Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-87-02037/USCOURTS-ca10-87-02037-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 

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UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

FILED 

Unit.ed States Court of Appeals 

Tenth Circuit 

In re: JACK J. GRYNBERG, a/k/a } 

JACK JAKOB GRYNBERG, a/k/a } 

JACK GRYNBERG, a/k/a JACK } 

GRYNBERG & ASSOCIATES, } 

} 

Debtor. } 

} 

JACK J. GRYNBERG, } 

} 

Debtor/Appellant, } 

} 

V • } 

} 

PAUL DANZIG, LOUIS DEGAN, CARL } 

ZWERNER and NORMAN J. LIPOFF, as } 

Executor of the Estate of ROBERT } 

RUSSELL, Deceased, individually } 

and on behalf of all Members of } 

the Certified Class in Danzig, } 

et al. vs. Grynberg (The Danzig } 

Class), CELESTE C. GRYNBERG, } 

} 

Appellees, } __________________ } 

} 

In re: CELESTE C. GRYNBERG, a/k/a } 

CELESTE CONSTANCE GRYNBERG, a/k/a } 

CELESTE GRYNBERG, } 

} 

Debtor. } 

} 

CELESTE C. GRYNBERG, } 

} 

Debtor/Appellant, } 

} 

V • } 

} 

PAUL DANZIG, LOUIS DEGAN, CARL } 

ZWERNER and NORMAN J. LIPOFF, as } 

Executor of the Estate of } 

ROBERT RUSSELL, Deceased, } 

individually and on behalf of all } 

Members of the Certified Class in } 

APR O 31989 

ROBERT L. HOECKER 

Clerk 

Consolidated Case Nos. 

87-2037 

87-2043 

87-2100 

(District of Colorado} 

(D.C. Nos. 86-F-2100 

86-F-2147 

86-F-2098 

86-F-2099) 

Appellate Case: 87-2037 Document: 010110035012 Date Filed: 04/03/1989 Page: 1 
Danzig, et al. vs. Grynberg (The ) 

Danzig Class), JACK J. GRYNBERG, ) 

) 

Appellees. ) 

___________________ ) 

) 

In re: CELESTE C. GRYNBERG, a/k/a ) 

CELESTE CONSTANCE GRYNBERG, a/k/a ) 

CELESTE GRYNBERG; ) 

) 

In re: JACK J. GRYNBERG, a/k/a ) 

JACK JAKOB GRYNBERG, a/k/a JACK ) 

GRYNBERG, a/k/a JACK GRYNBERG & ) 

ASSOCIATES, ) 

Debtors. ) 

) 

PAUL DANZIG, LOUIS DEGAN, CARL } 

ZWERNER and NORMAN J. LIPOFF, as } 

Executor of the Estate of ) 

ROBERT RUSSELL, Deceased, } 

and on behalf of all Members of } 

the Certified Class in Danzig, } 

et al. vs. Grynberg (The Danzig ) 

Class) , ) 

) 

Appellants, } 

) 

V • ) 

) 

CELESTE C. GRYNBERG and } 

JACK J. GRYNBERG, } 

} 

Debtors/Appellees. } 

ORDER AND JUDGMENT* 

Before ANDERSON, MCWILLIAMS and TACHA, Circuit Judges. 

* This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 

36.3. 

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Jack J. Grynberg and Celeste C. Grynberg objected to certain 

claims filed in the underlying bankruptcy proceeding contending 

that the California state court judgment upon which the claims are 

based is invalid on constitutional grounds. The essence of their 

contention is that the California court "had no jurisdiction over 

the absent plaintiffs [in a class action] which would support a 

nationwide money damages judgment in favor of any of them. 

Previous certification and notice of other claims confer no 

automatic class-action jurisdiction over a new, materially 

different money damages claim." Joint Opening Brief of Appellants 

at 13. They mount a further constitutional attack on the 

California trial court judgment on choice of law grounds. 

Additionally, the Grynbergs contend that a ruling by the 

California Court of Appeal that the Grynbergs had waived the 

foregoing claims was "so arbitrary and so fundamentally unfair as 

to deprive them of due process." Id. at 16. 

