In Re: Bolin & Co LLC

Filing 113

ORDER denying 70 Motion for Relief from Judgment. Signed by Judge Stefan R. Underhill on 9/24/2012. (Carter, J.)

UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
IN RE BOLIN & COMPANY, LLC
ROLAND CHORCHES, Trustee of the
Estate of Bolin & Company, LLC,
Plaintiff,

CIVIL ACTION NO.
3:08cv1793 (SRU)

v.
SALLY OGDEN,
Defendant.
RULING ON DEFENDANT'S MOTION FOR RELIEF FROM JUDGMENT
On September 27, 2010, this Court entered judgment, following a bench trial, against
defendant Sally Ogden ("Ogden") and in favor of plaintiff Ronald Chorches, trustee of the estate
of Bolin & Company, LLC ("Bolin"), in the amount of $226,000, having found Ogden liable for
tortious interference with Bolin's business relations. (doc. # 59). Thereafter, on September 21,
2011, Ogden filed a motion for relief from judgment pursuant to Federal Rule of Civil Procedure
60(b) (the "motion for relief") predicated on newly-discovered evidence that Bolin's former
bankruptcy trustee, Michael Daly, had been charged with embezzlement of debtor-funds and may
be in possession of some of Bolin's inventory. For the reasons that follow, Ogden's motion for
relief (doc. # 70) is DENIED. This ruling does not preclude Ogden from asserting a defense of
set-off in any action to correct the judgment.
I.

Background
On May 1, 2007, Daly, the former bankruptcy trustee for Bolin, filed an adversary

proceeding against Ogden in the United States Bankruptcy Court for the District of Connecticut
alleging various torts and objecting to Ogden's proof of claim in Bolin's bankruptcy case. On

November 24, 2008, the case was transferred to this Court. (doc. # 7). Daly later resigned as
trustee on July 27, 2009, and plaintiff Ronald Chorches ("the Trustee") was appointed in his
stead on July 28, 2009.
Following a bench trial, I found Ogden liable for tortious interference with Bolin's
business relations and concluded that her conduct prevented Bolin from conducting an orderly
liquidation of its inventory. See In re Bolin & Co., LLC, 437 B.R. 731, 757-58 (D. Conn. 2010).
Relying in part on Daly's testimony at trial, I calculated damages at $226,000, an amount equal to
Bolin's net asset value just prior to Ogden's tortious conduct, less the amount the Trustee had
previously raised or expected to raise by liquidating Bolin's assets. Id. at 762-66. Specifically, I
credited Daly's testimony in finding that:
Daly never considered selling the business as a whole instead of the individual
jewelry that Bolin owned. It was his opinion that Bolin did not own enough jewelry
to be a credible jewelry retailer in Greenwich, and lacked much goodwill after the
store's messy demise. Daly characterized the process of liquidating Bolin as “total
chaos.” The property that could be sold was disorganized and Bolin's records were
convoluted and incomplete. Furthermore, the value of the jewelry had sunk
considerably because of the delay between the bankruptcy and the eventual
liquidation. Jewelry buyers, in Daly's view, understood that the bankruptcy estate was
in duress and, therefore, Bolin would be forced to accept lower offers for its
inventory.
Id. at 749. Daly's testimony also helped establish that (1) the estate was able to liquidate a
portion of Bolin's inventory for approximately $88,0000; (2) the estate received $66,000 after
paying wholesalers' commissions; (3) the wholesalers held another $50,000 worth of jewelry to
be sold; and (4) a retailer agreed to buy or sell on consignment the remaining items for
approximately $24,000. Id. Based on Daly's testimony and other evidence in the record, I found
that the Trustee had already made or was likely to make a total sum of $140,000—an amount I

