Society of Lloyd's v. Garlington

For opinion see 107 Fed.Appx. 887

United States Court of Appeals,

Eleventh Circuit.

THE SOCIETY OF LLOYD'S, Plaintiff-Appellee,

Julius Peek GARLINGTON and Glenn Wayne Manning, Defendants-Appellants.

No. 03-13794 HH.

March 22, 2004.

ON APPEAL FROM THE NORTHERN DISTRICT OF GEORGIA CASE NO. 1 02-CV-1602-GET

Reply Brief of Appellant

Theodore W. Grippo, Jr., Lindenbaum Coffman Kurlander Brisky & Grippo, Ltd., Three First National Plaza, Suite 2315, Chicago, IL 60602-4206, (312) 855-4410

A. Stephens Clay, Stephen E. Hudson, Kilpatrick Stockton LLP, 1100 Peachtree St., Suite 2800, Atlanta, GA 30309-4530, (404) 815-6500

FNAttorneys for Defendant-Appellant Glenn Wayne Manning

*i TABLE OF CONTENTS

TABLE OF CITATIONS ... ii

INTRODUCTION ... 1

A. The District Court Abused Its Discretion in Refusing to Permit Appellant Manning to Conduct Discovery Before Ruling on Lloyd's Summary Judgment Motion ... 4

B. Appellant Manning Is Entitled to Conduct Meaningful Discovery to Obtain Evidence That Lloyd's Judgments Obtained in English Court Are Unenforceable Because They Were Procured by Fraud ... 5

CONCLUSION ... 8

CERTIFICATE OF COMPLIANCE WITH RULE 32(a) ...

CERTIFICATE OF SERVICE ...

Note: Table of Contents page numbers missing in original document

*ii TABLE OF CITATIONS

Cases

Dixon v. Commissioner, 316 F.3d 1041 (9th Cir. 2003) ... 2, 6

Driller Co. v. General Excavator Co., 290 U.S. 240 (1933) ... 6

Galindo v. ARI Mut. Ins. Co., 203 F.3d 771 (11th Cir. 2000) ... 5

Gen. Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074 (7th Cir. 1997) ... 5

Glassman v. Computervision Corp., 90 F.3d 617 (1st Cir. 1996) ... 5

Hilton v. Guyot, 159 U.S. 113 (1895) ... 1

Jefferson County Sch. Dist. No. R-1 v. Moody's Investor's Servs., Inc., 175 F.3d 848 (10th Cir. 1999) ... 5

Jones v. City of Columbus, Ga., 120 F.3d 248 (11th Cir. 1997) ... 4

Keystone Driller Co. v. General Excavator Co., 290 U.S. 240 (1933) ... 2, 6

Lipcon v. Underwriters at Lloyd's, London, 148 F.3d 1285 (11th Cir. 1998) ... 2, 6

Shane v. Fauver, 213 F.3d 113 (3d Cir. 2000) ... 5

Snook v. Trust Co. of Ga. Bank, NA, 859 F.2d 865 (11th Cir. 1988) ... 4

Soc'y of Lloyd's v. Ashenden, 233 F.3d 473 (7th Cir. 2000) ... 7

Soc'y of Lloyd's v. Mullin, 255 F. Supp. 2d 468 (E.D. Pa. 2003) ... 7

Soc'y of Lloyd's v. Turner, 303 F.3d 325 (5th Cir. 2002) ... 7

Soc'y of Lloyd's v. Webb, 156 F. Supp. 2d 632 (N.D. Tex. 2001), aff'd, 303 F.3d 325 (5th Cir. 2002) ... 7

Stripling v. Jordan Prod. Co., 234 F.3d 863 (5th Cir. 2000) ... 5

WSB-TV v. Lee, 842 F.2d 1266 (11th Cir. 1988) ... 4

*iii Statutes

O.C.G.A. § 9-12-114(5) (1993) ... 1

*1 INTRODUCTION

Appellant Manning demonstrated in his initial Brief that the District Court abused its discretion by entering summary judgment in favor of the Plaintiff-Appellee, The Society of Lloyd's ("Lloyd's), and against Appellant Manning, while denying him the opportunity to assert a fraud on the court defense or to conduct any discovery to support that defense. The District Court erroneously reasoned that such a defense was "futile" as a matter of law. [R. 4-37-2, -4, - 10, -11.] The District Court treated Lloyd's complaint to enforce its English judgments under the Georgia Foreign Money Judgments Recognition Act, O.C.G.A. § 9-12-1 10, et seq., as a perfunctory exercise and gave no attention to the serious allegations of fraud on U.S. courts sought to be raised in this case.

