Unpublished Disposition, 930 F.2d 27 (9th Cir. 1988)

MEMORANDUM^* 

The action that underlies this appeal was brought by the Federal Trade Commission ("the Commission") in August 1983 to obtain preliminary and permanent injunctive relief against unfair and deceptive practices in the sale of gemstones, and to obtain redress for consumers victimized by the deceptive practices. Defendant-appellant Steve Angelica exercised control over defendant Kimberly International Gem Corporation ("Kimberly"). Defendants, inter alia, fraudulently substituted inexpensive gemstones for valuable diamonds that customers sent them for resale.

In August 1985, Angelica agreed to a settlement of the Commission's civil action. This settlement barred him from misrepresenting the value of gemstones or other investments, and required him to pay $40,000 into a fund for restitution to victims of Kimberly's schemes. Although the settlement did not itself require that consumers participating in the restitution fund sign a release, Judge Ideman directed, sua sponte, that the Commission "shall make some statement in the notification letter that acceptance of a pro rata share of the settlement fund bars consumers from initiating future claims against defendants" (RE 24). The Commission accordingly prepared a waiver statement.

Meanwhile, the United States Attorney had brought a criminal action against Angelica and another Kimberly principal. A jury found them guilty on 23 counts of mail and wire fraud in violation of 18 U.S.C. §§ 1341 and 1343. In October 1986, Judge Pamela A. Rymer sentenced Angelica and his codefendants to prison and required, under the Victim and Witness Protection Act, 18 U.S.C. § 3579, that they pay $451,846 in restitution to 15 Kimberly customers who testified in the criminal proceedings. The criminal restitution was to be offset by any amount the witnesses received from the Commission's settlement fund (RE 33--34).

On September 16, 1987, almost a year after Angelica was sentenced, Judge Ideman approved the distribution to consumers from the Commission's settlement fund, and checks bearing the waiver statement prepared by the Commission were sent to consumers who had elected to participate (RE 29).

On January 20, 1988, the Commission applied for an order clarifying that the release that was executed as part of the civil proceeding would not bar the witnesses in the criminal action from receiving criminal restitution (RE 19). It is undisputed that the Commission mailed copies of its application to counsel for all parties, including Angelica's attorney, Stephen Smith. The court granted the Commission's application on January 26, 1988 (RE 17). Angelica now appeals the district court's refusal to vacate its January 26 order.

We must first deal with the Commission's argument that Angelica's appeal should be dismissed for want of jurisdiction. The Commission forthrightly admits that Angelica's motion can be treated as a motion for relief from judgment under Rule 60(b), so that the district court's denial of the motion is a final order within the meaning of 28 U.S.C. § 1291. Straw v. Bowen, 866 F.2d 1167, 1171 (9th Cir. 1989); Fiester v. Turner, 783 F.2d 1474, 1476 (9th Cir. 1986) (treating untimely motion for reconsideration as Rule 60(b) motion to vacate); Rodriguez v. Southern Pacific Transp. Co., 587 F.2d 980, 981 (9th Cir. 1978). However, the Commission nevertheless seeks to argue that "orders that merely clarify the court's intent without modifying prior orders are not appealable." Red at 2. Since the cases that the Commission cites in support of this argument are inapposite, we reject the argument and follow Fiester.¹ 

Angelica appears to contend that the district court abused its discretion when it failed to vacate its order clarifying that the waiver in the civil action did not affect the restitution rights of witnesses in Angelica's criminal trial. This contention lacks merit.

Federal Rule 60(b) (6) authorizes a district court to relieve a party from a final judgment for "any ... reason justifying relief from the operation of the judgment." Fed. R. Civ. P. 60(b) (6). District court decisions regarding whether to grant relief under Rule 60(b) (6) are reviewed for abuse of discretion. Schanen v. United States Dep't of Justice, 762 F.2d 805, 807 (9th Cir.), aff'd as modified, 798 F.2d 348 (9th Cir. 1985). Under Rule 60(b) (6), Angelica must demonstrate "extraordinary circumstances" to justify relief from judgment. Straw, 866 F.2d at 1171.

