Desjardins v. Van Buren Community Hospital

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

No. 93-1993

EUGENE DESJARDINS,

Plaintiff, Appellant,

v.

VAN BUREN COMMUNITY HOSPITAL,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MAINE

[Hon. Morton A. Brody, U.S. District Judge]

Before

Breyer,* Chief Judge,

Torruella and Boudin, Circuit Judges.

Paul F. Macri with whom Berman & Simmons, P.A. was on brief for

appellant.
June A. Jackson with whom Paul W. Chaiken and Rudman & Winchell

were on brief for appellee.

October 12, 1994

*Chief Judge Stephen Breyer heard oral argument in this matter, but
did not participate in the drafting or the issuance of the panel's
opinion. The remaining two panelists therefore issue this opinion
pursuant to 28 U.S.C. 46(d).

BOUDIN, Circuit Judge. In 1989, Eugene Desjardins

brought suit against Van Buren Community Hospital, Inc. ("the

Hospital"), a Maine Corporation, for federal and state claims

arising from Desjardins' discharge from the Hospital in 1988.

After trial, the jury found that the Hospital was liable

under Federal Rehabilitation Act of 1973, 29 U.S.C. 794 et

seq., two Maine statutes, and a pair of common-law counts

under Maine law. Desjardins was awarded almost $18,000 in

damages, $5,000 in "front pay," and substantial attorney's

fees.

The Hospital appealed to this court but during the

course of the appeal, the Hospital ceased operation for

financial reasons. Further, the Van Buren Hospital District

("the District"), a municipal entity authorized by Maine

statute to provide medical services in the Town of Van Buren,

Maine, filed for bankruptcy. The District, technically a

separate legal entity with taxation powers, owned the land,

building and equipment used by the Hospital. In the

bankruptcy pleadings, the District styled itself as "Van

Buren Hospital District, d/b/a Van Buren Community Hospital."

The District's chapter 11 petition was eventually

dismissed by the bankruptcy court on the ground that the

District was a government entity not entitled to chapter 11

protection. However, before the dismissal, the Hospital

-2-

secured a temporary stay of its own appeal in the Desjardins

case on the ground that the Hospital had filed for

bankruptcy; in fact, it was the District that had so filed

for bankruptcy. Ultimately, the stay was lifted and in July

1992, this court upheld judgment in favor of Desjardins.

Since the Hospital took the position that it was

virtually without assets, Desjardins requested a disclosure

hearing before the magistrate judge. The hearing was held in

December 1992. After hearing testimony, the magistrate judge

assigned the Hospital's checking-account balance and its

accounts receivable to Desjardins, but the magistrate judge

refused Desjardins' request to hold the District legally

responsible for the Hospital's debt to Desjardins. The

district court upheld the magistrate judge and also declined

to approve further discovery. Desjardins now appeals to this

court.

On appeal, Desjardins argues that several different

doctrines allow him to hold the District liable for the debts

of the Hospital. The magistrate judge rejected such an

attempt on two grounds: that the District was not a party to

the disclosure proceeding and, further, that in the original

action the claims against the Hospital had not been

separately asserted against the District, a distinct legal

entity. These threshold objections are not without force but

for various reasons we prefer to track the district court's

-3-

disposition, which addresses the merits of Desjardins'

attempts to impute liability to the District.

Desjardins' first claim on appeal is that the doctrine

of judicial estoppel prevented the District from denying that

it and the Hospital were one and the same. Judicial estoppel

may apply to bar a litigant from engaging in "intentional

self-contradiction . . . as a means of obtaining unfair

advantage . . . ." Patriot Cinemas, Inc. v. General Cinema

Corp., 834 F.2d 208, 212 (1st Cir. 1987) (quoting Scarano v.

Central R. Co., 203 F.2d 510, 513 (3rd Cir. 1953)). Here,

Desjardins says that the Hospital and District have been

engaged in such self-contradiction in three respects: at the

outset, the Hospital asserted a governmental immunity defense

applicable only to the District; the District's petition for

bankruptcy styled the District as "d/b/a Van Buren Community

Hospital" and listed Desjardins as a creditor; and the

Hospital requested and obtained a stay of its appeal from the

Desjardins verdict during the District's bankruptcy

proceedings.

Since the district court rejected this judicial estoppel

claim, the Hospital argues that the rejection should be

affirmed because not clearly erroneous. Desjardins responds

that judicial estoppel presents a matter of the law that

should be reviewed de novo. In reality, judicial estoppel is

not extrinsically a matter of fact or law; the issues that

-4-

arise may turn out to be ones of raw fact, abstract law, or

something in between, e.g., the application of a general

standard to a known set of facts. Here, fine distinctions

make no difference because we would affirm on the judicial

estoppel issue even if every aspect of it were open to de

novo review.

