Source: http://supreme.justia.com/cases/federal/us/486/847/case.html
Timestamp: 2013-12-05 19:06:42
Document Index: 427172727

Matched Legal Cases: ['§ 455', '§ 455', '§ 455', '§ 455', '§ 455', '§ 455']

Liljeberg v. Health Svcs. Acq. Corp. - 486 U.S. 847 (1988) :: Justia US Supreme Court Center
Justia > US Law > US Case Law > US Supreme Court > Volume 486 > Liljeberg v. Health Svcs. Acq. Corp. - 486 U.S. 847 > Case	NEW - Receive Justia's FREE Daily Newsletters of Opinion Summaries for the US Supreme Court, all US Federal Appellate Courts & the 50 US State Supreme Courts and Weekly Practice Area Opinion Summaries Newsletters. Subscribe Now
Liljeberg v. Health Svcs. Acq. Corp. - 486 U.S. 847 (1988)
Case	U.S. Supreme CourtLiljeberg v. Health Svcs. Acq. Corp., 486 U.S. 847 (1988)Liljeberg v. Health Services Acquisition Corp.No. 86-957Argued December 9, 1987Reargued April 25, 1988Decided June 17, 1988486 U.S. 847CERTIORARI TO THE UNITED STATES OF APPEALS FOR
In 1977, pursuant to a plan to construct and operate a hospital in Kenner, Louisiana, petitioner formed a corporation (St. Jude) to apply for the necessary state "certificate of need." During the next two years, petitioner negotiated with Loyola University over a proposal to purchase as the hospital site a portion of Loyola's Kenner land for several million dollars, coupled with a plan to rezone Loyola's adjoining land to greatly increase its value. Federal District Court Judge Robert Collins was a member, and regularly attended the meetings, of Loyola's Board of Trustees, whose minutes indicated regular discussions of the negotiations' progress and reflected the fact that Loyola's interest in the project was dependent on the issuance of the certificate. Petitioner also conducted negotiations with respondent's corporate predecessor, Hospital Affiliates International (HAI), culminating in HAI's purchase of a Kenner site not owned by Loyola and its filing of the certificate application upon petitioner's execution of an agreement which HAI believed gave it title to St. Jude. After the certificate was issued in St. Jude's name, and a dispute between petitioner and HAI arose as to St. Jude's ownership, petitioner's proposal to reopen the Loyola negotiations was discussed and formally approved at the Board's meeting on November 12, 1981, which Judge Collins attended. On November 30, 1981, respondent filed suit in the District Court seeking a declaration of ownership of St. Jude. Judge Collins, sitting without a jury, tried the case on January 21 and 22, 1982, immediately announcing his intention to rule for petitioner. On January 28, 1982, at a meeting which Judge Collins did not attend, the Loyola Board discussed the terms of an agreement of sale with petitioner, which provided, inter alia, that it would be void if petitioner failed to satisfy certain conditions, the fulfillment of which depended on his retention of control over the certificate. Judge Collins did not read the minutes of that meeting until March 24, 1982. In the meantime, on March 16, he entered judgment for petitioner, crediting petitioner's version of crucial, disputed conversations. Ten months after the Court of Appeals affirmed that judgment, respondent, having just learned that Judge Collins was associated with Loyola while petitioner Page 486 U. S. 848 and the University were engaged in negotiations concerning the hospital site, moved pursuant to Federal Rule of Civil Procedure 60(b)(6) to vacate the judgment on the ground that Judge Collins was disqualified under 28 U.S.C. § 455(a). Judge Collins denied the motion, but the Court of Appeals reversed and remanded to a different judge, who also denied the motion on the ground that, although the evidence gave rise to an appearance of impropriety, Judge Collins lacked actual knowledge of Loyola's interest in the litigation during the trial and prior to the filing of the judgment. The Court of Appeals again reversed, ruling that the appearance of impropriety is a sufficient ground for disqualification under § 455(a). Moreover, the court ruled that vacatur was an appropriate remedy in these circumstances.
2. Vacatur was a proper remedy for the § 455(a) violation in the circumstances of this case. In determining whether a § 455(a) violation requires vacatur under Rule 60(b)(6) -- which gives federal courts broad authority to grant relief from a final judgment "upon such terms as are just," provided that the motion is made within a reasonable time -- it is appropriate to consider the risk of injustice to the particular parties, the risk that the denial of relief will produce injustice in other cases, and the risk of undermining the public's confidence in the judicial process. Here, despite his lack of actual knowledge of Loyola's interest in the dispute during trial, Judge Collins' participation in the case created a strong appearance of impropriety, particularly in light of his regular attendance at Board meetings, including the one on November 12, 1982, and the financial Page 486 U. S. 849 importance of the project to Loyola; his failure to attend the January 28, 1982, meeting or to read the minutes of that meeting before entering judgment; his inexcusable failure to recuse himself or disclose his interest on March 24, 1982, when respondent still had time to file a new trial motion or to use the failure as an issue on direct appeal; and his failure to acknowledge, in denying the motion to vacate, that he had known about Loyola's interest both shortly before and shortly after trial, or to indicate any awareness of a duty to recuse himself in March, 1982. Moreover, vacatur here will not produce injustice in other such cases, and may, in fact, prompt other judges to more carefully search for and disclose disqualification grounds. Furthermore, a careful study of the merits of the underlying litigation suggests that there is a greater risk of unfairness in upholding the judgment for petitioner than in allowing a new trial, while neither petitioner nor Loyola has made a showing of special hardship by reason of their reliance on the original judgment. Finally, although a 10-month delay would normally foreclose vacatur based on a § 455(a) violation, the delay here is excusable, since it is entirely attributable to Judge Collins' conduct. Pp. 486 U. S. 862-870.
