Opposition Brief — Robinson v. Audi Aktiengesellschaft

Fe ee

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The second fundamental deficiency of the Petition is its ex

post facto effort to minimize plaintiffs’ factual claims as

charging mere recklessness or gross negligence. This gambit

cannot be squared with plaintiffs’ steadfastly maintained

claims of an elaborate, multifaceted “scheme and plan”

which was “designed precisely to prevent the Court from |

performing its function of impartially adjudging cases.” Infra

at h. 3. Indeed, in a prior submission to this Court, Petitioners

directly charged that their adversaries had “knowingly and

intentionally violated the law.” Herzfeld & Rubin, P.C. v.

Robinson, (No. 91-715), Brief in Opposition to Petition for

Certiorari (“H&R v. Robinson, Opp.”) at 13. Even on the

present Petition, plaintiffs maintain that the charged acts by

defense counsel “were specifically designed to suppress” the

relevant facts. Pet. at 4. Against this background, the district

court's dispositive finding — “[Nlowhere ... does there

appear clear and convincing evidence that defense counsel

was involved in a ‘deliberately planned and carefully

executed scheme’ to defraud this Court through misrepresen-

tation and non-disclosure” (App. at 47) — was a factual

finding, pure and simple, which the Court of Appeals found

“directly responsive to the claim asserted by plaintiffs.” App.

at 21. On this ground as well, the Petition fails at the thresh-

old.

Background

In the first decade of this litigation, from 1977 to1986,

plaintiffs lost on the merits at trial and in two appeals to the

Tenth Circuit. Robinson v. Audi NSU Auto Union 739 F.2d 1481

(10th Cir. 1984); Robinson v. Volkswagen of America, Inc., 803

F.2d 572 (10th Cir. 1986). Since 1987, they have pursued a

two-pronged strategy to continue this suit despite the twice

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affirmed adverse judgment. First, they sought ‘> relitigate the

underlying action under Oklahoma common law, notwith-

standing the prior judgment, by suing opposing counsel and

the corporate parent of the defendants in the underlying suit,

alleging the same causes of action on which they previously

lost, plus alleged fraud perpetrated against them by their

adversaries in securing that outcome. The second prong of

their attack took the form of an independent action under

Rule 60(b), Fed.R.Civ.P., against their former trial adversar-

ies, seeking relief from the previously entered final judgment

based upon alleged “fraud on the court.”

The present Petition challenges the Tenth Circuit's

affirmance on appeal of the district court's dispositive finding

that these charges, though sufficient in law, were comprehen-

sively unproven. Petitioners also question the Tenth Circuit's

application of traditional principles of claim and issue

preclusion under doctrines of res judicata and collateral

estoppel to foreclose their attempt to use a purported

Oklahoma law common law fraud action as a device to avoid

the requirements of Rule 60(b).

A detailed history of the underlying litigation is set forth

in the circuit court’s decisions. In the interest of brevity, we

incorporate these passages by reference. App. 3 - 6; 25 - 27.’

The following factual statement, fulsome as it may appear,

highlights only those aspects of that history which we view

as having been omitted or misstated by petitioners or which

otherwise bear directly on our opposition to the Petition.

The history of plaintiffs’ charges makes it inescapably

clear that plaintiffs, at all times until they discovered that

1. The appendix to the Petition is cited as “App. __,” and portions

of the record in the Court of Appeals are cited as in the decisions

below.

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they had lost the case, charged defendants with exactly what

the district court ultimately found they had failed to prove —

a “deliberately planned and carefully executed scheme’ to

defraud the court through misrepresentation and non-disclo-

sure.” The district court's rejection of that charge in almost

the exact words in which plaintiffs advanced it was a simple,

garden variety factual finding, on the basis of which one

party to a litigation prevailed. The Petitions’ effort to concoct

“certworthy” issues of law from their loss at trial on the facts

merits no consideration from this Court.

The Complaint — “A Scheme and Plan to Pre-

vent the Disclosure of the True Facts” —

Motion to Dismiss Denied — Allegations

That “The Attorneys For the Defendants

Lied”

According to the complaint, each of the multitude of

wrongs which plaintiffs charged the defense with having

committed was part of a deliberately conceived “scheme and

plan” to suppress the “true facts” concerning the corporate

relationship between Audi and its parent VWAG. (Aplt.App.

at 8, 918-20) The complaint made the extraordinary charge

2. Unless otherwise noted, references to pleadings and

submissions below relate to plaintiffs’ action for fraud on the

court, No. 92-5238 in the Tenth Circuit, which the Court of

Appeals found to be factually identical to plaintiffs’ action for

common law fraud. No. 93-5168 below.

3. 18. [Defense counsel] made false representations

concerning the design and the development of the

Audi 100 LS and the relationship of VWAG to that

design and to Auto Union GmbH and Audi NSU

. . » The true facts are set forth with particularity

(continued...)

