Friday, May 17, 2013

Dismissal for Fraud Upon the Court Under Federal Law


I have noticed that my piece regarding the standards governing Dismissal for Fraud Upon the Court, in the context of Florida State Court, has been receiving quite a bit of traffic. We are talking dozens and dozens of people per week. Seriously high volume stuff. 

Of course, I am generally surprised when anyone is interested in reading about the law, so I have to assume that most of the folks reading that article are attorneys looking to short circuit a research project. As such, if you happen to have a case in federal court (perhaps via removal for diversity), it might make sense to take note of the distinct standards which apply in that context. Before I lay out some of the governing doctrine, if you want a brief takeaway, it is this: Federal Courts require a substantially heightened showing to warrant dismissal for fraud. 

In Florida state court, dismissal is warranted where it can be demonstrated, by clear and convincing evidence, that a party deliberately engaged in a deception which went to the heart of their claim. This deception can include affirmatively lying under oath, or omitting material information. Thus, failure to disclose prior similar injuries can warrant dismissal of a personal injury case for fraud upon the Court. 

In contrast, Federal Court requires a showing that goes above and beyond “mere perjury.” Federal Courts generally hold that even where a party has demonstrably lied, this is simply evidence to be used in their impeachment. Dismissal for Fraud is warranted where there is long pattern of this type of misconduct, and further, where there has been some type of fabricated evidence beyond mere testimony. Thus, for example, suing upon a forged contract may warrant dismissal. Lying about how much money you were owed (via an oral promise) likely would not. As such, I present the following case law. Note that most of the cases cited are 11th Circuit, and SD-Fla, as my practice is generally centered in Florida.

Courts possess inherent authority to control and regulate the proceedings before them, including  the authority to sanction litigants for abusive practices. Vargas v. Peltz, 901 F. Supp 1572, 1579 (S.D. Fla. 1995); See also Martin v. Automobili Lamborghini Exclusive, Inc., 307 F.3d 1332, 1335 (11th Cir. 2002). Where a party acts in bad faith and continually and flagrantly abuses the judicial process, a Court may use its inherent power to impose severe sanctions, including dismissal with prejudice. See Martin, 307 F.3d at 1335-1336. Federal Courts are additionally empowered to dismiss an action for failing to comply with the Federal Rules of Civil Procedure and Court orders, pursuant to F.R.C.P. § 41(b). Goforth v. Owens, 766 F.2d 1533, 1535 (11th Cir. 1985). Federal Rule of Civil Procedure 41(b) provides:
                                                                                                     
For failure of the plaintiff to prosecute or comply with these rules or any order of court, a defendant may move for dismissal of an action or of any claim against the defendant. Unless the court in its order for dismissal otherwise specifies, a dismissal under this subdivision ... operates as an adjudication upon the merits.

Thus, a Court’s power to dismiss an action with prejudice for Fraud Upon the Court is derived (1) from its inherent authority to regulate the proceeding before it, and (2) from F.R.C.P. § 41(b). Zocaras v. Castro, 465 F.3d 479, 483 (11th Cir. 2006); Idearc Media Corp. v. Kimsey & Associates, P.A., 2009 WL 928556, *3 (M.D. Fla.).

A party commits Fraud Upon the Court where clear and convincing evidence demonstrates that:

a party has sentiently set in motion some unconscionable scheme calculated to interfere with the judicial system’s ability impartially to adjudicate a matter by improperly influencing the trier or unfairly hampering the presentation of the opposing party’s claim or defense.

Vargas, 901 F. Supp. at 1579.

While a finding of Fraud Upon the Court is necessarily fact-intensive, and District Courts are afforded considerable discretion in these matters, such a finding should be reserved for “only the most egregious misconduct, such as bribery of a judge or members of the jury, or the fabrication of
evidence by a party.” Patterson v. Lew, 265 Fed. Appx. 767, 768 (11th Cir. 2008) (quoting Rozier v. Ford Motor Co., 573 F.2d 1332, 1338 (5th Cir. 1978)). Dismissal of a case with prejudice under F.R.C.P. § 41(b) is an extreme sanction, applicable only as a “last resort,” and requires a finding that lesser sanctions will not suffice. Goforth, 766 F.2d at 1535 (citations omitted).

