Lehman v. Revolution Portfolio L.L.C.

Citation166 F.3d 389
Decision Date27 January 1999
Docket NumberNo. 98-1709,98-1709
PartiesBarry LEHMAN, Plaintiff, Appellee, v. REVOLUTION PORTFOLIO LLC, Defendant, Third-Party Plaintiff, Appellee, v. Stuart A. Roffman, Third-Party Defendant, Appellant.
CourtU.S. Court of Appeals — First Circuit

David Berman, with whom Franklin H. Levy, Gina Dines Holness, and Abrams, Roberts, Klickstein & Levy were on brief, for appellant.

Paul M. McDermott, with whom Jonathan W. Fitch, Suzanne Q. Feldman and Sally & Fitch were on brief, for appellee.

Before SELYA, Circuit Judge, CAMPBELL, Senior Circuit Judge, and LYNCH, Circuit Judge.

SELYA, Circuit Judge.

This appeal grows out of a triangular 1987 financial transaction that involved the Farm Street Trust (the Trust), its beneficiaries (Barry Lehman and Stuart A. Roffman), and First Mutual Bank for Savings (the Bank). In the ensuing eleven years, the transaction imploded, litigation commenced, the Bank and Lehman became insolvent, parties came and went, and the case was closed and partially reopened. In the end, only a third-party complaint proved ripe for adjudication. Even then, the district court dismissed two of its three counts, but entered summary judgment on the remaining count. The third-party defendant, Roffman, now appeals. After sorting through the muddled record and the case's serpentine procedural history, we affirm.

I. BACKGROUND

The historical facts are not seriously disputed. On or about October 19, 1987, the Trust, acting through its trustee, executed a promissory note for $2,800,000 in favor of the Bank in order to fund the purchase of property in Dover, Massachusetts. Lehman and Roffman, each of whom enjoyed a 50% beneficial interest in the Trust, personally guaranteed the note, and Lehman proffered two parcels of real estate as additional collateral. In short order, the Trust defaulted on the loan and the Bank foreclosed on Lehman's properties. Lehman responded by suing the Bank in a Massachusetts state court seeking restraint or rescission of the imminent sale of his real estate. The gravamen of his suit was a claim that Roffman had fraudulently introduced a sham investor to the Bank in order to gull it into making the loan, and that the Bank, in swallowing this spurious bait hook, line, and sinker, had failed to exercise due diligence.

Roughly one year after answering the complaint, the Bank failed. The Bank was a federally-insured financial institution. Consequently, the Federal Deposit Insurance Corporation (FDIC), acting as receiver under 12 U.S.C. § 1821(c)(3)(A), removed the action to the federal district court and successfully asked to be substituted as defendant. Six months later, it moved for leave to amend its answer to include a counterclaim against Lehman, qua guarantor, for the outstanding loan balance. At the same time, it moved for leave to serve a third-party complaint against Roffman. A magistrate judge granted the motion to amend on July 14, 1992, and granted the impleader motion on January 21, 1993.

The FDIC's third-party complaint contained three counts. The first two sought indemnification and contribution, respectively, in regard to the claims advanced by Lehman. The third sought judgment against Roffman, qua guarantor, for the outstanding loan balance.

After Roffman answered the third-party complaint, the FDIC moved for summary judgment. Roffman not only objected, but also moved to strike the third-party complaint in its entirety. The FDIC opposed that motion. Meanwhile, Lehman entered bankruptcy and requested a stay of proceedings in the civil suit.

On September 30, 1994, the district court, presumably acting in response to Lehman's stay request, issued a so-called "procedural order of dismissal" that stated:

In order to avoid the necessity for the counsel to appear at periodic status conferences, it is hereby ORDERED that the above-entitled action be and hereby is dismissed without prejudice to either party moving to restore it to the docket if any further action is required upon completion and termination of all bankruptcy or arbitration proceedings.

Upon receipt of this order, the clerk of court closed the file, but did not enter a final judgment. See Fed.R.Civ.P. 58.

Eight months later, and periodically thereafter during the next few years, the FDIC's counsel wrote to the district court soliciting action in respect to its summary judgment motion. Although these letters were served upon Roffman's lawyer and entered on the district court docket, Judge Wolf did not respond to any of them until late 1997, when he set a motions hearing (presumably encompassing both the FDIC's summary judgment motion and Roffman's related motion to strike). At that hearing, rescheduled and eventually held on April 28, 1998, the court entered an order reinstating the third-party complaint. It simultaneously denied Roffman's motion to strike, granted the FDIC's motion for brevis disposition on count 3, and dismissed the remainder of the third-party complaint without prejudice. On June 1, 1998, Roffman filed a notice of appeal.

