UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
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No. 94-11106
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ERGO SCIENCE, INC.,
Plaintiff-Appellee,
versus
DONN D. MARTIN, ET AL.,
Defendants,
ELITE THERAPEUTICS, INC.,
Defendant-Appellant.
versus
HOMER WEST, ET AL.,
Claimants-Appellees.
* * * * * * * * * * *
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No. 94-11107
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IN RE: Distribution of Funds Paid by Ergo
Science Incorporated Into Registry of
Court in No. 4:92-CV-917-A
ELITE THERAPEUTICS, INC.,
Appellant.
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Appeals from the United States District Court for the
Northern District of Texas
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January 26, 1996
Before WIENER, EMILIO M. GARZA and BENAVIDES, Circuit Judges.
BENAVIDES, Circuit Judge:
The central issue in this appeal is whether a district court
can rely upon statements made by counsel in open court disavowing
any interest in an interpleaded fund. Because as a matter of
federal civil procedure a district court can hold counsel to his
word, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
This controversy is rooted in a contract dispute between Ergo
Science Incorporated ("Ergo") and appellant Elite Therapeutics,
Inc. ("ETI"). Ergo holds the license for commercial development of
certain medical technologies for the treatment of obesity and
diabetes. ETI alleged that it purchased the right to sublicense
these technologies. Ergo denied this allegation contending that no
such sublicense existed. It is undisputed, however, that ETI paid
Ergo $1,050,000; these funds were raised by ETI from investors.
This appeal surrounds an interpleader action concerning these
funds.
In 1992, Ergo sued ETI and its president Donn Martin seeking
a declaratory judgment that no sublicense agreement existed. Ergo
later amended its complaint to include, inter alia, an interpleader
claim. Ergo alleged that it learned from certain investors that
ETI and Martin solicited the funds paid to Ergo by falsely stating
that ETI already had a sublicense for the technologies when in fact
the parties were merely negotiating. In the interpleader action,
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Ergo contended that some 500 individual investors, who were
defrauded by ETI, were third-party claimants to the fund.
On October 28, 1994, the district court conducted a hearing on
the interpleader claim. At this hearing, Ergo unequivocally waived
any interest in the $1,050,000 which it paid into the registry of
the court. Counsel for ETI, however, made conflicting statements
regarding the funds. Counsel repeatedly stated that the money
belonged to Ergo because of the alleged sublicense agreement. At
one point, counsel stated that if there was no contract, the money
belonged to ETI. However, after some discussion as to whether ETI
had filed a claim to the fund the court directly asked ETI:
If Ergo says I can give it to the investors, they wash
their hands of it. You say your clients wash their hands
of it, I give it to the investors. Then it's a matter of
me sitting down with the investors and trying to work out
a way to distribute it. Are we at that point?
Counsel for ETI answered: "Yes. That's fine with me, your Honor."
After this colloquy, the court discussed with counsel for the
investors-claimants possible procedures for pro rata relief.
Following this hearing, the district court ordered that Ergo,
Martin, and ETI "all disclaimed any claim to or interest in the
funds that Ergo has interpleaded into court in this action."
Furthermore, the court found that "Martin and ETI acknowledged that
they have made no claim to such funds; and, Ergo, Martin, and ETI
all agreed that the court can order that the proper claimants to
such funds are those parties to this action who . . . have asserted
in this action claims to such funds." In addition, the court
determined that "there is no just reason for delay in, and hereby
directs, entry of final judgment as to the rulings made by the
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court in this order." Simultaneously, the court issued a final
judgment that Ergo, ETI and Martin had no interest in the
interpleaded fund.
On December 21, 1994, ETI filed a Rule 60(b) motion for relief
from the judgment on the grounds that the district court was
mistaken when it concluded that ETI had waived all claims to the
funds. The district court concluded the motion was meritless
because, based upon the record of the hearing, ETI's counsel
relinquished any claim to the funds in open court. This appeal
ensued.
