MEDIATION: PROCEDURAL SUMMARY & ISSUES
A. HISTORY LEADING TO LITIGATION
August 27, 1987, the Sweeneys borrowed 1.6 million dollars from ComFed Savings Bank against two properties ("the mortgaged properties") they own in order to develop a subdivision. The financing was to continue as the Sweeneys completed each stage of the development plan. Each stage of the development would increase the value of the mortgaged property. Based upon the increased value at each stage of the development, ComFed was to advance funds for the next stage of the development. The terms of this agreement are reflected in the underlying mortgage notes. [TAB 1 - Judge Izzo, Middlesex Order of January 30, 1991, pg. 12, para. 44-52, pg.25, para 85-86].
The Sweeneys completed the first stage of development, increasing the value of the mortgaged property in 1988. By this time, ComFed Savings Bank, one of the parents of ComFed Mortgage, was in the throes of failure, with widespread public scandal concerning mortgage lending fraud by its officers. [TAB 1, Judge Izzo, Middlesex Order of January 30, 1991, pgs. 17-19, paras. 56-60; TAB 2 - Form 8-K filed by ComFed Savings Bank with the Securities and Exchange Commission; see narrative leading to settlement agreement.; TAB 8 - Newspaper article concerning Investigation of ComFed fraud].
ComFed refused the Sweeneys' offers to pay back the loan and reneged on its promise to advance funds to the Sweeneys for the future development, forcing the Sweeneys into default. [TAB 1, Judge Izzo, Middlesex Order of January 30, 1991, pg. 28, paras. 94-98].
B. ComFed SALEM FORECLOSURE CASES
ComFed Savings Bank filed two separate actions for foreclosure (one for each property) against the Sweeneys in Salem in November, 1988 ("the ComFed Salem cases") [TAB 3, Docket in ComFed Salem Case #88-3163, and TAB 4, Docket in ComFed Salem Case #88-3166.].
By this time, the property was worth substantially more than its mortgaged amount and the Sweeneys had overcome numerous obstacles to obtain a subdivision plan and approval from the Town Planning Board. By foreclosing and obtaining the property, ComFed Savings bank would gain a substantial windfall from the now-increased value of the property that would reflect favorably on their books (at a time when the officer of the bank knew it was failing).
The Sweeneys learned of the ComFed Salem cases in March and hired an attorney, James Frieden, who has since moved to California. Frieden apparently entered an appearance in both of the ComFed Salem foreclosure cases and did nothing else whatsoever in the Salem cases. [TAB 3, Docket in ComFed Salem Case #88-3163, and TAB 4, Docket in ComFed Salem Case #88-3166.]
C. SWEENEYS FILE SUIT-MIDDLESEX CASE
Frieden filed suit on behalf of the Sweeneys in Middlesex ("Sweeney Middlesex case") on April 14, 1989 for damages against ComFed Savings Bank, ComFed Mortgage, Inc., ComFed Advisory Co., and a mortgage officer, Furey. The suit also sought an order permanently enjoining all ComFed defendants from foreclosing on the properties. [TAB 5- Complaint in Sweeney Middlesex Case #MACV89-2424].
The claims in the Sweeney Middlesex case against the ComFed entities included:
Count I: Breach of contract;
Count II: Specific performance of contract to give partial releases against defendant ComFed Savings Bank;
Count III: Fraud in connection with $1.6 million loan against defendants ComFed and Furey;
Count IV: Breach of fiduciary duty with respect to $1.6 million dollars against defendant ComFed and Furey [this count was waived by plaintiffs prior to submission of case to jury.]
Count V: Breach of contract relating to the forward commitment in relation to the payment of $65,000.00 in interest; against defendant ComFed;
Count VI: Breach of fiduciary duty with respect to the forward commitment in relation to the payment of $65,0000.00 in interest; constructive trust against defendants ComFed and Furey. [This count was waived by plaintiffs prior to submission of case to the jury.]
Count VII: Interference with advantageous business relation against ComFed and Furey;
Count VIII: Unfair and deceptive trade practices under Massachusetts Deceptive Trade Practices Act against all ComFed Defendants;
Count IX: Intentional infliction of emotional distress by plaintiff Rhetta Sweeney against ComFed and Furey;
ComFed's attorney in both ComFed Salem cases and in the Sweeney Middlesex case
was John Hanify of Hanify & King. [TAB 6- Docket in Sweeney Middlesex Case #MACV89-2424, entry].
ComFed's Salem cases for foreclosure were not consolidated with the Sweeneys' Middlesex case against ComFed. [TABS 3&4 Salem docket sheets; TAB 5 Sweeney Middlesex Complaint; TABS 6, Sweeney Middlesex Docket; TAB 7, Answer of Defendants except Furey.].
On April 11, 1989, four days before Frieden had filed the Sweeney Middlesex Case, ComFed Savings Bank had been awarded a judgment of foreclosure against one of the properties in ComFed Salem Case #88-3166. [TAB 4 - Docket in ComFed Salem Case #88-3166.].
A Temporary Restraining Order enjoining ComFed from foreclosing on the two properties apparently issued from the Middlesex Court when the Complaint was filed. [TAB 6 - Middlesex Docket, second entry under #3 on Apr. 14, 1989, "Summons issued with interlocutory order returnable Thursday, April 27, 1989 at 2:00 p.m., in Courtroom 7A."] However, on April 25, 1989, ComFed obtained a default judgment for failure to answer in ComFed Salem Case #88-3163.
D. FAILURE TO RAISE SALEM FORECLOSURE JUDGMENTS
Defendants' attorney at that time in the Sweeney Middlesex case and as ComFed Savings Bank's attorney in the Salem cases, did not mention the foreclosure judgments from the ComFed Salem cases in the Sweeney Middlesex case, ever. (The Salem foreclosure petitions were evidentiary exhibits in the Sweeney Middlesex case, but the fact that ComFed Savings bank actually held judgments resulting from those petitions was never raised nor mentioned.)
(1) COMFED'S ATTORNEY, JOHN HANIFY: Hanify, as all the ComFed
At the time ComFed brought its action in the ComFed Salem Cases, ComFed was required to bring all claims against the Sweeneys it could have brought. Thus, the default judgments work an estoppel against ComFed Savings bank itself in any future litigation involving these parties.
The Sweeneys' attorney, Frieden, had entered an appearance in both of the ComFed Salem cases, but had failed to answer or file any counter-claim on behalf of the Sweeneys in either Salem case. At the least, Hanify also had a duty to his ComFed clients to have raised the Salem judgments as res judicata on behalf of ComFed Savings Bank in the Sweeneys' Middlesex case. This could have been raised as a 12(b)(6), affirmative defense or counter-claim in the Middlesex case to estop what could have been counter-claims by the Sweeneys in the Salem cases. The Sweeneys had failed to answer the Salem cases but then filed a complaint in Middlesex raising issues that could have been counter-claims in the Salem cases. [TAB 7 - Answer of ComFed Defendants in Sweeney Middlesex Case #MACV89-2424; TAB 6 - Docket in Sweeney Middlesex Case "MACV89-2424].
Hanify also did not offer the Salem judgments as an affirmative defense, offset, or counterclaim in the Answer filed for the ComFed defendants, nor in a Rule 12 (b)(6) Motion to Dismiss on behalf of his ComFed clients in the Sweeney Middlesex case. [TAB 7 - Answer of ComFed Defendants in Sweeney Middlesex Case #MACV89-2424.]
For ComFed's attorney, Hanify, this failure to mention, much less argue, the pre-existing ComFed Salem judgments in the Sweeney Middlesex case and pursuing a money judgment on a promissory note, which was secured by a mortgage for which he had already obtained an order of foreclosure, must be viewed with suspicion, at best. It may also have been the result of willful concealment, as further set forth below.
NOTE 1: Even though ComFed's attorney in both the ComFed Salem cases and in the Sweeney Middlesex case was technically John Hanify, Barbara Wegener and Gerald Richer, two of Hanify's associates, filed the Salem foreclosure actions. Hanify and David McCarthy appeared in the Sweeney Middlesex case. Thus, it would appear that these preliminary problems in the ComFed Salem cases and the Sweeney Middlesex case, occurred because the right hand didn't know what the left hand was doing at the Hanify firm, and because Hanify failed to supervise the associates in the ComFed Salem cases for foreclosure.
It is also possible that Hanify obtained the ComFed Salem case foreclosures by purposely failing to serve notice of various pending actions on the Sweeneys or their attorney. This appears likely, based upon the Sweeneys' attorney's conduct which indicates he simply did not know about these judgments (see below) and by Hanify's own otherwise unexplainable failure to mention these judgments in the Middlesex action.
Based on the interlocutory order (TRO) in the Sweeney Middlesex case temporarily restraining ComFed Bank from pursuing its foreclosure issued on April 14 [TAB 6, Docket in Sweeney Middlesex Case #MACV89-2424, Second Entry below #3.], Hanify apparently obtained the April 25 judgment of foreclosure in ComFed Salem case #88-3163, in defiance of the Middlesex Interlocutory Order. He could only have accomplished this by failing to mention the pending litigation in Middlesex to the Salem court, and vice versa. This may also explain why Hanify never mentioned the judgments to the Middlesex Court.
Hanify had failed to disclose the ComFed Salem judgments in the Sweeney Middlesex Case, which would have estopped his clients' counterclaims, and he had failed to raise the issues of res judicata and collateral estoppel on behalf of his clients. This failure to disclose these judgments later became significant in depriving the Sweeneys of due process and to a full and fair hearing as set forth below. Two trusts who were also plaintiffs in the Sweeney Middlesex case, Maple Leaf Trust and Canadian Realty Trust, were thus similarly deprived of due process.
Frieden, may not yet have known of the April 11 foreclosure judgment in the Salem case on April 14 when he filed the Sweeney Middlesex case. However, by June, when the parties were arguing in the Sweeney Middlesex case over whether ComFed could be enjoined from foreclosing [TAB 6, Middlesex docket, entries 7, 8, 9], Frieden should have inquired into the status of the ComFed Salem cases.
