## F I L E D United States Court of Appeals Tenth Circuit 

### AUG 24 1998 

### PATRICK FISHER Clerk PUBLISH
UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

FEDERAL DEPOSIT INSURANCE CORPORATION, Receiver for and on behalf of HERITAGE BANK AND TRUST, Plaintiff-Appellee,

v. UNITED PACIFIC INSURANCE COMPANY, a corporation, RELIANCE INSURANCE COMPANY, a corporation,

Defendants-Appellants. No. 96-4210

Appeal from the United States District Court

for the District of Utah (D.C. No. 90-CV-633)

Norman R. Carpenter, of Faegre & Benson, Minneapoli s, Minnesota (Philip L. Bruner with him on the briefs) for Defendants-Appel lants. Kathryn R. Norcross, Counsel, of Federal Deposit In surance Corporation, Washington, D. C., (Ann S. Duross, Assistant Genera l Counsel and Thomas L. Hindes, Senior Counsel, of Federal Deposit Insuranc e Corporation, Washington, D. C., and Mark E. Friedman, of Garvey, Shubert & B arer, Portland, Oregon, with her on the brief) for Plaintiff-Appellee.-2-

Before BALDOCK, HOLLOWAY, and MURPHY, Circuit Judges.

MURPHY , Circuit Judge.

United Pacific Insurance Company and Reliance Insur ance Company (“Defendants”) appeal the district court’s denial o f their Rule 60(b) motions seeking relief from judgment. Defendants also chal lenge the fairness of the proceedings on remand from the previous appeal of this case, arguing the district court’s procedures prevented a fair and accurate co mputation of the Federal Deposit Insurance Corporation’s (“FDIC”) net recove ry from the settlement of a legal malpractice suit against a third party. Exer cising jurisdiction pursuant to 28 U.S.C. § 1291, this court reverses and remands.
I. BACKGROUND The facts of this case have been fully set out in aprevious opinion of this

court. See FDIC v. United Pac. Ins. Co. , 20 F.3d 1070, 1072-75 (10th Cir. 1994). We therefore repeat only those facts necessary to r esolve the current appeal. In June 1990, the FDIC, as receiver for Heritage Bank and Trust (“Heritage”), brought this action against Defendant s United Pacific Insurance Company and Reliance Insurance Company seeking reco very under two fidelity bonds issued by Defendants. The FDIC sought to rec over for a loss from a loan-3-

made by Heritage in 1984 to Hartwell International, N.V. (“Hartwell”), a Netherlands Antilles corporation, in the amount of approximately $4,600,000. The Hartwell loan was secured by promissory notes, which were in turn secured by certificates of deposit purchased from H eritage totaling approximately $5,800,000. The makers on the notes were 1522 indi vidual investors in a number of oil and gas drilling partnerships, known as the Transpac Partnerships. The notes were payable to Andover Finance, Ltd. and ass igned to Hartwell, which then pledged the notes to Heritage as security for the loan. After taking over Heritage in April 1987, the FDIC settled a number of securities fraud claims brought by Transpac investo rs against Heritage seeking cancellation of their promissory notes and return o f their certificates of deposit. In April 1990, the FDIC also brought a malpractice action against John Lowe, outside legal counsel for Heritage during the perio d when the Hartwell loan transaction took place. The FDIC settled all claim s against Lowe and his firm in exchange for $1,950,000. In the suit against Defendants, the FDIC alleged th at John R. Starley, president of Heritage, engaged in dishonest or frau dulent acts with the intent to injure Heritage and to secure personal financial ga in, for which conduct Defendants’ bonds provided indemnity. The bonds pr ovided that the insurer must indemnify Heritage up to the limits of the bond for“[l]oss resulting directly from-4-

dishonest or fraudulent acts committed by an [e]mpl oyee” of Heritage. Section 7 of the bonds further provided:

(a) In the event of payment under this bond, the I nsured shall deliver, if so requested by the [Insurer], an assig nment of such of the Insured’s rights, title and interest and causes of action as it has against any person or entity to the extent of the l oss payment. (b) In the event of payment under this bond, the [ Insurer] shall be subrogated to all of the Insured’s rights of rec overy therefor against any person or entity to the extent of such payment. (c) Recoveries, whether effected by the [Insurer] or by the Insured, shall be applied net of the expense of suc h recovery first to the satisfaction of the Insured’s loss which would otherwise have been paid but for the fact that it is in excess of either the Single or Aggregate Limit of Liability, secondly, to the [Ins urer] as reimbursement of amounts paid in settlement of the Insured’s claim, and thirdly, to the Insured in satisfaction of any Deductible Amount.

. . . .

