Weinstein et al v. Homesite Insurance Company of the Midwest et al
Filing
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MEMORANDUM AND OPINION as set forth in following order. Signed by Chief District Judge Thomas A Varlan on 2/4/14. (ABF)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT KNOXVILLE
BARBARA WEINSTEIN, individually,
JEFF WEINSTEIN, individually, and
as the spouse of Barbara Weinstein, and
on behalf of S.W., individually, and as
the minor child of Barbara Weinstein,
Petitioners,
v.
HOMESITE INSURANCE COMPANY
OF THE MIDWEST, and
JEFFERY ROBARDS,
Respondents.
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No.:
3:13-MC-25-TAV-CCS
MEMORANDUM OPINION
This miscellaneous action is before the Court on petitioners’ Petition and Motion
for Relief in Equity from a Judgment Pursuant to Federal Rule of Civil Procedure 60(b)
[Doc. 1] and the Motion to Dismiss filed by respondent Homesite Insurance Company of
the Midwest (“Homesite”) [Doc. 2]. Petitioners filed a response in opposition to this
motion [Doc. 5], and Homesite replied [Doc. 7]. Petitioners filed a sur-reply [Doc. 10],
and Homesite filed a supplemental brief in opposition to petitioners’ sur-reply [Doc. 11].
For the reasons set forth below, the Court will deny petitioners’ petition and motion for
relief and deny as moot Homesite’s motion to dismiss.
I.
Background
Petitioners are the plaintiffs in case number 1-298-13 in the Circuit Court for
Knox County, Tennessee (the “Knox County Lawsuit”), and Marcia L. Robards and
Jeffery L. Robards are the defendants in that action [Doc. 1 pp. 1–2]. Homesite is an
insurer of Jeffery Robards (“Robards”) and filed a declaratory judgment action in this
Court on August 27, 2013, in case number 3:13-CV-515 [Id. at 1]. In this declaratory
judgment action, Homesite requested that the Court declare that Homesite “has no duty to
defend or indemnify . . . Jeffery Robards for any injury allegation or claim” in the Knox
County Lawsuit [Id. at 2]. Before Robards filed an answer or responded to the complaint,
Homesite and Robards filed a stipulation of dismissal with prejudice as to Homesite’s
declaratory judgment action [Id.].1
The stipulation states that the matters in controversy between Homesite and
Robards were resolved for valuable consideration [Id. at 2–3]. But petitioners submit that
the stipulation of dismissal is an attempt to circumvent their rights in the Knox County
Lawsuit [Id.]. They argue that Homesite settled the action with Robards for less than its
potential indemnification obligation in the Knox County Lawsuit, largely because
Robards is proceeding pro se and is judgment proof, and thus shielded itself from any
indemnification obligations [Doc. 6 pp. 3, 5–6]. Petitioners believe this settlement and
the fact that Robards is judgment proof leaves them unable to obtain satisfaction of any
1
Because Jeffery Robards had yet to file an answer or motion for summary judgment
when the stipulation of dismissal was entered, this stipulation constituted a voluntary dismissal
for which court approval was unnecessary. Fed. R. Civ. P. 41(a)(1)(A)(ii).
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judgment against Robards in the Knox County Lawsuit [Doc. 1 p. 3]. Accordingly,
petitioners ask that the Court set aside the Stipulation of Dismissal entered on October
15, 2013, in case number 3:13-CV-515 pursuant to Federal Rule of Civil Procedure
60(b)(6) [Doc. 1 p. 2].
Homesite contends that petitioners lack standing to bring a Rule 60(b) motion
because they were not a party to the action between Homesite and Jeffery Robards and do
not fit within any of the exceptions conferring such standing upon nonparties [Doc. 3 pp.
3–5]. Petitioners counter that they do in fact have standing to pursue the sought relief
and note that they simultaneously filed a motion to intervene in the action between
Homesite and Robards [Doc. 6 pp. 2–7].
