United States Court of Appeals
For the First Circuit
Nos. 16-1213
16-1620
LIZBETH VARGAS-COLÓN, in representation of her minor daughter,
L.C.V.; JAIME MANUEL CEDEÑO-VARGAS; JAIME ALEXANDER CEDEÑO-
VARGAS,
Plaintiffs, Appellants,
v.
FUNDACIÓN DAMAS, INC.; BANCO POPULAR DE PUERTO RICO,
d/b/a Banco Popular de Puerto Rico,
Defendants, Appellees,
JOHN DOES 1, 2 AND 3; A, B, C CORPORATIONS; UNKNOWN INSURANCE
COMPANIES A THROUGH H,
Defendants.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Gustavo A. Gelpí, Jr., U.S. District Judge]
Before
Howard, Chief Judge,
Lipez and Thompson, Circuit Judges.
David Efron, with whom Joanne V. Gonzales Varon and Law
Offices of David Efron, P.C. were on brief, for appellants.
Freddie Pérez-González, with whom Freddie Peréz-González &
Assoc., P.S.C. was on brief, for appellee Fundación Damas, Inc.
Luis E. Padrón Rosado for appellee Banco Popular de Puerto
Rico.
July 19, 2017
THOMPSON, Circuit Judge. The case before us is, simply
put, a hot mess. The ongoing dispute has an evolving cast of
characters and has featured stops in numerous federal and Puerto
Rico courts. And, in its present iteration, the briefing from all
parties leaves much to be desired. Yet, after slogging our way
through these muddied waters, a modicum of clarity has emerged.
In the end, because plaintiffs — L.C.V., a minor represented by
her mother, Lizbeth Vargas-Colón (Vargas),1 and L.C.V.'s two
brothers, Jaime Manuel Cedeño-Vargas and Jaime Alexander Cedeño-
Vargas (collectively, the brothers) — have not presented us with
a developed argument that convinces us to disturb the judgment of
the district court, we affirm.
BACKGROUND
Although we could spill gallons of ink explaining the
ins and outs of the extensive procedural history of the several
cases in this saga, we instead opt for a more efficient course:
setting forth only those background facts necessary to put these
appeals into their proper context. At its core, this case is about
a family's dogged efforts to recover for alleged acts of medical
malpractice.
1The record is not entirely consistent on Vargas's last name.
At some points, it is given as "Vargas Colón," but, at others,
"Vargas-Colon" is used. Our prior opinion in a related case
involving Vargas used "Vargas-Colón," Vargas-Colón v. Hosp. Damas,
Inc., 561 F. App'x 17, 18 (1st Cir. 2014), so we shall do the same.
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A. First Medical-Malpractice Action
This case has its genesis in an undeniably tragic
episode. In 2000, Vargas went to Hospital Damas in Ponce, Puerto
Rico for the birth of L.C.V. Plaintiffs allege the following facts
concerning L.C.V.'s birth. The birth by Cesarean section was
delayed until several hours after Vargas first arrived at Hospital
Damas. During some or all of this period of delay, L.C.V.'s brain
was not receiving a sufficient amount of oxygen. As a result, she
suffered severe and permanent neurological defects, "has no hope
of a normal life," and will require lifelong, round-the-clock care
for her conditions.
In 2007, Vargas and her husband, Jaime M. Cedeño,2
initiated a medical-malpractice action in the United States
District Court for the District of Puerto Rico on their own behalf
and on behalf of L.C.V. (Case No. 07-1032).3 The amended complaint
asserted claims against Vargas's doctor and "Hospital Damas or,
alternatively, John Doe Corporation d/b/a Hospital Damas." It
also alleged that "Hospital Damas is the owner and operator of a
hospital of the same name, located in Ponce, Puerto Rico." In
August 2009, on the eve of trial and after the parties engaged in
extensive discovery, the plaintiffs in Case No. 07-1032 settled
2 Cedeño is not a party to the case currently on appeal to
this court.
3 The brothers were not plaintiffs in Case No. 07-1032.
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with Hospital Damas, Inc. (HDI) and the defendant doctor.4 The
settlement agreement — which listed Vargas, Cedeño, and L.C.V. as
settling plaintiffs and HDI and Vargas's doctor as settling
defendants — called for the defendants to pay the plaintiffs a
total of $1.5 million in eight installments.
The district court entered a judgment approving the
settlement and dismissing the complaint with prejudice.
Additionally, as the parties agreed, the district court retained
jurisdiction over the case to enforce the terms of the settlement
agreement.
B. HDI's Bankruptcy Case
The defendants paid the plaintiffs the initial payment
of $400,000 under the settlement agreement. But HDI failed to
live up to its end of the bargain after that. Instead, it filed
a petition for bankruptcy in September 2010 (bankruptcy case). In
2012, a group of medical-malpractice creditors of HDI — including
L.C.V., Vargas, and Cedeño — moved to dismiss the bankruptcy
petition, alleging (among other things) that the petition was filed
fraudulently and in bad faith. These allegations were premised on
the fact that the license to operate Hospital Damas and the
4 According to the plaintiffs in this case, the first time
that the plaintiffs in Case No. 07-1032 learned of HDI was when
the defendants in that case presented the settlement agreement to
them.
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certificate of need and convenience (CNC) — a document needed to
operate a hospital in Puerto Rico — were actually held by Fundación
Damas, Inc. (Fundación) and not by HDI, such that HDI was not
lawfully operating Hospital Damas.
The bankruptcy court held a hearing on the motion, at
which documentary and testimonial evidence was admitted and the
medical-malpractice creditors and HDI argued their respective
positions. The bankruptcy court denied the dismissal motion. The
court found that Fundación "owns the real property on which the
hospital facility known as Hospital Damas is located. Prior to
1987, it operated Hospital Damas. In 1987, Fundación
. . . incorporated [HDI] and then leased the hospital facility to
[HDI]." It also found that Fundación "transferred the hospital
operation to [HDI]" in 1987 and that HDI "has been operating
Hospital Damas since 1987." The court determined that HDI
"inadvertently failed to realize that there was a problem with its
CNCs and licenses prior to the filing of the motion to dismiss."
