Ungar v. The Palestine Liberation

• Decision Date: 25 March 2010
• Docket Number: No. 09-1778.,09-1778.
• Parties: Efrat UNGAR et al., Plaintiffs, Appellees, v. The PALESTINE LIBERATION ORGANIZATION et al., Defendants, Appellants.
• Court: U.S. Court of Appeals — First Circuit

599 F.3d 79

Efrat UNGAR et al., Plaintiffs, Appellees, v. The PALESTINE LIBERATION ORGANIZATION et al., Defendants, Appellants.

No. 09-1778.

United States Court of Appeals First Circuit.

Heard: Jan. 7, 2010

Decided: March 25, 2010

COPYRIGHT MATERIAL OMITTED

Laura G. Ferguson, with whom Mark J Rochon, Miller & Chevalier Chartered Deming E. Sherman, and Edwards Angell Palmer & Dodge LLP were on brief, for appellants.

David J. Strachman, with whom McIntyre, Tate & Lynch was on brief, for appellees.

Before LIPEZ, Circuit Judge SOUTER, ^* Associate Justice, and SELYA, Circuit Judge.

SELYA, Circuit Judge.

This appeal turns on the question of whether there is a categorical rule that a party whose strategic choices lead to the entry of a default judgment is precluded as a matter of law from later obtaining relief from that judgment under Federal Rule of Civil Procedure 60(b)(6). The district court thought that precedent required it to apply such a categorical bar and, on that basis, it denied relief. Estates of Ungar v Palestinian Auth. (Ungar III), 613 F.Supp.2d 219, 229, 231 (D.R.I.2009). We conclude that no categorical bar applies.

Accordingly, we vacate the order appealed from and remand for reconsideration.

For present purposes, a brief synopsis of the factual and procedural background will suffice. The reader who hungers for greater detail may consult our previous opinion in this case. See Ungar v. Palestine Liberation Org. (Ungar II), 402 F.3d 274 (1st Cir.2005).

This case began with a senseless double murder. Yaron Ungar and his wife Efrat were gunned down by Hamas militants in Israel during the year 1996. An Israeli criminal court convicted the killers. On March 13, 2000, the Ungars' estates and heirs brought suit against the Palestine Liberation Organization (PLO) and the Palestinian Authority (PA) for damages under the Anti-Terrorism Act (ATA), 18 U.S.C. §§ 2331-2338, which provides a cause of action in favor of American nationals harmed by acts of international terrorism. Id. § 2333. The plaintiffs alleged in substance that the defendants gave aid and support to Hamas, including aid and support to the terrorist attack in which the Ungars were killed.¹

The defendants neither answered the complaint nor participated in discovery. Instead, at various times from 2000 to 2005 they interposed motions asserting nonmerits-based defenses of sovereign immunity, lack of jurisdiction, nonjusticiability and the like. As the defendants now concede, the decision to stonewall in this fashion was a deliberate stratagem driven by the advice of their then-counsel and their unwillingness to recognize the authority of the federal courts.

The defendants' stratagem did not work. After considerable skirmishing, the district court, adopting a magistrate judge's report and recommendation, entered a default judgment against them on July 12, 2004. See Estates of Ungar v. Palestinian Auth, (Ungar I), 325 F.Supp.2d 15, 69 (D.R.I. 2004). The amount of the judgment exceeded $116,000, 000.² Id.

The defendants appealed but still did not deign to address the merits; rather, they argued that they were entitled to a final resolution of their sovereign immunity defense before a default judgment could be entered. Ungar II, 402 F.3d at 292. We rejected that argument. Id. at 294.

By 2007, however, times had changed. The PLO and the PA had come under new leadership, and the new leaders desired to take a different approach to litigation pending in the federal courts. This decision affected a number of pending cases, including this one (in which the judgment remains unsatisfied).

On December 28, 2007, the defendants, represented by new lead counsel, moved in the district court under Rule 60(b)(6) to vacate the default judgment. They posited that exceptional circumstances justified this relief, mentioning among other things their own political transformation; the large size of the judgment (on which interest was accruing); the potential impact of further collection efforts on the IsraeliPalestinian peace process; and the delicatenature of this nation's foreign relations in the Middle East. The defendants pledged that, if the judgment were set aside, they would "litigate this matter fully and responsibly."

The district court denied the motion. Ungar III, 613 F.Supp.2d at 231. The court focused the lens of its inquiry on the defendants' original decision to eschew participation in the defense of the case on the merits, notwithstanding the magistrate judge's explicit warnings about the risks inherent in that course of action. Id. at 230-31. This timely appeal ensued.

The assignment of error is two-tiered. First, the defendants argue that the district court's deployment of a categorical rule to deny their Rule 60(b)(6) motion was incorrect as a matter of law. Second, they argue that refusing to grant Rule 60(b)(6) relief in these circumstances was an abuse of discretion.

