Opinion
Civ. No. 99-1061, SECTION: "R" (3), Bky. No. 98-11541.
February 15, 2000.
ORDER AND REASONS
Before the Court is the motion of appellants, Joseph and Ann Marie Celano, for relief from judgment under Rule 60(b)(5) on the grounds of an intervening change in Louisiana law applicable to their case. For the following reasons, appellants' motion is granted and this matter is ordered remanded to the Bankruptcy Court to make findings as provided in this Order.
I. BACKGROUND
This case arises from the efforts of appellants, Joseph and Ann Marie Celano, to exempt from their bankruptcy estate two investment contracts as annuities under Louisiana law. The trustee objected to this exemption and, on January 8, 1999, the Bankruptcy Court ruled in the trustee's favor. In concluding that the investment contracts were not exempt annuities under Louisiana law, the Bankruptcy Court relied on sections 20:33(1) and 22:647(B) of the Louisiana Revised Statutes as well as the Fifth Circuit's decision in Farm Credit Bank of Texas v. Guidry, 110 F.3d 1147 (5th Cir. 1997). In Guidry, the Fifth Circuit held that a variable annuity similar to Celano's investment contracts: was not an exempt "annuity" under Louisiana law. 110 F.3d at 1154. Because the Louisiana Insurance Code did not define annuity contracts, Guidry relied on the general definition of annuities found in the Louisiana Civil Code, in making its "Erie-guess as to how the Louisiana Supreme Court would rule. See id. at 1149-50 ( citing La. Civ. Code art. 2793).
On May 28, 1999, this Court affirmed the Bankruptcy Court's decision. Appellants argued that a bill before the Louisiana legislature revealed the legislature's intent to overrule Guidry. However, this Court found any legislative activity irrelevant in the absence of evidence that a relevant bill had been signed into law. The Court therefore relied heavily on the precedential weight of Guidry and held that it "cannot disregard the Fifth Circuit's 'Erie-guess' as to Louisiana law." Order and Reasons dated May 28, 1999, at 11.
Ten days after this Court's affirmance, the Governor of Louisiana signed Act 63 into law. See Act of June 8, 1999, No. 63, 1999 La. Sess. Law. Serv. Act 63 (H.B. 217) (West). The Act amends and reenacts La. Rev. Stat. Ann. §§ 13:3881(D)(1) and (2), § 20:33(1) and § 22:647(B) and enacts § 13:3881(D)(3). See id. These provisions relate to general exemptions from seizure and purportedly aim "to include all annuity contracts and tax-deferred arrangements as exempt," and "to define annuity contract," among other matters. Id. The Act is "interpretive" and applies to any annuity contract in existence on or prior to its effective date. See id. sec. 4. By affidavit, Emile Bruneau, Speaker Pro Tem of the Louisiana House of Representatives, states that the Louisiana legislature intended to overrule Guidry by means of Act 63. (See Apps.' Br. Supp. Clarif. Law Ex. B, at 2.)
Appellants timely appealed this Court's judgment to the Fifth Circuit. Before the Fifth Circuit, appellants filed a Rule 60(b) (5) motion to remand the case to this Court for reconsideration of the effect of the enactment of Act 63 by the Louisiana legislature. The Fifth Circuit granted the motion, and the case is now before this Court for the limited purpose of deciding appellants' Rule 60(b)(5) motion. Appellants argue that they are entitled to relief under Rule 60(b)(5) because the recent enactments and amendments to Louisiana law on annuities overruled Guidry and establish that their annuity contracts are exempt under Louisiana law.
II. DISCUSSION
A. Rule 60(b)(5)
The determination of a Rule 60(b) motion lies within the district court's sound discretion and will be reviewed on appeal for abuse of that discretion. See Seven Elves v. Eskenazi, 635 F.2d 396, 402 (5th Cir. 1981) ( citing Fackelman v. Bell, 564 F.2d 734, 736 (5th Cir. 1977)). Rule 60(b)(5) of the Federal Rules of Civil Procedure permits a court on motion to relieve a party from a final judgment when (1) "the judgment has been satisfied, released, or discharged;" (2) "a prior judgment upon which it is based has been reversed or otherwise vacated;" or (3) "it is no longer equitable that the judgment should have prospective application." Appellants do not specify under which prong of Rule 60(b)(5) they seek relief, nor do they address how this case meets the Rule's applicable standards. The Court notes the strong evidence that the Louisiana legislature intended to overrule Guidry with Act 63. Nevertheless, after reviewing the relevant caselaw, the Court finds that Rule 60(b)(5) does not warrant relief here.
First, no judgment has been satisfied, released, or discharged. This case therefore does not fall under the first clause of Rule 60(b)(5).
