Court Opinion

ID: 167572
Source: CourtListenerOpinion
Date Created: 2010-08-14 09:58:49+00
Date Added: 2024-06-11T17:24:53.281758
License: Public Domain

F I L E D
                                                                  United States Court of Appeals
                                                                          Tenth Circuit
                    UNITED STATES COURT OF APPEALS
                                                                          June 2, 2006
                             FOR THE TENTH CIRCUIT                    Elisabeth A. Shumaker
                                                                         Clerk of Court
    THE SOCIETY OF LLOYD’S,

               Plaintiff-Appellee,

    v.                                                 No. 05-4069
                                                (D.C. No. 2:02-CV-204-TC)
    WALLACE R. BENNETT; GRANT R.                         (D. Utah)
    CALDWELL; CALVIN P. GADDIS;
    DAVID L. GILLETTE; JAMES R.
    KRUSE; EDWARD W. MUIR;
    KENT B. PETERSEN,

               Defendants,

         and

    STEPHEN M. HARMSEN;
    KELLY C. HARMSEN,

               Defendants-Appellants.

                             ORDER AND JUDGMENT *

Before HENRY, BRISCOE, and MURPHY, Circuit Judges.

*
       After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument. This order and judgment is
not binding precedent, except under the doctrines of law of the case, res judicata,
and collateral estoppel. The court generally disfavors the citation of orders and
judgments; nevertheless, an order and judgment may be cited under the terms and
conditions of 10th Cir. R. 36.3.
      In a previous appeal of this action, we affirmed the district court’s grant of

summary judgment to plaintiff Society of Lloyd’s (“Lloyd’s”). Society of Lloyd’s

v. Reinhart, 402 F.3d 982 (10th Cir.), cert. denied, 126 S. Ct. 366 (2005). While

that appeal was pending, the Harmsen defendants filed a motion to set aside the

judgments under Fed. R. Civ. P. 60(b). The instant appeal follows the denial of

that motion. Our jurisdiction arises under 28 U.S.C. § 1291. 1 Since we conclude

that the Harmsens failed to make the requisite showing to justify Rule 60(b)’s

extraordinary relief, we affirm the district court’s order.

1
        Because it raises the question of our jurisdiction, we must first address
Lloyd’s Motion for Summary Disposition Because of Mootness. Lloyd’s
argument in support of the motion is based on the false premise that it received
nothing of value from the Harmsens that it could repay by way of restitution.
While Lloyd’s may have preferred to receive cash instead of credit notes, it
nonetheless was able to file satisfactions of judgment as to the Harmsens and
finally (or so it thought) end costly litigation against two more underwriters.
Viewed in this light, Lloyd’s undoubtedly received a benefit. It is also beyond
dispute that the credit notes operated as cash. The Harmsens were “free to
negotiate with Lloyd’s, using the credit notes as they would cash, to compromise
their disputed R&R debt.” In re Lloyd’s Am. Trust Fund Litig., No. 96 Civ. 1262
RWS, 2002 WL 31663577, *17 (S.D.N.Y. Nov. 26, 2002). Lloyd’s accepted the
credit notes, just as it would a check, by crediting the Harmsens’ accounts in
accordance with the face value of the notes. The equitable remedy of restitution
requires that “what has been lost to a litigant under the compulsion of a judgment
. . . be restored thereafter, in the event of a reversal.” Atl. Coast Line R. Co. v.
Florida, 295 U.S. 301, 309 (1935). If the district court judgment were reversed
or modified in this case, an equitable remedy could be fashioned to compensate
the Harmsens for “what has been lost” to them consistent with the principles of
restitution. Therefore, the appeal is not moot, and Lloyd’s motion is denied.

                                          -2-
                                    Background

      A. Facts and Procedural History

      The storied history of the litigation between Lloyd’s and the American

participants in the English insurance market, including the Harmsens, is recounted

in detail in Reinhart and the cases discussed in that opinion. We limit our

recitation here to the facts and procedural history relevant to the instant appeal.

