Court Opinion

ID: 9469447
Source: CourtListenerOpinion
Date Created: 2023-08-05 02:40:49.601581+00
Date Added: 2024-06-11T17:41:23.645813
License: Public Domain

REAVLEY, Circuit Judge,
dissenting in part:
I join most of Judge Gee’s fine opinion. I dissent, however, from the holdings (1) that Bintliff may be held liable to Chemetron as a civil conspirator and (2) that Bintliff is collaterally estopped by the findings in. a case that was settled and dismissed by agreement of the parties.
I. Conspiracy
There is no allegation or proof in this case to justify the court’s holding that Bintliff may be liable to Chemetron as a conspirator under Tex.Rev.Civ.Stat. § 4004. The evidence shows that Hall and Williams were engaged in a manipulative scheme to enhance the price of Westec stock from September 1964 until August 1966. The sale to Chemetron took place in January 1966. The only evidence against Bintliff is that he took part in three transactions — two in May 1966 and one in July 1966 — none of which concerned Chemetron. There is no evidence that Bintliff benefitted in any way from the Chemetron sale.
The majority’s holding confuses concepts of criminal and civil conspiracy. The gist of criminal conspiracy is the agreement itself: the defendant is guilty of the crime of conspiracy if he agrees to commit a substantive crime, regardless of whether he personally participates in or even knows of all the acts taken in furtherance of the conspiracy. That the defendant is guilty of conspiracy, however, does not make him guilty of the substantive crimes that his co-conspirators have committed as part of the conspiracy.
To hold a defendant liable in damages to a particular plaintiff as a civil conspirator, it is not enough to prove that, at some point, he became a member of the conspiracy. “[T]he gist of a civil conspiracy is the damage resulting from commission of a wrong which injures another, and not the conspiracy itself.” Schlumberger Well Surveying Corp. v. Nortex Oil & Gas Corp., 435 S.W.2d 854, 856 (Tex.1969). To be liable in damages as a civil conspirator, the conspirator must agree “to injure another by the commission of a particular wrong.” Id. at 857.
The majority concedes that Bintliff could not have agreed to the “particular wrong” to Chemetron. Nevertheless, the majority holds that Bintliff may be liable by invoking the principle that a late-joining conspirator “becomes in law a party to every act previously or subsequently done by any of the others in the pursuance of it.” State v. Standard Oil Co., 130 Tex. 313, 107 S.W.2d 550, 560 (1937). While this broad principle is sound for many purposes, it is clearly too broad even for the law of criminal conspiracy where guilt as a conspirator does not itself make the defendant guilty of substantive offenses his co-conspirators have committed as part of the conspiracy.
I agree with the majority that a co-conspirator need not have directly participated in or even have known of all the details of the Chemetron transaction to be liable. But Schlumberger requires that, at a minimum, he must have agreed to injure Chem-etron by the commission of a particular wrong. Such agreement could be proved by showing that the co-conspirator joined in the scheme to sell stock specifically to Chemetron, or that, prior to the sale to Chemetron, he joined in a fraudulent scheme to sell Westec stock to all comers. *1199But Bintliff cannot, consistently with Schlumberger, be held liable in damages for a particular wrong that he could not have agreed, either directly or indirectly, to commit.
We hear of no Texas authority for the proposition that a conspirator may be held liable in damages for particular wrongs committed long before his involvement in the conspiracy.1
Furthermore, the evidence in this record is insufficient as a matter of law to prove that Bintliff joined in a scheme to create actual or apparent active trading in, or to raise the price of, Westec stock for the unlawful purpose of fraudulently inducing the purchase of Westec stock by the general public.
The evidence shows that Hall and Williams were engaged in a manipulative scheme to enhance the price of Westec stock from September 1964 until August 1966. As representatives of both Westec and Business Funds, which controlled Wes-tec, they had many reasons to desire the long-term enhancement of the market price of Westec stock. The only evidence against Bintliff is that he took part in three transactions which occurred months after the January 1966 sale of stock to Chemetron. These three transactions are not sufficient circumstantial evidence to prove that Bint-liff ever joined in the conspirators’ broad purpose to induce the general public to buy Westec stock.