The phrases "self-contradiction" and "unfair advantage"

used in Patriot Cinemas are not self-executing. There are

many situations, especially at the outset of litigation,

where a party is free to assert a position from which it

later withdraws--or even to assert, in the alternative, two

inconsistent positions of its potential claims or defenses.

Of course, what is legitimate pleading in one context may be

negligent or even fraudulent in another. Lawyers and judges

are not beyond making the necessary distinctions.

Here, the relationship between the Hospital and the

District is surely one open to different interpretations and

susceptible to argument. We do not see any wrongful self-

contradiction, let alone unfair advantage, in the fact that

the Hospital initially asserted a governmental immunity

defense that was thereafter abandoned or that the District's

bankruptcy petition used a d/b/a reference to the Hospital

and mentioned Desjardins as a creditor, even though the

District now presumably rejects both these implications.

-5-

One could be more critical of the Hospital's request for

a stay of its own appeal because of the District's

bankruptcy. The request not only implied an identity of

entities but it also led a court to take action, namely, the

grant of a temporary stay. But again, there is no indication

of deliberate dishonesty by the Hospital nor has the

temporary stay been shown to have caused any serious

prejudice to judicial proceedings or the position of the

opposing party. Cf. Wang Laboratories, Inc. v. Applied

Computer Sciences, Inc., 958 F.2d 355, 358-59 (1st Cir.

1992). We do not think this is a proper case for estoppel.

Desjardins's next argument is that he should be allowed

to "pierce the corporate veil" to reach the District's

assets. Desjardins brought out that the District owned the

land, building and equipment of the Hospital; that the five

trustees of the District automatically became directors of

the Hospital (although not the only ones); and--based on the

testimony of one current trustee of the District--the

Hospital was the "operating entity" and the meetings of the

District trustees were only a "formality." "I guess I would

have to say", said the testifying trustee, "that we kind of

wear two hats."

This testimony shows a considerable overlap between the

two entities but hardly an identity so complete as to merge

automatically what are formally two different legal

-6-

organizations. That one entity holds property used by the

other is hardly unique, and obviously one who is a trustee

and a director wears "two hats." The reference to the

trustees' meetings as a "formality" might be sinister in some

contexts but here there is nothing surprising in the thought

that an operating hospital should be the busy organization

and that meetings of the titleholding District should be

routine. "Formality" is not quite the same as "subterfuge."

Equally important, Maine law requires something more

than overlap for an adversary of one corporation to pierce

the veil and reach another. Maine's highest court has said

that its courts "pierce the corporate veil only if the

corporate form is used fraudulently or illegally." LaBelle

v. Crepeau, 593 A.2d 653, 655 (Me. 1991). Maine courts may

also disregard separate corporate identities where separate

treatment would "justify a wrong", Bonnar-Vawter, Inc. v.

Johnson, 173 A.2d 141 (Me. 1961), or would defeat legislative

policy or statutory aims. See Brennan v. Saco Construction,

Inc., 381 A.2d 656, 662 (Me. 1978). But it is difficult to

see a "wrong" here, and no legislation is at issue.

Desjardins is in substance seeking to impose liabilities

of one entity on a closely related entity, the two of which

have close connections, including a number of common

directors, but is in other respects distinct. In Curtis v.

Lehigh Footwear, Inc., 516 A.2d 558 (Me. 1986), the former

-7-

employees of a bankrupt subsidiary company sued the parent

corporation for severance pay. Even though the subsidiary

parent shared several common directors, and corporate parents

can usually determine the ultimate direction of their

subsidiaries, the Maine court held that corporate entity

would not be disregarded in the absence of bad faith. There

is no showing of bad faith here.

Finally, Desjardins protested the district court's

treatment of possible further discovery. Desjardins reads a

comment of the district judge as precluding Desjardins from

engaging in any further discovery. The Hospital replies that

a law permits the debtor to be summoned for a new disclosure

hearing after six months, six months have passed since the

last hearing, and Desjardins is now free to subpoena the

Hospital again. The parties appear to agree that Desjardins

can now summon and interrogate the Hospital again as to its

assets.

Even with the aid of the district court decision and

three briefs, we are not able to tell what exactly remains of

the dispute between the parties as to further discovery.

Desjardins does say that he used the Maine procedures for the

post-judgment investigation, as permitted by Fed R. Civ. P.

69, but might now like to use Federal Rule methods; the

district judge did express some disagreement on this point.

But instead of pursuing this issue, Desjardins' reply brief

-8-

refers instead to the possibility of seeking discovery

against nonparties, as well as attachment, trustee process or

other liens.

We think that we do not have an adequately framed issue

before us on the discovery question. Desjardins' effort to

impose liability on the District or obtain its assets or

utilize its taxing authority has now been resolved. We think

that further discovery addressed to this issue is barred on

the ground that the matter has already been adjudicated. As

to Desjardins' use of any type of discovery for any other

purpose, we make no pronouncements and will address such

issues if and when presented by a specific controversy.

Affirmed.

-9-