Indianapolis Life Ins. Co. v. Herman

• Decision Date: 13 February 2008
• Docket Number: No. 07-1797.,07-1797.
• Citation: 516 F.3d 5
• Parties: INDIANAPOLIS LIFE INSURANCE COMPANY, Plaintiff, v. Rosalind HERMAN, Trustee, Financial Resources Network, Inc. Profit Sharing Plan and Trust; Financial Resources Network, Inc. Profit Sharing Plan and Trust, Defendants, Cross-Claim Defendants, Appellants, Rudy K. Meiselman, M.D., Defendant, Cross-Claim Plaintiff, Appellee, Gregg D. Caplitz; Hope E. Meiselman, Defendants.
• Court: U.S. Court of Appeals — First Circuit

516 F.3d 5

INDIANAPOLIS LIFE INSURANCE COMPANY, Plaintiff, v. Rosalind HERMAN, Trustee, Financial Resources Network, Inc. Profit Sharing Plan and Trust; Financial Resources Network, Inc. Profit Sharing Plan and Trust, Defendants, Cross-Claim Defendants, Appellants Rudy K. Meiselman, M.D., Defendant, Cross-Claim Plaintiff, Appellee Gregg D. Caplitz; Hope E. Meiselman, Defendants.

No. 07-1797.

United States Court of Appeals, First Circuit.

Heard November 8, 2007.

Decided February 13, 2008.

Robert D. Cohan with whom Cohan Rasnick Myerson LLP was on brief for appellants.

Charles P. Kazarian, P.C. for appellee.

Before BOUDIN, Chief Judge, CAMPBELL and STAHL, Senior Circuit Judges.

BOUDIN, Chief Judge.

In the district court, the plaintiff (now appellee) Rudy Meiselman obtained a default judgment against defendant (now appellant) Rosalind Herman—trustee of the Financial Resources Network Profit Sharing Plan and Trust ("FRN plan"). The dispute on this appeal is whether Herman, named in some court papers as trustee and in others not, is liable only in her trustee capacity or whether she is personally liable to Meiselman.

Financial Resources Network, Inc. ("FRNI") is apparently a Massachusetts corporation engaged in business as a registered investment advisor. During the pertinent period, Herman served as president, treasurer, secretary and a director of the company; Meiselman has alleged that she is the sole shareholder but that Gregg Caplitz is an undisclosed principal who controls the company. FRNI administers a profit sharing plan for its employees governed by the Employee Retirement Income Security Act (ERISA), 26 U.S.C § 401(k) (2000); 29 U.S.C. § 1001 (2000) et seq., and Herman acted as plan administrator and sole trustee.

Meiselman, now living in Florida, is a retired doctor who in 2002 became a technical analyst for FRNI. In joining the company, he elected to participate in the pension plan, directed that much of his salary be contributed to the plan and executed a tax-free rollover of his pre-existing retirement funds—over $11 million—into the plan. At the end of June 2004, Meiselman directed Herman to transfer all the assets in his plan account to a new IRA account that he had established elsewhere.

In November 2004, Indianapolis Life Insurance Company ("Indianapolis Life") brought a law suit in the Massachusetts federal district court against "Rosalyn Herman, Trustee," FRN Trust (but not FRNI), Caplitz and Meiselman and his wife. The complaint sought to rescind life insurance policies on the lives of Meiselman and his wife (designating the FRN plan as beneficiary) and to recover a large agent's commission paid to Caplitz. The complaint alleged that Herman had proceeded with the applications despite Meiselman's objection and without disclosing his failing health.

Meiselman answered the complaint (endorsing rescission), and "cross-claimed" against FRNI (although it was not a party), Herman and Caplitz. The cross-complaint sought substantial damages growing out of alleged derelictions by the cross-claim defendants in misappropriating Meiselman's funds and failing to execute his earlier directive to transfer his plan assets. The claims were based on various theories including breach of Meiselman's employment contract and pension plan rights, breach of fiduciary duty under ERISA and conversion of property.

The cross-claim defendants never answered Meiselman's complaint, a default was entered on June 28, 2005, and on August 18, the district court granted Meiselman's motion for default judgment. On January 6, 2006, Meiselman sought entry of a separate final judgment in the amount of $938,640.14, Fed.R.Civ.P. 54(b), while on January 10, Herman and her co-defendants sought relief from the default judgment, Fed.R.Civ.P. 60(b), on account of their then-counsel's allegedly excusable neglect in failing to answer. The district court held a hearing on January 25, 2006, refused to undo the default, and the following day granted Indianapolis Life's motion for summary judgment. On January 27, the court entered a final judgment on all the claims in the case, including Meiselman's cross-claim. On the cross-claim, the judgment was for $938,640.14 plus costs and interest "[f]or Crossclaim Plaintiff Rudy Meiselman against Crossclaim defendant[] Rosalind Herman, Trustee, Financial Resources Network, Inc., Profit Sharing Plan and Trust."

