Opinion
CIVIL ACTION NO. SA-95-CA-0226 NN.
August 9, 1999.
ORDER
Before the court is plaintiff Signtech USA, Ltd.'s ("Signtech") Motion to Take Discovery Related to Fraud on the court and Motion for Oral Hearing. Signtech moves to take discovery pursuant to the court's power to set aside a judgment under Federal Rule of Civil Procedure 60(b) or the court's inherent power for fraud upon the court. Signtech believes that the requested discovery will allow it to determine the extent of the defendant's possibly fraudulent conduct.
Docket Entries No. 179, 180.
Procedural Background
In the underlying action, Signtech and the defendant, Vutek, Inc. ("Vutek"), each asserted claims for patent infringement. After a trial on the merits, I entered a judgment in favor of Vutek on September 30, 1997. The judgment was recently affirmed in part by the United States court of Appeals for the Federal Circuit on April 8, 1999, with a clarification of the amount of treble damages awarded to Vutek being the only part of the trial court's decision modified on appeal.
Docket Entry No. 145; Signtech USA. Ltd. v. Vutek, Inc., No. SA-95-CA-0226, 1997 WL. 745034 (W.D. Tex. Sept. 30, 1997).
Signtech USA. Ltd. v. Vutek, Inc., 174 F.3d 1352 (Fed. Cir. 1999).
Less than three weeks after the Federal Circuit affirmed Signtech's adverse judgment, Signtech filed the present motion to take discovery to ascertain if Vutek's witnesses perjured themselves at trial. Signtech believes that the evidence produced in support of its motion is sufficient for the court to order a new trial, but it now requests that I permit it to take discovery to make certain that the facts are accurate and provable. In the interests of finality and because Signtech's motion is not timely under Rule 60(b) and does not establish that a fraud was perpetrated on this court, I will deny both of the motions.
Discussion
Generally, this court applies the law of the Federal Circuit to matters regarding patent law. However, for motions under Rule 60(b) involving procedural matters not unique to patent law, the Federal Circuit defers to the law of the regional circuit in which the district court sits. The alleged fraud in this case involves perjury and truthfulness concerning the production of incriminating documents at trial and is not unique to patent law. Therefore Fifth Circuit precedent controls. 1. Rule 60(b)
See 35 U.S.C. § 1, et seq.
Broyhill Furniture Indus., Inc. v. Craftmaster Furniture Corp., 12 F.3d 1080, 1082 (Fed. Cir. 1993) (citations omitted).See also Amstar Corp. v. Envirotech Corp., 823 F.2d 1538, 1550 (Fed. Cir. 1987).
See Fraige v. American-National Watermattress Corp., 996 F.2d 295 (Fed. Cir. 1993) (Federal Circuit defers to the law of the regional circuit when addressing the effect of testimony based on fraudulent documentation on patent validity).But see Broyhill Furniture 12 F.3d at 1082 (examination of whether a consent judgment should be set aside pursuant to Rule 60(b) following a judicial determination that the patent was procured through inequitable conduct in the Patent and Trademark Office involves substantive issues of patent law); Hybritech, Inc. v. Abbott Lab., 849 F.2d 1446, 1451 n. 12 (Fed. Cir. 1988) (standards governing the issuance of a preliminary injunction pursuant to 35 U.S.C. § 283 is a procedural matter, yet also involves substantive matters unique to patent law); Foster v. Halico Mfg. Co., Inc . 947 F.2d 469, 475 (Fed. Cir. 1991) (the effect of Supreme court precedent on consent judgments holding a patent valid and infringed presented a question of first impression to be resolved by the law of the Federal Circuit for uniformity purposes).
Federal Rule of Civil Procedure 60(b) permits a court to relieve a party from a final judgment for a variety of reasons, including fraud. While Rule 60(b) permits the court to set aside a judgment for fraud, it is also within the court's power to order discovery and employ other means to investigate fraudulent conduct. A motion for relief premised upon fraud under Rule 60(b) must be made within a reasonable time, but not more than one year after the final judgment was entered. The pendency of an appeal will not extend the one-year limit. However, if an appeal results in a substantive change in the judgment, the one-year period runs from the date of entry of the new judgment entered on mandate from the appellate court.
Universal Oil Products 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.").
"The motion shall be made within a reasonable time, and for reasons (1), (2), and (3) not more than one year after the judgment, order, or proceeding was entered or taken." FED. R. Civ. P. 60(b).
Nevitt v. United States, 886 F.2d 1187, 1188 (9th Cir. 1989) (Rule 60(b)(2) motion untimely since the one-year limitation period was not tolled during an appeal).
Gegenheimer v. Galan, 920 F.2d 307, 310 (5th Cir. 1991) ("[i]f[an] appeal results in a substantive change [in the judgment], then the time [for filing a Rule 60(b)(1) motion] would run from the substantially modified order entered on mandate of the appellate court.") (quoting Transit Casualty Co. v. Security Trust Co., 441 F.2d 788, 791 (5th Cir. 1971) (a change of dismissal with prejudice to dismissal without prejudice was not such a substantive change to extend time for filing motion under Rule 60(b))).
