Lehman v. Revolution Portfolio L.L.C.
166 F.3d 389 (1999)
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Rule of Law:
An administrative closing of a case is not a final judgment subject to the time limits of Fed. R. Civ. P. 60(b), and a court retains discretion to reopen it. Once a third party is properly impleaded under Fed. R. Civ. P. 14(a) on a colorable claim of derivative liability, additional independent claims may be joined against that third party under the permissive joinder rule of Fed. R. Civ. P. 18(a).
Facts:
- The Farm Street Trust, with beneficiaries Barry Lehman and Stuart A. Roffman, executed a $2,800,000 promissory note in favor of First Mutual Bank for Savings to purchase property.
- Both Lehman and Roffman personally guaranteed the note.
- Lehman also provided two parcels of his own real estate as additional collateral for the loan.
- The Trust subsequently defaulted on the loan.
- The Bank foreclosed on Lehman's collateral properties.
- Lehman claimed that Roffman had fraudulently introduced a sham investor to induce the Bank to make the loan and that the Bank failed to exercise due diligence.
Procedural Posture:
- Barry Lehman sued First Mutual Bank for Savings in a Massachusetts state court.
- After the Bank failed, the FDIC, as receiver, removed the action to the U.S. District Court and was substituted as the defendant.
- The FDIC was granted leave to file a third-party complaint against Stuart A. Roffman, seeking indemnification, contribution, and judgment on his personal guaranty.
- The FDIC moved for summary judgment on the guaranty claim, and Roffman moved to strike the third-party complaint.
- Following Lehman's bankruptcy filing, the district court issued a 'procedural order of dismissal,' administratively closing the case.
- Approximately three and a half years later, the district court reinstated the third-party complaint against Roffman.
- The district court denied Roffman's motion to strike, granted the FDIC's motion for summary judgment on the guaranty claim, and dismissed the remaining claims without prejudice.
- Roffman, as appellant, filed a notice of appeal to the U.S. Court of Appeals for the First Circuit.
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Issue:
Does a district court abuse its discretion by reinstating a case that was administratively closed years earlier and then allowing a third-party plaintiff to pursue an independent claim on a personal guaranty that was joined under Fed. R. Civ. P. 18(a) to proper third-party claims for indemnification and contribution under Fed. R. Civ. P. 14(a)?
Opinions:
Majority - Selya, Circuit Judge.
No. A district court does not abuse its discretion by reinstating an administratively closed case and permitting an independent claim joined to a proper impleader action. The district court's 'procedural order of dismissal' was merely an administrative closing to remove a dormant case from the active docket, not a final judgment. Therefore, it was not subject to the one-year time limit for relief from judgment under Fed. R. Civ. P. 60(b), and the court retained the discretion to reopen the case. The FDIC's impleader of Roffman under Fed. R. Civ. P. 14(a) was proper because it was based on colorable claims for indemnification and contribution, alleging Roffman's active fraud could make him derivatively liable for the Bank's alleged passive negligence. Because the Rule 14(a) claims were proper, the FDIC was permitted under the broad provisions of Fed. R. Civ. P. 18(a) to join its independent claim against Roffman for the outstanding loan balance based on his personal guaranty.
Analysis:
This decision provides important clarification on the distinction between an administrative closing and a final judgment, affirming that administrative closings are a docket management tool that do not terminate a court's jurisdiction over a case. The ruling reinforces the liberal standards for both impleader under Rule 14(a) and permissive joinder of claims under Rule 18(a). By endorsing the joinder of an independent claim to a derivative one, the court promotes judicial efficiency, allowing parties to resolve multiple disputes involving the same parties in a single action, thereby avoiding duplicative litigation.
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