Opinion ID: 1268811
Heading Depth: 2
Heading Rank: 2

Heading: Denial of Summary Judgment on Res Judicata Grounds

Text: Artemis appeals the district court's denial of its motion for summary judgment under principles of res judicata. Artemis argues that the Commissioner's claims are an impermissible collateral attack on the Rehabilitation Plan, which was approved by the Rehabilitation Court on August 13, 1993. In 1993, the central issue before the court was whether the Rehabilitation Plan was fair, equitable, non-discriminatory and not arbitrary and provides opt outs with value equal to or greater than their ratable share of the current liquidation value of all of ELIC's assets at closing. The court also heard motions to rescind the sale of ELIC's junk bond portfolio to Altus on grounds of impossibility, mutual mistake, failure of consideration and breach of fiduciary duty. The Rehabilitation Court approved the Rehabilitation Plan and denied the motion for rescission. As a result of the Rehabilitation Court's in rem jurisdiction over the ELIC Estate, [a]ll parties were forever enjoined from making any complaint with respect to the [Rehabilitation Plan] or any provisions thereof, and even though the causes of action [are] different, the prior determination of an issue is conclusive in a subsequent suit between the same parties as to that issue and every matter which might have been urged to sustain or defeat its determination. Pac. Mut. Life Ins. Co. v. McConnell, 44 Cal.2d 715, 724-25, 285 P.2d 636 (1955). The Commissioner and NOLHGA were both parties to the Rehabilitation Court proceedings; however, the Commissioner did not learn of the Altus/MAAF conspiracy until 1999, six years after judicial approval of the Rehabilitation Plan. As a result, the issue of conspiracy liability was not litigated before the Rehabilitation Court. Res judicata would not bar the Commissioner's claims unless we accept Artemis' characterization of this litigation as a collateral attack on the Rehabilitation Plan. Artemis relies principally on In re Met-L-Wood Corp., a Seventh Circuit bankruptcy case, in support of that characterization. 861 F.2d 1012 (7th Cir.1988). In that case, a trustee in bankruptcy filed a Federal Rule of Civil Procedure 60(b) motion to vacate a judgment confirming the judicial sale of a bankrupt corporation's assets. The trustee alleged a bid-rigging scheme to defraud the bankrupt corporation's unsecured creditors. The bankruptcy court denied the motion as untimely. The trustee filed a complaint in federal district court seeking damages for fraud. The Seventh Circuit affirmed dismissal of that complaint on res judicata grounds, reasoning: by seeking heavy damages from the seller, the purchaser, the purchaser's purchaser . . ., a law firm involved in the transaction, and the secured creditors that benefitted from the sale, the suit is a thinly disguised collateral attack on the judgment confirming the sale. Id. at 1018. Artemis argues by analogy: By seeking to recover Artemis' profits, the Commissioner effectively seeks to revise the carefully articulated profit participation provisions of the Rehabilitation Plan that was approved by the Rehabilitation Court. Appellee's Reply Brief at 17. [18] We are not persuaded that the Commissioner's legal and equitable claims seeking disgorgement of Artemis' profit obtained through participation in the Altus/MAAF Group conspiracy to defraud the Commissioner are equivalent to revision of contractual profit participation terms embodied in the Rehabilitation Plan. The Commissioner does not seek rescission or modification of the Rehabilitation Plan; he seeks only to hold Artemis personally liable in law and equity for Artemis's intentional misrepresentation, concealment and participation in the Altus/MAAF Group conspiracy to defraud the Commissioner. Under the circumstances of this case, we conclude that the California Supreme Court would not construe the Commissioner's claims as a collateral attack on the Rehabilitation Plan. The district court properly denied Artemis' motion for summary judgment on res judicata grounds.