Furthermore, no prior judgment upon which this Court's decision was based has been reversed or otherwise vacated. The Fifth Circuit has adopted the following interpretation of the second clause of Rule 60(b)(5):
For a decision to be 'based on' a prior judgment within the meaning of Rule 60(b)(5), the prior judgment must be a necessary element of the decision, giving rise, for example, to the cause of action or a successful defense. It is not sufficient that the prior judgment provides only precedent for the decision.Bailey v. Ryan Stevedoring Co., Inc., 894 F.2d 157, 159 (5th Cir. 1990) ( citing Lubben v. Selective Service System Local Board No. 27, 453 F.2d 645, 650 (1st Cir. 1972)); accord Picco v. Global Marine Drilling Co., 900 F.2d 846, 851 (5th Cir. 1990). In effect, then, a decision is "based on" a prior judgment only if it is related to the prior judgment on the basis of res judicata, collateral estoppel, or is somehow part of the same proceeding. See Tomlin v. McDaniel, 865 F.2d 209, 211 (9th Cir. 1988); Matos v. Secretary of Dep't of Health and Human Servs., 30 Fed. Cl. 223, 225 (1993); National Business Systems, Inc. v. AM Int'l, Inc., 607 F. Supp. 1251, 1254 (N.D. Ill. 1985). See also United States v. 4,299.32 U.S. Currency, 922 F. Supp. 430, 433 (W.D. Wash. 1996) ("It is well-settled that this section applies only when the law of the case changes, not when decisional law changes."); 11 WRIGHT MILLER, FEDERAL PRACTICE AND PROCEDURE § 2863, at 334-35 (1995) ("This ground is limited to cases in which the present judgment is based on the prior judgment in the sense of claim or issue preclusion."). Because Guidry merely provided precedential value to this Court's judgment, relief under the second prong of Rule 60(b)(5) is inappropriate. See, e.g., Bailey, 894 F.2d at 159-60 (no relief under Rule 60(b)(5) despite Supreme Court decision changing the standard for recovery of attorney's fees after entry of judgment).
Finally, because the judgment by this Court does not operate prospectively, as in the case of a continuing injunction, relief is unavailable under the last clause of Rule 60(b)(5). See Cook v. Birmingham News, 618 F.2d 1149, 1152 (5th Cir. 1980). See also Moody v. Empire Life Ins. Co., 849 F.2d 902, 906 (5th Cir. 1988) ("judgment operates prospectively if it requires a court to supervise changing conduct or conditions that are provisional or tentative"). The prospective application clause does not apply to judgments that provide a present remedy for a past wrong. See id.; 11 WRIGHT MILLER, FEDERAL PRACTICE AND PROCEDURE § 2863, at 337. Moreover, relitigation preclusion is not enough to trigger the clause. See Picco, 900 F.2d at 851 ( citing Bailey, 894 F.2d at 160; Cook, 618 F.2d at 1152); Heirs-at Law and Beneficiaries of Gilbert v. Dresser Indus., Inc., 158 F.R.D. 89, 93 (N.D. Miss. 1993). This Court's order affirming the Bankruptcy Court's decision refusing to exempt appellants' investment contracts from seizure is not executory, nor does it involve the supervision of changing conduct or conditions.
For the foregoing reasons, the Court cannot grant appellants relief under Rule 60(b)(5). In the interests of judicial economy, however, the Court will construe appellants' motion broadly as one also brought under Rule 60(b)(6).
B. Rule 60(b)(6)
Rule 60(b)(6) permits a district court to relieve a party from a final judgment for "any other reason justifying relief." It is well established that Rule 60(b)(6)'s catchall provision refers to any reason other than those contained in the first five clauses of Rule 60(b). See Batts v. Tow Motor Forklift Co., 66 F.3d 743, 747 (5th Cir. 1995); Government Fin. Servs. One Ltd. Partnership v. Peyton Place, Inc., 62 F.3d 767, 773 (5th Cir. 1995); Bailey, 894 F.2d at 160. See also Liljeberg v. Health Servs. Acquisition Corp., 486 U.S. 847, 862, 108 S.Ct. 2194, 2204 (1988) ("Rule 60(b)(6) . . . grants federal courts broad authority to relieve a party from a final judgment "upon such terms as are just," provided that the motion is . . . not premised on one of the grounds for relief enumerated in clauses (b)(1) through (b)(5)"). Thus, a party seeking relief under Rule 60(b)(6) must establish that "extraordinary circumstances" exist to warrant relief. See Batts, 66 F.3d at 747; Bailey, 894 F.2d at 160. A change in decisional law after entry of judgment does not ordinarily constitute an extraordinary circumstance and therefore cannot alone provide grounds for relief under Rule 60 (b)(6). See Batts, 66 F.3d at 749-50; Picco, 900 F.2d at 851; Bailey, 894 F.2d at 160 ( citing McKnight v. United States Steel Corp., 726 F.2d 333, 336 (7th Cir. 1984); Title v. United States, 263 F.2d 28, 31 (9th Cir. 1959)).