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that one individual attorney, a member of the defense team,

was both the architect and linchpin of these sophisticated,

single-minded and indeed virtually clairvoyant machina-

tions, which extended over a three year period and involved

a broad array of acts of professional misconduct in both the

Oklahoma and federal court systems. (Id. ¥] 21-65) Specific

allegations concerning the acts, statements and state of mind

of this lawyer appear over thirty times in the complaint.‘

3. (...continued)

in Paragraphs 22 through 37 herein. The

representations are set forth in particularity in

Paragraphs 46 through 51 herein. The knowledge

of the defendants and H&R, their attorneys, . . .,

are set forth in Paragraphs 38 through 45 herein.

19. These false representations were directed at

the judicial machinery itself and were a

fabrication of evidence by a party in which an

attorney is implicated... . This fraud . . . was

designed precisely to prevent the Court from

performing its function of impartially adjudging

20. The false representations were made as part of

a scheme and plan to prevent the disclosure of the

true facts concerning the relationship of VWAG to

the design and manufacture of the Audi 100LS

and its relationship with Auto Union GmbH and

Audi NSU. In addition to the representations

made by [defense counsel], the scheme and plan

was implemented through making false and

fraudulent answers to interrogatories and in

discovery. The acts which were performed to

implement this scheme and plan are set out

particularly in Paragraphs 52(e) and 54 through 65

herein.

4. Complaint (Aplt.App. at 1-39) 414, 418 (3 times), 420

(continued...)

6

Confirming the inherently intentional nature of the “scheme

or plan,” the complaint directly alleges that “This fraud . . .

was designed precisely to prevent the Court from performing

its function of impartially adjudging cases.” (Id. 419)”

The district court upheld the legal sufficiency of plaintiffs’

charges from the start of the case. In its own words, “. . . the

[district] Court opined that the allegations of ‘a scheme by

VWAG, its subsidiaries and its attorneys . . .’ and the allega-

tions that ‘the attorneys for defendants lied . . .’ were suffi-

cient to state a claim under Rule 60(b).” App. at 52 As

plaintiffs stated to this Court, this was a holding that “if the

facts alleged [in the complaint] are true, they constitute fraud

on the court.” H&R v. Robinson, Opp. at 2.

Opposition to Certiorari in No. 91-715 — De-

fense Counsel “Knowingly and Intentionally

Violated the Law.”

Defendants’ challenge to other aspects of the above-

quoted ruling led to a petition for certiorari, No. 91-715 in this

Court, on the issue of civil damage immunity to defense

counsel. In their opposition to that petition, plaintiffs devoted

a full page of their Brief in opposition to a complete quotation

4. (...continued)

(specifically identified as an architect and/or instrument of the

alleged “scheme or plan”), heading before 4 38-45, 443 (twice),

944 (H&R charged with various alleged categories of

“knowledge” of Shapiro), 945 (nine separately designated

subcategories of Shapiro’s alleged knowledge, imputed to H&R),

heading before 4946-51, 946, 947 (twice), 948 (twice), 449 (twice),

950 (four times), 451, 452, 957(twice).

5. Accord, Pet. at 4 (“The misrepresentations and omissions were

designed to suppress the role of... VWAG...”)

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of the district court’s characterization of their charges of a

“scheme or plan” in the course of which “throughout discov-

ery and at trial, the attorneys for defendants lied.” At the

conclusion of the quotation, plaintiffs stated that “This the

factual predicate upon which this case stands.” H&R v.

Robinson, Opp. at 3-4. This was not an isolated reference. The

“Question Presented” in their brief directly accused the

defense of “a broad fraudulent scheme which includes 1)

lying by the attorney directly to the judge as well as to

opposing counsel; 2) false answers to crucial discovery

requests; and, 3) other acts of misconduct outside the court-

room ...” Id at i. The brief concluded by directly charging

that defense counsel had “knowingly and intentionally

violated the law.” Id. at 13. This Court denied the writ.

Herzfeld & Rubin, P.C. v. Robinson, 112 S.Ct. 1160 (1992)

Pre-Trial Contentions — All Claimed Acts of

Misconduct Were “Part of a Scheme and Plan

to Deceive the Court... and “Designed to

Conceal or Obscure” the Relevant Facts.

In the Pre-trial Order, plaintiffs reiterated their factual

claim that all alleged acts of misconduct, regardless of the

specific state of mind involved in any particular incident,

were part of a “scheme and plan” knowingly and intention-

ally “designed” to subvert the integrity of the judicial

process:

1. Plaintiffs contend that Defendants, acting by and

through their attorneys, . .. made false statements or

made statements which omitted to state material facts,

which omissions made the statements materially false

and misleading in answering interrogatories and in

representations made. . . to the court.

8

2. Plaintiffs contend that Defendants knew that the

answers and representations were either (a) untrue, or

(b) in the exercise of reasonable diligence, would be

found to be untrue, or (c) made with reckless disre-

gard for the truth, or (d) were made in the context of

volunteering information which omitted to state

material facts, which omissions made the statements

materially false and misleading.

