Ungar v. Palestine Liberation Organization

United States Court of Appeals
For the First Circuit

No. 09-1778

EFRAT UNGAR ET AL.,

Plaintiffs, Appellees,

v.

THE PALESTINE LIBERATION ORGANIZATION ET AL.,

Defendants, Appellants.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF RHODE ISLAND

[Hon. Ronald R. Lagueux, U.S. District Judge]

Before

Lipez, Circuit Judge,
Souter,* Associate Justice,
and Selya, Circuit Judge.

Laura G. Ferguson, with whom Mark J. Rochon, Miller & Chevalier
Chartered, Deming E. Sherman, and Edwards Angell Palmer & Dodge LLP
were on brief, for appellants.
David J. Strachman, with whom McIntyre, Tate & Lynch was on
brief, for appellees.

March 25, 2010

*
Hon. David H. Souter, Associate Justice (Ret.) of the Supreme
Court of the United States, sitting by designation
 SELYA, Circuit Judge. This appeal turns on the question

of whether there is a categorical rule that a party whose strategic

choices lead to the entry of a default judgment is precluded as a

matter of law from later obtaining relief from that judgment under

Federal Rule of Civil Procedure 60(b)(6). The district court

thought that precedent required it to apply such a categorical bar

and, on that basis, it denied relief. Estates of Ungar v.

Palestinian Auth. (Ungar III), 613 F. Supp. 2d 219, 229, 231 (D.R.I.

2009). We conclude that no categorical bar applies. Accordingly,

we vacate the order appealed from and remand for reconsideration.

For present purposes, a brief synopsis of the factual and

procedural background will suffice. The reader who hungers for

greater detail may consult our previous opinion in this case. See

Ungar v. Palestine Liberation Org. (Ungar II), 402 F.3d 274 (1st

Cir. 2005).

This case began with a senseless double murder. Yaron

Ungar and his wife Efrat were gunned down by Hamas militants in

Israel during the year 1996. An Israeli criminal court convicted

the killers. On March 13, 2000, the Ungars' estates and heirs

brought suit against the Palestine Liberation Organization (PLO) and

the Palestinian Authority (PA) for damages under the Anti-Terrorism

Act (ATA), 18 U.S.C. §§ 2331-2338, which provides a cause of action

in favor of American nationals harmed by acts of international

terrorism. Id. § 2333. The plaintiffs alleged in substance that

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the defendants gave aid and support to Hamas, including aid and

support to the terrorist attack in which the Ungars were killed.1

The defendants neither answered the complaint nor

participated in discovery. Instead, at various times from 2000 to

2005 they interposed motions asserting non-merits-based defenses of

sovereign immunity, lack of jurisdiction, nonjusticiability, and the

like. As the defendants now concede, the decision to stonewall in

this fashion was a deliberate stratagem driven by the advice of

their then-counsel and their unwillingness to recognize the

authority of the federal courts.

The defendants' stratagem did not work. After

considerable skirmishing, the district court, adopting a magistrate

judge's report and recommendation, entered a default judgment

against them on July 12, 2004. See Estates of Ungar v. Palestinian

Auth. (Ungar I), 325 F. Supp. 2d 15, 69 (D.R.I. 2004). The amount

of the judgment exceeded $116,000,000.2 Id.

1
We refer generically to the plaintiffs without identifying
each of them. We note, however, that because Efrat Ungar was not
a citizen of the United States, her estate and heirs are no longer
parties. We use the term "defendants" to designate the PLO and the
PA, jointly and severally. Even though others were sued, these two
are the only defendants that matter now.
2
The PA and PLO are jointly and severally liable for the
damage award. However, each is liable to the plaintiffs for a
different amount of attorneys' fees. The court thus entered a
judgment of $116,421,048 against the PA and of $116,415,468 against
the PLO.

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 The defendants appealed but still did not deign to address

the merits; rather, they argued that they were entitled to a final

resolution of their sovereign immunity defense before a default

judgment could be entered. Ungar II, 402 F.3d at 292. We rejected

that argument. Id. at 294.