      Lloyd’s regulates an insurance market in London, England. Underwriters

in the market are called Names. The Harmsens had the misfortune of becoming

Names in the Lloyd’s market as the industry was facing billions of dollars in

losses. To avoid a wholesale collapse of the market, Lloyd’s implemented a

reconstruction and renewal plan, which required all Names to purchase

reinsurance pursuant to what is called the Equitas Contract. When the Harmsens

refused to pay the required premium under the Equitas Contract, Lloyd’s sued

them in England and obtained judgments that were upheld by the English

appellate courts. Lloyd’s then filed suit in federal court in Utah seeking to

enforce the English judgments. The district court granted summary judgment to

Lloyd’s, and the appeal of that order was the subject of our opinion in Reinhart.

We concluded that “the Utah Names [the Harmsens] were given a full and fair

opportunity to litigate their claims before the English Courts.” 402 F.3d at 1000.

                                         -3-
Therefore, we held that the judgments obtained by Lloyd’s in England were

enforceable.

      Lloyd’s drafted judgments as to each of the Harmsens setting forth the

amount in English pounds sterling that each owed to Lloyd’s. In accordance with

the Utah Uniform Foreign-Money Claims Act, the judgments included the

following exchange rate provision:

      At the defendant’s option, defendant may pay the number of United
      States dollars as will purchase the number of English pounds sterling
      then owing, with interest due, at a bank-offered spot rate at or near
      the close of business on the next banking day before the date of
      payment.

Aplt. App. at 177; see Utah Code Ann. § 78-22b-108(2) (1953). The Harmsens

filed objections to the form of the judgments, but they did not object to the

exchange rate language quoted above. The district court overruled the Harmsens’

objections and signed the judgments on March 17, 2003.

      While their appeal of the district court’s summary judgment order was

pending, the Harmsens filed a motion to set aside the judgments under Rule 60(b)

based on the exchange rate provision. The Harmsens argued that the exchange

rate applicable to their debt to Lloyd’s was governed by Clause 18 of the Equitas

Contract (“Clause 18”), not the Foreign-Money Claims Act. Alternatively, they

argued that the court should have applied whatever exchange rate was in place on

the date of the English judgments. The Harmsens pointed to other district courts

                                         -4-
that had applied the exchange rate set forth in Clause 18 ($1.51 per English

pound) and argued that such decisions collaterally estopped Lloyd’s from

contesting Clause 18’s applicability here. Lloyd’s countered that the Equitas

Contract was silent as to the exchange rate applicable to American judgments

expressed in English pounds and therefore resort to the Foreign-Money Claims

Act was proper. Lloyd’s attached to its response the Declaration of Nicholas P.

Demery, its English solicitor, which the Harmsens moved to strike based on the

parol evidence rule.

      The district court denied the Harmsens’ Rule 60(b) motion by order dated

March 7, 2005. The court found that it lacked jurisdiction to set aside the

judgments due to the pending appeal, but noted that it would decline to exercise

its discretion under Rule 60(b) in any event. The court rejected the Harmsens’

collateral estoppel argument because the decisions underlying that argument were

issued after the judgments were issued in this case. The court also declined to

depart from the law of the case and held that “the exchange rate applicable to the

Harmsens’ judgments is the rate expressed in the judgments . . . as required by the

Utah Uniform Foreign-Money Claims Act.” Aplt. App. at 543. The Harmsens’

motion to strike the Demery Declaration was summarily denied.

      B. Clause 18 of the Equitas Contract

                                         -5-
      The Harmsens’ primary argument on appeal centers on Clause 18. It

provides in relevant part, “[w]here any amount payable by a Name hereunder in

respect of his Name’s Premium is an amount denominated in US Dollars . . . the

Name shall instead pay an amount in sterling being one pound sterling for each

US$1.51.” Id. at 403-04. The Harmsens contend that this provision applies to

Lloyd’s judgments against them. They argue that Lloyd’s refusal to honor Clause

18 is unconscionable given that it has steadfastly held them to every other

provision of the Equitas Contract over their strong protests.

      Lloyd’s contends that Clause 18 has nothing to do with the American

judgments that it obtained against the Harmsens. Mr. Demery explains that

Clause 18 was included in the Equitas Contract when it was drafted in 1996

because certain Names had liabilities in U.S. dollars that were covered by their

Equitas premium, which was calculated in English pounds. Thus, the prevailing

exchange rate at the time was used to make the conversion into pounds. After the

conversion, a Name who chose to pay in U.S. dollars had to tender whatever

amount was necessary, depending on the prevailing exchange rate, in order to pay

the equivalent amount of English pounds as that Name’s Equitas premium. This

interpretation, Lloyd’s argues, is consistent with the language of Clause 18, which

by its terms applies only to amounts denominated in U.S. dollars. Since its

                                         -6-
judgments against the Harmsens are denominated in English pounds and not in

U.S. dollars, Lloyd’s argues that Clause 18 does not apply.

