23-1330 Marco Destin, Inc. v. Levy
United States Court of Appeals For the Second Circuit
August Term 2023
Argued: May 2, 2024 Decided: August 8, 2024
No. 23-1330
MARCO DESTIN, INC., 1000 HIGHWAY 98 EAST CORP., E&T, INC., PANAMA SURF & SPORT, INC.,
Plaintiffs-Appellants,
v.
SHAUL LEVY, individually agent of L&L Wings, Inc., MEIR LEVY, individually agent of L&L Wings, Inc., BENNETT KRASNER, individually agent of L&L Wings, Inc., ARIEL LEVY,
Defendants-Appellees.
Appeal from the United States District Court for the Southern District of New York No. 22-cv-8459, Laura Taylor Swain, Chief Judge.
Before: JACOBS, SACK, and SULLIVAN, Circuit Judges.
Plaintiffs Marco Destin, Inc., 1000 Highway 98 East Corp., E&T, Inc., and Panama Surf & Sport, Inc. (collectively, “Marco Destin”) appeal from a judgment of the United States District Court for the Southern District of New York (Swain, C.J.) dismissing their claims for fraud and “fraud on the court” against agents of L&L Wings, Inc. (“L&L”), with whom Marco Destin had executed a stipulated judgment in a separate trademark action in 2011. Marco Destin alleged that the stipulated judgment was the product of fraud because L&L had secured that judgment in partial reliance on a trademark registration that it had fraudulently procured from the United States Patent and Trademark Office (“USPTO”). Based on that alleged fraud, Marco Destin requested that the 2011 judgment be vacated pursuant to Federal Rule of Civil Procedure 60(d)(3) and that the defendants be sanctioned and ordered to pay damages for injuries associated with the fraud. The district court dismissed the action for failure to state a claim. On appeal, Marco Destin argues that the district court erroneously denied it relief after concluding that Marco Destin had a reasonable opportunity to uncover any fraud in the initial litigation. Taking up Marco Destin’s arguments, we confirm that we review a district court’s dismissal of an independent action asserting “fraud on the court” under Rule 60(d)(3) for abuse of discretion. We also conclude that the district court acted within its discretion when it declined to vacate the 2011 stipulated judgment based on its finding that Marco Destin should have uncovered the alleged fraud through the exercise of due diligence in the earlier litigation. We therefore AFFIRM the judgment of the district court.
AFFIRMED.
GARY M. MURPHREE, Am Law, LLC, Miami, FL, DAVID M. RABINOWITZ, Moses & Singer, LLP, New York, NY (Min Kyung Cho, Moses & Singer LLP, New York, NY, on the brief), for Plaintiffs-Appellants.
JAMES B. GLUCKSMAN (Robert L. Rattet, on the brief), Davidoff Hutcher & Citron LLP, New York, NY, for Defendants-Appellees Shaul Levy, Meir Levy, and Ariel Levy.
SPENCER A. RICHARDS (A. Michael Furman, on the brief), Furman Kornfeld & Brennan LLP,
2 New York, NY, for Defendant-Appellee Bennett Krasner.
RICHARD J. SULLIVAN, Circuit Judge:
Plaintiffs Marco Destin, Inc., 1000 Highway 98 East Corp., E&T, Inc., and
Panama Surf & Sport, Inc. (collectively, “Marco Destin”) appeal from a judgment
of the United States District Court for the Southern District of New York (Swain,
C.J.) dismissing their claims for fraud and “fraud on the court” against agents of
L&L Wings, Inc. (“L&L”), with whom Marco Destin had executed a stipulated
judgment in a separate trademark action in 2011. Marco Destin alleged that the
stipulated judgment was the product of fraud because L&L’s agents
(“Defendants”) had secured that judgment in partial reliance on a trademark
registration that it had fraudulently procured from the United States Patent and
Trademark Office (“USPTO”). Based on that alleged fraud, Marco Destin
requested that the 2011 judgment be vacated pursuant to Federal Rule of Civil
Procedure 60(d)(3) and that Defendants be sanctioned and ordered to pay
damages for injuries associated with the fraud. The district court dismissed the
action for failure to state a claim. On appeal, Marco Destin argues that the district
court erroneously denied it relief after concluding that Marco Destin had a
reasonable opportunity to uncover any fraud in the initial litigation.
