Court Opinion

ID: 153232
Source: CourtListenerOpinion
Date Created: 2010-08-14 03:33:56+00
Date Added: 2024-06-11T15:02:06.294267
License: Public Domain

PUBLISH

                       UNITED STATES COURT OF APPEALS
Filed 4/9/96
                               FOR THE TENTH CIRCUIT

 RICHARD D. LUEKER,
       Plaintiff - Appellee,                   No. 95-2056

       and

 CYNTHIA K. MORRIS, formerly known
 as Cynthia K. Boyle,

        Plaintiff,

 ROY W. BIDWELL, EILEEN
 BIDWELL, A. ROLFE BLACK,
 DOROTHY W. BLACK, VAUN T.
 FLOYD, NORMAN C. BARNHART,
 DONALD D. MARTIN, WILLA J.
 MARTIN, DANIEL E. BOYLE, JR., and
 PATRICIA A. BOYLE,

        Plaintiffs-Counter-Defendants,

       v.
 FIRST NATIONAL BANK OF BOSTON
 (Guernsey) LIMITED,
          Defendant - Appellant,

       and

 SUNWEST BANK OF
 ALBUQUERQUE, N.A.; UNITED NEW
 MEXICO BANK; FIRST SECURITY
 BANK, N.A.,

          Defendants-Counter-Claimants.

               APPEAL FROM THE UNITED STATES DISTRICT COURT
                      FOR THE DISTRICT OF NEW MEXICO
                           (D.C. No. CIV-94-232-JC)

Clark Varnell (John M. Eaves and John G. Baugh with him on the briefs), Eaves,
Bardacke & Baugh, P.A., Albuquerque, New Mexico, for Defendant - Appellant.

Bill Chappell, Jr. (Suzanne B. Kinney with him on the brief), Chappell & Barlow, P.A.,
Albuquerque, New Mexico, for Plaintiff - Appellee.

                            ____________________________

Before TACHA, McKAY, and JONES*, Circuit Judges.

                             ___________________________

McKAY, Circuit Judge.

                             ___________________________

      *
        The Honorable Nathaniel R. Jones, United States Court of Appeals for the Sixth
Circuit, sitting by designation.

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       Defendant First National Bank of Boston (Guernsey) Limited (hereinafter

“Guernsey”) appeals from the district court’s denial of its request for attorneys’ fees.

Guernsey sought attorneys’ fees pursuant to New Mexico law for dissolution of a

wrongfully obtained preliminary injunction. The district court refused this request,

because it believed that Guernsey had engaged in inequitable conduct. We hold,

however, that Guernsey is entitled to reasonable attorneys’ fees. Thus, we reverse and

remand for determination of a reasonable fee award.

       This case has its genesis in Plaintiff Richard Lueker’s attempt to force Lloyd’s of

London into litigation in a United States court. Mr. Lueker, a New Mexico resident,

began his relationship with Lloyd’s when he became a member of a Lloyd’s insurance

syndicate. In order to become a member, Lloyd’s required Mr. Lueker to provide security

from an approved source. Mr. Lueker obtained this security from Guernsey, a British

bank, in the form of two letters of credit in favor of Lloyd’s. In turn, Guernsey required

security from Mr. Lueker. Mr. Lueker provided Guernsey with two back-up letters of

credit issued on his account from Sunwest Bank of Albuquerque.

       After several years, Mr. Lueker came to believe that Lloyd’s had defrauded him.

Mr. Lueker’s agreement with Lloyd’s prevented him, however, from suing Lloyd’s in

New Mexico. Rather, a forum selection clause mandated that Mr. Lueker could only

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pursue legal action against Lloyd’s in the British court system. In response to this

dilemma, Mr. Lueker devised a scheme to force Lloyd’s to sue him in New Mexico.1 Mr.

Lueker believed that if he could prevent Sunwest from honoring its letters of credit to

Guernsey, Guernsey in turn would refuse to honor its letters of credit to Lloyd’s. Thus,

Lloyd’s recourse would be to sue Mr. Lueker in his home state. One other problem

existed: Mr. Lueker could not sue Guernsey in New Mexico because it was not subject to

personal jurisdiction in that state.