By 2007, however, times had changed. The PLO and the PA

had come under new leadership, and the new leaders desired to take

a different approach to litigation pending in the federal courts.

This decision affected a number of pending cases, including this one

(in which the judgment remains unsatisfied).

On December 28, 2007, the defendants, represented by new

lead counsel, moved in the district court under Rule 60(b)(6) to

vacate the default judgment. They posited that exceptional

circumstances justified this relief, mentioning among other things

their own political transformation; the large size of the judgment

(on which interest was accruing); the potential impact of further

collection efforts on the Israeli-Palestinian peace process; and the

delicate nature of this nation's foreign relations in the Middle

East. The defendants pledged that, if the judgment were set aside,

they would "litigate this matter fully and responsibly."

The district court denied the motion. Ungar III, 613 F.

Supp. 2d at 231. The court focused the lens of its inquiry on the

defendants' original decision to eschew participation in the defense

of the case on the merits, notwithstanding the magistrate judge's

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explicit warnings about the risks inherent in that course of action.

Id. at 230-31. This timely appeal ensued.

The assignment of error is two-tiered. First, the

defendants argue that the district court's deployment of a

categorical rule to deny their Rule 60(b)(6) motion was incorrect

as a matter of law. Second, they argue that refusing to grant Rule

60(b)(6) relief in these circumstances was an abuse of discretion.

The denial of a Rule 60(b)(6) motion is typically reviewed

for abuse of discretion. Teamsters, Chauffeurs, Warehousemen &

Helpers Union v. Superline Transp. Co., 953 F.2d 17, 19 (1st Cir.

1992). This standard is not monolithic: within it, embedded

findings of fact are reviewed for clear error, questions of law are

reviewed de novo, and judgment calls are subjected to classic abuse-

of-discretion review. R&G Mortg. Corp. v. FHLMC, 584 F.3d 1, 7-8

(1st Cir. 2009). To the extent that this appeal turns on the

existence vel non of a categorical rule, it poses a pure question

of law and, thus, engenders de novo review.

Rule 60(b) provides that, on motion and on such terms as

are just, a district court may relieve a party from a final

judgment. Fed. R. Civ. P. 60(b). The grounds for relief specified

in the rule are grouped into six subsections. Each of the first

five subsections describes a particular basis for relief from

judgment. Rule 60(b)(6), however, is a catch-all provision. In

terms, it authorizes the district court to grant relief from

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judgment for "any other reason that justifies relief." The decision

to grant or deny such relief is inherently equitable in nature. See

United States v. One Star Class Sloop Sailboat, 458 F.3d 16, 25-26

& n.10 (1st Cir. 2006); Teamsters, 953 F.2d at 19-20.

Although Rule 60(b)(6) applies to motions that seek to

relieve parties from judgments taken by default, a decision about

whether to vacate a default judgment involves a unique "blend of

centrifugal and centripetal forces." Teamsters, 953 F.2d at 19.

This is so because, in addition to the usual medley of factors that

influence the resolution of Rule 60(b) motions, granting or

withholding relief from a default judgment entails balancing the

importance of finality in litigation against the desirability of

deciding cases on the merits. See id. Such decisions tend to rest

on fact-specific considerations informed by the nature and

circumstances of the particular case. See Paul Revere Variable

Annuity Ins. Co. v. Zang, 248 F.3d 1, 5-6 (1st Cir. 2001).

A variety of factors can help an inquiring court to strike

the requisite balance. Such factors include the timing of the

request for relief, the extent of any prejudice to the opposing

party, the existence or non-existence of meritorious claims of

defense, and the presence or absence of exceptional circumstances.3

3
This list parallels the list of factors employed in
evaluating claims of good cause to vacate entries of default under
Rule 55(c). See, e.g., Coon v. Grenier, 867 F.2d 73, 76 (1st Cir.
1989). The primary difference is the greater ease with which
motions under Rule 55(c) are granted. See id.

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Teamsters, 953 F.2d at 20. This compendium is neither exclusive nor

rigidly applied. Id. Rather, the listed factors are incorporated

into a holistic appraisal of the circumstances. In a particular

case, that appraisal may — or may not — justify the extraordinary

remedy of vacatur. Paul Revere, 248 F.3d at 5.