Those and other arguments were rejected by the district court 

in a well-reasoned decision from which the Grynbergs take this 

appeal. After a careful review of the arguments and authorities 

presented to us by the Grynbergs, we affirm the district court 

substantially for the reasons articulated in its opinion below, a 

copy of which is attached and incorporated herein. 

The Grynbergs unsuccessfully but fully developed and advanced 

their arguments through the entire direct appellate proces s, 

including a petition to the United States Supreme Court for a writ 

of certiorari. The judgment of the California trial court became 

final and entitled to res judicata effect. The powerful policies 

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behind that doctrine are not affected in this case by the United 

States Supreme Court's decision in Phillips Petroleum Co. v. 

Shutts, 472 U.S. 797 (1985), a decision brought to the attention 

of the Supreme Court in the Grynberg's petition for a writ of 

certiorari. Even if we were inclined to look behind the final 

decision of the California courts, the issue of waiver would 

precede any collateral inquiry into the constitutionality of the 

class action or choice of law aspects of the state litigation. 

Those due process and related claims were waivable by the 

Grynbergs. The California courts did not engage in a separate 

denial of due process by defining what conduct constituted a 

waiver, and their judgment that the Grynbergs waived the claims 

upon which they now rely is also entitled to res judicata effect. 

This court is the seventh forum in which the Grynbergs have 

pursued essentially the same arguments. The salutary purposes of 

the doctrine of repose have never been more evident. The judgment 

of the district court is AFFIRMED, inclusive of its ruling from 

which the cross-appeal in docket No. 87-2100 is taken, since that 

appeal (No. 87-2100) is moot. Appellants' motion to supplement 

the record is GRANTED. 

DENIED. 

Appellees' request for sanctions is 

ENTERED FOR THE COURT 

Stephen H. Anderson 

Circuit Judge 

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IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF COLORADO 

Action No. 86-F-2100 

Bankruptcy No. 81 B 00821 C 

JACK J. GRYNBERG, 

Plaintiff, 

V. 

PAUL DANZIG, ET AL., 

Defendants. 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF COLORADO 

Action No. 86-F-2147 

Bank~uptcy Action No. 81 B 00825 C 

CELESTE C. GRYNBERG 

Plaintiff, 

v. 

PAUL DANZIG, ET AL., 

Defendants. 

OPINION 

Sherman G. Finesilver, Chief Judge 

These four bankruptcy appeals arise from two bankruptcy court 

rulings. The debtors, Jack Grynberg, and Celeste Grynberg ( the 

"Grynbergs"), and certain creditors appeal various portions of the 

fol lowing bankruptcy court's orders: 1) order of July 9, 1986, 

allowing the claims of the Danzig class members; and 2) judgment of 

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August 21, 1986, permitting the claims of the Danzig class members. 

The parties requested consolidation of the appeals. We permitted 

consolidation for purposes of oral argument. Finding that oral 

argument is not required, we make the following determinations 

AFFIRMING the bankruptcy court's decision. 

BACKGROUND 

The parties have been involved in a series of lawsuits that 

arose from the operation of an oi 1 and gas limited partnership known 

as the Greater Green River Basin Drilling Program 72-73 ("GGRB"). 

In 1972, the Grynbergs, doing business as Jack Grynberg & Associates, 

made a public offering of shares in GGRB for the purpose of obtaining 

investors in oil and gas leases which they owned. The Grynbergs 

eventually sold the $4 million registered offering to approximately 

55 ljmited partner investors. The largest number of investors were 

Ca1ifornia residents. 

Due to a variety of problems, including those related to recorded 

assignments of leases, certain investors brought suit against the 

Grynbergs on March 20, 1975 in the Alameda, California Superior 

Court.I The five named plaintiffs filed a class action suit 

i n d i v i du a 1 1 y and on be ha 1 f o f a 11 1 i mi t e d par t n er s o f GGRB . The 

original complaint set forth seven causes of action against the 

1. See Danzig v. Grynberg & Associates, 161 Cal. App. 3d 1128, 208 

Cal. Rptr. 336 (1984), cert. denied 106 S.Ct. 67 (1985), for a more 

detailed description of the facts underlying the lawsuit. 

