Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-95-02056/USCOURTS-ca10-95-02056-0/pdf.json

Nature of Suit Code: 430
Nature of Suit: Banks and Banking
Cause of Action: 

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PUBLISH 

~TEDSTATESCOURTOFAPPEALS 

FOR THE TENTH CIRCUIT 

RICHARD D. LUEKER, 

Plaintiff- Appellee, No. 95-2056 

and 

CYNTHIA K. MORRIS, formerly known 

as Cynthia K. Boyle, 

Plaintiff, 

ROY W. BIDWELL, EILEEN 

BIDWELL, A. ROLFE BLACK, 

DOROTHY W. BLACK, VAUNT. 

FLOYD, NORMAN C. BARNHART, 

DONALD D. MARTIN, WILLA J. 

MARTIN, DANIEL E. BOYLE, JR., and 

PATRICIA A. BOYLE, 

Plaintiffs-Counter-Defendants, 

v. 

FIRST NATIONAL BANK OF BOSTON 

(Guernsey) LIMITED, 

Appellate Case: 95-2056 Document: 01019279266 Date Filed: 04/09/1996 Page: 1 
Defendant - Appellant, 

and 

SUNWEST BANK OF 

ALBUQUERQUE, N.A.; UNITED NEW 

:MEXICO BANK; FIRST SECURITY 

BANK,N.A., 

Defendants-Counter-Claimants. 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF NEW :MEXICO 

(D.C. No. CIV-94-232-JC) 

Clark Varnell (John M. Eaves and John G. Baugh with him on the briefs), Eaves, 

Bardacke & Baugh, P.A., Albuquerque, New Mexico, for Defendant- Appellant. 

Bill Chappell, Jr. (Suzanne B. Kinney with him on the brief), Chappell & Barlow, P.A., 

Albuquerque, New Mexico, for Plaintiff- Appellee. 

Before TACHA, McKAY, and JONES*, Circuit Judges. 

McKAY, Circuit Judge. 

•The Honorable Nathaniel R. Jones, United States Court of Appeals for the Sixth 

Circuit, sitting by designation. 

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Appellate Case: 95-2056 Document: 01019279266 Date Filed: 04/09/1996 Page: 2 
Defendant First National Bank of Boston (Guernsey) Limited (hereinafter 

"Guernsey") appeals from the district court's denial of its request for attorneys' fees. 

Guernsey sought attorneys' fees pursuant to New Mexico law for dissolution of a 

wrongfully obtained preliminary injunction. The district court refused this request, 

because it believed that Guernsey had engaged in inequitable conduct. We hold, 

however, that Guernsey is entitled to reasonable attorneys' fees. Thus, we reverse and 

remand for determination of a reasonable fee award. 

This case has its genesis in Plaintiff Richard Lueker's attempt to force Lloyd's of 

London into litigation in a United States court. Mr. Lueker, a New Mexico resident, 

began his relationship with Lloyd's when he became a member of a Lloyd's insurance 

syndicate. In order to become a member, Lloyd's required Mr. Lueker to provide security 

from an approved source. Mr. Lueker obtained this security from Guernsey, a British 

bank, in the form of two letters of credit in favor of Lloyd's. In tum, Guernsey required 

security from Mr. Lueker. Mr. Lueker provided Guernsey with two back-up letters of 

credit issued on his account from Sunwest Bank of Albuquerque. 

After several years, Mr. Lueker came to believe that Lloyd's had defrauded him. 

Mr. Lueker's agreement with Lloyd's prevented him, however, from suing Lloyd's in 

New Mexico. Rather, a forum selection clause mandated that Mr. Lueker could only 

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Appellate Case: 95-2056 Document: 01019279266 Date Filed: 04/09/1996 Page: 3 
pursue legal action against Lloyd's in the British court system. In response to this 

dilemma, Mr. Lueker devised a scheme to force Lloyd's to sue him in New Mexico. 1 Mr. 

Lueker believed that if he could prevent Sunwest from honoring its letters of credit to 

Guernsey, Guernsey in tum would refuse to honor its letters of credit to Lloyd's. Thus, 

Lloyd's recourse would be to sue Mr. Lueker in his home state. One other problem 

existed: Mr. Lueker could not sue Guernsey in New Mexico because it was not subject to 

personal jurisdiction in that state. 

