Appeal from the United States District Court for the District of New Jersey - Trenton, D.C. Civil No. 79-2783.
Before: GIBBONS, Chief Judge, SEITZ, ADAMS,*fn* WEISS, HIGGINBOTHAM, SLOVITER, BECKER, STAPLETON, MANSMANN, and ALDISERT, Circuit Judges.
The Township of Edison, New Jersey appeals from a district court post-judgment order directing the township to pay a judgment entered in favor of Marcos and Louise Skevofilax and Michael Michaels against three co-defendant police officers employed by the township. The Skevofilaxes and Michaels obtained separate damage awards in the district court against both the individual police officers and the township.*fn1 those awards are not challenged. At the time of the events giving rise to the lawsuit, the township employed the police officers under the terms of a collective bargaining agreement that provided that the township would provide "the necessary means for the defense" in any action arising out of or incidental to the performance of their duty. The collective bargaining agreement also provided that
[i]n the event of a judgment against a member of the bargaining unit arising out of or incidental to the performance of his duty, the Employer agrees to pay for said judgment or arrange for the payment of said judgment.
The collective bargaining agreement further provided that the employer
agrees to continue to maintain in full force and effect all [liability] insurance now provided by the Employer for the benefit of, and covering Employees of the Employer and specifically Employees who are members of the bargaining unit covered by this Agreement.
The record before us makes it clear that the township contracted for liability insurance. We are called upon to decide whether, in light of the provisions of the collective bargaining agreement, the district court properly ordered the township to satisfy the judgments rendered against the individual defendant police officers.
At the heart of this appeal lies a disagreement amongst the insurance carrier, the township, and the individual police officers. After the district court entered judgment in favor of the plaintiffs, the carrier refused to pay either the $74,964.14 award against the township or the awards totaling $563,457.94 against the police officers. The carrier apparently took the position that because the conduct of the police officers violated the criminal law of New Jersey, any indemnification agreement, embodied either in a collective bargaining agreement or in an insurance contract, was void as a violation of New Jersey public policy. Although that ground for resisting payment had no relevance to the judgment against the township for negligence, the carrier nevertheless refused to pay the judgment against the township unless it first obtained from the officers a release of any right to indemnification they had under the collective bargaining agreement.
Since no payment was forthcoming, the plaintiffs, acting pursuant to Rule 69 of the Federal Rules of Civil Procedure, caused a writ of execution to be levied by the United States Marshal upon the township's bank account. At the same time and acting pursuant to the same Rule, they commenced garnishment proceedings upon the salaries of the police officers. In conjunction with these latter proceedings the district court held a hearing on April 15, 1985, at which time the plaintiffs notified the court that the police officers had commenced in the New Jersey Superior Court an action against the township to compel it to honor the indemnity undertaking contained in the collective bargaining agreement. They also notified the district court that the judgment against the township remained unpaid.
At the district court's suggestion the plaintiffs subsequently obtained and served upon the township an order directing it to show cause why it should not pay the judgments rendered against the individual police officers. The order provided for its service on the attorneys for the defendants on or before April 22, 1985, together with the papers on which the moving parties relied. These papers included the affidavit of Rafael Abramovitz, an attorney for the plaintiffs. The affidavit asserts that the collective bargaining agreement obliges the township, as a matter of contract, to pay the outstanding judgments against the individual police officers. Attached to the affidavit is a copy of the relevant portions of the collective bargaining agreement between the township and its policemen. also attached is a copy of the township's resolution implementing the collective bargaining agreement by authorizing the retention at township expense of attorneys for the defendant police officers in connection with an indictment growing out of the same incident giving rise to the suit. The resolution specifically acknowledged that "all of these defendants were police officers on active duty at the time of the incident charged in the indictment." Joint Appendix at 28.
The plaintiffs also served and filed a memorandum of law in support of their motion for an order compelling the township to pay the judgment against the police officers. That memorandum addressed the court's jurisdiction to issue such an order, and the township's contractual obligation to indemnify the officers.
When served with the order to show cause an supporting papers, the defendant police officers moved in writing to join in the plaintiffs' motion. In support of the plaintiffs' motion, the officers supplied to the district court and to counsel for the township copies of the brief they had filed in the New Jersey court in support of their own motion for summary judgment on their claim for contract indemnification.
