Court Opinion

ID: 2964201
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:22:03.67543+00
Date Added: 2024-06-11T11:42:52.405996
License: Public Domain

USCA1 Opinion

	

                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                 ____________________

        No. 95-2278

                               SUSAN D. LUNDBORG, ETC.,

                                Plaintiff, Appellant,

                                          v.

                            PHOENIX LEASING, INC., ET AL.,

                                Defendants, Appellees.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                              FOR THE DISTRICT OF MAINE

                       [Hon. Gene Carter, U.S. District Judge]
                                          ___________________

                                 ____________________

                                        Before

                                Boudin, Circuit Judge,
                                        _____________

                           Campbell, Senior Circuit Judge,
                                     ____________________

                              and Lynch, Circuit Judge.
                                         _____________

                                 ____________________

            Ralph A. Dyer with whom Law Offices of  Ralph A. Dyer, P.A. was on
            _____________           ___________________________________
        briefs for appellant.
            David M.  Wiseblood with whom Robert  B. Kaplan, Joseph N.  Demko,
            ___________________           _________________  ________________
        Frandzel & Share, Anthony Perkins and Bernstein, Shur, Sawyer & Nelson
        ________________  _______________     ________________________________
        were on brief for appellees. 

                                 ____________________

                                    August 5, 1996
                                 ____________________

                 BOUDIN, Circuit Judge.  In this case, the district court
                         _____________

            dismissed claims brought  by Susan  Lundborg against  Phoenix

            Leasing,  Inc. ("Phoenix Leasing"),  on the ground  that they

            were barred by res judicata.   We affirm the district court's
                           ____________

            judgment of dismissal but are compelled  to do so on a ground

            that  leaves open  to Lundborg  the opportunity  to  pursue a

            central aspect  of  her claims  by an  independent action  in

            Maine state  court.  For  reasons that will  become apparent,

            such a suit is not a promising venture.

                                          I.

                 The facts of the case are complicated and its procedural

            history involved; we offer a condensed version here.  Because

            the district court dismissed the  claims at issue on a motion

            to  dismiss,  the  underlying  "facts"  described  below  are

            primarily  drawn  from  the  allegations  of  the  complaint,

            Rockwell v.  Cape Cod  Hospital, 26 F.3d  254, 256  (1st Cir.
            ________     __________________

            1994),  supplemented by pleadings  in related cases  of which

            the district court took judicial  notice.  In fact, there are

            six other related cases. 
            ___

                 Susan  Lundborg, a  resident of  Florida,  was the  sole

            shareholder  of  Community  Cable  Services  of  Maine,  Inc.

            ("Community Cable"), which  in 1988 became a  general partner

            in  Merlin  Cable  Operators  ("Merlin"),   a  Maine  general

            partnership.    Soon  after  its  formation,  Merlin  secured

            franchises  to construct  and  operate two  cable  television

                                         -2-
                                         -2-

            systems  in Maine.  The partnership sought to borrow $850,000

            of the estimated $1,000,000 cost of these projects.  

                 In   early   1989,   Phoenix   Leasing,   a   California

            corporation,  agreed to  loan Merlin  that sum  at an  annual

            interest rate  of 18  percent.   The terms  of the  loan also

            required  Merlin to  pay Phoenix  Leasing 25  percent  of the

            value of  the  projects up  to $150,000,  plus an  additional

            $50,000 for  each year the  loan was outstanding  after 1990,

            amounting to  what Lundborg  claims was  an effective  annual

            interest rate in  excess of 40 percent.  The loan was secured

            by the  cable systems  and by  Lundborg's personal  guaranty,

            itself secured in part by a mortgage on her house in  Suffolk

            County, New York.

                 In 1990, two additional cable television operators owned

            wholly or  in part  by Lundborg agreed  to borrow  money from

            Phoenix Leasing.  The loans  to Cable One CATV ("Cable One"),

            a  New Hampshire limited  partnership, and Sure Broadcasting,

            Inc.  ("Sure"), a  Delaware  corporation, also  imposed  high

            rates of interest  and demanding terms.   Lundborg personally

            guaranteed  the loans  to Cable  One and  Sure, again  giving

            Phoenix Leasing a mortgage on  her Suffolk County house.  The

            total of the three loans exceeded $4 million.

                 By December 1990, all three borrowers had stopped making

            payments  to Phoenix  Leasing  and  in  April  1991,  Phoenix

            Leasing   began  court  actions  to  recover  upon  the  loan

                                         -3-
                                         -3-

            agreements  and  to  foreclose   on  the  various  properties

            securing the loans  and Lundborg's personal guaranty.   These

            included  state  court  actions  in  Maine  (against  Merlin,

            Community Cable, and others) and New York (against Lundborg),

            and federal  suits in New  Hampshire (against  Cable One  and

            others)  and Nevada (against  Sure).1  Phoenix  Leasing later

            filed  claims in  Merlin's federal  bankruptcy proceeding  in

            Maine   and  in  Cable   One's  similar  proceeding   in  New

            Hampshire.2

                 Phoenix Leasing  has prevailed  in every  case that  has

            reached decision.  In May 1991, Phoenix Leasing began a Maine

            state court action to recover on the original $850,000  loan.