3 Taking up Marco Destin’s arguments, we confirm that we review a district
court’s dismissal of an independent action asserting “fraud on the court” under
Rule 60(d)(3) for abuse of discretion. We also conclude that the district court acted
within its discretion when it declined to vacate the 2011 stipulated judgment based
on its finding that Marco Destin should have uncovered the alleged fraud through
the exercise of due diligence in the earlier litigation. We therefore AFFIRM the
judgment of the district court.
BACKGROUND
In 2007, L&L commenced an action in the Southern District of New York
(Jones, J.) asserting claims for, among other things, breach of contract and
trademark infringement related to Marco Destin’s unauthorized use of L&L’s
unregistered trademark “Wings” on beach apparel. L&L alleged that, in 1998, the
two companies had entered into a temporary licensing agreement (the “License
Agreement”) that permitted Marco Destin to use the trademark, but that Marco
Destin continued to use the mark after the agreement expired in 2006. Marco
Destin answered the complaint and filed several counterclaims, and the parties
engaged in discovery through mid-2008.
4 After the close of discovery, L&L revealed in its summary judgment filings
that it had recently registered the “Wings” mark with the USPTO, which by law
served as prima facie evidence that the mark was entitled to protection. Based in
large part on that registration, the district court granted summary judgment to
L&L with respect to liability, finding that Marco Destin had breached the License
Agreement and infringed L&L’s “Wings” mark. The parties ultimately entered
into a stipulated order of settlement and dismissal in 2011 (the “Stipulated
Judgment”), under which Marco Destin was required to pay L&L $3.5 million and
cease using the “Wings” mark. The settlement also included releases that
precluded Marco Destin from bringing any action against L&L based on the
“Wings” mark or the License Agreement.
At around the same time that L&L was litigating with Marco Destin in
Manhattan, L&L became embroiled in another licensing dispute in the Eastern
District of North Carolina with an unrelated company called Beach Mart, Inc.
During the course of that litigation, Beach Mart discovered that L&L was not the
owner of the “Wings” mark and that the trademark was in fact owned by Shepard
Morrow, who had obtained five separate registrations with the USPTO on the
name “Wings.” As revealed in the North Carolina action, L&L had tried to register
5 “Wings” with the USPTO, but after those attempts failed, it resorted to licensing
the mark from Morrow during a brief period in the 1990s. L&L eventually stopped
paying the required fees under that license, claimed the unregistered mark as its
own, and began licensing the mark to other entities – including Marco Destin and
Beach Mart.
Aided by these revelations, Beach Mart secured a judgment in the district
court for the Eastern District of North Carolina in 2021, which canceled L&L’s
registration of the “Wings” mark on the ground that L&L had procured it by
making false representations to the USPTO. The district court also granted Beach
Mart’s motion for sanctions, finding that L&L’s founder, Shaul Levy, had engaged
in “egregious discovery conduct” by failing to disclose Morrow’s registration of
the mark and the Morrow license agreement. Sp. App’x at 7 (internal quotation
marks omitted).
A year after the North Carolina judgment, Marco Destin filed this action in
the Southern District of New York (Swain, C.J.) against Shaul Levy and three other
agents of L&L – Ariel Levy, Meir Levy, and Bennett Krasner – based on their
conduct during the initial trademark suit before Judge Jones. The action asserted
two causes of action, for “fraud on the court” and “fraud,” and demanded vacatur
6 of the Stipulated Judgment, as well as sanctions and money damages. Defendants
moved to dismiss the complaint pursuant to Rule 12(b)(6), and the Levy
Defendants made a separate motion for sanctions against Marco Destin on the
grounds that Marco Destin’s claims were meritless and unreasonably multiplied
the proceedings.
The district court granted Defendants’ motion to dismiss but denied the
Levy Defendants’ motion for sanctions. Construing the “fraud on the court” claim
as an independent action for relief from a judgment under Rule 60(d)(3), the
district court concluded that Marco Destin was not entitled to the extraordinary
remedy of vacatur based on its own lack of diligence in uncovering L&L’s
misrepresentations and concealment concerning the “Wings” trademark. In
particular, the district court noted that the License Agreement expressly stated that
“one or more individuals and/or entities have registered trademarks . . . to the
mark ‘Wings’ and can and/or may claim a paramount right to the use of said
mark.” Id. at 13 (citing paragraph 11.3 of the License Agreement); see also App’x
at 616 (paragraph 11.3 of the License Agreement). Based on its finding that Marco
Destin had a reasonable opportunity to discover the fraud that allegedly occurred
during the initial litigation, the district court declined to vacate the Stipulated
7 Judgment under Rule 60(d)(3) and granted Defendants’ motion to dismiss. It also
dismissed Marco Destin’s separate “fraud” claim, finding that it was barred by (1)
Rule 60(b)(3)’s one-year filing window on motions for fraud against an adverse
party, (2) the New York statute of limitations for fraud, and (3) the release clause
in the 2011 Stipulated Judgment. The court further denied the Levy Defendants’
motion for sanctions against Marco Destin.
