Goodwin et al v. Beckley

Filing 13

MEMORANDUM DECISION. The Court AFFIRMS the bankruptcy court's denial of Beckley's motion to alter or amend the judgment. Signed by Judge B. Lynn Winmill. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (st)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

In re:

Case No. 1:13-cv-00140-BLW

WAYNE N. BECKLEY and WENDY M.
BECKLEY,

MEMORANDUM DECISION

Debtors.
__________________________________
DALE GOODWIN, JOHN & NANCY
LINDBERG, and ANN WALCH,
Plaintiffs/Appellees,
v.
WAYNE NILES BECKLEY,
Defendant.
INTRODUCTION
Debtor Wayne Beckley, who is also a defendant in this adversary proceeding,
appeals from the bankruptcy court’s order denying his motion to alter or amend a
judgment. (Dkt. 9). The Court will affirm.
BACKGROUND
In August 2010, this Court entered a default judgment of approximately $426,000
against defendant Wayne Beckley and in favor of plaintiffs Dale Goodwin, John and
Nancy Lindberg, and Ann Walsh. Default Judgmt,. Case No. 1:09-cv-594-BLW, Dkt.

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32. In entering judgment the Court held that “Plaintiffs have prevailed on their claims of
breach of contract and fraud, . . . .” Id. at 2.
Roughly sixteen months later, in January 2012, Beckley filed a Chapter 7
bankruptcy petition. The plaintiffs in the earlier, district-court case commenced an
adversary proceeding in bankruptcy court to protect their default judgment. They
contended that the $426,000 judgment was non-dischargeable because Beckley had
engaged in fraud. See generally 11 U.S.C. § 523(a)(2)(A). The bankruptcy court agreed
and granted summary judgment in plaintiffs’ favor.
Beckley moved for relief from this judgment under Federal Rule of Civil
Procedure 59(e). The bankruptcy court denied the motion, which prompted this appeal.
STANDARD OF REVIEW
District courts review bankruptcy court decisions in the same manner as would the
Ninth Circuit. See In re George, 177 F.3d 885, 887 (9th Cir. 1999). The denial of a
motion under Rule 59(e) to alter or amend the judgment is reviewed for an abuse of
discretion. See Ta Chong Bank Ltd. v. Hitachi High Techs. Am. Inc., 610 F.3d 1063,
1066 (9th Cir. 2010).
A motion for reconsideration under Rule 59(e) “should not be granted, absent
highly unusual circumstances,” unless the district court is (1) presented with newly
discovered evidence, (2) committed clear error or made an initial decision that was
manifestly unjust, or (3) or if there is an intervening change in the controlling law. 389
Orange St. Partners v. Arnold, 179 F.3d 656, 665 (9th Cir.1999); see also United Nat'l
Ins. Co. v. Spectrum Worldwide, Inc., 555 F.3d 772, 780 (9th Cir. 2009). In moving to
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amend or alter the bankruptcy court’s judgment, Beckley alleged neither the discovery of
new evidence nor an intervening change in the controlling law. So the only question
before this Court is whether bankruptcy court committed clear error or made a manifestly
unjust decision when it denied the motion.
ANALYSIS
The bankruptcy court did not err when it denied Beckley’s Rule 59(e) motion.
On appeal, Beckley makes two arguments. Both are aimed at allowing him to
litigate plaintiffs’ fraud claim in bankruptcy court – despite the fact that plaintiffs already
have a default judgment against Beckley on that claim. Beckley first contends that the
bankruptcy court incorrectly relied on Idaho law (rather than federal law) in deciding that
the default judgment precluded him from re-litigating the fraud claim. 1 Beckley next
argues that the bankruptcy court compounded its error by misapplying Idaho law.
The Court rejected both of these arguments when it denied Beckley’s Request for
Certification to the Court of Appeals. See Aug. 6, 2013 Decision, Dkt. 11. In its earlier
ruling, the Court explained that federal common law applies to determine the preclusive
effect of a federal district-court’s judgment entered in a diversity action. See id. at 3
(relying on Taylor v. Sturgell, 553 U.S. 880, 891 (2008) and Semtek Int’l Inc. v. Lockheed
Martin Corp., 531 US 497, 508 (2001)). Federal common law, in turn, requires a court to

1

It is not entirely clear if Beckley is challenging the bankruptcy court’s ruling that Idaho’s claim
preclusion law applies. In his opening brief, Beckley said he “does not argue that the court’s
reasoning with regards to choice of law was flawed, . . . .” Opening Br., Dkt. 9, at 11. But on
reply, he said that the bankruptcy court “erred because it did not use the correct law to determine
its choice of law.” Reply, Dkt. 12, at 9. Regardless, as will be explained, the Court concludes
that the bankruptcy court’s ruling was correct on this point.
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apply Idaho law if an Idaho federal district court enters a judgment in a diversity action.
See id. Thus, the bankruptcy court correctly concluded that Idaho’s claim-preclusion law
applies.
This Court has also previously held that in Idaho, if a district court enters
judgment, “all issues which were or could have been litigated are precluded.” Id. (citing
Waller v. State Dept. of Health & Welfare, 192 P.3d 1058, 1062 (Idaho 2008) (“The
general rule is that once a judgment is entered it is res judicata with respect to all issues
which were or could have been litigated.”). Further, the Idaho Supreme Court has
explicitly held “absent fraud or collusion, the principle of res judicata applies equally in
cases of default judgment.” Waller, 192 P.3d at 1062. As a result, and as this Court has
already concluded, the bankruptcy court correctly held that Beckley could not re-litigate
plaintiffs’ fraud claim in bankruptcy court.
In his appellate briefs, Beckley argues that Idaho law is unjust. Among other
things, he says that “Idaho preclusion law is unnecessarily broad and has the power to
unfairly injustice those with default judgments against them.” Opening Br., Dkt. 9, at 11.
He also suggests that because federal and Idaho law differ, the bankruptcy court was not
necessarily bound by Idaho law. As Beckley put it, “The cloud th[at] hangs from Idaho
preclusion law does not exist in federal law. And because of that, a review on the facts
are not precluded by a default judgment.” Id. The Court is not persuaded. Nor is it
persuaded by Beckley’s attempt to distinguish governing Idaho law. See id. at 6-8. The
bankruptcy court was bound to follow Idaho law and it did.

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CONCLUSION
For all the foregoing reasons, the Court AFFIRMS the bankruptcy court’s denial
of Beckley’s motion to alter or amend the judgment.

DATED: October 28, 2013

_________________________
B. Lynn Winmill
Chief Judge
United States District Court

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