Callon Petroleum Co. v. Frontier Insurance

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS December 3, 2003

FOR THE FIFTH CIRCUIT Charles R. Fulbruge III
_____________________ Clerk

No. 03-30057
_____________________

CALLON PETROLEUM COMPANY,
Plaintiff-Appellee,

versus

FRONTIER INSURANCE COMPANY,
Defendant-Appellant,

GREGORY V. SERIO, Superintendent
of Insurance for the State of
New York, as Rehabilitator of
defendant Frontier Insurance Company,
Appellant.

__________________________________________________________________

Appeal from the United States District Court
for the Eastern District of Louisiana

_________________________________________________________________

Before JOLLY and WIENER, Circuit Judges, and ROSENTHAL, District
Judge.*

E. GRADY JOLLY, Circuit Judge:

Callon Petroleum Company (“Callon”) brought this diversity

action against Frontier Insurance Company (“Frontier”) to collect

on a bond it had issued in Callon’s favor, and moved for summary

judgment. Frontier subsequently became represented by Gregory

Serio, the New York State Superintendent of Insurance as

rehabilitator (“Superintendent”), who failed to respond to the

*
District Judge of the Southern District of Texas, sitting by
designation.
motion, and the district court granted summary judgment. Over a

year later, the Superintendent, after three notices of the

judgment, moved to have the adverse summary judgment vacated under

Fed. R. Civ. P. 60(b). We hold that the judgment was not void, and

that the district court did not err in denying relief from the

judgment under Rule 60(b)(4). The crux of our reasoning in

affirming the denial of relief under Rule 60(b)(6) is simply that

the Superintendent offers no plausible excuse for ignoring the

judgment for some fourteen months. We therefore conclude that the

district court did not abuse its discretion and affirm its denial

of the Superintendent’s motion.

In December 1997, Callon entered into an agreement with Wood

Energy Company (“Wood”), in which Callon assigned its interest in

certain mineral leases to Wood. Under the agreement, Wood agreed

to plug and abandon the incident oil and gas wells, and to

guarantee its performance with a bond in Callon’s favor.

Subsequently, Frontier, as surety, issued a bond for $2.7 million

in Callon’s favor.

In August 2000, the Louisiana Commissioner of Conservation

demanded that Wood plug and abandon the wells. When Wood failed to

respond, the Commissioner demanded that Callon, as the wells’

owner, perform the work. In turn, Callon demanded that Frontier

comply with the Commissioner’s demand, or pay Callon the $2.7

million payable under the bond so Callon could perform the work

2
itself. Frontier neither tendered the penal sum nor performed the

work required.

On May 16, 2001, Callon filed suit, alleging that Frontier was

liable under the bond for the cost of plugging and abandoning the

wells, and otherwise complying with the Commissioner’s terms. On

July 9, Frontier answered the suit but raised no affirmative

defenses. On August 17, Callon filed a motion for summary

judgment, which was set for hearing on September 5.

On August 24, 2001, the Superintendent initiated delinquency

proceedings against Frontier in the Supreme Court of New York. On

August 27, that court entered an order to show cause (the “Order to

Show Cause”), which restrained Frontier, its officers, directors,

shareholders, members, trustees, agents, servants, employees,

policyholders, attorneys, managers, and all other persons from the

transaction of Frontier’s business or the waste or disposition of

its property, except as authorized by the Superintendent. The

Order also appointed the Superintendent as Frontier’s temporary

rehabilitator and authorized and directed him to take possession of

Frontier’s property and conduct its business. On September 4,

Frontier’s counsel provided the Order to Show Cause to Callon’s

counsel and filed it with the district court.

On September 5, in the absence of any opposing papers from

Frontier, the district court granted Callon’s motion for summary

judgment. It acknowledged the New York Order to Show Cause but did

not consider itself restrained by the Order because disposition of

3
the pending motion was not a transaction of Frontier’s business by

the restrained persons, as contemplated by that Order. The

district court subsequently entered a final judgment against

Frontier for $2.7 million.

