantive change
as to renew the right of plaintiffs to bring a motion for.
reliefunder Rule 60(b), F.R.Civ.P., or extend their: time
for filing such a motion, : ates
The Distri Court correctly held that the time for
bringing {He 60(b) motion for relief from the diSmissal
of the Complaint began on July 12, 1967.
IV.
* The District Court treated plaintiffs’ motion as having
been, brought under Rule ‘60(b) (1). As such it was clearly
‘ untimely because the rule specifically provides that such
motions must be made *‘not more than one year after the
judgment, order or proceeding was entered or taken.’’
Even using plaintiffs’ date of service of April 24,1969,
the motion was filed over a year and nine months after
July .12, 1967, and could not bé considered by the. court
under Rule 60(b)(1). +. ,
.
V. Fan
The final question then is whether the District Court
properly treated the motion as being brought under Rule -
60(b)(1) rather than. under 60(b}(6) as designated by .
_plaintiffs. The difference could be significant because
while one year absolutely bars the, 60(b)(1) motion, the
60(b)(6) motion can be made within a rehsonable time,
which plaintiffs argue could extend more than one year.
‘
be
9a
‘Rule 60(b), Federal Rules’ of Civil Procedure, provides
as follows: ; ;
‘‘Mistakes; Inadvertence; Psvceate Neglect; Newly -
Discovered Evidence; Fraud, etc. On motion and upon
such terms as are just, the court may relieve a party
or: his legal representative from a final judgment,
order, or proceeding for the following reasons: (1)
mistake, inadvertence, surprise, or excusable neglect;
* * * 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. judg- -
ment, order, or proceeding was entered or taken. A
. motion: under this subdivision (b) does not affect the
finality of a judgment or suspehd its operation. * * * ”
‘ [5] The motion was hela on .an allered misunder-
standing of the import of the Order of September 14, |
1966, with respect to the phrase ‘‘all members of the al-
leged class who have retained counsel ‘for the: plaintiffs
to represent them in these two cases.’’ .The misinder-
standing results from the words ‘‘retained’’ and ‘‘repre-
sent.’? Although the plaintiffs have continuously stated
that they represent all members of the class, ineluding the
Florida companies, which were not joined, they allege -
that they were retained only by the original plaintiffs.
Therefore, they’ contend,. the Order of September, 1966,
was complied with since all members of. the class who,
retained them were joined as plaintiffs, and thus the
dismissal . for failure to comply with the Order ‘was er-
roneous. :
We agree with the District Court that this is a typical
ease of mistake and nothing more. ‘‘Mistake,’’ which as
a common word should be given its common meaning,
means to misunderstand the meaning or intention of some-
thing, or to’ misinterpret it. The misunderstanding as *
to the distinction between ‘‘retained’’ .and ‘‘represented’’
NAD AE OLE RN EE HE ORE
10a ee :
falls squarely within the definition of “mistake.” 4 Gila
River Raneh, Ine. v. United States, 868 Wd 854 (9th
Cir. TGS), se
It makes no difference wiathaae the ease way dismissed
beeause Jthe plaintiffs mistakenly thought they rep com-
plied with 4he Order, when in facet they had not, « * he-
Tenuse the eourt mistakenly thought “they had aie ‘sae
plied with the Order, when in faet they had. The ground ‘
“for relief, i it were toe be granted, would be that) pro-,
vided for by ‘tmistake’? in Rule GO(b) (1).
“ VI.
16] Rule Gob) (1) wd Rule GO(D) (6) are not part
pass and are mutually exclusive, Riniert v. News. Syndi-
eate Co. 38d Fi2d SIS (2d “Cir. 1967): 7 Moore, Federal
Practiee, © 60.2711] (2d Md. 1970). The reason for -relief:
set forth in Rule 60(b)(1) eannot be the basis for relief
under Rule 60(b) (6); .
- Neverthdless, the Distriet Court further considered
whether dank othersefAsons brought plaintiffs within the
-broad equitaMe power of Rule GO(b)(6), whieh could be
invoked to prevent extreme hardship or injustice. Barron
& Holtzo? (Wright dition) § 1330, p. 426 (1 58). The
Court determined that ‘the situation here is not the
type th: at justifies such an extreme exereise of diseretion.’
On review of the reeord reveals no other: reasons which.
would compel the court to exere ise its dixeretion in: grant-
ing relief or would show any abuse of discretion in denyi ing
relief.
,
Affirmed. én . - -
4 Alth ough contending that these cireamstances were smitten
other than ‘‘mistake."’ the plaintiffs’ brief continually referred
to the matter in terms of mistake. Thus, they used the following
phrases ** mistaken conclusion of fhe counsel,’’ ‘‘mistakenly be-
li eved by counsel,’’ ‘plaintiffs’ counsel mistakenly maintained, “
‘mistaken’ representation by ‘counsel,”’ ‘plaintiffs’ counsel” mis-
taken! y informed the court’ that the September order required
soinder of all members of the class.”’ The synonyms. ‘‘misunder-
‘standing’ ‘ and ‘‘misinterpretation’’ were also regularly used in
the brief.
Bi,
Aint De GI 000 OS PRE DB VOM
as
Ha irs cancer
APPENDIX C
— IN THE
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
Nos. 29145 and 29146
<
RANSIT Casuaury Company, ETC, ET Alu,
‘ oe 3 Plaintifs Ajipellants,
|
V.
‘Secunrry ase Comrany, ETC., ET Al.., ;
_ De fe ndants- A Lppellces.
.
Appeals from the United’ States, District Court for the
Southern insinict of: Mlorida
On Peririon ror’ ReENEARING AND PHTITION FOR.
Renearina En Banc _ ‘
(Opinion Apr. 1, 1971, 5 Cir., 1971, ——, F.2d = ae
(May 28, 1971)
Before Ber LL, Drex and Roney, Circuit Judges.
Per Curtam: The Petition. for Rehearing is Denrep
and no member of this panel nor’ Judge in regular active
service on the Court having requested that the Court be
polled on rehearing en bane, (Rule 35 Fedéral Rules of
‘Appellate Procedure; Local Fifth Circuit Rule 12). the
Petition for Rehearing. En Bane is Denmp. -’
‘
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.