Prior to oral argument, Ergo and ETI settled their underlying
dispute. Likewise, ETI and the bulk of the investors-claimants
reached a settlement. However, one group of investors, the Barrett
group, did not settle; there remains an on-going dispute between
the Barrett investors and ETI. Consequently, this remaining
controversy breathes life into the arguments originally raised by
Ergo and the rest of the investors-claimants.
JURISDICTION
As a threshold matter, our jurisdiction to entertain this
appeal has been challenged on two grounds.1 Initially,
jurisdiction is challenged because ETI lacks standing since it
The jurisdictional issues were first raised by Ergo in a
motion to dismiss the appeal. We carried this motion to the
merits. The investors-claimants then adopted Ergo's argument by
reference. The Barrett group has in turn adopted the arguments
raised by the investors-claimants. Since Ergo has settled its
dispute with ETI, its motion to dismiss for lack of jurisdiction is
denied as moot. Nonetheless, we briefly address the jurisdictional
issues initially raised by Ergo and later adopted by the Barrett
group to determine our jurisdiction with respect to these remaining
appellees.
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disavowed any interest in the interpleaded funds. Secondly,
appellees contend that the district court's orders are
interlocutory. We reject both of these arguments.
As for standing, appellees rely on our recent opinion in Rohm
& Hass Texas, Inc. v. Ortiz Bros. Insulation, Inc., 32 F.3d 205,
209-12 (5th Cir. 1994). Rohm, however, is not controlling. In
Rohm, it was the plaintiff-stakeholder who sought to appeal. We
dismissed the appeal because the stakeholder had unequivocally
denied any interest in the fund, continued to disavow any interest
on appeal, and sought merely to prevent some possible future
indirect injury from the court's priority in distribution. The
situation presented here is quite different. This dispute involves
a potential claimant to the fund, not the stakeholder, and the very
issue on appeal is whether ETI has waived its interest in the
interpleaded funds or not. The district court's judgment decrees
that ETI has no interest or right to the interpleaded funds. ETI,
therefore, has standing to challenge this order because it is not
faced with a hypothetical or indirect injury as in Rohm, but a real
and immediate injury.
This court also has jurisdiction over the appeal because it
involves a final judgment under Federal Rule of Civil Procedure
54(b). This rule provides that:
When more than one claim for relief is presented . . . or
when multiple parties are involved, the court may direct
the entry of a final judgment as to one or more but fewer
than all of the claims or parties only upon an express
determination that there is no just reason for delay and
upon an express direction for the entry of judgment.
FED. R. CIV. P. 54(b). While as a general rule an order granting
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interpleader is interlocutory, such an order is appealable provided
the district court invokes Rule 54(b). See New Amsterdam Casualty
Co. v. United States, 272 F.2d 754, 756 (5th Cir. 1959); see also
Diamond Shamrock Oil & Gas Corp. v. Commissioner of Revenues, 422
F.2d 532, 534 (8th Cir. 1970); Guerin v. Guerin, 239 F.2d 909, 913
(9th Cir. 1956); Republic of China v. American Express Co., 190
F.2d 334, 338-39 (2d Cir. 1951).2
In its order, the district court disposed of one claim and one
party when it ordered that ETI had no interest in the interpleaded
funds. Furthermore, the district court complied with the Rule
54(b) requirements when it found no just reason for delay and
directed entry of a final judgment. Since the district court
complied with Rule 54(b) and the order granting interpleader
completely disposes of ETI's interest in the fund, this Court has
jurisdiction to consider the merits of the appeal.
DISAVOWAL OF INTEREST IN FUND
The essence of ETI's argument is that the statements made by
counsel do not rise to the level of a "waiver" of an interest in
the interpleaded funds.3 ETI contends that its conditional
The commentators concur. See 7 CHARLES A. WRIGHT ET AL., FEDERAL
PRACTICE AND PROCEDURE § 1720, at 651-52 (1986) ("But because [a
decision granting interpleader] leaves the claims to the stake
before the court and prevents the entry of a final judgment
embracing the entire action, the interpleader order is now
considered nonappealable, unless the court is willing to direct the
entry of a partial judgment under Rule 54(b).") (emphasis added);
3A JAMES W. MOORE, MOORE'S FEDERAL PRACTICE ¶ 22.14[6], at 22-148—22-149
(1995) ("Also interlocutory, in the absence of a Rule 54(b)
determination, is an order granting interpleader . . . .") (first
emphasis added).