On October 15, the New York Supreme (trial level) Court

entered an order of rehabilitation (“Rehabilitation Order”), making

the Superintendent’s appointment as rehabilitator of Frontier

permanent. In the Rehabilitation Order, the New York court

expressly enjoined all persons from prosecuting any actions against

Frontier or the Superintendent and from obtaining judgments or

making any levy against Frontier’s assets. The Superintendent did

not file the Rehabilitation Order with the district court until a

year later, when he filed it with his Rule 60(b) motion for relief.

As early as October 16, 2001, however, Callon had provided the

New York State Department of Insurance with a copy of the district

court’s final judgment. The accompanying letter stated that Callon

considered the judgment final and binding. Then again three months

later, in January 2002, Callon wrote another letter insisting on

the finality of the district court’s order, and demanding the sum

owed under the judgment. There was no response from the

Superintendent.

On September 5, 2002, a year after the district court granted

summary judgment, Callon moved in the New York rehabilitation

proceedings to have its claim against Frontier liquidated as a

matter of law and fixed at $2.7 million with interest. This action

4
finally prompted the Superintendent, on November 14, to file a Rule

60(b) motion for relief from judgment in the district court. The

Superintendent simultaneously filed a motion for stay or dismissal

without prejudice pending the outcome of the rehabilitation

proceedings. On December 12, after hearing argument, the district

court entered an order denying both of the Superintendent’s

motions. The Superintendent appeals.1

The Superintendent argues that the district court erred in

denying Rule 60(b) relief for two reasons. First, the

Superintendent contends that the judgment is void under Rule

60(b)(4) because the district court entered summary judgment after

Frontier’s delinquency proceedings had begun. Second, the

Superintendent argues that the extraordinary circumstances

surrounding the delinquency proceedings and the equities of the

case weigh in favor of vacating the judgment under Rule 60(b)(6) so

that Frontier may have its day in court. Each of these issues

1
Though the Superintendent’s notice of appeal designates both
a) his Rule 60(b) motion for relief and b) his motion for stay or
dismissal, we dismiss the appeal of the latter issue because the
Superintendent has failed to brief the issue and has thus abandoned
it. Dardar v. Lafourche Realty Co., 985 F.2d 824, 831 (5th Cir.
1993) (“Questions posed for appellate review but inadequately
briefed are considered abandoned.”); Fed. R. App. P. 28(a)(9)(A)
(requiring argument to contain “appellant’s contentions and the
reasons for them, with citations to the authorities and parts of
the record on which the appellant relies”).

5
involves a different standard of review and raises distinct legal

questions.2

We first look at whether the judgment is void under Rule

60(b)(4). This Court reviews a district court’s denial of a Rule

60(b)(4) motion to set aside a judgment de novo. Carter v. Fenner,

136 F.3d 1000, 1005 (5th Cir. 1998). We have recognized two

circumstances in which a judgment may be set aside under Rule

60(b)(4): 1) if the initial court lacked subject matter or

personal jurisdiction; and 2) if the district court acted in a

manner inconsistent with due process of law. Id. at 1006; see also

Jackson v. FIE Corp., 302 F.3d 515, 521-22 (5th Cir. 2002).3 We

take up both considerations in order.

The Superintendent contends that at the time of the district

court’s grant of summary judgment, jurisdiction over Callon’s claim

2
The relevant Rule 60(b) text provides:

On motion and upon such terms as are just, the
court may relieve a party or a party’s legal
representative from a final judgment, order,
or proceeding for the following reasons: . . .
(4) the judgment is void . . . or (6) any
other reason justifying relief from the
operation of the judgment.

Fed. R. Civ. P. 60.
3
Rule 60(b)(4) motions have no set time limit; in this
circuit, they need not even be made within a “reasonable time.”
Carter, 136 F.3d at 1006; New York Life Ins. Co. v. Brown, 84 F.3d
137, 142-43 (5th Cir. 1996).