The medical-malpractice claimants appealed the denial of their
motion to the United States Bankruptcy Appellate Panel (BAP) for
the First Circuit.
Meanwhile, the bankruptcy case continued on, and the
court eventually confirmed a reorganization plan for HDI. In
exchange for the medical-malpractice claimants' withdrawal of
their objections to the plan and their appeal to the BAP, HDI and
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the medical-malpractice claimants filed a Joint Amended Plan of
Reorganization (bankruptcy plan supplement) in the bankruptcy
court. In pertinent part, the bankruptcy plan supplement provided
that:
(C) . . . [N]othing in this Consented Supplement, or in
the Plan as confirmed[,] shall be construed as an
impediment to any medical malpractice claimant, with or
without judgment, to file before any court with
jurisdiction a complaint, motion or legal action against
Fundación or any other third party in order to pursue
any action or collect from Fundación or any other third
party any malpractice claim or deficiency thereof
(amount not collected from [HDI]) for which said entity
might be liable. . . .
. . .
(E) The Medical Malpractice Claimants that have judgment
shall also be entitled to . . . any reimbursement or
replenishment due the Trust Fund[5] and to pursue any
cause of action against Fundación, its Board of
Directors, the Trust Fund or any other third party for
the reimbursement or replenishment of the Trust Fund.
. . .
(H) The confirmation of the Plan does not preclude the
Medical Malpractice Claimants from pursuing their claims
against third parties, including, without limitation,
Fundación as to if [sic] Fundación must replenish the
Trust Fund.6
5
In 1986, Fundación created the Hospital Damas Self-Insurance
Trust Fund (Trust) for the payment of medical-malpractice claims
against Hospital Damas pursuant to the Puerto Rico Insurance Code.
See P.R. Laws Ann. tit. 26, § 4105.
6
Fundación was not a party to HDI's bankruptcy case. Hot on
the heels of the bankruptcy plan supplement's filing, Fundación
filed in the bankruptcy court what it called a "Special Appearance
. . . in Relation to [the Bankruptcy Plan Supplement]." In that
document, Fundación asserted that it did not participate in the
negotiations that led to the bankruptcy plan supplement and that
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The bankruptcy court ultimately confirmed the reorganization plan,
as supplemented by the bankruptcy plan supplement.
The plaintiffs in Case No. 07-1032 received $244,988.86
from HDI in payment of their pro rata distribution of their proof
of claim in the bankruptcy case, bringing the total amount received
to $644,988.86 — over $855,000 less than the $1.5 million to which
they were entitled under the settlement agreement.
C. Unsuccessful Attempt to Amend Judgment in Case No. 07-1032
In an effort to collect the balance, the plaintiffs in
Case No. 07-1032 returned to the district court and moved, pursuant
to Rule 60 of the Federal Rules of Civil Procedure — which is
entitled "Relief From a Judgment or Order" — to amend the judgment
"to substitute, nunc pro tunc, [HDI] in the settlement agreement
for another entity, Fundación." The motion argued that, because
Fundación was "the only legal entity holding a CNC and authorized
by law to operate Hospital Damas in Ponce, Puerto Rico[] as of the
time of the facts alleged in the complaint in November 2000," it
was the true "owner and legal entity authorized by law to operate
Hospital Damas" at the time of the alleged malpractice. Because
hospital owners and operators can be held vicariously liable for
it "reserve[d] any right or defense against all present or future
claims against it by the Medical Malpractice Claimants." Upon
motion of a medical-malpractice claimant, the bankruptcy court
struck Fundación's filing.
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the negligence of hospital employees and staff under Puerto Rico
law, the motion argued, Fundación was liable for the medical
malpractice. The motion therefore requested that Fundación be
added as a party defendant in Case No. 07-1032. Finally, the
motion repeated the theme sounded in the bankruptcy case: that HDI
and Fundación had fraudulently misled the plaintiffs into
believing that the soon-to-be bankrupt HDI was the owner and
operator of Hospital Damas and concealed Fundación's status as the
real owner and operator.7 HDI opposed the motion, arguing that
the bankruptcy court's finding that HDI, and not Fundación, was
the owner and operator of Hospital Damas barred the plaintiffs'
motion under the doctrine of issue preclusion.
7This fraud argument was exceedingly bare bones and not
pressed to its completion. For example, although the plaintiffs
complained in their motion that Fundación's relationship to
Hospital Damas "was [n]ever divulged in the disclosures, discovery
or appearances by defendant 'Hospital Damas,'" the motion did not
say that this nondisclosure constituted a discovery violation
(i.e., that plaintiffs asked who owned Hospital Damas and HDI
either didn't respond or provided an incorrect response).
Similarly, despite the "fraud" label, the plaintiffs cited Rule
60(b)(6), which authorizes a court to relieve a party from a
judgment for "any other reason that justifies relief," and not
Rule 60(b)(3), which allows for relief from a judgment because of
"fraud . . . , misrepresentation, or misconduct by an opposing
party." Finally, the plaintiffs abandoned entirely their reliance
on Rule 60(b) in their objection to the magistrate judge's report
and recommendation (R&R), instead relying solely on Rule 60(a),
see Vargas-Colón, 561 F. App'x at 20, which permits correction of
"a clerical mistake or a mistake arising from oversight or
omission," Fed. R. Civ. P. 60(a).
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The district court denied the motion to amend the
judgment. The plaintiffs in this case concede that, in
recommending the denial of the motion to amend in Case No. 07-
1032, the magistrate judge "appl[ied] the doctrine of issue
preclusion based on the ruling of the [b]ankruptcy [c]ourt." As
explained by the district-court judge who adopted the magistrate
judge's R&R, "the [b]ankruptcy [c]ourt made the factual findings
that, regardless of Fundación's ownership of the property
comprising the hospital, [HDI] was indeed the hospital's operator
since 1987, and, thus, liable for the negligence that caused [the
plaintiffs'] injuries." Therefore, the court explained, it was
"not persuaded by [the plaintiffs'] argument that [Fundación] was
and is the only lawful owner and operator of the Hospital Damas
and, as such, liable for the settlement agreement that led to a
judgment from this court." The court clarified, however, that it
was "not making a determination on the validity of any claims [the
plaintiffs] might have against Fundación."
