Resolution Trust Corp. v. Keating

• Decision Date: 06 August 1999
• Docket Number: No. 94-15989,N,94-15989
• Citation: 186 F.3d 1110
• Parties: (9th Cir. 1999) RESOLUTION TRUST CORPORATION, Plaintiff-Appellee, v. CHARLES H. KEATING, JR., Defendant-Appellant. RESOLUTION TRUST CORPORATION, Plaintiff-Appellee, v. MARY ELAINE KEATING; CHARLES H. KEATING, JR., Defendants-Appellants. o. 94-16956
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1110

186 F.3d 1110 (9th Cir. 1999)

RESOLUTION TRUST CORPORATION, Plaintiff-Appellee, v. CHARLES H. KEATING, JR., Defendant-Appellant.

RESOLUTION TRUST CORPORATION, Plaintiff-Appellee, v. MARY ELAINE KEATING; CHARLES H. KEATING, JR., Defendants-Appellants.

No. 94-15989, No. 94-16956

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted February 12, 1997

Submission withdrawn March 25, 1998

Resubmitted July 30, 1999

Filed August 6, 1999

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

Charles H. Keating, Jr., Pro Se, Tucson, Arizona, Mary Elaine Keating, Pro Se, Paradise Valley, Arizona, Stephen C. Neal, Palo Alto, California, for the defendants-appellants.

Michael C. Manning and Kristin L. Farnen, Morrison & Hecker, Phoenix, Arizona, for the plaintiffs-appellees.

Appeals from the United States District Court for the District of Arizona Richard M. Bilby, District Judge, Presiding. D.C. No. MDL-834-RMB.

Before: Procter Hug, Jr., Chief Judge, David R. Thompson and Andrew J. Kleinfeld, Circuit Judges.

OPINION

HUG, Chief Judge:

Charles Keating, Jr., appeals the district court's entry of summary judgment in favor of the Resolution Trust Corporation. The district court concluded that judgments in three prior proceedings foreclosed Keating from relitigating his liability in the instant action and entered judgment against Keating in the amount of $4,345,004,815.73. We must decide whether the doctrine of collateral estoppel or "issue preclusion" justifies the entry of summary judgment against Keating. We have jurisdiction pursuant to 28 U.S.C. S 1291, and we reverse.

BACKGROUND

American Continental Corporation ("American Continental") was a publicly held company based in Phoenix, Arizona. Charles Keating, Jr., was American Continental's principal shareholder, its chief executive officer, and chairman of its board. American Continental acquired Lincoln Savings and Loan Association ("Lincoln"), a California based company, in 1984. On April 13, 1989, American Continental declared bankruptcy. The following day, the Federal Home Loan Bank Board (the "Board"), pursuant to a statutory grant of authority, appointed the Resolution Trust Corporation (the "RTC") as Lincoln's conservator. Subsequently, the Board made the RTC Lincoln's receiver.

The RTC brought this action, as the successor in interest to Lincoln, against Keating and others in federal district court for the District of Arizona. On April 6, 1990, the Judicial Panel on Multi-district Litigation consolidated this case with several other actions brought against Keating in California, including Shields v. Keating, C.A. No. CV-89-2052 (SVW)(BX). In re American Continental Corp./Lincoln Sav. & Loan Securities Litigation, 130 F.R.D. 475, 476 (J.P.M.L. 1990). Before the consolidated cases went to trial, the RTC moved for a separate trial and, eventually, the district court severed the instant action.

The RTC filed its Third Amended Complaint on October 24, 1991, alleging RICO violations and various state and common law theories. The RTC then moved for summary judgment against Keating on the following counts: Count I -Violating 18 U.S.C. S 1962(c); Count III -- Violating 18 U.S.C. S 1962(d); Count VII -- Common Law Fraud; Count VIII -- Civil Conspiracy; and Count IX -- Breach of Fiduciary Duties. In its motion for summary judgment, the RTC agreed to dismiss all other counts then pending against Keating if it prevailed on the motion. The RTC grounded its motion on the criminal conviction in United States v. Keating, No. CR 91-01021-MRP (C.D. Cal. 1993), as well as the judgments rendered in Lincoln Sav. & Loan Ass'n v. Wall, 743 F.Supp. 901 (D.D.C. 1990) ("Wall") and Shields v. Keating (In re American Cont. Corp./Lincoln Savings & Loan Securi- ties Litigation), MDL No. 834 (D.Ariz. Nov. 5, 1992) ("Shields"). The RTC argued that all issues material to Keating's liability in the present action were actually litigated and determined against Keating in the prior proceedings. As a matter of law, therefore, the RTC contended it was entitled to summary judgment against Keating.

On April 20, 1994, the district court entered an Order and Memorandum Opinion granting the RTC's motion for summary judgment. The court then entered judgment in the amount of $4,315,004,815.73 in favor of the RTC against Keating on May 27, 1994. The district court also dismissed all other counts then pending against Keating, thereby concluding the litigation before that court. Keating's premature notice of appeal, filed May 18, 1994, is treated as if it was filed on May 27, 1994, after the district court entered the judgment. See FRAP 4(a)(2).