This appeal by Marco Destin followed. 1
DISCUSSION
I. Legal Framework
Federal Rule of Civil Procedure 60 permits parties to seek relief from a
judgment, including in cases of fraud or mistake. The “normal procedure” to
attack a judgment is by “motion in the court that rendered the judgment.” 11
Wright & Miller, Federal Practice & Procedure § 2868 (3d ed. 2023). However, Rule
60(d) also authorizes parties to file an “independent action” seeking the same
relief. Fed. R. Civ. P. 60(d)(1). These independent actions trace back to the pre-
Rule era, during which courts had inherent power to entertain motions seeking to
set aside judgments they had entered. See United States v. Beggerly, 524 U.S. 38, 42
1 The Levy Defendants have not cross-appealed the denial of their motion for sanctions.
8 (1998). This power was generally time-limited, in that a court could hear such a
motion only during the same “term” in which it entered the judgment. Id.; see also
Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 244 (1944), overruled on
other grounds by Standard Oil Co. of Cal. v. United States, 429 U.S. 17, 31 n.2 (1976).
But in cases of “manifestly unconscionable” fraud – such as a fraud upon the court
itself – parties were permitted to seek relief long after that term ended, which they
could do by filing various writs in equity, such as a “bill[] of review.” Hazel-Atlas,
322 U.S. at 244–45. The court then had “discretion” to grant that writ and vacate
the judgment. Id. at 248.
When Rule 60 was enacted, it expressly preserved the “power” of district
courts to “entertain” both motions and independent actions to set aside a
judgment. Fed. R. Civ. P. 60(d)(3); see also Beggerly, 524 U.S. at 45 (“The revision
made equally clear, however, that one of the old forms [of obtaining relief from a
judgment], i.e., the ‘independent action,’ still survived.” (footnote omitted)).
Therefore, as in the old regime, a party challenging a judgment may file either a
motion within a fixed time window – generally one year under Rule 60(b)(3) – or
an “independent action” any time after that pursuant to Rule 60(d)(3). Like the
old bills of review, these independent actions require a more demanding showing
9 of “fraud” than a “timely motion,” such as a fraud on the court itself. See
Campaniello Imports, Ltd. v. Saporiti Italia S.p.A., 117 F.3d 655, 663 (2d Cir. 1997)
(quoting Gleason v. Jandrucko, 860 F.2d 556, 558 (2d Cir. 1988)). And as we and
other circuits have long recognized, a district court has “discretion in determining
whether to entertain independent actions for relief” and may look to “traditional
equitable principles to guide its decision.” Id. at 661 (collecting cases).
II. Standard of Review
At the outset, the parties dispute the standard of review for appeals that
challenge a district court’s dismissal of an independent action to set aside a
judgment for fraud on the court. Citing our recent decision in Mazzei v. The Money
Store, 62 F.4th 88 (2d Cir. 2023), Marco Destin argues that we should review the
district court’s dismissal de novo, as we would for a routine complaint dismissed
under Rule 12(b)(6). Defendants, by contrast, argue that we should review only
for abuse of discretion, in line with our traditional approach to Rule 60(b) motions.
See Motorola Credit Corp. v. Uzan, 561 F.3d 123, 126 (2d Cir. 2009) (“We . . . review
the denial of a Rule 60(b) motion for abuse of discretion.”); United States v. Parcel
of Prop., 337 F.3d 225, 236 (2d Cir. 2003) (“We . . . review a claim of fraud on the
court [brought by motion under Rule 60(b)] for abuse of discretion.”).