The plaintiffs appealed from the denial of their motion,
and we affirmed on the ground that the plaintiffs were not entitled
to relief under Rule 60(a).8 See Vargas-Colón, 561 F. App'x at
8
We granted Fundación provisional leave to intervene in that
appeal, although we did not rely on the arguments provided in its
brief, which included an issue-preclusion defense, and ultimately
denied the motion to intervene. See Vargas-Colón, 561 F. App'x at
22 n.6.
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18, 21-22. In so doing, we expressed no opinion on "the question
of whether issue preclusion might provide Fundación a defense" or
on "the unpreserved suggestion that the settlement agreement might
(according to its terms, if not to common sense) have created
rights enforceable against Fundación and a number of other non-
signatories." Id. at 21-22. We explained that "[t]hese issues
are, at best, for another day in another case," id. at 22, and
that "[w]hether the plaintiffs actually have any viable claim
against Fundación is an issue we need not and do not reach in order
to affirm the judgment in this case," id. at 22 n.5.9
D. Puerto Rico Action Against Trustee
Meanwhile, in 2012, the plaintiffs in Case No. 07-1032
filed an action for injunctive relief against Banco Popular de
Puerto Rico (Banco Popular), as trustee of the Trust, in the Puerto
Rico Court of First Instance. The plaintiffs alleged that Banco
Popular committed acts as trustee that wrongfully impaired their
ability to collect the settlement proceeds from the Trust. For
reasons that need not concern us, the plaintiffs in that action
successfully moved for voluntary dismissal of their complaint
without prejudice in 2013.
9 Plaintiffs in this case argue on appeal that our opinion in
Vargas-Colón "intimated that this suit against third parties is
allowed," but, as the above-quoted passages demonstrate, it did no
such thing.
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E. This Case
At long last, we turn to the instant case. Vargas, on
behalf of L.C.V., and L.C.V.'s two brothers filed this diversity
action against Fundación and Banco Popular in December 2014. The
amended complaint alleges that Fundación "is[,] pursuant to
filings in the Department of Health, the owner and operator of
Hospital Damas located in Ponce, Puerto Rico." Plaintiffs assert
three causes of action, two of which are relevant on appeal.10
First, count 1 of the amended complaint asserts a medical-
malpractice claim against Fundación under Articles 1802 and 1803
of the Puerto Rico Civil Code.11 Second, plaintiffs also assert a
negligence claim against Fundación and Banco Popular for
mismanagement of the funds of the Trust (count 3).12 Count 3
10One of the counts of the amended complaint, count 2, asserts
a direct action against defendants Unknown Insurance Companies A
through H. Count 2 is not implicated in plaintiffs' appeal, so we
say no more about it.
11 Article 1802, "Puerto Rico's General Tort Statute," Díaz-
Nieves v. United States, 858 F.3d 678, 689 (1st Cir. 2017),
provides, in pertinent part, that "[a] person who by an act or
omission causes damage to another through fault or negligence shall
be obliged to repair the damage so done." P.R. Laws Ann. tit. 31,
§ 5141. Article 1803, meanwhile, provides as a general matter
that "[t]he obligation imposed by § 5141 of this title is
demandable, not only for personal acts and omissions, but also for
those of the persons for whom they should be responsible" and, as
is relevant here, that "[o]wners or directors of an establishment
or enterprise are likewise liable for any damages caused by their
employees in the service of the branches in which the latter are
employed or on account of their duties." Id. § 5142.
12 Although the heading accompanying count 3 in the amended
complaint characterizes the claim as a "[n]egligence [a]ction
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alleges that defendants owed plaintiffs, as medical-malpractice
claimants, a duty "to not mismanage the [Trust] funds" and that
they breached this duty by "squander[ing] . . . the funds."
Banco Popular moved to dismiss count 3, and Fundación
moved for summary judgment on counts 1 and 3. The district court
granted both defendants' motions. Plaintiffs timely appealed.13
ANALYSIS
On appeal, plaintiffs purport to challenge the district
court's grant of Banco Popular's motion to dismiss count 3 and its
grant of summary judgment in favor of Fundación. Because our
analysis of the brothers' claims differs from our treatment of
L.C.V.'s claims, we discuss them separately.
A. The Brothers
The amended complaint's treatment of the brothers'
claims is murky at best. As outlined above, the complaint asserts,
on behalf of all three of the plaintiffs in this case, a medical-
malpractice claim against Fundación in count 1 and, in count 3, a
[a]gainst Banco Popular," that count's allegations assert a
negligence claim against both Banco Popular and Fundación.
13 Plaintiffs also filed a motion for reconsideration, which
the district court denied on the basis that the motion simply
"reiterat[ed] arguments that were rejected by the [c]ourt."
Plaintiffs timely appealed from that order as well, and the two
appeals were consolidated for purposes of briefing and oral
argument. Because plaintiffs do not offer any argument relating
to the denial of their motion for reconsideration in their briefs,
we need not discuss this aspect of the case any further.
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negligence claim against Fundación and Banco Popular based on both
defendants' breach of the duty they owed to plaintiffs, as medical-
malpractice claimants, to properly manage the funds of the Trust.
But when it comes to specifics on the brothers' claims, the amended
complaint is frustratingly silent. It identifies the brothers as
plaintiffs and requests monetary recovery for their unspecified
"non-economic damages." But that's it. It contains no allegations
in support of their claims, and it does not explain in any way how
the alleged negligence of defendants harmed the brothers.
In its motion to dismiss, Banco Popular offered several
different grounds for dismissal, including the amended complaint's
failure to include any allegations in support of the brothers'
claims. In their opposition, plaintiffs inexplicably offered no
response to Banco Popular's pleading-deficiency argument. The
district court granted Banco Popular's motion to dismiss with
prejudice, as well as Fundación's motion for summary judgment, but
for other reasons argued by those defendants.14
On appeal, plaintiffs have at last offered a few
scattered, oblique hints — albeit far from a full explanation — of
14 Those other grounds — which we'll discuss in more detail
below — were that count 1 is barred by the doctrine of issue
preclusion and that count 3 failed as a matter of law because
plaintiffs were not intended beneficiaries of the Trust and, in
any event, the Puerto Rico Insurance Commissioner had primary
jurisdiction over the claim asserted in count 3.