. . . . (e) The Insured shall execute all papers and renderassistance to secure to the [Insurer] the rights and causes of action provided for herein. The Insured shall do nothing after discove ry of loss to prejudice such rights or causes of action. Prior to the jury trial in this case, the district court granted the FDIC’s in limine motion to exclude evidence relating to the Lowe se ttlement on the ground that the settlement was a recovery from a collatera l source which would not reduce the loan loss claim under the bonds. The di strict court also granted the
FDIC’s in limine motion to exclude evidence attempting to project t he FDIC’s recoveries through possible settlements of the rema ining investor claims and the liquidation of the remaining loan collateral, on th e ground that such evidence would be speculative.1 The FDIC presented evidence at trial of its settlem ent with 548 of the 1522

investors. The FDIC claimed that in settling these investors’ claims it paid out $658,992 in order to retain the certificates of dep osit worth a total of $2,228,295, and incurred $316,090 in administrative expenses insettling the claims, resulting in a net recovery on the certificates of $1,253,213

. -5- At trial, the FDIC claimed it suffered a loss of $4 ,586,257, the amount loaned to Hartwell. To this amount, the FDIC credi ted $1,253,213, which represented the net recoveries it obtained through the time of trial from settlements with some of the named investors on certificates of deposit held as collateral for the Hartwell loan. 1 Pursuant to the district court’s earlier rulings, no evidence was presented concerning the status or potential value of the remaining collateral or the recovery from the Lowe settlement. Defendants were permitted to argue, however, that because the Hartw ell loan was fully collateralized, the FDIC suffered no loss on the lo an. The jury returned a special verdict for the FDIC, f inding that Starley, while an officer of Heritage, committed a dishonest act w ith manifest intent to cause Heritage to sustain a loss and obtain financial ben efit for himself or another person. The jury further found that the loss to He ritage resulting from Starley’s dishonest act was $3,333,044. In reaching this fig ure, the jury deducted from the $4,586,257 loan balance $1,253,213 for the FDIC’s n et recovery from the loan collateral which had been liquidated as of the date of trial. Consistent with the-6-

terms of the bonds, the district court then entered judgment in favor of the FDIC in the amount of the bonds, $1,450,000, plus intere st. On appeal, this court reversed the district court’s ruling excluding evidence of the Lowe settlement, but affirmed on the remaini ng liability and damages issues raised by Defendants. See id. at 1083. With respect to the Lowe settlement issue, the court remanded the case to th e district court to determine what portion of the $1,950,000 settlement represent ed common damages, requiring a credit against the judgment to avoid a double recovery by the FDIC for the same loss. See id. Noting that the jury had concluded the FDIC susta ined a loss greater than the limits of the bonds, the co urt further directed that the applicable portion of the Lowe settlement proceeds must first reduce the FDIC’s total loss before the proceeds could be applied to reduce the judgment. See id. at 1083 n.12. On remand, in June 1994, Defendants filed a motion for relief from judgment pursuant to Federal Rule of Civil Procedur e 60(b). In addition to arguments relating to the Lowe settlement and a $91 ,798 loan fee which Defendants argued should be credited against the ju dgment, Defendants requested that the district court issue an order compelling a n accounting for all Hartwell loan collateral which remained in the hands of the FDIC and that the district court reduce the judgment by the value of the notes and c ertificates upon which the2 With respect to Defendants’ request for an accounti ng and credit for the

remaining collateral, the FDIC asserted that this h ad been adjudicated at trial based on the district court’s ruling that future re covery from investors was speculative and not admissible at trial and based o n the district court’s denial of Defendants’ Motion for JNOV and New Trial in which Defendants argued the FDIC did not suffer a loss because it still held no tes and certificates of deposit as collateral for the loan. -7- FDIC had recovered. Defendants argued that the rem aining collateral should be credited against the judgment because the FDIC woul d otherwise obtain a “double recovery” from both the collateral and the bond pro ceeds. Defendants further asserted that this court’s opinion contemplated that a credit would be given to Defendants for the value of the remaining collatera l and that their Rule 60(b) motion provided a procedural mechanism to accomplis h what this court contemplated in its decision. In response, the FDIC argued that Defendants’ Rule 60(b) motion sought to circumvent this court’s mandate by raising substant ive issues already disposed of on appeal. The FDIC asserted that this court affir med all issues relating to liability and damages with the exception of giving Defendants a credit for the FDIC’s net recovery from the Lowe settlement. The FDIC concluded that consideration of any other issue on remand would vi olate this court’s mandate. The FDIC further argued that Defendants had failed to demonstrate extraordinary circumstances justifying relief under Rule 60(b)(6)