Against this backdrop, we turn to the case at hand. In

denying relief to the defendants, the district court stated flatly

that "a litigant's strategic choice to default precludes a finding

of exceptional circumstances under Rule 60(b)(6)" and, thus,

precludes relief. Ungar III, 613 F. Supp. 2d at 229. Although the

court made a passing mention of potential prejudice, it did not

assess the mix of relevant factors but, rather, set aside factors

other than the defendants' strategic choice, labelling such other

factors "not determinative." Id. The decision, read as a whole,

leaves no doubt but that the court denied the Rule 60(b)(6) motion

on the basis that the defendants' willful default precluded relief

as a matter of law. See id. at 231.

Our law in this area has not been clear, and the ruling

of the able district judge misconceives it. We explain briefly.

Because Rule 60(b)(6) is a catch-all provision, its

contours are peculiarly malleable. See Paul Revere, 248 F.3d at 5.

Thus, hard-and-fast rules generally are not compatible with Rule

60(b)(6) determinations. Not surprisingly, then, a canvass of our

decided cases reveals that we have never laid down an explicit,

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broad-scale categorical rule concerning willful defaults in the Rule

60(b)(6) milieu.

To this point, our cases have been somewhat equivocal

about the existence of a categorical bar to vacatur under Rule

60(b)(6) when a party has willfully defaulted. A few cases suggest

that when a party makes such a free, calculated, and deliberate

choice, he must live with its consequences. See, e.g., Lubben v.

Selective Serv. Sys. Local Bd. No. 27, 453 F.2d 645, 651-52 (1st

Cir. 1972). But in those situations, the reason for requesting

vacatur boils down to a realization that, in hindsight, the movant's

initial strategic choice had proven improvident. Consequently,

principles of finality and repose carried the day. See, e.g., id.

at 651; see also Ackermann v. United States, 340 U.S. 193, 198

(1950).

Our later cases, however, have signaled a retreat from

absolutist language. These cases contemplate the possibility that

the "extraordinary circumstances" needed to obtain Rule 60(b)(6)

relief may arise, albeit in rare instances, even after a willful

default. Stating that this court "[o]rdinarily" will uphold a

refusal to vacate a default judgment entered against a willfully

defaulting party, Paul Revere, 248 F.3d at 6, clearly implies that

exceptions exist. See also Davis v. Hutchins, 321 F.3d 641, 646

(7th Cir. 2003) (qualifying a similar statement with the adverb

"[g]enerally").

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 We cannot predict the entire gamut of future factual

permutations that may occur, but we feel confident in saying that,

on occasion, it is possible that the equities may weigh in favor of

litigating a case on the merits even after a willful default. See

Wagstaff-EL v. Carlton Press Co., 913 F.2d 56, 57-58 (2d Cir. 1990)

(per curiam); see also Gonzalez v. Crosby, 545 U.S. 524, 529 (2005)

(acknowledging that finality "standing alone, is unpersuasive in the

interpretation of a provision [Rule 60(b)(6)] whose whole purpose

is to make an exception to finality"). We therefore conclude that

the flexible nature of Rule 60(b)(6) does not lend itself to a

categorical bar to relief in the face of a willful defaulter.

To be sure, there is an argument to be made for using a

categorical rule with respect to a narrow subset of Rule 60(b)(6)

motions. In Pioneer Investment Services Co. v. Brunswick

Associates, 507 U.S. 380 (1993), the Supreme Court wrote that "[t]o

justify relief under subsection (6) [of Rule 60(b)], a party must

show extraordinary circumstances suggesting that the party is

faultless in the delay." Id. at 393 (internal quotation marks

omitted). Taken in a vacuum, this statement might seem to support

the application of a categorical rule across the board in Rule

60(b)(6) cases.

The district court came to that conclusion. In doing so,

it relied in part on a First Circuit case which, like others,

reiterates the Pioneer Court's words. See Claremont Flock Corp. v.