(2) SWEENEY ATTORNEY, JAMES FRIEDEN: The Sweeneys' attorney,
For Frieden to not know ComFed had already obtained judgments in both the ComFed Salem cases by that time would have been negligent on his part. If Frieden did know of both ComFed Salem judgments, he, too, failed to tell either the Sweeneys or the Middlesex Court. So Frieden's failure to disclose the judgments indicates either negligence, in that he did not know, or an intentional concealment, perhaps stemming from his own failure to answer the foreclosure actions in Salem that had resulted in the default judgments against the Sweeneys in the ComFed Salem cases. [TAB 9 - Lynn Inst. v. Taff, 314 Mass. 380, 50 N.E.2d 203 (1943) (holding that a party may file a counterclaim to a foreclosure action brought to satisfy the Soldiers and Sailor's Civil Relief act); see also Mass.R.Civ.P.13(a), 365 Mass. 758 (1974), mandating compulsory counterclaims and 12(b)(9), 365 Mass. 755, completed litigation; but see State Realty Co. v. Macneil, 334 Mass. 294; 135 N.E.2d 291 (1956) (holding that the failure to file an answer or counter-claim to a foreclosure did not prevent the defendant from filing a separate suit for redemption and accounting).]
The Sweeneys (and apparently FDIC) learned of the Salem foreclosure judgments on Friday, August 15, 1997, six years later when undersigned counsel found them.
Either way, at a minimum, both attorneys were negligent. Frieden had failed to answer the ComFed Salem Cases and had failed to learn of or disclose the subsequent ComFed Salem judgments against his clients to either the Middlesex Court or the Sweeneys and in the Middlesex Court, he had failed to raise the issue of accord and satisfaction and res judicata presented by the ComFed Salem judgments. He also failed to press a contempt action against ComFed for proceeding in the second foreclosure in the face of the restraining order.
E. HANIFY'S TANGLED WEB #1: CONFLICT AND CONCEALMENT LEAD TO FRAUD
Hanify represented ComFed Savings Bank in the ComFed Salem Actions, and represented ComFed Savings Bank, ComFed Mortgage Co., and ComFed Advisory in the Sweeney Middlesex action.
Defendant Furey originally was defaulted in the Sweeney Middlesex action. [TAB 6-Docket in Sweeney Middlesex Case #MACV89-2424, entry 40 Default of Furey, on September 28, 1989, five months after the case was filed]. Hanify did not represent Furey originally and had not joined Furey in the answer he filed on behalf of the ComFed Defendants, but Hanify later ended up representing Furey, in what was a very clear conflict of interest by that time.
The Sweeneys' claims which included allegations of breach of fiduciary duty and deceptive trade practices, had been filed against these Defendants, jointly and severally. When the Sweeneys' claims were brought in April, 1989, ComFed Savings Bank was under criminal investigation [TAB 8-Newspaper articles concerning Investigation of ComFed fraud].
Under these circumstances, it should have been obvious to Hanify that at the very least, ComFed Mortgage, Inc. ComFed Advisory, and Furey, would hope to point the finger of blame in the direction of ComFed Savings Bank, if possible. In fact, all of the Defendants would have defenses against the interests of the others, creating a clear conflict between these Defendants' positions.
NOTE 2: Multiple representation is barred when there is a conflict of interest among clients by S.J.C. Rule 3:07, DR 5-105(A), 382 Mass. 781 (1981); however, a conflict of interest does not arise solely because there is joint representation. Commonwealth v. Soffen, 377 Mass. 433, 438 (1979). Commonwealth v. Davis, 376 Mass. 777, 781 (1978). Rather, a conflict exists whenever there is tension between the interests of one client of an attorney and those of another. See S.J.C. rule 3:22, DR 5-105, 359 Mass. 796, 816 (1972), "when there is a conflict of interests among the potential clients." Id.
"DR 5-105 Refusing to Accept or Continue Employment if the Interest of Another Client May Impair the Independent Professional Judgment of the Lawyer.
"(A) A lawyer shall decline proffered employment if the exercise of his independent professional judgment in behalf of a client will be or is likely to be adversely affected by the acceptance of the proffered employment, except to the extent permitted under DR 5-105 (C.
"(B) A lawyer shall not continue multiple employment if the exercise of his independent professional judgment in behalf of a client will be or is likely to be adversely affected by his representation of another client, except to the extent permitted under DR 5-105 (C.
"(C In the situations covered by DR5-105 (A) and (B) a lawyer many represent multiple clients if it is obvious that he can adequately represent the interest of each and if each consents to the representation after full disclosure of the possible effect of such representation on the exercise of his independent professional judgment on behalf of each."
In cases of joint representation there "is an actual, relevant conflict of interests if, during the course of the representation, the defendants' interests do diverge with respect to a material factual or legal issue or to a course of action." Cuyler v. Sullivan, 446 U.S. 335, 356 n.3 (1980) (Marshall, J., dissenting). A.B.A. Canons of Professional Ethics, Canon 6 (1965) ("lawyer represents conflicting interests when, in behalf of one client, it is his duty to contend that which duty to another client requires him to oppose"). Commonwealth v. Geraway, 364 Mass. 168, 178 (1973) (Tauro, C.J., and Braucher, J. dissenting), quoting from ABA Canons of Professional Ethics No. 6, "[A] lawyer represents conflicting interests when, in behalf of one client, it is his duty to contend for that which duty to another client requires him to oppose." Id.
The duty of counsel is to represent a "client zealously within the bounds of the law," A.B.A. Code of Professional Responsibility, Canon 7 (1969); Rule 3:22 of the Rules of the Supreme Judicial Court, 359 Mass. 787, 818 (1971); to treat all persons involved in the legal process with consideration, A.B.A. Code of Professional Responsibility, EC 7-10 (1969); and to uphold the integrity and honor of the legal profession, A.B.A. Code of Professional Responsibility, EC 9-6 (1969).
Based upon the filings of ComFed Bancorp, the parent of ComFed Savings Bank, with the Securities and Exchange Commission [TAB 2 - Extracts of Forms 8-K, 10-K and 10-Q filed by ComFed Savings Bank with the SEC, which never mention the Sweeney litigation], there is every indication that Hanify never advised ComFed Savings Bank, much less ComFed Mortgage, Inc., ComFed Advisory Co., or Furey, of either of the two Salem actions. If ComFed were aware of the Sweeney litigation, its parent, ComFed Bancorp, would have been required to disclose the Sweeney lawsuit in its Form 10 filed with the Security and Exchange Commission and did not. [TAB 2 - Extracts of Forms 8-K, 10-K and 10-Q filed by ComFed Bancorp with the SEC].
These early and seemingly minor oversights, bloomed into gargantuan issues of legal malpractice by the time Judge Izzo issued her order awarding the Sweeneys $4 million dollars in the Sweeney Middlesex case (discussed below). These issues and Hanify's need to conceal his own conduct from his clients, provide the motive that fueled Hanify's conduct throughout the remainder of his involvement in these cases.
F. SWEENEY MIDDLESEX CASE JURY VERDICT
The Sweeneys' Middlesex case was tried to a jury from February 16 to March, 1990. The Sweeneys' claims for ComFed's violation of the Massachusetts Deceptive Trade Practices Act and for specific performance, were reserved for ruling by Judge Izzo.
On the counts tried to the jury, the Jury awarded Rhetta Sweeney $65,000 for intentional infliction of emotional distress and found that the Sweeneys remained obligated to pay ComFed the $1.6 million mortgage.
The Jury's verdict was entered of record on March 19, 1990. [TAB 6 - Docket in Sweeney Middlesex Case #MACV89-2424, entry #130].
NOTE 3: Since ComFed's foreclosure was not considered with the Sweeney Middlesex case, and ComFed filed no counter-claim for foreclosure (but had already obtained a judgment of foreclosure), there was no lawful basis upon which the jury could try ComFed's foreclosure action or award a money judgment on the mortgage contract, other than allowing ComFed to claim an offset for damages awarded to the Sweeneys. It was not and could not have been a judgment of foreclosure because ComFed already had judgments of foreclosure from the Salem cases. ComFed never raised the issue of foreclosure in its answer in the Sweeney Middlesex case. ComFed was not entitled to a money judgment, since it already had satisfaction of the promissory notes secured by the property, by the earlier foreclosure judgments (but had not foreclosed). However, this finding alone, and that this issue was allowed to go to the jury, implicates Hanify in fraud and Frieden in malpractice for failing to disclose the underlying Salem foreclosure judgments, and implicates the Sweeneys' attorney at trial, Axelrod, in malpractice for failing to determine the disposition of the Salem cases and in failing to raise res judicata and estoppel to prevent this issue from going to the jury at all.
G. PROCEEDINGS FOLLOWING JURY VERDICT IN SWEENEY
Following the jury verdict in March, the Judge retained two of the claims tried in the case for judgment by the Court.
Numerous post-trial motions were heard from March 1990 through January 14, 1991 and taken under advisement by the Massachusetts Court. [TAB 6, Middlesex Docket entries #135-149 and TAB 1, Judge Izzo's Order, page 3, numbers 1-4].
In the midst of these various motions, on December 13, 1990, the Resolution Trust Corporation was made conservator of ComFed Savings Bank. [TAB 14 - RTC appointment as conservator, December 13, 1990].
Based upon this appointment, John Hanify claims that he embarked upon proceedings to remove the case from the Middlesex Court to Federal Court in January, 1991.
Hanify apparently believed he had 30 days to perfect a removal, following the appointment of the RTC as Conservator on December 13, 1990. However, he did not file to substitute the RTC for the ComFed defendants, nor did he inquire about obtaining certified copies of the Court file during this time.
At the eleventh hour, on January 10, 1991, Hanify filed a motion for substitution of the RTC for all the ComFed Defendants. This was not granted because Hanify had failed to provide proof of the appointment of RTC as conservator [TAB 6 - Middlesex Court docket, Entry 149]. On January 11, the Court, apparently believing Hanify had filed the necessary proof, granted Hanify's motion. However, a hearing was held by Judge Sullivan on January 15, 1991, at which Hanify appeared, and the Court vacated its earlier order, and granted substitution only as to ComFed Savings Bank, but not as to ComFed Mortgage Corporation, ComFed Advisory Corporation, or Defendant Furey.
On January 14 or 11, 1991, Hanify did apparently file something with the Federal Court. In his affidavit [TAB 12], Hanify claims it was a notice of removal, though that is contradicted by the Federal Court docket [TAB 20-Entry for "January 11, 1991" which shows the entry was made on January 14, 1997]. What Hanify apparently filed on January 14, 1991 in the State Court was simply a copy of the conservatorship papers which Hanify claims in his affidavit were filed by McCarthy on the 11th; however, the 14th is more likely because there is a docket entry to this effect in both the State and Federal courts and it apparently precipitated the hearing the next day in front of Judge Sullivan.) This is discussed in detail at II.E. Clear Fraud, below.
Hanify called the Middlesex Court, daily, to see if Judge Izzo's order had issued on the remaining two issues tried in March. [TAB 23 - Excerpt of Congressional testimony of Senator Cohen, January 31, 1995, Senate Record, page 47, attesting that he spoke to Judge Izzo and that Hanify had called the court daily to see if Judge Izzo's order had issued yet.]