            Merlin  raised several  affirmative  defenses, including  the

            defense   of   usury,   and   brought   several    compulsory

            counterclaims, see Me. R. Civ. P. 13(a), including claims for
                           ___

            fraud, breach of duty of good faith, negligence, and abuse of

            process.  The usury defense was cast in general terms and the

            fraud  claims related to  alleged actions of  Phoenix Leasing

            quite different than the fraud charges that are now advanced.

                                
            ____________________

                 1Phoenix  Leasing Inc. v. Merlin Cable Partners, No. CV-
                  _____________________    _____________________
            91-343  (Me.Sup.Ct. York Cty.); Phoenix Leasing Inc. v. Susan
                                            ____________________    _____
            Lundborg, No.  91-08094 (N.Y.Sup.Ct.  Suffolk Cty.);  Phoenix
            ________                                              _______
            Leasing, Inc. v. Cable One CATV Limited Partnership, Civ. No.
            _____________    __________________________________
            91-164-D (D.N.H.); Phoenix Leasing Inc. v. Sure Broadcasting,
                               ____________________    __________________
            Inc., No. CV-N-91-185-ECR (D.Nev.). 
            ____

                 2In   re  Merlin   Cable  Partners,   BK   No.  93-10067
                  _________________________________
            (Bankr.D.Me.); In re  Cable One CATV Limited  Partnership, BK
                           __________________________________________
            No. 91-12387-JEY (Bankr.D.N.H.).

                                         -4-
                                         -4-

                 Phoenix Leasing's Maine state  court suit against Merlin

            was dismissed  after Merlin  filed for  bankruptcy in  August

            1991.   In September  1992, the Maine  state court  entered a

            default judgment against Community Cable on Phoenix Leasing's

            claims and Community  Cable's counterclaims.  In  early 1994,

            the federal bankruptcy court in Maine awarded Phoenix Leasing

            cash and  a promissory note  on account of its  claim against

            Merlin. 

                 Phoenix Leasing also  prevailed in February 1992  in its

            suit in New York state court against Lundborg to foreclose on

            her  mortgage.     In  New  Hampshire,  Cable   One  declared

            bankruptcy after  Phoenix Leasing  brought  suit in  district

            court;  but in  the  ensuing  bankruptcy  proceeding  in  New

            Hampshire, the court  in December 1992 approved  a settlement

            in favor  of Phoenix Leasing  and in July 1993  confirmed the

            plan of liquidation.  In  March 1995, Phoenix Leasing won its

            suit in  the federal district  court in Nevada to  recover on

            the loan to Sure.

                 In February  1994, Lundborg  learned that  the loans  to

            Merlin,  Cable  One, and  Sure  were  not funded  by  Phoenix

            Leasing, but  rather by two limited partnerships,  in each of

            which Phoenix Leasing was general partner.  This fact emerged

            during  the  deposition of  Gary Martinez,  Phoenix Leasing's

            executive  vice president, in the Sure litigation in district
                                              ____

            court  in  Nevada.    Lundborg  alleges  that  these  limited

                                         -5-
                                         -5-

            partnerships,  and  not  Phoenix Leasing,  were  the  "actual

            lenders" in the loan transactions.

                 This  is said  to matter because  Phoenix Leasing,  as a

            licensed personal property broker, was admittedly exempt from

            California's  usury laws which cap the  interest rate that an

            unlicensed  lender  may  charge.   The  limited partnerships,

            Lundborg claims, were not exempt and the loans were therefore

            usurious  and fraudulent.  Moreover, Lundborg asserts that by

            suing in  its own  name, Phoenix  Leasing misrepresented  its

            standing to  recover  upon the  loans  in the  various  court

            actions, and Lundborg says this amounted to additional fraud.

                 Based  on the Martinez deposition, Lundborg in June 1994

            moved in the New York state suit to set aside the judgment on

            the  ground that Phoenix Leasing lacked standing to foreclose

            on the mortgage because  it was not the true  lender; the New

            York  court denied this  motion and Lundborg  did not appeal.

            In  the then  pending Nevada  federal action, Sure  moved for

            summary  judgment on similar  grounds; in December  1994, the

            district  court  rejected  this argument  and  in  March 1995

            entered judgment for  Phoenix Leasing, a ruling  later upheld

            by the Ninth Circuit in an unpublished opinion.  