The denial of a Rule 60(b)(6) motion is typically reviewed for abuse of discretion. Teamsters, Chauffeurs, Warehousemen & Helpers Union v. Superline Transp. Co., 953 F.2d 17, 19 (1st Cir.1992). This standard is not monolithic: within it, embedded findings of fact are reviewed for clear error, questions of law are reviewed de novo, and judgment calls are subjected to classic abuse-of-discretion review. R&G Mortg. Corp. v. FHLMC, 584 F.3d 1, 7-8 (1st Cir.2009). To the extent that this appeal turns on the existence vel non of a categorical rule, it poses a pure question of law and, thus, engenders de novo review.

Rule 60(b) provides that, on motion and on such terms as are just, a district court may relieve a party from a final judgment. Fed.R.Civ.P. 60(b). The grounds for relief specified in the rule are grouped into six subsections. Each of the first five subsections describes a particular basis for relief from judgment. Rule 60(b)(6), however, is a catch-all provision. In terms, it authorizes the district court to grant relief from judgment for "any other reason that justifies relief." The decision to grant or deny such relief is inherently equitable in nature. See United States v. One Star Class Sloop Sailboat, 458 F.3d 16, 25-26 & n. 10 (1st Cir.2006); Teamsters, 953 F.2d at 19-20.

Although Rule 60(b)(6) applies to motions that seek to relieve parties from judgments taken by default, a decision about whether to vacate a default judgment involves a unique "blend of centrifugal and centripetal forces." Teamsters, 953 F.2d at 19. This is so because, in addition to the usual medley of factors that influence the resolution of Rule 60(b) motions, granting or withholding relief from a default judgment entails balancing the importance of finality in litigation against the desirability of deciding cases on the merits. See id. Such decisions tend to rest on fact-specific considerations informed by the nature and circumstances of the particular case. See Paul Revere Variable Annuity Ins. Co. v. Zang, 248 F.3d 1, 5-6 (1st Cir.2001).

A variety of factors can help an inquiring court to strike the requisite balance. Such factors include the timing of the request for relief, the extent of any prejudice to the opposing party, the existence or non-existence of meritorious claims of defense, and the presence or absence of exceptional circumstances.³Teamsters, 953 F.2d at 20. This compen-dium is neither exclusive nor rigidly applied. Id. Rather, the listed factors are incorporated into a holistic appraisal of the circumstances. In a particular case, that appraisal may—or may not—justify the extraordinary remedy of vacatur. Paul Revere, 248 F.3d at 5.

Against this backdrop, we turn to the case at hand. In denying relief to the defendants, the district court stated flatly that "a litigant's strategic choice to default precludes a finding of exceptional circumstances under Rule 60(b)(6)" and, thus, precludes relief. Ungar III, 613 F.Supp.2d at 229. Although the court made a passing mention of potential prejudice, it did not assess the mix of relevant factors but, rather, set aside factors other than the defendants' strategic choice, labelling such other factors "not determinative." Id. The decision, read as a whole, leaves no doubt but that the court denied the Rule 60(b)(6) motion on the basis that the defendants' willful default precluded relief as a matter of law. See id. at 231.

Our law in this area has not been clear, and the ruling of the able district judge misconceives it. We explain briefly.

Because Rule 60(b)(6) is a catch-all provision, its contours are peculiarly malleable. See Paul Revere, 248 F.3d at 5. Thus, hard-and-fast rules generally are not compatible with Rule 60(b)(6) determinations. Not surprisingly, then, a canvass of our decided cases reveals that we have never laid down an explicit, broad-scale categorical rule concerning willful defaults in the Rule 60(b)(6) milieu.

To this point, our cases have been somewhat equivocal about the existence of a categorical bar to vacatur under Rule 60(b)(6) when a party has willfully defaulted. A few cases suggest that when a party makes such a free, calculated, and deliberate choice, he must live with its consequences. See, e.g., Lubben v. Selective Serv. Sys. Local Bd. No. 27, 453 F.2d 645, 651-52 (1st Cir.1972). But in those situations, the reason for requesting vacatur boils down to a realization that, in hindsight, the movant's initial strategic choice had proven improvident. Consequently, principles of finality and repose carried the day. See, e.g., id. at 651; see also Ackermann v. United States, 340 U.S. 193, 198, 71 S.Ct. 209, 95 L.Ed. 207 (1950).

Our later cases, however, have signaled a retreat from absolutist language. These cases contemplate the possibility that the "extraordinary circumstances" needed to obtain Rule 60(b)(6) relief may arise, albeit in rare instances, even after a willful default. Stating that this court "[o]rdinarily" will uphold a refusal to vacate a default judgment entered against a willfully defaulting party,...