On January 30, 1991, Judge Izzo issued a written order finding that ComFed was liable to the Sweeneys for $4 million plus pre- and post-judgment interest. Judge Izzo also added $250,000 to the $65,000 jury verdict award to Rhetta Sweeney. The order also awarded $97,000 in attorney fees to the Sweeneys.
Hanify was given a powerful $4 million dollar incentive to get that judgment extinguished any way he could.
On January 31, 1991, Hanify literally removed the entire original Court file, including the only existing copy of Judge Izzo's order and the docket, and kept it at his office [admitted in Hanify's affidavit, see TAB 12 - Hanify's affidavit].
Hanify was in a position to control the circumstances that followed, personally.
The Sweeneys were not.
II. UNLAWFUL REMOVAL
The claim that "the case was removed on January 11, 1991" is factually and fatally wrong on several points. Owing to Judge Harrington's less than illuminating order of June 7, 1991 [TAB 15 - Order of June 7, 1991 by Judge Harrington, #91-10098], and to the allegations for the basis of removal contained in Hanify's purported Notice of Removal [TAB 16 - Notice of Removal], and as further shown in Hanify's Emergency Motion to Substitute [TAB 17 - Emergency Motion for Substitution], it is necessary to demonstrate and address the fact that Hanify and Harrington raised every possible basis for removal, except for the proper basis (which did not exist and thus, was not raised as set forth in 12 U.S.C. Section 1819 and 1821, et. seq., and all without supporting law or findings).
A. FAILURE TO PERFECT REMOVAL UNDER GENERAL REMOVAL STATUE:
Hanify invoked the provisions of 28 U.S.C. Section 1446 which governs removable, generally, in his "Notice of Removal," [TAB 16]. Even assuming, arguendo only, that this statute was applicable, he never accomplished the removal, much less on January 11, 1991, as he claimed.
The provisions of 28 U.S.C. Section 1446 require that to effect a removal, several conditions must be met:
"(a) A defendant or defendants desiring to remove any civil action or criminal prosecution from a State court shall file in the district court of the United States for the district and division within which such action is pending a notice of removal signed pursuant to Rule 11 of the Federal Rules of Civil Procedure and containing a short and plain statement of the grounds for removal, together with a copy of all process, pleadings, and orders served upon such defendant or defendants in such action.
"(b) The notice of removal of a civil action or proceeding shall be filed within thirty days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based, or within thirty days after the service of summons upon the defendant if such initial pleading has then been filed in court and is not required to be served on the defendant, whichever period is shorter.
"If the case stated by the initial pleading is not removable, a notice of removal may be filed within thirty days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable, except that a case may not be removed on the basis of jurisdiction conferred by section 1332 of this title more than 1 year after commencement of the action."
[. . . ]
"(d) Promptly after the filing of such notice of removal of a civil action the defendant or defendants shall give written notice thereof to all adverse parties and shall file a copy of the notice with the clerk of such State court, which shall effect the removal and the State court shall proceed no further unless and until the case is remanded."
28 U.S.C. Section 1446 (emphasis added).
For Hanify to have perfected a removal by January 12, 1991 he was required to:
(1) To remove ComFed Savings Bank, the RTC had to prove its conservatorship
and be substituted in the action for ComFed Savings Bank. It then had to satisfy the requirements of 12 U.S.C. 1821 and provide this proof with its Notice of Removal. (RTC had not complied with 12 U.S.C. 1821 and had nothing to provide). On this basis alone, the removal of ComFed Savings Bank was not and could not have been effected. (28 U.S.C. 1446)
(2) Even if RTC had complied with 12 U.S.C. Section 1821, to remove ComFed
Savings Bank, Hanify was required to file a certified copy of the order substituting RTC, as well as a certified copy of RTC's appointment as conservator were required to be filed with the State and Federal notices of Removal, and did not. (28 U.S.C. Section 1446)
(3) To remove the state-chartered Defendants (all defendants other than ComFed
Savings Bank), RTC had to be substituted in the action for those Defendants. RTC obviously could not be substituted for Furey. To substitute for the state-chartered defendants, ComFed Mortgage or ComFed Advisory, RTC was first required to (1) comply with all requirements of HOLA to exercise conservatorship over these Defendants; (2) be substituted in the State action, and (3) provide proof of the substitution and compliance with HOLA with its Notice of Removal. [see TAB 14, page 2, regarding RTC's inability to supervise state-chartered institutions absent specific prerequisites]. RTC never did assert nor exercise such authority and these requirements were never met. Thus, there was never a basis for removing the State defendants at all. Otherwise, the only basis for removal would have required the Court to exercise its supplemental jurisdiction, which it could not do, because ComFed Savings Bank itself was never properly before the Court.
(4) The Notice of Removal was not promptly filed with the State Court as required
by 28 U.S.C. Section 1446(a) and ©. What was filed was deficient because it was late and it was missing all the same things required of a Notice of Removal to have been perfected in the Federal Court, set forth above at 1-3. As shown by the State Court docket, there was no "Notice of Removal" filed with the State Court on January 11 [Tab 6, entry #149]. In fact, no notice was filed with the State Court until January 30, 1991, as shown by the Docket [Tab 6]. The State Court file Stamp on Hanify's Notice of Removal [TAB 16] also reads January 30.
(5) Opposing parties were required to be served with a copy of the removal action
ostensibly filed on January 11, but they were not.
(6) Subsequent to properly filing the Notice of Removal with appropriate proofs,
Hanify was required to file certified copies of the State Court record with the Federal Court within 30 days, but never did.
Hanify completely missed the 30 day deadline to perfect the removal.
Hanify never filed a certified copy of the appointment of the RTC's conservatorship which formed the basis for the removal with the Notice of Removal (or otherwise, in the federal court), within the 30 day time limit. In Hanify's affidavit, [see TAB 12, paragraphs 14 and 15, where Hanify admits he obtained the entire original Court file on January 31, 1991. Oddly, he mentions that the last entry on the docket at that time read "Jan. 30, removal done." This refers to the date Hanify's Notice of Removal was file-stamped with the Court, as shown by the file-stamped copy, TAB 16, and the Middlesex docket, TAB 6, last entry #149 on Jan. 30, 1991.]
Thus, Hanify's "Notice of Removal" to the State Court was not effective. Even assuming arguendo only, that the removal was docketed either on January 14 (the altered entry to which he refers) or on January 30, 1991, as shown by the Court stamp, either way, he had missed the 30 day deadline for removal which had passed on January 12, 1991. However, Hanify insists he did, in fact, perfect his removal on January 11, and that the Middlesex Court Clerk never docketed his Notice. [TAB 12, paras. 7 and 31]. He offers no proof whatsoever of these claims and has no file-stamped copy of his notice to the Middlesex Court to support his claims, either.
Hanify's "affidavit" concerning removal in itself is a hodgepodge of inadmissible hearsay and claims lacking any evidentiary foundation whatsoever that should never have seen the light of day. It wholly fails to comply with the requirements that an affidavit set forth affirmatively that the affiant is competent to testify and that his statements are made under penalty of perjury. It also demonstrates on its face that statements within it could not possibly be based upon personal knowledge. For example, Hanify attests to "personal knowledge" of events which occurred wholly outside his sight or hearing and which are clearly inadmissible hearsay, i.e., attesting to what McCarthy and various others from his office did while over at the Middlesex Court; attesting what Judge Sullivan said to McCarthy, which is hearsay on hearsay; offering a completely hearsay, unauthenticated Courier service receipt to "prove" that a copy of the Notice of Removal was "delivered" to the court (also inadmissible for improper foundation, violation of the best evidence rule).
The affidavit otherwise fails to satisfy the Federal Rules of Evidence for admissibility on several bases, such as improper foundation, best-evidence rule, and hearsay-on-hearsay. For example, the "delivery receipt" referenced in Hanify's affidavit is a record complied by someone else, somewhere else, from facts clearly outside Hanify's knowledge. Even if the receipt were authenticated and supported, it proves nothing more than that something was delivered by a courier to the business office of the Middlesex Court, not that any written copy of a Notice of Removal was filed with the Middlesex Court. Hanify testifies that "this messenger service was called," which in itself is hearsay but it is so bad, it does not even purport to identify who called the service.
A first year law student should have torn this affidavit to shreds. Yet not only did Judge Harrington admit it, he accepted it as gospel, and refused to allow the Sweeneys to cross-examine Hanify. This should have been a confrontation-clause violation, at the least. However, it can also be viewed as an effort by Harrington to protect Hanify.
Noticeably absent are affidavits from the persons to whom Hanify's hearsay statements refer, two of whom work for Hanify in Hanify's office and presumable could have provided sworn testimony or affidavits. Many of the clerks to whom Hanify attributes all manner of hearsay statements and actions, likewise obviously could have provided affidavits. Instead, Hanify marshals all their actions and statements under his own affidavit.
Hanify must contend with the fact that his claim that he effected removal on January 11, 1991, is defeated by a number of deficiencies in the removal itself. Most glaringly, Hanify's own affidavit and contemporaneous court proceedings prove that he could not have perfected the removal on January 11, 1991, as he claims.
The facts plainly show that Judge Sullivan held a hearing on the issues of the substitution of the RTC for ComFed (a prerequisite for removal) on January 15, 1991, and that Hanify or his associate attended this hearing. Judge Sullivan's Jan. 15, 1991 order vacated a January 11 order of substitution [See TAB 6, entries 147-148]. If the case had actually been removed on January 11, Hanify himself would not have attended the January 15 hearing and Sullivan could not have issued the January 15 order.
The handwritten notes made contemporaneously on the court's copy of the Motion for Substitution also reflect the same three entries found in the docket for Jan. 10, 11, and 15. [TAB 17, handwritten findings/orders on the face of the Motion for Substitution, handwritten by Judge Sullivan's clerk.] Thus, there is no "missing entry" or "writeovers" in the docket that could have blotted out any January 11 "Notice of Removal." The writings in the docket reflect the changes resulting from Hanify's failure to produce the RTC Conservatorship Documents as Hanify claims in his affidavit, were produced by his associate, McCarthy, as promised on Jan. 11 [TAB 12, page 3, numbered paragraph 5]. However, Hanify next claims in his affidavit, at paragraph 6, that his associate McCarthy did in fact produce the Conservatorship papers on January 11th. This is not reflected in any docket, nor does Hanify have any file-stamped copy of the papers, showing they were filed in the Middlesex Court on January 11, 1991 (because they were not).
