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

                             -3-


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.
                                                                    

                             -16-