The first two Bintliff transactions took place in May 1966. Williams offered to sell Bintliff 60,000 shares of Westec stock at $40 a share when the market price was $50 a share. Bintliff made the deal and re-sold half the shares immediately. He expressed his intent to re-sell the remainder immediately, but then agreed not to sell it until November 1966.
Later in May, Williams and Hall were in need of funds to continue financing the conspiratorial scheme. Bintliff agreed to guarantee a $3,000,000 loan for 30 days. His fee was 3,000 shares of Westec, worth $150,000 on the market.
Finally, in July 1966 Bintliff guaranteed a 3 day, $3,000,000 loan for Hall. He received a guarantee fee of $216,000 and permission to sell immediately half of his remaining shares from the first transaction.
When Bintliff discovered in August 1966 that Williams and Hall could no longer get financing for their Westec purchases, he realized that the Westec market was about to crash, and he sold his remaining shares.
This evidence does not tend to prove that Bintliff ever joined in the conspirators’ purpose to induce the purchase of Westec stock by the general public through manipulation of the market. Rather, the evidence shows that Bintliff engaged in three arm’s-length transactions with the conspirators in which he exacted a high price for his services. It was irrelevant to him whether the conspirators’ long-range manipulation scheme was successful — if, indeed, he was even aware of its scope. Bintliff was acting for his own purposes, not to advance the conspirators’ purpose. In purchasing the Westec stock, he was attempting to make a quick profit on the difference between the sale price and the market price; in guaranteeing the loan, he was taking advantage of the conspirators’ desperate need for financing.
*1200It is not enough to show that Bintliff knew of the conspiracy, concealed it, and profited from it. See Schlumberger, supra. To hold Bintliff liable in damages as a civil conspirator, the evidence must show that Bintliff intended “to injure another by the commission of a particular wrong.” Schlumberger, 435 S.W.2d at 857. The evidence does not show that Bintliff ever shared the unlawful purpose that caused the conspirators to sell Westec stock to Chemetron.
II. Collateral Estoppel
The majority holds that Bintliff is collaterally estopped by withdrawn findings in a prior case that was settled and dismissed by agreement of the parties. This holding ignores settled principles of preclusion, overrules Fifth Circuit precedent, and undermines the strong public interest in the settlement of law suits. Its application to this case is especially unfortunate, for it deprives Bintliff of the primary benefit of his agreement to settle while resulting in almost no saving in time or resources to the litigants or the courts.
The most basic prerequisite to the use of preclusion is “a judgment that is valid, final, and on the merits.” 18 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 4427, at 269 (1981) [hereinafter Wright & Miller]. An issue is precluded (or subject to collateral estoppel) only when it is “determined by a valid and final judgment, and the determination is essential to the judgment.” Restatement (Second) of Judgments § 27 (1982); accord, Ashe v. Swenson, 397 U.S. 436, 443, 90 S.Ct. 1189, 1194, 25 L.Ed.2d 469 (1970); Hicks v. Quaker Oats Co., 662 F.2d 1158, 1166 (5th Cir. 1981); Kaspar Wire Works, Inc. v. Leco Eng’r & Mach., Inc., 575 F.2d 530, 535-36 (5th Cir. 1978).
The “judgment” on which the majority bases its holding was neither final nor on the merits. Nothing was determined by the order of dismissal in the Cosmos Bank case but that the court approved the parties’ settlement and withdrew the findings of fact that the majority today finds preclu-sive.
The majority reasons that the findings of fact in Cosmos Bank meet the requirement of a final judgment because “only the judicial act of signing a final, known adverse, judgment was left.” But findings of fact in themselves have no operative effect, and certainly these withdrawn findings cannot be considered “essential to the judgment” that was in fact rendered: a judgment of dismissal.