In paragraph 9 of his affidavit [TAB 12], Hanify alleges that an altered entry that is still visible in the Middlesex docket [TAB 6, Middlesex docket, Entries 147-149] shows that on January 11, 1991 the case was removed and this was written over. However, that entry is very readable on even a poor copy and it simply reflects that the Conservator Documents necessary for the Court's consideration of substitution (which McCarthy was supposed to have filed on the 11th were not filed until January 14 (and thus were the basis for the Court's vacation of substitution on the 15th.)
If January 11 were the actual day that the Notice of Removal were filed, then one must believe that Judge Sullivan acted without authority on January 15. Hanify attended that hearing on Jan. 15, when of course, he would not have if the case had actually been removed by that time. Hanify admits in his affidavit McCarthy was supposed to have filed conservatorship papers on Jan. 11 for the Court to grant substitution of the RTC. These conservatorship papers were not filed until Jan. 14th, as shown by the "corrected" docket entry. Hanify claims that the "altered" docket was done by the Middlesex Court clerk, but again, it is obvious the alterations benefited no one but Hanify and it was Hanify himself who had possession of the State Court docket for a month to make these changes.
The January 14th filing of the Conservatorship papers were the sole basis for the Middlesex Court hearing in front of Judge Sullivan on January 15 and the basis for Judge Sullivan's order allowing substitution of the RTC only as to ComFed Savings Bank on the 15th. Hanify filed none of this with the Federal Court. [TAB 20A - Federal Court original Docket and TAB 20B and 20C, edited dockets.]
The Federal Court docket shows that the so-called Jan. 11 "Notice of Removal" filed in the federal court didn't actually come into the Court until January 14 (which coincides with the date Hanify himself asserted in his affidavit was the entry altered in the State Court. The altered entry in the State Court docket shows January 14 was the date the Conservatorship papers regarding Hanify's substitution motion, were filed. This was the basis for the Middlesex Court order on Jan. 15). [TABS 20A - Federal Court Docket; TABS 20B and 20C, Federal Court Edited Dockets; and TAB 6, Middlesex Court Docket, first entry under 149].
Whatever was filed by Hanify on January 14th, it was entered on the 14th in the Federal Court and backdated to the 11th by the Court Clerk. [See TAB 20A, 20B]. It was originally recorded as "Complaint" filed. [See TAB 20A] In 1992, it was edited yet again, to read "Removal filed," as reflected in the Federal Court's docket [See TAB 20C].
In the Middlesex Court, no Notice of Removal was reflected anywhere on any original record before January 30, 1991 [TAB 6.]
This in itself proves that Hanify could not have removed the case on Jan. 11 as he claims. The entry written over in the State Court clerk, to which Hanify alludes in his affidavit as implying some wrongdoing by the State Court clerk, simply reflects that the Conservatorship papers were filed on Jan. 14. [TAB 6, Entry 149] The Jan. 14th entry would have helped Hanify, no one else, when he was trying to prove the removal occurred before Judge Izzo's order issued. However, the erasure of the entry also helped Hanify, no one else, because the entry in itself proved that Hanify missed the 30 day removal deadline.
Hanify's claim to have "removed" the case on January 11 rests solely on a naked "Notice of Removal," filed in Federal Court with none of the documents required to support it and which the Federal Court's own records show was entered on the 14th, but backdated to the 11th by the Judge Harrington's clerk. This Federal Court "Notice of Removal" shows a Federal Court file stamp with a hand-written entry on it that says "1-11-91" that has been obviously altered from previously reading "2-1-91."
As demonstrated above, to accept Hanify's claim that a removal was effected on January 11, one must accept this assertion in the face of clear proof that whatever documents Hanify did file on January 11 (if any), they were incomplete, and one must accept all of Hanify's other assertions of when he claims to have done things, without any file-stamped copies in support, and in the face of Court dockets and file-stamped documents to the contrary, which Hanify explains by claiming they were "altered."
Hanify himself was the only person in a position to have made the alterations. All the alterations were to Hanify's benefit. Without considering the alterations, Hanify has no file-stamped documents to support his own claims.
To accept this implausible series of assertions by Hanify, one must accept that there was a conspiracy by the entire Court staff of the Middlesex Court, encompassing two judges and at least three clerks, willing to alter records, hold hearings after their jurisdiction would have been removed, issue orders, and lie, all in order to defeat Hanify's supposed removal date of January 11 all of them without any plausible motivation whatsoever, in order for Hanify's story to be believed.
What Hanify did file in his efforts to effect the removal, he filed too late sometime on or after January 14. Undoubtedly Hanify knew that the RTC would be appointed as conservator on Feb. 1 and had figured this would give him another opportunity to remove the case when RTC was appointed receiver. This explains his lackadaisical attitude in never attempting to so much as ascertain the procedures to obtain the Court file before January 14 [TAB 12, para. #10]. It also explains his daily phone calls [TAB 23, pg. 47] to make sure Judge Izzo's ruling had not issued. It also explains why, when Judge Izzo's order issued in the interim, Hanify was thrown into a panic he had blown the removal deadline in the meantime. If he relied on the Feb. 1. appointment of the RTC as receiver, the State Court order, awarding $4 million to the Sweeneys, was a fait accompli and barred the removal.
When Hanify realized he had the actual Court record in its entirety, including Judge Izzo's January order, he knew the judgment had not been docketed, because he had both the judgments and the docket. His only hope to avoid the order was to "prove" he had perfected a removal to federal court before the Judge's order issued. He encountered a second problem in doing this, however, and that was proving he had perfected the removal, not only before the Judge's order issued, but before his 30 day time deadline had expired on Jan. 12 to perfect the removal. He was almost successful in covering all his tracks, but one the hearing before Judge Sullivan which proves the removal could not have been perfected before January 15, and that everything else Hanify asserts is derived from Hanify's own fraudulent conduct.
There is not one thing existing in fact that indicates Hanify ever "removed" the case on January 11, 1991.
B. CLEAR FRAUD:
Perhaps the most telling proof that Hanify engaged in clear fraud can be seen by examining TAB 12 (Hanify's affidavit), TAB 18 (Lucciola's letter of Feb. 8, 1991 transmitting the original Middlesex Court file to the federal court clerk), TAB 20 (federal court dockets with multiple alterations), and TAB 21 (excerpts of the transcript of the March 1, 1991 hearing before Judge Woodlock), demonstrating nothing was ever received by the U. S. District court other than part of the original Middlesex Superior Court file, not filed until Feb. 8, 1991.
Hanify admits that the entire original Court file was removed from the Middlesex Court on January 31. In Hanify's affidavit, he never mentions when he presented the original state court file to the federal court; however, he claims that a paralegal named Amory Meigs picked up the original file from the Middlesex Court on January 31, 1991. [TAB 12, para. 14, pg. 7].
Hanify admits in his affidavit [TAB 12] he kept what he calls the "post-removal documents." This refers to Judge Izzo's January 31, 1991 order and the last page of the docket. Hanify kept Judge Izzo's order and the last page of the original docket in his office for at least 26 days and did not file them with the Federal Court [TAB 12, para. 29, pg. 14]. He refused to file these papers with the federal court or to return them to Judge Izzo. He claims he was discussing what to do with the State Attorney General's office, as his excuse for keeping these papers. This isn't any sort of excuse. His conduct was clearly unethical and illegal.
The State Attorney General's office has no authority to authorize Hanify to take or keep court records, nor could Hanify, as an attorney, reasonably believe he could do so. Judge Harrington took no action whatsoever against Hanify for this. In fact, in a letter to the Sweeneys' attorney, Assistant Attorney General Luis Lavin, specifically asserts that he did not ever give Hanify any reason to believe he could keep the original court documents at any time. [TAB 13].
Hanify then claims no one in his office removed or retained anything else of the original Court file. Id. Since no records were kept of what was given to him by the Middlesex Court, there is no way to verify what he did or did not receive or keep.
By his own admission, Hanify kept at least Judge Izzo's original order and the last page of the State Court docket unlawfully in his office for 26 days, from January 31 until February 24!
In a letter dated February 8, 1991, Kara Lucciola of Hanify & King, stated that "certified copies of the Middlesex Court records were being filed" that day in the Federal Court. [TAB 18]
No certified copies of the Middlesex Court record were ever filed. Lucciola's letter refers to the original court file, obtained on January 31, 1991, by Hanify & King.
Thus, Kara Lucciola's letter shows that Hanify did not file whatever was filed of the original State Court records with the Federal Court until February 8, 1991, 9 days after Hanify & King picked up the original court file from the Middlesex Court. [TAB 18]. Hanify had nine days in which to pick and choose whatever he wanted from the original file, and to make any alterations he wanted to the original docket.
Kara Lucciola's letter also shows that the "Notice of Removal" was not filed with the Federal Court until February 8, 1991. This in itself is enough to show Hanify clearly missed the 30 day removal deadline.
Lucciola's letter [TAB 18] also proves that the Federal Court Docket entries [TABS 20A, 20B, and 20 C] could not possibly be correct, particularly Entry #2 which reads:
"1/31/91 - State Court Records (Certified Copies) Record is in three large boxes, filed in room 606. (cmg) [Entry date 2/15/91]."
There were never any certified copies of the Middlesex Court record filed, ever. [TAB 21, pgs. 4-5, excerpt of transcript on March 1, 1991 before Judge Woodlock]. At the hearing on March 1, 1991, Judge Woodlock comments that he should not have the original court file. Hanify claims that the Superior Court no longer provides certified copies, and that providing the "original" file is now "normal procedure." Id.
In Hanify's Affidavit, he admits the original court file was picked up on January 31 [TAB 12]. Thus, it would have been physically impossible for anyone to have obtained "certified copies" of the State Court file which was in John Hanify's possession.
Thus, entry #2 in the Federal Court docket is simply false.
The Federal Court docket entries themselves also note that virtually every entry was backdated or "edited" by the clerk.
These facts conclusively establish that someone at the U. S. District Court clerk's office was, in fact, altering the docket in a manner intended to benefit Hanify (by falsely dating the entries and reflecting the filing of certified copies of court records, which were never filed at all).
These facts conclusively establish that Hanify did in fact have Judge Izzo's order in his possession from January 31, 1991, days before he could even remotely be said to have perfected any removal, at the earliest, on February 8 (missing the removal deadline), and he knew it.
Judge Izzo's order awarding the Sweeneys $4 million, issued on January 30, 1991 and was docketed on January 31, 1991. Hanify admits that the entire original court file was picked up on January 31 [TAB 12] and Kara Lucciola's letter of February 8, transmitting the Court file, shows it was not filed with the federal court until February 8, 1991.