6
had vested exclusively in the New York Supreme Court. That is, by

virtue of commencement of rehabilitation proceedings in the New

York state courts, the federal district court in Louisiana no

longer maintained jurisdiction over the action.

Callon correctly points out that because federal courts

regulate the scope of their own jurisdiction, a Rule 60(b)(4)

challenge to jurisdiction should be sustained only where there is

a “clear usurpation of power” or “total want of jurisdiction.”

Nemaizer v. Baker, 793 F.2d 58, 64-65 (2d Cir. 1986); see also

United States v. Tittjung, 235 F.3d 330, 335 (7th Cir. 2000) (“Only

when the jurisdictional error is ‘egregious’ will courts treat the

judgment as void.”). Here, the district court clearly had

diversity jurisdiction over the litigation between Callon and

Frontier; moreover, the jurisdictional error, if any, in entering

judgment after the Order to Show Cause does not appear to be

“egregious.”

The Superintendent argues, however, that insurance regulation

should be an exception to the general rule that state courts are

powerless to restrain federal courts sitting in diversity

jurisdiction4: “Congress has evinced a strong federal policy in

favor of deferring to state regulation of insolvent insurance

companies as reflected in the McCarran-Ferguson Act and the express

exclusion of insurance companies from the federal Bankruptcy Code.”

4
See, e.g., Donovan v. City of Dallas, 377 U.S. 408, 412-13
(1964).

7
Munich American Reinsurance Co. v. Crawford, 141 F.3d 585, 595 (5th

Cir. 1998) (emphasis added).5 He further points out that because

“insurance regulation has long been recognized as an area of

traditional state concern,” Gross v. Weingarten, 217 F.3d 208, 223

(4th Cir. 2000), federal courts routinely confront the conflict

between their exercise of federal jurisdiction and state laws

establishing exclusive claims proceedings for insurance

insolvencies.6 Federal courts normally manage this conflict by

exercising Burford abstention to avoid interfering with state

rehabilitation proceedings. Burford v. Sun Oil Co., 319 U.S. 315

(1943).7 Although Burford abstention is generally considered the

5
The McCarran-Ferguson Act, 15 U.S.C. §§ 1011, et seq. (West
2003), reads, in pertinent part: “No Act of Congress shall be
construed to invalidate, impair, or supersede any law enacted by
any State for the purpose of regulating the business of insurance
. . . unless such Act specifically relates to the business of
insurance”. 15 U.S.C. § 1012(b).
6
This problem also arises in situations involving courts of
different states. As relates to the present case, state
legislatures (including New York and Louisiana) adopted the Uniform
Insurers Liquidation Act (“UILA”) and established reciprocal
procedures for resolving claims against insolvent insurers. See
N.Y. Ins. Law §§ 7408, et seq.; La. Rev. Stat. Ann. §§ 22:757, et
seq. Obviously, state legislatures can withhold jurisdiction from
their own state courts but cannot control the jurisdiction of the
federal courts.
7
See, e.g., Clark v. Fitzgibbons, 105 F.3d 1049, 1051-52 (5th
Cir. 1997); Barnhardt Marine Ins., Inc. v. New England Int’l Surety
of Amer., Inc., 961 F.2d 529, 531-32 (5th Cir. 1992); Martin
Insurance Agency, Inc. v. Prudential Reinsurance Co., 910 F.2d 249,
255 (5th Cir. 1990); Gonzalez v. Media Elements, Inc., 946 F.2d 157
(1st Cir. 1991); Law Enforcement Insurance Co. v. Corcoran, 807
F.2d 38 (2d Cir. 1986); Lac D’Amiante du Quebec Ltee v. American
Home Assurance Co., 864 F.2d 1033 (3d Cir. 1988); Hartford Casualty
Insurance Co. v. Borg-Warner Corp., 913 F.2d 419 (7th Cir. 1990);

8
exception rather than the rule, the insurance insolvency context

presents the classic example of the doctrine’s goal of preventing

“needless conflict with state policy.” Burford, 319 U.S. at 327.

