Court Opinion

ID: 9520717
Source: CourtListenerOpinion
Date Created: 2023-08-07 01:48:03.116589+00
Date Added: 2024-06-11T12:46:46.047620
License: Public Domain

JONES, Bankruptcy Judge, dissenting:
1. Collateral Estoppel
Although this Panel exercises de novo review over the rules governing collateral es-toppel, the application of collateral estoppel in a particular case is left to the broad discretion of the trial court. In re Gottheiner, 703 F.2d 1136, 1139 (9th Cir.1983); Garrett v. City & County of San Francisco, 818 F.2d 1515, 1520 (9th Cir.1987), (citing Mack v. South Bay Beer Distrib., Inc., 798 F.2d 1279, 1282 (9th Cir.1986)). Furthermore, in bankruptcy proceedings the use of collateral es-toppel is subject to the caveat that, since bankruptcy courts have exclusive jurisdiction to determine dischargeability, it be applied cautiously. In re Towe, 147 B.R. 545, 548 (Bankr.D.Mont.1992), (citing In re Daley, 776 F.2d 834, 838 (9th Cir.1985), cert. denied, 476 U.S. 1159, 106 S.Ct. 2279, 90 L.Ed.2d 721 (1986)).
Generally, where a judgment is entered by the parties’ consent or stipulation11 prior to trial on the issues, no issue may be said to have been fully, fairly or actually litigated for purposes of collateral estoppel.12 With respect to consent or stipulated judgments, however, a form of issue preclusion has developed that is not dependent on actual litigation of a matter. Foster, 947 F.2d at 480, (citing Restatement, § 27 comment (e) & note at 269). Under this exception, “the [issue preclusive] effect results not from the rule of [Section 27] but from an agreement manifesting an intention to be bound.”13
However, in determining whether the parties intended to foreclose the subsequent litigation of a particular issue, stipulated judgments asserted to give rise to collateral es-*313toppel must be.narrowly construed, Foster, 947 F.2d at 481. In Foster, the Federal Circuit, noting the congruity with the Ninth Circuit,14 stated, “[b]y requiring parties to be specific in qualifying the application of the general rules of issue preclusion, courts are not required to speculate as to the intent of the parties based on broad, general and ambiguous language.” Foster, 947 F.2d at 481.
In United States v. Armour & Co., 402 U.S. 673, 681, 91 S.Ct. 1752, 1757, 29 L.Ed.2d 256 (1971), the Supreme Court indicated that the scope of a consent decree is generally limited to its terms.15 Accordingly, a stipulated or consent judgment must initially be reviewed within its four corners. Armour, 402 U.S. at 681, 91 S.Ct. at 1757; Foster, 947 F.2d at 481. In Foster, the parties sought to introduce extrinsic evidence on appeal to show what the parties intended or did not intend, by their consent decree. Foster 947 F.2d at 482 n. 20. While acknowledging that extrinsic evidence may be useful for a trial court in ascertaining what the parties intended the terms in their agreement to mean, the court declined to evaluate the relative strength of the parties’ evidence on appeal. Id.
In the present appeal, the pertinent portion of the stipulated judgment states that “all claims of action which could arise from the subject matter of this action or the bringing of this action, including any claims for abuse of process or malicious prosecution [are] dismissed, with prejudice.” The subject matter of the prior litigation involved a contract claim (Count I) and a related claim for fraud (Count II). The nondischargeability of Berr’s debt to the FDIC was not a claim that “could arise from the subject matter of [the Kansas litigation]” since such a claim can not even potentially arise unless bankruptcy is filed, which, in this case, happened four years after the stipulated judgment was entered. Furthermore, as evidenced by the parties’ specific reference to actions for “abuse of process” and “malicious prosecution,” the parties knew how to clearly state their intent to waive potential future claims, yet they failed to address discharge-ability proceedings which might arise in the event of a subsequent bankruptcy.
It is not appropriate for this panel to speculate as to the intent of the parties based on broad, general and ambiguous language. Appellant has failed to meet his burden of showing that the parties intended to qualify the application of the general rules of issue preclusion by foreclosing the opportunity to challenge dischargeability in the event of a subsequent bankruptcy. Accordingly, Berr’s motion for summary judgment was properly denied and the bankruptcy court’s decision to proceed with a hearing on dischargeability should be affirmed.
Alternatively, I would remand to the bankruptcy court for entry of findings as set forth below. The Foster court recognized that “[w]hile the interpretation of the terms of the decree is an issue of law, if resort must be made to conflicting extrinsic evidence to determine the parties’ intent, we would be faced with a factual issue on which the trial court has not passed, at least not under the correct ‘narrow construction’ legal standard.” Id.; see also Favell v. United States, 16 Cl.Ct. 700, 716 (1989) (citing United States v. *314Sacramento Mun. Util Dist., 652 F.2d 1341, 1343—45 (9th Cir.1981). On remand, a bankruptcy court need only determine what issues, if any, were actually intended by the both parties to be resolved by the prior consent judgment. Thereafter, the trial court may exercise its discretion in determining, under the appropriate standards, whether to declare those issues established in the present litigation as a matter of collateral estoppel.
Finally, unless the Ninth Circuit adopts a contrary approach, I am bound under principles of stare decisis, to disagree with the majority’s suggestion that if this had been an appeal from a state court judgment, federal law would nonetheless apply in evaluating the judgment’s preclusive effect. See In re Nourbakhsh, 162 B.R. 841 (9th Cir. BAP 1994).
2. Equitable Estoppel
The application of estoppel against the government16 is generally disfavored.17 A party asserting estoppel against the government must carry a heavy burden. United States v. Shampang, 987 F.2d 1439, 1444 (9th Cir.1993). In addition to the traditional elements of equitable estoppel a movant must also prove the following additional elements to estop the government: (1) that the government engaged in “affirmative misconduct” going beyond mere negligence, and (2) that, on balance, not applying estoppel would result in a serious injustice, and the public will not be unduly burdened by the imposition of estoppel.18 To establish affirmative misconduct, the movant must show “an affirmative misrepresentation or [the] affirmative concealment of a material fact by the government.” Ruby, 588 F.2d at 703-04. Appellant has failed to meet its heavy burden of showing both “affirmative misconduct” by the FDIC, and demonstrating that the balance of the equities favors the application of estoppel against the government.

