United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued December 7, 2007 Decided February 1, 2008
No. 06-7179
RICHARD F. SMITH AND
MARINE CARRIERS (USA), INC.,
APPELLEES
v.
RAJ K. MALLICK,
APPELLANT
Appeal from the United States District Court
for the District of Columbia
(No. 96cv02211)
Kenneth J. Loewinger argued the cause for appellant. With
him on the briefs was Patricia B. Millerioux.
Joseph G. Cosby argued the cause for appellees. With him
on the brief was Thomas E. Patton.
Before: GINSBURG, Chief Judge, and ROGERS and BROWN,
Circuit Judges.
Opinion for the Court filed by Circuit Judge BROWN.
2
BROWN, Circuit Judge: Raj Mallick appeals the district
court’s denial of his motion for relief from judgment under Rule
60(b)(5) of the Federal Rules of Civil Procedure. He claims his
agreement with eDebt Management, Inc., to which Richard
Smith had assigned the judgment, discharged the judgment
against him. We agree and reverse the district court’s denial.1
I
After Mallick failed to make payments under a settlement
agreement with Smith and Marine Carriers (USA), Inc. (we refer
to both as “Smith”), Smith obtained a judgment against Mallick.
In 2002, Smith assigned all of his rights in that judgment to
eDebt for $5; eDebt agreed to collect from Mallick, returning
60% of any future recovery and keeping the rest. eDebt and its
lawyer, Lori Frank, notified Mallick of this assignment.
Roughly a year later, when Smith heard eDebt was no longer
trying to collect, Smith asked eDebt to reassign the judgment to
him—which it did on October 15, 2003. No one notified
Mallick or Frank.
Although eDebt’s president, T. Gordon Cranston or Gordon
C. Cranston,2 personally acknowledged the reassignment, Frank
continued to negotiate a settlement with Mallick. Before the
reassignment, Mallick had offered eDebt $20,000 and real
property he and his wife owned for a discharge of the judgment
against him. In November 2003, eDebt agreed to this, provided
Mallick acted with alacrity. Mallick immediately sent two
certified checks and a deed to Frank by overnight delivery; she
sent the money and a copy of the deed to eDebt, and forwarded
1
We dismiss as moot Smith’s motion to strike two pages of the
Appendix because we have not relied on them in deciding this appeal.
2
These names may have been aliases. See Appendix (App.) 20.
3
to Mallick a praecipe instructing the clerk of the district court to
“note [the] judgment as paid, satisfied and released.” App. 14.
On the line reserved for Smith’s signature was Cranston’s
signature and the notation “poa.” The scheme unraveled when
Smith heard about and objected to the arrangement. As the
lawyers for Mallick, Smith and eDebt tried to resolve the
miscommunication, eDebt and its president vanished.
Smith believes he is not bound by Mallick’s agreement with
eDebt because eDebt had no interest in the judgment at the time
it accepted Mallick’s offer. Mallick, naturally, disagrees; he
filed a motion for relief from the judgment—a motion the
district court denied.
II
We review the district court’s denial of a Rule 60(b) motion
for abuse of discretion unless its decision was based on a legal
error for which our review is de novo. Horowitz v. Peace Corps,
428 F.3d 271, 282 (D.C. Cir. 2005). We adopt District of
Columbia law in determining who prevails.3 See Makins v.
District of Columbia, 277 F.3d 544, 548 (D.C. Cir. 2002)
(“Aside from cases in which a settlement agreement is sought to
be enforced against the United States, or in which there is a
3
While the parties assume the District’s substantive law applies,
other states appear to have an interest in having their substantive law
applied. eDebt was a Colorado corporation, Smith appears to be a
New Jersey resident, and Marine Carriers is either a New York or New
Jersey corporation. However, neither party has argued that the
substantive law of another state should apply under Klaxon Co. v.
Stentor Electric Manufacturing Co., 313 U.S. 487 (1941), or under a
different federal conflicts-of-law rule. See UAW v. Hoosier Cardinal
Corp., 383 U.S. 696, 705 n.8 (1966). We thus assume the District’s
substantive law applies.
4
statute conferring lawmaking power on federal courts, we adopt
local law in determining whether a settlement agreement should
be enforced.” (internal citations omitted)).
“[T]hat [Mallick] may not have been aware that a reassign-
ment occurred,” the district court wrote, “cannot possibly mean
that an agreement with someone who no longer owned the debt
could possibly be effective.” Smith v. Mallick, No. 96-2211,
2006 WL 2193807, at *8 (D.D.C. Aug. 3, 2006). This may
seem intuitive, but the rule is exactly the opposite. Although a
valid assignment of a chose in action requires no notice to the
obligor, Hutchinson v. Brown, 8 App. D.C. 157 (D.C. Cir.