3. Plaintiffs contend that the representations to the court

and answers to the interrogatories were part of a scheme

and plan to decetve the court . . .and designed te conceal or

obscure the relationship between VWAG ang “st Union

or Audi NSU and thereby prevent any admu.sions of

VWAG from being introduced into evidence against

Audi at the first trial.

Aples. Supp. App. at 152. (emphasis added) The alleged

“scheme and plan” by the defendants’ attorney remained the

indispensible core of plaintiffs’ claims.*

Proposed Findings and Conclusions After Fial

— “The Record Establishes That the Court

Was Intentionally Lied To,” and shows “The

Involvement of an Officer of the Court in ‘A

Carefully Planned Scheme Calculated to

Deceive the Court’”

Plaintiffs’ proposed findings and conclusions, submitted

after trial on the merits, maintained their pre-trial position in

6. Recklessness was mentioned solely as a subcomponent of one

possible alternative state of mind with which some false

statements may have been committed within the framework of the

deliberately designed overall “scheme and plan.” Id. 42(d). Even

in that context, plaintiffs charged the alleged wrongdoers with

actual knowledge of their recklessness and the role which their

acts played in the “scheme and plan.”

9.

every respect. Factually, plaintiffs adhered to their charges of

a “scheme and plan,” specifically repeating, as a proposed

finding of fact, the complaint paragraph integrating all

charged misconduct into the scheme and plan. (App. Supp.

App. at 1520 | 58.) The alleged acts comprising that “scheme

and plan,” necessarily required deliberate planning and

execution (Aple. Supp. App. at 1520-34, passim.)(e.g. “false

instructions,” “false objections,” (id. ] 61) the attorney's

statements to the court “were designed to . . . conceal the

[Audi\ VWAG] relationship.” (Id. ] 62))

Plaintiffs specifically claimed to have proven “the

involvement of an officer of the court in ‘a carefully planned

scheme calculated to deceive the court:’”

4. The evidence establishes that the Court was inten-

tionally lied to and that those lies were relied upon by

the Court when it excluded Exhibits 45-49 in the

underlying case. . . . [T]hat is the equivalent of the

destruction of evidence . . . Such fraud is directed to

the judicial machinery itself. When that occurs, as

here, it is the equivalent of and at the same level as

bribery of a judge or bribery of a jury. ...

6. An attorney is an officer of the court. While he

should represent his client with singular loyalty, that

loyalty obviously does not demand that he act dishon-

estly or fraudulently; on the contrary, his loyalty to

the court, as an officer thereof, demands integrity and

honest dealing with the court. When he departs from

that standard in the conduct of a case he perpetrates

a fraud upon the court.

7. The involvement of an officer of the court in “a carefully

planned scheme calculated to decetve the court” is the type

of misconduct that warrants . . . the entry of a judg-

ment in favor of the plaintiff when, as here, the fraud

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is perpetrated by the defense. . . . Hazel-Atlas Glass Co.

v. Hartford-Empire Co., 322 U.S. 238 (1944)

(Aple. Supp. App. at 1538-40) (emphasis added)(citations

other than Hazel-Atlas omitted).

The District Court’s Dispositive Factual Finding

— “Nowhere... Does There Appear Clear

and Convincing Evidence That Defendants’

Counsel Was Involved in a ‘Deliberately

Planned and Carefully Executed Scheme’ to

Defraud this Court” — The District Court

Declines to Make Factual Findings as to the

Audi/VWAG Relationship

The district court found for defendants in its September

17, 1992 Order and Judgment. Nothing in the district court’s

review of plaintiffs’ claims or of the governing law (App. at

39-46) suggests any change in the district court's view that “if

the facts alleged are true, they constitute fraud on the court.”

H&R ov. Robinson, Opp. at 2. However, the district court

clearly and directly rejected plaintiffs’ claims to have proven

“the involvement of an officer of the court in ‘a carefully

planned scheme calculated to deceive the court:’”

. . . [NJowhere in this meticulously prepared and

effectively argued claim does there appear clear and

convincing evidence that Defendants’ counsel was

involved in a ‘deliberately planned and carefully

executed scheme’ to defraud this Court through

misrepresentation and nondisclosure.

(App. at 47).

Immediately before its dispositive factual finding, the

district court’s opinion includes the following passage:

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Asa preliminary matter, the Court must concede that

had it been apprised of the material contained in

Plaintiffs’ Proposed Findings of Fact and Conclusions

of Law (FF/CL), filed July 27, 1992, at pp. 38-42

(nos.53-55), the . . . exhibits at issue would most

assuredly have been admitted into evidence. Indeed,

it seems fair to say that if the relevant corporate

relationships set forth in Plaintiffs’ FF/CL, cited above

had been on record, VWAG would have been joined

as a party defendant. And the Court so finds.