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Grynbergs.2 The suit was certified as a class action suit, and 

notice of the class action was sent to the unnamed plaintiffs. None 

of the limited partners of GGRB opted out of the class. In 1979, 

thr~e years after the original complaint was certified as a class 

action, the named plaintiffs moved to amend the complaint to add 

claims for rescission and for restitution on an alternative theory 

from that pleaded in the first seven claims. No notice of the amended 

complaint was given to the class. 

The Alameda Superior Court permitted the amendments to the 

complaint. On February 14, 1980, the case went to trial as a class 

action. After a seven week trial, the court filed a statement of 

decision in favor of the plaintiff class on a rescission theory, and 

ordered plaintiffs to submit proposed findings of fact and conclusions 

of raw. The defendants objected to each proposed finding and 

conclusion that supported class adjudication. They asserted that 

the adequacy of class representation was at issue if the court granted 

relief in the form of rescission. The trial court denied the 

defendants' objections. On December 18, 1980, findings of fact and 

conclusions of law were issued, specifically holding that a proper 

class action existed, and that the named plaintiffs adequately 

r e pr es en t e d t he c 1 as s ( the II Danz i g j u d gm en t 11 ) • The Danz i g j u d gm en t 

provided for restitution to the class in excess of $6,700,000. 

The defendants, Grynbergs moved for a new trial, asserting that 

their due process rights had been denied. In their motion for new 

2 • See Bank r up t c y Co u r t Order o f Ju 1 y 9 , 1 9 8 6 , p • 2 , f or a des c r i pt i on 

of the seven causes of action. 

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trial, they argued for the first time that 1) the trial court lacked 

jurisdiction to enter a class judgment because no notice of the 

amended complaint had been sent to the class; and 2) the trial court 

should have applied the law of the state of residence of each class 

member to the person's cause of action, rather than applying California 

law to al 1 plaintiffs. The trial court denied the motion for new trial. 

In early 1981, the Grynbergs filed for bankruptcy under Chapter 

11 of the Bankruptcy Code. The debtors also appealed the judgment 

of the California trial court to the California Court of Appeals. 

The trial court's decision was affirmed three years later in Danzig 

v. Grynberg & Associates, 161 Cal. App. 3d 1128, 208 Cal. Rptr. 336 

(1984). The appellate court later denied a petition for rehearing. 

The California Supreme Court denied the Grynbergs' request for a 

hearing on February 14, 1985. The United States Supreme Court denied 

writs of certiorari. Grynberg v. Danzig, 106 S.Ct. 67 (1985). 

After the proceedings in the California courts were completed, 

and before the United States Supreme Court denied certiorari, the 

Danzig claimants moved for allowance of their proofs of claims. The 

Grynbergs objected to the Danzig claimants proofs of claim based 

primarily on Phillips Petroleum Co. v. Shutts, 105 S.Ct. 2965 (1985), 

a case which had been decided while the petition for certiorari in 

Danzig v. Grynberg was pending before the Supreme Court. The parties 

stipulated to a continuance of the hearing on allowance of the claims 

until the Supreme Court made a decision. Upon denial of the petition, 

the Danzig claimants again moved for allowance of the petition, and 

the debtors objected. In its cogent order of July 9, 1986, the 

bankruptcy court allowed the Danzig claimants' proofs of claim for 

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each member of the class, based upon the individual proofs of claim. 

On August 21, 1986, the bankruptcy court entered judgment in accordance 

with its July 9, 1986 order as follows: 

IT IS ORDERED AND ADJUDGED that the debtors' objections 

to allowance of the Danzig claims are denied. The claims 

shall be allowed based on the individual proofs of claim 

of each member of the Danzig class and the class proof of 

claim, which is duplicative of the individual proofs of 

claim filed by the claimants, is disallowed. 