1896), the assignee takes it subject to all claims and defenses
that accrued before the obligor had notice of the assignment, see
Gen. Elec. Credit Corp. v. Sec. Bank of Wash., D.C., 244 A.2d
920, 923 (D.C. 1968); RESTATEMENT (SECOND) OF CONTRACTS
§§ 336, 338 (1981). The assignee could have protected his
rights by giving the obligor notice of the assignment; he was
after all in the best position to do so. See 9 ARTHUR LINTON
CORBIN, CORBIN ON CONTRACTS § 890, at 510 (interim ed.
2002). Accordingly, we reject Smith’s contention that eDebt
and Mallick’s agreement cannot bind him absent an agency
relationship between him and eDebt.
The district court’s failure to focus on the operative rule is
understandable. Mallick relied primarily on an agency theory,
which the record plainly refutes.4 And he relied on a provision
4
Mallick contends that eDebt had lingering authority to settle the
judgment on Smith’s behalf because he had no notice of the
reassignment. The lingering authority doctrine protects third parties
who reasonably assume that an agent’s actual authority is ongoing
until they have notice of circumstances that make it unreasonable to
so assume. RESTATEMENT (THIRD) OF AGENCY § 3.11 cmt. c (2006).
But correspondence between Mallick’s lawyer and eDebt’s lawyer
5
of Article 9 of the Uniform Commercial Code as enacted in the
District,5 which permits a debtor to pay the assignor until the
debtor receives notice of the assignment, see D.C. CODE § 28:9-
406(a) (2001). Under this provision the district court concluded
that Mallick may be entitled to a credit for his performance to
eDebt, but he took “an improper leap” by stretching this
provision to cover the “full and final release of his judgment.”
Smith, 2006 WL 2193807, at *8. Only in his opening brief in
this court does Mallick cite section 28:9-404(a)(2), which
reflects the rule on which this case turns.
Although Mallick did not alert the district court to the rule,
“it is best to excuse the forfeiture” here. See Mwani v. bin
Laden, 417 F.3d 1, 11 n.10 (D.C. Cir. 2005). “Federal courts are
entitled to apply the right body of law, whether the parties name
it or not.” Id. Moreover, Mallick identified the correct principle
by asserting that Smith is bound by Mallick’s agreement with
eDebt because Mallick concluded it before having notice of the
reassignment and citing section 28:9-406(a)—simply a different
expression of the operative rule. In any event, Mallick cited
section 28:9-404(a)(2) in his opening brief and correctly asserted
that it reflects the common law; meanwhile, Smith “failed to
indicates clearly that Mallick never assumed eDebt to be acting on
Smith’s behalf. See Letter from Kenneth J. Loewinger to Victoria J.
Targosz (Apr. 22, 2003), App. 5 (“As I understand it, this judgment
has been assigned and sold. Please advise who is the legal holder of
the judgment.”); Letter from Victoria L. Targosz to Kenneth J.
Loewinger (May 6, 2003), App. 6 (“Edebt Management, Inc. is now
the legal holder of the judgment. This ownership interest was taken
on August 23, 2002. Mr. Richard F. Smith transferred this judgment
by assignment.”).
5
Article 9 does not apply to the assignment of judgments. D.C
CODE § 28:9-109(d)(9). However, the provisions at issue here reflect
the common law.
6
object” and “thereby waived [his] right to complain.” See Nat’l
Fed’n of Fed. Employees v. Greenberg, 983 F.2d 286, 288 (D.C.
Cir. 1993).
III
Smith does not deny Mallick lacked notice of the reassign-
ment when eDebt accepted Mallick’s offer and agreed to
discharge the judgment against him. Nor does Smith claim
Mallick’s agreement is otherwise invalid. Under the agreement,
eDebt accepted real property neither eDebt nor Smith could
have obtained through foreclosure because Mallick held the
property jointly with his wife. For this reason, Mallick argues
the agreement is valid and discharges the judgment against him.
The district court properly rejected his characterization of
this transaction as an “accord and satisfaction” because the
judgment is liquidated. See Pierola v. Moschonas, 687 A.2d
942, 948 (D.C. 1997). Although Mallick’s label is wrong, his
argument is correct. “If an obligee accepts in satisfaction of the
obligor’s duty a performance offered by the obligor that differs
from what is due, the duty is discharged.” RESTATEMENT
(SECOND) OF CONTRACTS § 278(1); see also Interdonato v.
Interdonato, 521 A.2d 1124, 1134 (D.C. 1987) (“[A] release,
like any other contract, must be supported by sufficient consid-
eration, and the consideration is not sufficient unless the releasor
receives something of value to which he or she had no previous
right.”). Because neither eDebt nor Smith could have obtained
this property through foreclosure, Mallick gave performance
different from what was due, and eDebt’s acceptance discharged
the judgment against him.
We therefore reverse the order of the district court and
remand for further proceedings consistent with this opinion.
So ordered.