United States Court of Appeals
For the First Circuit
No. 02-2590
K. ANDREW HULL; PATRICIA RIVERA-HULL; and
RIVERA-HULL CONJUGAL PARTNERSHIP,
Plaintiffs, Appellants,
v.
MUNICIPALITY OF SAN JUAN; ACE INSURANCE COMPANY;
and TARGET ENGINEERING, S.E.,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Gilberto Gierbolini-Ortiz, Senior U.S. District Judge]
Before
Boudin, Chief Judge,
Lynch and Howard, Circuit Judges.
Andrew R. Schulman with whom Getman, Stacey, Tamposi,
Schulthess & Steere, P.A. was on brief for appellants.
Luis G. Martínez-Lloréns with whom Colón, Colón & Martínez,
P.S.C. was on brief for appellees Target Engineering, S.E., and Ace
Insurance Company.
Harold D. Vicente-González for appellee Municipality of San
Juan.
January 20, 2004
BOUDIN, Chief Judge. This appeal arises from the
district court's dismissal of a personal injury lawsuit. The basis
for the dismissal was the district court's finding of fraud in the
conduct of the litigation. Because the finding of fraud as well as
the remedy adopted by the district court are contested on appeal,
we begin with a bare-bones summary of what happened, reserving some
of the details until discussion of the issues raised on appeal.
On November 8, 1999, Andrew K. Hull of California was
visiting San Juan, Puerto Rico, on a business trip. While walking
through a city sidewalk site that was under repair, Andrew
allegedly caught his foot on a raised piece of wire mesh and fell
heavily, hitting his face and left arm. He proceeded to dinner
but, still feeling pain in his left elbow, visited a local hospital
thereafter where x-rays revealed a fracture of the elbow and lesser
injury to the nose. Andrew attended business meetings over the
next three days and then returned to California.
After his return, Andrew allegedly experienced a range of
symptoms, consulted a number of doctors, and underwent several
surgeries. One was to repair a nasal obstruction and deviated
septum; others were spinal operations to relieve spinal cord
compression and repair an extruded disc and related conditions.
Carpal-Tunnel syndrome was diagnosed in both wrists, and surgery as
to both to relieve this condition ensued.
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Andrew also complained of mental and emotional problems,
including poor memory, sleeplessness, depression, fatigue,
headaches and sexual dysfunction. After testing, a neurologist
found that Andrew suffered from post-concussion syndrome. Although
Andrew had not lost consciousness at the time of the fall, the
neurologist opined that the syndrome could nevertheless have
resulted from the fall and the doctor prescribed treatments.
In due course, Andrew and Patricia, his wife, filed this
diversity action in the federal district court in Puerto Rico,
against the municipality, the contractor working on the sidewalk,
and the contractor's insurer. The complaint, charging negligence,
attributed to the accident the physical and mental impairments
already described as well as a few other symptoms (e.g., rotator
cuff injury, aphasia) and loss of income. On his own behalf,
Andrew sought $2 million in damages.
Patricia claimed separately for loss of income (due to
the need to care for Andrew) and mental anguish. Her claim was for
$300,000. An additional $561,000 was sought by the "conjugal
partnership," a community property concept recognized under the law
of Puerto Rico, e.g., Fernandez-Cerra v. Commercial Ins. Co. of
Newark, 344 F. Supp. 314, 316 (D.P.R. 1972); but no separate
argument has been offered on appeal as to its claim, and we
therefore disregard it.
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Extensive discovery was conducted by the defendants over
many months. Andrew did not reveal, in response to questions
fairly seeking this information, facts about his prior injuries and
treatment--until the defense uncovered this information on its own.
These included a rear-end automobile collision in 1982 in which
Andrew suffered back injuries; a neck injury in 1995 leading to a
diagnosis of nerve injury (neuropathy); and a 1996 slip and fall
incident in an Orlando, Florida, hotel, resulting among other
things in a diagnosis of Carpal-Tunnel syndrome.