       Mr. Lueker attempted to solve this jurisdictional conundrum by suing Sunwest in

New Mexico state court. Despite seeking in his complaint to enjoin Sunwest from

honoring its letters of credit to Guernsey, Mr. Lueker did not name Guernsey as a party to

the lawsuit. Additionally, Mr. Lueker did not allege in his complaint that Guernsey had

committed any wrongdoing. Rather, he limited his allegations of wrongdoing to Lloyd’s.

Nevertheless, the state court entered a temporary restraining order against Sunwest,

ordering the bank not to honor its letters of credit to Guernsey. The court later converted

the TRO to a preliminary injunction.

       1
        Mr. Lueker admitted to this strategy in his state court complaint requesting
injunctive relief: “Enjoining Sunwest from disbursing under the Letters of Credit, will
require Lloyd’s to present any claims for payment from Plaintiff under its Membership
Agreement in a court of competent jurisdiction in the United States . . . .” Appellant’s
App. at 213.

                                             4
       After the preliminary injunction was entered, Mr. Lueker amended his complaint

to add Guernsey as a party-defendant. Guernsey then removed the case to federal district

court and moved for dismissal. The district court subsequently dismissed the case based

on lack of personal jurisdiction over Guernsey and based on Mr. Lueker’s failure to join

Lloyd’s as an indispensable party. The court dissolved the injunction as “improvidently

granted.” Taking advantage of New Mexico law which allows recovery of attorneys’ fees

in favor of a party who successfully dissolves a wrongful preliminary injunction,

Guernsey moved the district court for such an award. In response, Mr. Lueker argued that

Guernsey could not obtain attorneys’ fees because it was not a party against whom a

preliminary injunction had been issued. In considering the motion, the district court

simply assumed that Guernsey was a proper party for an award of attorneys’ fees. The

court denied the motion, however, because it believed that Guernsey had engaged in

inequitable conduct by not intervening in the original state court proceedings. Guernsey

appeals this decision. Thus, two issues are before us: (1) may Guernsey recover

attorneys’ fees although it was not the party enjoined?; and (2) did Guernsey engage in

inequitable conduct when it did not intervene in the state court proceedings?

       New Mexico generally does not allow a winning litigant to recover attorneys’ fees.

It recognizes an exception to this rule, however, where a party expends attorneys’ fees in

order to dissolve a wrongful injunction. Gregg v. Gardner, 388 P.2d 68, 77 (N.M. 1963).

                                             5
Specifically, a party may recover only “where a resolution of the principal or underlying

issues is in favor of the party enjoined and the injunction is found to be wrongful.”

Schultz v. Pascoe, 614 P.2d 1083 (N.M. 1980). Mr. Lueker asserts that Guernsey cannot

avail itself of this rule because no injunction was ever entered against it. We disagree.

First, although the injunction was entered originally against Sunwest, we point out that

Guernsey was eventually made a party-defendant to Mr. Lueker’s complaint requesting an

injunction. Second, we note that Guernsey had standing to ask for the dissolution of the

injunction. Under the circumstances of this case, we believe that a party with standing to

dissolve a wrongful injunction may also recover attorneys’ fees. New Mexico recognized

the wrongful injunction exception to the general rule on attorneys’ fees in order to prevent

abuse of the court’s extraordinary power to enter restraining orders and injunctions.

Webb v. Beal, 247 P. 840, 842 (1926). If a party such as Guernsey were unable to avail

itself of the attorneys’ fees rule, the policy goals expressed by the New Mexico Supreme

Court would be thwarted. We would be remiss if we allowed such a result through an

overly technical application of the rule. Standing ensures that Guernsey’s interests are

sufficiently implicated to allow it to vindicate the policy concerns of New Mexico’s

attorneys’ fees rule.

       Mr. Lueker also asserts that the underlying issues in this case have been resolved

against Guernsey. He cites to a case between Guernsey and Sunwest involving the

                                             6
Sunwest letters of credit in which the district court ruled in favor of Sunwest. Again, Mr.

Lueker’s argument misses the mark. In Schultz v. Pascoe, 614 P.2d 1083, 1084 (N.M.

