FDIC v. S. Prawer & Co.

• Decision Date: 21 July 1993
• Docket Number: Civ. No. 92-379-P-C.
• Citation: 829 F. Supp. 439
• Parties: FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff, v. S. PRAWER & CO., et al., Defendants, v. FLEET BANK OF MAINE and Recoll Management Corp., Third-Party Defendants.
• Court: U.S. District Court — District of Maine

829 F. Supp. 439

FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff, v. S. PRAWER & CO., et al., Defendants, v. FLEET BANK OF MAINE and Recoll Management Corp., Third-Party Defendants.

Civ. No. 92-379-P-C.

United States District Court, D. Maine.

July 21, 1993.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Benjamin P. Zuckerman, Anne M. Dufour, Verrill & Dana, Portland, ME, for plaintiff.

Joseph J. Hahn, Bernstein, Shur, Sawyer, & Nelson, Portland, ME, Lawrence R. Kulig, Goldstein & Manello, Boston, MA, Jeffrey Bennett, Herbert H. Bennett & Associates, P.A., Portland, ME, for defendants S. Prawer & Co., Gilbert Prawer and Harvey Prawer.

Gerald Petruccelli, Michael K. Martin, Petruccelli & Martin, Portland, ME, for defendant C & S Wholesale Grocers, Inc.

John S. Campbell, Poulos, Campbell & Zendzian, Portland, ME, for defendants Edwin D. Abramson and Abramson, Quittner, Abramson & Moffa.

Thomas F. Monaghan, Monaghan, Leahy, Hochadel & Libby, Benjamin P. Zuckerman, Portland, ME, for third-party defendant Fleet Bank of Me.

MEMORANDUM AND ORDER ON MOTIONS TO DISMISS AND MOTION TO STRIKE

GENE CARTER, Chief Judge.

In this action the Federal Deposit Insurance Corporation (FDIC) seeks to recover on promissory notes which Defendant S. Prawer & Co. signed in favor of Third Party Defendant Fleet Bank and which are currently held by the FDIC. FDIC also seeks to recover for fraudulent transfer, civil conspiracy, and tortious interference with a contract. Defendants, insisting that the notes upon which the FDIC is suing have been paid in full, have brought a counterclaim against the FDIC (Docket No. 20) and a third-party complaint against Fleet Bank of Maine and Recoll Management Corp. (Docket No. 18). Recoll is alleged to be wholly-owned subsidiary of Fleet engaged in debt collection. The counterclaim and the third-party complaint, which are virtually identical in many respects, allege abuse of process, fraud, misrepresentation and deceit/fraud on the court, tortious and simple breach of contract/breach of the covenant of good faith and fair dealing, defamation and/or placing in a false light, intentional tort/intentional infliction of emotional distress, negligent infliction of emotional distress, advancing a wholly insubstantial, frivolous law suit while not in the exercise of good faith, and loss of consortium. The third-party complaint also sets forth claims for conversion, unjust enrichment and restitution, money had and received, punitive damages and indemnification/contribution against Fleet and Recoll. FDIC, Fleet and Recoll have all filed separate motions to dismiss, which are now before the Court. (Docket Nos. 29, 39, 41).

In passing on a motion to dismiss, the Court assumes that all of the factual allegations in the complaint are true, and draws all inferences in favor of the Plaintiffs. Resolution Trust Corp. v. Driscoll, 985 F.2d 44, 48 (1st Cir.1993). The Court need not, however, accept legal conclusions or bald assertions. Id. The complaint should not be dismissed unless it appears beyond doubt that Plaintiffs can prove no set of facts which would entitle them to relief. Wyman v. Prime Discount Securities, 819 F.Supp. 79, 81 (D.Me.1993).

Fleet, Recoll, and the FDIC all urge the Court to dismiss the counterclaim and third-party complaint on the grounds that they do not specify which of the three actually committed the acts complained of, alleging instead that "Fleet's/Recoll's/FDIC's conduct and actions" are wrongful. FDIC, Recoll, and Fleet argue that such general allegations do not afford them the fair notice of the claims against them that is required by Federal Rule of Civil Procedure 8(a).

The Court does not find that dismissal is warranted on these grounds. Many of the actions alleged to form the basis of the counterclaim and third-party complaint are those of a particular attorney who represented FDIC, Fleet, and Recoll at various meetings or those of an agent of Recoll who stated in an affidavit that he holds documents concerning the Prawers' outstanding obligations to Maine Savings Bank and to New Maine National Bank and its successors, which in both instances include Fleet and the FDIC. Given the overlap of representatives of the FDIC, Fleet and Recoll, the Court does not find the allegations too general to sustain a challenge based on lack of notice under Rule 8(a). This conclusion is supported by the fact that all three parties have been able to understand the allegations in the complaint well enough to file detailed motions to dismiss. The Court will, therefore, discuss the motions to dismiss as they apply to each specific count.