Ibid. The district court’s conclusion that the “material con-

tained in [plaintiff’s proposed findings 53-55],”” if true,

would have affected the admissibility of the documents and

the status of VWAG in the lawsuit, clearly reaffirmed its

earlier ruling that plaintiffs claims, if true, stated a case under

Rule 60(b). However, the district court carefully avoided

making any finding as to the truth of the “material contained

in plaintiffs’ proposed findings 53-55).”

Plaintiffs responded to the district court’s Order and

Judgment by moving, post-judgment, for supplemental

findings adopting their proposed findings 53-55 referenced

in the district court’s decision. (Aplt.App. at 179-83) The

stated rationale for plaintiffs’ motion was “clarification” of

“what we perceive to be the thrust of [the district court's]

order and judgment.” (Aplt.App. at 174) The district court

denied the motion. (Aplt.App. at 210) In denying plaintiffs’

7. The proposed findings detailed plaintiffs’ contentions as to the

VWAG/ Audi relationship. As the Court of Appeals noted, these

contentions were comprehensively controverted. App at 10-11.

-

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motion, the district court confirmed that no such findings had

been intended.”

The Appeals and Decisions Below

Before the Court of Appeals, plaintiffs claimed to raise no

challenge to the district court's finding on a factual basis, but

instead assailed it as a legal ruling adopting an impermissibly

narrow view of fraud on the court. As Petitioners have noted,

the Court of Appeals met and disposed of this claim squarely

on the law, finding that the district court's determination was

not erroneous. App. at 18-20. For the reasons set forth in the

body of argument, we submit that the Court of Appeals’

decision was correct.

It is important to note, as the Petition does not, that the

Court of Appeals identified two alternative and independ-

ently sufficient factual bases for affirmance of the district

court’s decision. First, the circuit upheld the district court's

dispositive factual finding as “directly responsive to the claim

asserted by plaintiffs:”

Although plaintiffs now maintain that the trial court's

opinion shows that it misunderstood that scope of

fraud on the court, in fact the court’s dispositive

finding was directly responsive to the claim asserted

by plaintiffs. See . . . Pretrial Order, Plaintiffs’ Conten-

tions, App. E, 4 3 [“Plaintiffs contend that the repre-

sentations to the court and answers to the interrogato-

8. See New York Trust Co. v. Eisner, 256 U.S. 345, 349 (1921)(“a

page of history is worth a volume of logic” (Holmes, J).

gg on —

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ries were part of a scheme and plan to deceive the

court, ”J[quoted supra at 8.]’

In a footnote to the quoted passage, the Court of Appeals

supplied a second alternative ground for affirmance on the

facts:

It is clear that the district court's ruling was based

upon a lack of any intent to defraud the court. We

would also point out, however, that notwithstanding

the court's “finding” that had it known the corporate

relationships it would have admitted the NHTSA

submissions and Volkswagen AG would have been

made a party, the district court made no finding that the

representations made by Audi's attorney were false.

Although plaintiffs argue that the statement that Volks-

wagen AG “had nothing whatever” to do with the design

or manufacture of the Audi 100 LS is “just not true,” such

’ a representation can be reasonably viewed as a true state-

ment of the legal relationship between these companies.

[Defense counsel’s] comments could clearly be consid-

ered a good faith legal argument.

App. at 20-21 n.6 (emphasis added).

Finally, given the fundamentally factual nature of plain-

tiffs’ diseomfiture with the outcome at trial, the Court of

Appeals for good measure affirmed the district court's factual

finding based upon the evidence:

Although plaintiffs deny that they are challenging the

district court’s factual determination, much of their

briefs is devoted to arguing that the evidence shows

that Audi’s attorney acted with an intent to deceive.

9. This passage completes the paragraph in the Court of Appeals’

opinion which the Petition partially quotes, Pet. at 11, without

indicating the elision.

-s

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We have reviewed the record and are satisfied that

the district court's finding is not clearly erroneous.

App. at 21.

In addition to challenging the district court’s dismissal of

their fraud on the court claims, Petitioners appealed the

district court's later dismissal of their Oklahoma common law

action. (App. at 48-55) This action asserted claim in negli-

gence, product liability and fraud against Herzfeld & Rubin,

P.C. (“H&R”) and VWAG, the two alleged wrongdoers who

were not parties to the underlying judgment. Because the

common law claims were based upon factual allegations

identical to those in the fraud on the court claims, the appeals

were heard together.

The Court of Appeals held that, because the judgment in

the underlying product liability suit precluded their showing

any damages from the loss of the prior suit, “the district court

was correct insofar as it concluded that plaintiffs could not

pursue their claims for damages without first seeking relief

from the [underlying product liability] judgment. However,

the district court was incorrect in stating that any request for

relief from the judgment was barred by the one year time

limit placed on motions under Fed.R.Civ.P. 60(b).” App. at

31-32.