Homesite also submits that petitioners’
response to its motion to dismiss was not timely filed [Doc. 7 p. 2 n.1], but the Court
finds that petitioners filed their response within the twenty-four days permitted under the
circumstances by Federal Rule of Civil Procedure 6(d).2
II.
Standard of Review
“A voluntary dismissal with prejudice operates as a final adjudication on the
merits,” and “[i]n such a case, the plaintiff’s stipulation is the legally operative act of
dismissal and there is nothing left for the court to do.” Warfield v. AlliedSignal TBS
Holdings, Inc., 267 F.3d 538, 541–42 (6th Cir. 2001); see also Gardiner v. A.H. Robins
Co., Inc., 747 F.2d 1180, 1189 (8th Cir. 1984) (“Caselaw concerning stipulated
2
Petitioners were served with Homesite’s motion to dismiss in accordance with Federal
Rule of Civil Procedure 5(b)(2)(E), and therefore Rule 6(d) allowed three days in addition to the
twenty-one days permitted by Local Rule 7.1(a).
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dismissals under Rule 41(a)(1)(ii) is clear that the entry of such a stipulation of dismissal
is effective automatically and does not require judicial approval.”).3 In fact, a Rule
41(a)(1)(A)(ii) stipulation of dismissal “terminate[s] the district court’s jurisdiction
except for the limited purpose of reopening and setting aside the judgment of dismissal
within the scope allowed by Rule 60(b) of the Federal Rules of Civil Procedure.”
Hinsdale v. Farmers Nat. Bank & Trust Co., 823 F.2d 993, 995–96 (6th Cir. 1987)
(citations and internal quotation marks omitted).
To this end, “Rule 60(b) of the Federal Rules of Civil Procedure is a litigant’s
exclusive avenue when seeking relief from a judgment or order.” Computer Leasco, Inc.
v. NTP, Inc., 194 F. App’x 328, 334 (6th Cir. 2006). Seeking relief pursuant to Rule
60(b) through an independent action, as opposed to a motion, is permitted, but
“[i]ndependent actions must, if Rule 60(b) is to be interpreted as a coherent whole, be
reserved for those cases of ‘injustices which, in certain instances, are deemed sufficiently
gross to demand a departure’ from rigid adherence to the doctrine of res judicata.”
United States v. Beggerly, 524 U.S. 38, 46 (1998) (quoting Hazel–Atlas Glass Co. v.
Hartford–Empire Co., 322 U.S. 238, 244 (1944)). Put differently, “an independent action
should be available only to prevent a grave miscarriage of justice,” which is a
“demanding standard.” Id. at 47.
Federal Rule of Civil Procedure 60(b)(6) states: “On motion and just terms, the
court may relieve a party or its legal representative from a final judgment, order, or
3
Rule 41(a)(1)(ii) was the predecessor to current Rule 41(a)(1)(A)(ii).
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proceeding for . . . (6) any other reason that justifies relief.” The Sixth Circuit has
cautioned that “relief under Rule 60(b)(6) should be granted only in unusual and extreme
situations where principles of equity mandate relief,” GenCorp, Inc. v. Olin Corp., 477
F.3d 368, 373 (6th Cir. 2007) (citations and internal quotation marks omitted), and that
“60(b)(6) is to be used only in exceptional or extraordinary circumstances which are not
addressed by the first five numbered clauses of the Rule,” Fuller v. Quire, 916 F.2d 358,
360 (6th Cir. 1990) (citations and internal quotation marks omitted). This is because
“relief under Rule 60(b) is circumscribed by public policy favoring finality of judgments
and termination of litigation.” Blue Diamond Coal Co. v. Trustees of UMWA Combined
Ben. Fund, 249 F.3d 519, 524 (6th Cir. 2001) (citations and internal quotation marks
omitted).
III.
Analysis
A.