The Fifth Circuit has nevertheless indicated that a change in decisional law might demonstrate an extraordinary circumstance when "an appeal or remand of the case is still pending." See Batts, 66 F.3d at 748 n. 6 ( citing Adams v. Merrill Lynch Pierce Fenner Smith, 888 F.2d 696, 702 (10th Cir. 1989); Wilson v. Al McCord, Inc., 858 F.2d 1469, 1478-79 (10th Cir. 1988)). Batts found the district court abused its discretion in granting Rule 60(b)(6) relief when an intervening change in state law having retroactive application occurred after the appellate court affirmed the district court, denied a petition for rehearing and rehearing en banc, and issued a mandate. By contrast, in Adams, the Tenth Circuit upheld the district court's award of Rule 60 (b)(6) relief when the Supreme Court altered the law regarding arbitration of securities claims while those claims were on appeal. 888 F.2d at 698, 702. Likewise, the Wilson court remanded for a new trial when the district court denied plaintiffs' Rule 60(b)(6) motion to reconsider even though the state supreme court had changed the applicable law during the pendency of the appeal. 858 F.2d at 1478.
Distinguishing Rule 60(b)(6) situations in which the relevant decisional law changes while the case is on appeal makes sense. Courts strictly construe Rule 60(b) in order to promote the finality of judgments and the predictability of the judicial process. See United States v. 329.73 Acres of Land, More or Less, Situated in Grenada or Yalobusha Counties, State of Miss., 695 F.2d 922, 925 (5th Cir. 1983) ( citing Fackelman, 564 F.2d at 736). Indeed, courts express concern that litigants will use Rule 60(b) in order to avoid or delay the time limits for appeal. See id. ( citing Alvestad v. Monsanto Co., 671 F.2d 908, 912 (5th Cir. 1982); Seven Elves, 635 F.2d at 402). Those interests in finality and the orderly procession of litigation are not implicated here. Rather, the facts here are similar to the Adams and Wilson cases distinguished by the Fifth Circuit in Batts.
The Louisiana legislature changed the relevant law on annuity contracts ten days after this Court issued its judgment. Appellants timely appealed to the Fifth Circuit and that court subsequently remanded the case for a clarification of applicable Louisiana law. Permitting Rule 60(b)(6) relief will encourage a speedy and efficient resolution of this case by having the court most familiar with the facts determine whether corrections to its judgment that might otherwise result in reversal on appeal are warranted due to an intervening change in the law. Indeed, the evidence here is strong that the outcome of this Court's previous judgment would be reversed on appeal. Accordingly, the Court finds that the extraordinary circumstances indicated in Batts when an appeal or remand is pending exist to permit relief under Rule 60(b)(6). The Court must now analyze the merits of appellants' claim that recent changes in Louisiana statutory law overruled Guidry and require the Court to vacate its prior judgment holding that appellants' annuity contracts were not exempt from the bankruptcy estate.
C. Effect of Act 63 on the Celano Judgment
In concluding that contracts purchased by appellants from Pacific Mutual Life Insurance Company and American Express Life Assurance Company were not annuities under Louisiana law and therefore not exempt from seizure, this Court relied heavily on the Fifth Circuit's opinion in Guidry. Specifically, the Court relied on Guidry's observation that although the Louisiana Insurance Code exempts an "annuity contract" from seizure, it does not define the term. Guidry in turn had relied on the definition of an annuity in article 2793 of the Louisiana Civil Code and concluded that a fundamental characteristic of an annuity under Louisiana law "is the complete divestiture of all ownership interest in the principal fund." 110 F.3d at 1150. Finding that appellants retained significant rights of control over the Pacific Mutual and AMEX policies, this Court found the policies were not annuities under Guidry. See Order and Reasons dated May 28, 1999, at 6-8.
When the Guidry court made its "Erie-guess" as to Louisiana state law, it noted that "neither the legislature nor the courts of Louisiana have spoken on the questions whether and to what extent such products should be considered 'annuities' for the purpose of shielding them from seizure by creditors." 110 F.3d at 1149. The Fifth Circuit expressly noted that its opinion might prompt the Louisiana legislature to clarify the law on the exemption of variable annuities. See id. at 1153. The court stated:
Given Louisiana's Civil Law tradition of the primacy of legislation over jurisprudence, we are especially sensitive to our lack of authority to expand Louisiana's statutory definition of an "annuity" to include accounts over which investors retain virtually absolute dominion and control, including the right to withdraw any or all of the principal at any time.
Id. at 1154.