Nevertheless, the circuit court affirmed the dismissal of

the action on three additional alternative grounds. First, the

Court of Appeals held that plaintiffs’ tactical approach, a

state law fraud claim for “damages” allegedly caused by a

valid adverse judgment, was not permissible under Okla-

homa law. Id. at 31 n.4, citing Terrel v. Gotcher, 174 P.2d 229,

230 (Okla. 1946). The second and third alternative grounds of

affirmance were based upon issue preclusion derived from

the circuit court’s own review of the record. The Court of

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Appeals began by holding that, if plaintiffs were taken at

their word that they were not seeking relief from the product

liability judgment in the underlying action, “the common law

fraud claims are barred because they are inconsistent with

facts underlying the prior judgment.” App. at 33. Alterna-

tively, the Court of Appeals analyzed the action as an

independent action in equity for relief from a judgment, as

preserved by the “savings clause” of Rule 60(b), Fed.R.Civ.P.

The complete overlap between the factual allegations in the

common law case and plaintiffs’ charges of “fraud on the

court” which had been rejected on the facts in the companion

action, however, foreclosed any further proceedings:

Clearly, the equitable principles recognized by the

courts authorize relief from judgments in certain cases

of fraud. [footnote] We think it cannot be fairly

disputed, however, that in addressing plaintiffs’ claim

of “fraud on the court” in Robinson v. Audi AG, No. 92-

5238(10th Cir.), the trial court expressly rejected as

unsupported by the evidence the same factual basis

now asserted by the plaintiffs as justification for

avoiding the prior judgment.

In their “fraud on the court” complaint plaintiffs

set forth allegations of fraud identical in all material

respect to those asserted in the [common law] com-

plaint . . . The trial court conducted a bench trial on

those allegations and, after hearing all of the evidence,

concluded that there was no clear and convincing

evidence that Audi's attorney . . . engaged in a scheme

to defraud the court . . . Plaintiffs have identified

nothing that would indicate they did not have a full

and fair opportunity to present their claims of fraud

in that forum. . . The trial court's finding is simply

incompatible with the allegations of fraud in the

complaint against Volkswagen AG and H&R and

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precludes relitigation of the fraud issue in this action.

Bulloch v. Pierson, 768 F.2d 1191, 1193 (10th Cir. 1985)

App. at 34-35.

SUMMARY OF ARGUMENT

Petitioners lost at trial because they presented no proper

proof whatever of the “shocking ubiquity of fraud” they had

alleged. The effort to manufacture issues of law from their

loss on the facts by palming off their discredited claims as

uncontroverted fact, which the Court of Appeals saw through

and rejected, unfortunately continues in the present Petition.

The district court's single dispositive finding was a purely

factual determination, which was “directly responsive to the

claim asserted by plaintiffs.” Moreover, as the decision below

reflects, “the district court made no finding that the represen-

tations . . . were false,” and the attorney’s statements to the

district court at the first trial “could clearly be considered a

good faith legal argument.” App. at 20-21, n.6. There is no

basis for this Court to review the unmixed factual determina-

tions below.

The purportedly conflicting circuit court decisions

referenced in the Petition are distinguishable on their facts.

In addition, the Third Circuit decision which Petitioners

invoke has had no discernable impact whatever upon federal

jurisprudence. The Court of Appeals correctly decided this

case.

The lower courts are in no need of supervisory direction

with respect to fraud on the court. The reported cases

conclusively demonstrate that the courts can and do readily

discern and decisively redress such misconduct — provided

only that it is proven.

a

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REASONS FOR DENYING THE WRIT

I. |THE DECISION BELOW AFFIRMED A PURELY FAC-

TUAL REJECTION OF PLAINTIFFS’ CHARGES, AND

THE RECORD COMPELS THE CONCLUSION THAT

DEFENDANTS’ COUNSEL SPOKE THE TRUTH IN

Goon FAITH. THERE IS NOTHING WORTHY OF THIS

COURT'S REVIEW

Little need be added to the Statement of the Case on this

point. As to the claims of “fraud on the court,” the Court of

Appeals, after pointedly noting that “the district court made

no finding that the representations made by Audi’s attorney

were false,” examined the record for itself and found substan-

tial support both for the truth of those representations and for

the good faith with which they were made. (App. 20 n.6) This

conclusively establishes in this Court, as a matter of law, that

the statements in question were truthful and made in good

faith. For reasons which need not be belabored further, this

determination disposes of the entire Petition.

Petitioners have never disputed that fraud on the court,

like any fraud, must be proved by clear and convincing

evidence. E.g. App. at 18, citing Aoude v. Mobil Oil Corp., 892

F.2d 1115, 1118 (1st. Cir. 1989); Booker v. Dugger, 825 F.2d 281,

283-84 n.4 (11th Cir. 1987), cert. denied 485 U.S. 1015

(1988)(“[T]he policy of finality of judgments requires that

[clear and convincing], if not more stringent, standards be

applied to independent actions alleging fraud on the court.

