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.
I
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
II
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
A
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.
1
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.
2
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.
B
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.
14