                 In the  bankruptcy courts  in Maine  and New  Hampshire,

            Lundborg  made  somewhat   broader  efforts  to  reopen   the

            judgments but  with the  same result.   In January  1995, the

            Maine bankruptcy court (in circumstances more fully described

                                         -6-
                                         -6-

            hereafter)  rejected   Lundborg's  motion  for   relief  from

            judgment  on account  of fraud  and based  upon the  Martinez

            deposition.  In  November 1995, the New  Hampshire bankruptcy

            court rejected  Cable One's effort  to set aside  the earlier

            settlement  of the case, ruling that the limited partnerships

            involved  in  the   Cable  One  loan  in  fact  had  licenses

            permitting  them  to  exceed  the  usual  usury  limit  under

            California law.  At least  one of the limited partnerships in

            the  Merlin transaction was  evidently not involved  with the

            Cable One loan.

                 No comparable effort was made  by Lundborg to reopen the

            earlier  Maine state  court default judgment  entered against

            Community  Cable in  September 1992.    Instead, in  December

            1994,   Lundborg  filed the  present  action against  Phoenix

            Leasing and others  in the federal  district court in  Maine,

            both on her own behalf and as successor in interest to Merlin

            and Community Cable.  The gravamen was the same  set of fraud

            allegations  stemming from  the  Martinez deposition  but the

            complaint set forth a welter of claims.

                 Lundborg's complaint  included nine counts:  a statutory

            claim for perjury arising under Maine law (count I); abuse of

            process in connection with the  litigation in New York (count

            II); common  law conversion, fraud,  breach of  duty of  good

            faith,  and  interference with  economic  opportunity (counts

            III-VI); violation of California's usury statute (count VII);

                                         -7-
                                         -7-

            unjust  enrichment (count VIII); and violation of the federal

            civil  RICO statute (count  IX).  Additional  defendants were

            the limited  partnerships  that allegedly  funded the  Merlin

            loan,  Gus Constantin (the  chairman of Phoenix  Leasing) and

            Martinez. 

                 All  defendants in  the Maine  district  court moved  to

            dismiss.    Adopting  the able  recommended  decision  of the

            magistrate judge, the  district court granted this  motion on

            September 6, 1995, without a separate  opinion.  The district

            court found  that Lundborg  had failed to  articulate a  RICO

            claim; in the  absence of that claim  the court held that  it

            had no personal  jurisdiction over the  individual defendants

            as to  any of  the counts.   Lundborg  does not appeal  these

            rulings.

                 The  district court further held that the September 1992

            judgment in Maine state court barred all of Lundborg's claims

            on  res  judicata  grounds and,  further,  that  Lundborg was
                _____________

            estopped by judgments in New York and in the Maine bankruptcy

            court from relitigating the issue of Phoenix Leasing's fraud.

            Lundborg appeals this ruling as to counts I, III, IV,  V, VII

            and VIII  with respect  to  Phoenix Leasing  and the  limited

            partnerships.

                                         II.

                 As an initial matter, Lundborg argues as a matter of law

            that her count I claim for perjury, pursuant to 14 Me. R.S.A.

                                         -8-
                                         -8-

              870, cannot  be precluded by the earlier  judgment in Maine

            state court.  Section 870 creates a cause of action "[w]hen a

            judgment has been obtained against  a party by the perjury of

            a  witness introduced  at trial  by the  adverse party,"  and

            provides that "the  judgment in the former action  is no bar"

            to such a suit.  Phoenix Leasing insists that Lundborg waived

            this  argument by failing  to articulate  it in  the district

            court.  

                 We affirm  the dismissal  of the  perjury count  because

            Lundborg has not stated a  claim under the statute.  Lundborg

            alleges  that pleadings and affidavits submitted in the Maine

            state court action were perjurious.  But section 870  applies

            only to testimony "introduced at trial by the adverse party,"

            and the Maine action was  decided prior to trial.  The  Maine

            Supreme Judicial Court has made  clear that section 870 is to

            be construed strictly,  Spickler v. Greenberg, 644  A.2d 469,
                                    ________    _________

            472  (Me. 1994); and we have  no qualm in holding Lundborg to

            "the terms of the statute."  Id. (quoting Milner v. Hare, 135
                                         ___          ______    ____

            A. 522 (Me. 1926)). 

                 This  brings us  to the  heart  of Lundborg's  remaining

            claims.   California  law, which  governed  the Merlin  loan,

            limits  the amount  of interest  that can  be charged  on any

            loan; the  law exempts certain  classes of loans  and lenders

            from its  provisions.   Cal. Const.  Art. 15,    1.   Phoenix

            Leasing was a "personal property broker" and therefore exempt

                                         -9-
                                         -9-

            from the usury statute.  Former Cal. Fin. Code   22009.  (The

            current version of the statute refers to lenders like Phoenix

            Leasing as "finance lenders" but the change appears to be one

            of name only.)