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the nature of the brothers' claims. In their opening brief, for
instance, plaintiffs assert in an argument subheading that the
brothers "suffered damages and those damages are continuous, as
they live with their sister." In a single sentence in the
statement-of-facts section of their brief, plaintiffs state, with
no citation to the record, that L.C.V.'s "two older brothers,
Plaintiff-Appellants Jaime Manuel Cedeño Vargas and Jaime
Alexander Cedeño Vargas[,] have had to sacrifice their quality of
life and that of their parents because of Minor Plaintiff, L.C.V.'s
greater needs and would have to put their sister's urgent needs
first before their own." Along similar lines, at oral argument,
when asked to identify the amended complaint's allegations on
behalf of the brothers, plaintiffs' counsel avoided a direct
response, instead vaguely alluding to the brothers' "pain and
suffering."
Piecing together these hints along with the amended
complaint's allusion to the brothers' "non-economic damages" and
its citation to Articles 1802 and 1803 as support for the medical-
malpractice claim asserted in count 1, we suspect that the brothers
are asserting a derivative claim under Article 1802. Under Puerto
Rico law, "individuals who are harmed because a close relative or
loved one is tortiously injured may invoke Article 1802 as a
vehicle for prosecuting a cause of action against the tortfeasor."
Díaz-Nieves, 858 F.3d at 689. This "wholly derivative" claim,
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id., requires the plaintiff to prove three elements: "(1) that he
has suffered emotional harm, (2) that this harm was caused by the
tortious conduct of the defendant toward the plaintiff's relative
or loved one, and (3) that the defendant's conduct was tortious or
wrongful," id. (quoting Méndez-Matos v. Municipality of Guaynabo,
557 F.3d 36, 57 (1st Cir. 2009)).
Banco Popular reiterates on appeal many of the arguments
it made below, including the contention that the amended complaint
wholly lacks any allegations in support of the brothers' claims.
And, as was true below, plaintiffs fail to address this argument
in their reply brief.
In our de novo review of the district court's entry of
summary judgment, as well as the dismissal of a complaint under
Rule 12(b)(6) of the Federal Rules of Civil Procedure, we are free
to affirm on any ground apparent from the record. See Delgado
Echevarría v. AstraZeneca Pharm. LP, 856 F.3d 119, 126 (1st Cir.
2017); Hochendoner v. Genzyme Corp., 823 F.3d 724, 730 (1st Cir.
2016). We exercise that authority with respect to the brothers'
claims.
The brothers' claims for recovery for their "non-
economic damages" immediately falter because, contrary to
counsel's representation to us at oral argument, the amended
complaint contains absolutely no factual allegations with respect
to the first element of the brothers' derivative claim: that they
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suffered emotional harm. See Díaz-Nieves, 858 F.3d at 689. The
amended complaint is therefore woefully deficient and clearly
fails to state a plausible derivative medical-malpractice claim on
behalf of the brothers.15 See Portugués-Santana v. Rekomdiv Int'l,
Inc., 725 F.3d 17, 26-27 (1st Cir. 2013) (affirming dismissal under
Rule 12(b)(6) where complaint's allegations failed to establish
element necessary to make out plausible claim).
The same can be said for count 3: Because the alleged
duty that defendants owed to plaintiffs with respect to count 3
was premised on plaintiffs' status as medical-malpractice
claimants, the brothers' failure to plead a plausible derivative
medical-malpractice claim dooms their claim for negligent
management of the Trust funds. Accordingly, we affirm the district
court's entry of judgment for defendants on the brothers' claims
in counts 1 and 3.
15Although the district court entered summary judgment in
Fundación's favor, instead of dismissing the claims against
Fundación for failure to state a claim under Rule 12(b)(6), that
poses no barrier to our affirmance of the judgment on alternative
grounds. After all, "[a] plaintiff is not entitled to present
affidavits and reach the summary judgment stage if her complaint,
on its face, reveals an inadequate basis for her claim." Jacob v.
Curt, 898 F.2d 838, 839 (1st Cir. 1990) (per curiam); cf. 10A
Charles Alan Wright et al., Federal Practice & Procedure § 2713
(4th ed. 2016) ("Of course, a summary-judgment motion may be made
on the basis of the pleadings alone, and if this is done it
functionally is the same as a motion to dismiss for failure to
state a claim or for a judgment on the pleadings." (footnote
omitted)).
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B. L.C.V.
We now turn to the claims of the sole remaining
plaintiff, L.C.V. We first address the district court's treatment
of count 3 — the claim for mismanagement of the Trust funds —
before proceeding to analyze the entry of summary judgment in
Fundación's favor on the medical-malpractice claim asserted in
count 1.
1. Count 3
Banco Popular moved to dismiss count 3 on several
grounds. The district court granted the motion for two independent
reasons advanced by Banco Popular. First, the court concluded
that Banco Popular owed L.C.V.16 no duty as trustee because she was
not an intended beneficiary of the Trust. Second, the court
concluded that, even if L.C.V. was a beneficiary of the Trust,
dismissal of count 3 would still be warranted because the Puerto
Rico Insurance Commissioner had primary jurisdiction over the
claim asserted in that count.17
16 From here on out, we'll limit our focus to L.C.V.
17 Although the district court's decision characterized
count 3 as asserting a negligence claim against Banco Popular, it
is clear that the court understood count 3 as asserting claims
against both Banco Popular and Fundación; it explained in its
decision that "Count III of Plaintiffs' complaint is a specific
cause of action against [Banco Popular], alleging that both [Banco
Popular] and Fundación are liable for [Banco Popular's]
mismanagement of the funds within the . . . Trust . . . as Trustee
of the same." It's apparent from this passage that the court
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Typically, we would review the district court's Rule
12(b)(6) dismissal de novo, viewing all the factual allegations in
the complaint as true, drawing all reasonable inferences in
L.C.V.'s favor, and assessing whether the complaint contains
sufficient factual material to state a facially plausible claim.
