Geo. P. Reintjes Co. v. Riley Stoker Corp.

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

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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.

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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.

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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.

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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

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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).

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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

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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).

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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.

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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

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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

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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.

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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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