What John Hanify did to falsely claim the file had been removed to federal court, was purely and simply, fraud.
C. RES JUDICATA, COLLATERAL ESTOPPEL, JUDICIAL ESTOPPEL, FEDERALISM AND COMITY PREVENTED REMOVAL:
The Sweeney Middlesex case had been tried to the Court and Jury on all claims and counterclaims by March 19, 1990. The jury verdict was entered on March 19, 1990. [TAB 6, docket entry #130.] Massachusetts Judge Izzo had reserved the Sweeneys' claims against the ComFed defendants for Deceptive Trade practices and specific performance, for ruling by the bench.
Even assuming, arguendo, that Hanify filed a "Notice of Removal" on January 11, the federal court had no jurisdiction.
Hanify was estopped from attempting to remove the case to Federal Court and was estopped from relitigating on "summary judgment" all the issues already tried in the Middlesex Sweeney action.
A person is estopped from again setting up a claim in a subsequent suit which was necessarily involved in a prior suit between the same parties and this whether such matter was actually considered by the court or not. Beloit v. Morgan, 7 Wall. 619, 623; Cromwell v. County of Sac, 94 U.S. 351; Hopkins v. Lee, 6 Wheat. 109, 113. Nalle v. Oyster, 230 U.S. 165, 57 L.Ed. 1439, 33 S. Ct. 1043 (1913).
In general a judgment is res judicata not only as to all matters litigated and decided by it, but as to all relevant issues which could have been but were not raised and litigated in the suit. Cromwell v. County of Sac, 94 U.S. 351, 352; Grubb v. Public Utilities Comm'n, 281 U.S. 470, 479 (1930); Chicot County Dist. v. Bank, 308 U.S. 371, 375 (1940).
Under collateral estoppel, once a court has decided an issue of fact or law necessary to its judgment, that decision may preclude relitigation of the issue in a suit on a different cause of action involving a party to the first case. Allen v. McCurry, 449 U.S. 90, 101 S. Ct. 411 (1980) citing to Montana v. United States, 440 U.S. 147, 153.
Indeed, though the federal courts may look to the common law or to the policies supporting res judicata and collateral estoppel in assessing the preclusive effect of decisions of other federal courts, Congress has specifically required all federal courts to give preclusive effect to state-court judgments whenever the courts of the State from which the judgments emerged would do so:
"[P]roceedings [of any court of any state] shall have the same full faith and credit in every court within the United States and its Territories and Possessions as they have by law or usage in the courts of such State
..28 U.S.C. Section 1738.' Huron Holding Corp. v. Lincoln Mine Operating Co., 312 U.S. 183, 193; Davis v. Davis, 305 U.S. 32, 40."
Allen v. McCurry, 449 U.S. 90, 101 S. Ct. 411 (1980) citing to Montana v. United States, 440 U.S. 147, 153.
A state court would have been required to afford full faith and credit to the fact that the case had been tried on all issues to a jury and to the Judge and to give effect to Judge Izzo's order. Article IV, Section 1 of the Constitution of the United States requires that "Full faith and credit shall be given in each State to the public act, records, and judicial proceedings of every other State. And the Congress may, by general laws, prescribe the manner in which such acts, records, and proceedings shall be proved, and the effect thereof.
The U. S. congress has required Federal Courts to afford this same full faith and credit to actions of State Courts:
"State and Territorial statutes and judicial proceedings; full faith and credit
"The Acts of the legislature of any State, Territory, or Possession of the United States, or copies thereof, shall be authenticated by affixing the seal of such State, Territory or Possession thereto.
"The records and judicial proceedings of any court of any such State, Territory or Possession, or copies thereof, shall be proved or admitted in other courts within the United States and its Territories and Possessions by the attestation of the clerk and seal of the court annexed, if a seal exists, together with a certificate of a judge of the court that the said attestation is in proper form.
"Such Acts, records and judicial proceedings or copies thereof, so authenticated, shall have the same full faith and credit in every court within the United States and its Territories and Possessions as they have by law or usage in the courts of such State, Territory or Possession from which they are taken.
28 U.S.C. Section 1738.
NOTE 4: The jury verdict entry in the Sweeney Middlesex Case (and the Salem judgments, also entered of record) all three illustrate a clear error in Judge Harrington's federal order of April 14, 1992, in which he awarded summary judgment of foreclosure to ComFed.
Harrington first found that "As of the time of removal, no judgments had been entered in this case." [TAB 11 - April 14, 1992 Memorandum and Order by Judge Harrington, pg. 2, lns. 17-18.] This is a clear error [even assuming, arguendo only, that the removal date was Jan. 11, 1991, as asserted by Hanify and Judge Harrington.] The jury verdict was, in fact, entered on March 19, 1990 [TAB 6 - Middlesex Sweeney Case docket, entry #130].
This false proclamation, however, was clearly offered by way of avoiding the clear mandates to afford full faith and credit to the underlying proceedings, and to avoid the effects of res judicata and collateral estoppel on Harrington's authority to act in the case at all.
The false assertion that no verdict had been entered was adopted from language in a sworn affidavit in 1991, filed by John Hanify, in which he purports to explain how the Sweeney Middlesex Court file came to be missing for 26 days. In that sworn affidavit, Hanify claims "Moreover, no judgment had been entered on a jury verdict." (at the time of removal) [TAB 12 - Affidavit of John Hanify, April 19, 1991, pg.2, para.2, lines 11-12, and footnote 1 on page 2]. This was a false sworn statement, which Hanify knew was false. There were verdicts entered in both Salem ComFed Cases in 1990, and in the Middlesex case, the jury verdict had been entered on March 19, 1991, nearly a year earlier! [TAB 3 - Docket in ComFed Salem Case #88-3163, entry 7; TAB 4 - Docket in ComFed Salem Case #88-3166, entry 7; TAB 6 - Docket in Sweeney Middlesex Case #MACV89-2424, entry #130 on March 19, 1990).
This is mentioned as but one illustration that the record is replete with examples that Hanify was engaged in an ongoing misrepresentations, alterations of records, false statements of fact, and omissions of material fact before both tribunals, all, apparently, because he was motivated to avoid a malpractice action against himself and his firm, as set forth above, and that Judge Harrington at the least, acted contrary to law, and very likely in collusion with Hanify.
Additionally, the RTC itself was collaterally estopped from taking a posture
in the Sweeney case inconsistent with pleadings filed in other cases removed to federal court, such as Wechsler and the Lowell Complaint against ComFed Officers, where both ComFed and the RTC admitted that ComFed Banking Officers committed fraud.
The Office of Thrift Supervision requested that RTC be appointed conservator [TAB 10]. As one of the bases for this request, the OTS noted that ComFed had terrible documentation for its loans [TAB 10, page 11]. OTS also devoted considerable discussion to the fact that an appraiser named Reilly, the same appraiser used in the Sweeney case, was not qualified to perform appraisals, yet had accounted for approximately 60% of the appraisals used to support loans (with poor documentation) at ComFed. [TAB 10, page 6].
D. UNLAWFUL REMOVAL - FAILURE TO FOLLOW FIRREA PROCEDURES:
Assuming, arguendo only, that the jury verdict entered in the Middlesex case on March 14, 1989 did not estop ComFed Savings Bank from removing the action against it to Federal Court, at the time RTC was appointed conservator on December 13, 1991, the RTC had two options under federal statutes, referred to collectively as "FIRREA," 12 U.S.C. Section 1821, et. seq. Either it could (1) substitute into the Massachusetts case and request a 90 day stay, sending notice to the Sweeneys that they were required to pursue their administrative remedies with RTC. Then, and only after the exhaustion of administrative remedies, could the case be removed to federal court; or (2) RTC could allow the action to continue in state court. 12 U.S.C. Section 1821 (d)(12); Damiano v. FDIC, slip. Op. #94-4947 (11th Cir. Ct. App. Jan. 29, 1997) TAB 19]; see also Praxis Properties, Inc. v. Colonial Sav. Bank, 947 F.2d 49, 71 (3d Cir. 1991). The removal provisions found in 12 U.S.C. 1441a(l) are of purely statutory creation and they are not and cannot be invoked until and unless the prerequisite statutory requirements set forth in 12 U.S.C. Section 1821 are met. The reasoning and basis are well discussed in Damiano v. FDIC, slip. op. #94-4947 (11th Cir. Ct. App. Jan. 29, 1997) [See TAB 19, Damiano v. FDIC.].
In Hanify's Notice of Removal [TAB 16], Hanify cites to the general removal statute, 28 U.S.C. Section 1446. The general removal statute has no application to jurisdictional issues in this case. The authority to remove is one strictly afforded by statute and only when specific preconditions are met, as set forth in FIRREA.
Note 5: In the Damiano case, Damiano sued a bank, the RTC became receiver during the litigation, and within a month of becoming receiver, RTC moved to be substituted as the Defendant in Damiano's case. So far, so good (and identical to the Sweeney case to this point). At that point, the RTC was entitled to request a 90 day stay of proceedings in order to engage in the exhaustion of Damiano's administrative remedies. However, the RTC failed to send notice to this effect to Damiano, and failed to request a stay. (Also identical to the Sweeney case).
In the Damiano case, the RTC simply waited until after the 90 day period had expired before claiming Damiano's case should be dismissed because she had "failed to exhaust her administrative remedies." In the Sweeney case, the RTC simply claimed it had the right to remove the case immediately, without mentioning, much less exhausting, administrative remedies, and removed it without reference to the requirements of 12 U.S.C. Section 1821 at all.
In the Damiano case, the district court originally granted the RTC's motion to dismiss Damiano's claims for "failing to exhaust administrative remedies." However, the Court of Appeals reversed, holding that at the time the RTC became receiver during the pendency of the litigation, the RTC had had one of two options, (1) either to send notice and request a 90 day stay of the litigation, so the Plaintiff could engage in administrative remedies, or, (2) By failing to exercise the option to require the Plaintiff to exhaust administrative remedies, the RTC had elected to proceed judicially in the court in which the case was filed.