The parties appeal various portions of the bankruptcy court's 

r u 1 i n gs . The debtor Jack Gr y n berg a pp ea 1 s fr om the bankruptcy co u r t ' s 

denial of his objections to the Danzig claims in Action No. 86-F2100. The debtor Celeste Grynberg raises a similar appeal in Action 

No. 86-F-2147. In Action No. 86-F-2098 and Action No. 86-F-2099, 

the Danzig claimants appeal only from that portion of the bankruptcy 

court's order denying the proof of claim filed on behalf of the 

( Dan~ i g c 1 as s . They c on c e d e t ha t i f t h e i n d i v i du a 1 p r o o f s o f c 1 a i m 

are allowed, then the class proof of claim will be moot and should 

be stricken on that basis. Appel lees' Reply Brief, filed on December 

16, 1986, pp. 2-3. 

ANALYSIS 

The debtors contend that the bankruptcy court erred in finding 

they were estopped from objecting to the Danzig claimants' proofs 

of claim, based upon principles of res judicata. They further assert 

the Danzig judgment lacks fundamental fairness, and was entered in 

violation of their due process rights. The main issue in this appeal 

is whether res judicata applies to the Danzig judgment or whether 

the debtors may collaterally attack it. 

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A. Res Judicata 

The proofs of cla1m permitted by the bankruptcy court are based 

upon the Danzig judgment, a judgment entered in favor of the Danzig 

claimants in the Alameda Superior Court. The judgment has been 

affirmed by the California Appellate Court. A hearing was denied by 

( the California Supreme Court. Writs of certiorari were denied by 

the United States Supreme Court. 

( 

A denial of certiorari by the Supreme Court is not an adjudication 

on the merits insofar as the decision may affect persons not parties 

to the judgment. However, it does render the judgment final between 

the par1ies, and bars them from any further attack on it. Dairy 

Distributors, Inc. v. Western Conference of Teamsters, 294 F.2d 348, 

352 (10th Cir. 1962), cert. denied 368 U.S. 988 (1962). Therefore, 

the Danzig judgment is final, and subject to the principles of res 

judicata. 

Under the principles of res judicata, a final judgment on the 

merits in a prior suit involving the same parties or their privies 

precludes a subsequent suit upon the same cause of action. Parklane 

Hosiery Co. v. Shore, 439 U.S. 322 (1979). Res judicata prevents 

the relitigation of all grounds for recovery or defenses that were 

previously available to the parties, regardless of whether they were 

assserted or determined in the prior proceeding. Brown v. Felsen, 

442 U.S. 127 (1979). A state judgment which is final is res judicata; 

any subsequent attack upon that judgment is barred. Underwriters 

National Assurance Co. v. North Carolina Life & Accident & Health 

InsuranceGuarantyAssociation, 455 U.S. 691, 705-707 (1982); Bolling 

v . Ci t y & Co u n t y o f Den v e r , 7 9 0 F . 2 d 6 7 ( 1 0 th Ci r . 1 9 8 6 ) ; K i ow a Tr i be 

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of Oklahoma v. Lewis, 777 F. 2d 587 (10th Cir. 1985), cert. denied 

(107 S. Ct. 247 1986). 

Even if a judgment is incorrect, the judgment is still final. 

As the court stated in Collins v. City of Wichita, 254 F. 2d 837, 

839 (10t11 Cir. 1958), 

Litigation must end some time, and the fact that a court 

may have made a mistake in the law when entering judgment, 

or that there may have been a judicial change in the court's 

view of the law after its entry, does not justify setting 

it aside. [citations omitted]. 

However, a state court judgment need not be followed if it is so 

fundamentally flawed that it violates the minimum procedural 

requirements of the Fourteenth Amendment's Due Process Clause. Kremer 

v. Chemical Construction Corp., 456 U.S. 461 (1982); Kiowa, supra. 

Thus, issues which have already been litigated and decided may 

not be relitigated after the judgment becomes final. The Alameda 

Superior Court and the California Appellate Court decided each of 

the issues raised by the Grynbergs. The Supreme Court denied 

certiorari. The Danzig judgment is now final. The Ca 1 i for n i a 

proceedings were not a violation of the Grynbergs due process rights. 

Therefore, it is appropriate to give res judicata effect to the 

California judgment. 

