The opinion of the court was delivered by: SHADUR
MILTON I. SHADUR, UNITED STATES DISTRICT JUDGE
This is the latest (and it is to be hoped the last) excursion into the arcane mysteries of federal jurisdiction in this action -- excursions that have contributed to keeping this case in existence far longer than either the mean or median life of cases on this Court's individual calendar (let alone the total calendars that make up the caseload in this District Court). Now-dismissed defendant William Bettison, Jr. ("Bettison") seeks to invoke Fed.R.Civ.P. ("Rule") 60(b)(4) to recover the amount that he contributed toward the sum of $ 288,771.71 collected by Newman-Green, Inc. ("NGI") on May 12, 1987 on the partial summary judgment (the "Judgment") that this Court had awarded earlier on Count I of NGI's Complaint. For the reasons stated in this memorandum opinion and order, this Court denies both (1) Bettison's motion and (2) the additional relief that has now been sought by Bettison's former co-defendants (and still defendants in this action) Alejandro Alfonzo-Larrain, Irene Larrain de Caplan, Alberto Tudela and Rafael Tudela (collectively "Remaining Defendants").
Though many of the other aspects of the checkered history of this litigation could also serve as suitable grist for the mill of a law school course in federal jurisdiction, this opinion will limit itself to retracing the steps relevant to the current motion. No factual dispute has been raised by the parties about those matters -- and to the extent that they depend on representations made by the litigants in their current submissions (for example, the amount Bettison says he contributed to the single lump-sum payment made to NGI in satisfaction of the Judgment), this Court will accept such representations as true.
On June 26, 1985 this Court entered partial summary judgment on Count I, finding in favor of NGI and holding Bettison and Remaining Defendants (collectively "Guarantors") liable as a matter of law on one aspect of their written guaranty undertaking (612 F. Supp. 1434 (N.D.Ill. 1985)).
Then after further proceedings had provided the necessary information as to the amount at issue in that one aspect, on December 17, 1986 this Court quantified Guarantors' Count I liability as aggregating $ 207,908.86 plus prejudgment interest. And on January 5, 1987 a supplement to the December 17 order was entered, including a Rule 54(b) determination that rendered the following judgment order final:
NGI shall have judgment in its favor on Count I of its complaint against Alejandro Alfonzo-Larrain R., Irene Larrain de Caplan, Rafael Tudela, Alberto Tudela and William L. Bettison, jointly and severally, in the total amount of $ 279,936.46, representing the principal amount of $ 207,908.86 plus 5 percent per annum prejudgment interest on that principal amount from January 31, 1980 to the date of this judgment.
In contrast to that straightforward (albeit protracted) sequence of events, the other aspects of this litigation have followed an extraordinarily tortuous path. When other aspects of this Court's rulings (not the Count I money judgment) were taken up on appeal, the Court of Appeals identified a jurisdictional flaw that had escaped all the litigants and this Court as well: Bettison, who is a United States citizen but who was not alleged in the Complaint to be a citizen of any state (apparently he resides, as do Remaining Defendants, in Venezuela), was a diversity spoiler in subject matter jurisdictional terms. That problem occupied the Court of Appeals not only at the initial panel level (832 F.2d 417, 419-20 (7th Cir. 1987)) but en banc (854 F.2d 916 (7th Cir. 1988) and dissenting opinion, id. at 927), then found its way to the Supreme Court, which by a 7-to-2 vote reversed our Court of Appeals' en banc reversal of the panel decision (490 U.S. 826, 109 S. Ct. 2218, 104 L. Ed. 2d 893 (1989)).
At the end of that line it was conclusively decided that the Court of Appeals had the power to dismiss out Bettison as a defendant and thus to preserve this Court's subject matter jurisdiction over the case. That was done in a one-paragraph order entered by the Court of Appeals on November 1, 1989, and on the same day that Court remanded the case here for further proceedings consistent with the original panel opinion, 832 F.2d at 420-22. What Bettison now contends is that he should recoup his contribution to the funds that made up the Ex. 1 cashier's check because that contribution was made when the jurisdictional flaw had not yet been cured.