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rounded up in Ogden's favor. Id. at 762. Accordingly, I reduced Bolin's value by $140,000 to
arrive at the total damages figure of $226,000. Id. at 765.
Approximately ten months later, on July 12, 2011, Daly pleaded guilty to federal charges
of embezzlement of debtor-funds related to his work as trustee for the bankruptcy estate of
Lehman Brothers, Inc. See United States v. Daly, No. 3:11-cr-121 (AWT). During the course of
the government's investigation, the FBI executed a search warrant of Daly's office and found that
Daly was in possession of some of Bolin's jewelry. See Aff. of Christopher Cieplik, attached as
Ex. C. to Def.'s Mot. For Relief from J. (doc. # 71-3). As of September 17, 2010, the jewelry had
an appraised value of approximately $22,100. See id. In Daly's plea agreement, the government
indicated that it intended to introduce evidence of Daly's alleged conversion of Bolin's jewelry at
the sentencing hearing for consideration as "relevant conduct" under the Sentencing Guidelines.
Daly, however, denied that he committed any criminal wrongdoing while trustee to any
bankruptcy estate other than Lehman.
Daly was eventually sentenced to eighteen months' imprisonment, assessed a $15,000 fine,
and ordered to pay restitution in the amount of $11,100. See Tr. of Sentencing Proceedings, at 8791, attached as Ex. 3 to Def.'s Reply Mem. (doc. # 112-3). In determining Daly's sentence, Chief
Judge Alvin W. Thompson indicated that he "also considered the defendant's conduct with
respect to the Bolin estate" and concluded that the "only logical inference to me, from all the
evidence, is that [Daly] stole the property." Id. at 87.
On September 21, 2011, Ogden filed the instant motion for relief, arguing that the
judgment should be reopened because of Daly's criminal conduct and newly-discovered evidence
that Daly may be in possession of thousands of dollars worth of Bolin's inventory. (doc. # 70).
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II.

Discussion
Federal Rule of Civil Procedure 60(b) sets forth grounds for relief from a final judgment

or order, which are "addressed to the sound discretion of the district court." Mendell v. Gollust,
909 F.2d 724, 731 (2d Cir. 1990) (citation omitted). In pertinent part, Rule 60(b) permits courts
to grant such relief for the following reasons:
(2) newly discovered evidence that, with reasonable diligence, could not have been
discovered in time to move for a new trial under Rule 59(b);
(3) fraud (whether previously called intrinsic or extrinsic), misrepresentation, or
misconduct by an opposing party; . . . [or]
(6) any other reason that justifies relief.
Fed. R. Civ. P. 60(b)(2)-(3), (6). "Properly applied Rule 60(b) strikes a balance between serving
the ends of justice and preserving the finality of judgments." Nemaizer v. Baker, 793 F.2d 58, 61
(2d Cir. 1986). However, "[a] motion for relief from judgment is generally not favored and is
properly granted only upon a showing of exceptional circumstances." United States v. Int'l Bhd.
of Teamsters, 247 F.3d 370, 391 (2d Cir. 2001); accord Pichardo v. Ashcroft, 374 F.3d 46, 55 (2d
Cir. 2004). "Generally, courts require that the evidence in support of [a Rule 60(b) motion] be
highly convincing, that a party show good cause for the failure to act sooner, and that no undue
hardship be imposed on other parties." Kotlicky v. U.S. Fid. & Guar. Co., 817 F.2d 6, 9 (2d Cir.
1987) (internal quotation marks and citations omitted). "The burden of proof is on the party
seeking relief from judgment." Int'l Bhd. of Teamsters, 247 F.3d at 391.
Here, Ogden moves for relief pursuant to Rule 60(b)(2) and 60(b)(3). I divide my analysis
accordingly.

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A.

Newly-Discovered Evidence Under Rule 60(b)(2)