ETI also contends that the district court implicitly and
erroneously held that ETI was required to file a third-party claim
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statements do not meet the standard of waiver under Texas law
because the concession does not amount to an intentional
relinquishment of a known right. See First Interstate Bank v.
Interfund Corp., 924 F.2d 588, 595 (5th Cir. 1991) (describing
Texas waiver law). Furthermore, because the district court failed
to apply Texas waiver law, ETI posits that we must apply a de novo
review.4 We believe, however, that the issue is more one of
estoppel rather than relinquishment of a known right.
Properly framed, the issue presented in this case is not one
of application of Texas waiver law. Rather, the question is one of
procedure in the federal courts: Can a federal district judge rely
upon statements made by counsel in open court renouncing a specific
claim? This question does not implicate Texas waiver law at all,
but strikes at the very core of protecting the integrity of the
judicial process and the discretion of the district court.
Viewed in this light, the issue is more akin to judicial
estoppel.5 The doctrine of judicial estoppel prevents a party from
to the interpleaded fund. ETI contends that since it was not named
by Ergo as a third-party claimant, the district court's scheduling
order requiring claims to be filed within a specific time period
did not apply to it. However, based upon the district court's
order denying ETI's Rule 60(b) motion, it is clear that the court
relied on ETI's open-court renunciation of any interest in the
fund, not its failure to file a claim.
4
ETI does not contend, and indeed would be hard-pressed to
contend, that its counsel lacked the authority to waive its
interest in the interpleaded funds at the pretrial hearing. See
FED. R. CIV. P. 16(c) ("At least one of the attorneys for each party
participating in any conference before trial shall have authority
to enter into stipulations and to make admissions regarding all
matters that the participants may reasonably anticipate may be
discussed.").
We note that Texas law also embraces the doctrine of judicial
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asserting a position in a legal proceeding that is contrary to a
position previously taken in the same or some earlier proceeding.
United States v. McCaskey, 9 F.3d 368, 378 (5th Cir. 1993), cert.
denied, 114 S. Ct. 1565 (1994). We recognize the applicability of
this doctrine in this circuit because of its laudable policy goals.
The doctrine prevents internal inconsistency, precludes litigants
from "playing fast and loose" with the courts, and prohibits
parties from deliberately changing positions based upon the
exigencies of the moment. Id.
In this case, ETI's counsel made statements at a pretrial
hearing that disclaim any interest in the interpleaded funds. A
similar situation was presented in Veillon v. Exploration Servs.,
Inc., 876 F.2d 1197, 1199-1201 (5th Cir. 1989). Following a
maritime accident, Travelers Insurance Company deposited what it
believed to be as the limits of its policy coverage into the
court's registry. Later, a dispute arose as to the amount of
policy limits. Following settlement negotiations, Travelers agreed
that it would not oppose withdrawal of the deposited funds by the
injured plaintiff in exchange for summary judgment establishing the
policy limit at a level favorable to Travelers. Veillon, 876 F.2d
at 1199. At a pretrial hearing, the district court characterized
the plaintiff's motion as one to dismiss as opposed to summary
judgment. Because dismissal would not resolve the coverage limit
issue, counsel for Travelers balked. Id. Nonetheless, after some
discussion, the court asked: "Travelers has no further interest in
estoppel and distinguishes it from waiver. See 34 TEX. JUR. 3D
Estoppel §§ 5, 19 (1984).
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those funds [in the court's registry]." To which counsel
responded, "That's correct." Id. Despite having disavowed any
interest in the funds in open court, Travelers later moved to
withdraw the funds.6 The district court denied the motion after
reviewing the transcript of the earlier hearing. Id. at 1200.
Travelers appealed arguing that counsel had not relinquished rights
to the funds. We rejected this position and held counsel to its
word noting that "when the district judge stated that Travelers had
no further interest in the funds, [counsel] for Travelers
responded, `That's correct.'" Id. at 1201. Furthermore, this
Court rejected Travelers's argument that the transcript was somehow
an inaccurate reflection of the statements made at the hearing.