Jurisdiction To Determine Jurisdiction
As the just-completed historical outline reflects, this action has once before been diverted from its merits into a jurisdictional bypass. To prevent a possible recurrence of that situation, this opinion first examines the issue of jurisdiction over the present motion -- lest the already-remarked absence of diversity between Bettison and NGI might also be thought to impair this Court's ability to deal with Bettison's motion.
Two bases for such jurisdiction present themselves. Both are persuasive and may be dealt with quickly.
For one thing, because Bettison's motion is filed under Rule 60(b)(4) it is viewed as ancillary to NGI's original action. No independent jurisdictional basis is thus required. As Smith v. Widman Trucking & Excavating, Inc., 627 F.2d 792, 799 (7th Cir. 1980) (citations omitted) put it in a somewhat different context:
These principles are controlling in this case. It is clear that a Rule 60(b) motion is considered ancillary to or a continuation of the original suit; the motion thus requires no independent jurisdictional ground. . . . If the district court had jurisdiction when the original suit was filed, it has jurisdiction to entertain a Rule 60(b) motion. This jurisdiction is not divested by subsequent events.
This case poses a variant on that situation, one in which jurisdiction over the action itself plainly exists now (with Bettison out of the lawsuit). There is no apparent reason to treat his Rule 60(b)(4) motion as any less ancillary to the underlying action.
It is equally well established that a challenge to the continuing validity of a federal judgment, made by a motion seeking relief from that judgment, poses a federal question (see, e.g., Villarreal v. Brown Express, Inc., 529 F.2d 1219, 1221 (5th Cir. 1976) (per curiam)). That being so, any absence of diversity of citizenship is wholly irrelevant.
Either of those grounds suffices to confirm subject matter jurisdiction over the current motion. Bettison's lack of the requisite diverse citizenship, though it must now be viewed as fatal to the original judgment as against him, does not taint his current motion.
At its core Bettison's motion rests on the premise that the Judgment (though it ran against all Guarantors and not against Bettison alone) was void for lack of subject matter jurisdiction -- and that being so, he says, anything that followed upon the Judgment was equally tainted. To that end Bettison cites to Watts v. Pinckney, 752 F.2d 406 (9th Cir. 1985), in which the Court of Appeals for the Ninth Circuit granted relief under Rule 60(b)(4), finding that the judgment involved there was void and therefore ordering restitution of the amount previously paid by the judgment debtor in satisfaction of that nullity.
But in this instance Bettison's underlying premise is totally false. Unlike Watts (where the judgment itself was void
), the judgment in this case was void only as against Bettison. Unless no real effect is to be given to the decision of the Supreme Court and to the later action of our Court of Appeals in dismissing Bettison and thus implementing the Supreme Court's decision, the case against Remaining Defendants must be treated as always having been within federal jurisdiction by reason of the dismissal of stream-polluting defendant Bettison -- not as having been a nullity from the outset and a continuing nullity running through the time of the Judgment and thereafter, only to be raised from the dead like Lazarus when Bettison was ultimately dismissed.
That conclusion necessarily follows from the Supreme Court decision and the foundation on which it rested. As did the dissenting opinion in our Court of Appeals (authored by Judge Easterbrook, joined by Judges Flaum and Kanne), the Supreme Court pointed to Carneal v. Banks, 23 U.S. (10 Wheat.) 181, 187-88, 6 L. Ed. 297 (1825) and Horn v. Lockhart, 84 U.S. (17 Wall.) 570, 579, 21 L. Ed. 657 (1873) as precedential authority -- see, in the Supreme Court, 109 S. Ct. at 2224 and, in Judge Easterbrook's dissent, 854 F.2d at 930-31. In those two seminal Supreme Court cases the dismissal of dispensable nondiverse parties had been viewed as totally curative -- so that the dismissals accomplished what Judge Easterbrook described at 854 F.2d 930 in citing those early cases:
Long before [ Mansfield, Coldwater & Lake Michigan Ry. v.] Swan, [111 U.S. 379, 28 L. Ed. 462, 4 S. Ct. 510 (1884)] the Court held that a district judge may dismiss a dispensable, non-diverse party and get on with the case -- presumably "retroactively" validating any acts that had occurred before the dismissal.