. -”), citing Johnson Waste Materials v. Marshall, 611 F.2d 593,

600 (Sth Cir. 1980); Rozier v. Ford Motor Company, 573 F.2d

1332 (Sth Cir. 1978); United States v. Standard Oil Co. of

California, 73 ER.D. 612 (N.D.Cal. 1977), aff'd, 412 U.S. 924

(1973). See generally Woodby v. INS, 385 U.S. 276, 285, n.18

(1966)(A requirement of clear and convincing proof, “or an

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even higher one, has traditionally been imposed in cases

involving allegations of civil fraud. . .”)

Under the “clear and convincing” standard in fraud

cases, the fact finder case must adopt any reasonable view of

the evidence which negates fraud. Tyler v. Hartford Accident

& Indemnity Co., 195 Okl. 523, 159 P.2d 722, 725 (Okla.

945)(“when a transaction is fairly susceptible of two construc-

tions, one which will free it from imputation of fraud will be

adopted”). Accord, Barnett v. Life Insurance Co. of the South-

west, 562 F.2d 15, 19 (10th Cir. 1977); Federal Deposit Insurance

Corp. v. Palermo., 815 F.2d 1329, 1335(10th Cir. 1987) (“Fraud

is never presumed; the evidence must be ‘clear, strong and

convincing and such as to rebut every presumption of

honesty and fair dealing.’”) In cases under Rule 60(b), this

requirement is subsumed within the broader principle that

the court must resolve all doubts in favor of finality. Bulloch

v. United States, 763 F.2d 1115, 1121 (10th Cir. 1985), cert.

denied 474 U.S. 1086 (1986); Great Coastal Express, Inc. v. Int'l

Brotherhood of Teamsters, 675 F.2d 1349, 1355 (4th Cir. 1982). A

record that reasonably supports a factual conclusion negating

fraud therefore mandates such a finding.

Below, the Tenth Circuit found substantial record

support for the proposition that the attorney charged with the

alleged “scheme and plan to deceive the court” spoke the

truth to the court and “clearly” did so in good faith. App. at

20 n.6. This determination, which Petitioners do not challenge

(or indeed even mention),”” thereby conclusively establishes

10. Cf. Pet at 21 (“Petitioners submit that there is no more

fundamental and important requirement for the effective and fair

functioning of the federal [judicial] system than the requirement

of candor to the court.”)

Se eee

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the truth and good faith of the key statements, mooting the

entire Petition.

In addition, on the record in this case, the district court's

dispositive ruling was a direct, comprehensive factual

rejection of plaintiffs’ claims, which they specifically articu-

lated after trial as claiming “the involvement of an officer of

the court in a carefully planned scheme to deceive the court.”

Supra at 9. A “scheme and plan,” in this or any other case, can

only result from conscious design and intent." Even the most

casual reading of the district court’s decision demonstrates

that, had the court found the alleged “scheme and plan” to

have been proven, it would have found itself compelled to set

aside the prior judgment. No legal issue can therefore arise

from its purely factual rejection of the specific charges made

by the plaintiffs, in virtually the exact words of their pro-

posed post-trial conclusion on the issue, or from the affir-

mance of that outcome by the Court of Appeals. The factual

rejection of an unproved claim, in terms “directly responsive

to the claim asserted by plaintiffs,” App. at 21, raises no issue

which merits this Court’s consideration.”

11. E.g. Random House Unabridged Dictionary (2d. ed. 1993):

scheme... 1. a plan, design, or program of action to be

followed; project. (p. 1713)

plan .. . 1. a scheme or method of acting, doing,

proceeding, making, etc., developed in advance: battle

plans. (p. 1480)

12. The Court of Appeals’ determination as to the preclusive

effect of this determination upon the common law fraud action

below (App. at 35) is neither challenged, or again even mentioned,

in the Petition.

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Il. THE Circurr Court DECISIONS WHICH PETITION-

ERS CLAIM CONFLICT WITH THE DECISION BELOW

ARE DISTINGUISHABLE ON THEIR FACTS., AND, IN

THE CASE OF THE THIRD CIRCUIT, ARE OF LITTLE IF

ANY CURRENT INFLUENCE. THE COURT OF APPEALS

DECIDED THIS CASE CORRECTLY.

Petitioners claim to discern major conflicts with deci-

sions in other circuits. For the reasons discussed immediately

above, we submit that any such asserted conflict is mooted by

the purely factual bases upon which decisions below firmly

rest. Nevertheless, just as the Court of Appeals, though under

no compulsion to do so, considered and rejected the legal

challenges which plaintiffs raised below, we now consider

and urge this Court to reject Petitioners’ claims of intercircuit

conflict.

Demjanjuk v. Petrovsky

Petitioners point first to Demjanjuk v. Petrovsky, 10 F.3d

338 (6th Cir. 1993), cert. denied_ U.S. _, 115 S.Ct. 295 (1994),

as conflicting with the Tenth Circuit’s view that “fraud on the

court, whatever else it embodies, requires a showing that one

has acted with an intent to deceive or defraud the court.”