The disposition of Cosmos Bank the majority uses was not “final.” It is the general rule that a decision is not “final” for collateral estoppel purposes if it cannot be tested by appellate review. 18 Wright & Miller, supra, § 4433, at 315-21.2 Bintliff could not appeal a judgment that was never entered.3 If he had allowed the entry of *1201judgment and then appealed, and this court had reversed and remanded for further proceedings — as it does in this case today-then the findings in the Cosmos Bank case could have no preclusive effect. Id. § 4432, at 303. And even if this court had affirmed, no finding would be entitled to preclusive effect unless that finding was necessary to the specific grounds on which the court’s affirmance was based. Hicks, 662 F.2d at 1168 & n.6 (collecting cases); 18 Wright & Miller, supra, § 4421, at 205, § 4432, at 302. Thus, if the Cosmos Bank plaintiff prevailed in the district court on many legal theories but this court found it necessary to pass on only one, all of the findings that were not essential to the ground of affirmance would have no collateral estoppel effect.
Nor was the disposition of Cosmos Bank “on the merits.” It is well-settled that when litigation is terminated by a consent decree, the judgment may only preclude “the issues actually intended to be precluded by the parties.” Kaspar Wire Works, 575 F.2d at 539; accord, 18 Wright & Miller, supra, § 4443, at 382. In this case, both the parties and the trial court made express their intent that the settlement and dismissal have no collateral estoppel effect.
Recognizing these basic principles of the law of preclusion, this court held in Associates Capital Servs. Corp. v. Loftin’s Transfer & Storage Co., 554 F.2d 188, 189 (5th Cir. 1977), that the findings in a case that is dismissed pursuant to a settlement can have no collateral estoppel effect, even after judgment has been entered and the case is pending on appeal. Today the majority not only overrules Loftin’s but goes further to give preclusive effect to findings on which a court has never entered judgment. The majority “distinguishes” Loftin’s on the ground that Loftin’s involved “defensive” collateral estoppel, but it fails to explain how this distinction has anything to do with the requirement of a final judgment. The majority then attempts to prop up this distinction by terming Parklane Hosiery Co. v. Shore, 439 U.S. 322, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979), a “watershed case on offensive collateral estoppel” which “create[s] a ‘need to redefine the doctrine of collateral estop-pel.’ ” But the Parklane decision has absolutely nothing to do with the requirement of a final judgment.4 Parklane is a landmark only because it abandons the requirement of mutuality; offensive collateral es-toppel is itself nothing new. See, e.g., Mason Lumber Co. v. Buchtel, 101 U.S. 638, 25 L.Ed. 1073 (1880); 18 Wright & Miller, supra, § 4416, at 138 n.13. The majority fails to point to one word in Parklane that justifies its departure from the firm rule of this circuit that a panel cannot overrule a decision of another panel.
Apparently, the majority believes that it need not adhere to our precedent because Bintliff voluntarily chose to avoid judgment and forgo appeal. In essence, what the majority holds today is that once a trial court is prepared to enter judgment against a litigant, that litigant may not settle his case for the purpose of avoiding the collateral estoppel effect of the district court’s findings. I think that is bad law and bad policy. Society maintains a strong interest in settlements at every stage of litigation. The majority claims that this interest is not served here because “the reason that settlements are favored is that they avoid litigation,” and that “the savings of legal resources by settling after a full trial [a]re nominal.” Even assuming, without agreeing, that “the” only reason settlements are favored is that they conserve legal re*1202sources,51 do not agree with the majority’s estimation of the potential savings.
Certainly the majority is wrong in its estimation of the savings in this case.6 But more importantly, today’s decision will deter post-trial settlements and force all defendants facing multi-plaintiff litigation to appeal every adverse finding of fact made by every trial court. Even if the defendant believes that his appeal is unmeritorious— because, for example, the particular plaintiff is entitled to prevail on one of many legal theories — the defendant will be forced to challenge all of the findings and alternative bases of recovery on which he believes the trial court erroneously relied. “[F]orc-ing a losing litigant to take an appeal he knows he will lose on the basis of one alternative ground is a waste of the resources of both litigants and courts, and is contrary to the principles of judicial economy which motivated the doctrine of collateral estoppel in the first place.” Hicks, 662 F.2d at 1169. And while these unnecessary appeals are pending, the preclusive effects of the trial courts’ findings will remain uncertain, since a reversal or an affirmance on an alternative ground will prevent the application of collateral estoppel. See generally 18 Wright & Miller, supra, § 4433, at 311-13.
