Crowe v. Bolduc

• Decision Date: 22 April 2004
• Docket Number: No. 03-2356.,03-2356.
• Parties: Byron A. CROWE, Plaintiff, Appellee, v. J.P. BOLDUC, Defendant, Appellant.
• Court: U.S. Court of Appeals — First Circuit

365 F.3d 86

Byron A. CROWE, Plaintiff, Appellee, v. J.P. BOLDUC, Defendant, Appellant.

No. 03-2356.

United States Court of Appeals, First Circuit.

Heard February 5, 2004.

Decided April 22, 2004.

COPYRIGHT MATERIAL OMITTED

Michael J. Gartland, with whom Lee H. Bals and Marcus, Clegg & Mistretta, P.A. were on brief, for appellant.

John M.R. Paterson, with whom Jennifer D. Sawyer and Bernstein, Shur, Sawyer & Nelson were on brief, for appellee.

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

SELYA, Circuit Judge.

This is, as Yogi Berra might say, deja vu all over again. Not long ago, we affirmed a verdict awarding plaintiff-appellee Byron A. Crowe $86,381.98 in his indemnity action against defendant-appellant J.P. Bolduc. Crowe v. Bolduc, 334 F.3d 124 (1st Cir.2003) (Crowe II). Flush from his appellate triumph, Crowe repaired to the district court and successfully petitioned for incremental awards of prejudgment interest and attorneys' fees. Bolduc challenges both awards.

The prejudgment interest issue requires us to revisit prior circuit precedent, specifically, Aubin v. Fudala, 782 F.2d 287 (1st Cir.1986). Aubin held that the proper vehicle for the initial assessment of mandatory prejudgment interest, wholly omitted from an earlier judgment, is a motion to correct the judgment pursuant to Fed.R.Civ.P. 60(a) rather than a motion to alter or amend the judgment pursuant to Fed.R.Civ.P. 59(e). Id. at 290. Recognizing that an intervening Supreme Court decision has undermined Aubin's resolution of this point, we overrule that determination and hold that, in such circumstances, resort should be made to Rule 59(e).¹ However, since Crowe justifiably relied upon, and faithfully followed, existing circuit precedent, we direct that this holding operate in a purely prospective fashion. Consequently, we affirm the award of prejudgment interest even though Crowe failed to file his motion within the ten-day period delineated in Rule 59(e).

The remaining question involves Crowe's entitlement vel non to attorneys' fees. The answer to that question depends principally on contractual arrangements entered into by and between the parties. Fairly read, those agreements authorize fee-shifting in the circumstances of this case. Thus, we affirm the award of attorneys' fees as well.

I. BACKGROUND

We do not write on a pristine page. This appeal is an offspring of a transaction that has been mired in litigation for several years. That litigation has inspired two published circuit court opinions, each of which recounts pertinent aspects of the factual background. See Crowe II, 334 F.3d at 128-30; Achille Bayart & Cie v. Crowe, 238 F.3d 44, 45-46 (1st Cir.2001) (Crowe I). We refer the reader who hungers for further details to those opinions. For present purposes, we offer only an overview.

Crowe was the president and sole shareholder of Andrew Crowe & Sons, Inc. d/b/a Crowe Rope Company (Crowe Rope). Once an industry leader, Crowe Rope fell upon hard times. By December of 1995, the company owed over $8,600,000 to its prime commercial lender, Fleet Bank. To secure this debt, Fleet held mortgages on, and security interests in, all the assets of Crowe Rope. When Crowe Rope defaulted on its obligations to Fleet, Bolduc emerged as a white knight.

Acting through a web of holding companies, Bolduc purchased the Fleet debt and stepped into Fleet's shoes as Crowe Rope's principal secured creditor. Crowe Rope then transferred all of its assets to one of Bolduc's nominees (the Operating Company) and Crowe and his wife transferred some business-related real estate held in their names to another of Bolduc's nominees. In exchange, Bolduc and/or the Operating Company agreed to (i) cancel the existing debt and release the Crowes from any personal liability, (ii) pay the Crowes (or the survivor of them) a $40,000 lifetime annuity, (iii) pay Crowe a $60,000 one-time fee for consulting services and for agreeing not to compete, and (iv) hold the Crowes harmless should creditors cry foul. We discuss below the various documents that memorialize this transaction.

The deal left Crowe Rope's trade creditors barking up a defoliated tree. On May 6, 1998, one such creditor, Achille Bayart & Cie, brought suit against the Crowes seeking to set aside the $40,000 annuity as a fraudulent transfer. See Crowe I, 238 F.3d at 46. After some preliminary skirmishing, not relevant here, the district court granted the Crowes' motion for judgment as a matter of law. We affirmed that decision. Id. at 49.