The information was patently material. Various symptoms
and conditions associated with Andrew's earlier injuries overlapped
with those that he claimed had resulted from the more recent fall
in Puerto Rico. This is obvious with respect to the Carpal-Tunnel
syndrome but, in addition, the rear-end collision in 1982 was a
possible source of some of the spinal damage, and nerve injury and
sleep problems had been claimed as a result of one or both of the
other two earlier accidents.
When taxed about these omissions, Andrew's position was
that in the heat of his deposition he had not remembered any of
these incidents or claims. As to their absence from interrogatory
answers, Andrew said that defendants had not asked the right
questions. The defendants moved for dismissal of the case on the
ground that the litigation was being perpetrated through fraud.
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In October 2002, the district court granted the motion
and dismissed the case in a 23-page opinion and order, analyzing in
detail Andrew's answers to interrogatories, deposition questions
and in affidavit statements. The district judge concluded "by
clear and convincing evidence" that Andrew had committed fraud,
said that the proper remedy was a matter of discretion, and
concluded that "weighing all of the circumstances in this case,"
dismissal was the proper sanction "commensurate with Mr. Hull's
conduct" and to deter future misconduct.
On this appeal, the plaintiffs make three different
claims of error: that the fraud finding was not supported by clear
and convincing evidence; that dismissal was not an appropriate
sanction; and that--independent of these arguments--dismissal of
Patricia's claims for her own mental anguish and economic expense
was not supported by any independent finding of fraud on her part.
We reject the first two claims but conclude that a remand is
required to determine whether Patricia's claims should be
dismissed.
The first question is whether Andrew engaged in a pattern
of deliberate deception in the course of discovery. It is common
ground that clear and convincing evidence is required, Aoude v.
Mobil Oil Corp., 892 F.2d 1115, 1118 (1st Cir. 1989). On the other
hand, the district court's findings as to whether Andrew
dishonestly withheld information are reviewed only for "clear
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error." Cavallaro v. United States, 284 F.3d 236, 245 (1st Cir.
2002). (The phrase "abuse of discretion" is sometimes used, e.g.,
Aoude, 892 F.2d at 1117-18, but the phrasing makes little
difference.)
It is clear that Andrew failed to disclose the prior
injuries when specifically asked for such information during his
deposition and that the omissions were material. The harder issue,
usually the sticking point in perjury and fraud cases, is Andrew's
state of mind which–-absent a confession–-must be inferred from
circumstances. Here, several circumstances combine to reinforce
the district court's finding of scienter.
First, the information was squarely sought. In his
deposition, Andrew was asked directly about his prior medical
history and failed to reveal any of the three prior incidents. All
three of the prior incidents were serious and sufficiently related
to the current claim of injuries, so that it is unlikely that even
one would have been forgotten. That all three would have been
forgotten through happenstance or distraction strains belief. And,
given Andrew's obvious self-interest to enlarge his potential
damages, the inference of deliberate deceit is hard to escape.
Second, there is a broader pattern of deceit. For
example, when the Orlando incident was unearthed by the defense,
Andrew gave answers as to his medical treatment omitting the
diagnosis of Carpal-Tunnel syndrome; and he withheld such
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information from his own doctor in this case, reducing the
likelihood that it would be discovered. Andrew also appears to
have lied when he answered an interrogatory by saying that all of
his present claimed injuries were the result of the fall in San
Juan, although this might be a closer question.1
Third, Andrew was not a neophyte. He was the president
of a firm named "Settlement Associates" which sells insurance and
structured settlements to law firms and other companies. His wife
was a claims manager for State Farm Insurance Company. Further,
his prior injuries had resulted in a range of doctor and hospital
visits over a substantial period, and he could not have avoided
learning a good deal about the causes and nature of his prior
injuries.
We find no clear error in the district court's finding
that Andrew's fraud was proved by clear and convincing evidence.
It is easy enough to forget details of one's past; and possibly
Andrew did suffer some impairment in the fall affecting his memory.
But the information withheld was too patent and too convenient, and
the pattern of deceit and grudging concessions too marked, to
excuse the misstatements and omissions as merely careless.
1
The defense relies upon Andrew's negative answers to two
interrogatory questions dealing with medical history; but one
(strangely) arguably excluded "personal injury" and the other
related to post-claim accident injuries or illnesses. Yet in
response to the latter, Andrew incautiously added that "all" his
present injuries were due to the San Juan accident.