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Alm, 281 F.3d 297, 299-300 (1st Cir. 2002) (dictum); see also

Blanchard v. Cortés-Molina, 453 F.3d 40, 44 (1st Cir. 2006)

(dictum). But these cases are readily distinguishable. Each of

them involved a situation in which a party attempted to cloak a Rule

60(b)(1) motion in the raiment of Rule 60(b)(6).4 See Blanchard,

453 F.3d at 43, 45; Claremont Flock, 281 F.3d at 300.

Rule 60(b)(1) contemplates the possibility of relief in

cases involving "mistake, inadvertence, surprise, or excusable

neglect." Fed. R. Civ. P. 60(b)(1). These cases most often recite

the Pioneer language simply as a means of illustrating a structural

defect in the movant's argument. See, e.g., Blanchard, 453 F.3d at

44-45; Claremont Flock, 281 F.3d at 299-300. Other times, a single

factor's weight is so predominant as to be dispositive, or the

reference is simply elegiac. See, e.g., Aguiar-Carrasquillo v.

Agosto-Alicea, 445 F.3d 19, 28-29 (1st Cir. 2006); Dávila-Alvarez

v. Escuela de Medicina Universidad Central del Caribe, 257 F.3d 58,

67 (1st Cir. 2001); Cotto v. United States, 993 F.2d 274, 280 (1st

Cir. 1993). Such a reference would be understandable, say, in the

case of a negligently defaulting party, who cannot employ Rule

60(b)(6) to obtain relief because "a motion under [Rule 60(b)(6)]

is appropriate only when none of the first five sections pertain,

4
The impetus for this masquerade is usually temporal. Rule
60(b)(1) is available only if a motion is made within one year
after the entry of the judgment. Fed. R. Civ. P. 60(c). Rule
60(b)(6) motions are timely so long as they are brought "within a
reasonable time" following entry of the judgment. Id.

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and section (6) may not be used as means to circumvent those five

preceding sections." Ahmed v. Rosenblatt, 118 F.3d 886, 891 n.9

(1st Cir. 1997); see, e.g., Claremont Flock, 281 F.3d at 300

(stating that a defendant cannot use Rule 60(b)(6) to obtain relief

on a ground that comes within Rule 60(b)(1)). Likewise, willfulness

(that is, the making of a deliberate strategic choice) is not a

ground for relief under Rule 60(b)(1) and, in fact, is directly

antagonistic to a claim premised on any of the grounds specified in

that subsection. Thus, these cases use the Pioneer language to set

up an appropriate roadblock: a categorical rule barring relief when

a party attempts to drive down the wrong avenue to obtain it. See

Teamsters, 953 F.2d at 20 n.3 (stating that the first five

subsections of Rule 60(b) are mutually exclusive of subsection six).

This case does not involve a claim of mistake,

inadvertence, surprise, or excusable neglect. It is the antithesis

of such a case: the defendants freely admit that the default

judgment resulted from their deliberate strategic choice. They have

not attempted to disguise their request for relief under Rule

60(b)(1) but, rather, brought the motion — properly — under Rule

60(b)(6).

The defendants say, however, that they have come to regard

their deliberate choice as misguided and that exceptional

circumstances warrant relieving them from the judgment upon such

terms as the court may deem just. They then recount, in

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considerable detail, why they say the circumstances are exceptional.

Given the nature of this motion, the district court's application

of a categorical rule was a per se abuse of discretion. See R&G

Mortg., 584 F.3d at 7-8 (stating that a material legal error is a

per se abuse of discretion).