Rule 60(b)(2) permits relief from a judgment when a party comes forward with newlydiscovered evidence that, with reasonable diligence, could not have been discovered earlier. To
meet this "onerous" standard, the movant must establish that: (1) the newly-discovered evidence
was of facts in existence at the time of trial; (2) the movant was justifiably ignorant of the newlydiscovered evidence despite due diligence; (3) the evidence was both admissible and material,
meaning that it was of such importance that it probably would have changed the outcome of the
proceeding; and (4) the evidence was not merely cumulative or impeaching. Int'l Bhd. of
Teamsters, 247 F.3d at 392; Lorusso v. Borer, 260 Fed. App'x 355, 357 (2d Cir. 2008).
Here, Ogden's motion likely satisfies the first and second elements: (1) the facts
surrounding Daly's mishandling of Lehman's bankruptcy, and his possession of Bolin's jewelry,
existed at the time of trial; and (2) Ogden was justifiably ignorant of those facts. However,
Ogden's motion falls short on the remaining elements.
First, Ogden fails to show that evidence of Daly's embezzlement in an unrelated case, or
evidence that Bolin's jewelry was found in Daly's office, would materially affect the outcome of
the trial. Even taking into account Daly's misconduct at Lehman, and assuming Ogden's
accusations are true—i.e., that Daly stole $22,100 worth of Bolin's jewelry (because once a
crooked trustee, always a crooked trustee)—I see no reason to discredit the crucial aspects of
Daly's otherwise uncontradicted testimony: namely, that Ogden's conduct harmed Bolin and
precluded an orderly liquidation. After all, even a crook can testify credibly to Bolin's diminished
reputation in the community, the "chaos" that surrounded the process of locating buyers and
consignors for Bolin's inventory, and the distressed circumstances that forced Bolin to sell its
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assets at fire-sale prices. See In re Bolin & Co., LLC , 437 B.R. at 749. The veracity of that
testimony depends not on Daly's reputation or whether he can be trusted with other people's
money, but on his first-hand knowledge of the circumstances surrounding Bolin's demise. Thus,
none of Ogden's newly-discovered evidence would materially affect my conclusion that, based on
the totality of the evidence presented at trial, Ogden is liable to Bolin for tortious interference.
See Boule v. Hutton, 328 F.3d 84, 95 (2d Cir. 2003) (where newly-discovered evidence is not
material to the outcome of the proceeding, such evidence cannot warrant relief under Rule
60(b)(2)).
Second, Ogden fails to show that evidence of Daly's wrongdoing serves a purpose other
than merely to impeach Daly's credibility. At most, evidence of Daly's possible misappropriation
of $22,100 worth of Bolin's jewelry demonstrates that Ogden may be entitled to a set-off in the
total amount of damages assessed against her. Ogden, however, has offered no evidence on the
extent of Bolin's actual ownership interest in the jewelry or whether other parties may claim a
security or other interest in those same assets. Indeed, the evidence at trial demonstrated that
much of Bolin's inventory was held on consignment. But even if she had, such questions are more
properly addressed at a later stage—after the appellate process is complete and Bolin has sought
to collect on its judgment. Because nothing prevents Ogden from raising the issue of Daly's
misappropriation of Bolin's inventory—and her possible entitlement to a set-off—in a collateral
proceeding for correction of the judgment, there is no reason to vacate the judgment.
Accordingly, Ogden cannot meet her heavy burden to demonstrate that the proffered evidence
warrants relief under Rule 60(b)(2).

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B.

Fraud, Misrepresentation or Misconduct Under Rule 60(b)(3)

Rule 60(b)(3) permits relief from a final judgment on the basis of "fraud . . . ,
misrepresentation, or misconduct by an opposing party." Fed. R. Civ. P. 60(b)(3). However,
such relief "cannot be granted absent clear and convincing evidence of material
misrepresentations and cannot serve as an attempt to relitigate the merits" of the underlying
decision. Fleming v. N.Y. Univ., 865 F.2d 478, 484 (2d Cir. 1989); see also Liu v. Kinokuniya
Co., Ltd., 161 Fed. App'x 119, 119 (2d Cir. 2005) ("A party seeking vacatur under Rule 60(b)(3)
must establish the opposing party's fraud by clear and convincing evidence."). To prevail on a
Rule 60(b)(3) motion, the movant "must show that the conduct complained of prevented [her]
from fully and fairly presenting [her] case." State St. Bank & Trust Co. v. Inversiones Errazuriz
Limitada, 374 F.3d 158, 176 (2d Cir. 2004) (internal quotation marks and citation omitted).
Here, to the extent Ogden alleges that misrepresentations and/or misconduct occurred
during Daly's testimony at trial, Ogden's claim fails at the threshold. The plain text of Rule
60(b)(3) requires that the fraud, misrepresentation or misconduct be committed by an opposing
party. See Fed. R. Civ. P. 60(b)(3). At the time of his testimony at trial, however, Daly was no
longer Bolin's trustee and, therefore, not an "opposing party" as contemplated by Rule 60(b)(3).
See Lee v. Marvel Enterprises, Inc., 765 F. Supp. 2d 440, 450 (S.D.N.Y. 2011) (denying Rule
60(b)(3) motion because movant "was not a party to this action, and Rule 60(b)(3) deals with
'fraud, . . . misrepresentation, or misconduct by an opposing party'") (quoting Fed. R. Civ. P.
60(b)(3)); Perri v. Kelly, 2011 WL 5024299, at *1-2 (E.D.N.Y. Oct. 19, 2011) ("[P]laintiff is not
entitled to relief under this section because he has not alleged that an opposing party has
committed fraud or misconduct in connection with the judicial proceedings before this Court.")
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(emphasis added). Because Daly was merely a witness at trial, any alleged fraud or misconduct
during his testimony does not warrant relief from the judgment under Rule 60(b)(3).1 See
Rodriguez v. Mitchell, 252 F.3d 191, 201 (2d Cir. 2001) (noting that fraud committed by a witness
is not fraud by an "opposing party" for purposes of Rule 60(b)(3)); Thornton v. United States,
2009 WL 2871167, at * 3 n.2 (N.D.N.Y. Sept. 3, 2009) (same).2
Moreover, to the extent Ogden alleges that the misrepresentation or misconduct warranting
relief under Rule 60(b)(3) was Daly's misappropriation of Bolin's jewelry prior to his resignation