See O'Shea ex rel. O'Shea v. UPS Ret. Plan, 837 F.3d 67, 77 (1st
Cir. 2016). But this case comes with a unique (and confounding)
twist: Even though L.C.V. asserts on appeal that she is appealing
the district court's entry of judgment on count 3, her brief is
completely devoid of any arguments that address either ground
relied upon by the district court. L.C.V.'s opening brief asserts
that "[t]he beneficiaries of the [Trust] are Plaintiff-Appellants,
whom [sic] are medical malpractice claimants" in a heading in
multiple places in the brief, but it offers absolutely no argument
on the beneficiary issue or why the district court, in her view,
got it wrong. Nor does the opening brief offer any analysis of
the district court's alternative, primary-jurisdiction ground for
dismissing count 3. Instead, under the heading concerning
plaintiffs' status as trust beneficiaries, L.C.V. proffers a
completely different and unrelated argument: that, because the
district court in Case No. 07-1032 retained jurisdiction to enforce
intended its analysis of count 3 to apply to the claim asserted in
that count against both Banco Popular and Fundación.
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the settlement agreement, L.C.V. is entitled to enforce it against
Fundación, an entity that is, according to her, covered by the
settlement agreement's language. That's the sum and substance.
When pressed at oral argument to identify where in the opening
brief any developed argument concerning the dismissal of count 3
could be found, plaintiffs' counsel identified the passage we just
described. But neither that section of the brief nor any other
contains any such argument.
L.C.V.'s failure to make any argument challenging either
ground invoked by the district court in dismissing count 3 with
prejudice has serious consequences:
[I]ssues adverted to in a perfunctory manner,
unaccompanied by some effort at developed argumentation,
are deemed waived. It is not enough merely to mention
a possible argument in the most skeletal way, leaving
the court to do counsel's work, create the ossature for
the argument, and put flesh on its bones.
United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990) (internal
citations omitted). Therefore, we will not consider any argument
that L.C.V. could have made (but failed to make) in the opening
brief with respect to the district court's entry of judgment for
defendants on the claim asserted in count 3 for alleged
mismanagement of Trust funds. See Tutor Perini Corp. v. Banc of
Am. Sec. LLC, 842 F.3d 71, 96 (1st Cir. 2016) (concluding that
appellant "waived any argument it might have on" a claim because,
although "a heading in [appellant's] opening brief suggests the
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judge erred in dismissing the . . . claim, its appellate papers
never explain how this is so"); Sparkle Hill, Inc. v. Interstate
Mat Corp., 788 F.3d 25, 29 (1st Cir. 2015) ("Our precedent is
clear: we do not consider arguments for reversing a decision of a
district court when the argument is not raised in a party's opening
brief."); Acevedo-Delgado v. Rivera, 292 F.3d 37, 42 n.6 (1st Cir.
2002) (concluding that argument was not properly before court where
heading in brief raised issue but "[t]he discussion that follow[ed]
[did] not address that point").18
We emphasize that L.C.V.'s briefing failure renders it
unnecessary for us to address either ground relied upon by the
district court in dismissing count 3 with prejudice. Therefore,
18 L.C.V.'s belated attempt to address these grounds in the
reply brief does not effectively excuse her inexplicable failure
to do so in the opening brief because "it is well-settled that a
legal argument made for the first time in an appellant's reply
brief comes too late and need not be addressed." United States v.
Arroyo-Blas, 783 F.3d 361, 366 n.5 (1st Cir. 2015) (quoting United
States v. Brennan, 994 F.2d 918, 922 n.7 (1st Cir. 1993)).
Moreover, we note that the documents identified by L.C.V. in the
reply brief in support of her assertion that she is a trust
beneficiary do not provide any support for the subheading in the
opening brief that states: "Fundaci[ó]n Damas, Inc. admits that
the Trust Fund's intended beneficiaries are medical malpractice
claimants." (Emphasis added.) These documents do suggest that
HDI admitted in pleadings in the bankruptcy case that the intended
beneficiaries of the Trust were medical-malpractice creditors, but
the documents say nothing about any admission by Fundación, and
L.C.V. has offered no legal arguments as to why this court should
treat the two corporations as one entity under, for example, "the
'alter ego' (piercing the corporate veil) analysis." Santiago-
Hodge v. Parke Davis & Co., 859 F.2d 1026, 1029 (1st Cir. 1988).
- 21 -
because we need not do so, we express no opinion on the merits of
the district court's decision.
2. Count 1
Count 1 of the amended complaint seeks to hold Fundación
vicariously liable for the medical malpractice under Articles 1802
and 1803. It is clear from the amended complaint and L.C.V.'s
brief on appeal that the medical-malpractice claim against
Fundación is premised on its liability as the owner and operator
of Hospital Damas at the time of the acts of malpractice.
Fundación moved for summary judgment on several grounds;
first and foremost, Fundación argued that L.C.V. was "barred under
issue preclusion from filing this lawsuit due to the decision of
the bankruptcy court holding that HDI is Hospital Damas['s]
operator." The district court agreed.19 It concluded that the
issue of the "alleged illegality of HDI's operation[]" of Hospital
Damas "was raised and adjudicated by the [b]ankruptcy [c]ourt" and
that "[j]udgment [in the bankruptcy case] was formally entered as
to this issue when HDI's plan of reorganization was confirmed,
19
The primary basis on which the court granted summary
judgment in Fundación's favor was claim preclusion. The court
then noted that it "need not enter [the] waters" of issue
preclusion in light of its claim-preclusion analysis.
Nevertheless, "[i]n [an] abundance of caution," the district court
went on to explain why issue preclusion also barred L.C.V.'s claims
against Fundación. On appeal, L.C.V. concedes that the entry of
summary judgment in Fundación's favor was based, at least in part,
on issue-preclusion grounds.
- 22 -
after the [b]ankruptcy [c]ourt ruled on the medical malpractice
claimants' argument." The court also explained that it was
"certain that the issue argued and adjudicated by the bankruptcy
court is identical to the one [p]laintiffs raise today."
Therefore, the court concluded that "Plaintiffs are precluded from
re-litigating the issue of HDI's operations, under the theory of
issue preclusion-res judicata." We review the district court's
entry of summary judgment and its application of the doctrine of
issue preclusion de novo. See Delgado Echevarría, 856 F.3d at
126; Robb Evans & Assocs., LLC v. United States, 850 F.3d 24, 31
(1st Cir. 2017).
