Petition for Writ of Certiorari — LabMD, Inc., Petitioner v. Tiversa, Inc.
Supreme Court briefSep 7, 2018
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No. _______
_________________________
IN THE
SUPREME COURT OF THE UNITED STATES
_________________________
LABMD, INC.,
v.
Petitioner,
TIVERSA, INC., a Pennsylvania Corporation,
Respondent.
_________________________
On Petition For Writ of Certiorari to the
United States Court of Appeals for the
Eleventh Circuit
_________________________
PETITION FOR A WRIT OF CERTIORARI
_________________________
JAMES W. HAWKINS
JAMES W. HAWKINS LLC
11339 Musette Circle
Alpharetta, GA 30009
(678) 697-1278
jhawkins@jameswhawkinsllc.com
Counsel for Petitioner
QUESTIONS PRESENTED
Whether a judgment obtained by fraud on a
court must be set aside pursuant to Hazel-Atlas Glass
Co. v. Hartford-Empire Co., 322 U.S. 238 (1944) and
Fed. R. Civ. P. 60(d)(3) where the party who obtained
the judgment perpetrated related frauds on a federal
agency and Congress.
Whether an attorney must be implicated in his
client’s fraud on the court in order for a judgment to
be set aside pursuant to Hazel-Atlas and Fed. R. Civ.
P. 60(d)(3).
Whether an attorney who helps his client
obtain a judgment by perpetrating a fraud on a court
must be counsel of record in that court in order for the
judgment to be set aside pursuant to Hazel-Atlas and
Fed. R. Civ. P. 60(d)(3).
Whether an attorney who helps his client
obtain a judgment by perpetrating a fraud on a court,
who is not counsel of record in that court, must
actively participate in the litigation in order for the
judgment to be set aside pursuant to Hazel-Atlas and
Fed. R. Civ. P. 60(d)(3).
Whether a fraud on the court must be
intentionally false in order to set aside a judgment
pursuant to Hazel-Atlas and Fed. R. Civ. P. 60(d)(3) or
will conduct that is wilfully blind to the truth or is in
reckless disregard for the truth suffice.
ii
PARTIES TO THE PROCEEDING
Petitioner states that all parties to this
proceeding are contained in the caption of the case.
CORPORATE DISCLOSURE STATEMENT
Pursuant to this Court’s Rule 29.6, Petitioner
states that it has no parent corporation and no
publicly held company owns 10% or more of the
corporation’s stock.
iii
TABLE OF CONTENTS
QUESTIONS PRESENTED ........................................ i
PARTIES TO THE PROCEEDING............................ ii
TABLE OF AUTHORITIES ...................................... vi
PETITION FOR WRIT OF CERTIORARI ................. 1
OPINIONS BELOW.................................................... 2
JURISDICTION .......................................................... 3
RULE INVOLVED ...................................................... 3
STATEMENT OF THE CASE .................................... 5
A.
Facts Giving Rise To This Case ............ 5
B.
The District Court Proceedings........... 18
C.
The Appellate Court Proceedings ....... 20
REASONS FOR GRANTING CERTIORARI ........... 20
iv
I.
Review Is Warranted Because All Circuits
Have
Imposed
Overly
Restrictive
Requirements for Setting Aside Judgments
Resulting From Fraud On The Court. ........... 20
II.
Review Is Warranted To Resolve Conflicts
In The Circuits Regarding The Definition Of
Fraud On The Court In Fed. R. Civ. P.
60(d)(3) And Hazel-Atlas. ............................... 23
A.
The Circuit Courts Are In Conflict
Regarding the Necessary Mens Rea
for Establishing Fraud on the Court. . 25
B.
Broader Definitions Of Fraud On The
Court in the Fourth and Ninth
Circuits Conflict With Every Other
Circuit. ................................................. 27
C.
Eleventh Circuit Law Conflicts With
Every Other Circuit By Allowing
Parties To Use Non-Litigating
Attorneys To Perpetrate Frauds on
The Courts. .......................................... 29
III.
Review Is Warranted Because Limitations
Imposed In Every Circuit Violate The Plain
Language in Rule 60(d)(3) That “This Rule
Does Not Limit A Court’s Power To . . . Set
Aside A Judgment For Fraud On The
Court.” ............................................................. 31
IV.
Review Is Warranted Because Hazel-Atlas
Holds That A Corresponding Fraud On
Other Branches Of The U.S. Government,
Like Tiversa’s, Renders A Judgment
Obtained By Fraud On The Court
“Manifestly Unconscionable.” ........................ 33
v
CONCLUSION .......................................................... 37
APPENDIX ...........................................................App-1
APPENDIX A ............................................App-2
APPENDIX B ..........................................App-18
APPENDIX C ..........................................App-34
APPENDIX D ..........................................App-41
vi
TABLE OF AUTHORITIES
CASES
Broyhill Furniture Indus. v. Craftmaster Furniture
Corp.,
12 F.3d 1080 (Fed. Cir. 1993)................................ 24
Demjanjuk v. Petrovsky,
10 F.3d 338 (6th Cir. 1993) ....................... 24, 25, 26
Eastern Fin. Corp. v. JSC Alchevsk Iron & Steel
Works,
258 F.R.D. 76 (S.D.N.Y. 2008) .............................. 23
Glenwood Farms, Inc. v. O'Connor,
666 F. Supp. 2d 154 (D. Me. 2009)........................ 28
Great Coastal Express, Inc. v. Int’l Bhd. of Teamsters,
675 F.2d 1349 (4th Cir. 1982) ......................... 23, 27
Hadges v. Yonkers Racing Corp.,
48 F.3d 1320 (2d Cir. 1995)................................... 24
Hartford-Empire Co. v. Hazel-Atlas Glass Co.,
137 F.2d 764 (3d Cir. 1943)................................... 30
Hartford-Empire Co. v. Hazel-Atlas Glass Co.,
59 F.2d 399 (3d Cir. 1932)..................................... 30
Hazel-Atlas Glass Co. v. Hartford-Empire Co.,
322 U.S. 238 (1944) ....................................... passim
Hertz v. United States,
18 F.2d 52 (8th Cir. 1927) ..................................... 32
vii
In re LabMD Inc.,
2015 FTC LEXIS 272 (F.T.C. November 13, 2015)
................................................................................ 13
In re LabMD, Inc.,
2013 FTC LEXIS 111 (F.T.C. August 29, 2013) ..... 6
Jordan v. Paccar, Inc.,
1996 U.S. App. LEXIS 25358 (6th Cir. Sep. 17,
1996) ...................................................................... 17
Kenner v. Commissioner,
387 F.2d 689 (7th Cir. 1968) ................................. 24
LabMD, Inc. v. FTC,
678 F. App’x 816 (11th Cir. 2016) ......................... 15
LabMD, Inc. v. FTC,
891 F.3d 1286 (11th Cir. 2018) ................. 14, 15, 35
LabMD, Inc. v. Tiversa Holding Corp.,
2016 U.S. Dist. LEXIS 21250 (W.D. Pa. Feb. 22,
2016) ...................................................................... 16
LabMD, Inc. v. Tiversa, Inc.,
2012 U.S. Dist. LEXIS 190853 (N.D. Ga. Aug. 15,
2012) ...................................................................... 10
LabMD, Inc. v. Tiversa, Inc.,
2016 U.S. Dist. LEXIS 194820 (N.D. Ga. May 12,
2016). ......................................................... 15, 25, 29
LabMD, Inc. v. Tiversa, Inc.,
509 Fed. App’x 842 (11th Cir. 2013) ................. 7, 10
LabMD, Inc. v. Tiversa, Inc.,
719 F. App’x 878 (11th Cir. 2017) ......................... 29
viii
Rozier v. Ford Motor Co.,
573 F.2d 1332 (5th Cir. 1978) ............................... 28
Southerland v. Cnty. of Oakland,
77 F.R.D. 727 (E.D. Mich. 1978) ........................... 23
Southerland v. Irons,
628 F.2d 978 (6th Cir. 1980) ................................. 22
Toscano v. Commissioner,
441 F.2d 930 (9th Cir. 1971) ................................. 28
Travaglio v. Am. Express Co.,
735 F.3d 1266 (11th Cir. 2013) ............................. 17
United States v. International Telephone &
Telegraph Corp.,
349 F. Supp. 22 (D.Conn.1972) ............................. 28
United States v. Shaffer Equip. Co.,
11 F.3d 450 (4th Cir. 1993) ............................. 23, 32
United States v. Stonehill,
660 F.3d 415 (9th Cir. 2011) ................................. 24
Universal Oil Prods. Co. v. Root Ref. Co.,
328 U.S. 575 (1946) ............................................... 32
V.I. Hous. Auth. v. David,
823 F.2d 764 (3d Cir. 1987)................................... 24
Weese v. Schukman,
98 F.3d 542 (10th Cir. 1996) ................................. 24
Wilson v. Johns-Manville Sales Corp.,
873 F.2d 869 (5th Cir. 1989) ................................. 24
ix
Workman v. Bell,
245 F.3d 849 (6th Cir. 2001) ................................. 25
Zakrzewski v. McDonough,
490 F.3d 1264 (11th Cir. 2007) ............................. 24
STATUTES
42 U.S.C. § 1320d-6................................................... 36
OTHER AUTHORITIES
7 J. Moore, Federal Practice, § 60.33 ....................... 24
RULES
Fed. R. Civ. P. 60....................................................... 30
Fed. R. Civ. P. 60(b) .................................................. 23
Fed. R. Civ. P. 60(d)(3) ........................................ 30, 32
PETITION FOR WRIT OF CERTIORARI
Systemic confusion regarding the standards for
fraud on the court strikes at the heart of the judicial
system and the public’s perception of its integrity.