The Grynbergs argue that exceptions to the application of res 

judicata should apply to prevent its application. This argument is 

based upon t he de c i s i on r ender e d i n Ph i 1 1 i p s Pe t r o 1 e um Co . v . Shu t t s , 

105 S. Ct. 2965 (1985), a case decided while the petition for 

certiorari in Danzig v. Grynberg & Associates was pending before the 

Supreme Court. The debtors assert that Phillips constitutes a change 

in controlling case law regarding due process requirements in class 

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actions. The debtors' contentions are unpersuasive. The bankruptcy 

court properly found that even assuming Phillips resulted in a 

substantial change in constitutional rights, this alone is 

insufficient to preclude application of res judicata. Bankruptcy 

Court Order of July 9, 1986, pp. 12-13. 

A change in the law regarding a constitutional right does not 

preclude application of res judicata, unless continued enforcement 

of the previously entered judgment would result in the continuation 

of unconstitutional conduct or preclusion of rights. The cases cited 

by debtors in which this exception has been applied are not applicable 

to the case at bar. In Stanley v. Missouri State Board of Law 

Examiners, 616 F. Supp. 142 (D. Mo. 1985), the issue was the continuing 

preclusion of plaintiff's right to practice law after similar 

residency requirements had been declared unconstitutional by the 

United States Supreme Court. The issue was the right of plaintiff 

to ·practice law in the future. See also, ~- Moch v. East Baton 

Rouge Parish School Board, 548 F. 2d 594 (5th Cir. 1977), cert. 

denied, 434 U.S. 859 (1977) and Parnell v. Rapides Parish School 

Board, 563 F.2d 180 (5th Cir. 1977), cert. denied, 438 U.S. 915 

(1978) (Both cases involved the validity of school reapportionment 

plans still in use after changes in constitutional standards.) The 

continuing deprivation of constitutional rights in the above cited 

cases are distinguishable from the case at bar, involving a money 

judgment. No continuing or future conduct is involved in this case. 

Further, public policies at issue in the above-cited cases, justifying 

an exception to the principles of res judicata are not present here. 

Therefore, an exception to res judicata is not applicable. The 

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bankruptcy court correctly determined that res judicata applied to 

the Danz i g j u d gm en t , and p e rm i t t e d t he Danz i g c 1 a i man t s ' pr o of s o f 

claim based upon the judgment. 

B. Phillips Petroleum Company 

Even if an exception to the doctrine of res judicata were 

( applied, the Phillips decision does not require a finding that the 

Danzig judgment should be overturned. The Grynbergs argue that the 

decision rendered in Phillips, supra, changed the law of California 

f r om t ha t a pp l i e d i n t h e D a n z i g j u d gm en t , and t ha t t h e r e f o r e , t he 

Danzig judgment should be overturned. This argument is flawed. 

The Phillips decision involved a class action brought by gas 

company investors to recover interest on royalties which had been 

suspended, pending final administrative approval of a gas price 

( incr~ase. The final class consisted of 28,000 members from all fifty 

states, and several foreign countries. The main focus of the decision 

involved the validity of the procedures used to certify the class. 

Instead of having an "opt in" procedure, whereby a potential class 

member could opt into the class, the plaintiffs used an "opt out" 

procedure. Thus, all investors in the gas company were automatically 

in the class, unless they opted out. The defendant gas company 

objected to the certification procedures in the trial court. However, 

the trial court certified the case as a class action. When judgment 

entered in favor of plaintiffs, the defendant appealed, contending 

that their due process rights had been violated by the certification 

procedures. The Supreme Court found that the defendant had standing 

to bring the suit, reasoning that: 

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Whether it wins or loses on the merits, petitioner has a 

distinct and personal interest in seeing the entire 

plaintiff class bound by res judicata just as petitioner 

is bound.The only way a class action defendant like 

petitioner can assure itself of this binding effect of the 

judgment is to ascertain that the forum court has 

jurisdiction over every plaintiff whose claim it seeks to 

adjudicate, sufficient to support a defense of res judicata 

in a later suit for damages by class members. 