The Damiano court also noticed that under FIRREA, removal could only be predicated upon exhaustion of administrative remedies. Thus, in the Sweeneys' case, the RTC could not have removed without first (1) giving notice to the Sweeneys that they were entitled to exhaust their administrative remedies, and (2) engaging in meaningful administrative resolution. [See TAB 19, Damiano v. FDIC, slip op. #94-4947 (11th Cir. Ct. Ap. Jan. 29, 1997); see also Brady Development v. RTC, 14 F.3d 998, 1006 (4th Cir. 1994) and RTC v. Mustang Partners, 946 F.2d 103, 106 (10th Cir. 1991) (all holding that exhaustion of administrative remedies apply to pre-receivership litigation); Motorcity of Jacksonville, Ltd. v. Southeast Bank, N.A., 39 F.3d 292 & 296 & n.4 (11th Cir. 1994) (collecting cases), vacated for reh'g en banc, 58 F.3d 589 (1995), reinstated in part, 83 F.3d 1317, 1323 n. 3 (1996) (en banc) (reinstating the relevant part of the first opinion in which the panel construed the administrative exhaustion requirement of FIRREA); see also Aguilar v. F.D.I.C., 63 F.3d 1059, 1061 (11TH Cir. 1995) (per curium) (recognizing that FIRREA's administrative exhaustion requirement applies generally to all claims against an institution in federal receivership).
The Sweeneys were thereby denied due process which wholly deprived them of yet another opportunity to resolve their claims without the further expense and trauma of continued litigation, and which could only have occurred through a willful violation by RTC of its own duties to deal in good faith with the Sweeneys. Greater Slidell Auto Auction v. American Bank & Trust Co., 32 F.3d 939, 942 (5th Cir. 1994) (holding "that failure to provide [the plaintiffs] notice by mail violates their right to due process")(citing Mullane v. Central Hanover Bank & Trust Co. 339 U.S. 306, 317-20, 70 S. Ct. 652, 658-60, 94 L.Ed 865 (1950)); Whatley v. RTC, 32 F.3d 905, 910 n.1 (5th Cir. 1994) (Duhe, J., concurring) (suggesting "that the receiver's very authority to determine claims [administratively] hinges on its compliance with the notice requirements.").
The Damiano Court also found that subject matter jurisdiction is ordinarily tested as of the time of filing the complaint. Damiano v. FDIC, slip. op. #94-4947 (11th Cir. Ct. App. Jan. 29, 1997) citing to Lujan v. Defenders of Wildlife, 504 U.S. 555, 569 n. 4, 112 S.Ct. 2130, 2141 n.4, 119 L.Ed 2d 351 (1992); Rosa v. RTC, 938 F.2d 383, 392 n. 12 (3rd Cir.), cert. denied, 502 U.S. 981, 112 S.Ct. 582, 1 16 L.Ed.2d 608 (1991). "Therefore, courts in which lawsuits were pending when the RTC is appointed receiver remain vested with jurisdiction." Damiano v. FDIC, slip. op. #94-4947 (11th Cir. Ct. App. Jan. 29, 1997) citing to Whatley v. RTC, 32 F.3d 905, 907 (5th Cir. 1994). (emphasis added) "This is confirmed by the statute's reference to the continuation, as opposed to the reinstatement, of pre-receivership lawsuits after the appointment of the receiver. See 12 U.S.C. Section 1821 (d)(5)(F)(ii)." Id.
This is also supported by the Supreme Court in other decisions as well. Only state court actions that originally could have been filed in federal court may be removed to federal court by the defendant. Absent diversity of citizenship, federal-question jurisdiction is required. The presence or absence of federal-question jurisdiction is governed by the "well-pleaded complaint rule," which provides that federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint. The rule makes the plaintiff the master of the claim; he or she may avoid federal jurisdiction by exclusive reliance on state law. Caterpillar v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 2429 (1987) and cited in Ching v. Mitre Corp., 921 F.2d 11 (1st Cir. 1990).
In addition, "a case may not be removed to federal court on the basis of a federal defense, including the defense of pre-emption, even if the defense is anticipated in the plaintiff's complaint, and even if both parties concede that the federal defense is the only question truly at issue." Caterpillar v. Williams, 482 U.S. 386, 393, 107 S.Ct. 2425, 2430 (1987).
There was no other way for the RTC legally to have removed this case other than to afford notice to the Sweeneys, apply for a 90-day stay, and allow the Sweeneys to pursue their administrative remedies.
Thus, when John Hanify filed his "Notice of Removal" predicated upon the removal section found at 12 U.S.C. 1441a(l), he had failed to satisfy the necessary prerequisites to be entitled to remove the case at all. [TAB 16-Notice of Removal].
Under 12 U.S.C. Section 1821(d)(13)(D), the Federal Court is prohibited from assuming jurisdiction unless the FIRREA statute provides specific authority for it:
"Except as otherwise provided in this subsection [1821 (d)], no court shall have jurisdiction over -
"(i) any claim or action for payment from, or any action seeking a determination of rights with respect to, the assets of any depository institution for which the [RTC] has been appointed receiver
"(ii) any claim relating to any act or omission of such institution or the [RTC] as receiver.
12 U.S.C. Section 1821(d)(1)(D) (emphasis added); McMillian v. F.D.I.C., 81 F.3d 1041, 1045 (11th Cir. 1996) (involving a post-receivership employee claim); Damiano v. FDIC [TAB 19.]
Since the RTC failed to comply with the law which requires that administrative remedies be exhausted before RTC can remove a case to federal court by failing to request a 90 day stay in order to require the Sweeneys' to pursue their administrative remedies and failed to afford any notice of this option to the Sweeneys, the RTC opted to allow the litigation to continue in the underlying Court and had no authority to remove the case at all.
E. UNLAWFUL REMOVAL - NO JURISDICTION:
Because the RTC had no statutory or other authority to remove this case from State Court, and the Federal Court had several bases upon which it was required to decline jurisdiction, Judge Harrington never lawfully acquired subject matter jurisdiction in the case and had no authority to act.
In Judge Harrington's order denying the Sweeneys' Petition for Remand, Judge Harrington makes specific findings that Hanify was not entitled to remove under 12 U.S.C. Section 1441a(l), other than to the D.C. District Court. [TAB 15]
Judge Harrington finds, instead, that Hanify was entitled to remove, based on a "federal question," and that under 28 U.S.C. Section 1447, the Sweeneys had waived the issue of venue by failing to object within 30 days of the removal. [TAB 15, June 7, 1991, numbered finding #2, para. 2; and numbered finding #3.]
This ruling, however, completely sidestepped the central issue, that the Court had never acquired jurisdiction over the case at all, by Hanify's failure to satisfy the prerequisites of removal. [See II. Unlawful Removal, A-D., above].
Further, no "federal question" existed. No federal claims were presented in the original complaint. It was 12 U.S.C. Section 1441a which would have given the case any federal standing whatsoever and upon finding it inapplicable, Judge Harrington should have then dismissed the case from federal court for lack of jurisdiction. (Fed.R.Civ.P. 12(h)(3). Even if there were a "federal defense," a case may not be removed to federal court on the basis of a federal defense, including the defense of pre-emption, even if the defense is anticipated in the plaintiffs' complaint, and even if both parties concede that the federal defense is the only question truly at issue. Caterpillar v. Williams, 482 U.S. 386, 393, 107 S.Ct. 2425, 2430 (1987)).
(The Court of Appeals also acknowledged this issue by sidestepping it, categorizing the Sweeneys' protest to the removal as a protest to venue, ignoring the clear jurisdictional issue.)
Jurisdiction, unlike venue, is not waived if an objection is not made within 30 days. Pursuant to Fed.R.Civ.P.12 (h)(3), "Whenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action." Id.
The Judge's finding that the Sweeneys' "missed the 30 day deadline" to protest defects in venue also ignored the fact that Hanify himself prevented them from learning of the removal, as demonstrated herein, and why and how he did so, employing fraud and purposeful deceit to do so. Thus, the Sweeneys could not have protested the removal within 30 days in any event. However, the Sweeneys were not required to protest the removal at all, because the removal was never properly effected and the Court never had authority to act, lacking jurisdiction to do so. The Court was under a legal duty to determine if it had jurisdiction and did not do so.
The finding in the June 7th order [TAB 15] that RTC had an absolute right to remove the case was clear error.
First of all, government agencies have no "rights." Only individual citizens have "rights," which are unalienable and from God. Government agencies have powers conferred upon them by The People through authority delegated to Congress in the Constitution. Congress, in turn, delegates its authority to the various federal agencies. Congress has no "rights," either, it has only powers. Congress cannot grant or delegate that which it does not have itself. Thus, Congress cannot confer and no federal agency possesses, any "rights" at all.
The power or authority of the RTC to remove a case is specifically set forth in 12 U.S.C. Section a(l). This power is also just as clearly constrained by 12 U.S.C. Section 1821(d)(13)(D), which specifically prohibits the Court from exercising jurisdiction unless expressly provided [See Note 5, above.]
Judge Harrington avoided the mandate of Fed.R.Civ.P.12(h)(3) by determining the Sweeneys' Motion for Remand to be one challenging "venue" instead of subject matter jurisdiction. However, he could not have reached this conclusion, had he examined FIRREA and Hanify's various filings, all of which avoided and failed to cite the constraints found in 12 U.S.C. Section 1821(d)(13)(D). It also by necessity means that Harrington found that the removal occurred, instead, under 28 U.S.C. Section 1441 (federal question), governed by 28 U.S.C. Section 1446 and 1447.
No "federal question" was presented by the complaint whatsoever, and thus, even under 28 U.S.C. Section 1441, there was no lawful basis for removal of any claim. Even if there were a federal defense, that would have presented no basis for removal, either.
RTC's only basis to remove was a statutorily conferred grant of status to the RTC, to be treated as if it were a government agency for removal purposes, found in 12 U.S.C. Section 1441a(l). Harrington found Hanify had failed to comply with that statute. Absent the application of that statute, the RTC stood on no different footing than any ordinary company or person. Unless there was diversity jurisdiction or an actual federal question presented, it simply could not remove, there was no basis for it. All the claims in the case were State claims issues, particularly when RTC no longer had the benefit of the statutorily conferred grant of status found in 12 U.S.C. Section 1441a.
Judge Harrington had no discretion whatsoever to assume subject matter jurisdiction which he lawfully did not have. He could have dismissed the action. Fed.R.Civ.P.12(h)(3). He also could have abstained and remanded, as the Sweeneys requested. However, he had no jurisdiction to act on the case.
E. HANIFY'S TANGLED WEB #2 - COLLUSION AND DECEIT:
ComFed's attorney, Hanify, was not without knowledge that 12 U.S.C. Section 1819 and 1821 applied to his removal before invoking the removal provisions of 12 U.S.C. Section 1441a(l). He did not bring this to the Court's attention, though he had a legal duty to do so (duty of candor to the Court and opposing parties arising under the Canons of Ethics).