Perpetually
shifting, conflicting,
and
overly
restrictive definitions of fraud on the court foster an
atmosphere that promotes unethical behavior and
rewards corruption with impunity. Some courts
require that an officer of the court be implicated in
order for judgments to be set aside for fraud on the
court. Some courts say otherwise. Some courts say
wilful blindness or reckless disregard for the truth
suffice for fraud on the court while others say
intentional fraud must be proved by clear and
convincing evidence. The Eleventh Circuit Court of
Appeals (“Eleventh Circuit”) has held below, for the
first time in any Circuit, that not only must an
attorney be implicated in his client’s fraud to set aside
a judgment, but also that that attorney must also be
counsel of record or actively participate in the case. In
other words, a non-litigating attorney such as
corporate counsel can advise his client how to cheat
the system without consequence to a judgment
obtained by the resulting fraud.
This is what
happened below but due to the Eleventh Circuit
disregarding Tiversa’s extensive frauds on the U.S.
Government and now having the most restrictive
definition of fraud on the court in the country, it is
virtually impossible to hold accountable those who
perpetrate frauds on courts in the Eleventh Circuit.
The federal district and appellate court
decisions in the fraud on the court arena are
irreconcilably inconsistent with the plain language of
Fed. R. Civ. P. 60(d)(3), with this Court’s historic
2
precedent and with each other. Fraud on the court
jurisprudence is in desperate need of this Court’s
intervention, clarification and guidance.
Petitioner LabMD, Inc. respectfully prays that
a Writ of Certiorari issue to review the judgment and
opinion of the United States Court of Appeals for the
Eleventh Circuit entered below on December 7, 2017.
OPINIONS BELOW
The Opinion of the United States District Court
for the Northern District of Georgia (“District Court”)
finding that Petitioner presented a colorable claim of
fraud on the court (Pet. App-2-17) is reported at
LabMD, Inc. v. Tiversa, Inc., No. 1:11-CV-4044-LMM,
2016 U.S. Dist. LEXIS 194820 (N.D. Ga. May 12,
2016).
The Opinion of the United States District Court
for the Northern District of Georgia Denying
Petitioner’s Motion for Reconsideration is attached
hereto. (Pet. App-18-33).
The Opinion of the Eleventh Circuit (Pet. App34-40) is reported at LabMD, Inc. v. Tiversa, Inc., 719
F. App’x 878 (11th Cir. 2017).
The Eleventh Circuit’s denial of Petitioner’s
Petition for Rehearing and En Banc is attached
hereto. (Pet. App-41-42).
3
JURISDICTION
The Opinion of the Eleventh Circuit was
rendered on December 7, 2017. A timely Petition for
En Banc Review was filed on December 28, 2018. The
Petition for En Banc Review was denied on April 10,
2018. The Judgment of the Eleventh Circuit was
entered on April 18, 2018. On June 28, 2018, Justice
Thomas extended the time for filing this Petition to
and including September 7, 2018. This Petition for
Writ of Certiorari was timely filed on September 7,
2018. The jurisdiction of the Supreme Court is
invoked pursuant to 28 U.S.C. 1254(1).
RULE INVOLVED
Rule 60. Relief from a Judgment or Order
(a) Corrections Based on Clerical Mistakes;
Oversights and Omissions. The court may correct a
clerical mistake or a mistake arising from oversight or
omission whenever one is found in a judgment, order,
or other part of the record. The court may do so on
motion or on its own, with or without notice. But after
an appeal has been docketed in the appellate court
and while it is pending, such a mistake may be
corrected only with the appellate court’s leave.
(b) Grounds for Relief from a Final Judgment,
Order, or Proceeding. On motion and just terms, the
court may relieve a party or its legal representative
from a final judgment, order, or proceeding for the
following reasons:
(1) mistake,
excusable neglect;
inadvertence,
surprise,
or
4
(2) newly discovered evidence that, with
reasonable diligence, could not have been discovered
in time to move for a new trial under Rule 59(b);
(3) fraud (whether previously called intrinsic or
extrinsic), misrepresentation, or misconduct by an
opposing party;
(4) the judgment is void;
(5) the judgment has been satisfied, released, or
discharged; it is based on an earlier judgment that has
been reversed or vacated; or applying it prospectively
is no longer equitable; or
(6) any other reason that justifies relief.
(c) Timing and Effect of the Motion.
(1) Timing. A motion under Rule 60(b) must be
made within a reasonable time—and for reasons (1),
(2), and (3) no more than a year after the entry of the
judgment or order or the date of the proceeding.
(2) Effect on Finality. The motion does not
affect the judgment’s finality or suspend its operation.
(d) Other Powers to Grant Relief. This rule does
not limit a court’s power to:
(1) entertain an independent action to relieve a
party from a judgment, order, or proceeding;
(2) grant relief under 28 U.S.C. § 1655 to a
defendant who was not personally notified of the
action; or
(3) set aside a judgment for fraud on the court.
(e) Bills and Writs Abolished. The following are abolished:
bills of review, bills in the nature of bills of review, and writs
of coram nobis, coram vobis, and audita querela.
5
STATEMENT OF THE CASE
A.
Facts Giving Rise To This Case
Tiversa, Inc. (“Tiversa”), founded and
headquartered in Pittsburgh, Pennsylvania, purports
to be a cybersecurity firm.
Robert J. Boback
(“Boback”) was the chief executive officer of Tiversa
from its inception in 2004, until March 2016 after the
FBI raided Tiversa headquarters in connection with
an investigation regarding fraudulent statements
Boback made to Congress and the Federal Trade
Commission. Those fraudulent statements and other
misconduct by Tiversa are at the heart of the dispute
between Petitioner and Tiversa.
Petitioner was a small, Atlanta-based medical
laboratory that provided cancer detection services to
urologists who needed their patients’ tissue samples
analyzed for prostate and bladder cancer.