In Crowe's view, certain provisions in the agreements between the parties bound Bolduc to defray the legal fees that he had expended in defending Crowe I. Accordingly, he brought suit against Bolduc in a Maine state court to recoup those fees. Bolduc removed the case to the district court based on diversity of citizenship and the existence of a controversy in the requisite amount. 28 U.S.C. §§ 1332(a)(1), 1441(a). The parties proceeded by consent before a magistrate judge. See id. § 636(c). After a two-day trial, a jury accepted Crowe's view of the arrangement and awarded him $86,381.98. Crowe II, 334 F.3d at 130. We affirmed that award on July 3, 2003. Id. at 139.

That did not end the case, but, rather, set the stage for further proceedings. On July 25, 2003, Crowe invoked Fed.R.Civ.P. 60(a) and moved to correct the judgment by adding prejudgment interest. He also moved for an award of attorneys' fees pursuant to Fed.R.Civ.P. 54(d)(2). The magistrate judge granted both motions, tacking on $3,437.44 in prejudgment interest and $67,872.50 in attorneys' fees.² This appeal ensued.

II. PREJUDGMENT INTEREST

Bolduc's challenge to the prejudgment interest award turns on abstract questions of law. We therefore review the lower court's decision de novo. Disola Dev., LLC v. Mancuso, 291 F.3d 83, 86 (1st Cir.2002); R.I. Charities Trust v. Engelhard Corp., 267 F.3d 3, 5 (1st Cir.2001).

When a plaintiff obtains a jury verdict in a diversity case in which the substantive law of the forum state supplies the rules of decision, that state's law governs the plaintiff's entitlement to prejudgment interest. See R.I. Charities Trust, 267 F.3d at 8; Roy v. Star Chopper Co., 584 F.2d 1124, 1135 (1st Cir.1978). Maine law broadly entitles prevailing civil plaintiffs to prejudgment interest as a matter of right. Me.Rev.Stat. Ann. tit. 14, § 1602 (repealed and replaced by Me.Rev.Stat. Ann. tit. 14, § 1602-B, effective for judgments entered on or after July 1, 2003); Sawyer v. Walker, 572 A.2d 498, 499 (Me.1990). It is, therefore, beyond serious question that Crowe's success in Crowe II carried with it an entitlement to prejudgment interest so long as that entitlement was properly preserved.

Despite Crowe's right to recover prejudgment interest, the district court's judgment in Crowe II made no mention of interest, but simply confirmed the damage award. That judgment entered no later than November 12, 2002.³ On July 25, 2003 — more than eight months thereafter — Crowe filed a motion to augment the judgment by adding prejudgment interest. Crowe brought this motion under Fed.R.Civ.P. 60(a), which provides in pertinent part that "[c]lerical mistakes in judgments ... and errors therein arising from oversight or omission may be corrected by the court at any time ... on the motion of any party."

Bolduc opposed Crowe's motion, asseverating that Rule 60(a) was the wrong procedural vehicle and that recourse to the proper vehicle — Fed. R. Civ. P. 59(e) — was time-barred. Rule 59(e) governs motions to alter or amend a judgment and explicitly provides that all such motions "shall be filed no later than 10 days after entry of judgment." Because Crowe had filed his motion to add prejudgment interest more than 250 days after the entry of judgment, the ten-day deadline, if applicable, had long since expired.

The district court rejected Bolduc's importunings. It found this case "indistinguishable in all material respects" from our earlier decision in Aubin, 782 F.2d at 290. Relying principally on that precedent, the court anointed Rule 60(a) as an acceptable vehicle for adding prejudgment interest and adjudged Crowe's motion timely. Aubin, however, was a weaker reed than the district court thought. We explain briefly.

In Aubin, the plaintiff won a jury verdict in New Hampshire's federal district court and, thus, became entitled to prejudgment interest as a matter of New Hampshire law. Id. at 289 (citing N.H.Rev.Stat. Ann. § 524:1 b). The court entered a judgment that referred only to the amount of damages and the plaintiff subsequently moved to add prejudgment interest. The district court allowed the motion even though it had been filed more than ten days after entry of the judgment. We affirmed, holding that a Rule 60(a) motion was an appropriate vehicle for correcting a final judgment that omitted mandatory prejudgment interest and that, therefore, the plaintiff's motion was not subject to the temporal strictures of Rule 59(e). Id. at 290.

This court decided Aubin in 1986. Three years later, the Supreme Court decided Osterneck v. Ernst & Whitney, 489 U.S. 169, 109 S.Ct. 987, 103 L.Ed.2d 146 (1989). In that case, the Court held that a motion to augment a previously entered judgment by adding discretionary prejudgment interest is properly classified as a motion to alter or amend the judgment, and, thus, must be brought under Rule 59(e). Id. at 175, 109 S.Ct. 987. The Court reasoned from the premise that the use of Rule 59(e) is appropriate when a motion involves "reconsideration of matters properly encompassed in a decision on the merits." Id. at 174, 109 S.Ct. 987 (quoting White v. N.H. Dep't of Emp. Sec., 455 U.S. 445, 451, 102 S.Ct. 1162, 71 L.Ed.2d 325 (1982)). It then noted two considerations pertinent to discretionary prejudgment interest: (i) prejudgment interest traditionally has been regarded as a make-whole remedy and as a part of the plaintiff's...