Id.
A review of the record from the pretrial hearing in this case
yields the same result. Despite vacillations by ETI's counsel, a
denouement occurs. The court directly asked counsel: "If Ergo says
I can give it to the investors, they wash their hands of it. You
say your clients wash their hands of it, I give it to the
investors. Then it's a matter of me sitting down with the
investors and trying to work out a way to distribute it. Are we at
that point?" ETI's counsel replied: "Yes. That's fine with me,
your Honor." Faced with this record, this is the same type of
renunciation present in Veillon.
Still, ETI maintains that the district court misunderstood its
This action was precipitated by the final judgment in the
underlying injury claim where the district court dismissed the
claims against the insureds.
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comments. If there was a mistake, however, the procedural remedy
is a Rule 60 motion for relief from judgment, as we counseled in
Veillon. See id. ETI requested precisely this relief. The
district court, however, denied the motion. It is well-settled
that we must review a denial of a Rule 60(b) motion under an abuse-
of-discretion standard. Government Fin. Servs. One Ltd.
Partnership v. Peyton Place, Inc., 62 F.3d 767, 770 (5th Cir.
1995); Cooper v. Noble, 33 F.3d 540, 543 (5th Cir. 1994).
A review of the record, however, reveals no abuse of
discretion. In its order denying the Rule 60(b) motion, the
district court outlined the portions of the record upon which it
relied. This included the exchange between the court and counsel
where counsel consented to the distribution of the interpleaded
funds to the investors. In addition, the district court's order
recounts that this concession was followed by "lengthy discussions
with counsel for the investors/claimants relative to procedures
that might be followed in the allocation of the interpleaded funds
between the investors/claimants." As the court noted, at no time
during these discussions did ETI suggest in any way that the
court's course of action was inappropriate. In fact, our review of
the record also reveals that at the conclusion of the discussion
with the investors, the court, speaking to pro se investors,
stated: "Well, you've heard the discussion about persons who claim
an entitlement to the $1,050,000. And apparently the main actors,
Ergo and Mr. Martin and his company [ETI], have given up any claim
to it. So it's to be divided up amongst the investors, and an
effort is going to be made to have some third party work with the
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attorneys for the investors in deciding on an appropriate way to
divide that up." While the court made this unequivocal statement
concerning the parties' renunciation of any interest in the fund
and its intention to distribute it to the investors, counsel for
ETI sat silently. Given these circumstances, the district court
did not abuse its discretion in concluding that ETI disavowed its
interest in the fund.
To be sure, ETI's counsel continues to maintain that it did
not mean to renounce its interest in the funds. Counsel offers a
potential reading of the colloquy with different emphasis
illustrating the conditional nature of the statements. However,
unlike counsel, we were not privy to the tone and inflection of the
statements made before the district court; we must confine our
review to a cold record. On the other hand, the district judge was
engaged in the pretrial hearing. Unlike us, he heard counsel's
remarks and concluded both at the hearing and on later review of
the record that renunciation occurred. This conclusion is entitled
to great weight. Faced with a burgeoning docket and with a complex
commercial lawsuit at hand, a district judge must be able to winnow
the issues for trial. This includes reliance on statements made by
counsel in open court disavowing specific claims.
Whether this reliance is labelled as "waiver," "judicial
estoppel," or "renunciation" is immaterial. What is clear is that
the district court, as a matter of federal procedure, is entitled
to rely on statements made by counsel in open court. When a later
dispute arises as to the nature of the statements, litigants
possess procedural remedies to correct mistakes. However, once
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the district court concludes that no mistake has been made, such a
conclusion must be given deference. That deference is not
unfettered. We can review the record, as done in this case, for an
abuse of discretion. In the absence of such abuse, the district
court's conclusion must stand.
CONCLUSION
Based upon our review of the record, the district court did
not abuse its discretion in concluding that counsel for ETI
disavowed any interest in the interpleaded funds. We AFFIRM.
EMILIO M. GARZA, Circuit Judge, concurs as to the judgment only.
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