In
February 2008, Tiversa hacked into and took from a
LabMD computer in Atlanta a 1,718-page confidential
LabMD document containing personal information
and personal health information on approximately
9,300 patients (the “1718 File”).1
In May 2008, Tiversa contacted Petitioner, told
Petitioner that it “found” the 1718 File somewhere in
cyberspace and offered to remediate the very “leak”
caused by Tiversa. When Petitioner refused to buy
Tiversa’s services, Tiversa reported Petitioner to the
Federal Trade Commission along with approximately
1 Tiversa’s theft, possession and distribution of the 1718 File was
a violation of 42 U.S.C. § 1320d-6 (criminal violations for
obtaining individually identifiable health information relating to
an individual and/or disclosing individually identifiable health
information to another person).
6
one hundred other companies that refused to
purchase Tiversa’s services. Tiversa told the FTC that
LabMD had leaked the 1718 File and that Tiversa
found the file on peer-to-peer networks on the
computers of several known identity thieves. Based
on this and other information, the FTC initiated an
investigation of LabMD in 2010 and filed an
administrative enforcement action against Petitioner
in August 2013. See Complaint, In re LabMD, Inc.,
2013 FTC LEXIS 111 (F.T.C. August 29, 2013).
Petitioner believed that Tiversa had hacked
into and taken the 1718 File directly from a LabMD
computer. On October 19, 2011, Petitioner sued
Tiversa in the Fulton County Superior Court in
Atlanta for Tiversa’s conversion of the 1718 File and
related causes of action. The case was removed to the
District Court on November 23, 2011. Tiversa was
represented in the litigation by Pepper Hamilton LLC
partners John Hansberry, Tiversa’s counsel of record,
and Eric Kline, Tiversa’s outside general counsel.2
Kline was not counsel of record in the District Court
and is not a litigator.
Kline was Boback’s long-time friend, business
partner and personal lawyer. He had been Tiversa’s
outside general counsel since the company’s inception.
Kline was involved in the day-to-day operations of
Tiversa. He even helped Tiversa solicit business from
Petitioner.
2 Tiversa’s counsel admitted in related litigation in the Western
District of Pennsylvania that Kline “represented Tiversa in the
action that was filed against Tiversa by Petitioner in the
Northern District of Georgia.” Tiversa now disputes this fact.
7
On November 30, 2011, Tiversa filed a motion
to dismiss this case for lack of personal jurisdiction
(“Tiversa’s Motion to Dismiss”). Tiversa’s Motion to
Dismiss was supported by a declaration from Boback
(the “Boback Declaration”), wherein Boback declared,
under penalty of perjury, that “Tiversa does not
regularly solicit business in Georgia” and that
“Neither Tiversa nor any of its employees or agents
have ever conducted any business in Georgia, engaged
in a persistent course of conduct in Georgia or derived
any revenue from the rendition of services in Georgia,
and particularly in any way related to the allegations
of LabMD, Inc. (“LabMD”) in the Complaint.” The
District Court granted Tiversa’s Motion to Dismiss
and the Eleventh Circuit affirmed that ruling.
LabMD, Inc. v. Tiversa, Inc., 509 F. App’x 842 (11th
Cir. 2013).
Five years later Petitioner would learn in other
litigation that the Boback Declaration was fraudulent
when Petitioner discovered that (1) Tiversa hacked
files and solicited business from at least five (5) other
companies in Georgia (i.e., Papa John’s Pizza, CocaCola, Georgia Music Educators Assoc., Logisticare
Solutions and Franklin’s Budget Car Sales); (2)
Tiversa and Boback attended and solicited business at
an FBI-LEEDA conference in Atlanta on March 29-31,
2010 – a year and a half before Tiversa filed the
Boback Declaration; (3) Boback was a featured
speaker on the last day of the Atlanta conference; (4)
Tiversa collected at least thirteen (13) business cards
from prospective Georgia customers at the conference;
(5) while in Atlanta, Boback met with Natasha Curry,
an anchor at HLN (formerly Headline News), to press
CNN to air a promotional piece for Tiversa; (6) Tiversa
Advisory Board Member Wesley Clark solicited
8
business for Tiversa at the Masters Golf Tournament
in Augusta, Georgia in April 2009; and (7) Tiversa
Advisory Board Member Howard Schmidt solicited
business for Tiversa during a May 2006 presentation
he made at Georgia Tech in Atlanta. Tiversa has
never denied these facts or given any explanation for
Boback’s fraudulent declaration.
Pepper Hamilton attorneys assisted Tiversa in
the preparation of Boback’s Declaration. They falsely
asserted the following in Tiversa’s briefs filed in the
District Court and in the Eleventh Circuit:
As set forth in Tiversa’s prior brief and the
accompanying Boback Declaration, Tiversa’s
only solicitation of business to date in the state
of Georgia consists of the one phone call and
eight emails to LabMD described in the
Complaint.
These nine contacts to one
potential customer over a two month period
over two and half years ago cannot reasonably
be deemed regular solicitation of business in
the state of Georgia.
Tiversa’s only contact with Georgia is one
phone call and eight emails placed to LabMD
during the period of May through July 2008.
Tiversa has no customers and conducts no
business in Georgia, and its only effort ever to
solicit business in Georgia – consisting of one
phone call and eight emails to LabMD during a
two-month period over four years ago – does not
constitute “regularly” soliciting business.
Tiversa did not target or direct its activities at
the State of Georgia. Instead, it downloaded a
publicly available file from a P2P file sharing
9
network without knowledge
location.
of
the
file’s
Here, it is undisputed that Tiversa did not hack
any computers, did not somehow target LabMD
or even know where LabMD and its servers (if
it even had servers) were located when it
downloaded the 1,718 File.
In the District Court’s August 15, 2012 Order,
the court accepted as true and relied upon the
fraudulent Boback Declaration and the false
representations of the Pepper Hamilton attorneys as
its basis for granting Tiversa’s Motion to Dismiss:
Tiversa avers that it has no customers in
Georgia, does not provide any services in
Georgia, and has derived no revenue from
business activities in Georgia. Tiversa argues
that one telephone contact and eight email
contacts do not rise to the level of “regularly”
soliciting business in Georgia. The court agrees.
These limited contacts between Tiversa and
LabMD – one telephone call and eight emails –
are insufficient to establish that Tiversa
regularly solicits business in Georgia. The word
“regular” is defined as “recurring, attending, or
functioning at fixed or uniform intervals.”
WEBSTER’S
NEW
COLLEGIATE
DICTIONARY 992 (9th ed. 1990). It implies a
pattern of behavior. There is no evidence of any
pattern of Tiversa soliciting business from
Georgia businesses and residents. There is no
evidence that Tiversa contacts Georgia
businesses and residents every few weeks or
months or even once a year to attract new
clients.
10
LabMD, Inc. v. Tiversa, Inc., No. 1:11-cv-04044-JOF,
2012 U.S. Dist. LEXIS 190853, at *10-12 (N.D. Ga.
Aug. 15, 2012).
In Petitioner’s appeal of the August 15, 2012
ruling, the Eleventh Circuit also accepted as true and
relied upon the fraudulent Boback Declaration and
the false representations of the Pepper Hamilton
attorneys as its basis for affirming the District Court’s
August 15, 2012 ruling:
Tiversa’s contact with Georgia consisted of one
phone call and nine emails to LabMD. Such
contact is not enough under Georgia law to
subject Tiversa to personal jurisdiction in
Georgia courts. See Gust, 257 Ga. at 130; ETS
Payphone, 236 Ga. App. at 715-16.
***
And, although Tiversa’s business involves the
global searching of computer networks, this
circumstance alone is also not enough to
establish personal jurisdiction.
LabMD, Inc. v. Tiversa, Inc., 509 Fed. App’x 842, 845
(11th Cir. 2013).
Tiversa’s fraud on the court was not discovered
for several years. In August 2013, the U.S. House of
Representatives Committee on Oversight and
Government Reform launched an extensive
investigation into Tiversa and its relationship with
the FTC.