Angelica argues that the district court abused its discretion when it refused to vacate its order because the order was contrary to statute. Angelica claims that under 18 U.S.C. § 3579 only those individuals who did not receive any proceeds from the civil settlement may obtain criminal restitution. Indeed, the applicable statute provides:

The court shall not impose restitution with respect to a loss for which the victim has received or is to receive compensation, except that the court may, in the interest of justice, order restitution to any person who has compensated the victim for such loss to the extent that such person paid the compensation.

18 U.S.C. § 3579.

The flaw in Angelica's argument is apparent: Angelica has already appealed the sentence of restitution imposed on him in the criminal proceeding. And at the time of Angelica's criminal appeal, the terms of the settlement of the Commission's action were established, though the claim-waiver provision had not yet been issued. Thus, at the time of Angelica's criminal appeal it was clear that a substantial number of persons would receive an amount of compensation through the Commission's efforts. Nevertheless, this court affirmed the order of criminal restitution, though we remanded the case to have the amount of restitution redetermined. United States v. Angelica, 859 F.2d 1390 (9th Cir. 1988). Angelica had a full and fair opportunity to contest the legality of the restitution order, he did contest the legality of the restitution order, and he lost. See Robi v. Five Platters, Inc., 838 F.2d 318, 322, 326 (9th Cir. 1988). As such, Angelica cannot now relitigate the legality of the criminal restitution order in the guise of a challenge to the civil judgment. See id.

Nor does it appear that justice required the district court to vacate its clarification order. See Straw, 866 F.2d at 1171. The release signed by the consumers was not part of the parties' settlement, but was required by the district court sua sponte. Thus, Angelica was not unfairly subjected to a modification of the settlement terms that he had agreed to. Rather, the district court simply made its meaning clearer.

Angelica also seems to argue that the district court should have granted relief from judgment on the basis of Rule 60(b) (1). This rule provides that a court may relieve a party from a final judgment for "mistake, inadvertence, surprise, or excusable neglect." Fed. R. Civ. P. 60(b) (1). Angelica claims that the district court should have granted relief from its clarification order because service of the Commission's application for clarification was not actually received by Angelica's attorney.

Angelica's service argument fails. It is well-established that service is complete upon mailing by first-class mail. Fed. R. Civ. P. 5(b); Kim v. Commandant, Defense Language Institute, 772 F.2d 521, 524 (9th Cir. 1985); Kiki Undies Corp. v. Promenade Hosiery Mills, Inc., 308 F. Supp. 489, 494-95 (S.D.N.Y. 1969). We would in effect delete Rule 5(b) from the statute books if we held that, even though service is complete upon mailing, a district court abuses its discretion if it does not grant relief from a judgment entered after notice by mail but not actual notice. This we decline to do.

Finally, Angelica argues that the district court violated his right to due process by issuing its clarification order without providing him with prior notice and an opportunity for a hearing. However, it is beyond dispute that Angelica was provided with Rule 5(b) notice. This in itself indicates to some degree that Constitutional requirements have been met. See Hannah v. Plumer, 380 U.S. 460, 471 (1965).

Moreover, "due process is flexible and calls for such procedural protections as the particular situation demands." Morrissey v. Brewer, 408 U.S. 471, 481 (1972). In the instant case expeditious action was necessary because Commission counsel learned of the consumer-witnesses' concerns about the release shortly before the 120-day period during which the consumers could cash their previously issued checks expired. Further, the action of the court did not alter the terms under which Angelica agreed to settle, but merely clarified the import of a waiver created by the court's own sua sponte order. In these circumstances, it was no violation of due process for the district court to proceed on the basis of Rule 5(b) notice.

The district court's order is AFFIRMED.