Issue preclusion, sometimes referred to as collateral
estoppel, "bars parties from re-litigating issues of either fact
or law that were adjudicated in an earlier proceeding." Robb
Evans, 850 F.3d at 31; see also Taylor v. Sturgell, 553 U.S. 880,
892 (2008). Although it is not entirely clear from L.C.V.'s
briefing whether she believes Puerto Rico law or federal common
law controls in this case,20 the particular finding of fact that
Fundación argues (and the district court concluded) is entitled to
preclusive effect was made by the federal bankruptcy court.
20
For instance, at one point in the opening brief, L.C.V.
appears to concede that federal common law governs, but, later on
in the same brief, she seems to assert that Puerto Rico law should
control the issue-preclusion question in this case.
- 23 -
Therefore, federal common law controls the question of issue
preclusion in this case. See Taylor, 553 U.S. at 891 ("The
preclusive effect of a federal-court judgment is determined by
federal common law."); see also Daniels v. Agin, 736 F.3d 70, 87
(1st Cir. 2013); Kane v. Town of Harpswell (In re Kane), 254 F.3d
325, 328 (1st Cir. 2001); Iannochino v. Rodolakis (In re
Iannochino), 242 F.3d 36, 41 (1st Cir. 2001); Monarch Life Ins.
Co. v. Ropes & Gray, 65 F.3d 973, 978 (1st Cir. 1995).
The party asserting issue preclusion under federal
common law must make a four-part showing: "that '(1) both
proceedings involve[] the same issue of law or fact, (2) the
parties actually litigated that issue [in the prior proceeding],
(3) the prior court decided that issue in a final judgment, and
(4) resolution of that issue was essential to judgment on the
merits.'" Robb Evans, 850 F.3d at 32 (alterations in original)
(quoting Global NAPs, Inc. v. Verizon New Eng. Inc., 603 F.3d 71,
95 (1st Cir. 2010)).
L.C.V. makes no argument that the district court's
determinations on prongs one and two — that both this case and the
bankruptcy case involve the same issue of fact (namely, the
identity of the owner and operator of Hospital Damas) and that the
issue was actually litigated before and adjudicated by the
- 24 -
bankruptcy court — were erroneous.21 Along similar lines, L.C.V.
does not make any argument with respect to prongs three and four:
that the bankruptcy court decided the issue in a final judgment
and that the resolution of the issue was essential to the
bankruptcy court's judgment on the merits. In light of L.C.V.'s
failure to offer a discrete argument that any of these issue-
preclusion prerequisites have not been met, we need not dwell on
them. See Robb Evans, 850 F.3d at 32 (sidestepping consideration
of three prerequisites that were not challenged by party resisting
issue preclusion and limiting analysis to only prerequisite in
dispute); Daniels, 736 F.3d at 88 (holding that party resisting
issue preclusion waived, for lack of developed argumentation, any
argument that issue was not the same in earlier and later cases).22
Instead, we proceed to tackle L.C.V.'s arguments (as best as we
can understand them) that the district court erred as a matter of
21
L.C.V. has not argued, for example, that the bankruptcy
court's finding that HDI is the owner and operator of Hospital
Damas leaves room for a conclusion that Hospital Damas had more
than one owner or operator and that Fundación was one of them.
L.C.V. has also not contended that the medical-malpractice
creditors — a group that included L.C.V. — were not given a full
and fair opportunity to litigate the ownership issue. Therefore,
we need not consider these issues.
22
We emphasize that we are not expressing any opinion on
whether these issue-preclusion prerequisites have been met;
L.C.V.'s failure to offer any argument that any of these
prerequisites have not been met compels our silence on this point.
- 25 -
law in applying issue preclusion in this case.23 We address each
contention one by one.
a. L.C.V. first contends that, because the bankruptcy
plan supplement expressly permits the medical-malpractice
creditors to sue Fundación, Fundación cannot assert issue
preclusion as a defense. The bankruptcy plan supplement, L.C.V.
tells us, "specifically includes Fundación . . . and excludes any
issue preclusion." (Emphasis omitted.) And, to cinch matters,
L.C.V. points to a Puerto Rico Court of Appeals decision that,
according to her, supports her position. We are unpersuaded.
In our view, the language of the bankruptcy plan
supplement does not "exclude[] any issue preclusion." To the
contrary, it does not mention the notion of issue preclusion (or
the bankruptcy court's factual findings in connection with the
motion to dismiss) at all. Instead, its language is more limited.
For instance, it provides that "nothing in this Consented
Supplement, or in the Plan as confirmed[,] shall be construed as
an impediment" to suit against Fundación and that "[t]he
confirmation of the Plan does not preclude" the medical-
malpractice creditors from suing Fundación. (Emphases added.)
23
Because we have already determined that judgment in favor
of defendants on the brothers' claims was properly entered, we
need not address any issue-preclusion arguments that relate solely
to the brothers' claims.
- 26 -
Although we agree with L.C.V. that the bankruptcy plan supplement
permitted the medical-malpractice creditors to sue Fundación, we
must, given the language of that document, reject her assertion
that it also shielded her from Fundación's ability to assert the
affirmative defense of issue preclusion. Cf. R.I. Hosp. Tr. Nat'l
Bank v. Bogosian (In re Belmont Realty Corp.), 11 F.3d 1092, 1098
(1st Cir. 1993) (rejecting argument "that the Bank must be deemed
by implication to have 'waived' any res judicata effects of [a
bankruptcy decision] when it agreed, in the Consent Order, to have
the merits of the counterclaims decided in the [d]istrict [c]ourt
[a]ction" because "[n]othing was said about waiving the res
judicata effects of the [bankruptcy decision]" in the Consent
Order; "[i]n effect, Bogosian is asking this Court to supply in
the Consent Order a missing contract term to which the parties
never expressly agreed, namely, an agreement by the Bank to forego
its res judicata defense. We see no reason to do so.").
But wait, L.C.V. says: Another court has already ruled
against Fundación on its issue-preclusion defense. L.C.V. points
to a decision from the Puerto Rico Court of Appeals, Narváez v.
Hospital de Damas, KLAN201201997, 2014 WL 718435 (P.R. Cir. Jan.
