Reintjes Company v. Riley Stoker

• Court: Court of Appeals for the First Circuit
• Decided: December 7, 1995
• Docket: 95-1552
• Status: Published

Opinion

USCA1 Opinion

December 13, 1995 UNITED STATES COURT OF APPEALS

                                FOR THE FIRST CIRCUIT



                                 ____________________



          No. 95-1552



                             GEO. P. REINTJES, CO., INC.,



                                Plaintiff, Appellant,



                                          v.



                              RILEY STOKER CORPORATION,



                                 Defendant, Appellee.



                                 ____________________


ERRATA SHEET
                                     ERRATA SHEET



               The opinion of  this Court  issued on December  7, 1995,  is

          amended as follows:



               On page 2,  first paragraph, line 12,  change "Reintjes'" to

          "Riley Stoker's."



UNITED STATES COURT OF APPEALS
                            UNITED STATES COURT OF APPEALS

                                FOR THE FIRST CIRCUIT
                                FOR THE FIRST CIRCUIT



                                 ____________________



        No. 95-1552



                             GEO. P. REINTJES CO., INC.,



                                Plaintiff, Appellant,



                                          v.



                              RILEY STOKER CORPORATION,



                                 Defendant, Appellee.



                                 ____________________


APPEAL FROM THE UNITED STATES DISTRICT COURT



                          FOR THE DISTRICT OF MASSACHUSETTS



                   [Hon. Nathaniel M. Gorton, U.S. District Judge]
                                              ___________________



                                 ____________________


Before



                                Torruella, Chief Judge,
                                           ___________



                      Aldrich and Coffin, Senior Circuit Judges.
                                          _____________________



                                 ____________________


Duane J. Fox with whom  Gregory S. Gertstner,  Seigfreid, Bingham,
            ____________            ____________________   ___________________

        Levy, Selzer  & Gee, Edmund C.  Case, Roger Lane and  Testa, Hurwitz &
        ___________________  _______________  __________      ________________

        Thibeault were on brief for appellant.
        _________

            David P. Grossi with whom  Barry A. Bachrach and  Bowditch & Dewey
            _______________            _________________      ________________

        were on brief for appellee.



                                 ____________________



                                   December 7, 1995

                                 ____________________



ALDRICH,  Senior  Circuit Judge.   This  is another
                                _____________________



            case  seeking, inter  alia, to  attribute  to M.G.L.  c. 93A,
                           ___________



               2(a)  and 11 (1988 ed.), the universal capacity of a Swiss



            army jack-knife.   Briefly,  plaintiff Geo. P.  Reintjes Co.,



            Inc.  of Kansas  City, Missouri,  and defendant  Riley Stoker



            Corp.  of Worcester,  Massachusetts,  found themselves  faced



            with  the  question of  who  must  bear  a loss  due  to  the



            inappropriateness  of  A.P.  Green  furnace  lining material,



            obtained  and installed  by Reintjes  in boilers  supplied by



            Riley  Stoker to  a  third party.    The answer  depended  on



            whether Reintjes'  warranty  to  Riley  Stoker  included  the



            material's design.   The parties resorted  to arbitration and



            the  arbitrator  credited   Riley  Stoker's  employees,   who



            testified,  in its  favor, that  it was  so understood.   The



            arbitrator's  findings  were confirmed  by the  United States



            District Court  for the  District of Massachusetts  and Riley



            Stoker  obtained a judgment in  the amount of  $989,119.  The



            parties agreed  to settle the judgment for $950,000 which, in



            due course, was done.



                      Some two years later  Reintjes learned, through the



            accident of its counsel in the arbitration case being engaged



            in entirely independent  litigation with  Riley Stoker,  that



            Riley  Stoker employees  may  have committed  perjury in  the



            Reintjes arbitration  proceeding.  Reintjes  then filed  this



            action  claiming  Riley  Stoker's  failure  to  disclose  the


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alleged  fraud  during settlement  negotiations, that  led to



            Reintjes paying a  substantial sum, amounted to a  common law



            misrepresentation and, more, was  an "unfair or deceptive act



            . . . in the conduct of . . . trade or commerce" under M.G.L.



            c. 93A,   2(a), entitling Reintjes  to damages.  According to



            Reintjes, its present suit rests not on the original cause of



            action,  but  on  the  independent  allegation  of  fraud  in



            procurement of the settlement agreement.