                 Lundborg alleges that the Merlin loan was funded  by two

            limited partnerships, Phoenix Leasing  Cash Distribution Fund

            III and Phoenix Leasing Income  Fund 1975 ALP, and that these

            partnerships  were not  then  licensed  as personal  property

            brokers.   Lundborg insists  that the  partnerships were  the

            actual lenders in the Merlin transaction, that Phoenix either

            assigned the  loan to  the partnerships or  held it  as their

            agent  and  that  the  loan  was  therefore  usurious.    The

            complaint seeks actual damages of over $6 million.

                 This  set of  allegations and  arguments  gives rise  to

            Lundborg's remaining claims.   Counts III,  IV, V, and  VIII,

            while  variously  styled,  all  charge that  Phoenix  Leasing

            defrauded  Merlin and  Lundborg by  failing  to disclose  the

            identity of  the "actual  lenders" at the  time the  loan was

            negotiated and thereafter,  particularly when Phoenix Leasing

            pursued legal claims  against Merlin and Lundborg  in its own

            name.   Count  VII is  a claim  for treble damages  under the

            civil remedy provision of California's  usury law.  Cal. Civ.

            Code   1916-3.

                 It  is far  from  clear  that  the  funding  arrangement

            alleged by Lundborg was illegal  under California law.   See,
                                                                     ____

                                         -10-
                                         -10-

            e.g., Strike  v. Trans-West  Discount Corp.,  155 Cal.  Rptr.
            ____  ______     __________________________

            132,  139  (Cal.Ct.App.),  appeal  dismissed,  444  U.S.  948
                                       _________________

            (1979).  Phoenix  Leasing points out  that a licensed  lender

            may assign a high-interest loan to an unlicensed third party;

            elsewhere   Phoenix  Leasing  has  argued  that  despite  the

            internal accounting  arrangements that  it made, it  remained

            the  holder of  the Merlin  note  under California  law.   An

            argument by Sure  that challenged the funding  arrangement of

            its own  loan was  rejected by the  Nevada district  court in

            Phoenix Leasing Inc. v. Sure Broadcasting, Inc., CV-N-91-185-
            ____________________    _______________________

            ECR, slip op. at 8-9 (D. Nev. Dec. 18, 1994):

                         Phoenix's continued possession  of the
                      promissory note  appears to  preclude any
                      negotiation  of   the  promissory   note.
                      Cal.Comm.   3201.   Regardless of whether
                      Phoenix  transferred  ownership   or  the
                      right to  receive monies under  the note,
                      Phoenix  may  remain  the  holder of  the
                      note.  Cal. Comm    3201 & 3203.  Phoenix
                      may also enforce  the note even if  it is
                      not the owner  of the note.   Cal.Comm.  
                      3301.

                 But it is  not certain  that the  facts surrounding  the

            Sure  loan are identical to those respecting the earlier loan

            to Merlin and  the facts concerning the Merlin  loan were not

            developed in the  district court.   Indeed, in briefing  this

            case Phoenix Leasing has  devoted relatively little attention

            to California law,  understandably relying  primarily on  the

            res  judicata rationale  of the  district court.    Thus, the
            _____________

            question for us is whether the district court's rationale can

                                         -11-
                                         -11-

            be  sustained, a  matter  we  review de  novo.   Apparel  Art
                                                 ________    ____________

            Internat'l,  Inc. v. Amertex  Enterprises Ltd., 48  F.3d 576,
            _________________    _________________________

            582 (1st Cir. 1995).  

                 Were it  not for  Lundborg's allegations  of fraud,  the

            application  of res  judicata doctrine  to  bar this  present
                            _____________

            action  would be  straightforward.   Under  Maine law,  which

            governs  the preclusive  effect  of  the  Maine  state  court

            judgment, e.g., Diversified  Foods, Inc. v. First  Nat'l Bank
                      ____  ________________________    _________________

            of Boston,  985 F.2d 27, 30 (1st  Cir.), cert. denied, 113 S.
            _________                                ____________

            Ct. 3001 (1993), a valid  prior judgment in an action between

            the  same parties  or their  privies  bars relitigation  with

            respect to the same claims of "all issues that were tried, or

            may have been tried"  in the prior action.   Currier v.  Cyr,
                                                         _______     ___

            570 A.2d 1205, 1208 (Me. 1990).

                 Functionally, this familiar doctrine--known  in the past

            as the merger and bar branch of res judicata and now as claim
                                            ____________

            preclusion--prevents  a  plaintiff  or  counterclaimant  from

            splitting  its related claims  among several suits.   Apparel
                                                                  _______

            Art, 48 F.3d at 583.  Such a policy responds to  the parties'
            ___

            interest in repose  and the courts' desire  to avoid needless

            litigation.  Maine  follows the modern  rule and defines  the

            claims  that  must be  brought  in  one action  by  use  of a

            transactional test, so that

                 a  subsequent  suit  that arises  out  of  the same
                 aggregate of  operative facts shall be  barred even
                 though the second  suit relies upon a  legal theory
                 not  advanced in  the first  case, seeks  different

                                         -12-
                                         -12-

                 relief  than that  sought in  the  first case,  and
                 involves  evidence  different   from  the  evidence
                 relevant to the first case.