In Hanify's "Notice of Removal" [TAB 16], which the Federal Court would have seen, and in his Middlesex Motion to Substitute [TAB 17], which was presented to the Middlesex court, and in which both filings were premised upon the substitution of the RTC as conservator ComFed Savings Bank, Hanify claims the basis for substitution and removal are pursuant to 12 U.S.C. 1441a. However, at paragraph 4 of the Emergency Motion for Substitution [TAB 17, 2 para. 4, lines 7-8], which occurred before Hanify's "Notice of Removal," Hanify specifically references 12 U.S.C. Section 1821(d)(2) as providing the authority for removal necessary to invoke 12 U.S.C. Section 1441a(l).
No mention is made that the provisions of 12 U.S.C. Section 1821 were satisfied prior to Hanify's attempted removal under 12 U.S.C. Section 1441a(l) (because indeed, as set forth above in the Damiano discussion, Note 5, these requirements were not satisfied. The Court wholly lacked jurisdiction to entertain the removal).
Then, after the "removal," when Hanify was facing accusations of fraudulent concealment and other irregularities, he offered an "affidavit" by way of explaining how the case was removed. In his "Affidavit" [TAB 12 - Affidavit of John Hanify, April 19, 1991] Hanify asserts that removal was pursuant to "12 U.S.C. Section 1811, et. seq." [TAB 12 - Affidavit of John Hanify, April 19, 1991, pg.2,para2, lns 1-2].
Given the other circumstances set forth herein, and the complexity of the FIRREA statutes, particularly to a novice reader, these jumping-jack citations could be seen as a purposeful effort to obscure the fine details necessary to perfect a removal under FIRREA from detection by either the Court or the Sweeneys. If so, it succeeded.
G. DISMISSAL OF CLAIMS UNDER D'OENCH DUHME UNLAWFUL
For the same reason the Middlesex Court would have been estopped from re-litigating the foreclosure action had Hanify raised the Salem ComFed Judgments as res judicata, Hanify was estopped from seeking a money judgment on the promissory note (satisfied by the Salem foreclosure judgments) and from re-litigating the foreclosure in federal court. That issue was completely res judicata.
The D'Oench Duhme doctrine [TAB 22] applies only to prevent an impairment of the RTC's interest in the underlying mortgage. The RTC had already been granted a judgment of foreclosure and a money judgment for the same mortgage.
The only basis upon which the D'Oench Duhme doctrine could have been applied, even to ComFed Savings Bank, was ComFed (and RTC's) interest in the mortgage note. This interest had already been litigated, twice, in RTC's favor in the Salem cases and in the Sweeney Middlesex cases. No claim concerning the liability of the Sweeneys to repay the underlying mortgage remained to be affected by D'Oench Duhme, even if the case were properly "removed."
The only claims remaining by the time of removal, whenever and if it ever occurred, were the Sweeneys' claims against the ComFed entities for their own tortuous conduct, and against State defendants wholly unaffected by D'Oench Duhme.
If any or all of the state defendants (ComFed Mortgage, ComFed Advisory and Furey) could have been removed, the Federal Court could not apply the D'Oench Duhme doctrine (12 U.S.C. 1823) to them in its subsequent order granting summary judgment to ComFed Savings Bank, because the Court was required to apply Massachusetts law to them. The RTC was not their conservator and there was no federal question presented. Principals of collateral estoppel and comity required that the District Court recognize Judge Izzo's order of January 30, 1991, as to these defendants, when the case had clearly been tried to jury verdict.
Likewise, the D'Oench Duhme doctrine could not have applied to any claims of ComFed Savings Bank, either, because the D'Oench Duhme doctrine is an affirmative defense barring claims which defeat the security of the underlying note. Nothing whatsoever still pending could have affected the underlying note, which was already a judgment in favor of the RTC, twice. None of the remaining claims could lawfully have been affected in any manner by the D'Oench Duhme doctrine. [TAB 22, D'Oench Duhme case].
H. HARRINGTON BAILS OUT HANIFY AGAIN:
Judge Harrington himself apparently appreciated the fact that Hanify, at least, admitted by his various assertions in his affidavit, that he had missed the 30 day removal deadline (and had failed to comply with FIRREA, thus, seeking removal under a general removal statute).
This is seen from Judge Harrington's April 14, 1992 Order [TAB 11 - Apr. 14 Order], where he clearly and erroneously finds that RTC was "appointed conservator on December 30, 1990." In fact, the RTC was appointed Conservator on December 13, 1990 [TAB 14, Appointment of RTC as conservator].
Were it not for the other evidence of collusion by Hanify with Judge Harrington or his clerk or both in this case, as set forth herein, perhaps this could be seen as a mere and insignificant misstatement. However, under the circumstances, the Judge's finding can also be viewed as "creating his record" for the Court of Appeals that artificially gave the impression Hanify was well within the 30 day removal period, when in fact, he had missed it and the Court never acquired jurisdiction on this basis alone.
The fact that Harrington could not or did not recite the correct date upon which RTC became conservator also tends to acknowledge that the Court did not have before it the very papers necessary to have perfected the Notice of Removal in the Federal Court. Hanify was required by 28 U.S.C. Section 1446(a) and (c ) to have filed a copy of RTC's Conservatorship appointment at the time of filing his Notice of Removal. The fact that the Judge did not have these papers, further confirms that Hanify never perfected the removal.
Had Hanify filed the requisite copy of the Conservatorship appointment [TAB 14] with the Order of Substitution from the Middlesex Court and the Conservatorship papers, as he was required to do at the time of removal, it would have been obvious that RTC had no authority to be substituted for, nor to remove, the state-chartered Defendants (ComFed Advisory Co., ComFed Mortgage, or Furey). To be substituted for these Defendants, RTC would have been required to provide proof with the Notice of Removal that RTC had fully complied with HOLA. [See TAB 14, page 2, references to RTC assuming control of State Banks].
Judge Harrington had an affirmative duty to determine these prerequisites to his jurisdiction, but failed to do so. Instead, he actually proclaimed that Hanify did not have to comply with 12 U.S.C. Section 1441a(l) or its corresponding prohibitions to jurisdiction under 12 U.S.C. Section 1819, et. seq.. Instead, Harrington declared that removal was based on a (nonexistent) "federal question." After making this patently erroneous proclamation, Harrington then ruled the Sweeneys had "missed the deadline" to object to the removal by failing to object within 30 days, relying upon the companion statute to 28 U.S.C. Section 1446, at 28 U.S.C. Section 1447, which was also completely inapplicable to this case.
Harrington's conduct, at a minimum, demonstrates a gross failure to apply existing law, demonstrates a purposeful effort to apply inapplicable law, and tends to indicate he was, in fact, acting on Hanify's behalf.
I. HANIFY'S TANGLED WEB #3: FEDERAL JUDGE NOTES IRREGULARITIES:
Hanify originally presented the entire, original court file, without the final page of the docket or Judge Izzo's order in it, directly to Federal District Court Judge Woodlock, on February 8 (according to Lucciola's transmittal, TAB 18), after picking up the entire original State Court file on Jan. 31. This means Hanify had at least nine days to pick and choose out of the file what would be filed with the Federal Court. Nothing exists which shows what was, in fact, in the file when Hanify picked it up, nor the state of the original docket when Hanify picked it up.
Hanify admits he kept original records (not certified copies) from the Middlesex state court file when some of the original state court records were filed with the federal court on Feb. 8, 1991. The records he admits he kept were Judge Izzo's original order and the last page of the State Court docket. [TAB 12, Hanify's reference to keeping "the post-removal papers."] Judge Izzo's order and the last page of the docket, which Hanify kept in his office, were presented directly to Federal District Court Judge Woodlock in a hearing on March 1, 1991.
At the hearing on March 1, Judge Woodlock himself made observations on the record of deficiencies and irregularities in the removal by Hanify, most notably:
"Well, what I guess I don't understand is why doesn't Middlesex Court have these papers, the original of these papers? The only way that papers get over here on removal is certified copies or a Writ of Certiorari is issued by the Court. I'm not aware that a Writ was issued here, so, consequently, we shouldn't have the original papers."
[TAB 21, pp. 4-5].
III. CONFLICTS EVERYWHERE FOXES GUARDING THE HEN HOUSE
A. JUDICIAL APPEARANCES OF IMPROPRIETY AND ACTUAL CONFLICTS:
When the case was originally presented to Judge Woodlock on March 1, 1991, Judge Woodlock disqualified himself on the basis of a conflict of interest because he "may have met the Sweeneys at a country club" and because he worked briefly with the Defendant's attorney.
When Judge Woodlock disqualified himself, the case should have been redrawn, at random, however, it was assigned directly to Judge Edward F. Harrington. Judge Harrington refused to disqualify himself, despite overwhelmingly obvious conflicts of interests and the clear appearance of impropriety. Judge Harrington had legal duties to disqualify himself on multiple bases.
Judge Harrington, to whom the case was transferred, was formerly the U. S. Attorney for Massachusetts. both ComFed's attorney, John Hanify, and Judge Woodlock, from whom the case was transferred to Harrington, worked as Assistant U.S. Attorneys with Harrington in the U.S. Attorneys office.
John Hanify's father is Edward Hanify., Edward Hanify's law firm, Ropes and Gray, represented Edward Kennedy in the Chappaquidick litigation. Judge Harrington was nominated to the federal bench by Edward Kennedy.
John Hanify's father, Edward Hanify, testified on behalf of Harrington's nomination to the federal judiciary at Confirmation hearings before Congress.
Judge Woodlock, to whom the file was originally presented, also testified on behalf of Harrington at his nomination to the federal judiciary at the Confirmation hearings before the U. S. Congress.
In 1993, during the Sweeney litigation, Judge Harrington's son, William T. Harrington, went to work for Hanify & King, John Hanify's law firm.
Also in 1993 during the Sweeney litigation, Luke T. Cadigan, Judge Harrington's law clerk, went to work for Ropes & Gray.
B. NUTTER, MCCLENNEN & FISH CONFLICTS:
During the course of the Sweeney case, Joe Shea, of Nutter, McClennen & Fish, replaced Hanify as counsel for the Resolution Trust Co. (RTC) and then became counsel for the FDIC.
Robert L. Ullman, of Shea's law firm, Nutter, McClennen & Fish, had also worked with Judge Harrington as a U. S. Attorney.
Joe Shea was mailing papers to the Sweeneys' attorney under Fidelity Investments' Airborne Express account number in July. After inquiries were made into why Fidelity would pay for Shea to ship documents to the Sweeneys' attorney the entries at Airborne were abruptly changed. Shea refused to identify any interest of Fidelity in the Sweeney action; however, until March, 1997, Robert Ullman of Nutter, McClennen & Fish was representing the CEO of Centennial Technologies, which is owned by Fidelity, in a criminal case involving insider trading and misappropriation charges. Individuals from both Fidelity and Nutter, McClennen & Fish, are directors on many of the same corporations.