App. at 19. As Petitioners observe, the Tenth Circuit took

specific note of language in Demjanjuk that “’a scheme based

on a subjective intent to commit fraud’ is not required

because ‘reckless disregard for the truth is sufficient.’” App

at 18; Demjanjuk, 10 F3d. at 353. The Tenth Circuit did not

delve further into the matter, electing instead to adopt the

view of the overwhelming majority of courts, which have

held, in varying formulations, that “a violation of the duty of

honesty is essential to a finding of fraud on the court.” App.

at 20; see id. at 18-20, passim. The circuit court made no

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further mention of Demjanjuk, and in particular made no

mention of a conflict. We submit that there is none.

In fact, in the very passage quoted by the Tenth Circuit,

the Sixth Circuit in Demjanjuk made clear that it was not

adopting a general rule for fraud on the court in private civil

litigation, by carefully limiting its holding to “cases such as

this one.” 10 F.3d at 353. The factors distinguishing Demjanjuk

from virtually any other type of case involving charges of

fraud on the court are self-evident. First, in Demjanjuk the

party which failed to disclose critical exculpatory information

to which it had exclusive access was the United States.

Second, although the underlying litigation in Demjanjuk was

technically a “civil” denaturalization proceeding, the stakes

involved not merely revocation of citizenship, but extradition

to Israel to face trial on charges of mass murder allegedly

committed as a guard in the Nazi death factory at Treblinka

during the Second World War. These charges were capital

crimes without a statute of limitations in Israel. In this sui

generis context, the Sixth Circuit found the case controlled by

Brady v. Maryland, 373 U.S. 83 (1963), under which “the

suppression by the prosecution of evidence favorable to an

accused upon request violates due process . . ., irrespective of

the good faith or bad faith of the prosecution.” Id. at 87 (emphasis

added) The application of Brady renders Demjanjuk irrelevant

to purely private civil litigation such as this case. Recognizing

the unique situation before it, the Sixth Circuit carefully

avoided potential conflict with the unanimous rule in other

circuits, by specifically acknowledging that “there are cases

holding that a ‘plan or scheme’ must exist in order to find

fraud on the court,” 10 F.3d. at 352-53, while confining its

recklessness standard to quasi-criminal “cases such as this

one.” Ibid. There is no need to resolve a “conflict” which

Demyjanjuk itself effectively avoided.

-22-

Averbach v. Rival Mfg. Co.

Petitioners also claim that the decision below in No. 93-

5168, their purported “common law” action, conflicts with

Averbach v. Rival Mfg. Co., 809 F.2d 1016 (3d. Cir.), cert. denied,

482 U.S. 915, 484 U.S. 822 (1987). Once again, a key factual

distinction between the cases obviates the conflict. In addi-

tion, the idiosyncratic Averbach doctrine which Petitioners

invoke appears to have had no effect whatever on federal

jurisprudence, rendering any divergence between it and the

majority rule followed below academic.

In Averbach, the Third Circuit, alone among federal

circuits which have considered the issue, held that relief from

a judgment more than one year after entry need not be

premised upon fraud on the court or some other extraordi-

nary circumstance encompassed in the “savings clause” of

Rule 60(b). Instead, Averbach allowed such relief to be sought

on the basis of allegations of common law fraud asserted in

a diversity action for damages triable to a jury under state

law, even where the same factual allegations would be time-

barred under Rule 60(b)(3)as “fraud .. misrepresentation or

other misconduct of an adversary.” The Third Circuit held

that “the elements of a cause of action for . . . relief [from a

federal judgment] in an independent action are not different

from those elements in a Rule 60(b)(3) motion [based upon

fraud or other misconduct of an adversary].” 809 F.2d at

1012-13. In this regard, the Third Circuit espoused a more

lenient standard than did the court below, which found that

the permissible grounds for an independent action for relief

from a judgment filed more than one year after entry of the

judgment are “considerably narrower than common law

fraud,” and indeed virtually indistinguishable from fraud on

the court under Rule 60(b). App. at 34 n.6. Respondents

regard the Tenth Circuit view on these issues, which is

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unanimously supported by all other decided circuit court

cases, as the correct one. However, there is no reason for this

Court to address the issue in this case.

In the first place, one of the essential building blocks for

the Averbach approach, a body of state law which would

permit a common law fraud action otherwise barred by a

valid extant federal judgment, is not present here. As the

Tenth Circuit noted, Oklahoma has specifically rejected the

notion that a common law suit may be maintained for

“damages” caused by an extant adverse judgment. App. at 31

n.4. The lack of Oklahoma law supporting plaintiffs’ claims

clearly distinguishes Averbach, which predicated its allowance

of relief from a federal judgment under principles of state law

on its finding that the state of Pennsylvania would recognize

the theory of plaintiffs’ case. 809 F.2d at 1019.