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The next question is whether a district court has power
to dismiss a complaint because the plaintiff lies substantially and
materially in the course of discovery. In our own circuit, fraud--
at least of a kind sometimes called "fraud on the court"2--is a
potential basis for dismissing a claim on the facts where
a party has sentiently set in motion some
unconscionable scheme calculated to interfere
with the judicial system's ability impartially
to adjudicate a matter by improperly
influencing the trier or unfairly hampering
the presentation of the opposing party's claim
or defense.
Aoude, 892 F.2d at 1118-19. There is similar case law in other
circuits. Shepherd v. Am. Broad. Cos., 62 F.3d 1469, 1476-78 (D.C.
Cir. 1995); Wyle v. R.J. Reynolds Indus., 709 F.2d 585, 589 (9th
Cir. 1983).
Although not so terrible as attempted bribery of a judge,
Andrew's conduct fits within the Aoude category. It was
deliberate, broad enough to constitute a scheme, unconscionable,
and calculated to enhance damages, thus unfairly hampering the
defense. The unfairness was two-fold: the scope of the injuries
2
The "fraud on the court" phrase is also sometimes used in
drawing distinctions in the quite different context of reopening
final judgments--especially in distinguishing between fraud that
must be presented within one year of the judgment and fraud that
can be invoked later under the savings clause of Fed. R. Civ. P.
60(b). Compare 11 Wright & Miller, Federal Practice and Procedure,
§ 2860 (2d ed. 1995) (discussing Fed. R. Civ. P. 60(b)(3) ("fraud,
. . . misrepresentation or other misconduct") with id. § 2870
(discussing "fraud on the court" under the savings clause).
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attributable to Andrew's fall in Puerto Rico was likely to be the
main issue in the case, and, in the nature of things, past medical
information is peculiarly within the privileged control of the
plaintiff. The same conduct might not necessarily be enough to
reopen a final judgment after one year, Geo. P. Reintjes Co., Inc.
v. Riley Stoker Corp., 71 F.3d 44, 47-49 (1st Cir. 1995), but
finality of long-standing judgments is a different matter than
dismissal of a current complaint.
That a remedy is in principle available does not mean
that its use is reasonable in all circumstances. Here, plaintiffs
make both a substantive and a procedural objection. The first is
that it was unreasonable to use so extreme a remedy as dismissal,
especially where the defense ultimately gained the information and
lesser remedies were available. The second is that the district
court erred by not specifically considering the pros and cons of
alternative lesser remedies. Both are uphill arguments, given the
trial judge's special competence in judging the extent of the
misbehavior and its effects. Young v. Gordon, 330 F.3d 76, 81 (1st
Cir. 2003).
Starting with substance, the sanction was obviously
severe and lesser sanctions were available. For example, the court
could have debarred Andrew from presenting certain claims of
injury, underscored the jury's ability to draw negative inferences
from his deceits, or both. And while the deceits imposed extra
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expenses on the defense, an award of attorney's fees and costs
could have been treated as sufficiently offsetting this damage.
On the other hand, dismissing only the affected claims of
injury would have wiped out most of the main damage claims anyway,
while inference drawing would be available without a sanction and
could be pretty mild in effect if Andrew were nimble on cross-
examination. His deceits were substantial, deliberate, and went to
the heart of the case. And since not everyone will be caught, the
penalty needs to be severe enough to deter. In the choice of
remedy, there was no abuse of discretion--the proper test as to
remedy. Aoude, 892 F.2d at 1117; Fernandez v. Leonard, 963 F.2d
459, 462 (1st Cir. 1992).
As for procedure, plaintiffs draw our attention to cases
in other circuits saying that the trial judge must expressly
consider lesser alternatives before adopting the extreme remedy of
dismissal; and they urge us to adopt such a rule. Shepherd, 62
F.3d at 1479; Halaco Eng'g Co. v. Costle, 843 F.2d 376, 381-82 (9th
Cir. 1988). We agree that lesser remedies ought to be considered,
where reasonably available, whenever a judge imposes the harshest
sanction. But in our view, how much consideration, and in what
form depend upon the circumstances.
