Hillbroom v. Lujan
Filing
177
DECISION and ORDER Denying Defendants Lujan and Israel's Motion for Judgment on the Pleadings re: 144 Motion for Judgment on the Pleadings. Signed by Chief Judge Ramona V. Manglona on 07/24/2015. (BTC)
FILED
Clerk
District Court
JUL 24 2015
for the Northern Mariana Islands
By________________________
(Deputy Clerk)
1
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN MARIANA ISLANDS
2
3
4
Case No. 1:10-cv-00009
In Re: Junior Larry Hillbroom Litigation
5
DECISION AND ORDER DENYING
DEFENDANTS LUJAN AND ISRAEL’S
MOTION FOR JUDGMENT ON THE
PLEADINGS
6
7
8
9
10
I.
11
Before the Court is a Motion for Judgment on the Pleadings (“Motion,” ECF No. 144) filed
12
13
INTRODUCTION
by Defendants David J. Lujan and Barry J. Israel (collectively “Defendants”). In support of the
14
Motion, defense counsel has submitted two sets of Cross-Defendant Keith Waibel’s responses to
15
interrogatories and one set of his responses to requests for production of documents (ECF No.
16
145), and has requested that the Court take judicial notice of 91 documents from the case of In the
17
Matter of the Estate of Larry Lee Hillblom, Superior Court of the Northern Mariana Islands, Case
18
19
20
21
22
No. 95-626 (Request for Judicial Notice, ECF No. 147).1 Plaintiff Junior Larry Hillbroom
(“Junior”) has filed an Opposition (No. 171) to the Motion, supported by two exhibits: Waibel’s
answer to the First Amended Complaint in Hillbroom v. Lujan et al., Case No. CV09-0841 ODW
(C.D. Cal.), and Judge David O. Carter’s Order Granting in Part and Denying in Part Motion to
23
24
1
The unopposed Request for Judicial Notice is hereby GRANTED.
1
1
Dismiss in the case at bar (ECF No. 34). Defendants have filed a Reply (ECF No. 172). The matter
2
came on for a hearing on May 8, 2015. Having considered the papers and the oral arguments of
3
counsel, the Court DENIES the Motion.
4
II.
5
6
7
8
9
BACKGROUND
The background of this case has been sketched in many prior decisions of this Court and
other courts, in litigation over the management of approximately $100 million in assets distributed
to Junior in the settlement of the estate of Larry Lee Hillblom, who died in 1995. It is unnecessary
to rehearse it here in any detail. Suffice it to say that in two Complaints,2 Junior alleges that in
10
2001 his lawyers, Defendants Israel and Lujan, together with Kieth Waibel, trustee of the Junior
11
Larry Hillbroom Trust (“JLH Trust”), conspired to wrongfully increase their contingency fee in
12
Junior’s recovery from the Hillblom estate from 38 percent to 56 percent, and thereby to drain the
13
14
trust of millions of dollars. It is alleged that the conspiracy was effectuated through fraud and
involved breaches of fiduciary duty to Junior and his guardians, especially his grandmother, Naoko
15
16
Imeong (“Naoko”).
III.
17
LEGAL STANDARD
18
On a motion for judgment on the pleadings under Rule 12(c) of the Federal Rules of Civil
19
Procedure, the court “must accept all factual allegations in the complaint as true and construe them
20
in the light most favorable to the non-moving party.” Fleming v. Pickard, 581 F.3d 922, 925 (9th
21
Cir. 2009). Judgment on the pleadings should be granted “when there is no issue of material fact
22
23
24
2
Junior filed suit separately against Lujan, in 1:10-cv-00009, and Israel, in 1:10-cv-00031. Subsequently,
the two cases were consolidated. The allegations relevant to this Motion are nearly identical in the two
Complaints. Paragraph references are to the Complaint (ECF No. 1) against Lujan.
2
1
in dispute, and the moving party is entitled to judgment as a matter of law.” Id. The legal analysis
2
is substantially the same as under Rule 12(b)(6), which requires the court to determine whether a
3
complaint states a plausible claim for relief. Chavez v. United States, 683 F.3d 1102, 1108 (9th
4
Cir. 2012). The Court’s review of a Rule 12(b)(6) or 12(c) motion is generally limited to the
5
contents of the complaint, but the Court may also consider documents attached to or incorporated
6
7
8
by reference in the complaint, or matters of judicial notice. United States v. Ritchie, 342 F.3d 903,
908 (9th Cir. 2003).