27, 2014) (certified translation provided by the parties), that
was decided before this case was filed and that denied Fundación's
attempt to assert the affirmative defense of issue preclusion
against another medical-malpractice creditor. L.C.V. asserts that
- 27 -
Narváez "specifically mentions [the bankruptcy court's denial of
the medical-malpractice creditors' motion to dismiss the
bankruptcy petition] as being set aside for purposes of the
bankruptcy court's confirmation of a plan of reorganization."24
Deciphering precisely what L.C.V. is saying in this quoted passage
is a bit challenging. We think she is saying that Narváez stands
for the proposition that the critical bankruptcy-court finding
relative to HDI's ownership and operation of Hospital Damas was
set aside when the plan (as supplemented by the bankruptcy plan
supplement) was confirmed and that, for this reason, issue
preclusion is not available to Fundación.25 But Narváez says
nothing about the bankruptcy-court finding being set aside, and
its conclusion that Fundación could not assert issue preclusion
was in actuality based on two grounds that L.C.V. has not argued
on appeal.26 We therefore reject L.C.V.'s assertion that the
24Plaintiffs' opposition to Fundación's motion for summary
judgment contained the same passage. The district court did not
address this argument or the Narváez case in its decision granting
the summary-judgment motion.
25
Fundación seems to interpret this passage of L.C.V.'s brief
the same way we do, and, to the extent L.C.V. meant otherwise, she
failed to clear up Fundación's misunderstanding in her reply brief.
26 Although Narváez noted that "the language of the
[bankruptcy plan supplement] is crystal clear and establishes that
[the bankruptcy plan supplement] did not constitute a waiver of
liability for Fundación Damas since the causes of action of the
creditors of the malpractice claims were reserved," Narváez 2014
WL 718435 (certified translation at 47), that observation is not,
at least as we read the opinion, the reason why the court rejected
- 28 -
bankruptcy plan supplement prevents Fundación from asserting the
defense of issue preclusion.
b. L.C.V. next argues that "there is no identity of
parties because it is Fundación Damas whom [sic] wants to use the
Fundación's issue-preclusion defense. Instead, the court offered
the following reasoning for that decision:
It should be pointed out that the bankruptcy procedure
is one that is sui generis where there are no plaintiffs
and defendants. The same is focused on the protection
of the assets of the debtor ("the estate"), in this case
[HDI]. The fact that the appellant, Mrs. Maldonado, and
the other creditors of claims for malpractice filed a
motion to dismiss does not automatically convert the
bankruptcy procedure into an adversative one. This is
reflected in the focus of the hearing held by the
Bankruptcy Court which was geared to deciding if [HDI]
had committed fraud in the bankruptcy. The "Opinion and
Order" issued by the Bankruptcy Court constitutes an
expression of this forum with regard to the fact that
there was no fraud in the bankruptcy. In no way does
this constitute a final determination as to whether
Fundación Damas is or [is] not liable with regard to the
appellant for the amount owed by Hospital Damas.
Especially when Fundación Damas was not a party in the
process and said matter was not subject to discussion in
the evidentiary hearing held before the Bankruptcy
Court. That is why, we consider that the appellant has
not had the opportunity to litigate this matter.
Id. (certified translation at 45-46).
In a different case, Maldonado v. Damas Found., Inc., Civ.
No. 12-1042 (JAG), a district-court judge permitted Fundación to
assert the defense of issue preclusion against a different medical-
malpractice creditor. In doing so, the district court in Maldonado
rejected the reasoning of Narváez. We need not enter this fray,
however, because, as explained above, see supra note 21, L.C.V.
has not argued that the issue decided in the bankruptcy case is
not the same as the critical issue in this case or that the medical-
malpractice creditors were not given a full and fair opportunity
to litigate the ownership issue in the bankruptcy case.
- 29 -
preclusive effect of the [b]ankruptcy court order issued to [HDI]."
We interpret this passage as an argument that Fundación cannot
assert issue preclusion because it was not a party to the
bankruptcy case, and we reject this erroneous position.
Under the concept of nonmutual issue preclusion, a
defendant like Fundación who was not a party to the earlier
proceeding may still assert issue preclusion "to prevent a
plaintiff from asserting a claim the plaintiff has previously
litigated and lost against another defendant," Rodríguez-García v.
Miranda-Marín, 610 F.3d 756, 771 (1st Cir. 2010) (quoting Parklane
Hosiery Co. v. Shore, 439 U.S. 322, 326 n.4 (1979)), provided that
the party against whom issue preclusion is asserted "has had a
full and fair opportunity for judicial resolution of the same
issue," id. (quoting Fiumara v. Fireman's Fund Ins. Cos., 746 F.2d
87, 92 (1st Cir. 1984)). In this case, L.C.V. does not argue that
she did not have a full and fair opportunity to litigate the issue
of the hospital's ownership in the bankruptcy case in which she
was a medical-malpractice creditor and does not dispute that she
lost the battle on that issue. Thus, her argument "is foreclosed
by the precedent permitting defensive nonmutual collateral
estoppel." Id.
c. L.C.V. next argues that issue preclusion should not
apply because defendants fraudulently misled her as to the identity
of the true owner and operator of Hospital Damas. She points to
- 30 -
four documents to support this contention.27 But she has not
offered us any explanation whatsoever of how these documents
demonstrate that defendants engaged in any misrepresentation, and,
after viewing the documents for ourselves, we cannot see any
support in them for her claim that she has been fraudulently
misled. Other than her unexplained citation to these documents,
L.C.V. makes no attempt to develop this fraudulent-
misrepresentation argument or to explain how this argument impacts
the district court's issue-preclusion conclusion. In these
circumstances, we need not consider her woefully undeveloped
argument. See Zannino, 895 F.2d at 17.
d. Perhaps somewhat relatedly, L.C.V. appears to argue
that issue preclusion is inapplicable in this case because the
bankruptcy court's finding that HDI was the owner and operator of
Hospital Damas was incorrect. But this argument is a total
nonstarter because "issue preclusion prevent[s] relitigation of
wrong decisions just as much as right ones." B & B Hardware, Inc.
v. Hargis Indus., Inc., 135 S. Ct. 1293, 1308 (2015) (alteration
27These documents consist of the following: minutes of a
2009 meeting of Fundación's board of directors in which Case No.