STEVENS, J., delivered the opinion of the Court, in which BRENNAN, MARSHALL, BLACKMUN, and KENNEDY, JJ., joined. REHNQUIST, C.J., filed a dissenting opinion, in which WHITE and SCALIA, JJ., joined, post, p. 486 U. S. 870. O'CONNOR, J., filed a dissenting opinion, post, p. 486 U. S. 874.
In 1974, Congress amended the Judicial Code "to broaden and clarify the grounds for judicial disqualification." 88 Stat. 1609. The first sentence of the amendment provides: Page 486 U. S. 850
Based on this information, respondent moved pursuant to Federal Rule of Civil Procedure 60(b)(6) to vacate the judgment on the ground that Judge Collins was disqualified under § 455(a) at the time he heard the action and entered judgment Page 486 U. S. 851 in favor of Liljeberg. Judge Collins denied the motion, and respondent appealed. The Court of Appeals determined that resolution of the motion required factual findings concerning the extent and timing of Judge Collins' knowledge of Loyola's interest in the declaratory relief litigation. Accordingly, the panel reversed and remanded the matter to a different judge for such findings. App. to Pet. for Cert. 40a. On remand, the District Court found that, based on his attendance at Board meetings, Judge Collins had actual knowledge of Loyola's interest in St. Jude in 1980 and 1981. The court further concluded, however, that Judge Collins had forgotten about Loyola's interest by the time the declaratory judgment suit came to trial in January, 1982. On March 24, 1982, Judge Collins reviewed materials sent to him by the Board to prepare for an upcoming meeting. At that time -- just a few days after he had filed his opinion finding for Liljeberg and still within the 10-day period allowed for filing a motion for a new trial -- Judge Collins once again obtained actual knowledge of Loyola's interest in St. Jude. Finally, the District Court found that, although Judge Collins thus lacked actual knowledge during trial and prior to the filing of his opinion, the evidence nonetheless gave rise to an appearance of impropriety. However, reading the Court of Appeals' mandate as limited to the issue of actual knowledge, the District Court concluded that it was compelled to deny respondent's Rule 60(b) motion. App. to Pet. for Cert. 14a.
"a reasonable observer Page 486 U. S. 852 would expect that Judge Collins would remember that Loyola had some dealings with Liljeberg and St. Jude and seek to ascertain the nature of these dealings."
Petitioner, John Liljeberg, Jr., is a pharmacist, a promoter, and a half-owner of Axel Realty, Inc., a real estate brokerage firm. In 1976, he became interested in a project to construct and operate a hospital in Kenner, Louisiana, a suburb of New Orleans. In addition to providing the community with needed health care facilities, he hoped to obtain a real estate commission for Axel Realty and the exclusive right to provide pharmaceutical services at the new hospital. The successful operation of such a hospital depended upon the acquisition of a "certificate of need" from the State of Louisiana; without such a certificate, the hospital would not qualify for health care reimbursement payments under the federal medicare and medicaid programs. [Footnote 2] Accordingly, in October 1979, Liljeberg formed St. Jude, intending to have the corporation apply for the certificate of need at an appropriate time. Page 486 U. S. 853
Liljeberg was also conducting serious negotiations with respondent's corporate predecessor, Hospital Affiliates International (HAI), a national health management company. In the summer of 1980, Liljeberg and HAI reached an agreement in principle, outlining their respective roles in developing Page 486 U. S. 854 the hospital. The agreement contemplated that HAI would purchase a tract of land in Kenner (not owned by the University) and construct the hospital on that land; prepare and file the certificate of need; and retain Liljeberg as a consultant to the hospital in various capacities. In turn, it was understood that Liljeberg would transfer St. Jude to HAI. Pursuant to this preliminary agreement, various documents were executed, including an agreement by HAI to purchase the tract of land from its owner for $5 million and a further agreement by HAI to place $500,000 in escrow. In addition, it was agreed that Axel Realty, Inc., would receive a $250,000 commission for locating the property. Eventually, Liljeberg signed a "warranty and indemnity agreement," which HAI understood to transfer ownership of St. Jude to HAI. After the warranty and indemnity agreement was signed, HAI filed an application for the certificate of need.
On August 26, 1981, the certificate of need was issued and delivered to Liljeberg. He promptly advised HAI, [Footnote 4] and HAI paid the real estate commission to Axel Realty. A dispute arose, however, over whether the warranty and indemnity agreement did in fact transfer ownership of St. Jude to HAI. Liljeberg contended that the transfer of ownership of St. Jude -- and hence, the certificate of need -- was conditioned upon reaching a final agreement concerning his continued participation in the hospital project. This contention was not supported by any written instrument. HAI denied that there was any such unwritten understanding, and insisted that, by virtue of the warranty and indemnity agreement, it had been sole owner of St. Jude for over a year. The dispute gave rise to this litigation. Page 486 U. S. 855
During the period be