We can certainly agree that, had the Superintendent timely

moved the district court to dismiss or stay this action on Burford

grounds, it would have been proper, if not obligatory, for the

district court to have done so. However, these are not the facts

before us. In any event, it is clear that the district court had

diversity jurisdiction over the case; although federal courts

usually apply state law when exercising diversity jurisdiction,

they are not automatically stripped of subject matter jurisdiction

over claims asserted against an insurer undergoing state insolvency

or rehabilitation proceedings. See, e.g., Munich American, 141

F.3d at 595; Martin, 910 F.2d at 254.8

In sum, the law does not support the Superintendent’s argument

that the judgment in Callon’s favor is void. This is so because

Grimes v. Crown Life Insurance Co., 857 F.2d 699 (10th Cir. 1988).
8
Only one federal court has given traction to the
Superintendent’s argument that the New York rehabilitation
proceedings left the district court without jurisdiction to rule on
Callon’s summary judgment motion. In Insurance Affiliates, Inc. v.
O’Connor, the district court held that the UILA divested Colorado
courts of jurisdiction “to hear actions involving controverted
claims involving out-of-state insurers unless ancillary proceedings
have been commenced in Colorado.” 522 F. Supp. 703, 706 (D. Colo.
1981). But in Martin, we squarely refused to adopt that position
stating, “[a]lthough we agree with the district court that this
case should be dismissed, we do not think dismissal should be based
on lack of subject matter jurisdiction in federal courts.” 910
F.2d at 254-55 (concluding that dismissal under the Burford
abstention doctrine was more appropriate).

9
because the district court had jurisdiction at the time it entered

the judgment.

The Superintendent contends, in the alternative, that the

district court’s grant of summary judgment was inconsistent with

due process, and that for this reason the judgment is void. In

support of this argument, the Superintendent raises similar points

to those raised in connection with his contention that the district

court lacked jurisdiction. We also find them unpersuasive.

As noted earlier, Rule 60(b)(4) relief is warranted if a

district court’s actions are inconsistent with due process of law.

See Carter, 136 F.3d at 1006; New York Life, 84 F.3d at 143. If a

court has both subject matter and personal jurisdiction, however,

the “only inquiry is whether the district court acted in a manner

so inconsistent with due process as to render the judgment void.”

New York Life, 84 F.3d at 143. Such circumstances are rare because

due process in civil cases usually requires only proper notice and

service of process and a court of competent jurisdiction. Id.

“[P]rocedural irregularities during the course of a civil case,

even serious ones, will not subject the judgment to collateral

attack.” Id. (quoting Fehlhaber v. Fehlhaber, 681 F.2d 1015, 1027

(5th Cir. 1982)).

Here, Frontier -- and subsequently the Superintendent -- were

fully aware of the summary judgment proceedings and had a fully

adequate opportunity to be heard: Frontier was afforded the

10
opportunity to brief Callon’s summary judgment motion and to appear

at oral argument; and the Superintendent had notice that the

district court had entered judgment for over a year before he

finally acted. Thus, although the Superintendent may argue that he

had no opportunity to argue for a stay or dismissal based on the

Order to Show Cause before the judgment was entered, he

nevertheless had notice of the judgment and ample time to present

in a more timely manner his arguments for Rule 60(b) relief; yet he

failed to respond for some fourteen months. It seems to us that

these facts do not allow the Superintendent to hide his failings

behind the skirts of a due process argument.

Accordingly, we find no convincing support for the

Superintendent’s due process argument, and therefore hold that the

judgment of the district court was not void on due process grounds.

We turn finally to the question of whether the district court

erred in denying Frontier’s motion for relief from judgment under

Rule 60(b)(6) (“any other reason justifying relief”). We review

the denial of Rule 60(b)(6) relief under an abuse of discretion

standard. Carter, 136 F.3d at 1005.