105 S. Ct. at 2972. The Supreme Court also found that the certification 

procedure, providing for an "opt out" method, satisfied the 

defendant's due process rights. Fi n a l 1 y , the Supreme Co u r t he 1 d 

that to apply Kansas law to all plaintiffs, even though 97% of the 

plaintiffs had no contact with Kansas other than the lawsuit, was a 

violation of due process. Thus, the judgment of the Kansas Supreme 

Court was upheld insofar as it found jurisdiction over all of the 

plaintffs, and reversed insofar as it held Kansas law was applicable 

to all claims. 

The Phillips decision does not entitle the Grynbergs to a 

reversal of the Danzig judgment. Phillips found that class members 

must receive notice of the class action and that the forum court 

must consider whether the law of the forum state or of the various 

states of residence of the class members should be applied. In 

Phillips, the defendant vigorously asserted their objections to the 

class certification procedures at the trial level, before an 

adjudication on the merits. This assertion of rights gave the 

plaintiffs the opportunity to cure any defects in the certification 

procedures. Phillips did not deal with the situation involved in 

this case. In the case at bar, defendants raised objections to class 

certification procedures only after trial on the merits and after 

an adverse adjudication. The California Court of Appeals found that 

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the Grynbergs' failure to object to the certification procedures 

prior to trial resulted in a waiver of any defects in the procedures. 

The California Court of Appeals stated: 

Once the initial determination has been made [to 

certify a class action suit], a motion to decertify the 

class action may be used whenever changed circumstances 

render class status no longer appropriate. [citation 

omitted]. But a request for decertification must be made 

before a decision on the merits. [citation omitted]. 

Herein, Grynberg registered no formal objections to 

the initial certification of the class. Indeed, he conceded 

that crie action may be a "proper class action" while 

expressing concern only that divergent views within the 

class be represented. Nor did he move to decertify the 

class after the amendment to the complaint seeking 

rescission. 

Grynberg's challenge to the class certification was 

raised for the first time in his objections to the proposed 

findings of fact. His argument that the objections were 

timely since formal judgment had not yet been entered is 

unpersuasive. The very purpose in requiring pretrial 

determination of class issues is to avoid precisely what 

happened here: passsive acquiescence to class 

· certification awaiting results of trial, and if 

unfavorable, then belatedly attacking the class 

· certification order as improper. [citations omitted]. We 

conclude that Grynberg's failure to move timely to decertify 

or recertify the class effectively waived any objections 

to the class certification based on a claim of changed 

circumstances. [Emphasis in original]. 

2 0 8 Ca 1 • Rp tr • at 3 41 . 

Thus, in the proceedings before the Alameda Superior Court, the 

class action was properly certified at the inception of the lawsuit. 

When an amended complaint was filed, the class was not renotified of 

the causes of action raised in the amended complaint. The defendants 

made no objection to the validity of the class action with respect 

to the amended complaint. Defendants objected only after an adverse 

judgment was entered. Since that time, defendants have raised the 

issue at each step of appeal. Nothing in Phillips suggests that a 

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defendant may wait to raise pretrial objections unti 1 after an adverse 

judgment. 

C. Waiver 

The Grynbergs argue that "allowance of the Danzig claims solely 

on the basis of the Danzig judgment lacks fundamental fairness". 

( Debtors Joint Opening Brief, filed on November 17, 1986, p. 16. They 

argue that the plaintiffs were not given the opportunity to opt out 

before trial, but rather, were given the opportunity after a trial 

t o op t i n t o a j u d gm en t i n t he i r favor . They f u r t he r as s e r t t ha t t he 

Tenth Circuit has recognized the impropriety of class certification 

( 

after trial on the merits. E. g. Horn v. Associated Wholesale 

Grocers, Inc., 555 F. 2d 270, 274 (10th Cir. 1977). 