Abuse of Process

In both the counterclaim and the third-party complaint, the Prawer Defendants allege that "the allegations and claims contained in the complaint constitute an abuse and misuse of lawful process ... asserted with ... wrongful intent." Counterclaim, ¶ 33, Third-Party Complaint, ¶ 34. Under Maine law, the elements necessary to sustain an action for abuse of process include "`1) a use of the process in a manner not proper in the regular conduct of the proceedings and 2) the existence of an ulterior motive.'" Packard v. Central Maine Power Co., 477 A.2d 264, 267 (Me.1984) (quoting Nadeau v. State, 395 A.2d 107, 117 (Me. 1978)). The action is limited in that it lies for the improper use of process after it has issued, not for maliciously causing process to issue. Id.; Lambert v. Breton, 127 Me. 510, 514, 144 A. 864 (1929). The Maine Law Court has also explained that "the test for abuse of process is, probably, whether the process has been used to accomplish some unlawful end, or to compel the defendant to do some collateral thing which he could not legally be compelled to do." Lambert v. Breton, 127 Me. at 514, 144 A. 864. "`The gist of tort ... consists in the unlawful use of a lawful process. The bad intent must culminate in an actual abuse of the process by perverting it to a use to obtain a result which the process was not intended by law to effect.'" Saliem v. Glovsky 132 Me. 402, 406, 172 A. 4 (1934) (quoting Sec. 375, 50 C.J. at 614-15).

Here, the only party which has used any legal process against the Prawers is the FDIC. The abuse of process claims must, therefore, be dismissed as against Recoll and Fleet. The Prawers at certain points seem to be alleging that the filing of the complaint, with allegedly wrongful and legally insubstantial claims, constitutes abuse of process. Counterclaim, ¶ 34, 38. Such allegations alone, even when taken as true, would not support an abuse of process claim, for as the Law Court has made clear, a claim for abuse of process only lies for actions taken after process has issued. Lambert v. Breton, 127 Me. at 514, 144 A. 864.¹

The complaint also includes allegations, however, that counsel for the FDIC during the progression of this case "has routinely sabotaged settlement negotiations," and has proposed a stay of litigation and wrongfully retracted it. Counterclaim, ¶¶ 24-26. The Prawer Brothers argue that these actions and the complaint were used to try wrongfully to force them to pay individually a debt owed by the Prawer Company. The complaint, however, seeks recovery on the debt only from the Company and seeks other relief from the Prawer Brothers relating to their alleged actions in conjunction with the sale of Prawer Company's assets. Even if filing the complaint were actionable conduct, these are permissible uses of process. The settlement negotiations in the course of litigation are not technically process of the court subject to charges of abuse of process. In any event, while the settlement negotiations may have been uncivil, there is no allegation that the ill-will or strong-arm tactics alleged to have occurred "culminated in an actual abuse of the process, by perverting it to a use to obtain a result which the process was not intended by law to effect."² Saliem v. Glovsky, 132 Me. at 406, 172 A. 4. As the Law Court stated in Saliem v. Glovsky, 132 Me. at 406, 172 A. 4, "regular use of process cannot constitute abuse, even though the user was actuated by a wrongful motive." The allegations of the counterclaim and third-party complaint, therefore, are not sufficient to state a claim of abuse of process and must be dismissed as to the FDIC as well as to Fleet and Recoll.

Fraud, Misrepresentation and Deceit, Fraud on the Court

As the Court understands Count II of both the counterclaim and the third-party complaint, it alleges that "Fleet/Recoll/FDIC" have falsely represented to the Court that the notes at issue in this suit are in default and that they are entitled to recover on them, and that the Court is relying on these false representations to the detriment of the Prawers. Under Maine law a separate action may be brought alleging fraud on the court. Lewien v. Cohen, 432 A.2d 800, 805 (Me.1981). The nature of such an action, however, is to present a collateral attack on a judgment entered in a previous action. Since there is no prior judgment here, the Prawers have failed to state a claim under Maine law upon which relief can be granted.

Fraud on the court is frequently raised in the federal courts in the context of a post-judgment motion brought under Federal Rule of Civil Procedure 60(b). Obviously, this case, still in its pre-trial stages, is not ripe for the filing of a 60(b) motion. Although Rule 60(b) does not preclude resort to an independent action to set aside a judgment for fraud or other reasons, no judgment exists here to be set aside. To the extent that Count II attempts to state a claim under federal law, it too must fail. Obviously, however, if there is a possibility of fraud on the court in a given action, it may and should be raised in the course of that action by motion, and appropriate remedies are available if such fraud is found. See Aoude v. Mobil Oil Corp. 892 F.2d 1115, 1118-19 (1st Cir.1989).

Count II, which is the same in both the counterclaim and the...