The Committee’s investigation was
prompted by Michael J. Daugherty, Petitioner’s chief
executive officer. Daugherty was concerned about
both the relationship between the FTC and Tiversa
and the veracity of information Tiversa provided to
11
the FTC. With the help of a whistleblower and former
Tiversa employee, the Committee unearthed and
exposed massive frauds committed by Tiversa. See
Staff of H. Comm. On Oversight and Gov’t Reform,
113th Cong., Tiversa, Inc.: White Knight or HighTech Protection Racket (2015) (the “OGR Report”).3
In its 99-page report, the Committee staff disclosed
the following:
Several years ago, Tiversa CEO Robert Boback
began perpetrating a scheme in which at least
one Tiversa employee manipulated documents
legitimately found on the peer-to-peer network
to show that the documents had spread
throughout the peer-to-peer network. For
example, Tiversa downloaded a file that
computer A shared on a peer-to-peer network.
The file could be copied and the metadata easily
manipulated thoroughly [sic] widely-accessible
computer software programs to make it appear
that it had been downloaded by computers B, C,
and D, and thus spread throughout the peer-topeer network.
Tiversa relied on the
manipulated documents to create a need for
their “remediation” services and to grow the
company’s
reputation
through
press
statements and manipulation of media
contacts. Boback told media contacts that
certain
documents,
including
sensitive
government documents, spread throughout the
peer-to-peer network when in fact they had not.
3 The OGR Report is an exhibit in the record below. It is available
for review at https://www.databreaches.net/wpcontent/uploads/
2015.01.02-Staff-Report-for-Rep.-Issa-re-Tiversa.pdf.
12
According to a whistleblower, Tiversa not only
provided the manipulated information to its
clients, but in some instances also provided
false documents to various entities of the
United States government, including the
Congress and several agencies. Not only is this
unethical, but it is illegal to give false
information to the United States government.
It is also illegal to obstruct a congressional
investigation by providing false information to
a congressional committee.
OGR Report at 6. The Committee Staff further found
that Tiversa withheld documents and Boback
repeatedly failed to provide honest, forthright
responses to questions under oath. The Committee
Staff reported, for example, that (1) “Tiversa routinely
provided falsified information to federal government
agencies;” (2) “Boback provided false testimony about
fabricated documents to the U.S. House of
Representatives;” (3) “one Tiversa employee, under
the direction of Boback, provided intentionally false
information to the United States government on more
than one occasion;” (4) “Tiversa withheld from the
FTC a series of documents that are inconsistent with
testimony company officials provided under oath;” (5)
“Tiversa appears to have provided intentionally false
information to this Committee and numerous other
federal departments and agencies;” and (6) “Tiversa’s
failure to produce numerous relevant documents to
the Commission demonstrates a lack of good faith in
the manner in which the company has responded to
subpoenas from both the FTC and the Committee. It
also calls into question Tiversa’s credibility as a source
of information for the FTC.” OGR Report at 78.
13
On May 5, 2015, the whistleblower testified
under criminal immunity in the FTC’s enforcement
action against LabMD that, as a Tiversa employee, he
hacked into and took the 1718 File from a LabMD
computer in Atlanta, Georgia, and that Tiversa never
found the 1718 File anywhere else.4
The
whistleblower’s testimony directly refutes the 2011
statements by Pepper Hamilton attorneys that “it is
undisputed that Tiversa did not hack any computers,
did not somehow target LabMD or even know where
LabMD and its servers were located when it
downloaded the 1,718 File.”
After the whistleblower revealed Tiversa’s
fabricated evidence and false testimony in the
enforcement action, the FTC had no evidence that the
1718 File ever left Petitioner’s computer (other than
Tiversa’s theft) and that there was no actual or likely
harm to consumers. As a result, on November 13,
2016, Chief Administrative Law Judge Michael D.
Chappell dismissed the FTC’s complaint finding, inter
alia, that “the record in this case contains no evidence
that any consumer whose Personal Information has
been maintained by LabMD had suffered any harm as
a result of LabMD’s alleged failure to employ
“reasonable” data security for its computer networks,”
and
“fundamental
fairness
dictates
that
demonstrating actual or likely substantial consumer
injury under Section 5(n) requires proof of more than
the hypothetical or theoretical harm that has been
submitted by the government in this case.” Initial
Decision, In re LabMD Inc., 2015 FTC LEXIS 272
(F.T.C. November 13, 2015), vacated by Opinion of the
4 A transcript of the whistleblower’s testimony is in the record
below.
14
Commission, (July 29, 2016), rev’d sub nom., LabMD,
Inc. v. FTC, 891 F.3d 1286 (11th Cir. 2018). In other
words, Tiversa’s false testimony and fabricated
evidence in the FTC caused a substantial waste of
public resources.
Tiversa’s general counsel Eric Kline is no
stranger to deceit either. Petitioner learned from
discovery in the enforcement action that in 2009, in
furtherance of another one of Tiversa’s frauds, Kline
helped Tiversa create a sham organization known as
The Privacy Institute. This company was used by
Tiversa to funnel documents to the FTC for its use
against Petitioner and other potential customers that
refused Tiversa’s services. See OGR Report at 54, 58
and 72. Kline set up The Privacy Institute to avoid
any connection with Tiversa. Neither Tiversa’s nor
Boback’s nor any affiliated entity’s name is found
anywhere in the incorporation documents; the
company was organized as a non-profit corporation;
the purpose of the organization was falsely stated as
“pursuing regulatory, legislative and judicial
activities in furtherance of individual privacy rights;”
one of Boback’s friends, Brian J. Tarquinio, was the
only director and officer of the company; the address
of the company was misleadingly stated to be 1
Regency Court, Marlton, NJ, 08053, the address for
Boback’s uncle; and David M. Speers (a paralegal in
Morgan Lewis and Bockius, where Kline was a
partner at that time) is listed as the organizer.
Documents Kline produced to the FTC through
The Privacy Institute and other documents later
produced by Tiversa are further evidence of Tiversa’s
fraud on the court. Specifically, the documents reveal,
contrary to Boback’s Declaration, that (1) Tiversa had
15
solicited business from at least five (5) other business
in Georgia with the same shakedown scheme it tried
on LabMD;5 (2) Tiversa hacked the 1718 File directly
from a LabMD computer in Atlanta, Georgia;6 and (3)
the 1718 File had never spread through cyberspace.
The District Court assumed that Kline reviewed these
documents, was aware of their contents and knew that
Tiversa had more contacts with the state of Georgia
than his client would later represent to the District
Court and the Eleventh Circuit. LabMD, Inc. v.
Tiversa, Inc., No. 1:11-cv-4044-LMM, 2016 U.S. Dist.
LEXIS 194820, at *13 (N.D. Ga. May 12, 2016); Pet.
App-12.
Although Petitioner recently prevailed against
the FTC in the Eleventh Circuit Court of Appeals,
LabMD, Inc. v. FTC, 891 F.3d 1286 (11th Cir. 2018),
Petitioner ceased operations in January 2014 due to
the costs of the FTC investigation and litigation. See
LabMD, Inc. v. FTC, 678 F. App’x 816, 819 (11th Cir.
2016).
5 “Documents produced to the Committee show that in an effort
to generate business, Tiversa repeatedly sought to coerce
companies to purchase its services. Tiversa’s methods have
ranged from contacting a company about a leak but failing to
provide anywhere close to full information, to referring nearly
100 companies to the FTC.” OGR Report at 67.
6 “Thus, according to this report, Tiversa had only downloaded
the LabMD file from one source in Atlanta, Georgia by August
2008. This contradicts Boback’s testimony that Tiversa first
downloaded the LabMD file from an IP address in San Diego,
California. If Tiversa had in fact downloaded the LabMD file
from a San Diego IP address in February 2008, then that fact
should be included in this 2008 forensic report. It is not.” OGR
Report at 75.
16
Because Tiversa had fraudulently escaped the
jurisdiction of the courts in Georgia, Petitioner was
compelled to file suit against Tiversa in Pittsburgh,
Pennsylvania, Tiversa’s hometown, where, in January
2015, Petitioner sued Tiversa for Federal RICO and
other claims in federal court. The claims were based,
inter alia, on the whistleblower’s disclosure that
Boback and Tiversa made numerous false statements
to the FTC to entice the FTC to investigate and then
prosecute Petitioner.