            Currier, 570  A.2d at 1208;  see Beegan v. Schmidt,  451 A.2d
            _______                      ___ ______    _______

            642, 645 (Me. 1982) (citing Restatement (Second), Judgments  
                                        _______________________________

            24 (1982)).

                 Lundborg's claims  at issue  here all  arise out of  the

            alleged  wrongdoing  of  Phoenix   Leasing  and  the  limited

            partnerships in connection with the making and enforcement of

            the Merlin loan.   But Merlin and Community  Cable previously

            brought  claims against Phoenix  Leasing arising out  of that

            same loan as  counterclaims in the Maine  state court action.
                          _____________

            Although Merlin  was dismissed from the action  when it filed

            for  bankruptcy,  a  default  judgment  was  entered  against

            Community Cable  in that action,  and a default  judgment has

            the same claim-preclusive effect as a judgment on the merits.

            Irving Pulp  & Paper Ltd.  v. Kelly,  654 A.2d 416,  418 (Me.
            _________________________     _____

            1995).  

                 Lundborg asserts in conclusory fashion that the  default

            judgment was  never  made final  but  offers no  argument  in

            support of this  claim, nor do  we detect any  basis for  it.

            Nor can  Lundborg seriously deny  that she and Merlin  are in

            privity  with  Community  Cable, which  was  wholly  owned by

            Lundborg  and was a general partner  of Merlin.  Restatement,
                                                             ___________

            supra,     59(3), 60(2).  Under the circumstances, Lundborg's
            _____

            present claims  arise  out of  the  same transaction  as  the

                                         -13-
                                         -13-

            counterclaims in  the earlier  action and are  barred by  res
                                                                      ___

            judicata, absent some exception to the general rule.
            ________

                                         III.

                 Thus  far our view is  the same as  that of the district

            court.   Where we part company--with  some reluctance for the

            issue  is very close--concerns  a possible escape  hatch from

            res  judicata  invoked by  Lundborg  in  this  case.   It  is
            _____________

            Lundborg's position  that the  1992 default  judgment against

            Community Cable in the Maine state court cannot be considered

            a valid judgment for purposes  of res judicata because it was
              _____                           ____________

            tainted by an aspect of the  same fraud that is the basis  of

            Lundborg's present claims,  namely, the alleged fraud  in the

            litigation   to  enforce   the  original   loan   to  Merlin.

            Otherwise,  claim  preclusion  applies  to  underlying  fraud

            charges no less than to other tort theories.

                 This contention takes us to  a body of doctrine that has

            few peers  in the common  law as  a source  of confusion  for

            lawyers  and  judges  alike, namely,  the  rules  that govern

            independent   actions  that   collaterally  attack   a  prior

            judgment.     Partly,  the   problem  is  one   of  confusing

            terminology,  see Restatement, supra, ch. 5 intro. note, and,
                          ___ ___________  _____

            in  addition, the  law in  this area  is neither  uniform nor

            stable.   But so far  as the law permits  collateral attacks,

            the rules  are  effectively  a set  of  exceptions  to  claim

            preclusion.

                                         -14-
                                         -14-

                   In the past  some courts have been unwilling  to treat

            all litigation fraud as an  exception to res judicata; it has
            ___                                      ____________

            sometimes  been said that  only special categories  of fraud,

            such as bribery of a judge, would permit a collateral attack.

            See Restatement, supra,     68 cmt. a, 70 cmt. c.  The modern
            ___ ___________  _____

            approach has been  to lower the substantive bar to collateral

            attack  while insisting on severe conditions to the assertion

            of such a claim, due diligence  in the discovery of the fraud

            in the original action  and clear and convincing  evidence of

            fraud in the collateral one.  Id.   70 cmt. d.;  cf. Spickler
                                          ___                ___ ________

            v. Greenberg, 644 A.2d 469, 471 (Me. 1994).
               _________

                 In  considering Lundborg's  claim to a  fraud exception,

            our  concern is  with Maine  law because  a federal  district

            court in Maine  has been asked to permit  a collateral attack

            on a Maine state court  judgment.  7 Moore, Federal Practice,
                                                        ________________

              60.37[3],  at 60-395 (2d ed.  1995).  Maine law,  in accord

            with  the Restatement,  no  longer  rigidly  adheres  to  the
                      ___________

            traditional  labels  of  extrinsic  and  intrinsic  fraud  in

            determining which  circumstances justify overturning  a prior

            judgment.  Society  of Lloyd's v. Baker, 673  A.2d 1336, 1339
                       ___________________    _____

            (Me. 1996).  We read Kradoska  v. Kipp, 397 A.2d 568-69  (Me.
                                 ________     ____

            1979), to suggest  that Maine is more interested  in  whether

            the fraud claim was  known or should  have been known at  the

            time of the earlier  action.  See 11  Wright, Miller &  Kane,
                                          ___

            Federal  Practice and Procedure,    2868,  at 400-01  (2d ed.
            _______________________________

                                         -15-
                                         -15-

            1995).