Contrary to the District Court's ruling, a fraud on the court defense is not futile as a matter of law. Fraud is a specifically enumerated defense to an action under the Georgia Foreign Money Judgments Recognition Act, O.C.G.A. § 9-12-114(5) (1993); Hilton v. Guyot 159 U.S. 113,205-06(1895). Moreover, as Appellant Manning discussed in his initial Brief, federal courts have the "inherent power" to deny relief to a party, and to protect the integrity of their own procedures, where that party comes before the federal court with "unclean hands," having obtained a prior judgment on the basis of fraud on U.S. courts. *2Keystone Driller Co. v. General Excavator Co., 290 U.S. 240 (1933); Dixon v. Commissioner, 316 F.3d 1041 (9th Cir. 2003).

Appellant Manning has offered evidence that Lloyd's made misrepresentations directly to U.S. courts about the remedies available to Names in England to convince the U.S. courts to enforce the forum selection clauses in the Names' contracts with Lloyd's and to require the Names to litigate their claims against Lloyd's in England. These misrepresentations were also made indirectly to the Names, such as Appellant Manning. These misrepresentations led directly to the U.S. precedent that required U.S. Names, including Appellant Manning, to litigate in England, and that litigation produced the English judgments that Lloyd's seeks to enforce in this case.

For example, Appellant Manning has offered evidence that Lloyd's represented to the District Court in the Eastern District of Virginia that the Names' remedies in England are "far better than any remedy [a Name] has in the United States," that "the law in the United Kingdom is vastly superior, in many respects, to the law in the United States [for the Names]," and that the Names will receive "substantially better [protection in England], than [they] could find [in the U.S.]." [R. 3-23-79. -80, -82.] Additional examples of such representations are included in the record. [R.3-23-78.] Several U.S. courts, including this Court in Lipcon v. Underwriters at Lloyd's, London, 148 F.3d 1285, 1299 (11th Cir. 1998), enforced *3 the forum selection clauses in the Names' contracts based on these and similar representations by Lloyd's.

These representations were not accurate, and Lloyd's does not even argue that they were accurate. Moreover, neither Lloyd's nor its witnesses disclosed the significant limitations and restrictions placed on any Name's effort to obtain legal redress against Lloyd's in the United Kingdom as a result of the R&R byelaw enacted in December 1995. The full extent of these restrictions was unknown to the Names, including Appellant Manning, until October 1996. [R. 3- 23-73, -75.

Thus, contrary to the District Court's holding, it cannot be said that, as a matter of law, Appellant Manning will not be able to develop any evidence during discovery to support a fraud on the court defense. Appellant Manning should be given the opportunity to assert its fraud on the court defense and to conduct discovery to support that defense before the District Court rules on Lloyd's summary judgment motion. This Court, therefore, should reverse the District Court's order and judgment, and remand the case with instructions that Appellant Manning be given leave to amend his answer to assert a fraud on the court defense and be given an adequate time to conduct appropriate discovery before ruling on Lloyd's motion for summary judgment.

*4 ARGUMENT AND CITATION OF AUTHORITY

A. The District Court Abused Its Discretion in Refusing to Permit Appellant Manning to Conduct Discovery Before Ruling on Lloyd's Summary Judgment Motion.

This Court has held, consistently and repeatedly, that a party opposing a motion for summary judgment must be permitted an adequate opportunity to conduct meaningful discovery before consideration of the motion. "The law in this circuit is clear: the party opposing a motion for summary judgment should be permitted an adequate opportunity to complete discovery prior to consideration of the motion." Jones v. City of Columbus. Ga., 120 F.3d 248, 253 (11th Cir. 1997); accord. Snook v. Trust Co. of Ga. Bank, NA. 859 F.2d 865, 870-71 (11th Cir. 1988); WSB-TV v. Lee. 842 F.2d 1266, 1269 (11th Cir. 1988). The District Court's summary judgment order in this case is inconsistent with this authority.

Lloyd's does not attempt to address or distinguish this line of cases. Instead, Lloyd's argues only that the District Court did not abuse its discretion in refusing to permit Appellant Manning to conduct any discovery before granting Lloyd's motion for summary judgment because his proposed fraud defense was "futile" as a matter of law and thus the discovery sought was irrelevant. Lloyd's Brief at 19-20. Lloyd's entire defense of the District Court's discovery ruling hinges on the legal futility of Appellant Manning's fraud defense. If, however, the District Court's *5 conclusion about Appellant Manning's defense is wrong, then its refusal to allow him to conduct any discovery is erroneous as well.