. 2-8-

In July 1994, the FDIC filed a Motion for Order to Determine Calculation of Damages on Remand, requesting that the district court establish by order that Defendants were only entitled to a credit for the F DIC’s net recovery from the Lowe settlement and that the judgment would only be reduced if that net recovery was greater than the $1,883,044 difference between the $3,333,044 jury verdict and the bond amount. Further, the FDIC argued thatunless the net settlement recovery exceeded $1,883,044, it would be unnecessary for the district court to determine the extent to which the judgment and the Lowe settlement represented common damages. In November 1994, the district court granted the FD IC’s motion and denied Defendants’ Rule 60(b) motion “[f]or the reasons outlined by [the FDIC] in its responsive pleading.” In April 1995, Defendants filed a Motion to Interve ne in the state court Heritage receivership proceedings, asserting they h ad an interest in the remaining collateral on the Hartwell loan. Defendants stated that the Hartwell loan collateral was free of adverse claims pursuant to astipulation filed in October 1994 in the state proceeding which allegedly resolv ed the dispute between the Transpac investors and the FDIC over the notes and certificates. In August 1995, before the state court ruled on Defendants’ motion, Defendants and the FDIC stipulated that Defendants’ Motion to Intervene wou ld be stayed and that the-9-

FDIC would prepare an accounting of the dispositionof the Hartwell assets in the receivership, including the promissory notes and ce rtificates of deposit. In December 1995, Defendants filed a second Rule 60 (b) motion for relief from judgment premised on the accounting provided b y the FDIC in the Heritage receivership proceeding. Defendants asserted that the FDIC’s recovery through the Lowe settlement and liquidation of the remainin g loan collateral exceeded the Hartwell loan loss and that Defendants should there fore be relieved from payment under the bonds. Defendants argued that the FDIC’s full recovery on the loan loss constituted extraordinary circumstances warranting relief under Rule 60(b)(6). The FDIC opposed Defendants’ Rule 60(b) motion, arg uing that the issues raised by Defendants were fully litigated at trial and were foreclosed by this court’s mandate. In addition, the FDIC stated that“any issues of credit, assignment, or subrogation were not raised by the d efendants at trial” or in their pleadings and therefore these issues were not prese rved. The FDIC further asserted that Defendants’ subrogation and assignment rights under the bonds were their exclusive remedies and that Defendants had fa iled to properly and timely assert their rights in the state receivership proce edings as required by state law. The FDIC concluded that the federal district court therefore lacked jurisdiction to consider the subrogation and assignment claims. Fi nally, the FDIC again argued-10-

Defendants failed to demonstrate that exceptional c ircumstances existed warranting Rule 60(b) relief. The district court again denied Defendants’ Rule 60 (b) motion. The court reasoned that the loss from the Hartwell loan and the collectibility of the disputed collateral were fully litigated at trial and on app eal. The court also concluded that Defendants failed to demonstrate extraordinary circ umstances and that reviewing any issue other than the Lowe settlement would ther efore violate the mandate on remand. Based on affidavits from the FDIC’s counsel concern ing the FDIC’s legal fees and administrative expenses incurred in the Lo we settlement, the district court issued an order finding that the FDIC’s net r ecovery from the Lowe settlement was $1,512,855.34. Because that net rec overy was less than the $1,883,044 difference between the $3,333,044 jury v erdict and the bond coverage, the district court concluded the settlement proceed s did not reduce the original amount of the judgment. The district court thus fo und it unnecessary to determine whether the judgment and the settlement proceeds re presented common damages. Accordingly, the court entered judgment for the FDI C in the amount of $1,450,000, plus prejudgment interest and costs. T he court also ordered Defendants to pay postjudgment interest pursuant to 28 U.S.C. § 1961(a).
II. DISCUSSION3 Federal Rule of Civil Procedure 60(b) provides, in relevant part: On motion and upon such terms as are just, the court may relieve a party . . . from a final judgment . . . f or the following reasons: . . . (3) fraud . . . , misrepresentation, or other misconduct of an adverse party; . . . (5) the judgment has been s atisfied, released, or discharged . . . ; or (6) any other reason justifyi ng relief from the operation of the judgment. On appeal, Defendants state they are seeking reviewof the district court’s denial of their motions pursuant to Rule 60(b)(5). A review of the record indicates, however, that to the extent Defendants i dentified the specific clause of Rule 60(b) on which they were relying, Defendants r elied on 60(b)(6) before the district court. In their first Rule 60(b) motion, Defendants did not identify any of the six grounds delineated in the rule. Because De fendants did not specify the particular clause of Rule 60(b) they were relying o n, the FDIC assumed in its response to Defendants’ motion that they were relyi ng on 60(b)(6). In their second Rule 60(b) motion, Defendants requested reli ef under 60(b)(6). In oral argument on their second motion, Defendants asserte d relief was appropriate under either 60(b)(3), (5), or (6). Defendants didnot further address, however, which of these grounds they were specifically relyi ng on during oral argument before the district court, nor did Defendants provi de any specific analysis or authority with respect to any of these grounds. Although Defendants have been inconsistent in ident ifying the specific grounds for relief under Rule 60(b), Defendants hav e consistently presented the same argument for seeking relief from judgment. Th e FDIC, therefore, has not been deprived of an opportunity to respond to Defen dants’ arguments. Further, although Defendants apparently now characterize the ir motions as relying on 60(b)(5), rather than 60(b)(6), “we need not rigidl y compartmentalize our analysis upon review. Instead, we look to the record in its entirety to see if the trial judge . . . failed to recognize some . . . compelling rea son for relief to be granted.” Pelican Prod. Corp. v. Marino , 893 F.2d 1143, 1146 (10th Cir. 1990) (citation omitted). -11-