                 In the present  case, the district court  assumed, as we

            do, that fraud in the course of the earlier Maine state court

            litigation  might  give   rise  to  an  exception   to  claim

            preclusion.   But it  held that the  issue whether  fraud had
                                                       _______

            occurred had itself been resolved on the merits, adversely to

            Lundborg,  in  the  New  York  state  court   and  the  Maine

            bankruptcy  court.    As already  noted,  after  the Martinez

            deposition, Lundborg sought  in 1994 to reopen  the judgments

            in both of  those courts based on some of the same assertions

            that are the  bases for Lundborg's affirmative  claims in the

            district court.

                 The district  court's ruling  that the  fraud issue  had

            earlier been  resolved rested upon  the other  branch of  res
                                                                      ___

            judicata known  as collateral  estoppel or  issue preclusion.
            ________

            This  doctrine bars the relitigation between the same parties

            of  any issue  of fact  or  law that  was actually  litigated

            between them, was  determined and was  necessary to a  final,

            valid judgment  in a prior  case.  Restatement, supra,    27;
                                               ___________  _____

            Spickler v.  York, 505 A.2d 87, 88  (Me. 1986).  Unlike claim
            ________     ____

            preclusion, this doctrine requires an actual determination of

            the issue.  

                 We  do not  share  the district  court's  view that  the

            decision of the New York state court that Phoenix Leasing had

            standing  to  enforce  Lundborg's loan  guaranties  precludes

                                         -16-
                                         -16-

            Lundborg's  claims here.   As  far  as we  can tell  from the

            papers  submitted to  us, Lundborg  did not  raise her  usury

            claims and the related fraud  claims in seeking to reopen the

            New  York action;  and  a holding  that  Phoenix Leasing  had

            standing  to enforce the loan is not necessarily inconsistent

            with  the possibility that  the loans' terms  were originally

            made by the  partnerships and were usurious  under California

            law, and that Phoenix Leasing concealed this information from

            the Lundborg entities in prior litigation.

                 The  Maine bankruptcy decision is a closer call.  Merlin

            filed for bankruptcy in August 1991; a plan of reorganization

            was confirmed in May 1994, awarding Phoenix Leasing $900,000.

            In November 1994, Lundborg filed  a motion under Fed. R. Civ.

            P.  Rule 60(b)  for relief  from  the judgment  based on  the

            February  1994  deposition,   arguing  that  the   deposition

            testimony  revealed  that  the  Merlin loan  was  fraudulent,

            usurious, and not enforceable by Phoenix Leasing.  Lundborg's

            Rule  60(b)  motion thus  raised the  same factual  and legal

            arguments that she asserts in this case.

                 Phoenix  Leasing opposed  the  motion  on  two  grounds:

            first,  that the  motion  was  untimely  under  the  one-year

            limitation  on  Rule  60(b) motions  grounded  in  fraud; and

            second, that  on the  merits the loan  was not  fraudulent or

            usurious  and  could be  collected  by Phoenix  Leasing.   In

            denying Lundborg's  Rule 60(b) motion,  the bankruptcy  court

                                         -17-
                                         -17-

            found  tersely  that  Lundborg  had  stated  "no  basis"  for

            granting  the motion.   The  result  is that  we cannot  tell

            whether the bankruptcy court rested on lack of timeliness  or

            on the merits in denying the motion to reopen.

                 Thus Phoenix  Leasing cannot  carry its  burden, as  the

            party claiming the  benefit of issue preclusion, to show that

            the fraud issue was actually decided in the prior case by the

            Maine bankruptcy  court.  See  Dowling v. United  States, 493
                                      ___  _______    ______________

            U.S. 342, 350  (1990).  Lundborg may therefore  be free under

            Maine law to press her collateral attack on the earlier Maine

            state judgment,  assuming that  she can  prove her  charge of

            fraud in the prior proceeding and meet the other requirements

            for  such an  attack.    At least,  this  possibility is  not

            foreclosed by issue preclusion.

                                         IV.

                 To  say  that  the  claims may  survive  a  res judicata
                                                             ____________

            defense is  not to say  that the district court  was wrong in

            dismissing  the case.   In order  to reach the  merits on the

            counts in question  (e.g., fraud, conversion),  Lundborg must
                                 ____

            first succeed  in her  collateral attack  on the  Maine state

            court  judgment.   Although in  form she  does not ask  for a

            declaration  or injunction, in substance this is a collateral

            attack  because  the  relief  sought  would  undo  the  Maine

            judgment and because  res judicata bars the claims unless the
                                  ____________

            Maine judgment is held to be vitiated by fraud.  See Griffith
                                                             ___ ________

                                         -18-
                                         -18-

            v. Bank of New York, 147 F.2d 899, 901 (2d Cir. 1945).
               ________________

                  But  "[t]he  principle"  is  that,  where  possible  in

            collateral  attacks, "relief should  ordinarily be  sought in

            the  court that rendered the judgment" being thus challenged.

