ARGUMENT ANALYSIS

Justices poised to reject “mishmash” standard for reopening a case

Monday’s argument in BLOM Bank SAL v. Honickman took the justices back to their law school days, with a question straight out of a traditional first-semester course in Civil Procedure. The specific topic here is the standard for reopening a judgment that a court already has entered, the subject of Rule 60 of the Federal Rules of Civil Procedure.

Rule 60(b) includes several specific reasons why a court might do that (a mistake in the judgment, evidence the plaintiff couldn’t have found the first time, fraud, and the like) but then offers in Rule 60(b)(6) a famous (and oft-litigated) general exception for “any other reason that justifies relief.” The traditional standard for Rule 60(b)(6), reiterated by the Supreme Court and lower courts numerous times, requires “extraordinary circumstances,” the idea being that the specific reasons in the other five subparts of Rule 60(b) include all of the ordinary circumstances that might justify reopening a judgment; only something extraordinary should justify relief for a reason that didn’t make it onto that list.

On quite a different topic, earlier in a case, Rule 15(a) outlines a very lax standard for when a court should permit a plaintiff to amend its complaint. Indeed, at least in the first instance, there is an almost overwhelming presumption that the court should permit the plaintiff to amend the complaint. The question in this case is what to do if the plaintiff wants to reopen a final judgment (already affirmed on appeal) to amend its complaint not for newly discovered evidence (which would fall under Rule 60(b)(2)) but rather for evidence that it knew all along but simply failed to include.

To provide context, this is a suit by survivors of a series of Hamas attacks between 2001 and 2003 against a Lebanese bank that served customers that they say were connected to Hamas. Under the Justice Against Sponsors of Terrorism Act, such a suit can succeed only if the plaintiffs can show that the bank “knowingly provid[ed] substantial assistance” to a designated terrorist group. Because the original complaint did not include any information showing that the bank knew that those customers were involved with Hamas when it provided services to them, the district court dismissed the complaint. Before doing so, the court asked the survivors’ lawyer if they wanted to amend their complaint, but they declined.

Later, after the U.S. Court of Appeals for the 2nd Circuit affirmed the judgment dismissing the complaint, the survivors returned to the district court, seeking to reopen the judgment to offer additional evidence to show that the bank knew about its customers’ links to Hamas. The district court rejected that request, noting the lack of extraordinary circumstances. The court of appeals reversed, concluding that the extraordinary circumstances test does not apply if the plaintiff had not yet amended its complaint a single time. Rather, it said, the traditional rule calling for “extraordinary circumstances” must be tempered by the “liberal” policy for amendment in Rule 15.

At arguments on Monday the bench was quite dubious about the 2nd Circuit’s analysis. This was clearest in Michael Radine’s argument, trying to defend the ruling on behalf of the survivors. When Radine started his argument by describing the “extraordinary circumstances” that would justify amending the complaint in this case, Justice Elena Kagan interrupted him to point out that he agreed that “the right standard is … extraordinary circumstances …. [But [t]hat’s not what the Second Circuit said, is it?”

Kagan went on to describe the lower court’s reasoning as “some kind of mishmash of a standard, which is part 60(b) and part 15(a).” She continued, “as I understood your introduction, you have given up on that.” So, Kagan asked, why shouldn’t the court simply say that the lower court’s reasoning is “wrong” and it should “go back and try it again”?

When Radine tried again to discuss the extraordinary circumstances in his case, Justice Neil Gorsuch backed Kagan’s idea bluntly: “What objection would have you to a short opinion from this court saying simply that the Rule 60(b) standard applies, there isn’t this mishmash … between 15 and 60, go back and try again.”

Another indicator of the thin likelihood that the justices will back a watered-down standard for Rule 60 came from Justice Amy Coney Barrett when Radine said he saw the “extraordinary circumstances standard as a “lower altitude mountain” than counsel for the defendants. Barrett jumped in emphatically to say: “Our precedent hasn’t treated it that way, and pretty much the uniform practice in the court of appeals so far as I’m aware is to say extraordinary circumstances really are extraordinary because we do have a preference in favor of letting final judgments be final.”

The only thing on the bright side for the survivors was an interchange with Michael McGinley, representing the bank. Gorsuch (seconded by Kagan) pressed McGinley on the view that although Rule 60(b) might not “require consideration of Rule 15,” neither does it seem to “preclude it.” As he put it, “could[n’t] a district court in its discretion take into account [whether] leave to amend might be appropriate? … [I]t’s one thing to say the district court abuses its discretion in 60(b)(6) by not looking at Rule 15 and quite another to say the district court abuses its discretion to look at Rule 15 in some 60(b)(6) cases.”

This argument really sounded like Gorsuch was just about dictating the opinion as he went along. I’d predict a short opinion, before the first day of May, and I wouldn’t be the least bit surprised if Gorsuch or Kagan wrote it.