We agree with Defendants that the dismissal of an independent action
10 brought under Rule 60(d) is reviewed for abuse of discretion. In fact, we explicitly
held as much in Campaniello Imports, where we explained that the trial court
“exercises discretion in determining whether to entertain independent actions for
relief” under Rule 60(d) and that “an appellate court should not disturb the
equitable determination of the trial judge unless it can conclude that the trial judge
abused its discretion.” 117 F.3d at 661 (alterations and internal quotation marks
omitted); see also Cresswell v. Sullivan & Cromwell, 922 F.2d 60, 71 (2d Cir. 1990)
(“Decisions in [an independent action] are committed to the court’s discretion,
informed by traditional equitable principles.”). This standard aligns with the
equitable origins of these independent actions, which as explained above were
firmly committed to the court’s “discretion.” Hazel-Atlas, 322 U.S. at 248.
Mazzei does not say otherwise. In fact, the issue of the proper standard of
review for the dismissal of an independent action for fraud on the court was not
even before the Mazzei panel, given that both parties agreed in their briefs that the
standard of review was de novo. 2 And while Mazzei repeated the parties’
articulation of that standard, it did not purport to “squarely address,” or otherwise
decide on its own accord, what the proper standard of review is for dismissal of
2See Brief for Plaintiffs-Appellants at 29, Mazzei, 62 F.4th 88 (No. 21-2696), 2022 WL 278534; Brief for Defendants-Appellees at 21, Mazzei, 62 F.4th 88 (No. 21-2696), 2022 WL 671913.
11 an independent action in equity to vacate a judgment for fraud on the court. Deem
v. DiMella-Deem, 941 F.3d 618, 624–25 (2d Cir. 2019). At most, Mazzei assumed
without deciding that de novo review applied based on party “concession[s],” an
assumption that is not binding on later panels. See Friends of the E. Hampton Airport,
Inc. v. Town of East Hampton, 841 F.3d 133, 153 (2d Cir. 2016); Getty Petroleum Corp.
v. Bartco Petroleum Corp., 858 F.2d 103, 113 (2d Cir. 1988) (“[A] sub silentio holding
is not binding precedent.” (internal quotation marks omitted)).
We thus take this occasion to confirm what we have long held: we review
the grant or dismissal of an independent action for fraud on the court under Rule
60(d)(3) for abuse of discretion. See Campaniello Imports, 117 F.3d at 661. As usual,
“[a] district court . . . abuse[s] its discretion if it base[s] its ruling on an erroneous
view of the law or on a clearly erroneous assessment of the evidence, or render[s]
a decision that cannot be located within the range of permissible decisions.”
Motorola Credit, 561 F.3d at 126 (internal quotation marks omitted).
III. Analysis
Applying that standard, we readily conclude that the district court did not
abuse its discretion in dismissing Marco Destin’s independent action for fraud on
12 the court. 3 “Generally, claimants seeking equitable relief through independent
actions must . . . (1) show that they have no other available or adequate remedy;
(2) demonstrate that [their] own fault, neglect, or carelessness did not create the
situation for which they seek equitable relief; and (3) establish a recognized
ground – such as fraud, accident, or mistake – for the equitable relief.” Campaniello
Imports, 117 F.3d at 662. Among those “recognized ground[s]” is fraud on the
court. Id. at 661. To obtain relief on that basis, the plaintiff “must prove, by clear
and convincing evidence, that the defendant interfered with the judicial system’s
ability to adjudicate impartially and that the acts of the defendant must have been
of such a nature as to have prevented the plaintiff from fully and fairly presenting
a case or defense.” Mazzei, 62 F.4th at 93–94; see also Hadges v. Yonkers Racing Corp.,
48 F.3d 1320, 1325 (2d Cir. 1995) (explaining that “fraud on the court” includes
only a limited “species of fraud”). And as in every action for equitable relief, the
plaintiff must show that the equities tip in favor of relief under the first and second
Campaniello Imports factors, such as by demonstrating that its own “neglect” did
3 Marco Destin’s opening brief did not raise any specific challenges to the dismissal of its common law fraud claims or the denial of its motion for sanctions. We therefore decline to review those issues on appeal. See JP Morgan Chase Bank v. Altos Hornos de Mex., S.A. de C.V., 412 F.3d 418, 428 (2d Cir. 2005) (“[A]rguments not made in an appellant’s opening brief are [forfeited] even if the appellant pursued those arguments in the district court or raised them in a reply brief.”).
13 not lead to the fraudulent judgment. Campaniello Imports, 117 F.3d at 662 (“It is
fundamental that equity will not grant relief if the complaining party has, or by
exercising proper diligence would have had, an adequate remedy at law, or by
proceedings in the original action to open, vacate, modify, or otherwise obtain
relief against, the judgment.” (alterations and internal quotation marks omitted)).