These arguments completely ignore the fact that the Danzig class 

action had been certified prior to trial. The only causes of action 

whi_ch plaintiffs did not receive notice of, were those in the amended 

complaint. The Grynbergs raised no objections on this point until 

after the trial court had indicated his intention to rule against 

them. Un de r the c i r cums tan c es , i t w a s the Gr y n be r gs , r a t he r than 

the plaintiffs, who have attempted to "opt out" of an unfavorable 

judgment. The California Court of Appeals specifically found that 

once a class action has been certified, and notice sent to all class 

members (as occurred in the Danzig action), the defendant waives 

pre-trial objections to the adequacy of that notice if he does not 

assert them prior to the trial. TheCaliforniaCourt of Appeals stated: 

Finally, we discern no prejudice to Grynberg by reason of 

the failure to provide notice to the class of the amendment 

seeking the different remedy of rescission. Since plaintiff 

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class received adequate notice of the original complaint 

alleging the same ultimate factual averments underlying 

the rescission theory of relief, separate lawsuits by 

individual members could not be successfully maintained. 

In any case, since the judgment was returned in favor of 

plaintiff class, none of whose members earlier chose to 

opt out, the error--i f any--in failing to provide additional 

notice, was clearly harmless. [Empahsis in original]. 

2 0 8 Ca 1 . Rp tr . at 3 41- 3 4 2 n . 5 . The Danz i ,g j u d gm en t i s n o t 

fundamentally unfair to the debtors. The debtors should have raised 

their objections prior to an adverse adjudication. Once a class 

action has been properly certified, a defendant may not sit mute, 

invite pretrial procedural errors, and then raise objections to 

pretrial procedures only after an adverse decision is reached. 

Debtors assert that the California courts unfairly shifted the 

burden to the debtors of moving prior to trial for class certification; 

they assert the plaintiff has the burden of protecting absent class 

plaintiffs in a class action suit. This argument cannot prevail; 

the.class action had been properly certified. The case was proceeding 

as a class action. Only an amended complaint, involving causes of 

action arising from the same facts, but asserting different remedies 

was added. If the debtors objected to class proceedings on those 

issues, objections should have been raised prior to trial. 

California Courts so found. 

Both 

Debtors argue that they were precluded from litigating their 

contentions before the California courts "on procedural grounds." 

They further contend that no court has addressed the merits of their 

due process arguments. These contentions beg the very issues which 

were decided against them. The "procedural ground" was the issue 

of waiver. Debtors were not "precluded" from raising their contentions 

before the California trial court; they totally failed to raise them 

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u n t i 1 a f t e r j u d gm en t was en t e r e d . Due p r o c e s s r i g h t s can be w a i v e d by 

a party if not timely asserted. Insurance Corp. of Ireland, Ltd. 

v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702-704 (1981). 

Debtors' claims were fully and fairly heard. The Grynbergs arguments 

are an attempt to raise objections before the bankruptcy court and 

( on appeal from the bankruptcy court's decision, by way of a collateral 

attack on the Danzig judgment. These are issues which they failed 

to assert before the California trial court. This is expressly what 

the doctrine of res judicata prohibits. 

The Grynbergs argue that many federal courts have held that a 

material amendment to a previously certified class complaint requires 

recertification and new notice if class members are to be bound. 

See, ~. Zenith Laboratories, Inc. v. Carter Wallace, Inc., 64 

F.R.D. 159 (D. N.J. 1974), affirmed, 530 F. 2d 508 (3d Cir. 1976), 

cert: denied, 429 U.S. 828 (1976); Matarazzo v. Friendly Ice Cream 

Corp., 70 F.R.D. 556, 560 (E.D. N.Y. 1976). These cases are 

distinguishable. In both cases the objections to the class 

certification procedures were raised prior to trial. The 

determination of the alleged insufficiency of notice was made in the 

class action itself. 

Recertification of a class action is not required every time a 

complaint is amended. Practically speaking, class actions would be 

unnecessarily bogged down with procedural impediments if we were to 

follow the arguments of the Grynbergs on this point. Under the facts 

of this case, the California trial court did not make, and was not 

required to make a sua sponte determination that recertification was 

necessary. Further, since theGrynbergs failed to raise any objections 

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to the previously certified class action, the matter was not even 

at issue unti 1 an adverse judgment against the Grynbergs was announced. 