Mr. Lueker attempted to solve this jurisdictional conundrum by suing Sunwest in 

New Mexico state court. Despite seeking in his complaint to enjoin Sunwest from 

honoring its letters of credit to Guernsey, Mr. Lueker did not name Guernsey as a party to 

the lawsuit. Additionally, Mr. Lueker did not allege in his complaint that Guernsey had 

committed any wrongdoing. Rather, he limited his allegations of wrongdoing to Lloyd's. 

Nevertheless, the state court entered a temporary restraining order against Sunwest, 

ordering the bank not to honor its letters of credit to Guernsey. The court later converted 

the TRO to a preliminary injunction. 

1

Mr. Lueker admitted to this strategy in his state court complaint requesting 

injunctive relief: "Enjoining Sunwest from disbursing under the Letters of Credit, will 

require Lloyd's to present any claims for payment from Plaintiff under its Membership 

Agreement in a court of competent jurisdiction in the United States .... " Appellant's 

App. at 213. 

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Appellate Case: 95-2056 Document: 01019279266 Date Filed: 04/09/1996 Page: 4 
After the preliminary injunction was entered, Mr. Lueker amended his complaint 

to add Guernsey as a party-defendant. Guernsey then removed the case to federal district 

court and moved for dismissal. The district court subsequently dismissed the case based 

on lack of personal jurisdiction over Guernsey and based on Mr. Lueker's failure to join 

Lloyd's as an indispensable party. The court dissolved the injunction as "improvidently 

granted." Taking advantage ofNew Mexico law which allows recovery of attorneys' fees 

in favor of a party who successfully dissolves a wrongful preliminary injunction, 

Guernsey moved the district court for such an award. In response, Mr. Lueker argued that 

Guernsey could not obtain attorneys' fees because it was not a party against whom a 

preliminary injunction had been issued. In considering the motion, the district court 

simply assumed that Guernsey was a proper party for an award of attorneys' fees. The 

court denied the motion, however, because it believed that Guernsey had engaged in 

inequitable conduct by not intervening in the original state court proceedings. Guernsey 

appeals this decision. Thus, two issues are before us: (1) may Guernsey recover 

attorneys' fees although it was not the party enjoined?; and (2) did Guernsey engage in 

inequitable conduct when it did not intervene in the state court proceedings? 

New Mexico generally does not allow a winning litigant to recover attorneys' fees. 

It recognizes an exception to this rule, however, where a party expends attorneys' fees in 

order to dissolve a wrongful injunction. Gre~~ v. Gardner, 388 P.2d 68, 77 (N.M. 1963). 

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Appellate Case: 95-2056 Document: 01019279266 Date Filed: 04/09/1996 Page: 5 
Specifically, a party may recover only "where a resolution of the principal or underlying 

issues is in favor of the party enjoined and the injunction is found to be wrongful." 

Schultz v. Pascoe, 614 P.2d 1083 (N.M. 1980). Mr. Lueker asserts that Guernsey cannot 

avail itself of this rule because no injunction was ever entered against it. We disagree. 

First, although the injunction was entered originally against Sunwest, we point out that 

Guernsey was eventually made a party-defendant to Mr. Lueker's complaint requesting 

an injunction. Second, we note that Guernsey had standing to ask for the dissolution of 

the injunction. Under the circumstances of this case, we believe that a party with 

standing to dissolve a wrongful injunction may also recover attorneys' fees. New Mexico 

recognized the wrongful injunction exception to the general rule on attorneys' fees in 

order to prevent abuse of the court's extraordinary power to enter restraining orders and 

injunctions. Webb v. Beal, 247 P. 840, 842 (1926). If a party such as Guernsey were 

unable to avail itself of the attorneys' fees rule, the policy goals expressed by the New 

Mexico Supreme Court would be thwarted. We would be remiss if we allowed such a 

result through an overly technical application of the rule. Standing ensures that 

Guernsey's interests are sufficiently implicated to allow it to vindicate the policy 

concerns ofNew Mexico's attorneys' fees rule. 

Mr. Lueker also asserts that the underlying issues in this case have been resolved 

against Guernsey. He cites to a case between Guernsey and Sunwest involving the 

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Appellate Case: 95-2056 Document: 01019279266 Date Filed: 04/09/1996 Page: 6 
Sunwest letters of credit in which the district court ruled in favor of Sunwest. Again, Mr. 