Here, the district court dismissed Marco Destin’s independent action for
fraud on the court on the equitable grounds that Marco Destin had a reasonable
opportunity to uncover the fraud during the underlying action. We see no abuse
of discretion in how the court reached that conclusion. As Campaniello Imports
itself contemplated, courts generally will not grant relief under Rule 60(d) if the
plaintiff could have prevented the fraudulent judgment through “proper
diligence.” Id.; accord Mazzei, 62 F.4th at 94 (explaining that we are typically
“unwilling[] to find fraud on the court where the alleged fraud could have been
redressed in the underlying action”). That is what the district court found here
when it concluded that, with “due diligence,” Marco Destin could have exposed
L&L’s fraudulent efforts to conceal the Morrow license and his ownership of the
“Wings” trademark. Sp. App’x at 13 (quoting Mazzei, 62 F.4th at 94). Indeed, the
License Agreement explicitly informed Marco Destin that other parties may have
14 paramount ownership claims to the “Wings” mark. Id. (citing to paragraph 11.3
of the License Agreement); see also App’x at 616 (paragraph 11.3 of the License
Agreement). Consequently “[i]f Marco Destin had sought to ascertain from L&L
during the [u]nderlying [a]ction who else could claim a paramount right to use the
‘Wings’ mark, it might well have found the Morrow [l]icense [a]greement on its
own.” Sp. App’x at 14. Similar diligence likewise would have revealed L&L’s
fraudulent efforts to register the “Wings” mark with the USPTO, given that the
public docket for L&L’s application explicitly identified Morrow as the previous
owner of a similar mark. See id. Although the court was careful not to “condone”
L&L’s nondisclosure, it ultimately concluded that Marco Destin “could have
addressed the alleged fraud” in the initial action and therefore was not entitled to
equitable relief. Id. at 15–16. We see no abuse of discretion in those conclusions,
which are fully supported by the record and consistent with our precedent on
equitable relief under Rule 60. 4
4In so ruling, we note that the district court dismissed the independent action based on equitable factors, which we review for abuse of discretion. A district court may dismiss an independent action because it fails to “establish a recognized ground – such as fraud, accident, or mistake – for the equitable relief” sought. Campaniello Imports, 117 F.3d at 662. Although that action would still generally be subject to abuse-of-discretion review, we take no position on whether we would review de novo the underlying question of whether the facts alleged or proven constitute the unique “species of fraud” that amounts to fraud on the court. Hadges, 48 F.3d at 1325 (“The concept of ‘fraud on the court’ embraces only that species of fraud which does[,] or attempts to,
15 Marco Destin leans heavily on Hazel-Atlas, asserting that it authorizes courts
to grant relief to plaintiffs on their fraud-on-the-court claims even if those plaintiffs
were not diligent in the underlying action. We agree, but only to a point. Hazel-
Atlas established that a court has “discretion” to vacate a judgment even where the
plaintiff was not diligent in the underlying action, at least in cases of particularly
brazen fraud on the court. Hazel-Atlas, 322 U.S. at 248 (emphasis added). But
nothing in Hazel-Atlas precludes a court from considering a party’s lack of
diligence, nor does it compel vacatur of the prior judgment regardless of the
plaintiff’s negligence in uncovering the asserted fraud. Instead, when a district
court entertains an independent action for fraud on the court as contemplated by
Rule 60(d)(3), it may balance the equities as usual in deciding whether to vacate
the underlying judgment; in doing so, the court is free to assess the plaintiff’s
diligence and the severity of the alleged fraud before granting the request for
equitable relief.
Here, even though the district court did not explicitly invoke the equitable
standard from Campaniello Imports, it nonetheless followed the same line of
defile the court itself, or is a fraud perpetuated by officers of the court so that the judicial machinery cannot perform in the usual manner its impartial task of adjudging cases.” (internal quotation marks omitted)).
16 reasoning in dismissing Marco Destin’s action for lack of diligence. Because
“nothing in the record suggests that the [d]istrict [c]ourt would appraise the facts
differently” under the Campaniello Imports framework, we see no need to remand
on that basis. Monasky v. Taglieri, 589 U.S. 68, 86 (2020) (explaining, in a different
context, that an appeals court need not remand when there is no reason to
“anticipate that the [d]istrict [c]ourt’s judgment would change”). We therefore
affirm the district court’s judgment without resorting to remand.
CONCLUSION
For the reasons stated above, we AFFIRM the judgment of the district court.