            Restatement, supra,   79, cmt. b:  see also id.   79 cmt.  d.
            ___________  _____                 ________ ___

            This preference  is not  merely a matter  of comity  but also

            reflects  practical  considerations:  here, the  Maine  state

            court  has  the  advantage over  all  other  courts,  both in

            deciding  whether fraud occurred in its own prior proceedings

            and  in  determining   whether  Lundborg  adequately  pursued

            discovery efforts in that case.

                 Maine's own Rule  60, like the federal  rule, recognizes

            that  an independent  collateral attack  based  on litigation

            fraud may  be brought  even after the  one-year period  for a

            motion to reopen has passed.  Me. R. Civ. P. 60(b); Lewien v.
                                                                ______

            Cohen,   432  A.2d  800   (Me.  1981).     Quite  apart  from
            _____

            administrative reasons for this distinction between reopening

            and  collateral attack,  the conditions  on  relief are  more

            severe when it  is made by independent action.   Restatement,
                                                             ___________

            supra,    78 cmt.  c.   The Maine  state courts  are thus  an
            _____

            available forum.

                 The Supreme Court has warned that federal courts are not

            lightly to relinquish jurisdiction, and that even a difficult

            issue of state  law or parallel  pending state litigation  is

            not automatically a warrant to abstain.   See Wright, Federal
                                                      ___         _______

                                         -19-
                                         -19-

            Courts   52  (5th ed. 1994)(collecting the  pertinent cases).
            ______

            Yet the Court has said  that its own abstention decisions are

            not "rigid pigeonholes,"  Pennzoil v. Texaco, Inc.,  481 U.S.
                                      ________    ____________

            1, 11 n.9,  107 S. Ct. 1519,  1526 n.9 (1987), but  reflect a

            skein  of considerations  that  vary with  the facts  of each

            case.  See Moses H. Cone Hospital v. Mercury Construc. Corp.,
                   ___ ______________________    _______________________

            460  U.S. 1,  19-26 (1983).   And  no Supreme  Court decision

            deals  directly   with  a  case  such  as  ours  involving  a

            collateral attack under  state law upon  a prior state  court

            judgment.3 

                 Here, we  think that  in the  peculiar circumstances  of

            this case, abstention  is appropriate.   There is a  complete

            assurance   that  relief,  if  available  at  all,  is  fully

            available  in the Maine state court;  indeed, Maine's own law

            controls on this issue.  Conversely, and of great importance,

            there is no direct federal  interest nor any issue of federal

            law  presented either  by  the collateral  attack  or by  the

            underlying claims in the complaint.  Compare Cone, 460 U.S at
                                                 _______ ____

            23,  26 (noting the  pertinence of an  available state remedy

            (or lack thereof) and of  federal issues) with Colorado River
                                                      ____ ______________

            Water Cons. Dist. v. United  States, 424 U.S. 800, 819 (1976)
            _________________    ______________

                                
            ____________________

                 3Similarly, federal appellate decisions in this area are
            sparse and the few cases we  have found are divided.  Compare
                                                                  _______
            Lapin v.  Shulton,  Inc.,  333  F.2d 169  (9th  Cir.),  cert.
            _____     ______________                                _____
            denied,  379  U.S.  904  (1964),  and  Carr  v.  District  of
            ______                                 ____      ____________
            Columbia, 543 F.2d 917, 927 (D.C. Cir. 1976), with Locklin v.
            ________                                      ____ _______
            Switzer Bros.,  Inc., 335 F.2d  331, 334-35 (7th  Cir. 1964),
            ____________________
            and Wohl v. Keene, 476 F.2d 171 (4th Cir. 1973).
                ____    _____

                                         -20-
                                         -20-

            (emphasizing the existence of a state remedy).

                 Further, this suit  is effectively an attempt  to undo a

            preexisting,  final  judgment  of a  state  court  based upon

            matters  pertaining solely to the conduct of prior litigation

            in that court.  While there is no flat bar to conducting this

            autopsy in a federal court, the considerations of "comity and

            orderly  administration of  justice"  that  point toward  the

            rendering court as the  preferable forum, Lapin, 333 F.2d  at
                                                      _____

            172,  may have  special weight  where the  latter is  a state

            court.  Cf.  Younger v. Harris, 401 U.S. 37, 43-45 (1971); 28
                    ___  _______    ______

            U.S.C.     2283  (ordinarily  barring  federal  courts   from

            enjoining state proceedings).