Lueker's argument misses the mark. In Schultz v. Pascoe, 614 P.2d 1083, 1084 (N.M. 

1980), the New Mexico Supreme Court required the underlying issues to be resolved in 

favor of the party seeking attorneys' fees. The court introduced this requirement to 

ascertain that the dissolved injunction was in fact wrongful. An injunction is wrongful 

where "'plaintiff had no just right either in the law or the facts to justify him in asking and 

obtaining"' such a remedy. ld.. at 1084 (citation omitted). According to the court, if a 

plaintiff won on the underlying issues, then it could not be said that he had no right to ask 

for an injunction. It is clear, however, that the Schultz court only considered whether the 

injunction was wrongful as a substantive matter. In this case, Mr. Lueker had no right in 

law or fact, as a procedural matter, to ask for an injunction. Lloyd's was clearly an 

indispensable party, and Guernsey, added to the lawsuit after the preliminary injunction 

was issued, was not subject to personal jurisdiction. These two facts certainly came as no 

surprise to Mr. Lueker. He should have known that his lawsuit would fail for these 

reasons. Thus, the fact that Mr. Lueker may have been correct on the underlying 

substantive issues does not alter the fact that the injunction was wrongful as a procedural 

matter. Accordingly, we hold that Guernsey can invoke New Mexico's rule allowing the 

recovery of attorneys' fees for the dissolution of a wrongful injunction. 

Finally, we address the issue whether Guernsey engaged in inequitable conduct 

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Appellate Case: 95-2056 Document: 01019279266 Date Filed: 04/09/1996 Page: 7 
• 

when it failed to intervene in the state court proceedings before it had been named as a 

party. Guernsey argues that, had it intervened, it would have subjected itself to personal 

jurisdiction.2 This result, Guernsey argues, is exactly what Mr. Lueker intended. We 

agree with Guernsey that its decision not to intervene was not inequitable conduct in light 

of the circumstances of this case. By obtaining a wrongful injunction, Mr. Lueker hoped 

to force Guernsey and Lloyd's to litigate in New Mexico. Although Mr. Lueker is free to 

attempt to force Lloyd's to litigate in an American court, the fact remains that he 

furthered his machinations by abusing the court's power to issue injunctions. Thus, 

Guernsey acted reasonably when it refused to capitulate to Mr. Lueker's wrongful use of 

the injunction. We hold that the district court abused its discretion when it found that 

Guernsey acted inequitably. We remand to the district court for an award of reasonable 

attorneys' fees. 

REVERSED and REMANDED. 

2

Under New Mexico law, a special appearance is made when counsel appears for 

the sole purpose of objecting to the jurisdiction of the court. New Mexico ex rel. Valles 

v. Brown, 639 P.2d 1181, 1185 {N.M. 1981). Failure to join an indispensable party~ 

however, is not a jurisdictional defect. C.E. Alexander & Sons. Inc. v. DEC Int'l. Inc., 

811 P.2d 899, 900 (N.M. 1991). Thus, Guernsey would have subjected itself to personal 

jurisdiction had it sought to intervene and assert that Lloyd's was an indispensable party. 

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. .., 

, 

95-2056, Lueker v. First National Bank of Boston 

TACHA, Circuit Judge, Dissenting 

New Mexico law allows a winning litigant to recover attorneys' fees expended to 

dissolve a wrongful injunction only when that litigant is the "party enjoined." Schultz v. 

Pascoe, 614 P.2d 1083 1084-5 (N.M. 1980). The injunction at issue in this case was issued 

against Sunwest Bank of Albuquerque, not against defendant First National Bank of Boston 

(Guernsey) Limited ("Guernsey"). Under a plain reading of New Mexico law, then, 

Guernsey cannot recover attorneys' fees because it was not the party enjoined. The majority 

reasons that Guernsey may recover attorneys' fees because it was made a party-defendant 

to the action that gave rise to the injunction. Adding Guernsey to the complaint, however, 

merely made Guernsey a party, not the enjoined party. The majority also construes this 

interpretation of New Mexico law as an overly technical application of the rule at issue. But 

interpreting "party enjoined" as the enjoined party, as opposed to ,am:: party involved in the 

litigation, is not overly technical; it is instead a plain reading of New Mexico law. For that 

reason, I respectfully dissent. 

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