United States Court of Appeals
For the First Circuit
No. 00-2266
RUSSELL P. STOEHR,
Appellant,
v.
PRINCE MOHAMED BIN BANDER
MOHAMED BIN ABDUL RAHMAN AL SAUD,
Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Rya W. Zobel, U.S. District Judge]
Before
Boudin, Circuit Judge,
Bownes, Senior Circuit Judge,
and Lipez, Circuit Judge.
Arthur H. Goldsmith for appellant.
Mark S. Foss, with whom MacCarthy Pojani & Hurley, LLP were
on brief for appellee.
April 3, 2001
Per Curiam. Shortly after being found liable for
damages under Mass. Gen. Laws ch. 93A in the Massachusetts
Superior Court, debtor-appellant Russell Stoehr filed for
bankruptcy. The plaintiff in the superior court action,
appellee Prince Mohamed Bin Bander Mohamed Bin Abdul Rahman Al
Saud (“the Prince”), sought a declaration that the chapter 93A
judgment against Stoehr was non-dischargeable under 11 U.S.C. §
523(a)(2). Stoehr now appeals from the district court’s
affirmance of the bankruptcy court’s allowance of the Prince's
motion for summary judgment.
I. Background
In March, 1990, the Prince filed an action in the
Massachusetts Superior Court for conversion, fraud, and unfair
or deceptive acts in violation of Mass. Gen. Laws ch. 93A
against Stoehr and Fast Forward, Inc.1 The Prince alleged that
he entrusted four luxury automobiles to an individual named
Hilton Pereira so that the cars could be “federalized,” i.e.,
brought into conformity with United States safety and emissions
standards. Without the Prince’s knowledge, Pereira transferred
the cars to Stoehr and Fast Forward. Stoehr obtained
1
At all relevant times, Stoehr was an officer and director
of Fast Forward.
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counterfeit certificates of origin for the cars and sold two of
them to third parties.
The jury returned a verdict on the conversion claim
against Fast Forward and awarded the Prince $430,000 in damages.
The court reserved the chapter 93A claim for decision. On June
17, 1993, the court entered findings and judgment on the chapter
93A claim against Fast Forward and Stoehr, including double
damages in the amount of $860,000 and attorney's fees. In its
findings, the court described Stoehr's conduct as "fraudulent."
Stoehr appealed the chapter 93A judgment to the
Massachusetts Appeals Court, which affirmed the superior court.
Mohamed Bin Bander Mohamed Bin Abdul Rahman Al Saud v. Fast
Forward, Inc., 673 N.E.2d 568, 569 (Mass. App. Ct. 1996). After
additional state-court appeals, the judgment against Stoehr
remained in effect. Id., 682 N.E.2d 1363 (Mass. App. Ct. 1997).
On September 24, 1997, Stoehr filed a Chapter 7
bankruptcy petition in the bankruptcy court. On December 18,
1997, the Prince sought a declaration under 11 U.S.C. §
523(a)(2) that the superior court judgment against Stoehr was
non-dischargeable because it was obtained by "actual fraud."
The bankruptcy court allowed the Prince’s motion for summary
judgment on the ground that it was collaterally estopped from
rehearing the issue of Stoehr’s fraud, because that issue had
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been decided in the superior court's chapter 93A ruling. This
appeal followed.
II. Discussion
In an appeal from district court review of a bankruptcy
court order, this court independently reviews the bankruptcy
court's decision, ordinarily applying the "clearly erroneous"
standard to findings of fact and de novo review to conclusions
of law. Grella v. Salem Five Cent Sav. Bank, 42 F.3d 26, 30
(1st Cir. 1994) (citing In re SPM Mfg. Corp., 984 F.2d 1305,
1310-11 (1st Cir. 1993)). Since the bankruptcy court granted
summary judgment, however, our review here is de novo on all
issues.
Although bankruptcy proceedings are normally intended
to provide a debtor with a "fresh start" by discharging his or
her debts, 11 U.S.C. § 727, debtors who obtain money or property
fraudulently are not entitled to bankruptcy protection.