A. Rule 60(b) Request for Relief from Judgment Defendants assert the district court improperly den ied their Rule 60(b) motions for relief from judgment. 3 Defendants rely upon the FDIC’s alleged recovery of the full amount of its loss on the Hartwell loan from the Lowe-12-

settlement and the post-trial settlement of investo r claims and subsequent liquidation of the remaining loan collateral. Defe ndants argue they are entitled to relief based on bond provisions and because it is n ecessary to avoid double recovery by the FDIC. This court has recognized that Rule 60(b) provides courts with a “grand reservoir of equitable power to do justice in a particular case.” State Bank of S. Utah v. Gledhill (In re Gledhill) , 76 F.3d 1070, 1080 (10th Cir. 1996) (internal quotations omitted). A district court accordingly has substantial discretion to grant relief as justice requires under Rule 60(b). See Pelican Prod. Corp. v.
Marino , 893 F.2d 1143, 1146 (10th Cir. 1990). Neverthele ss, such relief “is extraordinary and may only be granted in exceptiona l circumstances.” Bud Brooks Trucking, Inc. v. Bill Hodges Trucking Co. , 909 F.2d 1437, 1440 (10th Cir. 1990). This court reviews the district court’s denial of aRule 60(b) motion for abuse of discretion. See Pelican Prod. Corp. , 893 F.2d at 1145. “‘A district court would necessarily abuse its discretion if it based its ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence.’” Lyons v. Jefferson Bank & Trust , 994 F.2d 716, 727 (10th Cir. 1993) (quoting Cooter & Gell v. Hartmarx Corp. , 496 U.S. 384, 405 (1990)). 1. Relitigation of Issues-13-

The FDIC argues the district court properly denied Defendants’ request for relief because Defendants’ Rule 60(b) motions const ituted an improper attempt to relitigate substantive issues which were raised anddecided at trial and which were affirmed on appeal. In denying Defendants’ se cond Rule 60(b) motion, the district court likewise concluded that “the collect ibility of the disputed collateral [was] fully litigated at trial and on appeal.” As the FDIC notes, Rule 60(b) is “not available to allow a party merely to reargue an issue previously addressed by the court when the reargument merely advances new arguments or supporting facts which we re available for presentation at the time of the original argument.” Cashner v. Freedom Stores,
Inc. , 98 F.3d 572, 577 (10th Cir. 1996). In requesting relief pursuant to Rule 60(b) based on the FDIC’s recovery from the post-tr ial liquidation of the remaining collateral, however, Defendants were not merely rearguing issues which were already raised at trial or which were av ailable for presentation at trial.

Before trial, the district court granted the FDIC’s in limine motion to exclude evidence relating to the FDIC’s future sett lements with investors and potential recovery from the liquidation of the rema ining loan collateral on the ground that such evidence would be speculative. Be cause this evidence was excluded from trial, the collectibility and status of collateral liquidated following-14-

the trial was not a matter which was actually befor e the jury or trial court or which could have been presented by Defendants at tr ial. Moreover, in ruling that evidence of the FDIC’s potential recovery from the remaining collateral could not be presented at trial, the district court did not r esolve the issue of whether Defendants were entitled to a credit under the bond s for any actual future recoveries obtained by the FDIC. The FDIC, however, asserts that Defendants’ Rule 60 (b) motions constituted an attempt to relitigate the jury’s det ermination of the FDIC’s “loss” under the bonds, a determination which was affirmedon appeal. As the FDIC notes, issues relating to whether the FDIC actuallysustained a loss under the bonds and relating to the actual amount of that los s were litigated at trial and disposed of on appeal. See United Pac. Ins. Co. , 20 F.3d at 1079-83. Contrary to the FDIC’s characterization of Defendants’ Rule 60( b) motions, however, Defendants are not seeking to relitigate those issu es. As this court noted in our prior opinion, the start ing point for determining the FDIC’s loss was the full amount of the loan, $4 ,586,257, which would never be collected from Hartwell. See id. at 1080. Under the bond terms, the loan collateral that was liquidated by the FDIC at the t ime of trial was a “recovery” against that loss. See id. at 1081. In reaching the verdict of $3,333,044, t he jury-15-