Let us be perfectly clear. We do not mean to minimize the

gravity of a willful default in calibrating the Rule 60(b)(6)

balance. That factor weighs heavily. See, e.g., Paul Revere, 248

F.3d at 6 ("Ordinarily, the discretionary power granted by Rule

60(b)(6) is not for the purpose of relieving a party from [a] free,

calculated, and deliberate choice[] . . . ." (internal quotation

marks omitted)). But even for a willful defaulter, relief is not

categorically barred.5

In an effort to salvage the judgment, the plaintiffs argue

that a court need not do a mechanical, multi-factor analysis every

time a party seeks relief under Rule 60(b)(6). That is true: there

is no ironclad rule requiring an in-depth, multi-factored analysis

in every case. Sometimes one factor predominates to such an extent

that it inexorably dictates the result. See, e.g., Aguiar-

5
We do not in any way suggest that the flexibility of Rule
60(b)(6) somehow transmutes it into an easier road to relief for
willful defaulters than for those whose requests rest on different
circumstances. The opposite is true: a willful defaulter faces an
uphill climb in making the requisite showing of exceptional
circumstances. See Ahmed, 118 F.3d at 891. That climb is likely
to be steeper for the willful defaulter than, say, for a movant
alleging inadvertence or mistake.

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Carrasquillo, 445 F.3d at 28-29; Paul Revere, 248 F.3d at 6. Here,

however, there is a substantial dispute between the parties about

the incidence and weight of other, potentially relevant factors.

For their part, the plaintiffs insist that granting Rule

60(b)(6) relief at this late date would work undue prejudice; in

their view, the passage of time and the shifting political winds

have caused a loss of material evidence and witnesses. Moreover,

they maintain that the defendants have no viable defenses.

But the defendants tell a different tale. They blame

political extremism within the PLO and the PA for their earlier

decision to default. They insist that they have had a good-faith

change of heart and that they have legitimate, merit-based defenses

to the action. They also see the amount of the judgment as unlikely

to withstand adversarial testing. They vigorously dispute the

plaintiffs' claim that evidence and witnesses have been irreparably

compromised. They emphasize the special nature of the cause of

action, the uniqueness of the case, its political ramifications, and

its potential effect on international relations. Taken in the

ensemble, these justifications, in the defendants' view, add up to

exceptional circumstances.

Whether or not the defendants' arguments ultimately carry

the day, they are substantial. Indeed, several district courts,

presented with similar circumstances and similar arguments in other

ATA cases against these same defendants, have engaged in holistic

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analyses and granted relief from defaults or default judgments.

See, e.g., Gilmore v. Palestinian Interim Self-Gov't Auth., No. 01-

853, 2009 WL 5083402 (D.D.C. Dec. 28, 2009); Saperstein v.

Palestinian Auth., No. 04-20225, 2008 WL 4467535 (S.D. Fla. Sept.

29, 2008); Knox v. Palestine Liberation Org., 248 F.R.D. 420

(S.D.N.Y. 2008). But see Biton v. Palestinian Interim Self-Gov't

Auth., 252 F.R.D. 1 (D.D.C. 2008). While we caution against reading

too much into these decisions — after all, every case is apt to be

sui generis — they indicate that the defendants' asseverational

array deserves full-throated consideration.

As a fallback, the plaintiffs invite us to review the

record de novo and affirm the district court's order on the

alternative ground that the equities weigh in their favor. We

decline this invitation. Appellate and trial courts have different

institutional competencies. Here, the parties' competing proffers

must be sorted and weighed. The district court enjoys a long

familiarity with the case, and that court's factfinding capabilities

put it in a better position to construct the fact-specific balance

that Rule 60(b)(6) demands.

We need go no further. The district court did not analyze

the totality of the circumstances but, rather, focused on what it

improvidently believed to be a categorical bar to relief.

Concluding, as we do, that this categorical rule does not apply in

the circumstances of this case, we vacate the order appealed from

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and remand for further proceedings consistent with this opinion.

We take no view of the appropriate outcome.6

Vacated and remanded. All parties shall bear their own costs.

6
We do think it prudent to point out that, on remand, the
district court has a range of options. It may, for example, deny
the Rule 60(b)(6) motion, grant the motion outright, or grant it
upon conditions, which may include requiring a bond to ensure
payment of a future judgment, see, e.g., Knox, 248 F.R.D. at 433,
or requiring the payment of costs and expenses incurred by the
plaintiffs due to the defendants' original obstinacy, see, e.g.,
Coon v. Grenier, 867 F.2d 73, 79 (1st Cir. 1989).

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