                                     Discussion

      A. Standard of Review

      We review a district court’s denial of a motion to set aside a judgment

under Rule 60(b) for an abuse of discretion. Allender v. Raytheon Aircraft Co.,

439 F.3d 1236, 1242 (10th Cir. 2006). “[I]n determining whether a district court

abused its discretion, we are mindful that relief under Rule 60(b) is extraordinary

and may only be granted under exceptional circumstances.” Id. (quotation

omitted). The district court correctly held that it lacked jurisdiction to grant relief

under Rule 60(b) due to the pending appeal. See Griggs v. Provident Consumer

Discount Co., 459 U.S. 56, 58 (1982) (holding that the filing of a notice of appeal

generally divests the district court of jurisdiction over aspects of the case

involved in the appeal). However, since the court nonetheless explained why it

would deny the motion, we will consider those reasons as alternative grounds for

the court’s decision. Cf. Aune v. Reynders, 344 F.2d 835, 841 (10th Cir. 1965)

(explaining that a district court retains jurisdiction to deny a Rule 60(b) motion

during pendency of appeal).

      B. Collateral Estoppel

                                          -7-
      The Harmsens claim that since other federal courts have rejected Lloyd’s

interpretation of Clause 18, Lloyd’s should be estopped from making its exchange

rate argument in this case. 2 The district court rejected their collateral estoppel

argument because the decisions on which the Harmsens relied were issued after

the March 2003 judgments in this case. This holding was correct. When certain

conditions are met, the doctrine of collateral estoppel “precludes a court from

reconsidering an issue previously decided in a prior action.” B-S Steel of Kan.,

Inc. v. Tex. Indus., Inc., 439 F.3d 653, 662 (10th Cir. 2006) (emphasis added). A

collateral estoppel argument cannot be based on a contrary holding that post dates

the decision at issue. Therefore, the question in this case is not whether the

district court committed error in refusing to apply the doctrine, as the Harmsens

assert, but whether the doctrine was applicable at all, and it plainly was not. The

district court was therefore free to accept Lloyd’s interpretation of Clause 18.

      C. Judicial Estoppel and the Demery Declaration

      The Harmsens next contend that the district court erred by failing to invoke

the doctrine of judicial estoppel against Lloyd’s as to its exchange rate argument

because Lloyd’s previously agreed to the $1.51 exchange rate in an Indiana case.

2
      Specifically, the Harmsens rely on Society of Lloyd’s v. Tufts, Civil
Action No. 03-2316 (E.D. La. July 27, 2004) (applying the exchange rate as of
the date of the English judgments), and Society of Lloyd’s v. Abramson,
No. 3:03-MC-001-P, 2004 U.S. Dist. LEXIS 16092, at *20 (N.D. Tex. Mar. 29,
2004) (applying the exchange rate set forth in Clause 18 of the Equitas Contract).

                                          -8-
Lloyd’s, through the Demery Declaration, counters that it never made such an

agreement. According to Demery, Lloyd’s did not agree to the $1.51 exchange

rate in the Indiana case, but accidentally accepted less than the amount owed in

that case due to his miscommunication with another Lloyd’s employee.

      The Harmsens charge the district court with committing additional error by

failing to strike the Demery Declaration as being in violation of the parol

evidence rule.

      We recently explained the doctrine of judicial estoppel as follows:

      Where a party assumes a certain position in a legal proceeding, and
      succeeds in maintaining that position, he may not thereafter, simply
      because his interests have changed, assume a contrary position,
      especially if it be to the prejudice of the party who has acquiesced in
      the position formerly taken by him.

Johnson v. Lindon City Corp., 405 F.3d 1065, 1069 (10th Cir. 2005) (quotation

and alteration omitted). In this case, the district court rejected the Harmsens’

judicial estoppel argument based on Demery’s explanation of what happened in

the Indiana case. Therefore, the strength of that argument on appeal turns on

whether the district court’s consideration of the Demery Declaration was proper.