IV.
9
DISCUSSION
10
A.
11
Defendants assert that judgment should enter in their favor because the relief Junior is
12
seeking would require this Court to engage in improper appellate review of final orders of the
13
14
Arguments of the Parties
Guam Superior Court and exceed its authority by altering or vacating those orders. (Mot. 1.) In
their view, the exercise of subject matter jurisdiction by this Court would violate the Full Faith and
15
16
17
Credit Clause (article IV, section 1) of the U.S. Constitution and the so-called Rooker-Feldman
doctrine, which bars federal district courts from entertaining appeals of state court judgments. The
18
Guam court orders that Defendants allege Junior is collaterally attacking are: (1) a 1995 order
19
approving Junior’s grandmother as his guardian; (2) a 1998 order establishing a trust account for
20
interim payments to Junior; (3) a 1999 order approving the JLH Trust, with Waibel as trustee, and
21
22
23
24
payment of attorney fees and costs; (4) a 1999 order of a preliminary distribution from the Hillblom
estate to JLH Trust; (5) a 2000 order approving Waibel as Junior’s off-island guardian; (6) a 2001
order approving the 56 percent JLH Trust fee agreement; and (7) four 2001–2 orders approving
3
1
Waibel’s accounting. According to Defendants, Plaintiff is “improperly ask[ing] this Court to
2
vacate these Guam Court orders and readjudicate the propriety of the accountings, expenditures
3
and actions taken by the Protectors . . .” (Mot. 9.)
4
In response, Junior asserts he is not seeking to invalidate any orders other than the 2001
5
order approving the 56 percent fee. (Opp. 17.) As to that order, Junior notes that a federal court
6
7
8
9
has the power to set aside a state-court order that was obtained by extrinsic fraud, and asserts that
he has sufficiently pled extrinsic fraud. (Id.) Defendants deny that Junior has adequately pled
extrinsic fraud. (Reply 8.)
10
The Court agrees with Junior that the only Guam court order that is arguably under
11
collateral attack is the 2001 order approving the 56 percent fee agreement. If Junior wins this
12
lawsuit, that order alone will effectively be made a nullity. Junior is not seeking to roll back any
13
14
of the other orders.
B.
Full Faith and Credit
15
16
17
Under the Full Faith and Credit Act, any court within the United States must give “the same
full faith and credit” to any judicial act as that act has in the state, territory, or possession that
18
issued it. 28 U.S.C. § 1738. Under the doctrine of full faith and credit, a party is precluded from
19
relitigating claims and issues that were already decided in any U.S. court. This preclusive effect is
20
sometimes referred to as res judicata. Robi v. Five Platters, Inc., 838 F.2d 318, 321 (9th Cir. 1988).
21
22
23
24
Federal courts must “apply the res judicata rules of a particular state to judgments issued by courts
of that state.” Id. at 322. The Full Faith and Credit Act treats territories and possessions the same
as states. Therefore, Guam res judicata rules apply to determining whether this Court is precluded
4
1
from revisiting the 2001 order of the Guam court. Under Guam law, a claim is precluded only if
2
(1) there has been a “final judgment on the merits; (2) the party against whom claim preclusion is
3
asserted was a party or is in privity with a party in the prior suit; and (3) the issue decided in the
4
prior suit is identical with the issue presented in the later suit.” Presto v. Lizama, 2012 Guam 24 ¶
5
22.
6
7
8
9
Defendant Lujan has already raised res judicata as a defense against this lawsuit once
before, in a motion to dismiss (ECF No. 14). In its 2010 Order (ECF No. 34) denying in part and
granting in part the motion, the Court rejected that defense. Because the order was not a final
10
judgment on the merits, it does not have preclusive effect – a trial court may revise its decision “at
11
any time before the entry of” a final judgment. Fed. R. Civ. P. 54(b). As to Lujan, the instant
12
motion is an invitation for the Court to reconsider its prior ruling. C.A. Wright and A.R. Miller,
13
14
Federal Practice and Procedure § 4478.1 (2d ed.); United States v. Houser, 804 F.2d 565, 567 (9th
Cir. 1986).