On January 8, 2016, the
Pittsburgh federal court granted Tiversa’s Rule
12(b)(6) motion to dismiss all of Petitioner’s claims on
statute of limitations grounds. The court refused to
equitably toll the statutes of limitations for the time
Petitioner spent litigating against Tiversa in Georgia.
LabMD, Inc. v. Tiversa Holding Corp., Civil Action
No. 2:15-cv-92, 2016 U.S. Dist. LEXIS 21250 (W.D.
Pa. Feb. 22, 2016).
In other words, Tiversa
successfully avoided any liability for harming
Petitioner by defrauding two federal courts in
Georgia.
Immediately after the January 8, 2016 ruling,
Petitioner’s counsel scoured thousands of documents
from the FTC’s enforcement action against Petitioner
as well as transcripts of hearings in related litigation
to look for any evidence that might disprove Tiversa’s
statements to the District Court and the Eleventh
Circuit that it never solicited business in Georgia.
This search led to Petitioner’s discovery of Tiversa’s
extensive solicitations of business in Georgia and
other materials establishing that the Boback
Declaration was a fraud on the court.
On January 29, 2016, Petitioner filed in the
District Court below a Motion to Reopen Case, a Rule
17
60(d)(3) Motion for Relief from Judgment and a
Motion for Discovery in Aid of Plaintiff’s Rule 60(d)(3)
Motion for Relief from Judgment (“Fraud on the Court
Motions”). In addition to submitting the evidence
described above, Petitioner submitted a transcript
from a hearing in the Western District of
Pennsylvania where Tiversa’s counsel admitted that
Kline “represented Tiversa in the action that was filed
against Tiversa by Petitioner in the Northern District
of Georgia.” In response, Tiversa submitted no
declaration from Kline or any other evidence to refute
this fact. Instead, Tiversa’s attorney claimed in a brief
filed in the District Court that his admission was a
mistake. The District Court allowed no discovery on
this issue and accepted Tiversa’s unsworn assertion at
face value.7
Evidence submitted by Petitioner in support of
its Fraud on the Court Motions led the District Court
to find that Petitioner had presented a colorable claim
of fraud on the court. “Based on the foregoing analysis
of LabMD’s Rule 60(d)(3) Motion, the Court finds that
LabMD has demonstrated some evidence of possible
fraud.” LabMD, Inc., U.S. Dist. LEXIS 194820, at *18
(emphasis in original). The District Court, however,
severely limited discovery, allowing Petitioner only
ten interrogatories and requiring that they be directed
solely to John Hansberry, Tiversa’s counsel of record.
The District Court refused to permit any meaningful
investigation of the fraud perpetrated on the court.
7 Unsworn statements in briefs are not evidence.
Travaglio v.
Am. Express Co., 735 F.3d 1266, 1269 (11th Cir. 2013); See also
Jordan v. Paccar, Inc., No. 95-3478, 1996 U.S. App. LEXIS 25358
(6th Cir. Sep. 17, 1996) (district court erred in determining fraud
on the court by taking defendant’s assertions at face value).
18
The court permitted no discovery from or about Kline
based on the legally erroneous belief that Kline’s
participation in his client’s fraud on the court was
irrelevant because, according to the court, Kline was
not “an officer of this Court.” Id. at *13 (emphasis
added). The court denied all of Petitioner’s other
requests for discovery (i.e., subpoenas duces tecum
and depositions) to investigate Boback, Tiversa and
other key participants in the fraud. The District
Court also denied Petitioner’s motion to appoint a
Special Master to investigate Tiversa’s fraud on the
court and to address crime-fraud exceptions to the
attorney-client privilege asserted by Tiversa. Several
months later, the District Court narrowed Petitioner’s
discovery to just three interrogatories.
B.
The District Court Proceedings
This lawsuit began on October 19, 2011, when
Petitioner filed its complaint against Tiversa and
other defendants in the Superior Court of Fulton
County, Georgia. The complaint included counts for
conversion, violations of the Computer Fraud and
Abuse Act (18 U.S.C. § 1030) and other claims.
The state court action was removed to the
District Court on November 23, 2011.
On November 30, 2011, Tiversa filed a Motion
to Dismiss Plaintiff’s Complaint. The motion was
based on Fed. R. Civ. P. 12(b)(2).
On December 1, 2011, Tiversa filed a
declaration by Robert J. Boback, Tiversa’s chief
executive officer, in support of its Rule 12(b)(2) motion
(“Tiversa’s Motion to Dismiss”).
The District Court granted Tiversa’s Motion to
Dismiss on August 15, 2012.
19
Petitioner discovered Tiversa’s fraud on the
court in January 2016. On January 29, 2016,
Petitioner filed a Motion to Reopen Case, a Rule
60(d)(3) Motion for Relief from Judgment and a
Motion for Discovery in Aid of Plaintiff’s Rule 60(d)(3)
Motion for Relief from Judgment.
On May 12, 2016, the District Court denied
Petitioner’s Rule 60(d)(3) motion (with the right to
refile). The District Court granted Petitioner’s Motion
for Discovery, in part, allowing Petitioner to serve just
ten (10) written interrogatories on Pepper Hamilton
partner John Hansberry, Tiversa’s counsel of record.
The District Court denied Petitioner any other
discovery.
On September 6, 2016, Petitioner filed a Motion
for Appointment of Special Master. The District Court
denied this motion on November 10, 2016.
On November 10, 2016, the District Court
ordered that Hansberry need only respond to three (3)
of the ten (10) interrogatories Petitioner served upon
him.
Petitioner filed a Motion for Reconsideration on
January 20, 2017, wherein Petitioner requested
reconsideration of the District Court’s refusal to allow
Petitioner any meaningful discovery.
Petitioner filed a Motion for JurisdictionRelated Discovery on January 22, 2017, to address the
District Court’s stated concern that it may not have
personal jurisdiction over Tiversa. On March 20,
2017, the District Court denied Petitioner’s Motion for
Jurisdiction-Related Discovery and Motion for
Reconsideration.
20
Petitioner filed a timely Notice of Appeal on
March 21, 2017.
C.
The Appellate Court Proceedings
On February 2, 2013, a panel of the Eleventh
Circuit affirmed the District Court’s grant of Tiversa’s
Motion to Dismiss.
On December 7, 2017, a panel of the Eleventh
Circuit affirmed the District Court’s denial of
Petitioner’s Rule 60(d)(3) Motion for Relief from
Judgment and the District Court’s denial, in part, of
Petitioner’s Motion for Discovery in Aid of Plaintiff’s
Rule 60(d)(3) Motion for Relief from Judgment.
On December 28, 2017, Petitioner filed a
Petition for En Banc Review.
On April 10, 2018, the Eleventh Circuit denied
Petitioner’s Petition for En Banc Review.
REASONS FOR GRANTING CERTIORARI
I.
Review Is Warranted Because All Circuits
Have
Imposed
Overly
Restrictive
Requirements
for
Setting
Aside
Judgments Resulting From Fraud On The
Court.
The seminal case on setting aside judgments for
fraud on the court is Hazel-Atlas Glass Co. v.
Hartford-Empire Co., 322 U.S. 238 (1944), overruled
on other grounds by Standard Oil Co. of Cal. v. United
States, 429 U.S. 17 (1976). In Hazel-Atlas, the Court
held that the one-term rule then in effect does not bar
a court from setting aside a judgment obtained by
fraud on the court. Id. at 245. There is “a universally
recognized need for correcting injustices which, in
certain instances, are deemed sufficiently gross to
21
demand a departure from rigid adherence to the term
rule.” Id. at 244. When a judgment is “manifestly
unconscionable,” the courts are empowered to set
judgments aside “without hesitation.” Id. at 245.
To be sure, Hazel-Atlas was “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.” Id. at 245.
Instead, the facts showed “a deliberately planned and
carefully executed scheme to defraud not only the
Patent Office but the Circuit Court of Appeals.” Id.