                      The district  court  initially took  the view  that



            Reintjes' claims  arising from procurement  of the settlement



            agreement  were cognizable independently of the judgment, but



            later,  on Riley  Stoker's motion,  undertook  to reconsider.



            Reintjes  thereupon  moved  for  leave  to  file  an  amended



            complaint to set aside the judgment.   This was denied on the



            grounds that Reintjes did  not state a claim for  relief from



            the judgment in  the absence of a showing that fraud upon the



            court  had occurred.   The court then  granted Riley Stoker's



            motion  to  dismiss Reintjes'  common  law  and state  claims



            because  they  could not  lie  unless relief  from  the prior



            judgment was obtained.  We affirm.



                                          I.
                                          __



                      Reintjes  first  asserts that  the  court  erred in



            ruling its fraud and  chapter 93A claims barred by  the prior



            judgment.  Reintjes states that "failure to disclose any fact



            which   would  influence  a  person   not  to  enter  into  a


-4-



transaction is a violation of chapter 93A;" that this statute



            therefore "imposed  upon  Riley Stoker  an  affirmative  duty
                                                        _________________



            (sic)  to  disclose,  during  procurement  of  the settlement



            agreement, that  the  award  was  obtained  through  perjured



            testimony," and that Reintjes relied on the non-disclosure in



            entering into the settlement agreement.



                      Our  assent to such a  contention would amount to a



            rule,  in  Massachusetts at  least,  that  attached to  every



            federal judgment affecting commercial matters is  an inherent



            condition that it  must be  proved correct, or  it cannot  be



            relied upon, for  there is an "affirmative duty"  to disclose



            if  it is  faulty.   Reintjes concludes  that Rule  60, which



            prescribes the  exclusive methods by which  federal judgments



            may be  attacked, "cannot curtail"  its state and  common law



            claims,  citing  28 U.S.C.A.    2072(b)  to  the effect  that



            Federal Rules of Civil  Procedure "shall not abridge, enlarge



            or  modify any substantive right."   With due  respect, it is



            inconceivable  that the  finality of otherwise  valid federal



            judgments is  dependent upon their validity  under state law.



            Reintjes  cites  no  authority.    We  summarily  affirm  the



            district court's  ruling that Reintjes' only  route to relief



            from  the  settlement  and  underlying  judgment  is  through



            application of  Federal Rule  of Civil Procedure  Rule 60(b).



            To this we turn.



                                         II.
                                         ___


-5-



Reintjes claims  the court erred in  ruling that it



            was  unable to state a claim for relief from judgment because



            its allegations did not amount to a fraud upon the court, or,



            alternatively, that Rule  60(b) does not  require it to  show



            fraud  upon  the  court  and that  its  allegations  state  a



            cognizable  basis for  relief  under the  Rule.   It contends



            Riley's witnesses  engaged in  a concerted effort  to present



            perjured  testimony during the  arbitration hearing regarding



            the central issue in  the case, namely, whether Reintjes  had



            assumed  design  warranty  for  the boiler  linings.    These



            charges stem  from Reintjes' discovery, some  two years after



            entry  of  judgment  against  it,  of  materials1  indicating



            Riley's witnesses may have perjured themselves.



                      Rule 60(b) permits relief  from final judgment for,



            inter alia,
            __________



                      (2)  newly  discovered evidence  which by

                      due   diligence   could  not   have  been

                      discovered  in time  to  move for  a  new

                      trial under Rule 59(b);



                      (3) fraud (whether heretofore denominated

                      intrinsic          or         extrinsic),

                      misrepresentation, or other misconduct of

                      an adverse party . . .



            Fed.R.Civ.P. 60(b).  The  Rule requires that motions pursuant



            to the above grounds "shall be made within a reasonable time,



            and . . . not more  than one year after the  judgment, order,



                                
            ____________________



            1.  Letters  and  notes of  a  third-party  participant in  a

            pivotal  meeting between  the parties,  about which  both had

            testified.