. For purposes of applying collateral estoppel, the similarity of judgments on stipulations and judgments by consents justifies their similar treatment. Moore’s Manual: Federal Practice and Procedure, § 30.05[5] at 30-106 ("Moore's Manual"). In both situations, the "intent of the parties” in entering into either the stipulated or consent judgment determines its collateral estop-pel effect since the issues have not been "actually litigated” or "necessarily decided” by the court in the sense that the doctrine normally requires. Id.

. Restatement (Second) of Judgments (hereinafter "Restatement”), § 27 comment (e) at 257 (1982); Foster v. Hallco Manufacturing Co., Inc., 947 F.2d 469 (Fed.Cir.1991).

. Restatement, § 27 comment (e); see also Green v. Ancora-Citronelle Corp., 577 F.2d 1380, 1383 (9th Cir.1978). But see Moore's Manual § 30.05[5] at 30-105 (noting that this rule has not been uniformly accepted by the courts); Anderson, Clayton & Co. v. United States, 562 F.2d 972 (5th Cir.1977), cert. denied, 436 U.S. 944, 98 S.Ct. 2845, 56 L.Ed.2d 785 (1978) (raising a rebuttable presumption that an issue resolved by stipulation is not conclusively established for purposes of a subsequent suit involving a different cause of action).

. The Foster court stated that both circuits are guided by the views set forth in the Restatement. Foster 947 F.2d at 477, comparing Jackson Jordan, Inc. v. Plasser American Corp., 747 F.2d 1567, 1575-78 (Fed.Cir.1984); People of State of California v. Federal Communications Comm’n, 905 F.2d 1217, 1245 n. 39 (9th Cir.1990); Robi v. Five Platters, Inc., 838 F.2d 318, 321 n. 2 (9th Cir.1988).

. Armour, 402 U.S. at 682, 91 S.Ct. at 1757. “Consent decrees are entered into by parties to a case after careful negotiation has produced agreement on their precise terms. The parties waive their right to litigate the issues involved in the case and thus save themselves the time, expense, and inevitable risk of litigation. Naturally, the agreement reached normally embodies a compromise; in exchange for the saving of cost and elimination of risk, the parties each give up something they might have won had they proceeded with litigation. Thus, the decree itself cannot be said to have a purpose; rather the parties have purposes, generally opposed to each other, and the resultant decree embodies as much of those opposing purposes as the respective parties have the bargaining power and skill to achieve. For these reasons, the scope of a consent decree must be discerned within its four comers, and not by reference to what might satisfy the purposes of one of the parties to it.” Id.

. The FDIC, when acting as the regulator or receiver of a failed bank, is a governmental entity. See Fed. Deposit Ins. Corp. v. Baker, 739 F.Supp. 1401, 1406-07 (C.D.Cal.1990) (declining to follow "proprietary” distinction in light of Congress’ enactment of FIRREA; granting motion to strike equitable estoppel affirmative defense against the FDIC to the extent that it assumed a duty owed by federal regulators); but see Fed. Deposit Ins. Corp. v. Harrison, 735 F.2d 408, 412 (11th Cir.1984), (holding that when the FDIC acts in its corporate capacily as receiver, its liability must be determined in the same fashion as that of a private party).

. United States v. Ruby, 588 F.2d 697, 703 (9th Cir.1978), cert. denied, 442 U.S. 917, 99 S.Ct. 2838, 61 L.Ed.2d 284 (1979); United States v. Browning, 630 F.2d 694, 702 (10th Cir.1980), cert. denied, 451 U.S. 988, 101 S.Ct. 2324, 68 L.Ed.2d 846 (1981).

. United States v. Shampang, 987 F.2d 1439, 1444 (9th Cir.1993); see also Ruby, 588 F.2d at 703-04 (noting that even if a movant proves all estoppel elements, including affirmative misconduct, the movant would also need to show that, on balance, the equities in favor of estopping the government outweigh those inherent equitable considerations which the government asserts as the "constitutional trustee on behalf of the people”).