“Hartford’s fraud, hidden for years but now admitted,
had its genesis in the plan to publish an article for the
deliberate purpose of deceiving the Patent Office. The
plan was executed, and the article was put to
fraudulent use in the Patent Office, contrary to law.”
Id. at 250.
The Hazel-Atlas Court specifically rejected the
notion that finality was more important than
equitable solutions for hardship cases:
Equitable relief against fraudulent judgments
is not of statutory creation. It is a judicially
devised remedy fashioned to relieve hardships
which, from time to time, arise from a hard and
fast adherence to another court-made rule, the
general rule that judgments should not be
disturbed after the term of their entry has
expired.
Id. at 248. In fact, instead of favoring a policy of
finality of judgments, the Court ruled, “The Circuit
Court on the record [t]here presented had both the
duty and the power to vacate its own judgment and to
22
give the District Court appropriate directions.” Id. at
249-250 (emphasis added).
Finality is an important principle in the law,
and one that the Courts have long touted for good
reason. In many circumstances finality is, in fact, a
more important concept and desired good than getting
the individual merits of a particular case exactly right.
But as this Court made clear 74 years ago in HazelAtlas, finality is not and should not be more valuable
than ensuring that the parties to court proceedings do
not perpetrate fraud on the courts and on the other
litigants. This Court properly recognized that the
actual and potential harm from failing to properly
curtail fraud on the court, wherever it is found, is a
harm far greater than lack of finality in these
circumstances.
Today, the lessons of Hazel-Atlas are lost in the
lower courts’ morass of inconsistent and improper
application of the fraud on the court definitions and
standards. As a result, this area of the law is so
confused and inconsistent as to be rendered almost
useless. It is most unfortunate that this state of the
law has worked to the advantage of those who
perpetrate fraud on the court. The Circuits have
strayed from Hazel-Atlas by defining fraud on the
court so narrowly that in the 74 years since HazelAtlas there appears to be only one reported decision
where a Circuit Court upheld a district court ruling
setting aside a judgment for fraud on the court. See
Southerland v. Irons, 628 F.2d 978 (6th Cir. 1980). As
a result, there is a dearth of reported district court
cases where judgments have been set aside for fraud
on the court. Rare examples include Eastern Fin.
Corp. v. JSC Alchevsk Iron & Steel Works, 258 F.R.D.
23
76 (S.D.N.Y. 2008); Southerland v. Cnty. of Oakland,
77 F.R.D. 727, 728 (E.D. Mich. 1978), aff’d, 628 F.2d
978 (6th Cir. 1980. Certainly there have been more
than a handful of “manifestly unconscionable”
judgments in the federal courts in the last 74 years.
The Circuits’ obstacles for proving fraud on the
court have become so strict that trial courts rarely
investigate the frauds perpetrated upon them and, as
illustrated in this case, rarely permit discovery to
uncover those who cheat, defile the courts and thwart
justice. This is not healthy. “Our adversary system
for the resolution of disputes rests on the unshakable
foundation that truth is the object of the system’s
process which is designed for the purpose of
dispensing justice….” United States v. Shaffer Equip.
Co., 11 F.3d 450, 457 (4th Cir. 1993). “Even the
slightest accommodation of deceit or a lack of candor
in any material respect quickly erodes the validity of
the process.” Id.
II.
Review Is Warranted To Resolve Conflicts
In The Circuits Regarding The Definition
Of Fraud On The Court In Fed. R. Civ. P.
60(d)(3) And Hazel-Atlas.
Since Hazel-Atlas, courts have struggled to
define fraud on the court. See, e.g., Geo. P. Reintjes
Co. v. Riley Stoker Corp., 71 F.3d 44, 48 n.5 (1st Cir.
1995). (“The cases have struggled, usually without
great success, to provide a useful definition of ‘fraud
on the court.’”); Great Coastal Express, Inc. v. Int'l
Bhd. of Teamsters, etc., 675 F.2d 1349, 1356 (4th Cir.
1982) ) (“The federal courts that have struggled with
the definition of ‘fraud on the court’ in the context of
Rule 60(b) have found such a definition elusive”);
United States v. Stonehill, 660 F.3d 415, 444 (9th Cir.
24
2011) (“We have struggled to define the conduct that
constitutes fraud on the court.”).
The struggle to define fraud on the court has led
the Circuit Courts to render conflicting definitions of
fraud on the court. The courts have come to very
different results applying different standards. Both
litigants and lower courts lack the appropriate
guidance needed to yield the needed consistency in
applying this standard.
Several circuits have adopted the following
definition from Professor Moore:
‘Fraud upon the court’ should, we believe,
embrace only that species of fraud which does,
or attempts to, defile the court itself, or is a
fraud perpetrated by officers of the court so that
the judicial machinery can not perform in the
usual manner its impartial task of adjudicating
cases that are presented for adjudication.8
See, e.g., Hadges v. Yonkers Racing Corp., 48 F.3d
1320, 1325 (2d Cir. 1995); V.I. Hous. Auth. v. David,
823 F.2d 764, 767 (3d Cir. 1987); Wilson v. JohnsManville Sales Corp., 873 F.2d 869, 872 (5th Cir.
1989); Demjanjuk v. Petrovsky, 10 F.3d 338, 352 (6th
Cir. 1993); Kenner v. Commissioner, 387 F.2d 689, 691
(7th Cir. 1968); Weese v. Schukman, 98 F.3d 542, 553
(10th Cir. 1996); Zakrzewski v. McDonough, 490 F.3d
1264, 1267 (11th Cir. 2007); Broyhill Furniture Indus.
v. Craftmaster Furniture Corp., 12 F.3d 1080, 1085
(Fed. Cir. 1993).
Although Professor Moore’s definition includes
two scenarios – frauds which defile the court and
8 7 J. Moore, Federal Practice, § 60.33.
25
frauds perpetrated by officers of the court, every
Circuit except the Fourth and Ninth, as discussed
below, ignore the word “or” in his definition. As noted
above, the only requirement in Hazel-Atlas for setting
a judgment aside is that the judgment be “manifestly
unconscionable.” Id. at 245. Indeed, this is a broad
concept, but if the Court wanted to impose the
requirements we now see in the Circuits, it would
have either done so in Hazel-Atlas or in another case
since Hazel-Atlas.
The Eleventh Circuit’s failure to follow HazelAtlas is indicated in the fact that the Court did not
even cite the decision. The District Court cited HazelAtlas, but only for the proposition that a “motion
based upon fraud on the court is not barred by laches
or unclean hands, and there is no time limitation for
setting aside a judgment.” LabMD, Inc., U.S. Dist.
LEXIS 194820, at *5; Pet. App-5.
The Eleventh Circuit ruling needs to be
reviewed because the court failed to apply this Court’s
“manifestly unconscionable” standard in Hazel-Atlas.
A.
The Circuit Courts Are In Conflict
Regarding the Necessary Mens Rea
for Establishing Fraud on the Court.
The Sixth Circuit is the only Circuit where
conduct that is “wilfully blind to the truth” or “is in
reckless disregard for the truth” will establish the
necessary mens rea for fraud on the court. Workman
v. Bell, 245 F.3d 849, 852 (6th Cir. 2001) (quoting
Demjanjuk v. Petrovsky, 10 F.3d 338, 348 (6th Cir.
1993). Specifically, the elements of Rule 60 fraud on
the court in the Sixth Circuit include conduct:
(1) On the part of an officer of the court;
26
(2) That is directed to the “judicial machinery”
itself;
(3) That is intentionally false, wilfully blind to the
truth, or is in reckless disregard for the truth;
(4) That is a positive averment or is concealment
when one is under a duty to disclose;
(5) That deceives the court.
Id. In Demjanjuk, the Circuit Court, in vacating the
judgment of the district court, stated as follows:
Thus, we hold that the OSI attorneys acted
with reckless disregard for the truth and for the
government’s obligation to take no steps that
prevent an adversary from presenting his case
fully and fairly. This was fraud on the court in
the circumstances of this case where, by
recklessly assuming Demjanjuk’s guilt, they
failed to observe their obligation to produce
exculpatory materials requested by Demjanjuk.