With the claimed Watts underpinning for his position thus removed, Bettison's entire superstructure collapses entirely. What we have in the Judgment is a valid judgment against Remaining Defendants, satisfied by a lump-sum payment by Guarantors to which Bettison contributed. And that contribution was obviously the product of a mistaken perception of the law (one then shared by all the other litigants and this Court) that Bettison too was jointly and severally liable for the entire amount of the Judgment. If Bettison had been more perceptive or prescient, he could have raised the issue before this Court
-- but having failed to do so, he cannot now inflict on NGI the cost of his own mistake of law in pitching in toward payment of the Judgment. Bettison contributed to a total fund that was tendered to NGI as a unitary payment by the Bell, Boyd & Lloyd law firm (then representing all Guarantors). There were no direct negotiations between NGI and Bettison and no separate payment by him, and those things alone would appear to pose problems for Bettison's current effort to carve out a portion of what was paid over in the form of an indivisible cashier's check.
But even apart from that roadblock to recovery, Bettison's payment was at best made under a mistake of law and cannot be recouped for that reason (there are a number of Illinois cases standing for that proposition, but the leading case remains Groves v. Farmers State Bank of Woodlawn, 368 Ill. 35, 12 N.E.2d 618 (1938)). Bettison Mem. 2 and Remaining Defendants Mem. 4 urge that the just-stated doctrine that payments made under a mistake of law are not subject to recapture "applies only to voluntary payments" or payments not "made under compulsion." That much is true, but what both Bettison and Remaining Defendants have failed to acknowledge is that those terms "voluntary" and "compulsion" are entirely matters of definition and that the controlling Illinois authority, Groves, 368 Ill. at 47, 12 N.E.2d at 624 squarely held that a payment made under the pressure of an outstanding judgment (even though that judgment was erroneous) was not made under compulsion and was indeed voluntary -- so that the payment was thus held nonrecoverable precisely because it had been "paid under a mistake of law."
In sum, then, NGI had initially obtained a valid judgment entered by a court that -- given the teaching of the Supreme Court -- did have subject matter jurisdiction (though that result came about by reason of later validation). Bettison voluntarily kicked into the payment of that judgment as the result of discussions with his fellow defendants in which NGI had no voice. NGI received a single payment of the Judgment without any indication of the source and amount of the respective contributions. If Bettison wants relief from his voluntary but mistaken participation, he must look to the other defendants and not to NGI. Bettison's motion must be and is denied.
Remaining Defendants' Prayer for Injustice
Because Remaining Defendants' current claim is wholly derivative, Bettison's failure also spells automatic defeat for Remaining Defendants. But against the possibility that an appellate court might differ with this Court's view of Bettison's motion -- and at least as importantly because of the extraordinary outrageousness of what Remaining Defendants' counsel urge as a collateral result of victory for Bettison if he should achieve it -- some separate treatment of Remaining Defendants' submission is in order.
That submission really has to be read to be believed. It is succinctly summarized at Remaining Defendants Mem. 1, where the proposed additional consequences of Bettison's attempted recoupment are stated this way:
Based upon well established federal and Illinois law, defendants submit that the judgment entered on Count I of the Second Amended Complaint should be vacated, that Mr. Bettison should recover from plaintiff Newman-Green, Inc. ("NGI") his pro rata share of the amount paid on the judgment entered thereon, and that NGI should recover no part thereof from the defendants. In addition, the restitution made by NGI should include all postjudgment interest paid by the defendants and an amount to cover applicable Venezuelan taxes.
For that extraordinary outcome, in which NGI would be stripped not only of the amount contributed by Bettison to the previously-satisfied Judgment but also of any ability to recover that amount from the jointly and severally liable Remaining Defendants, those Remaining Defendants point to the post-remand with-prejudice dismissal of Bettison by our Court of Appeals. In response to this Court's inquiry made after it had received that startling proposal, Remaining Defendants' counsel have tendered the September 24, 1987 motion that NGI submitted to the Court of Appeals asking dismissal of Bettison to preserve subject matter jurisdiction (Ex. 4 to this opinion),
then the parties' respective September 1, 1989 submissions to the Court of Appeals in response to that court's post-remand August 21, 1989 direction (Exs. 5 and 6 to this opinion), followed by the Court of Appeals' November 1, 1989 one-paragraph order dismissing Bettison with prejudice. Then, say Remaining Defendants to this Court and to NGI (their Mem. 5, emphasis added):
Because the judgment paid by defendants and Mr. Bettison was void, NGI must be required to make restitution of the entire sum and should not be allowed to recover subsequently for the amount of the judgment reflecting postjudgment interest. In addition, if and when this Court reenters judgment under Count I, the amount of that judgment must be reduced by Mr. Bettison's pro rata share because NGI has released all its claims against Mr. Bettison.