credited against the total $4,586,257 loss $1,253,2 13 in net recoveries from settling investors. See id. at 1081 n.9. In seeking a credit against the judgment for the ne t amount recovered by the FDIC on the remaining loan collateral, Defendan ts are not attempting to relitigate the issue of the total loss sustained bythe FDIC. Defendants are not now challenging the jury’s determination that the F DIC suffered a loss within the coverage of the bonds. Instead, Defendants are mer ely seeking to be partially or fully relieved from the judgment based on the FDIC’ s recovery for the same loss through the liquidation of the remaining loan collateral. Thus, the issue of Defendants’ right to a credit fo r the FDIC’s post-trial liquidation of the remaining loan collateral was no t litigated and decided at trial or on appeal. To the extent the district court rel ied on Defendants’ alleged relitigation of the issues in denying relief under Rule 60(b), the district court abused its discretion. Cf. Lyons , 994 F.2d at 727 (noting district court abuses its discretion when decision is based on erroneous viewof law or clearly erroneous assessment of evidence). 2. Mandate of Appellate Court The FDIC also argues that Defendants’ Rule 60(b) mo tions were an attempt to have the district court disregard this court’s m andate on remand. The district court appears to have assumed that it was precludedfrom granting Defendants’-16-

motions by this court’s mandate. The district court stated that “Rule 60(b)(6) cannot be properly used to alter the substantive co ntent of a judgment once it has been affirmed on appeal, except in extraordinary ci rcumstances.” The district court then concluded that Defendants had failed to demonstrate extraordinary circumstances and that reconsideration of any issue other than the Lowe settlement would therefore violate the Tenth Circui t mandate remanding for “further proceedings consistent with” the Tenth Cir cuit’s opinion. This court’s mandate did not, however, preclude the district court from granting Defendants relief under Rule 60(b). Altho ugh strict compliance with the mandate of the reviewing court is required, a distr ict court may consider a Rule 60(b) motion to reopen a decision that has been aff irmed on appeal when the basis for the motion was not before the appellate court o r resolved on appeal. See Standard Oil Co. of Calif. v. United States , 429 U.S. 17, 18-19 (1976). A court is not flouting the mandate of the appellate court by acting on a motion raising events occurring after the trial or appeal because “the appellate mandate relates to the record and issues then before the court, and do es not purport to deal with possible later events.” Id. at 18. In this case, Defendants were seeking to reopen the judgment to consider whether they are entitled to a credit for the FDIC’ s post-trial recovery from the remaining collateral. Defendants’ motions thus rel ated to facts arising after the-17-

trial: the post-trial settlements with investors an d the liquidation of the remaining collateral. The motions did not raise an issue whi ch was resolved on appeal, either expressly or implicitly. In our prior opinion, this court did refer to the l oan collateral. In addressing Defendants’ argument that there was no l oss under the bonds because the loan was fully collateralized, the court stated that “whether a loss occurred is determined regardless of the security the bank has for the loss.” United Pac. Ins.
Co. , 20 F.3d at 1081 (internal quotations omitted). T he court then continued: The value of the collateral does not define the los s; rather, if the collateral is finally determined in favor of the in sured, under the terms of the bond, it becomes a “recovery” applicab le against the loss. The certificates of deposit and promissory n otes that remain the subject of separate litigation have not yet been fi nally determined in favor of the FDIC; therefore, until such time as th ey are, or until the FDIC enters into settlements with the remaining inv estors, the value of the certificates does not reduce the FDIC's loss