                                         -6-



or proceeding was entered or taken."  Id.  At  the same time,
                                                  ___



            the Rule



                      does not  limit the  power of a  court to

                      entertain   an   independent  action   to

                      relieve a party  from a judgment,  order,

                      or  proceeding, . . . or  to set  aside a

                      judgment for fraud upon the court.



            Id.
            ___



                      Our initial reaction is  that, despite the apparent



            openness  of this final provision, where the body of the Rule



            contains an  explicit  time limitation  for motions  invoking



            specified grounds for relief, it would make no sense to apply



            the  final general provision, containing no limit of time, so



            broadly as to cover all the grounds for which  the time limit



            is expressly stated.  Since Reintjes' claims would appear  to



            fall  exactly under  sections (2)  and (3)  of the  Rule, but



            materialized too late  to file  in a motion  to the  judgment



            court,2 it should not now be  able to elect to proceed  under



            the  unlimited  clause  without  some  additional  ground  or



            reason.   Historically,  however,  this may  be  too easy  an



            answer.  In view  of the curtness of the Rule's final clause,



            and  a  modicum of  disagreement  in  the  circuits, we  will



            examine its origins.


____________________



            2.  Reintjes did file  such a  motion to  the judgment  court

            (Young,  J.), however,  it was  summarily denied,  presumably

            because  it was filed more  than one year  after entry of the

            judgment.  Fed.R.Civ.P. 60(b)(3).  No appeal was filed.



                                         -7-



Prior to the adoption of the Federal Rules of Civil



            Procedure the  general rule  was that application  for relief



            from  judgment on  account  of fraud  could  be made  to  the



            presiding court before expiration of the term in which  final



            judgment was entered.  Bronson v. Schulten, 104 U.S. 410, 415
                                   _______    ________



            (1882).  See also Glass, et al.  v. Excelsior Foundry Co., 56
                     ___ ____ _____________     _____________________



            F.3d 844, 848 (7th  Cir. 1995).  However, efforts  to balance



            the value of finality against aversion to  condoning abuse of



            the  judicial  apparatus  led  courts sitting  in  equity  to



            recognize  an  exception  for  a  narrow  category  of  fraud



            "extrinsic," or collateral,  to the original action.   On the



            other hand, intrinsic  fraud, such as perjury  relating to an



            issue actually decided, could not form the basis for untimely



            relief.   United States v.  Throckmorton, 98 U.S.  61, 66, 68
                      _____________     ____________



            (1878)  (judgment  confirming certain  land  claims  based on



            falsified land grant could not be set aside 18 years later on



            claim  of  fraud  because  validity of  grant  was  the issue



            tried).



                      The  Throckmorton rule  that fraud  claimed  in the
                           ____________



            matter  tried cannot form  the basis for  an untimely request



            for  relief from  final judgment  was refined  in Hazel-Atlas
                                                              ___________



            Glass Co. v. Hartford-Empire  Co., 322 U.S. 238 (1944).3   An
            _________    ____________________



                                
            ____________________



            3.  This  case avoided  the extrinsic/intrinsic  labels. Some

            have long found the  distinction dubious, dubbing it "clouded

            and confused," 11 Wright, Miller & Kane, Federal Practice and
                                                     ____________________

            Procedure,   2868, p.  401 (1995 ed.), and "at times  . . . a
            _________

            journey into futility."   Moore & Rogers, Federal Relief from



                                         -8-



attorney for Hartford had  contrived to have an  encomium for



            its patent claim published  in a trade journal under  the by-



            line of a  disinterested expert, which was  then presented in



            evidence.  Hartford lost at trial, but its attorneys  paraded



            the article before  a panel  of the court  of appeals,  which



            then  reversed  and  entered judgment  in  Hartford's  favor,



            supporting  its  opinion  with quotation  from  the  spurious



            publication.   Id. at  240-42.  Nine  years later Hazel-Atlas
                           ___



            instigated an  action to  undo the  judgment  based on  newly



            obtained  evidence of  Hartford's caper.   The  Supreme Court



            directed  that judgment  for Hartford  be  set aside  and the



            district court's original order denying relief to Hartford be



            reinstated.   Id.  at  251.   The  Court emphasized  the  old
                          ___