The Court finds that the evidence proffered by appellants clearly establishes that the Louisiana legislature expressly aimed to overrule Guidry with Act 63 and that the new law applies retroactively to appellants' claims. Act 63 amended La. Rev. Stat. Ann. §§ 13:3881(D)(1) and 20:33(1) to expressly exempt "annuity contracts" from the reach of creditors. See 1999 La. Sess. Law Serv. Act 63 sec. 1, § 3881(D)(1); sec. 2, § 33(1). Most significantly, Act 63 amended § 22:647(B), relied on by Guidry and this Court, to include a definition of "annuity contract" not found in the prior law:
The term "annuity contract" shall include any contract which: (1) is issued by a life insurance company licensed to provide the contract in the state in which it was issued at the time of issue; (2) states on its face or anywhere within the terms of the contract that it is an "annuity" including but not limited to an immediate, deferred, fixed, equity indexed, or variable annuity, irrespective of current pay status or any other definition of "annuity" in Louisiana law; (3) provides the contract owner the ability to defer United States income taxes on any interest earned and not distributed to the owner; (4) transfers some risk of financial loss to the insurance company for financial consideration; and (5) was approved as an annuity contract by the Department of the Insurance of the state in which it was issued prior to issue.Id. sec. 3, § 22:647(B). By its terms, the amended § 22:647(B) provides a definition of annuity contract that includes variable annuities and supersedes the definition of annuity found in article 2793 "of the Louisiana Civil Code. In further support of their argument that Act 63 overruled Guidry, appellants proffer the affidavit of Emile Bruneau, Speaker Pro Tem of the Louisiana House of Representatives. ( See Apps.' Br. Supp. Clarif. Law Ex. B.) The lead author of Act 63, Mr. Bruneau, states that "the Louisiana Legislature intended Act 63 to legislatively overturn. the Fifth Circuit opinion in the Guidry case." (Id. at 2.) Based on the foregoing evidence, the Court concludes that to the extent the Guidry court used the definition of annuity in article 2.793 to determine whether variable annuities qualified for exemption under Louisiana law, Guidry has been overruled by Act 63.
Furthermore, the Court finds that Act 63 applies retroactively to appellants' case. Under Louisiana law, interpretive laws apply both prospectively and retroactively, absent contrary legislative intent. See La. Civ. Code art. 6. See also Ardoin v. Hartford Accident and Indemnity Co., 360 So.2d 1331, 1338 (La. 1978) (exceptions to general principle of non-retroactivity of legislation for "laws that are merely interpretive of existing legislation, and those that the legislature has expressly or impliedly declared to be retroactive.") ( citing 1 M. PLANIOL, CIVIL LAW TREATISE, Nos. 249-52 (La.St.L.Inst.Transl. 1959); A. YIANNOPOULOS, CIVIL LAW SYSTEM, 68 (1977)); Industrial Risk Insurers v. New Orleans Public Service, Inc., 735 F. Supp. 200, 202 (E.D. La. 1990) (same); Laubie v. Sonesta Int'l Hotel Corp., 587 F. Supp. 457, 460 (E.D. La. 1984) (interpretive amendment merely clarifies duties already in existence and therefore applies retroactively under Louisiana law). Act 63 expressly states that it is "interpretive" and applies to any annuity contract covered by the Act which is in existence on or prior to the Act's effective date of June 8, 1999. See 1999 La. Sess. Law Serv. Act 63 sec. 4. Mr. Bruneau confirmed that Act 63 "was intended to be curative and interpretive of existing Louisiana law regarding annuities." (Apps.' Br. Supp. Clarif. Law. Ex. B, at 2.) It is thus clear that Act 63 is interpretive of existing legislation and may therefore be applied retroactively. Moreover, since appellants purchased the Pacific Mutual and AMEX contracts on February 2, 1996 and July 20, 1990, these contracts were in existence on or prior to the effective date of the Act. Act 63 therefore applies to these contracts.
Finally, appellants argue that their Pacific Mutual and AMEX plans constitute "annuity contracts" as defined in § 22:647 (B), as amended by Act 63, and are thus exempt from seizure under Louisiana law. The Court is unable to resolve this issue because neither annuity contract was made part of the record on appeal. Additionally, the Bankruptcy Court did not make factual findings from which this Court could determine whether appellants have satisfied § 22:647(B)'s five-part test.
III. CONCLUSION
For the foregoing reasons, appellants' motion for relief from judgment is granted under Rule 60(b)(6). This Court's order of May 28, 1999 is hereby vacated. This matter is remanded to the Bankruptcy Court for a determination of whether appellants' Pacific Mutual and AMEX investment plans constitute annuity contracts under recently revised Louisiana law and are therefore exempt from seizure.
New Orleans, Louisiana, this 14th day of February, 2000.
MINUTE ENTRY DUVAL, J. February 10, 2000