Even if that accurately represented the law, it is fair to state that there is no court in the land that would not relieve NGI of the harsh and inequitable result of relieving Remaining Defendants of legal responsibility for 20% of their adjudicated and substantively undisputed liability. For one thing, it appears on its face to have all the characteristics of a sneak play -- as to which some explanation is in order.
The opinion of the Supreme Court endorsed the panel's conclusions (1) that this court had power to grant plaintiff's motion to dismiss the nondiverse defendant, thereby perfecting the jurisdiction of this court over the case, and (2) that that power was correctly exercised on the facts of this case, without any need for a remand to permit the district court to pass on such a motion in the first instance. The Supreme Court's reversal thus extends to the only grounds given by the en banc opinion for vacating the panel decision.
Instead it was the panel's initial opinion in the Court of Appeals that introduced the notion of a dismissal with prejudice (832 F.2d at 420 (citations omitted, emphasis added)):
A court ought not allow a dismissal that injures adverse parties unduly, compared with the position the plaintiff could have achieved by suing the right parties in the first place. The guarantors other than Bettison may be injured in fact by Bettison's dismissal: they must pay the $ 200,000 (plus interest) for the pre-November 1979 sales without Bettison's help, and they are exposed to liability for other sales. We gather from NGI's representations at oral argument that Bettison has property in the United States on which NGI may have planned to levy. This is not, however, the sense of prejudice that matters. The guarantors are jointly and severally liable, so none is an indispensable party under Fed.R.Civ.P. 19(b). . . . NGI could have sued only the four Venezuelan guarantors in the first place, putting them in the same position they will occupy once NGI dismisses Bettison. Bettison's presence in the district court did not affect the conduct of the litigation.
The only apparent prejudice is to Bettison, who has participated in this litigation and faces the prospect of a second suit in state court. Had NGI filed this case in the courts of Illinois or Venezuela, or sued Bettison in one court while pursuing the Venezuelan guarantors in another, his liability would have been finally determined in a single litigation. NGI's carelessness about federal jurisdiction is responsible for this problem, so although we grant NGI's motion to dismiss Bettison, we dismiss him with prejudice. The other guarantors may pursue Bettison to obtain contribution or indemnity, if they are entitled to any.
And it will be remembered that the Court of Appeals said that in the context of an unappealed judgment (unappealed even by Bettison) for the more than $ 200,000 referred to in the quoted language.
What the panel ordered there was ultimately specifically approved by the Supreme Court, employing virtually the same language about Remaining Defendants having to seek contribution or indemnity from Bettison once he was dismissed from the lawsuit (109 S. Ct. at 2226):
Second, given that all of the guarantors (including Bettison) are jointly and severally liable, it cannot be argued that Bettison was indispensable to the suit. Fed.Rule Civ.Proc. 19(b); see 854 F.2d at 938 (Easterbrook, J., dissenting). The only person who faces any prejudice is Bettison himself, who has participated in this litigation from the start, and who would face the possibility of suit in a state or Venezuelan court. The panel solved this problem by terminating the litigation against Bettison with prejudice, thus leaving the other guarantors with the burden of pursuing Bettison to obtain contribution or indemnity. 832 F.2d at 420. The panel's disposition was entirely appropriate. Nothing but a waste of time and resources would be engendered by remanding to the District Court or by forcing these parties to begin anew.