In addition, the doctrinal differences between the

decision below and Averbach would appear to be of academic

interest only. Respondents’ research has revealed that, while

the case has been cited on other points, the unique approach

to relief from judgments taken in Averbach has never been

followed, or even discussed, by any federal court, in the

Third Circuit or elsewhere, since the decision issued. All

other circuits hold that equitable proceedings under Rule

60(b) provide the exclusive means of relief from judgments in

the federal courts.’ The one post-Averbach decision on this

13. E.g., Metlyn Realty Corp. v. Esmark, Inc., 763 F.2d 826, 833 (7th

Cir. 1985)(“The principles developed in the application of Rule

60(b) ... are the sole means of attack on final civil judgments.”);

Villareal v. Brown Express Inc., 529 F.2d 1219, 1221 (5th Cir. 1976);

Vassos v. Societa Trans-Oceania Canopus, 272 F.2d 182, 183 (2d Cir.

1959), cert. denied, 362. U.S. 935 (1960).

-24-

point does not mention the case, even to distinguish it.* Until

and unless Averbach has some discernible influence upon

other cases, there is no pressing need to address its unique

features. See, e.g. McCray v. New York, 461 U.S. 961, 963

(1983)(Stevens, J.)(certiorari denied where issue requires

“further study” in lower courts); Gilliard v. Mississippi, 464

U.S. 867 (1983) (Marshall, J., addressing dissent from denial

of certiorari to “those of my Colleagues who... . believe that

this Court should postpone consideration of the issue until

more . . . courts have experimented with substantive and

procedural solutions. . .”)

Lastly, for the reasons so cogently set forth in the

opinions below, we submit that the decisions of the circuit

court in this case were correctly decided. “Fraud on the

court,” virtually the only basis upon which a final judgment

may be set aside regardless of the passage of time, self-

evidently must be narrowly defined, unless final judgments

are simply to become way stations in endless litigation of

every case with a sufficiently large potential payoff. (App. at

19) Though not essential to the outcome in this case, the

Court of Appeals’ decision requiring a showing of a depar- )

ture from the standard of honesty expected of all attorneys in |

cases of alleged fraud on the court is in agreement with the

view of all circuits which have considered the matter in the

context of private civil litigation. (Id. at 18, and cases cited)

Plaintiffs’ attempted common law end-run around Rule 60(b)

was properly dismissed as doubly precluded, first by the

extant valid judgment in the underlying suit, and second by

the district court’s comprehensive rejection of plaintiffs’

14. Cresswell v. Sullivan & Cromwell, 922 F.2d 60, 71 (2d Cir.

1990)(an independent action under Rule 60(b) “is not an action at

law but is one addressed to the court's equity powers” .)

ia aliaaa |

-25-

charges of wrongdoing on the facts. Nothing in these deter-

minations raises any issue meriting the involvement of this

Court.

III. THE LOWER COURTS ARE IN NO NEED OF THIS

COURT’S SUPERVISION.

Petitioners conclude by portraying the federal judiciary

as helpless in the face of an epidemic of fraud. Cf. Pet. at 20-

24. This apocalyptic vision does not jibe with reality. Indeed,

in each of the cases cited at page 20 of the Petition as evidenc-

ing the supposed onslaught, the court, far from being

impotent, upon proof of fraud on the court, set the relevant

judgments aside or otherwise granted effective relief. The

federal courts are both alert for improper conduct, and fully

capable of dealing with it appropriately.

The unique confluence of the Brady doctrine and Rule

60(b) in Demjanjuk illustrates that fraud on the court can

assume varied and not always entirely predictable guises.

Aoude v. Mobil Oil Corp., 892 F.2d at 1118 (“Because corrupt

intent knows no stylistic boundaries, fraud on the court can

take many forms.”) Careful yet flexible application of the

federal courts’ inherent powers, informed in the first instance

by the district courts’ experience of the day-to-day realities of

litigation, is more than sufficient to cope with real, as op-

posed to imagined, misconduct by officers of the court.

In this case, the district court which was allegedly

defrauded found no factual support whatever for the charges

which plaintiffs had so long and so stridently asserted. The

circuit court affirmed on the facts, agreed on the law, and

properly applied principles of claim and issue preclusion to

cut off plaintiffs’ attempted collateral attack on the adverse

judgments in the underlying case.

-26-

There was neither error in the proceedings below, nor

was the outcome of importance to anyone but the battle-

weary litigants. Nearly two decades after the events which

set this litigation in motion, the time has finally come to

apply the principle of “enough is enough.”

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CONCLUSION

The Petition should be denied.

Respectfully submitted.

HERBERT RUBIN

40 Wall Street

New York, New York 10005

(212)344-5500

Attorney for Respondents

Of Counsel:

IAN CERESNEY RICHARD M. ELDRIDGE

DANIEL V. GSOVSKI JOHN H. TUCKER

HERZFELD & RUBIN, P.C. RHODES, HIERONYMUS,

JONES, TUCKER & GABLE

November, 1995