The sole authority the majority finds for its decision today is Aetna Cas. & Surety Co. v. Jeppesen & Co., 440 F.Supp. 394 (D.Nev.1977), vacated on other grounds, 642 F.2d 339 (9th Cir. 1981). That district court decision has not met with favor elsewhere.
[T]he result [in Aetna] is questionable at best. The terms of settlement and dismissal would make it impossible to apply issue preclusion between the parties to the original action. The prospect of applying preclusion in favor of a non-party *1203is little more attractive. Not only did the settlement sacrifice the possibility of appeal from the findings of liability, but the subsequent use of preclusion may make it more difficult to settle cases in this posture.
18 Wright & Miller, supra, § 4433, at 318 (footnote omitted).
Finally, the majority’s holding is unfair to Bintliff. As the majority acknowledges, the primary reason that Bintliff settled Cosmos Bank was to avoid the application of collateral estoppel. He relied on well-settled rules of law in deciding to settle. He gave up his right to appeal, the exercise of which would either have delayed the trial in this case or prevented, for all practical purposes, the use of collateral estoppel in this case. He saved the judicial system a certain appeal and a possible retrial and second appeal, and saved his adversary additional time and expense in collecting damages. Nevertheless, today the majority disregards his justifiable reliance interests and deprives him of the primary benefit of his bargain. The majority says that the rules of collateral estoppel are based on “fairness,” but I see nothing fair about the majority’s decision.

. Standard Oil was an action by the State of Texas to recover statutory penalties and obtain injunctive relief against the members of an agreement that violated the state antitrust laws; it was not an attempt to recover damages for particular anti-competitive acts. See 107 S.W.2d at 552. Thus, the only thing the state needed to prove in Standard Oil was membership in the conspiracy itself.
Bourland v. State, 528 S.W.2d 350 (Tex.Civ.App.—Austin 1975, writ refd n. r. e.), was an action by the state under the Texas Deceptive Trade Practices Act seeking, inter alia, restitution for the victims of a land development fraud. The developers’ attorney was held liable for the full amount of restitution, despite his claim that he first became aware of the fraud well after the inception of the scheme. The evidence showed, however, that the attorney had profited from the scheme from its inception, and that after he learned of its fraudulent nature he joined in it, intending to perpetuate the fraud against the investors and to retain his prior, ill-gotten gains. By contrast, there is no proof in this case that Bintliff knew of or benefited in any way from the Chemetron sale.

. An exception exists if the decision “is surrounded by alternative protections or special policies that support preclusion,” id. at 316— for example, findings adopted by the Supreme Court in cases under its original jurisdiction are given preclusive effect, see id. at 320-21. But the exception would swallow the rule if the requisite “alternative protections or special policies” could be found in the nonappealable findings of any district court.

. The unavailability of an appeal distinguishes this case from ail of the appellate court decisions on which the majority relies in finding a “final judgment.” Not only was an appeal available in the prior action in each of these cases, but in all but one the appeal had in fact been taken and the appellate court had rendered its judgment. Compare Miller Brewing Co. v. Jos. Schlitz Brewing Co., 605 F.2d 990, 991-92, 995-96 (7th Cir. 1979) (in prior action, court of appeals had determined as a matter of law that plaintiffs’ brand name was not entitled to trademark protection), cert. denied, 444 U.S. 1102, 100 S.Ct. 1067, 62 L.Ed.2d 787 (1980); Kurlan v. Commissioner, 343 F.2d 625 (2d Cir. 1965) (preclusive effect given to judgment of state supreme court despite settlement after remand on a single issue); Zdanok v. Glidden Co., Durkee Famous Foods Div., 327 F.2d 944, 947 (2d Cir.) (in prior action, court of appeals had reversed a district court dismissal on the merits, had authoritatively determined the issue of liability, and remanded only for an assessment of damages), cert. denied, 377 U.S. 934, 84 S.Ct. 1338, 12 L.Ed.2d 298 (1964), with United States ex rel. DiGiangiemo v. Regan, 528 F.2d 1262, 1265 & n.1 (2d Cir. 1975) (government had right to appeal trial court’s suppression order in earlier, aborted prosecution), cert. denied, 426 U.S. 950, 96 S.Ct. 3172, *120149 L.Ed.2d 1187 (1976). These decisions provide little support for the majority’s holding in this case, where the court in the prior action never reached a legally operative determination of any rights of the parties, and where no appeal was ever available.

