IN RULING THAT FEDERAL COURT HAS JURISDICTION OVER HILLBROOM LAWSUIT
U.S. District Court for the NMI Chief Judge Ramona V. Manglona has ruled that lawyers Barry J. Israel and David J. Lujan have offered no persuasive argument why the federal court does not have jurisdiction over the lawsuit filed against them by their former client, Junior Larry Hillbroom.
In denying Israel’s and Lujan’s motion to dismiss Hillbroom’s lawsuit, Manglona said Hillbroom does not need to establish extrinsic fraud to invoke federal jurisdiction.
Hillbroom satisfied his burden of establishing federal question jurisdiction over his Racketeer Influenced and Corrupt Organization Act claims, and diversity jurisdiction over the remaining claims, said Manglona in a written order Thursday last week that contains detailed reasoning for the decision.
The judge issued an oral ruling of the motion to dismiss after hearing the parties’ arguments last Sept. 19.
Israel, through counsel Theodore Frank, moved to dismiss the lawsuit. Lujan joined in the motion.
Israel and Lujan assert that extrinsic fraud is the sole basis of federal jurisdiction over this case and now that discovery is complete, the absence of extrinsic fraud evidence warrants a dismissal.
Israel and Lujan claim that, without evidence of extrinsic fraud, Hillbroom’s RICO claim fails and without RICO claim, there is no federal jurisdiction.
Defendants further declared, without citing to the record, that the District Court “ruled extrinsic fraud is necessary for federal…jurisdiction over plaintiff’s claims.”
At the hearing, Israel’s counsel directed Manglona to a sentence in her decision and order denying Lujan and Israel’s motion for judgment on the pleading to support this contention.
Manglona disagreed with the defendants’ interpretation of that decision.
In her written order, Manglona said nowhere did she rule that extrinsic fraud was required for jurisdiction. Rather, Manglona said, she considered the defendants’ arguments that the exercise of jurisdiction over this case would involve the improper review of a Guam Superior Court order in violation of the full faith and credit clause of the U.S. Constitution and the Rooker-Fieldman doctrine.
The full faith and credit clause refers to the duties that states within the U.S. have to respect the “public acts, records, and judicial proceedings of every other state.”
Rooker-Fieldman refers to a legal principle that a federal court “do not have jurisdiction to review decisions of state courts or claims inextricably intertwined with an earlier state-court judgment.”
Manglona said she addressed the role of extrinsic fraud but did not hold that it was a determinative factor in rejecting both defenses.
First, as to the full faith and credit cause, Manglona said she held that “the issues the Guam court decided are not identical to the issues in this lawsuit, and therefore the third prong of the res judicata test is not satisfied.”
Manglona said defendants have not presented any argument why a lack of evidence of extrinsic fraud would change that conclusion.
Res judicata refers to a legal doctrine that bars litigation in a subsequent action of any claims that were raised or could have been raised in the prior action.
Hillbroom is suing Israel, Lujan, and his former trustee, Keith Waibel, alleging mismanagement of approximately $90 million he inherited as heir of Larry Lee Hillblom, a co-founder and former owner of DHL Worldwide Express.
In two separate lawsuits, Hillbroom alleges that the defendants increased their contingency fee from $38% to 56% through fraud and breaches of their fiduciary duties.
He also alleges that defendants fraudulently backdated the 56% retainer, submitted a false report to the trust protector, and paid unsubstantiated costs from the trust funds.
Hillbroom’s first lawsuit was only against Lujan. In his second complaint, he sued Israel and Waibel. Both cases allege nearly the same facts.
Hillbroom, however, did not bring a claim of negligence against Lujan. The court consolidated the two cases.
Hillbroom is suing for legal malpractice, negligence, breach of fiduciary duty, fraud and RICO violation.
Hillbroom is one of the four DNA-proven children of Hillblom. His name is spelled differently from that of Hillblom.
Hillblom died in a seaplane crash off Anatahan waters on a flight from Pagan to Saipan on May 21, 1995, leaving behind an estate worth approximately $550 million. The bodies of the pilot and a business partner were found, but Hillblom’s body was never recovered.