Id. at 354.
No other Circuit Court has recognized that
wilful blindness or reckless disregard for the truth
would be sufficient to set aside a judgment for fraud
on the court. The Sixth Circuit is correct in doing so
because conduct that is wilfully blind or that
recklessly disregards the truth satisfies the
“manifestly unconscionable” standard in Hazel-Atlas.
This Court should accept this Petition to
resolve the Circuit split regarding the requisite mens
rea necessary to establish fraud on the court.
27
B.
Broader Definitions Of Fraud On
The Court in the Fourth and Ninth
Circuits Conflict With Every Other
Circuit.
The Fourth and the Ninth Circuits have
refused to require that fraud on the court be
perpetrated by an “officer of the court.” The Fourth
Circuit correctly interprets Hazel-Atlas as imposing
no requirement that an officer of the court be involved
in the fraud:
It may be well to dispel at the outset the notion
that proof of bribery of a judge or juror or of
fraud perpetrated by other officers of the court
is an essential element of fraud on a court. To
be sure, this wrongdoing would be a badge of
such fraud, but the opinion in Hazel-Atlas did
not rely on this type of misconduct.
Commentators
have
suggested
that
involvement of an attorney is an essential
component of fraud on the court when
misconduct of other officers of the court is not
established. The Supreme Court, however,
neither predicated its decision in Hazel-Atlas on
the narrow ground of an attorney’s involvement
in the litigant’s fraud, nor did it identify this as
an element of fraud on the court. Consequently,
a civil judgment may be set aside because of a
litigant’s fraud on the court though no
wrongdoing is ascribed to an attorney or other
officer of the court.
Great Coastal Express, Inc. v. Int’l Bhd. of Teamsters,
etc., 675 F.2d 1349, 1362-63 (4th Cir. 1982) (citations
omitted) (emphasis added).
28
Like the Fourth Circuit, the Ninth Circuit has
refused to require attorney involvement by an
attorney or other officer of the court to constitute
fraud on the court. Toscano v. Commissioner, 441
F.2d 930 (9th Cir. 1971); cf. Glenwood Farms, Inc. v.
O'Connor, 666 F. Supp. 2d 154, 177 n.18 (D. Me. 2009)
(“To the extent Toscano does not require the
involvement of an officer of the court, and binding
First Circuit authority does, the Court declines to
follow it.”).
Eleventh Circuit law conflicts with Fourth and
Ninth Circuit law in its requirement that an attorney
be implicated in order to set aside a judgment for
fraud on the court. Rozier v. Ford Motor Co., 573 F.2d
1332, 1338 (5th Cir. 1978) (“Generally speaking, only
the most egregious misconduct, such as bribery of a
judge or members of a jury, or the fabrication of
evidence by a party in which an attorney is implicated,
will constitute a fraud on the court.”) (quoting United
States v. International Telephone & Telegraph Corp.,
349 F. Supp. 22, 29 (D.Conn.1972 aff’d without
opinion, 410 U.S. 919, 93 S. Ct. 1363, 35 L. Ed. 2d 582
(1973)).
The Eleventh Circuit ruling needs to be
reviewed in order for this Court to resolve whether an
attorney must be implicated in his client’s fraud in
order for a judgment to be set aside for fraud on the
court.
29
C.
Eleventh Circuit Law Conflicts With
Every Other Circuit By Allowing
Parties To Use Non-Litigating
Attorneys To Perpetrate Frauds on
The Courts.
In this case, the District Court and the
Eleventh Circuit restricted the fraud on the court
definition even more so than the overly restrictive
Circuits that require that fraud on the court be
perpetrated by an officer of the court. The District
Court required and the Eleventh Circuit affirmed not
only that an attorney be implicated in order to
establish fraud on the court but also that said attorney
be either an officer of that court or actively participate
in the litigation. LabMD, Inc., U.S. Dist. LEXIS
194820, at *13; Pet. App-12 (“LabMD fails to prove
that an officer of this Court was involved in the alleged
fraud.”) (emphasis added.)
The District Court’s finding that “LabMD
offers no such evidence of Kline’s participation,” Id. at
*14; Pet. App-13 is belied by Tiversa’s admission, in
the record, that Kline “represented Tiversa in the
action that was filed against Tiversa by LabMD in the
Northern District of Georgia.” Id. at *15; Pet. App-14.
Nevertheless, the Eleventh Circuit endorsed the
District Court’s novel propositions. “The district
court, thus, limited post-judgment discovery to the
pertinent issue before it: whether Mr. Hansberry
[Tiversa’s counsel of record] had actual knowledge of
Tiversa’s contacts with Georgia and mispresented
intentionally that information to the court.” LabMD,
Inc. v. Tiversa, Inc., 719 F. App’x 878, 881 (11th Cir.
2017); Pet. App-39.
30
There is certainly no requirement in HazelAtlas that fraud on the court be perpetrated by an
attorney of record.
Indeed, in Hazel-Atlas, the
attorney who wrote the fraudulent article, had it
published and submitted it to the Patent Office was
R.F. Hatch, an attorney in the patent department at
Hartford. Hartford-Empire Co. v. Hazel-Atlas Glass
Co., 137 F.2d 764, 766 and 768 (3d Cir. 1943). Hatch
was not counsel of record in the Circuit Court where
the underlying fraud on the court occurred. See
Hartford-Empire Co. v. Hazel-Atlas Glass Co., 59 F.2d
399 (3d Cir. 1932) (listing counsel of record).
The District Court and Eleventh Circuit rulings
on these points conflict with the law in every other
circuit and would, if endorsed, lead to absurd results.
There is no authority for the proposition that the
attorney implicated in his client’s fraud must be
counsel of record or must actively participate in the
litigation.
The unacceptable consequence of the
Eleventh Circuit’s decision below would be that a
party, like Tiversa, can bypass its counsel of record,
like Hansberry, and call upon a non-litigating
attorney, like Kline, for help in perpetrating a fraud
on the court without fear that the fraudulentlyobtained judgment, like the judgment below, will ever
be set aside. Allowing a party to insulate itself from
the consequences of its own fraud merely by
controlling which attorneys it involves in the fraud
and which ones it keeps in the dark vitiates the very
purpose for setting aside judgments obtained by fraud
on the court.
If an attorney must be implicated in his client’s
fraud in order to set a judgment aside for fraud on the
Court, the Eleventh Circuit decision needs to be
31
reviewed for this Court to resolve whether the
attorney must be counsel of record or actively
participate in the case.
III.
Review Is Warranted Because Limitations
Imposed In Every Circuit Violate The
Plain Language in Rule 60(d)(3) That
“This Rule Does Not Limit A Court’s
Power To . . . Set Aside A Judgment For
Fraud On The Court.”
Fed. R. Civ. P. 60 imposes no requirement that
an attorney or other officer of the court be implicated
in a party’s fraud on the court in order to set aside a
judgment. Indeed, the plain language of Rule 60(d)(3)
provides that “This rule does not limit a court’s power
to…set aside a judgment for fraud on the court.” As
shown in the cases discussed above, however, each
Circuit has grafted insurmountable restrictions and
conditions on the Rule so much so that in the 74 years
since Hazel-Atlas, there appears to be only one
reported decision where a Circuit Court upheld a
district court ruling setting aside a judgment for fraud
on the court. See Southerland v. Irons, 628 F.2d 978
(6th Cir. 1980). It is no surprise then that there is a
dearth of reported district court cases where
judgments have been set aside for fraud on the court.
The Circuits’ definitions of fraud on the court coupled
with the corresponding clear and convincing standard
for proving fraud is simply too difficult to meet.
Because
of
their
fundamental
misunderstanding about and misapplication of the
fraud on the court standard in Hazel-Atlas, trial
32
courts rarely investigate9 and, as below, rarely permit
discovery to uncover those who cheat, defile the courts
and thwart justice. “Our adversary system for the
resolution of disputes rests on the unshakable
foundation that truth is the object of the system’s
process which is designed for the purpose of
dispensing justice.” United States v. Shaffer Equip.