In 1993, well after Judge Harrington had issued all his various rulings against the Sweeneys, the RTC blatantly admitted that the RTC had never been substituted in the federal action, not even for Defendant ComFed Savings Bank, when it filed a Motion for Substitution of Aug. 3, 1993]. This motion admits that the RTC never had any standing to remove the action to federal court, ever. It also admits the RTC had no authority to proceed in federal court at all.
This eleventh hour submission is also an admission by Joe Shea, the RTC's attorney, from Nutter, McClennen & Fish, that he knew, or should have known, all the federal court proceedings were unlawful because the Court had no subject matter jurisdiction at any time over ComFed Savings Bank, and clearly had no jurisdiction whatsoever over the remaining state-chartered Defendants.
This eleventh hour submission is also an admission by Joe Shea, the RTC's Attorney, from Nutter, McClennen & Fish, that he knew, or should have known, all the federal court proceedings were unlawful because the Court had no subject matter jurisdiction at any time over ComFed Savings Bank, and clearly had no jurisdiction whatsoever over the remaining state-chartered Defendants.
C. FDIC CONFLICTS:
An attorney who worked for Hanify & King, David McCarthy, who was involved in the original foreclosure against the Sweeneys and is implicated by Hanify's affidavit in some of the collusion involved in taking the Middlesex Court file, went to work for the FDIC during the pendency of this litigation.
Officers and Directors of a "specialty financial services company" in Columbus, Ohio, Crown North Corp., somehow became directors of ComFed Mortgage Company during the pendency of this litigation, from 1990 to 1994 [TAB 27-Annual reports of ComFed showing the officers and directors.]
In 1995, Marvin S. Mayer, became President of ComFed Mortgage Co. [TAB 27 - Annual reports of ComFed showing the officers and directors.] The address of ComFed Mortgage was and is 101 E. River Dr. in Hartford, which is also the address of the FDIC regional headquarters. This is the same office as Joe Palladino (who will be representing the FDIC at the mediation). Mayer is now an Assistant Auditor at the FDIC in Dallas.
In 1995, Joanne Giese, became Treasurer, Director, and Clerk of ComFed Mortgage Co. [TAB 27 - Annual reports of ComFed showing the officers and directors.] Giese is currently the Special Assistant to the Regional Director of the FDIC at the Hartford FDIC regional office, again located at 101 E. River Dr. This is the same office as Joe Palladino (who will be representing the FDIC at the mediation).
D. RTC CONFLICTS:
ComFed Mortgage has remained continuously in business. [TAB 27 - Annual Corporation Reports for ComFed Mortgage Corp.]. ComFed Mortgage, Inc., and ComFed Advisory were never liquidated nor under the conservatorship or receivership of RTC/FDIC. However, ComFed Advisory was merged into ComFed Mortgage during the pendency of litigation, which is a transfer of assets, possibly intended to defeat the Sweeneys' claims, and in any ordinary litigation, would be considered a badge of fraud.
In October, 1990, one month before the RTC was appointed conservator of ComFed Savings Bank, John D. Donovan, Jr., and Joan McPhee, of Edward Hanify's law firm, Ropes & Gray represented ComFed Savings Bank and ComFed Mortgage Company in a complaint filed against James G. Baldini, former President and CEO of ComFed Mortgage Company. On Jan. 14, 1991, they proceeded in the same action as attorneys for RTC.
A subsequent settlement agreement, signed by an unidentifiable attorney of the RTC, literally lets the worst wrongdoer, Baldini, the former CEO of ComFed Mortgage, off the hook for a measly $100,000 in cash and a promissory note for $185,000. In one year alone, in 1985, Baldini was paid a base salary of $360,000.00 and a bonus of $2,944,381.00, totaling $3,404,381.00.
The following years, his salary remained at $360,000.00, but his bonus was capped at $800,000 in 1986, $1,300,000 in 1987, and $1,350,000 in 1988.
On top of letting Baldini off with a clear di minimis payment, the agreement purports to provide a "bar" to anyone suing him (it could be seen as an agreement by RTC/FDIC to indemnify him too, but this would be outrageous.). The Compromise Settlement Agreement and Release was entered on November 20, 1995, 40 days before the RTC was abolished.
SEC Forms 8-K, 10-K, & 10Q: As shown filings of ComFed Bancorp with the Securities & Exchange Commission ("SEC"), the Sweeney litigation is never mentioned, even though another action, by Wechsler, is mentioned. [TAB 2 - Filings by ComFed Bancorp with the Securities and Exchange Commission.] In 1990, the Office of Thrift Supervision cited ComFed for failing to cite pending litigation in its form 10-K's filed with the SEC in 1988-90 [TAB 10, page 10, paragraph 7]. However, the FDIC and (the RTC) subsequently failed to make the same reports in filings for ComFed with the SEC after the RTC and FDIC took over ComFed Bancorp. [TAB 2 - Filings by ComFed Bancorp with the Securities and Exchange Commission, not made until 1995.] This is significant, because it demonstrates the RTC and FDIC's own stake in refusing to settle the Sweeney lawsuit and a motive to defraud the Sweeneys of their judgment.
When the failure to mention the Sweeney litigation in SEC filings, is considered in conjunction with other litigation tangential to the Sweeney case, such as ComFed's suit against its former CEO, Baldini and the Wechsler class-action shareholder suit, a clear pattern of fraud is shown. ComFed and RTC settled the Baldini and Wechsler cases less than 45 days before the RTC was disbanded. The Baldini settlement let the CEO of ComFed off the hook for having swindled the bank and its customers of millions of dollars (while purporting to create a bar against future litigation by non-parties). [See Footnote #1 at end of Brief]
Criminal charges were also dismissed against bank officers, and the Wechsler settlement obtained a pay out of insurance proceeds, split 50-50 between shareholders and the RTC, in exchange for what amounts to the RTC indemnifying the insurance company against any other claims. If the insurance company was unaware of the Sweeneys' pending claims (or judgment for $4 million dollars), this settlement likely could not have occurred.
E. OTHER PEOPLE INTERESTED IN THIS CASE & CONFLICTS:
Documents located by the Sweeneys show that a massive ComFed loan servicing portfolio was sold to private interests, including Goldman Sachs, before the RTC became receiver (which would have been a wholly unlawful transfer) [TAB 28]. Current Secretary of the Treasury (and current supervisor over the FDIC), Robert Rubin, was a partner at Goldman Sachs during this time.
Documents located by the Sweeneys from several sources, including documents from the FDIC regional headquarters, show the note inn the Sweeney case was passed to either Ryland (now indicted, see TAB 26), Potomac [See TAB 25], or State Street Bank [TAB 24], any one or all of which should have deprived FDIC of any standing in this action.
F. MORE HANIFY CONFLICTS:
Kara Lucciola, the person who physically picked up the original file at the Middlesex Court, now works for the State Attorney General's office.
In 1991, in yet another clear conflict, William Meserve, an attorney from Ropes & Gray, ostensibly representing the RTC (according to his appearance papers), arrived in court, announced that he was appearing for John Hanify in the Sweeney case when Hanify was accused of wrongdoing in the removal proceedings. Meserve's appearance in the case, and especially in defense of Hanify was a matter clearly adverse to Ropes & Gray's own client, ComFed Bank, and also clearly in conflict with Meserve's duty to RTC.
Hanify had a clear conflict in representing all the ComFed Defendants, jointly, in the initial litigation (particularly when many of the top officials of ComFed Savings Bank were under criminal investigation already). He had an even worse conflict representing the RTC because the RTC was tasked with investigation the underlying bank failure on behalf of the U. S. government. The RTC's interest was thus clearly adverse to ComFed Savings Bank and the interests of ComFed Savings Bank were clearly adverse to those of ComFed Mortgage, ComFed Advisory, and Furey's interests were adverse to all the other defendants.
Despite these clear conflicts of interests, John Hanify, in two sworn affidavits, claimed that he represented the RTC. [Hanify's affidavit for fees and Hanify's Affidavit concerning removal, TAB 12].
Documents from the RTC prove that John Hanify was not retained to represent the RTC and never had a legal services agreement (required by the government) to represent the RTC. [TAB 29]. These facts, coupled with Hanify's proven wrongdoing in removing this case, manifest clear intent to defraud, both the Plaintiffs and the United States government.
END OF BRIEF
Paragraph 4 of this agreement purports to protect Baldini from any and all claims anyone, ever, and is given the name of "bar order," by the parties, and reads:
"If, at any time, after the execution of this agreement, a third party claim for contribution or indemnification has been asserted against Baldini, neither the RTC, nor its successor or assigns, shall oppose a motion by Baldini for a bar order. The RTC and its successors and assigns understand and hereby agree that such a motion would seek an order that the settlement embodied in this agreement is in good faith within the meaning of the law of the state in which the bar order is sought, or federal common law, or any other applicable law, and that all claims against Baldini which have been, could have been, or could be asserted against Baldini arising under federal or state law, based on, relating to, or arising from Baldini's role as an officer, director, and/or employee of the bank, or any direct or indirect subsidiary or parent thereof, including, without limitation, claims for contribution, indemnity, reimbursement or any other form of monetary relief, are extinguished, discharged, satisfied and/or otherwise barred and unenforceable. The RTC and its successors and assigns further understand and agree that the Settling Party, moving for such an order will submit a copy of this agreement, including, without limitation, paragraph 2(a) hereof in support of that motion."
Paragraph 5 of the agreement by RTC with Baldini is a "sharing agreement:"
"Nothing in this agreement, nor any of the acts required to be performed by this agreement, shall be deemed or consumed to have any effect whatsoever on the Sharing and Settlement Agreement dated September 25, 1991 between the RTC and counsel acting on behalf of plaintiff Classes of Shareholders of ComFed Bancorp, Inc., who have asserted claims against Baldini in litigation ("the Shareholder Litigation") consolidated in the United States District Court for the District of Massachusetts, under Civil Action 89-2224-MLW, or any of the RTC's rights or interests thereunder."
(The Civil action referenced in the above paragraph is the Wechsler suit, a class action shareholder suit against ComFed Savings Bank, in which insurance policy limits of $7 million were split, with 47.5% of the first 7 million and 50% of any sum over 7 million going to the class-action shareholder plaintiffs with the remainder to the RTC. The Wechsler agreement was effective Dec. 7, 1995, 24 days before the RTC ceased to exist.)