The RTC, pursuant to FRCP 59(e), filed a timely motion to amend or alter the judgment to include the marital estate of Mary Elaine Keating.¹ The district court initially denied the RTC's motion on August 3, 1994. Upon the RTC's Motion to Reconsider, on September 12, 1994, the court entered an order, which concluded that all of Keating's acts had been committed for the benefit of his marital estate and granted the RTC's Motion for Reconsideration. A separate amended judgment was entered on September 20, 1994. Keating and Mary Elaine Keating filed a timely notice of appeal from the amended judgment on October 14, 1994.²

DISCUSSION

A grant of summary judgment is reviewed de novo . Bagdadi v. Nazar, 84 F.3d 1194, 1197 (9th Cir. 1996). Whether collateral estoppel, which is more accurately designated "issue preclusion," is available to a litigant is a question of law that we review de novo. In re Russell, 76 F.3d 242, 244 (9th Cir. 1996). With regard to the use of offensive nonmutual collateral estoppel in the federal courts, the Supreme Court has indicated that it is not precluded, but that trial courts should have broad discretion to determine when it should be applied. Parklane Hosiery Co. Inc. v. Shore, 439 U.S. 322, 331 (1979).

Collateral estoppel, or issue preclusion, prevents parties from relitigating an issue of fact or law if the same issue was determined in prior litigation. Robi v. Five Platters, Inc., 838 F.2d 318, 322 (9th Cir. 1988). To invoke non-mutual offensive issue preclusion in this case, the RTC must prove that: (1) Keating was afforded a full and fair opportunity to litigate the issues in the prior actions; (2) the issues were actually litigated and necessary to support the judgments; (3) the issues were decided against Keating in final judgments; and (4) Keating was a party or in privity with a party in the prior proceedings. Pena v. Gardner, 976 F.2d 469, 472 (9th Cir. 1992).

Here, the district court found that the doctrine of issue preclusion prevented Keating from further litigating his liability. The district court found that Keating's "criminal conviction alone provides a sufficient basis for entry of judgment on Counts I, III, VII, VIII and IX of the RTC's Third Amended Complaint." Resolution Trust Corp. v. Keating (In re American Continental Corp./Lincoln Sav. & Loan Securities Litigation), MDL No. 834, 89-1509 at 6 (D. Ariz. April 25, 1994) (hereinafter "District Court Order"). The court found, in the alternative, that the litigation in Wall and Shields would also support summary judgment on the basis of issue preclusion. Id. at 6-7. We discuss each of these proceedings separately.

I. The Criminal Conviction

Following the collapse of Lincoln, Keating was charged with and found guilty of numerous federal crimes, including violating 18 U.S.C. S 1962 (c) and (d) and conspiring to defraud Lincoln. Keating appealed. A panel of our court remanded the case for the district court to determine whether there was a reasonable probability that extrinsic evidence affected the jury's verdict. United States v. Keating, 87 F.3d 1324 (9th Cir. 1996) (unpublished disposition). We withdrew submission pending the outcome of the criminal proceeding.

Pursuant to the remand order, the district court held an evidentiary hearing, vacated the judgment of conviction, and ordered a new trial. United States v. Keating , Nos. CR 911021-MRP, CR 92-0110-MRP at 1 (C.D. Cal. Jan. 10, 1997). Keating has recently pled guilty to wire fraud and concealment of assets with the intent to defeat the provisions of the bankruptcy code. Id. (C.D. Cal. Apr. 6, 1999). Keating stipulated that he directed Medena Home Loans of Utah, an American Continental subsidiary, to issue unsecured loans to insiders. Id. at Ex. A. Keating's conduct, as outlined in the criminal plea, is not included in Counts I, III, VII, VIII, or IX of the RTC's complaint. We cannot affirm the grant of summary judgment in favor of the RTC on the basis of Keating's original criminal conviction that was vacated, nor on the basis of the recent criminal conviction as the conduct outlined in the plea agreement is not related to the RTC's claims.

II. The Wall Litigation

When American Continental filed for bankruptcy, the Federal Home Loan Bank Board (the "Board"), pursuant to its statutory powers under 12 U.S.C. S 1464(d)(6)(A), appointed a conservator to operate Lincoln. Wall, 743 F.Supp. at 902903. The Board decided to appoint a conservator after it concluded in an ex parte proceeding that Lincoln was" `in an unsafe and unsound condition to transact business,' and that there had been a `substantial dissipation of assets or earnings due to . . . violations of law, rules, or regulations, or to any unsafe or unsound . . . practices.' " Id. at 903 (quoting 12 U.S.C. S 1464(d)(6)(A)) (footnote omitted). The Board later replaced the conservator with a receiver. Id.

American Continental and Lincoln then challenged the Board's determinations. Id. The district court conducted a 29 day evidentiary hearing, in which oral testimony and docu- mentary evidence were received by the district court. Id. at 904 n.3. The district court reviewed the central issue of whether statutory grounds existed for the appointment of a conservator or receiver at the time the Bank Board...