Co., 11 F.3d 450, 457 (4th Cir. 1993). “Even the
slightest accommodation of deceit or a lack of candor
in any material respect quickly erodes the validity of
the process.” Id.
Tiversa’s frauds on the U.S. Government are
more egregious, extensive and harmful to the public
than the frauds in Hazel-Atlas, yet the courts below
imposed limitations not found in Hazel-Atlas and
refused to permit any meaningful investigation of the
frauds imposed on them. The Hazel-Atlas Court
instructed that “The Circuit Court on the record
[t]here presented had both the duty and the power to
vacate its own judgment and to give the District Court
appropriate directions.” 322 U.S. at 249-250
(emphasis added). “The inherent power of a federal
court to investigate whether a judgment was obtained
by fraud, is beyond question.” Universal Oil Prods.
Co. v. Root Ref. Co., 328 U.S. 575, 580 (1946). “The
power to unearth such a fraud is the power to unearth
it effectively.” Id. Three interrogatories will never
unearth such a fraud effectively. The real travesty of
justice here is that a party that has defiled not only
two federal courts but also a U.S. government agency
and Congress succeeded at manipulating the judiciary
9 It is a court’s duty to investigate fraud on the court.
United States, 18 F.2d 52, 55 (8th Cir. 1927).
Hertz v.
33
to its advantage at extreme expense to the U.S.
Government as well as Petitioner.
The Eleventh Circuit decision needs to be
reviewed for this Court to resolve whether the lower
courts may impose limitations on Rule 60(d)(3).
IV.
Review Is Warranted Because Hazel-Atlas
Holds That A Corresponding Fraud On
Other Branches Of The U.S. Government,
Like Tiversa’s, Renders A Judgment
Obtained By Fraud On The Court
“Manifestly Unconscionable.”
In Hazel-Atlas, the Court determined that the
judgment Hartford obtained was “manifestly
unconscionable” because the facts showed “a
deliberately planned and carefully executed scheme to
defraud not only the Patent Office but the Circuit
Court of Appeals.” 322 U.S. at 245. Here, similarly,
Tiversa not only defrauded the courts but also
defrauded other federal entities (e.g., the FTC and
Congress). Tiversa’s frauds, however, are worse than
those in Hazel-Atlas.
Evidence in the record below establishes that
Tiversa’s fraud on the District Court and the Eleventh
Circuit was part of an overall scheme to commit
crimes10 and defraud the U.S. Government for
Tiversa’s commercial gain and Boback’s personal
gratification of revenge.11 “Tiversa routinely provided
10 See, e.g., 42 U.S.C. § 1320d-6.
The ALJ noted in his Initial Decision that “Boback was
motivated to retaliate against LabMD for LabMD’s refusal to
purchase remediation services from Tiversa.” Initial Decision, In
re LabMD Inc., 2015 FTC LEXIS 272 *70 (F.T.C. November 13,
2015.
11
34
falsified information to federal government agencies.”
OGR Report at 5. In addition, “Tiversa used the FTC
in further pursuing the company’s coercive business
practices.” OGR Report at 67. In late 2009, for
example, Tiversa obtained nonpublic knowledge that
the FTC intended to pursue regulatory actions against
many companies on Tiversa’s list of companies that
allegedly leaked personal, confidential or classified
files. OGR Report at 62. “Tiversa maneuvered to
position itself to profit from the FTC’s actions.” Id.
Other evidence in the record shows that Tiversa
claimed to have gathered and stored a substantial
amount of classified information.12 OGR Report at 4.
In one example, Tiversa downloaded blueprints for
Marine One, the president’s helicopter, and claimed in
a highly publicized story that it located those plans on
a computer in Iran. OGR Report at 16-18. The OGR
Committee learned from a whistleblower that a
portion of Tiversa’s story was a fraud. Tiversa
downloaded the plans from the computer of a defense
contractor. Id. In the midst of an NCIS investigation
into the matter, Tiversa hired Tim Hall, an individual
at NCIS who investigated the Marine One leak. OGR
Report at 17.
12 “Tiversa’s co-founder claims the company is in possession of a
greater quantity of sensitive and classified information than
NSA-leaker Edward Snowden.” OGR Report at 4. To escape
liability for taking, possessing and distributing such information,
Tiversa falsely claims that it had a right to take the material
because it was “publicly available” on peer-to-peer networks.
Tiversa’s theft of Petitioner’s 1718 File and false claim that it
found the file spreading through cyberspace is a prototypical
example of this pretense.
35
The Eleventh Circuit itself (in a separate case
with a different panel than this case) recognized
Tiversa’s manipulation of and fraud on the FTC
where, in oral argument, the court observed that “the
aroma that comes out of the investigation of this case
is that Traversa [sic] was shaking down private
industry with the help of the FTC,” and further
acknowledged Tiversa’s “falsifications to the
Commission.”13
Tiversa’s download, retention and distribution
of Petitioner’s 1718 File was a violation of 42 U.S.C. §
1320d-6 (criminal violations for obtaining individually
identifiable health information relating to an
individual and/or disclosing individually identifiable
health information to another person).
Tiversa
capitalized on this crime by making false
representations and fabricating evidence about where
it found the file to instigate an FTC investigation and
then fuel an administrative enforcement action
against Petitioner that would involve a trial and an
appeal to the Eleventh Circuit where Petitioner
ultimately prevailed. LabMD, Inc. v. FTC, 891 F.3d
1286 (11th Cir. 2018). In other words, Tiversa
engaged in a massive “deliberately planned and
carefully executed scheme to defraud not only the
[U.S. Government] but the [district court and the]
Circuit Court of Appeals.” See Hazel-Atlas, 322 U.S.
at 245.
In addition to defrauding
numerous
departments and agencies of the U.S. Government
and diverting and wasting a considerable amount of
As of September 7, 2018, an audio recording of the oral
argument in the referenced appeal was available at
http://www.ca11.uscourts.gov/oral-argument-recordings.
The
observations quoted above are found between 23:18 and 25:30.
13
36
federal resources, Tiversa and its counsel have
undermined the institutional integrity of the federal
courts, violated the sanctity of the judicial process
and, so far, have escaped responsibility for any of
these egregious acts.
In extreme contrast to the documented and
manifest injustice of Tiversa’s extensive and
systematic deceit on the U.S. Government and the
attention given by the FTC and Congress to Tiversa’s
fraudulent testimony and fabrication of evidence that
are at the heart of the case below, the District Court
permitted Petitioner, a cancer detection laboratory
destroyed
by
Tiversa’s
frauds,
just
three
interrogatories to investigate and prove a colorable
claim of fraud on the court. This, and the fact that the
Eleventh Circuit affirmed the District Court, are vivid
examples of why this Court should grant certiorari to
(1) provide a uniform definition of Rule 60(d)(3) fraud
on the court; (2) direct the federal judiciary that fraud
on the court shall not be tolerated and that colorable
claims of fraud on the court deserve meaningful
investigations; (3) remind all members of the bar that
their duty to prevent their clients from perpetrating
frauds on the courts is paramount; and (4) preserve
the integrity of the judicial system.
The District Court and the Eleventh Circuit
failed to take any of Tiversa’s crimes or frauds on the
U.S. Government into account in their analyses of
fraud on the court here. The Eleventh Circuit decision
needs to be reviewed for this Court to resolve whether
corresponding frauds in other branches of the U.S.
government must be considered in the determination
of whether a judgment obtained by fraud on the court
is “manifestly unconscionable.”
37
CONCLUSION
For the reasons set forth above, this Court
should grant the petition for certiorari.
Respectfully submitted,
JAMES W. HAWKINS
JAMES W. HAWKINS LLC
11339 Musette Circle
Alpharetta, GA 30009
(678) 697-1278
jhawkins@jameswhawkinsllc.com
Counsel for Petitioner
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