It was Remaining Defendants' (and not NGI's) September 1, 1989 post-remand submission to the Court of Appeals that referred to the proposed "with prejudice" dismissal of Bettison -- in each of the three numbered paragraphs of Remaining Defendants' submission. Yet not a word was said in Remaining Defendants' "Reasons for the Actions Suggested" (the substantive part of their September 1 submission) as to their current strategy, although that same submission to the Court of Appeals specifically projected the current move by Bettison (whom, it will be recalled, the same lawyers had also represented throughout his prior involvement in this litigation):
Accordingly, defendants-appellees submit that the case should be remanded to Judge Shadur to consider whether the case should proceed against the remaining guarantors after the dismissal of Mr. Bettison. At that time, Mr. Bettison also intends to move that all payments made by him in satisfaction of the partial summary judgment be returned to him.
So it is flat-out misleading for Remaining Defendants' counsel to ascribe the with-prejudice aspect of the Bettison dismissal to NGI, as they do in their current Mem. 6 to this Court:
By dismissing with prejudice its claim against Mr. Bettison, NGI has released him from his liability under the guaranty. See, e.g., Luke v. Signal Oil & Gas Co., 523 F.2d 1190, 1191 (5th Cir. 1975) (a dismissal with prejudice of a claim has the "force and effect of a full release"). With the release of Mr. Bettison, the remaining guarantors are released to the extent of one-fifth of the guaranteed amount, and any judgment entered against the defendants on Count I must be correspondingly reduced.
What is now sought by Remaining Defendants is bankrupt both equitably and legally. It would take away from NGI an amount to which it has been formally adjudicated to be entitled, an amount never thereafter challenged by Remaining Defendants as representing NGI's just due -- and it would provide Remaining Defendants with a corresponding undeserved and unanticipated windfall. It must again be recalled that only NGI was an appellant before the Court of Appeals -- it was successfully seeking reversal of the aspects of this Court's ruling adverse to it and in favor of Guarantors. That claim -- NGI's remaining joint and several claim against Guarantors, and not its already-satisfied Judgment -- was what it then moved to dismiss solely against Bettison. When the Court of Appeals panel then determined in the first instance that such dismissal should be with prejudice, it expressly contemplated and expressly said that Remaining Defendants would still be jointly and severally liable for the entire amount of the Judgment that was not up for review (a judgment that the Court of Appeals was unaware had already been paid, as well as its not having been appealed). Either as a matter of construction -- of any fair reading -- of the Bettison dismissal or as a matter of relief from the egregiously unfair result now urged by Remaining Defendants, the "release" of Bettison cannot be given the effect they claim.
This opinion has consistently adverted to Remaining Defendants' counsel as well as to the litigants themselves. That has not been accidental. In a related area of the law, Rule 11 has come in for more than its share of criticism, some well-founded and some not. But one constructive result of the objective good-faith standard now embodied in that Rule might well be seen as a formalization (in a way not unlike the enactment of the criminal law) of standards that define antisocial conduct -- but as with the criminal law, those are most typically standards with which people ought to comply even in the absence of such formalization. This Court's former colleague, Judge Susan Getzendanner, used to refer to the "straight face test" as one that every lawyer ought to adhere to with or without the compulsion of Rule 11: Never make an argument you cannot advance with a straight face.
Counsel for Remaining Defendants clearly fail that test. They are indeed spared potential exposure to the most frequently imposed Rule 11 sanction -- that of fee-shifting -- by the fact that this Court has not required any of the parties to respond to the initial memorandum filed by any other. That being true, NGI has not been subjected to the expense of any lawyers' fees in order to answer Remaining Defendants' contentions dealt with in this opinion. But it is this Court's candid opinion that no self-respecting lawyer could or should present the arguments that have now been submitted by counsel for Remaining Defendants -- whether of their own devising or at their clients' behest. Those arguments fly directly in the face of the Court of Appeals' express intention, which could not have been more plainly stated. And in other respects those arguments simply misstate the law (see n.9).
Advocacy has its proper place, and that of course can and should include a lawyer's advancement of any contention that can be made in good conscience. It is not the place of any court to chill responsible advocacy. But professionalism has its proper place as well. In this Court's view, Remaining Defendants' counsel have breached even the most forgiving standard.
All that however is an unfortunate sideshow to the main event. In substantive terms, if this Court's determination as to Bettison were not to prevail, it remains this Court's view that Remaining Defendants ...