15
16
17
An added twist is that the earlier ruling was made not by the undersigned but by a different
judge, Judge David O. Carter. Deference to a predecessor’s rulings may have the desirable effect
18
of deterring judge-shopping. Wright and Miller, Fed. Prac. And Proc. § 4478.1. At the same time,
19
a judge should no sooner hesitate to correct a predecessor’s clear error than she should refuse to
20
correct her own. See id. (“Self-correction is manifestly important if the alternative is the greater
21
22
23
delay and expense that would result from persisting in the error and eventual appellate reversal.”);
Gilbert v. Illinois State Bd. of Educ., 591 F.3d 896, 902 (7th Cir. 2010) (“The successor judge
24
5
1
should depart from the [prior] judge’s decision only if he has a conviction at once strong and
2
reasonable that the earlier ruling was wrong . . .”) (citation and internal quotation marks omitted).
3
Judge Carter pointed to two reasons that the Guam court’s approval of the 56 percent fee
4
5
6
7
8
9
10
11
12
13
14
15
16
17
does not preclude Junior’s claims:
First, [Junior] Hillbroom does not simply seek a re-adjudication of those fee
payments; his claims instead arise out of Lujan's alleged failure to apprise
Hillbroom of his request for an increased contingency fee award, as well as Lujan's
corresponding failure to faithfully represent Hillbroom's interests by knowingly
submitting baseless attorneys' fees calculations to the Guam Superior Court. The
Guam Superior Court did not resolve, or even purport to resolve, Hillbroom's
concerns about the quality of Lujan's representation. Second, and to the extent
Hillbroom challenges the attorneys' fees distributions approved by the Guam
Superior Court, the Complaint expressly alleges that the Guam Superior Court's
approval was induced by Lujan's fraudulent conduct, including but not limited to
(1) Lujan's omission of material facts in his ex parte argument to the Guam Superior
Court; (2) Lujan's failure to inform the Guam Superior Court about the fact that the
proposed retainer agreement had been backdated; and (3) Lujan's failure to inform
the Guam Superior Court that Waibel (Hillbroom's guardian and the trustee to the
JLH Trust) had been fraudulently induced to agree to the revised attorneys' fee
agreement. It is well-established that such allegations of extrinsic fraud act as an
exception to general rules of issue preclusion.
2010 Order 5 (citations omitted).
Judge Carter got it right. Junior’s claims of breach of fiduciary duty, fraud, and RICO
18
violations stand regardless of whether Defendants were entitled to a 56 percent fee – the claim
19
decided by the Guam court. That is to say, the issues the Guam court decided are not identical to
20
the issues in this lawsuit, and therefore the third prong of the res judicata test is not satisfied.
21
Moreover, res judicata may be avoided and an order set aside if the order was obtained by extrinsic
22
23
24
fraud. Kougasian v. TMSL, Inc., 359 F.3d 1136, 1141 (9th Cir. 2004) (“It has long been the law
that a plaintiff in federal court can seek to set aside a state court judgment obtained through
6
1
extrinsic fraud.”); E. & J. Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280, 1287 (9th Cir. 1992)
2
(under California probate law, where order of settlement “has been obtain by extrinsic fraud
3
perpetrated by the executor, the order can be set aside”). Defendants do not dispute this, but they
4
maintain that as a matter of law, extrinsic fraud has not been adequately pled. Extrinsic fraud is
5
“conduct which prevents a party from presenting his claim in court.” Wood v. McEwen, 644 F.2d
6
7
8
9
797, 801 (9th Cir. 1981); accord Trans Pacific Export Co. v. Oka Towers Corp., 2000 Guam 3 ¶
34. Junior has complained that Defendants concealed their self-dealing from him, fraudulently
induced his guardians to backdate the 56 percent retainer agreement, and submitted a report falsely
10
justifying the fee. Any of this conduct, if proved, would constitute extrinsic fraud. (Compl. ¶¶ 39–
11
47.)
12
13
14
Defendants’ arguments to the contrary (Reply 5–7) are unconvincing. First, they assert that
because at the time of the events in question Junior was a minor, he had no power to consent to
the retainer agreement and any fraudulent concealment from him would have no legal
15
16
17
consequence. Even if that were true, the complaint alleges that Defendants kept information not
only from Junior but also from Naoko. (Compl. ¶¶ 30, 44.) Second, they maintain that because the
18
Guam court approved the very payments that fraudulently (according to Junior) induced Naoko to
19
go along with the backdating, a finding in Junior’s favor would necessarily impute that the Guam
20
court itself was corrupt. That conclusion doesn’t follow from the premise. Undue influence on his
21
22
23
24
guardians would have deprived Junior of a full and fair “opportunity to present his case in court.”