Palmacci v. Umpierrez, 121 F.3d 781, 786 (1st Cir. 1997). 11
U.S.C. § 523, "Exceptions to discharge," provides, in relevant
part:
(a) A discharge under section 727, 1141,
1228(a), 1228(b), or 1328(b) of this title
does not discharge an individual debtor from
any debt--
(2) for money, property, [or] services . . .
to the extent obtained by--
(A) false pretenses, a false representation,
or actual fraud . . .
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Here, the bankruptcy court held that because the superior court
had determined that Stoehr committed fraud, the issue could not
be relitigated and the Prince was entitled to summary judgment.
When there is an identity of the parties in subsequent
actions, the doctrine of collateral estoppel is properly applied
when: (1) the issue sought to be precluded is the same as that
involved in the prior action; (2) the issue was actually
litigated; (3) the issue was determined by a valid and binding
final judgment; and (4) the determination of the issue was
essential to the judgment.2 Grella, 42 F.3d at 30. "An issue
may be 'actually' decided even if it is not explicitly decided,
for it may have constituted, logically or practically, a
necessary component of the decision reached in the prior
litigation." Id. at 30-31 (citing Dennis v. Rhode Island Hosp.
Trust, 744 F.2d 893, 899 (1st Cir. 1984)).
Here, the bankruptcy court correctly determined that
these factors were satisfied. There is ample record support for
the conclusion that the superior court based its chapter 93A
judgment on Stoehr's fraudulent conduct. The superior court
included in its findings and conclusions the following
statements:
2
Stoehr appears to contest the existence of the first,
second and fourth factors.
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(1) that Fast Forward and Stoehr's conduct
included “fraudulent, knowing, intentional,
and unfair, if not criminal, deceptive acts
and practices”;
(2) that Fast Forward and Stoehr "used
counterfeit certificates [to accomplish] a
fraud on the purchasers of the vehicles and
on the plaintiff";
(3) that "defendant Stoehr knew that the
certificates of origin were counterfeit and
nonetheless used the certificates to
transfer title, intending to deprive the
true owner of his title and deceive the
purchasers who he understood would rely [on]
the forged documents; and
(4) that "defendant Stoehr, individually and
as president of [Fast Forward,] participated
in the fraudulent conduct that result[ed] in
the damages found by the jury . . . ."
These findings make clear that the issue of fraud was actually
litigated in the superior court, was a necessary component of
the court's judgment, and was the same as the issue adjudicated
in the section 523(a)(2) proceeding. See Grella, 42 F.3d at 30.
Stoehr contends that he did not actually litigate, nor
have the opportunity to litigate, the issue of fraud in the
superior court because it was not tried to the jury. Although
no common-law fraud claim was tried to the jury, the chapter 93A
judgment was premised on fraud. See Nickerson v. Matco Tools
Corp., 813 F.2d 529, 531 (1st Cir. 1987) (recognizing close
relationship between common-law fraud and unfair or deceptive
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practices under chapter 93A).3 Here, the superior court's
findings and conclusions under chapter 93A were based solely on
the evidence presented to the jury.
Stoehr also argues that fraud was not essential to the
chapter 93A judgment. He correctly points out that chapter 93A
violations and fraud are not synonymous, and that chapter 93A
liability may be premised on conduct other than fraud. The
superior court's findings, however, make clear that fraud was in
fact the basis for chapter 93A liability in this case, and do
not suggest any different theory of chapter 93A liability.
In sum, the Prince satisfied each of the elements of
collateral estoppel, and we affirm the district court's order of
summary judgment.
3 In addition to challenging the district court's ruling on
collateral estoppel grounds, Stoehr attacks the superior court
judgment based on the due process clause, the Seventh Amendment,
and overall procedural fairness. The district court correctly
held, however, that the proper venue for these arguments was the
Massachusetts courts of appeal, not the federal courts.
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