07-1032 was listed as a topic of discussion; letters dated 2007
and 2008 from Fundación's attorneys to the Puerto Rico Health
Department concerning Hospital Damas; minutes of a 2006 joint
meeting of Fundación's board of directors and HDI's board of
directors; and a 2006 contract between Fundación and the Puerto
Rico State Insurance Fund Corporation concerning the provision of
hospital services.
- 31 -
in original) (quoting B & B Hardware, Inc. v. Hargis Indus., Inc.,
716 F.3d 1020, 1029 (8th Cir. 2013) (Colloton, J., dissenting));
see also Bath Iron Works Corp. v. Dir., Office of Workers' Comp.
Programs, 125 F.3d 18, 22 (1st Cir. 1997) ("[T]he point
of collateral estoppel is that the first determination is binding
not because it is right but because it is first . . . .").
e. Undeterred, L.C.V. cites Montana v. United States,
440 U.S. 147, 159 (1979), for the proposition that "changes in
facts essential to a judgment will render collateral estoppel
inapplicable in a subsequent action raising the same issues." And
she believes that this case involves just such a change in facts:
"The confirmation of Fundación Damas being the owner and acting as
the operator of Hospital Damas is a material fact in Plaintiffs-
Appellants' case and in the judgment."
Montana offers L.C.V. no support. She has not identified
a change in facts since the bankruptcy court's finding — which is
what we care about in this case for issue-preclusion purposes.
Cf. Montana, 440 U.S. at 162 ("Because the factual and legal
context in which the issues of this case arise has not materially
altered since Kiewit I [the decision to be given preclusive
effect], normal rules of preclusion should operate to relieve the
parties of 'redundant litigation [over] the identical question of
the statute's application to the taxpayer's status.'" (second
alteration in original) (emphasis added) (quoting Tait v. W. Md.
- 32 -
Ry. Co., 289 U.S. 620, 624 (1933))). Instead, she seems to be
saying that her perception of the true owner and operator of
Hospital Damas changed between the settlement in Case No. 07-1032
and the bankruptcy-court finding, which finding, she says, was
erroneous. As we just explained, however, issue preclusion
prevents L.C.V. from relitigating the bankruptcy court's rejection
of her position that Fundación was the owner and operator of
Hospital Damas. See id. ("[A] fact, question or right distinctly
adjudged in the original action cannot be disputed in a subsequent
action, even though the determination was reached upon an erroneous
view or by an erroneous application of the law." (emphasis
omitted) (quoting United States v. Moser, 266 U.S. 236, 242
(1924))).
f. L.C.V. also argues that, as a matter of public
policy, issue preclusion should not be applied to this case, which,
according to her, involves Fundación's perpetration of a "fraud"
"to evade responsibility and eventually justice." We are
unpersuaded by L.C.V.'s public-policy argument.
For starters, the cases on which L.C.V. relies apply
Puerto Rico law of preclusion. See Barreto-Rosa v. Varona-Mendez,
470 F.3d 42, 48 (1st Cir. 2006) (recognizing that, under Puerto
Rico law, res judicata "may not apply if . . . public policy
demands an exception," but noting that "[t]his exception was
successfully argued in [only] two cases" and concluding that
- 33 -
"[p]ublic policy does not demand an exception in this case");
Medina v. Chase Manhattan Bank, N.A., 737 F.2d 140, 144 (1st Cir.
1984) (similar); Bonafont Solís v. Am. Eagle, 143 D.P.R. 374, 429-
30 (1997) (Berlingeri, J., dissenting) (discussing public-policy
exception under Puerto Rico law of res judicata). But, as
mentioned above, federal common law governs the application of
issue preclusion in this case, and L.C.V. has not cited any cases
applying a similar exception under federal principles of issue
preclusion. In any event (and as noted earlier), she fails to
meaningfully develop her argument that defendants fraudulently
misled her. Therefore, we need say no more about this argument.
g. Finally, L.C.V. notes that the district court in
Case No. 07-1032 retained jurisdiction to enforce the settlement
agreement in that case and argues that the agreement's terms are
enforceable against Fundación. But this argument is completely
unresponsive to the issue-preclusion hurdle that L.C.V.'s claim
against Fundación faces. The amended complaint asserts no claim
to enforce the settlement agreement against Fundación. Instead,
the claim asserted in count 1 against Fundación is one for medical
malpractice as the owner or operator of Hospital Damas under
Articles 1802 and 1803. And we've concluded that L.C.V. is barred
under issue preclusion from relitigating the issue of whether
Fundación was the true owner and operator, and, as we just spelled
- 34 -
out, L.C.V. has not offered us any developed, persuasive argument
as to how she gets around the issue-preclusion bar.
* * *
Because L.C.V. fails to challenge the existence of
several of the prerequisites of issue preclusion and because the
arguments she does make are undeveloped, meritless, or both, we
affirm the district court's entry of summary judgment in
Fundación's favor on the claim that L.C.V. asserted against it in
count 1.
CONCLUSION
For these reasons, we affirm the district court's entry
of judgment in favor of both defendants. Each party shall bear
its own costs.28
28 We deny Fundación's meritless request that we impose
sanctions on plaintiffs for filing a frivolous appeal. See In re
Efron, 746 F.3d 30, 37 (1st Cir. 2014) ("An appeal is frivolous if
the arguments in support of it are wholly insubstantial and the
outcome is obvious from the start. Put another way, an appeal is
frivolous 'when the appellant's legal position is doomed to failure
— and an objectively reasonable litigant should have realized as
much from the outset.'" (emphasis added) (citation omitted)
(quoting Toscano v. Chandris, S.A., 934 F.2d 383, 387 (1st Cir.
1991))); id. at 38 ("[A]n appeal can be weak, indeed almost
hopeless, without being frivolous . . . ." (alteration in original)
(quoting Lallemand v. Univ. of R.I., 9 F.3d 214, 217-18 (1st Cir.
1993))).
- 35 -
Vargas-Colon v. Fundacion Damas, Inc.
Court: Court of Appeals for the First Circuit
Date filed: 2017-07-19
Citations: 864 F.3d 14
Copy Citations