            English rule that, "under certain circumstances, one of which



            is  after-discovered  fraud, relief  will be  granted against



            judgments regardless of the term of their entry," id. at 244,
                                                              ___



            was  to  be  applied   cautiously,  i.e.,  only  "in  certain



            instances   . . .  deemed  sufficiently  gross  to  demand  a



            departure  from rigid adherence" to finality.  Id.  The Court
                                                           ___



            justified   its   application   in   Hazel-Atlas   Glass   by
                                                 ___________________



            distinguishing  this  situation  from  a  case  where  after-



            discovered evidence indicates merely  that a witness may have



            perjured  himself, id.  at  245, from  cases concerning  only
                               ___



            private  parties, id.  at  246, and  from cases  resulting in
                              ___



                                
            ____________________



            Civil Judgments, 55 Yale L.J. 623, 658 (1946).



                                         -9-



injury merely to a single litigant (deeming fraud perpetrated



            to  obtain a  favorable patent  ruling  "a wrong  against the



            institutions set  up to  protect and safeguard  the public").



            Id.    And,  Hartford's   was  "a  deliberately  planned  and
            ___



            carefully  executed scheme"  by an  attorney "to  defraud not



            only the  Patent Office but  the Circuit  Court of  Appeals."



            Id. at 245-46.   In fact, it reached  all persons affected by
            ___



            the patent.



                      Hazel-Atlas  Glass thus expanded  the range  of the
                      __________________



            fraud exception  for untimely requests  for relief delineated



            in Throckmorton  to include  fraud committed by  "officers of
               ____________



            the  court."  See Moore, 7  Federal Practice,   60.33, p. 60-
                          ___           ________________



            359  (1995).     It  carries  forward   the  well-established



            understanding  that  this  exception  never  included garden-



            variety fraud:



                      This is  not simply a case  of a judgment

                      obtained with  the aid of a  witness who,

                      on   the    basis   of   after-discovered

                      evidence,  is  believed possibly  to have

                      been guilty of perjury.



            Hazel-Atlas Glass, 322 U.S. at 245.
            _________________



                      In  1946 Congress  adopted the  current version  of



            Rule  60(b)   which  specifies  fraud,   "whether  heretofore



            denominated extrinsic or  intrinsic," Fed.R.Civ.P.  60(b)(3),



            as  an explicit ground for  a motion for  relief and subjects



            it,  like several  other  grounds specified,  to  a one  year



            limitation.    The Rule  preserves  judicial  power to  grant


-10-



relief  in  an  independent  action "insofar  as  established



            doctrine permits,"4  and "expressly does not  limit the power



            of the court,  when fraud  has been perpetrated  upon it,  to



            give relief under the saving clause."  Fed.R.Civ.P. 60, Notes



            of  Advisory  Committee on  Rules,  1946  Amendment, Note  to



            Subdivision (b) (hereinafter "Advisory Committee Notes").



                      Other  than specifying  "fraud  upon  the  court,"5



            however,  the Rule "makes no  attempt to state  the bases for



            the  independent  action."    Moore, 7  Federal  Practice,   
                                                    _________________



            60.37[2].   Rather, it leaves  this substantive determination



            to established principles,  id., "which have  heretofore been
                                        ___



            applied in such an  action."  Advisory Committee Notes.   See
                                                                      ___



            Indian  Head Nat. Bank of  Nashua v. Brunelle,  689 F.2d 245,
            _________________________________    ________



            248-49 (1st Cir. 1982) (as Advisory Committee Notes indicate,



            "the Rule expressly  preserves independent equitable actions"



            available "prior  to the  Rule's enactment").   We find  that



            Congress  incorporated into Rule  60(b) pre-existing judicial



            principles governing  untimely requests for  equitable relief



                                
            ____________________



            4.  The Rule as originally adopted did not specify fraud as a

            ground  for relief, but did contain a saving clause that left

            courts free to  continue to exercise their inherent  power to

            grant   relief  from  judgments  where  established  doctrine

            warranted.   Fed.R.Civ.P. 60(b) (1937), 28  U.S.C.A.   723(c)