Nonparties Seeking Relief Under Rule 60(b)
By its terms, “a party or its legal representative” is entitled to seek relief under
Federal Rule of Civil Procedure 60(b). Petitioners are neither parties to case number
3:13-CV-515 nor the legal representatives of parties to that action. Therefore, petitioners
do not qualify for relief under the plain language of Rule 60(b). Bridgeport Music, Inc. v.
Smith, 714 F.3d 932, 940 (6th Cir. 2013).
Even so, a nonparty in privity with a party may move for Rule 60(b) relief. Id.
Yet, petitioners do not contend that they are in privity with Homesite or Robards.
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The Sixth Circuit has also held that “a claim of fraud on the court may be raised
by a non-party.” Southerland v. Irons, 628 F.2d 978, 980 (6th Cir. 1980). Fraud on the
court consists of “conduct: (1) On the part of an officer of the court; . . . (2) That is
directed to the “judicial machinery” itself; . . . (3) That is intentionally false, wil[l]fully
blind to the truth, or is in reckless disregard for the truth; . . . (4) That is a positive
averment or is concealment when one is under a duty to disclose; . . . (5) That deceives
the court.” Workman v. Bell, 245 F.3d 849, 852 (6th Cir. 2001). Petitioners “have the
burden of proving existence of fraud on the court by clear and convincing evidence.”
Johnson v. Bell, 605 F.3d 333, 339 (6th Cir. 2010).
In their petition for relief, petitioners allege that Homesite and Robards “appear to
have colluded for the purpose of either denying [petitioners] access to funds which may
be used to satisfy a potential judgment against Jeffery Robards or any other insured, or to
discourage the prosecution of the underlying tort lawsuit filed by [petitioners]” [Doc. 1 p.
3]. This conclusory allegation is insufficient to demonstrate fraud on the court by clear
and convincing evidence.
Though petitioners speculate that Homesite and Robards
colluded in order to defraud them, they present no specific evidence of such collusion or
any untruthful, fraudulent, or deceptive conduct on the part of Homesite or Robards.
A nonparty may also seek Rule 60(b) relief where “its interests were directly or
strongly affected by the judgment.” Bridgeport Music, Inc., 714 F.3d at 940 (citing
Grace v. Bank Leumi Trust Co., 443 F.3d 180, 188–89 (2d Cir. 2006); Binker v.
Pennsylvania, 977 F.2d 738, 745 (3d Cir. 1992); Dunlop v. Pan Am. World Airways, Inc.,
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672 F.2d 1044, 1051–52 (2d Cir. 1982); In re Lawrence, 293 F.3d 615, 627 n. 11 (2d Cir.
2002)). In Dunlop, the “[Rule 60(b)] movants were precluded from bringing an age
discrimination action because of a prior judgment to which they were not a party.”
Grace, 443 F.3d at 188. The Second Circuit stated that “on the facts of this case,” the
movants had standing to bring a Rule 60(b)(6) motion. Dunlop, 672 F.2d at 1052. In
Grace, the Second Circuit, carefully limiting its decision to the facts before it, held:
where plaintiffs enter into a settlement agreement with a judgmentproof, pro se defendant with the intent at the time of the settlement
to collect from a third party that allegedly received fraudulent
conveyances, and further, they attempt to use the judgment as a
predicate for a fraudulent conveyance action against the third party,
the third party is ‘strongly affected’ by the judgment and entitled to
standing to bring a Rule 60(b) motion.
Grace, 443 F.3d at 188 (quoting Lawrence, 293 F.3d at 627 n. 11).
In Bridgeport Music, Inc., the Sixth Circuit acknowledged these other-circuit
precedents in a case where a nonparty to a copyright lawsuit had requested that the
district court set aside a default judgment pursuant to Rule 60(b), alleging that she, not
the plaintiffs, legally owned the copyright at the time the lawsuit was commenced. 714
F.3d at 935. Referring to the “directly or strongly affected interest” exception, the Sixth
Circuit stated: “Even if we adopted such an exception, [the nonparty’s] motion would
clearly fail,” given that she “has not established that her renewal copyright interest is
‘strongly affected’ because she has not shown that she was prevented from litigating any
claims due to a previous judgment to which she was not a party.” Id. at 941.