                 In  addition, the  Maine state  court  is obviously  the

            forum  that can most readily determine  whether in fact fraud
                                                            _______

            occurred  in its own  prior proceedings and  whether diligent

            discovery  by the plaintiff  in those proceedings  would have

            uncovered  in a  more  timely  fashion  the  information  now

            claimed to be vital.  This appraisal is likely to be informed

            not only  by the records  possessed by the Maine  state court

            but  also  by that  court's  superior  knowledge of  how  its

            proceedings are  customarily conducted and what  discovery is

            available.   

                 Finally, in deciding to defer to the Maine state courts,

            it is significant,  see Quackenbush v. Allstate Ins. Co., 116
                                ___ ___________    _________________

            S.  Ct. 1712,  1721-22 (1996),  that  the implicit  threshold

                                         -21-
                                         -21-

            relief   required   to   entertain   Lundborg's   claims--the

            collateral  attack  on  the  Maine   judgment--is  itself  an

            equitable  remedy within the  sound discretion of  the court.

            Despite  some limited common law antecedents, equity has been

            the main source of collateral relief from judgments,  and the

            independent  action  is  treated as  equitable  in character.

            Wright, Miller & Kane, supra,    2868, at 396 (citing cases);
                                   _____

            see, e.g., Lewien v. Cohen, 432 A.2d at 805.
            ___  ____  ______    _____

                 This appraisal leads us to affirm the dismissal of count

            I on the  merits but to affirm  the dismissal of  counts III,

            IV, V, VII and  VIII on a ground different than  that adopted

            by the district  court and with  different consequences.   In

            principle, Lundborg may pursue these counts by filing suit in

            Maine state  court and by  persuading the state court  that a

            collateral  attack on  the 1992  Maine  state court  judgment

            should be allowed.

                                          V.

                 It may be of help to the parties, and to any Maine state

            court that  may  grapple with  this  matter, to  explain  our

            concerns  about Lundborg's collateral attack.  Our problem is

            not with Lundborg's attempt to avoid on technical grounds the

            loan  obligations that  she or  her  companies took  on in  a

            commercial  venture.     Technical  defenses   are  sometimes

            narrowly  read, but Lundborg is as free  to argue for them as

            she would be to invoke  a statute of limitations to avoid  an

                                         -22-
                                         -22-

            otherwise just debt.

                 Rather, our concern is primarily with the timing of this

            defense.    It  is  uncertain  whether  the  news  that   the

            partnerships were  involved came  as a  complete surprise  to

            Lundborg  in  1994.    Cf.  In  re  Cable  One  CATV  Limited
                                   ___  _________________________________

            Partnership,  BK  No.  91-12387-JEY, slip  op.  at  6 (Bankr.
            ___________

            D.N.H.,  Nov.  29,  1995)  ("[I]t is  difficult  to  find any

            misrepresentation since  the  principal  [Lundborg]  had  the

            checks involved and was on notice as to who was advancing the

            monies.").   But assuming  surprise, it  is doubtful  whether

            Lundborg can  be excused  for not  discovering this  possible

            defense in the course of lawsuits brought in 1992.

                 This is  not a  case of forged  documents or  bribery of

            jurors or  other kinds of  litigation fraud uniquely  hard to

            imagine  or uncover.  Phoenix  Leasing was licensed to exceed

            the usury  restriction and it  is a  fair guess that,  if the

            Merlin  loan ran  afoul  of the  restriction  because of  the

            limited partnerships, which is far  from clear, it was due to

            routine planning decisions  made for tax or  similar reasons.

            Lundborg  knew full  well of  the  usury laws--a  boilerplate

            defense bearing this label was actually asserted--and she was

            free  in  the  Maine  state   court  action  to  explore  the

            underpinnings of the loan.

                 It is possible,  but we think unlikely, that a potential

            usury claim based on the role of the limited partnerships was

                                         -23-
                                         -23-

            so substantial but  at the same time so  thoroughly concealed

            that  it  would  have  escaped  even  a  diligent  effort  at

            discovery.   Under the  Restatement, the failure  to exercise
                                    ___________

            due diligence  to unearth  such a claim  in the  earlier case

            would itself  bar a  later collateral  attack.   Restatement,
                                                             ___________

            supra,   70 cmt. d.   In sum, even assuming that  there was a
            _____

            usury defense, we are very  doubtful that the possible  usury

            defense was diligently  pursued or that fraud can  be said to

            infect the Maine state judgment.

                 Our substantial doubts are not a legal defense against a

            new state  court action.   But given the  sanctions available

            for  unfounded  lawsuits,  Lundborg  ought  to  give  careful

            consideration to her  own position--and to her  succession of

            seven straight  litigation defeats  in related  cases--before

            she embarks upon  an eighth lawsuit  bearing a strong  family

            resemblance.   "The law  abhors fraud and  perjury.   It also

            abhors interminable litigation."   Cole v. Chellis,  119 A.2d
                                               ____    _______

            623, 625 (Me. 1923).

                 Affirmed.
                 ________

                                         -24-
                                         -24-