            (West 1941).  See, e.g., Central Hanover Bank & Trust Co.  v.
                          ___  ____  ________________________________

            Wardman Real Est. Prop., 31 F.Supp. 685 (D.D.C. 1940).
            _______________________



            5.  In this Circuit we have held  such fraud to consist of an

            "unconscionable  scheme  calculated  to  interfere  with  the

            judicial system's ability impartially to adjudicate a matter"

            involving an officer of the court.  Aoude v. Mobil Oil Corp.,
                                                _____    _______________

            892 F.2d 1115, 1118 (1st Cir. 1989).



                                         -11-



from fraudulent  judgments.  See Hazel-Atlas  Glass, 322 U.S.
                                         ___ __________________



            238.



                      While "fraud  upon the court" is  therefore not the



            only  permissible basis  for  an independent  action, as  the
            ____



            district  court held,  and therefore  Reintjes need  not make



            such  a  showing,  there  is  also  little  doubt that  fraud



            cognizable to maintain an  untimely independent attack upon a



            valid and final judgment has long been  regarded as requiring



            more than common  law fraud.   Throckmorton, 98  U.S. at  66;
                                           ____________



            Hazel-Atlas  Glass,  322 U.S.  at  244-45  (untimely bid  for
            __________________



            relief justified only where  enforcement of judgment would be



            "manifestly  unconscionable")  (quoting Pickford  v. Talbott,
                                                    ________     _______



            225 U.S. 651, 657 (1912)).  See also, Chicago, R.I.  & P. Ry.
                                        ___ ____  _______________________



            v. Callicotte, 267 F. 799, 810 (8th Cir. 1920), cert. denied,
               __________                                   ____________



            255 U.S. 570  (1921) ("indispensable" element of  independent



            attack  on judgment for fraud is that it prevented party from



            presenting his case); Aetna Casualty & Surety  Co. v. Abbott,
                                  ____________________________    ______



            130 F.2d 40, 43-44 (4th Cir. 1942) ("it is well settled  that



            [a conspiracy between plaintiff  and his witnesses to present



            perjured testimony]  constitutes no ground" upon  which court



            could  deny   enforcement  of  judgment  in   an  independent



            proceeding).   The  great  majority of  cases addressing  the



            scope  of fraud  necessary to  sustain an  independent action



            under the  modern Rule 60(b)  has adhered to  this principle.



            See,  e.g., Gleason v. Jandrucko, 860 F.2d 556, 558 (2nd Cir.
            ___   ____  _______    _________


-12-



1988)  (fraud  necessary  to  sustain independent  action  is



            narrower  than that which  is sufficient to  obtain relief by



            timely  motion); Travelers  Indemnity Co.  v. Gore,  761 F.2d
                             ________________________     ____



            1549 (11th Cir. 1985) (allegations of perjury insufficient to



            entitle plaintiff  to relief from judgment  in an independent



            action  under Rule  60(b));  Great Coastal  Express v.  Int'l
                                         ______________________     _____



            Brotherhood  of  Teamsters, 675  F.2d  1349,  1358 (4th  Cir.
            __________________________



            1982), cert. denied, 459 U.S. 1128 (1983);  Robinson, 56 F.3d
                   ____________                         ________



            at  1274 n.6 (10th  Cir. 1995).   But see,  Averbach v. Rival
                                              _______   ________    _____



            Manufacturing Co.,  809 F.2d 1016, 1022-23  (3rd Cir.), cert.
            _________________                                       _____



            denied, 482 U.S. 915,  and cert. denied, 484 U.S.  822 (1987)
            ______                     ____________



            ("[T]he  elements of  a cause  of action  for [relief  from a



            judgment on the ground of fraud] in an independent action are



            not different from those elements  in a Rule 60(b)(3) motion,



            and . . . the  time limit on such a motion does  not apply to



            an independent action.").