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In the present matter, petitioners contend that they will be discouraged from
litigating the Knox County Lawsuit because of concerns that the settlement of the dispute
between Homesite and Robards “may preclude the Weinsteins from obtaining satisfaction
if a judgment is entered in their favor [in the Knox County Lawsuit]” [Doc. 1 p. 3]. This
reasoning is “indirect and speculative.” Flagstar Bank, FSB v. S. Star Capital, LLC, No.
13-10290, 2013 WL 5719176, at *5 (E.D. Mich. Oct. 21, 2013). Moreover, given the
Sixth Circuit’s current position on the “directly or strongly held interest” exception—the
court has not adopted the exception and in supposing it did so, has construed the
exception as providing Rule 60(b) standing to those who are prevented from litigating a
claim because of a prior judgment to which they were not a party—petitioners have not
demonstrated that they are entitled to Rule 60(b) standing. Petitioners are not prevented
in any way from litigating the Knox County Lawsuit against Robards and instead merely
speculate that if they prevail in that action, satisfaction of their judgment may be difficult
because they allege that Robards is judgment proof. Accordingly, even if the Sixth
Circuit were to adopt the “directly or strongly held interest” exception, petitioners have
not made a sufficient showing that they have Rule 60(b) standing under its auspices.
B.
Rule 60(b)(6) Relief Generally
Even assuming petitioners have standing to seek Rule 60(b)(6) relief, they have
not made a sufficient showing that they are entitled to such relief. As previously stated,
independent actions under Rule 60(b) “are available only to prevent a grave miscarriage
of justice,” Beggerly, 524 U.S. at 47, and more specifically, “[Rule] 60(b)(6) is to be used
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only in exceptional or extraordinary circumstances,” Fuller, 916 F.2d at 360.
Here,
petitioners allege that Homesite and Robards “appear to have colluded” to deny
petitioners access to funds in the event petitioners prevail in their state court action or to
discourage the prosecution of that action [Doc. 1 p. 3]. Yet, petitioners do not provide
specific evidence bolstering this allegation except that Robards is proceeding pro se and
is allegedly judgment proof. On this record, the Court cannot say that petitioners have set
forth the sort of extraordinary circumstances warranting the invocation of Rule 60(b)(6)
relief to prevent a grave miscarriage of justice. Therefore, even if the petitioners had
standing to bring this action, they would not be entitled to relief.
Finally, petitioners argue that “[i]f [Homesite’s] motion to dismiss is granted,
insurance companies will . . . have new incentive to improperly file declaratory judgment
actions against their insured[s] in an effort to settle the action[s] and obtain a release for
significantly less than the insurance company might be obligated to indemnify its
insured[s] for, if the insured[s] were to lose in an underlying tort action” [Doc. 6 p. 5].
Yet, countervailing policy considerations exist, as well. To this end, “relief under Rule
60(b) is circumscribed by public policy favoring finality of judgments and termination of
litigation.” Blue Diamond Coal Co., 249 F.3d at 524 (citations and internal quotation
marks omitted). “This is especially true in an application of subsection (6) of Rule 60(b),
which applies only in exceptional or extraordinary circumstances which are not addressed
by the first five numbered clauses of the Rule.” Id. (citations and internal quotation
marks omitted). Petitioners have failed to make such a showing, assuming that they have
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Rule 60(b) standing, and thus the Court finds that they have not overcome the policy in
favor of the finality of judgments and termination of litigation.
IV.
Conclusion
Accordingly, the Court will DENY petitioners’ Petition and Motion for Relief in
Equity from a Judgment Pursuant to Federal Rule of Civil Procedure 60(b) [Doc. 1] and
therefore DENY as moot the Motion to Dismiss filed by Homesite [Doc. 2].
ORDER ACCORDINGLY.
s/ Thomas A. Varlan
CHIEF UNITED STATES DISTRICT JUDGE
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