1

Even if Daly's testimony at trial could be attributed to an "opposing party," Ogden has
not identified, by clear and convincing evidence, any material aspect of Daly's testimony that was
knowingly false when made. See United States v. Mason, 2012 WL 1638124, at *1 (2d Cir. May
10, 2012) (stating that Rule 60(b)(3) relief "'cannot be granted absent clear and convincing
evidence of material misrepresentations'") (quoting Fleming, 865 F.2d at 484). Instead, Ogden
makes generalized accusations about Daly's credibility, and asks the Court to infer that Daly lied
on the stand based on his embezzlement conviction in the (unrelated) Lehman Brothers case.
However, Ogden fails to point to any specific material misrepresentation made by Daly, as
required under Rule 60(b)(3), or to explain how such information prevented her from fully and
fairly presenting her case. See Farb v. Baldwin Union Free School Dist., 2011 WL 6046491, at
*2 (E.D.N.Y. Dec. 5, 2011) (denying Rule 60(b)(3) relief where movant "allege[d] that plaintiffs
ha[d] committed fraud but offer[ed] nothing more than generalized conclusions to support his
claim"). Accordingly, Ogden cannot meet her burden under Rule 60(b)(3).
2

Ogden does not seek relief for "fraud on the court" pursuant to Federal Rule of Civil
Procedure 60(d)(3), a provision that clearly encompasses fraud by non-parties. See Fed. R. Civ.
P. 60(d)(3). But even if she did, her motion would be denied. The standard to prove "fraud on
the court" is extremely high, and relief under Rule 60(d) is "narrower in scope than that which is
sufficient for relief by timely motion [under 60(b)(3)]." Gleason v. Jandrucko, 860 F.2d 556,
558 (2d Cir. 1988). "'[F]raud upon the court' as distinguished from fraud on an adverse party is
limited to fraud which seriously affects the integrity of the normal process of adjudication." King
v. First Am. Investigations, Inc., 287 F.3d 91, 95 (2d Cir. 2002) (internal quotation omitted).
Thus, Rule 60(d)(3) embraces "only that species of fraud which does or attempts to, defile the
court itself, or is a fraud perpetrated by officers of the court so that the judicial machinery cannot
perform in the usual manner its impartial task of adjudging cases." Id. (internal quotation
omitted). "Examples of conduct that meet the definition of fraud upon the court include bribery
of a judge, jury tampering, or hiring an attorney for the sole purpose of improperly influencing
the judge." Stewart v. O'Neill, 2002 WL 1917888, at *2 (S.D.N.Y. Aug. 20, 2002) (citing United
States v. Buck, 281 F.3d 1336, 1342 (10th Cir. 2002)). Nothing of that type is alleged here.
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as trustee, Ogden has failed to make any showing that Daly's actions prevented her from fully and
fairly presenting her case. See State St. Bank & Trust Co., 374 F.3d at 176 ("To prevail on a Rule
60(b)(3) motion, a movant must show that the conduct complained of prevented the moving party
from fully and fairly presenting his case.") (internal quotation marks omitted). As noted above,
Daly's alleged theft of $22,100 worth of Bolin's inventory establishes, at most, Ogden's potential
entitlement to a set-off against the judgment. Because Bolin has yet to register its judgment and
initiate collection efforts, Ogden retains the right to assert a set-off claim in a separate proceeding.
Ogden's circumstances are not so exceptional to warrant the extraordinary remedy she seeks.
Accordingly, Ogden's motion for relief from the judgment under Rule 60(b)(3) must also be
denied.

III.

Conclusion
For the reasons stated above, the defendant's motion for relief (doc. # 70) is DENIED.

Ogden may file a separate action seeking a set-off, if any, against the judgment based on newlydiscovered evidence of Bolin jewelry in Daly's possession.
It is so ordered.
Dated at Bridgeport, Connecticut, this 24th day of September 2012.

/s/ Stefan R. Underhill
Stefan R. Underhill
United States District Judge

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