Later the same month, the FDIC moved to substitute Revolution Portfolio LLC (RP) as the real party in interest, averring that it previously had assigned its interest in certain of the Bank's assets (including the Trust's indebtedness and Roffman's guaranty) to RP. Roffman timely filed an opposition. He also moved for relief from the April 28 judgment, see Fed.R.Civ.P. 60(b), asserting that the district court, at the time it entered summary judgment, did not have the real party in interest before it. The court granted the motion to substitute, see Fed.R.Civ.P. 25(c), and denied the motion for relief from judgment. Roffman did not file a second notice of appeal at that juncture. 1

II. DISCUSSION

Roffman asseverates that the district court never should have reopened the case in the first place; that, even if the court appropriately reinstated the third party complaint, it erred in entertaining the third-party complaint and granting summary judgment on count 3; and that the court impermissibly permitted an untimely substitution of parties. We consider these arguments seriatim.

A. Reinstatement.

Roffman contends that reinstatement of the claim for the outstanding balance three years after the court's issuance of a "procedural order of dismissal" violated the temporal strictures of Fed.R.Civ.P. 60(b)(1) (which authorizes a court to relieve a party from a final order or judgment on grounds of, among other things, "mistake, inadvertence, surprise, or excusable neglect" if a motion is made within one year following the entry of the order or judgment). Roffman arguably waived this point by not raising it in the lower court after the court had notified him that it would hear the FDIC's summary judgment motion. After all, the opposition that he filed in anticipation of the hearing merely replicated arguments previously made, and did not question revivification of the action. We do not pursue the question of waiver, however, because the argument against reinstatement is easily dispatched on the merits.

Roffman begins from the mistaken premise that the so-called "procedural order of dismissal" entered by the district court on September 30, 1994, constituted a final judgment, which could be corrected only under Rule 60. In fact, the September 30 order did no more than bring about an administrative closing of the case. 2 Administrative closings comprise a familiar, albeit essentially ad hoc, way in which courts remove cases from their active files without making any final adjudication. See Corion Corp. v. Chen, 964 F.2d 55, 56-57 (1st Cir.1992) (holding that an order deeming a case "administratively closed" was not a final, appealable order absent a separate document to signal the court's "view that the case had concluded"). The method is used in various districts throughout the nation in order to shelve pending, but dormant, cases. See, e.g., id.; In re Arbitration Between Phila. Elec. Co. v. Nuclear Elec. Ins. Ltd., 845 F.Supp. 1026, 1028 (S.D.N.Y.1994); Mercer v. Allegheny Ludlum Corp., 132 F.R.D. 38, 38-39 (W.D.Pa.1990), aff'd, 931 F.2d 50 (3d Cir.1991). We endorse the judicious use of administrative closings by district courts in circumstances in which a case, though not dead, is likely to remain moribund for an appreciable period of time. 3

Properly understood, an administrative closing has no effect other than to remove a case from the court's active docket and permit the transfer of records associated with the case to an appropriate storage repository. 4 "In no event does such an order bar a party from restoring the action to the Court's active calendar upon an appropriate application." In re Arbitration, 845 F.Supp. at 1028. Nor is the power to resurrect reserved to the parties. The court, too, retains the authority to reinstate a case if it concludes that the administrative closing was improvident or if the circumstances that sparked the closing abate. Consequently, the September 30 order did not terminate the underlying case, but, rather, placed it in inactive status until such time as the judge, in his discretion or at the request of a party, chose either to reactivate it or to dispose of it with finality.

That ends this aspect of the matter. Judge Wolf opted to reopen the case to permit litigation of the third-party complaint after the FDIC's repeated correspondence brought the matter to his attention and further study convinced him that he had swept too broadly in closing the entire file. 5 This decision falls comfortably within the realm of the court's discretion, and the time parameters specified in Rule 60(b) do not apply. Hence, we uphold the district court's reinstatement order.

B. Joinder.

Resolution of the reinstatement question only begins the work of disentangling the imbricated strands of Roffman's appeal. We next must answer the question whether the FDIC's deployment of a third-party complaint against Roffman was proper. In...

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