D. Choice of Law 

Citing Phillips, supra, the debtors urge that the California 

courts violated their due process rights by arbitrarily applying the 

) law of California to all of the Danzig claimants, rather than the law 

of the residence of each individual. However, the California approach 

to choice of law issues is very similar to that enunciated by Phillips. 

Phillips does not require that the law of the state of each class 

member's residence be applied to that person's claim; it requir~s 

that there be an initial determination of whether the forum has a 

substantial interest in applying its law or should apply the various 

laws of the states of residence of the absent class members. California 

applies a sinilar balancing test. Hurtado v. Superior Court, 11 Cal. 

3d 574, 581, 114 Cal. Rptr. 106, 522 P. 2d 666 (1974). However, 

California does not permit a party to raise objections to the choice 

of law used by the trial court after judgment is entered. See Estate 

of Patterson, 108 Cal. App. 3d 197,207, 166 Cal.Rptr. 435 (1980). 

The Phillips decision did not raise the issue of waiver. 

D. Individual Proofs of Claim 

The Danzig claimants appeal that portion of the bankruptcy 

court's determination which held that class proofs of claim are not 

permissible in bankruptcy proceedings. The Danzig claimants concede 

that if this Court finds that the individual proofs of claim are 

permissible, then their appeal is moot. 

The bankruptcy court denied the Danzig claimants class proof 

of claim. However, based upon the Danzig judgment, the Danzig 

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( 

claimants' individual proofs of claims were permitted. The bankruptcy 

court stated: 

There is no provision of the Bankruptcy Code or Bankruptcy 

Rules that specifically authorizes the filing of a proof 

of claim on behalf of a class. To the contrary, to allow 

a representative of a class to file a claim on behalf of 

others would be inconsistent with 11 U.S.C. § 501 and 

Bankruptcy Rules 3001 and 3003 and should not be allowed. 

See In re Baldwin-Limited Corp., 52 Bankr. 146 (Bankr. 

S.D. Ohio 1985), and In re Computer Devices, 51 Bankr. 

471 (Bankr. D. Mass. 1985). 

July 9, 1986 Order, p. 16. This Court is not persuaded that class 

proofs of claims are impermissible in a bankruptcy case when the 

claims are based upon a final judgment obtained in another court. 

Nevertheless, the issue is not dispositive, and need not be determined 

in this case. Thus, this Court finds the bankruptcy court properly 

permitted the Danzig claimants proofs of claim, based upon the 

individual claims. 

After an independent review of the bankruptcy court's conclusions 

of law, the Court finds that they are substantially supported by the 

law. Further, the factual findings upon which the legal conclusions 

are based are amply supported by the record, and are not clearly 

erroneous. Accordingly, 

IT IS ORDERED: 

1) The Danzig claimants' appeals in Action No. 86-F-2098 and 

Action No. 86-F-2099, from the bankruptcy court's order denying the 

proof of claim filed on behalf of the Danzig class, are DENIED as 

MOOT. The bankruptcy court's order of July 9, 1986, and judgment 

of August 21, 1986 are AFFIRMED. 

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2) The debtor Jack Grynberg's app e al in Action No. 86-F-2100 

is DENIED. The bankruptcy court's order of July 9, 1986, and judgment 

of August 21, 1986 are AFFIRMED. 

3) The debtor Celeste Grynberg's a ppeal in Action No. 86-F2147 is DENIED. The bankruptcy court's order of July 9, 1986, and 

judgment of August 21, 1986 are AFFIRMED. 

4) Each party shall bear its own costs and attorney fees 

incurred on these appeals. 

5) The Clerk of Court is DIRECTED to enter judgments in these 

cases, in accordance with this opinion. 

Done this Jj_ day of June, 1987, in Denver, Colorado. 

ENTERED 

OH THE DOCKIT 

JUN 11 1987 

J.(!;f~!'~R ft·•;::,•·· ··'? 

I'' =---~ BY ... - ·•" . ......... ·- ··-•- •4 •~ 

BY THE COURT: _ ~ 

~~t~ ~/ -/1/(,/J~~-~ 

Sherman G. Finesilver, Chief Judge 

United States District Court 

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