. Id. (citations omitted). This court further rejected Defendants’ argument th at there was no loss under the bonds because the FDIC was a holder in du e course of the remaining collateral. The court stated that this case was no t the proper forum for deciding whether the FDIC was a holder in due course of the collateral, as the investors were not parties in the case. See id. at 1081-82. The court further noted that the ultimate collectibility of the notes and certif icates does not absolve Defendant from its present liability under its bond. This is so because Defendant is liable until the notes and certificate are-18-

finally determined in favor of the FDIC, or until t he FDIC enters into settlements with the remaining investors. Id. at 1082 (internal quotations, alterations, and cit ation omitted). Although the above language in this court’s prior o pinion did not expressly address or approve Defendants’ present claims, the language certainly did not foreclose Defendants from requesting that the distr ict court reopen the judgment based on the FDIC’s post-trial recovery on the rema ining collateral. Nor would the district court’s grant of relief under Rule 60( b) flout this court’s mandate remanding the case “for further proceedings consist ent with this opinion.” Id. at 1083. The district court was therefore not preclud ed by this court’s mandate from considering the Rule 60(b) motions. The district c ourt’s denial of relief on the ground that such denial was dictated by this court’ s mandate thus constituted an abuse of discretion. Cf. Lyons , 994 F.2d at 727.
3. Allocation of Recoveries Under the Bond Provisi ons The FDIC also asserts that Defendants cannot obtainrelief under Rule 60(b) because (1) they failed to preserve their rig hts to subrogation or assignment in this case; (2) they have no subrogation or assig nment rights to the collateral under the terms of the bonds until Defendants have paid on the bonds; (3) they cannot acquire subrogation rights to collateral alr eady liquidated; and (4) they failed to preserve any subrogation or assignment cl aim they may have had against the general receivership estate. All of these issu es are resolved by Defendants’-19-

reliance on section 7(c) of the bonds rather than o n sections 7(a) and 7(b), the assignment and subrogation provisions of the bonds. Sections 7(a) and 7(b) of the bonds provide that af ter the insurer makes payment under the bond, the insurer is entitled to the insured’s rights of recovery by assignment or subrogation against any person or entity to the extent of such payment. The FDIC asserts Defendants have not effe ctively pursued their rights under these sections. Although Defendants may not have pursued their assignment or subrogation rights under the bonds, h owever, they nevertheless remain entitled to a credit for “net recoveries” ob tained by the FDIC on the losses covered by the bonds pursuant to section 7(c) of th e bonds. See United Pac. Ins.
Co. , 20 F.3d at 1083; see also FDIC v. Fidelity & Deposit Co. of Md. , 827 F. Supp. 385, 389 (M.D. La. 1993), aff’d 45 F.3d 969 (5th Cir. 1995). Section 7(c) provides the manner in which recoverie s by either the insured or the insurer must be allocated. Section 7(c) pro vides that recoveries shall be applied, net of the expense of such recovery, first , to satisfy the insured’s loss in excess of the amount paid under the bond, second, t o the insurer as reimbursement of amounts paid in settlement of the insured’s claim, and third, to the insured to satisfy any deductible amount. Ther efore, if the FDIC has obtained a net recovery on the loss which exceeds the differ ence between its total loss and4 In conjunction with their subrogation argument, the FDIC also asserts that

the district court was without jurisdiction to grant the relief sought by Defendants. The FDIC argues that in claiming they were entitled to a credit on the judgment based on the bond provisions, Defendants were essentially asserting a subrogation or assignment claim against general assets of the r eceivership. The FDIC therefore maintains that Defendants were required t o assert a claim in the state receivership proceedings and the district court was without jurisdiction to consider Defendants’ claim against assets under the jurisdiction of the state courts. In denying Defendants’ second Rule 60(b) m otion, the district court likewise noted that “it appears that the judgment i s an asset of the receivership” and “under Utah law, an exclusive procedure is prov ided by which a creditor may claim against the assets of a failed financial inst itution.” Defendants’ present claims, however, are not premis ed on assignment and subrogation. They are instead based on the net rec overy credit provided in section 7(c) of the bonds. Thus, even assuming exc lusive state jurisdiction in the receivership proceedings over subrogation and assig nment claims, the federal district court retains jurisdiction over its judgme nt for the assertion of the section 7(c) bond rights. Further, even if the judgment, o nce final, is deemed a general asset of the receivership, the district court retai ns jurisdiction to reopen the federal judgment under the circumstances outlined i n Rule 60(b) when necessary to accomplish justice. Therefore, to the extent th e district court denied Defendants’ second Rule 60(b) motion on the ground that it was without jurisdiction, this was an abuse of discretion. See LSLJ Partnership v. Frito-Lay, Inc. , 920 F.2d 476, 479 (7th Cir. 1990) (noting distric t court “may abuse its discretion by failing to exercise its discretion,” as when district court erroneously concludes it is without jurisdiction to consider Ru le 60(b) motion on the merits). -20- the bond limits, Defendants are entitled to a credi t from the FDIC’s net recovery. 4 The failure to effectively pursue the rights provid ed by sections 7(a) and 7(b) of the bonds does not affect the operation of section 7(c). 4. Extraordinary Circumstances Warranting Rule 60(b) Reli ef Finally, the FDIC argues Defendants have not shown extraordinary circumstances sufficient to justify relief under Ru le 60(b). In so arguing, the5 Defendants have persistently maintained that the FD IC has obtained a