                      In   sum,  perjury  alone,   absent  allegation  of



            involvement by an officer of the court (Reintjes makes none),



            has  never  been sufficient.   Throckmorton,  98 U.S.  at 66;
                                           ____________



            Hazel-Atlas Glass, 322 U.S.  at 245.  See also,  Gleason, 860
            _________________                     ________   _______



            F.2d  at 559  (2nd Cir.);  Travelers Indemnity,  761 F.2d  at
                                       ___________________



            1551-52 (11th Cir.); Wood  v. McEwen, 644 F.2d 797  (9th Cir.
                                 ____     ______



            1981), cert. denied, 455 U.S. 942 (1982).  The possibility of
                   ____________



            perjury, even concerted, is a common hazard of  the adversary



            process  with which  litigants are  equipped to  deal through


-13-



discovery and cross-examination, and, where warranted, motion



            for   relief   from   judgment   to   the  presiding   court.



            Fed.R.Civ.P.  60(b)(3).    Were  mere  perjury  sufficient to



            override   the  considerable  value  of  finality  after  the



            statutory time  period for  motions on  account of  fraud has



            expired,  it would  upend  the Rule's  careful balance.   See
                                                                      ___



            Great  Coastal Express, 675 F.2d at 1354-55 (Rule 60(b) is an
            ______________________



            effort to  balance competing judicial values  of finality and



            equity, with  equitable considerations favored for  up to one



            year from entry of judgment, and finality thereafter).



                      Reintjes   points  to  no  reason  why  this  newly



            discovered evidence might justify relief from judgment beyond



            the statutory  time frame.   Discrediting witnesses  does not



            generally  justify  an  "extraordinary"  second  opportunity.



            Xerox  Financial Services Life Ins. Co.  v. High Plains Ltd.,
            _______________________________________     ________________



            44 F.3d 1033,  1038-39 (1st Cir. 1995).  See Moore, 7 Federal
                                                     ___          _______



            Practice,   60.37  (Rule 60(b)  does not license  a party  to
            ________



            relitigate, whether  via motion  or  independent action,  any



            "issues  that were made or  open to litigation  in the former



            action where he had a  fair opportunity to make his claim  or



            defense").  See, also, Travellers Indemnity, 761 F.2d at 1552
                        ___  ____  ____________________



            (11th Cir.); Comptex, S.A.  v. LaBow, 783 F.2d 333,  335 (2nd
                         _____________     _____



            Cir.  1986); Carter  v. Dolce,  741 F.2d  758, 760  (5th Cir.
                         ______     _____



            1984).   Reintjes' claims amount, at  best, to ordinary fraud



            which,  as  we  have  said,  cannot  form  the  basis  of  an


-14-



independent  action  under the  Rule's saving  provision when



            they would certainly be barred if presented as a motion under



            section  (3).6  See Wallace  v. United States,  142 F.2d 240,
                            ___ _______     _____________



            244   (2nd  Cir.),   cert.  denied,   323  U.S.   712  (1944)
                                 _____________



            ("[o]bviously it cannot  have been intended that  what may be



            done  within six months, pursuant  to the body  of Rule 60(b)



            may also be done thereafter, under the exception contained in



            its  last  sentence") (referring  to  predecessor  to current



            Rule).   See  also, Moore,  7 Federal  Practice,    60.33 (if
                     _________            _________________



            fraud  that may form basis of independent action "is not kept



            within proper  limits  but is  ballooned  to include  all  or



            substantially all  species of fraud within  60(b)(3) then the



            time limitation upon 60(b)(3) motions will be meaningless").



                      Finally, while the notion that it would be "against



            conscience" to  let a particular  judgment stand may  in some



            instances serve to tip what would otherwise be ordinary fraud



            into the special category that can invoke  a court's inherent



            powers  to breach finality, see  Marshall v. Holmes, 141 U.S.
                                        ___  ________    ______



            589,  595  (1891), Hazel-Atlas  Glass,  322  U.S. at  244-45,
                               __________________



            Reintjes  has failed to  so move us  here.   There is nothing



            particularly offensive about  the circumstances  surrounding,



            or  the  result of,  Reintjes'  warranty  dispute with  Riley



            Stoker.  See id. at  244.  If Reintjes should have  won, then
                     ___ ___


____________________



            6.  See note 2, supra.
                ___         _____



                                         -15-



the most  that can be said  is that it lost  in large measure



            due to its own lack of diligence.



                      The judgment of the district court is affirmed.
                                                            ________


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