Given the extreme nature of dismissal as a sanction, Courts in the 11th Circuit hold that Fraud Upon the Court does not generally encompass fraud between the parties, nondisclosure of material evidence, or perjury. Patterson, 265 Fed. Appx. at 769; (citing S.E.C. v. ESM Group, Inc., 835 F.2d 270 (11th Cir. 1988)). Courts in the 11th Circuit have repeatedly held that lying under oath, in the absence of additional bad conduct by a party, does not constitute Fraud Upon the Court. See e.g., Securities & Exchange Commission v. E.S.M. Group, Inc., 835 F.2d 270, 273-274 (11th Cir. 1988) (“this Court has held that perjury does not constitute fraud upon the court ... [because] [t]his is the type of fraud which litigants should discover; it does not prevent a party from gaining access to an impartial system of justice.”) (internal citations and quotations omitted); Bryant v. Troutman, 2006 WL 1640484 (M.D. Fla.) (finding that “lying under oath, giving misleading answers under oath, thwarting Defendants’ discovery, and concealing the existence and/or extent of both prior and subsequent injuries” in personal injury action did not constitute Fraud Upon the Court); Dewdney v. Eckerd Corp., 2008 WL 2370155 (M.D. Fla.) (finding that numerous “significant inconsistencies” in Plaintiff’s sworn testimony were not so significant as to warrant an involuntary dismissal with prejudice); McCarthy v. American Airlines, Inc., 2008 WL 2517129 (S.D. Fla.) (finding that Plaintiff’s failure to disclose prior injuries and the names of all prior treating physicians in personal injury action did not warrant the “extreme sanction of dismissal”); But see Televideo Systems, Inc. v. Heidenthal, 826 F.2d 915 (9th Cir. 1987) (finding that Defendant’s admitted pervasive pattern of perjury was orchestrated to reap a tactical advantage, and constituted Fraud Upon the Court.)

While perjury alone is generally insufficient to warrant dismissal for Fraud Upon the Court, it is well established that dismissal is appropriate where a party fabricates evidence purporting to substantiate its claims. Vargas, 901 F. Supp at 1579. In Vargas, the Plaintiff produced a pair of panties during a deposition as evidence of sexual harassment, claiming that while she worked for the Defendant he had given her the panties and asked her to pose in them. Id. at 1574. The Defendant submitted affidavits from the manufacturer of the panties which conclusively showed that the subject panties were not actuallymanufactured or sold until well after the Plaintiff had been employed by the Defendant. Id. at 1574-75. The Court found that “Plaintiff’s intentional misconduct in presenting false evidence in support of her claims,” constituted a Fraud Upon the Court, compelling dismissal of the case. Id. at 1579. In McDowell v. Seaboard Farms of Athens, Inc., 1996 WL 684140 (M.D. Fla.), the Court found that Plaintiff had fabricated a diary and submitted it as evidence to bolster his racial discrimination claim against his employer. Id. at 8. Citing Vargas, the Court found that the Plaintiff had committed a Fraud Upon the Court, noting that “when a party fabricates evidence purporting to substantiate its claims, federal case law is well established that dismissal is appropriate.” Id. at *2. While the Plaintiffs in Vargas and McDowell both clearly engaged in perjury, both Courts expressly stated that the submission of fabricated evidence compelled dismissal of the action for Fraud upon the Court. Thus, fabricated evidence was the key distinguishing fact that caused the Plaintiffs’ misconduct to rise to the level of Fraud Upon the Court.

The McDowell and Vargas Courts both approvingly cited Aoude v. Mobil Oil Corp., 892 F. 2d 1115 (9th Cir. 1989), as support for the proposition that dismissal for Fraud Upon the Court is proper where a party fabricates evidence. In Aoude, the Plaintiff’s submission of a forged franchise purchase agreement with an inflated purchase price constituted Fraud Upon the Court, justifying the dismissal of Plaintiff’s complaint with prejudice. Id. at 1118. McDowell and Vargas additionally cited Pope v. Federal Express Corp., 138 F.R.D. 675 (W.D. Mo. 1990), aff’d in relevant part, 974 F.2d 982 (8th Cir. 1992). In Pope, the Plaintiff’s production of a fabricated love note as evidence in support of her sexual harassment claim constituted Fraud Upon the Court and justified dismissal of Plaintiff’scomplaint with prejudice. Id. at 682-83.

While dismissal for Fraud Upon the Court most commonly results from fabricated evidence, 11th Circuit Courts have also found Fraud Upon the Court where a party wrongfully conceals the identity of the real party in interest in the case. In Zocaras v.Castro, the 11th Circuit upheld a dismissal for Fraud Upon the Court where the Plaintiff had filed suit under a false name and “proceed[ed] with that deception right up to trial.” Zocaras, 465 F.3d at 485. In Martin v. Automobili Lamborghini Exclusive, Inc., the 11th Circuit upheld a dismissal for Fraud Upon the Court where the Plaintiffs had engaged in substantial misconduct which included:

1) misleading the court about the real party in interest in the case;
2) engaging in extensive discovery abuse to obstruct revelation of the known falsities in the Complaint;
3) using letters threatening class-action litigation to extort settlement
offers from [Defendants] without any intention of filing a case, and;
4) filing with the court many documents where the signatures of lawyers were forged by [a plaintiff].
Martin, 307 F.3d at 1336 n. 2.

The foregoing case law clearly establishes that in order to dismiss an action for Fraud Upon the Court, there must be egregious misconduct that deliberately interferes with the judicial system’s ability to impartial adjudicate the matter, or hampers the opposing party’s claim or defense. Vargas, 901 F. Supp. at 1579. While fabricating evidence and misleading Courts about the party in interest may constitute Fraud Upon the Court, perjury and non-disclosure of material evidence generally does not. Indeed, where discovery reveals evidence that a party has committed perjury, the opposing party’s defense is not hampered in any way, as they “have ample opportunity to bring those untruths to light at trial.” Bryant, 2006 WL 1640484 at *2.

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