“double recovery” for its loss on the Hartwell loan . The FDIC disputes this and asserts that the accounting which it provided to De fendants was only a “partial accounting of the disposition of some of the collat eral which secured the Hartwell loan” and does not show that the FDIC has received a double recovery or has recovered all of its losses. The FDIC further asse rted at oral argument in this appeal that it remains exposed to suits by a numberof the investors. The FDIC also apparently disputes Defendants’ contention that all the Hartwell loan collateral has now been liquidated. This court exp resses no opinion as to whether the FDIC has actually recovered in full or in part on the Hartwell loan loss from its post-trial liquidation of the collateral. -21- FDIC primarily relies on its assertions that the is sues raised in Defendants’ Rule 60(b) motions were litigated and decided at trial. As discussed above, however, these issues were not decided at trial. Instead, t he question of a credit based on post-trial liquidation of collateral was precluded from consideration at trial by the district court’s pre-trial order. Further, the FDIC is not entitled to recover twice for the same loss, once from Defendants and once from the liquidated collat eral. Thus, assuming the FDIC has partially or fully recovered on the loss c overed by the bonds from its post-trial liquidation of the remaining collateral, Defendants are not only entitled to a credit pursuant to section 7(c) of the bonds, but such a credit is necessary to avoid a double recovery by the FDIC. 5 In this court’s prior opinion discussing whether the FDIC’s net recovery from the Lowe settl ement should be applied as a credit against the judgment, we noted that “‘[i]t i s a fundamental legal principle that an injured party is ordinarily entitled to onl y one satisfaction for each-22-

injury.’” United Pac. Ins. Co. , 20 F.3d at 1082 (quoting U.S. Indus., Inc. v. Touche Ross & Co. , 854 F.2d 1223, 1236 (10th Cir. 1988)). Similarly, in this situation, if the FDIC has recov ered its loss on the loan from the loan collateral, the FDIC is not entitled to a double recovery from both the collateral and the fidelity insurers merely bec ause all the collateral was not liquidated at the time of trial. Such a double rec overy constitutes extraordinary circumstances which justify relief from judgment. Although a district court has substantial discretion to deny a Rule 60(b) motion, “a district court does not have discretion to require two satisfactions.” Sunderland v. City of Phila. , 575 F.2d 1089, 1090 (3d Cir. 1978); see also Johnson Waste Materials v. Marshall , 611 F.2d 593, 599 (5th Cir. 1980) (noting that when the re is “practically conclusive evidence” that judgment has been satisfied, judgment should be set aside to prevent a “windfall” and “manifest miscarriage of j ustice” (internal quotations and emphasis omitted)). Because no reason appears from the record why Defen dants’ Rule 60(b) motions should not have been granted, this court re mands to the district court to determine whether the FDIC has obtained a recovery from the remaining loan collateral that either partially or fully compensat es the FDIC for its loss under the Hartwell loan and to grant or deny Defendants relie f from the judgment accordingly.-23- B. Remand Proceedings Concerning Lowe Settlement Defendants next argue that in the proceedings on re mand relating to proof of the FDIC’s net recovery from the Lowe settlementthey were denied a meaningful opportunity to respond to the FDIC’s evi dence and were thus denied due process. Defendants specifically assert the di strict court improperly permitted the FDIC to offer into evidence the affid avits of its counsel as to the attorney fees incurred by the FDIC in settling the Lowe malpractice suit, without allowing Defendants to take any discovery or to cro ss-examine the affiants. Defendants also contend the district court improper ly allowed the FDIC to produce only summary bills for its legal services and prevented further examination into the bills based on the FDIC’s asse rtion of attorney-client privilege. Defendants finally assert they were imp roperly denied the opportunity to examine the FDIC’s witnesses concerning the admi nistrative expenses incurred by the FDIC in settling the Lowe case. Although a district court is required on remand to conduct proceedings consistent with the appellate court’s mandate, a di strict court has broad discretion in determining the procedure to be followed. It is within the district court’s discretion to determine what means would afford the parties an adequate opportunity to present and object to evidence, incl uding whether to allow limited discovery and cross-examination of witnesses. Cf. Krell v. Prudential Ins. Co. of-24-

