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Chemlen v. Bank of Ireland, 8 F.3d 809, 1st Cir. (1993)
Chemlen v. Bank of Ireland, 8 F.3d 809, 1st Cir. (1993)
3d 809
RICO Bus.Disp.Guide 8412
Appeal from the United States District Court for the District of
Massachusetts
Leon P. Chemlen on brief pro se.
Alan R. Hoffman and Lynch, Brewer, Hoffman & Sands, on brief for
appellee.
D.Mass.
AFFIRMED.
Before Breyer, Chief Judge, Torruella and Selya, Circuit Judges.
Per Curiam.
Appellant Leon Chemlen appeals the dismissal of his civil action alleging
violations of the Racketeer Influenced and Corrupt Organization Act [RICO],
18 U.S.C. 1961 et seq., the Massachusetts Consumer Protection Act, M.G.L.
ch. 93A, and state and federal civil rights statutes by appellees Bank of Ireland,
its general counsel, Joel Brickman, the law firm of Sheehan, Phinney, Bass &
Green and two of its employees, and Joseph Schindler, trustee of appellee's
Finally, Chemlen appealed the order authorizing the trustee to settle the suits
against the bank, the order denying his request to enjoin the settlement, and the
order denying his request to remove the trustee. The district court dismissed his
appeal on these issues on the ground that Chemlen lacked standing. The court
found that the settlement proceeds were part of the estate and that Chemlen had
not shown that a successful appeal would create a surplus of assets over
liabilities for the estate. Chemlen therefore lacked any direct pecuniary interest
in the estate and was not a "person aggrieved" by the contested orders. Chemlen
did not appeal the decision of the district court.
Meanwhile, in January 1993, Chemlen filed the instant suit. It repeats various
factual allegations previously made before the bankruptcy court. However,
Chemlen now seeks relief under RICO, federal civil rights law and state
consumer protection and civil rights law. The gravamen of Chemlen's
complaint is that he suffered harm from appellees' illegal actions depriving him
of his property in the proceeds of the two lawsuits settled by the trustee. The
district court dismissed the complaint on the ground that it was an improper
We have recently placed the doctrine of res judicata into workable perspective:
The doctrine of res judicata bars all parties and their privies from relitigating
issues which were raised or could have been raised in a previous action, once a
court has entered a final judgment on the merits in the previous action. United
States v. Alky Enterprises, Inc., 969 F.2d 1309, 1314 (1st Cir. 1992). The
essential elements of res judicata, or claim preclusion, are (1) a final judgment
on the merits in an earlier action; (2) an identity of the parties or privies in the
two suits; and (3) an identity of the cause of action in both the earlier and later
suits. Kale v. Combined Insurance Co. of America, 924 F.2d 1161, 1165 (1st
Cir.), cert. denied, 112 S.Ct. 69 (1991).
F.D.I.C. v. Shearson-American Express, Inc., 996 F.2d 493, 497 (1st Cir. 1993)
(quoting Aunyx Corp. v. Canon U.S.A., Inc., 978 F.2d 3, 6 (1st Cir. 1992), cert.
denied, 113 S.Ct. 1416 (1993)) (emphasis in original). "The normal rules of res
judicata and collateral estoppel apply to the decisions of the bankruptcy
courts." Id. (quoting Katchen v. Landy, 382 U.S. 323, 334 (1966)). "Generally,
a court-approved settlement receives the same res judicata effect as a litigated
judgment." In re Medomak Canning, 922 F.2d 895, 900 (1st Cir. 1990).
We find all the elements of res judicata to have been met in this case. We
consider the elements in reverse order for the sake of clarity.
10
v. Avent, 891 F.2d 583, 586-87 (5th Cir.), cert. denied 498 U.S. 819 (1990)
(appellant's RICO and securities claims which are "directly inconsistent with
the crux" of bankruptcy court decision are "same cause of action" for purposes
of res judicata); In re Met-L-Wood Corp, 861 F.2d 1012, 1018 (7th Cir. 1988),
cert. denied 490 U.S. 1006 (1989) (dismissing on res judicata grounds a RICO
suit because "the suit is a thinly disguised collateral attack on the judgment" of
the bankruptcy court).
11
Second, even though the bank may not have been a party or a privy to a party in
bankruptcy proceedings, it may still estop Chemlen from relitigating his
challenge to the settlements. See Blonder-Tongue Laboratories, Inc. v.
University of Illinois Foundation, 402 U.S. 313 (1971) (defendant may invoke
estoppel against plaintiff who lost on same issue to earlier defendant); Lynch v.
Merrell-National Laboratories, Div. of Richardson-Merrell, Inc., 830 F.2d
1190, 1192 (1st Cir. 1987) (same).
12
Third, the order approving the settlement of the suits is a final order within the
context of the bankruptcy proceedings. In bankruptcy proceedings, "an order
which disposes of a 'discrete dispute within the larger case' [is] considered final
and appealable." In re American Colonial Broadcasting Corp., 758 F.2d 794,
801 (1st Cir. 1985) (quoting In re Saco Local Development Corp., 711 F.2d
441, 444 (1st Cir. 1983)). For purposes of this rule:
13
A final judgment is one which disposes of the whole subject, gives all the relief
that was contemplated, provides with reasonable completeness for giving effect
to the judgment and leaves nothing to be done in the cause save superintend,
ministerially, the execution of the decrees.
14
Id. (quoting City of Louisa v. Levi, 140 F.2d 512, 514 (6th Cir. 1944)). The
court order approving the settlement of the suits fits this definition. See In re
Patel, 43 Bankr. 500, 503 (N.D. Ill. 1984) ("bankruptcy court order approving a
settlement is final and appealable under [28 U.S.C.] 1334(a) because it
determines the rights of the parties to the settlement").
15
Finally, Chemlen asserts that he falls within an exception to the usual rules of
res judicata because his appeal was dismissed for lack of standing and thus was
not an appeal on the merits of the bankruptcy court decision. See, e.g., 18
Wright, Miller, & Cooper, Federal Practice and Procedure: Jurisdiction 4433,
at 316 ("If ordinary opportunities to appeal are thwarted by the circumstances
of a particular case ... preclusion may prove unwise."); McCarney v. Ford
Motor, Co., 657 F.2d 230, 234 (8th Cir. 1981) (dismissal based upon lack of
standing is ordinarily not "on the merits" of the underlying substantive claims).
16
17
Appellee Bank of Ireland is the parent of First New Hampshire Bank, the
successor to Merchants National Bank
Chemlen's motion to dismiss the trustee was simply another attempt to block
the settlement