Appeal from an order of the United States District Court for the Southern District of New York, Mary Johnson Lowe, Judge, denying a motion by the nonparty appellants for relief from a judgment against the corporate defendants pursuant to rule 60(b)(5) and (6) of the Federal Rules of Civil Procedure. The motion was denied on the grounds (1) that the decision of the defendant corporations not to appeal the judgment had been considered and deliberate, and (2) that there existed no extraordinary circumstances justifying relief from the binding effect of the corporate decision not to appeal. Affirmed. Judge Mansfield and Judge Pierce concur in separate opinions.
Before MANSFIELD, PIERCE, and PRATT, Circuit Judges.
This is the second time this case has come before us. On the earlier appeal the corporate defendants, Dutchess Shipping Co., Ltd. ("Dutchess") and International Ship Management, Inc. ("ISM"), did not appeal, but we reversed and dismissed the complaint as against the individual defendant, Stavros Sorros. Cruickshank & Co., Ltd. v. Sorros, 765 F.2d 20 (2d Cir. 1985). Now, movant-appellants, who are not parties to the action, but who are the directors and officers of the corporate defendants, seek to intervene and gain the benefit of our decision in favor of Sorros through a motion under Fed. R. Civ. P. 60(b)(5) and (6) to vacate the judgment against the corporations. Perceiving no abuse of discretion by the district court in denying the motion, we affirm.
Assuming familiarity with our earlier decision, we shall review only those facts necessary to understand this appeal.
Cruickshank, an Indian corporation, contracted with ISM to serve the Irinio, a ship belonging to and managed by the corporate defendants, while it was in part at Vadinar, India. While in port, the Irinio incurred "pull-back" charges in the amount of $142,000. To avoid paying the charges, the corporate defendants caused the Irinio to depart without proper clearance from port authorities.
Plaintiffs sued in the United States District Court for the Southern District of New York, alleging among other things breach of ISM's contractual obligation to satisfy the charges. The corporate defendants defaulted on liability but contested damages. After a trial Judge Mary Johnson Lowe found that defendant Sorros, an employee of ISM, was liable under a theory of conversion, a tort that plaintiffs had not alleged, and ultimately assessed damages totalling $1,009,619.65 against all defendants, jointly and severally.
This court then reversed as to Sorros. We noted that we were "unable to fathom how there can be liability for conversion", 765 F.2d at 21, and found that "the district court mistook a case in contract for one in tort," id. at 25. Since Sorros was not a party to the contract, we held that he could not be liable for its breach. As to the corporations, however, the panel specifically noted that, "the corporate defendants defaulted in the district court and do not now appeal; we therefore do not address the propriety of the judgment entered against them." Id. at 26.
Plaintiffs then commenced an action in state court, seeking to pierce the corporate veil and hold the individual directors and officers liable for the judgment against Dutchess and ISM, both of which were judgment-proof. Faced with the prospect of potential personal liability in the state court action, the directors and officers moved before Judge Lowe under rule 60(b)(5) and (6) to have the corporations relieved from the judgment. Had the motion been granted, or if the movants are successful on this appeal, the amount of damages which the plaintiffs might be entitled to recover in the state court action could be substantially reduced. Movants claimed that the basis for the judgment against the corporations had been erased by our decision on Sorros's appeal, and that the circumstances surrounding the corporations' decision not to appeal that judgment constituted extraordinary conditions justifying relief.
Judge Lowe denied the motion, holding that the corporate decisions not to appeal was a conscious and considered one, and that a rule 60(b) motion may not be substituted for a timely appeal. This appeal ensued.
Appellants raise essentially the same contentions advanced before Judge Lowe. They rely on subsections (5) and (6), two distinct provisions of rule 60(b). If they are entitled to prevail under subsection (5), they are ineligible for relief under subsection (6), which allows relief only for "any other reason [than those enumerated in subsections 1 through 5] justifying relief from the operation of the judgment." Fed. R. Civ. P. 60(b)(6); see also 11 C. Wright and A. Miller, ...