1980), the New Mexico Supreme Court required the underlying issues to be resolved in

favor of the party seeking attorneys’ fees. The court introduced this requirement to

ascertain that the dissolved injunction was in fact wrongful. An injunction is wrongful

where “‘plaintiff had no just right either in the law or the facts to justify him in asking and

obtaining’” such a remedy. Id. at 1084 (citation omitted). According to the court, if a

plaintiff won on the underlying issues, then it could not be said that he had no right to ask

for an injunction. It is clear, however, that the Schultz court only considered whether the

injunction was wrongful as a substantive matter. In this case, Mr. Lueker had no right in

law or fact, as a procedural matter, to ask for an injunction. Lloyd’s was clearly an

indispensable party, and Guernsey, added to the lawsuit after the preliminary injunction

was issued, was not subject to personal jurisdiction. These two facts certainly came as no

surprise to Mr. Lueker. He should have known that his lawsuit would fail for these

reasons. Thus, the fact that Mr. Lueker may have been correct on the underlying

substantive issues does not alter the fact that the injunction was wrongful as a procedural

matter. Accordingly, we hold that Guernsey can invoke New Mexico’s rule allowing the

recovery of attorneys’ fees for the dissolution of a wrongful injunction.

       Finally, we address the issue whether Guernsey engaged in inequitable conduct

                                              7
when it failed to intervene in the state court proceedings before it had been named as a

party. Guernsey argues that, had it intervened, it would have subjected itself to personal

jurisdiction.2 This result, Guernsey argues, is exactly what Mr. Lueker intended. We

agree with Guernsey that its decision not to intervene was not inequitable conduct in light

of the circumstances of this case. By obtaining a wrongful injunction, Mr. Lueker hoped

to force Guernsey and Lloyd’s to litigate in New Mexico. Although Mr. Lueker is free to

attempt to force Lloyd’s to litigate in an American court, the fact remains that he

furthered his machinations by abusing the court’s power to issue injunctions. Thus,

Guernsey acted reasonably when it refused to capitulate to Mr. Lueker’s wrongful use of

the injunction. We hold that the district court abused its discretion when it found that

Guernsey acted inequitably. We remand to the district court for an award of reasonable

attorneys’ fees.

       REVERSED and REMANDED.

       2
        Under New Mexico law, a special appearance is made when counsel appears for
the sole purpose of objecting to the jurisdiction of the court. New Mexico ex rel. Valles
v. Brown, 639 P.2d 1181, 1185 (N.M. 1981). Failure to join an indispensable party,
however, is not a jurisdictional defect. C.E. Alexander & Sons, Inc. v. DEC Int’l, Inc.,
811 P.2d 899, 900 (N.M. 1991). Thus, Guernsey would have subjected itself to personal
jurisdiction had it sought to intervene and assert that Lloyd’s was an indispensable party.

                                             8
95-2056, Lueker v. First National Bank of Boston

TACHA, Circuit Judge, Dissenting

       New Mexico law allows a winning litigant to recover attorneys’ fees expended to

dissolve a wrongful injunction only when that litigant is the “party enjoined.” Schultz v.

Pascoe, 614 P.2d 1083 1084-5 (N.M. 1980). The injunction at issue in this case was issued

against Sunwest Bank of Albuquerque, not against defendant First National Bank of Boston

(Guernsey) Limited (“Guernsey”). Under a plain reading of New Mexico law, then,

Guernsey cannot recover attorneys’ fees because it was not the party enjoined. The majority

reasons that Guernsey may recover attorneys’ fees because it was made a party-defendant to

the action that gave rise to the injunction. Adding Guernsey to the complaint, however,

merely made Guernsey a party, not the enjoined party. The majority also construes this

interpretation of New Mexico law as an overly technical application of the rule at issue. But

interpreting “party enjoined” as the enjoined party, as opposed to any party involved in the

litigation, is not overly technical; it is instead a plain reading of New Mexico law. For that

reason, I respectfully dissent.

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