Herman, the company, the plan and Caplitz sought review of the final judgment in this court, challenging the grant of summary judgment to Indianapolis Life and the denial of their request to undo the default. In a per curiam decision, this court upheld both of the district court's actions, Indianapolis Life Ins. Co. v. Herman, 204 Fed.Appx. 908, 910 (1st Cir. 2006) ("Meiselman I"). That final judgment is controlling in this case; the present appeal concerns its interpretation and Meiselman's efforts to enforce it.

On March 6, 2006, Meiselman obtained an execution from the clerk of the district court for $1,046,955.23 (plus costs and post-judgment interest) against "Gregg D. Caplitz, Rosalind Herman, and Financial Resources Network, Inc.," jointly and severally. Meiselman noticed Herman's deposition and sought production of an assortment of her personal financial documents. When Herman failed to appear, a magistrate judge held a hearing on October 18, 2006, and found Herman in contempt. At a subsequent show cause hearing on November 20, Herman agreed to produce the requested documents and to appear for a deposition.

On December 15, 2006, Herman filed a motion to stay enforcement of and correct the execution, arguing that the execution made her personally liable whereas she was actually liable only in her capacity as trustee. Opposing the motion, Meiselman asked the district court to amend the judgment to remove the trustee designation following Herman's name, At a hearing on December 21, the district court denied Herman's motion without prejudice, instructed her to purge herself of the contempt order before filing further motions, and denied Meiselman's motion as moot.

On March 6, 2007—after Herman had been deposed and had produced certain documents—the contempt order was lifted. Herman then renewed her motion to stay enforcement of and correct the execution, and Meiselman renewed his motion to amend the judgment. On May 4, 2007, the district court issued an order without opinion denying Herman's motion, clearing the way—it appears—for Meiselman to proceed against Herman's personal assets in satisfaction of the judgment.

Herman has now filed a timely appeal with this court arguing that the district court erred in not amending the execution to conform to the judgment; she asserts that the cross-complaint and resulting judgment made her liable only in her capacity as trustee of the FRN plan. Meiselman defends the district court's orders. We are now left to sort out this sorry tangle. The standard of review (Herman says de novo; Meiselman, abuse of discretion) depends on the particular issue. See Roger Edwards, LLC v. Fiddes & Son Ltd., 427 F.3d 129, 132 (1st Cir.2005).

The sole order under review, evidenced only by a docket entry, was entered on May 4, 2007, denying the "emergency motion" by Herman and the plan to set aside and correct the execution as not conforming to the judgment; the motion also sought to set aside an attachment secured against Herman's residence and an order against Meiselman preventing him from "proceeding against Herman's personal assets to collect the Original Judgment" entered January 27, 2006, and upheld in Meiselman I.

Herman's main and best argument is that she was never a party to the case in her personal capacity and that the judgment itself ran against her only in her capacity as trustee. If so, the execution procured by Meiselman, seemingly effective against Herman in her personal capacity, would be inconsistent with the judgment. Ordinarily, a money judgment against an individual in his official capacity runs only against the entity's assets.¹

The district court has inherent power to correct an execution at odds with the supporting judgment; this does not, as some of the briefing suggests, depend on state law. The judgment is that of the district court and while state procedures can be used for collection, Fed.R.Civ.P: 69(a), a discrepancy between two directives of the district court—judgment and execution—would be a matter subject to the court's inherent powers. See Patton v. Sec'y of Dep't of Health & Human. Servs., 25 F.3d 1021, 1027 (Fed.Cir.1994); Fed. R.Civ.P. 60(a).

Here, the district court gave no reason for its denial of Herman's motion, but, in opposing the motion, Meiselman had argued that the cross-complaint sought to impose liability on Herman in her personal capacity and that the judgment should be read conformably. The district judge, we can assume, accepted this view. No other basis for denying the motion was urged. And such an interpretation explains why the district judge found it unnecessary to rule on Meiselman's back-up motion to amend the judgment itself.

At first blush, such a reading of the cross-complaint and judgment might seem surprising: the case caption in the district court throughout the case described the first defendant as "Rosalind Herman, Trustee," and the pertinent final paragraph of the judgment awarded the money judgment to Meiselman "against ... Rosalind Herman, Trustee" (along with the other two cross-claim defendants). Nor was she re-served in her individual capacity.² But the case caption is not conclusive and the judgment is subject to more than one reading.

The caption started with the original complaint by Indianapolis Life and, so far as Herman was a defendant in that aspect of the case, she was certainly sued by Indianapolis Life in her capacity as trustee. The main relief sought against her was to rescind policies of which the plan was beneficiary; monetary relief was sought only against...