Trans Pacific, 2000 Guam at ¶ 34 (citation omitted). Third, Defendants insist that because the
report Junior claims was false was reviewed by the Guam court, this action improperly seeks
7
1
appellate review of the Guam court’s order. But Junior has alleged that the falsified report
2
prevented him and his guardian Naoko from recognizing that the 56 percent fee was unjustified,
3
thus depriving her of an opportunity to appeal on those grounds. That’s extrinsic fraud.
4
For these reasons, after an independent review of the pleadings and moving papers, the
5
undersigned finds that Judge Carter’s ruling that res judicata does not bar Junior’s claims is well
6
7
8
9
supported and deserves to be followed. Defendants assert that their full faith and credit defense is
distinct from the preclusion claim that Judge Carter analyzed. Generally speaking, however, full
faith and credit merely extends the common law doctrine of res judicata so as to prevent claims
10
that have already been addressed in state court from being wastefully relitigated in federal court.
11
Riley v. New York Trust Co., 315 U.S. 343, 349 (1942) (“By the Constitutional provision for full
12
faith and credit, the local doctrines of res judicata . . . become a part of national jurisprudence . .
13
14
.”). Defendants have not articulated a theory as to how their full faith and credit defense differs
from res judicata. Therefore, the Court finds no basis in the Full Faith and Credit Clause to grant
15
16
17
Defendant’s motion for judgment on the pleadings.
C.
Rooker-Feldman Doctrine
18
Defendants assert that Junior’s federal lawsuit is barred because he is asking the district
19
court to overturn a state court judgment – the 2001 Guam order approving the 56 percent fee – in
20
violation of the jurisdictional limitation announced in Rooker v. Fidelity Trust Co., 263 U.S. 413
21
22
23
24
(1923), and District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983). The RookerFeldman doctrine “prohibits a federal district court from exercising subject matter jurisdiction over
a suit that is a de facto appeal from a state court judgment.” Kougasian, 359 F.3d at 1139. Its
8
1
operation is “confined to cases . . . brought by state-court losers complaining of injuries caused by
2
state-court judgments rendered before the district court proceedings commenced and inviting
3
district court review and rejection of those judgments.” Exxon Mobil Corp. v. Saudi basic
4
Industries Corp., 544 U.S. 280, 284 (2005). Rooker-Feldman “applies only when the federal
5
plaintiff both asserts as her injury legal error or errors by the state court and seeks as her remedy
6
relief from the state court judgment.” Kougasian, 359 F.3d at 1140 (original emphasis).
7
Rooker-Feldman does not bar this lawsuit, for two reasons. First, Junior is not a state-court
8
9
loser. In the Guam court in 2001, Junior was not Defendants’ adversary. Rather, in the Hillblom
10
probate and guardianship cases, Defendants were attorneys representing Junior’s interests. (See
11
Lujan Answer ¶ 4, ECF No. 36; Israel Answer ¶ 2, ECF No. 113.) The fact that Junior now feels
12
that Defendants “sold out [his] interests” and “connived at his defeat” (Compl. ¶ 39) does not turn
13
him into the losing party of a state-court contest.
14
Second, Junior does not seek to set aside the 2001 order based on legal errors by the Guam
15
16
17
court, but because of Defendants’ extrinsic fraud. “Extrinsic fraud on the court is, by definition,
not an error by that court. It is, rather, a wrongful act committed by the party or parties who
18
engaged in the fraud.” Kougasian, 359 F.3d at 1141. As explained earlier, Junior has sufficiently
19
alleged extrinsic fraud. Therefore, although this lawsuit may be a de facto appeal of the 2001 Guam
20
court order, it is not barred by the Rooker-Feldman doctrine.
21
22
23
24
//
//
//
9
1
V.
CONCLUSION
2
Because Junior’s claims are not precluded as res judicata, do not violate the Full Faith and
3
Credit Clause, and are not subject to the Rooker-Feldman doctrine, all of Defendants’ grounds for
4
judgment on the pleadings fail. Therefore, the motion (ECF No. 144) is DENIED.
5
6
SO ORDERED this 24th day of July, 2015.
7
_____________________________
RAMONA V. MANGLONA
Chief Judge
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
10
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?