      The parol evidence rule is a substantive rule of evidence. Its application in

federal diversity cases is, therefore, governed by state law. See Blanke v.

Alexander, 152 F.3d 1224, 1231 (10th Cir. 1998). Utah recognizes the doctrine of

partial integration under which parol evidence not inconsistent with the written

                                         -9-
portions of a contract is admissible to prove a part not reduced to writing.

Stanger v. Sentinel Sec. Life Ins. Co., 669 P.2d 1201, 1205 (Utah 1983). In

addition, “a court may consider extrinsic evidence if the meaning of the contract

is ambiguous or uncertain.” Ward v. Intermountain Farmers Ass'n, 907 P.2d 264,

268 (Utah 1995). Whether a contract is partially integrated or ambiguous such

that resort to parol evidence by the district court was proper is generally a

question of law that we review de novo. See Flying J Inc. v. Comdata Network,

Inc., 405 F.3d 821, 832 (10th Cir. 2005), cert. denied, 126 S. Ct. 1331 (2006);

accord Betaco, Inc. v. Cessna Aircraft Co., 32 F.3d 1126, 1131 (7th Cir. 1994).

On the other hand, the district court’s interpretation of the extrinsic evidence is a

finding of fact that we review for clear error. See Flying J Inc., 405 F.3d at 832;

Betaco, 32 F.3d at 1131.

      It is unclear in this case whether the district court admitted the Demery

Declaration pursuant to the doctrine of partial integration or to clarify ambiguity

in Clause 18. Either way, we agree with Lloyd’s that the Equitas Contract is only

partially integrated in terms of the exchange rate issue. 3 By its own terms, Clause

18 applies only to Equitas premiums that were “denominated in US Dollars.”

Aplt. App. at 403. It is entirely silent as to what exchange rate should apply to

3
      Since the record contains only an excerpt from the Equitas Contract, and
the parties cite to no other provision, we assume that there are no other provisions
relevant to the parties’ exchange rate arguments.

                                         -10-
U.S. judgments expressed in English pounds. Therefore, the district court

committed no error in relying on the Demery Declaration to clarify the scope of

Clause 18 or as a basis to reject the Harmsens’ judicial estoppel argument.

      D. Law of the Case

      Finally, the Harmsens argue that the district court erred by applying the law

of the case doctrine to the exchange rate provision of the judgments. We have

held that “[a] legal decision made at one stage of litigation, unchallenged in a

subsequent appeal when the opportunity to do so existed, becomes the law of the

case for future stages of the same litigation, and the parties are deemed to have

waived the right to challenge that decision at a later time.” Concrete Works of

Colo., Inc. v. City & County of Denver, 321 F.3d 950, 992 (10th Cir. 2003)

(alteration and quotation omitted). Here, application of Utah’s Foreign-Money

Claims Act to the judgments became the law of the case when the Harmsens

failed to object to its application in their earlier appeal.

      Although law of the case is not jurisdictional, we have nonetheless limited

a district court’s authority to deviate from it to the following scenarios:

“(1) when the evidence in a subsequent trial is substantially different; (2) when

controlling authority has subsequently made a contrary decision of the law

applicable to such issues; or (3) when the decision was clearly erroneous and

would work a manifest injustice.” Id. at 993. The Harmsens contend that this

                                           -11-
case fits the third scenario. They argue that the district court’s application of the

Foreign-Money Claims Act was clearly erroneous and manifestly unjust because

Lloyd’s agreed to a $1.51 exchange rate in Clause 18 of the Equitas Contract.

This argument, however, is foreclosed by the district court’s interpretation of

Clause 18, as aided by the Demery Declaration, as to which we find no error.

Since no other exception to the doctrine applies, and as we find no merit to the

Harmsens’ remaining arguments, we conclude that the district court correctly

upheld the judgments’ exchange rate provisions as law of the case.

                                         -12-
                                   Conclusion

      Based on our review of the record, we conclude that the district court acted

within its discretion in denying the Harmsens’ motion and its order is hereby

AFFIRMED.

                                                  Entered for the Court

                                                  Robert H. Henry
                                                  Circuit Judge

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