. Migues v. Fibreboard Corp., 662 F.2d 1182, 1187 (5th Cir. 1981), which the majority also cites in its effort to disregard Loftin’s, involved no collateral estoppel issue at all. The dictum quoted by the majority came in the course of a discussion concerning the “latent” question whether the abandonment of mutuality in Park-lane could be extended to allow offensive collateral estoppel against a defendant who was not a party to the earlier litigation. Thus, not even the dictum in Migues concerned the requirement of a final judgment.

. Settlements are favored for many reasons besides the conservation of judicial and other legal resources.
In addition to ending the uncertainty and anxiety of the litigants concerning the results of further litigation, settlements also resolve any doubts concerning the correctness of the court’s fact findings and the justness of the remedy it devises. Because “ ‘[t]here are “two sides” to most disputes,’ ” Howard v. Commissioner, 447 F.2d 152, 158 (5th Cir. 1971) (quoting Corbin on Contracts § 620 (I960)), “[o]ne of the fundamental principles of judicial administration is that, in most cases, the absolute result of a trial is not as high a quality of justice as is the freely negotiated, give a little, take a little settlement.” Will, Merhige & Rubin, The Role of the Judge in the Settlement Process, 75 F.R.D. 203, 203 (1976) (remarks of Judge Will). See generally J. Frank, Facts are Guesses, in Courts on Trial 14 (1949).
Settlements also protect the litigants’ interest in autonomy, allowing them to reach their own solution to their dispute rather than having a remedy imposed on them by a legal system that may not necessarily share the litigants’ own shared norms. See generally Eisenberg, Private Ordering Through Negotiation: Dispute-Settlement and Rulemaking, 89 Harv.L.Rev. 637, 656-57 (1976).
Moreover, it has long been recognized that the restoration of amicable and socially useful relationships is more likely to result after a negotiated settlement than after a litigated fight to the finish. See Howard v. Commissioner, 447 F.2d at 158; Eisenberg, supra, at 646.

. Despite the majority’s hyperbole about “years of discovery” and “several weeks of trial,” it is obvious that the only savings in this case will be the time and expense of retrying issues that the parties have already tried once. In my estimation, it is this savings that is “nominal” when compared to the savings that resulted when Bintliff agreed to settle the Cosmos Bank case. There is no reason to believe that an appeal in Cosmos Bank — which involved smaller stakes but issues similar to those in this case — would have consumed significantly less time than the over two-and-one-half years that have elapsed since the district court entered judgment in this case. During the pendency of that appeal, the preclusive effects of the Cosmos Bank findings would have remained uncertain. See 18 Wright & Miller, supra, § 4433, at 311-13. Since a reversal in Cosmos Bank would have nullified any reliance on the Cosmos Bank findings in this case, see id. § 4432, at 303, as a practical matter the parties would have been forced to relitigate the issues, await the court of appeals’ decision in Cosmos Bank, or risk retrial of this complex case when and if Cosmos Bank was reversed.
The majority makes the mathematically indefensible claim that the Cosmos Bank settlement has resulted in “no” savings to the judicial system, because “this issue has now come before an appellate court.” What issue? No appellate court has even considered whether possible trial errors, incorrect interpretations of law, or insufficiency of evidence would require reversal of all or part of the judgment that was never entered in Cosmos Bank.