The Superintendent advances a number of arguments to support

his contention that the district court abused its discretion when

it turned its back to his long delayed request for equitable

relief. First, he maintains that the circumstances surrounding

Frontier’s rehabilitation show that neither Frontier’s nor his

11
failure to respond to Callon’s summary judgment motion was

deliberate. The Superintendent contends that this failure occurred

because it was “practically impossible,” in the nine days between

his appointment as rehabilitator and the district court’s grant of

summary judgment, to determine whether immediate action was

required in the case, and that it was “all [he] could do” to notify

Frontier’s counsel of the injunction contained in the New York

order directing the cessation of transacting business on Frontier’s

behalf. His excuse that he would have acted except for the

heightened activity occurring at the particular time is

unconvincing when we consider that the Superintendent failed to act

for fourteen months.

Further, the Superintendent’s excuse is belied to a

significant extent by an unpublished opinion of a California

appellate court that involves these very rehabilitation

proceedings. Serio v. The Superior Court, Nos. G030164, 030165,

2002 WL 31794160 (Cal. App. Dec. 13, 2002). Serio indicates that

the Superintendent moved for a stay of California state court

proceedings shortly after Frontier’s rehabilitation proceedings

commenced in New York. There, the parties adverse to Frontier

filed summary judgment motions in September 2001, to which Frontier

filed opposition motions before the matter was set for hearing on

October 23. Id. at *1. After the New York court enjoined all

proceedings against Frontier (under the Rehabilitation Order), the

Superintendent quickly asked the California court for a stay under

12
the Uniform Insurers Liquidation Act. In other words, the

Superintendent took precisely the kind of action on behalf of

Frontier in California that he claims could not be taken here. Had

the Superintendent acted so expeditiously in our case, he may well

have secured a stay, or had a different case on appeal.

Second, the Superintendent gamely argues that his request for

Rule 60(b)(6) relief was timely and, moreover, that the

Rehabilitation Order left it unnecessary for further action to set

aside the final judgment. These contentions rely on the faulty

understanding of the UILA as making it unnecessary to move to set

aside the district court’s judgment given the UILA’s designation of

the New York court’s exclusive jurisdiction for settling all claims

against the insolvent insurer. As we explained earlier, state

court injunctions flowing from the UILA’s operation simply do not

strip the federal courts of jurisdiction.9 In addition, Callon’s

counsel sent two letters -- one dated October 16, 2001 and the

other dated January 22, 2002 -- referencing the judgment’s

finality. Yet the Superintendent did not act until November 14,

2002. The district court did not abuse its discretion in

determining that, to set aside the judgment it was necessary to

act, and that the Superintendent failed to do so in a reasonably

timely manner.10

9
See n.8 and discussion, supra.
10
See, e.g., Pioneer Inv. Servs. Co. v. Brunswick Assoc., 507
U.S. 380, 393 (1993) (“If a party is partly to blame for the delay,

13
In sum, because the Superintendent offers no plausible excuse

for ignoring the judgment of the district court -- a judgment of

which he was fully apprised -- for some fourteen months, we hold

that there was no abuse of discretion by the district court in

denying the Superintendent’s Rule 60(b)(6) motion.11

III

Accordingly, for the foregoing reasons, the judgment of the

district court is

AFFIRMED.

relief must be sought within one year under [Rule 60(b)(1)] and the
party’s neglect must be excusable.”); Claremont Flock Corp. v. Alm,
281 F.3d 297, 299 (1st Cir. 2002).
11
The Superintendent maintains that he has sufficient evidence
for a meritorious defense of fraudulent inducement that would
preclude summary judgment. Even if Frontier did not waive this
defense by failing to plead it in its answer to Callon’s complaint,
having a meritorious defense does not alone make a case for
reversing a district court’s Rule 60(b)(6) ruling on appeal. The
Superintendent also asserts that the equities of the case militate
in favor of Rule 60(b)(6) relief. In support, the Superintendent
repeats his argument that Frontier should be given a fair
opportunity to oppose Callon’s summary judgment motion. While this
argument would have carried some weight in a timely Rule 60 motion,
it does not support a finding of abuse of discretion in the light
of the fourteen-month delay.