In this instance, the district judge did not grasp
thoughtlessly for dismissal. The choice of remedy followed a
careful study over many pages of the precise deceits and Andrew's
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culpability; the court recognized that it had discretion as to
remedy; and it said that dismissal was "commensurate" with Andrew's
conduct and the need to deter "this type of behavior from
recurring"–-behavior that the court said went well beyond injury to
an opposing litigant and threatened "the integrity of this court."
Requiring a district judge to list and address
alternatives may sometimes make sense, for example where the judge
has ignored a seemingly superior remedy. Occasionally it may be
a polite way to say that the remedy chosen is disproportionate to
the offense–-also not the case here. How much explanation is
required of the remedy chosen, and how much discounting of
alternatives may be warranted, depend on the facts, and to us a
mindlessly mechanical rule makes no sense. Here, the district
court did enough to assure reasoned consideration of the remedy.
Patricia's claims are a different matter. The subject of
claims by one who is secondarily injured is complicated, but Puerto
Rico law allows one spouse to recover in some cases at least for
emotional distress suffered through the injury of the other spouse,
Santini Rivera v. Serv Air, Inc., 137 P.R. Dec. 1, 10 (1994). Nor
do defendants suggest that such a claim is barred because the
directly injured spouse is debarred from recovery by his own
misconduct in court.
Instead, defendants argue that Patricia joined actively
in the fraud. They say that she joined in the complaint asserting
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that her own damages were due in part to Andrew's Carpal-Tunnel
syndrome and back injuries allegedly due to the San Juan accident;
that she joined by cross reference her husband's false
interrogatory answer ("All the injuries and treatment I had were as
a result of the 11-9-99 incident which is the subject of the
complaint"); and that when the plaintiffs were ordered by the court
to disclose all of Andrew's medical history, she joined in the
response which failed to disclose the full history of prior
accidents and treatment.
Defendants then argue that Patricia must have known of
the three prior incidents of greatest importance (1982, 1995, 1996)
and, given the filings made on her behalf, is equally responsible
for the deceits. They also note that Patricia worked for many
years as a claims manager at State Farm Insurance Company and dealt
with personal injury claims, so had to understand the importance of
the omissions. Quite possibly the district court did believe that
she was complicit in the fraud, and the evidence may well support
such conclusion.
Still, nowhere does the district court's decision
separately muster evidence of Patricia's culpability or make an
express finding that she personally engaged in or knowingly abetted
the fraud. The single strongest evidence of fraud against Andrew
is his deposition answers and we know nothing about what, if
anything, Patricia said in any deposition of her own. The proper
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solution is a remand to allow the district judge to make his own
determination and supporting findings as to Patricia's
responsibility for the fraud--assuming that she thinks it advisable
to proceed with her claims which are now much weakened by Andrew's
lack of credibility.
The plaintiffs have asked that any remand that may be
necessary should be conducted before a different judge. The ground
given is that the district court's findings of fraud are so couched
as to "suggest[] some antipathy to [the] litigant"; plaintiffs'
counsel says that while the "judge [who presided in the district
court] would, no doubt, remain an impartial and professional jurist
on remand," a new judge approaching the case "on a fresh page"
would be better. The defendants oppose the request.
The statute providing for remands confers on the circuit
courts authority to make such orders "as may be just under the
circumstances," 28 U.S.C. § 2106 (2000); and remand orders by the
circuit court to a different judge have been held permissible by
the Supreme Court, Liteky v. United States, 510 U.S. 540, 554
(1994). But views formed by a judge in considering a case are
normally not a sound basis either for required recusal or for
directing that a different judge be assigned on remand. Liteky,
510 U.S. at 555-56. In this instance, nothing in the district
judge's decision warrants the remedy sought by plaintiffs.
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The judgment of dismissal is affirmed as to the claims of
Andrew Hull and the conjugal partnership. As to the individual
claims of Patricia Hull, the judgment is vacated and the matter
remanded for further proceedings consistent with this decision.
It is so ordered.
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