Am. (In re Prudential Ins. Co. Am. Sales Practice L itig. Agent Actions) , Nos. 97-5155, 97-5156, 97-5217, 97-5312, 1998 WL 409156, at *53 (3d Cir. July 23, 1998). In this case, however, the district court’s blanket denial of Defendants’ requests for discovery and cross-examination did no t afford Defendants an adequate opportunity to evaluate and object to evid ence presented by the FDIC and the denial thus constituted an abuse of the dis trict court’s discretion. We note that, while the procedure followed on reman d was inadequate, Defendants are not entitled to a mini-trial on the issue of the attorney fees and administrative expenses incurred by the FDIC. The determination of the FDIC’s legal fees and expenses should not result in a seco nd major litigation. The district court is also not required to allow Defendants to r elitigate issues already raised and resolved under the guise of determining the netrecovery from the Lowe settlement. Under section 7(c) of the bonds, Defen dants are only entitled to reimbursement from the FDIC’s net recoveries from third parties. Because Defendants chose to rely on their rights under sect ion 7(c) rather than pursuing their assignment and subrogation rights under the b onds and attempting to obtain their own recovery from third parties, Defendants w ere able to avoid incurring their own legal and administrative expenses and wer e also able to avoid the risk of loss in pursuing such recoveries. In relying onsection 7(c), Defendants are therefore required to accept the FDIC’s deductions from the Lowe recovery for its6 In rejecting Defendants’ request that the FDIC prod uce more detailed

billing information, the district court apparently accepted the FDIC’s assertion that such information was protected from disclosure because it contained “descriptions of work performed that the FDIC regar ds as privileged attorney/client communications.” Based on the reco rd before us, this court is unable to address the merits of the FDIC’s claim of attorney-client privilege. The party seeking to invoke the attorney-client pri vilege has the burden of establishing its applicability. See Motley v. Marathon Oil Co. , 71 F.3d 1547, 1550 (10th Cir. 1995). To satisfy this burden, it is insufficient for the FDIC merely to contend that documents contain privileged information. See, e.g., Hollins v. Powell , 773 F.2d 191, 196 (8th Cir. 1985); Durokee Co. v. United States (In re Grand Jury Subpoena) , 697 F.2d 277, 279-80 (10th Cir. 1983). Therefore, on remand, the FDIC must make a more sub stantial showing to invoke the attorney-client privilege and avoid production of the records at issue. In determining whether the relevant billing records co ntain privileged communications, the district court may adopt proced ures, such as in camera review of allegedly privileged documents, to protec t against disclosure of privileged communications. The district court may not, however, impose a blanket prohibition on discovery of more detailed s tatements or records based on the FDIC’s bare assertion that such records containprivileged communications. -25- legal fees and administrative expenses, so long as such fees and expenses are reasonable. This court remands to the district court to structu re the procedure for determining the FDIC’s legal fees and expenses so that Defendants can make some reasonable inquiry into the nature of and reas onableness of the costs incurred by the FDIC in settling the Lowe malpracti ce suit. 6
III. CONCLUSION This court REVERSES and REMANDS for the district court to determine whether Defendants are entitled to relief from the judgment due to the FDIC’s7 If necessary, the district court must also determin e on remand to what

extent the judgment and the FDIC’s net recovery fro m the Lowe settlement represent common damages.

8 Defendants also argue the district court improperlygranted the FDIC’s motion under Federal Rule of Civil Procedure 60(a) to amend the final judgment to award the FDIC postjudgment interest on the enti re amount of the judgment, including prejudgment interest and costs. Defendants assert that although a district court has discretion to impose postjudgment interest on prejudgment interest, there is no indication in the record here that the district court so intended. This circuit has recognized, however, th at postjudgment interest awarded under 28 U.S.C. § 1961(a) applies to the entire award granted by the district court, including any prejudgment interest and costs. See Bancamerica Commercial Corp. v. Mosher Steel of Kansas, Inc. , 103 F.3d 80, 82 (10th Cir. 1996); Wheeler v. John Deere Co. , 986 F.2d 413, 415 (10th Cir. 1993); see also Air Separation, Inc. v. Underwriters at Lloyd’s of London , 45 F.3d 288, 290 (9th Cir. 1995) (“[I]t is well-established in other circ uits that postjudgment interest also applies to the prejudgment interest component of a district court’s monetary judgment.”). Therefore, should the district court conclude on remand that the FDIC is entitled to postjudgment interest on the ju dgment pursuant to 28 U.S.C. § 1961(a), that interest would apply to the entire judgment, including any award of prejudgment interest and costs. -26- post-trial liquidation of collateral on the Hartwel l loan and to structure fair procedures for the determination of the FDIC’s lega l and administrative expenses incurred in obtaining its recoveries from third parties. As this court noted in our prior opinion, the applicable portion of the Lowe s ettlement proceeds 7and the FDIC’s net recovery from the liquidated collateral must first reduce the FDIC’s total loss before these proceeds are applied to red uce the judgment against Defendants. 8