On the return date of the order to show cause the township appeared, represented by two attorneys. One, Peter DeSarno, was the regular township attorney, and the other, Martin McGowan, was a member of the firm that the insurance carrier had retained on behalf of the defendants. The police officers had their own counsel. Neither DeSarno nor McGowan filed papers in opposition to the relief sought by the plaintiffs, nor did they request additional time to do so. Neither suggested that the district court should abstain from deciding any legal issue that might have been resolved in the then-pending state court action. Both addressed the merits of the motion.
The township argued that the district court did not have jurisdiction to order the township to pay the judgments rendered against the individual defendants. Alternatively, it contended that the indemnity agreement in the collective bargaining agreement was void under New Jersey law. It did not claim that there were any issues of material fact concerning the construction of the indemnification clause. The record is unambiguous in this respect. Mr. DeSarno spoke on behalf of the township with respect to the indemnification claims. His argument with respect to the collective bargaining agreement, in full, was as follows:
THE COURT: What about your collective bargaining agreement? What did you do with that[?]
MR. DE SARNO: it has to be read in connection with the statute, Judge.
THE COURT: Oh, you mean you make [an] agreement with your employees, and then you later take it and shove it at them [like] that[?]
MR. DE SARNO: Judge, it is strictly a state matter. The Moya case settles the issues. The Moya case talks about when . . . officers are entitled to be represented[;] it talks inferentially about the obligations that may be the obligation[s] of the municipality. This is willful, wanton action. If there is coverage, I have suggested to the counsel for the officers, as a matter of fact, who is taking the burden of these plaintiffs, that he ought to join the carrier. There might be some coverage, but to say that the Township itself directly is liable, I think is incorrect, and it is against all the law of New Jersey.
THE COURT: What? Your collective bargaining agreement?
MR. DE SARNO: What about it, Judge?
THE COURT: Would you please explain to me the effect of a collective bargaining agreement on this?
MR. DE SARNO: The collective bargaining agreement merely recites the statute, it talks about obligations, you have read it in the context of the whole position, 40(a). It really recites the statute about whether they are entitled to be represented. Then it goes on to say that the first part of that section they pulled out wasn't put into the brief, I have it in brief which I don't have but when you read it all in context, what it suggests, and I suggest this to you Honor, collective bargaining agreement is not dispositive of ultimately the issue in this case. It depends what the Constitution permits us to do and what other statutory authority permits us to do. It does not permit us to pay this kind of judgment.
THE COURT: "In the event of a judgment against a member of the bargaining unit arising out of or incidental to the performance of his duty, the employer agrees to pay for said judgment or arrange for the payment of said judgment." What could be clearer than that[?]
MR. DE SARNO: Assuming that it could be done within the framework of the Constitution of New Jersey, and when the statutory authority of a municipality. You have to assume that, Judge, and you can't do it.
THE COURT: You mean you entered into [an] agreement with your employees violative of both the Constitution and the statute[?]
MR. DE SARNO: That is not unusual, Judge, in collective bargaining agreements.
THE COURT: Oh, Mr. DeSarno.
MR. DE SARNO: There are not a managerial things that contracts are not enforceable. You are reading it too strictly. You are not understanding the framework of the state law that surrounds itself.
Joint Appendix at 100-02.
The colloquy between court and counsel discloses clearly that the court understood counsel to be arguing not that the indemnity clause on which plaintiffs relief was in fact inapplicable, but that, assuming it was, the clause was illegal. The court's understanding of the township's argument was reiterated later in the hearing, when Mr. Abramovitz, the plaintiffs' attorney observed:
MR. ABRAMOVITZ: Yes. If he is challenging the clear and obvious clause in the contract, I think the words defeat him. The contract is beyond dispute.
THE COURT: I think his argument, and I could be wrong, but I think his argument is, you know, the contract is fine, which the laws of the State of New Jersey say that they are not required to compensate for. I think that is his argument.
Id. at 105-06. Mr. De Sarno made no objection to this characterization of his position on the contract. No issue of contract interpretation was ever clearly tendered to the district court.
Mr. DeSarno did contend that the district court should not decide the indemnity issue, but that argument appears to have been addressed to the township's jurisdictional contention. From what appears in the transcript of the argument, the township seems to have urged that because the indemnification question had not been litigated during the trial, it could not be litigated in a proceeding under Fed. R. Civ. P. 69. The following exchange occurred:
MR. DE SARNO: But you Honor, the judgment you are enforcing is not against the Township of Edison. That is the problem. There was never a judgment entered against the township except in one respect. Now you --
THE COURT: I can enforce it against the Township of Edison.
MR. DE SARNO: You are litigating an issue that was never raised in the trial before, your Honor. it is ...