B. Appellant Manning Is Entitled to Conduct Meaningful Discovery to Obtain Evidence That Lloyd's Judgments Obtained in English Court Are Unenforceable Because They Were Procured by Fraud on U.S. Courts.

A proposed amendment to a pleading is "futile" if the pleading, as amended, "'would be subject to dismissal." 'Galindo v. ARJ Mut. Ins. Co., 203 F.3d 771, 777 (11th Cir. 2000) (quoting Jefferson County Sch. Dist. No. R-1 v. Moodv's Investor's Servs., Inc., 175 F.3d 848, 859 (10th Cir. 1999). Other circuits have made it clear that "futility" in this context means that the proposed amended pleading "would fail to state a claim upon which relief could be granted." Stripling v. Jordan Prod. Co., 234 F.3d 863, 872-73 (5th Cir. 2000); accord. Shane v. Fauver, 213 F.3d 113, 115 (3d Cir. 2000); Gen. Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1085 (7th Cir. 1997); Glassman v. Computervision Corp., 90 F.3d 617, 623 (1st Cir. 1996). As demonstrated above, it cannot be said the Appellant Manning's fraud on the court defense fails to state a valid defense under applicable law. Appellant Manning should have been given leave to raise that defense.

Significantly, Lloyd's makes no attempt to defend as accurate the representations to U.S. courts quoted above or in Appellant Manning's initial Brief. Lloyd's does not even mention them or address them. On the current record, it is *6 undisputed that those representations were inaccurate in describing the remedies that Names would have in England in litigation with Lloyd's. Jf given the opportunity, Appellant Manning believes that discovery will reveal that Lloyd's made similar misrepresentations to U.S. courts, including this Court in Lipcon, supra, and that their decisions upholding the forum selection clauses were based, at least in part, on Lloyd's misrepresentations.

Lloyd's makes no effort to defend the misrepresentations quoted above and argues only the Appellant Manning's fraud defense is futile because U.S. courts have enforced English judgments against Names and in so doing have found that the procedural rights afforded the Names in England in litigation with Lloyd's met the minimum requirements of due process. Lloyd's Brief at 12-18. In effect, Lloyd's is arguing that it can make misrepresentations to U.S. courts with impunity so long as the procedural rights available to the Names in England met the minimum requirements of due process, even if they were woefully short of the remedies promised by Lloyd's to U.S. courts and to U.S. Names.

This Court should not and must not countenance Lloyd's argument. It is well-settled that federal courts have the "inherent power" to deny relief to a party where that party comes before the federal court with "unclean hands," having obtained a prior judgment on the basis of fraud on U.S. courts. Keystone Driller Co. v. General Excavator Co., 290 U.S. 240 (1933); *7Dixon v. Commissioner, 316 F.3d 1041 (9th Cir. 2003). The discovery that Appellant Manning sought to conduct - document requests and depositions of Lloyd's representatives - would have allowed him to obtain documents and testimony relevant to establishing his defense that Lloyd's procured the English judgments through fraudulent statements to American courts and therefore the judgments are not entitled to recognition under Georgia law or international comity. This is valid defense and Appellant Manning should be afforded an opportunity to conduct discovery to develop it.

Lloyd's argues, and Appellant Manning concedes, that several published decisions have affirmed judgments in favor of Lloyd's and against American Names enforcing English judgments. See, e.g., Soc'y of Lloyd's v. Turner, 303 F.3d 325 (5th Cir. 2002); Soc'v of Lloyd's v. Ashenden, 233 F.3d 473 (7th Cir. 2000); Soc'v of Lloyd's v.Mullin, 255 F. Supp. 2d 468 (E.D. Pa. 2003); Soc'v of Lloyd's v. Webb. 156 F. Supp. 2d 632 (N.D. Tex. 2001), aff'd, 303 F.3d 325 (5th Cir. 2002). But none of these cases considered Appellant Manning's fraud on the court defense and, of course, that issue was not litigated in England. The issue raised in this Court - whether Appellant Manning should be permitted to assert a fraud on the court defense and conduct discovery to support that defense - is an issue of first impression. This Court should not allow Lloyd's to get away with misrepresentations to U.S. courts, including this Court, that resulted in the judicial *8 precedent that made it possible for Lloyd's to obtain the English judgments that it seeks to enforce in this case.

CONCLUSION

For the reasons stated above and in Appellant Manning's initial brief, the Court should reverse the District Court's order granting Lloyd's motion for summary judgment and remand, with instructions that Defendant Manning be allowed full discovery and trial.