Signtech now claims that it has uncovered evidence which demonstrates that Mr. Gary Ferran, one of the most damaging witnesses to testify during trial, committed perjury. Signtech has provided an affidavit and the results from a lie detector test taken by the president of Signtech, Mr. James Gandy, who claims that Mr. Ferran admitted to him after the trial that he lied on the stand and was also untruthful as to the origin of the incriminating documents he produced at trial. Additionally, Signtech claims that it now has evidence that Mr. Cleary, the president of Vutek, had a "mole" at Signtech. Signtech also produced an affidavit from Ms. Linda Reddy, a former Vutek purchasing agent who often answered the telephone for Mr. Cleary, who claims she overheard and witnessed Mr. Cleary's alleged incriminating comments and meetings with a Signtech employee. Signtech alleges that this evidence demonstrates that Vutek's conduct at trial was fraudulent and therefore it now moves to take discovery to determine the truth and extent of these allegations.
Docket Entry No. 179, Exhibits 6, 6A.
Docket Entry No. 179, Exhibit 7.
Signtech first moves to take discovery pursuant to Rule 60(b). Signtech does not specify which of the many grounds listed in Rule 60(b) is applicable in the instant situation. The facts presented could possibly fall within Rule 60(b)'s provisions granting a court the power to relieve a party from a final judgment for fraud, misconduct of an adverse party, or for newly discovered evidence. However, Signtech' s motion would not be timely since the Rule states that a motion on these grounds must be made within a reasonable time and not more than one year after the final judgment of the district court was entered.
Signtech's motion under Rule 60(b) is time-barred as falling outside the mandatory one-year time limit. Signtech claims that the one-year deadline has not passed because the Federal Circuit substantively changed the district court's decision by reversing it in part. While the Federal Circuit may have summarized that the decision was reversed in part, the decision clearly indicates that the substance of this court's decision was affirmed, and only the calculation of the enhanced damages award was clarified, a point which both parties conceded. Because this was not such a substantive change so as to extend the deadline, the absolute last date for Signtech to have brought a motion pursuant to Rule 60(b)(l), (2), or (3) expired on September 30, 1998, one year from the entry of the trial court's judgment.
"[T]his court merely clarifies that the $140,000 damage award is included within the $420,000 enhanced damage award." Signtech USA Ltd. v. Vutek, Inc., 174 F.3d 1352, 1359 (Fed. Cir. 1999).
Even if Signtech's motion was not time-barred as falling outside the one-year absolute deadline imposed by Rule 60(b), Signtech's motion would still not be timely since it was not made within a "reasonable time." Signtech makes no mention of how it has complied with Rule 60's requirement that the motion be made within a reasonable time. Signtech does not address why it failed to file this motion when the evidence came to light. It had knowledge of the evidence from Mr. Gandy for more than a year before it filed its present motion. Furthermore, no explanation is made as to why the information from Ms. Reddy was not obtained before trial during the normal discovery period.
Mr. Gandy's alleged conversation with Mr. Ferran occurred in April of 1998. Ms. Reddy's affidavit is dated October 1998 and the incidents she witnessed occurred as early as 1991. Docket Entry No. 170. Exhibits 6-7. Signtech's motion was not filed until April 28, 1999.
Apparently Signtech delayed in filing this motion until the Federal Circuit released its decision since the present motion was filed less than three weeks after the affirmation of Signtech's adverse judgment. However, this does not justify Signtech's lengthy delay. The motion was not filed with a reasonable time and is therefore time-barred. Because Signtech may not file a motion pursuant to Rule 60(b), this court is powerless to grant the requested discovery pursuant to that rule.
"The one-year period represents an extreme limit, and the motion will be rejected as untimely if not made within a 'reasonable time' even though the one-year period has not expired." II CHARLES A. WRIGHT ARTHUR MILLER, FEDERAL PRACTICE AND PROCEDURE § 2866 (2d. ed. 1995).
2. Fraud on the court
Rule 60(b) also affirms that a court has the inherent power to set aside a judgment for fraud on the court. The power to vacate a judgment for fraud on the court is an extreme power relatively free from procedural limitations. If the court determines that a fraud has been perpetrated on the court, the court should vacate the judgment and deny the guilty party all relief. The court's inherent ability to set aside a judgment for fraud on the court is not subject to any time limits.
"This rule does not limit the power of a court . . . to set aside a judgment for fraud upon the court." FED. R. Civ.P.60(b).
II CHARLES A. WRIGHT ARTHUR MILLER, FEDERAL PRACTICE AND PROCEDURE § 2870 (2d ed. 1995).
Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 250-51 (1944).
See Id. (judgment set aside after nine years had passed).
Because the power to set aside a judgment for fraud upon the court is so great, not all fraud which might occur during the course of the presentation of a case to the court will constitute "fraud on the court." The Fifth Circuit has held that, "[t]o establish fraud on the court, 'it is necessary to show an unconscionable plan or scheme which is designed to improperly influence the court in its decision.'" Furthermore, "[o]nly 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." "Less egregious misconduct, such as nondisclosure to the court of facts allegedly pertinent to the matter before it, will not ordinarily rise to the level of fraud on the court."
"Indeed, the savings clause of Rule 60(b) 'should be construed very narrowly' because 'the otherwise nebulous concept of fraud on the court could easily overwhelm the specific Ifraudi provision of 60(b)(3) and its [one-year] time limitation.'" Broyhill Furniture Indus., Inc., v. Craftmaster Furniture Corp., 12 F.3d 1080, 1085 (Fed. Cir. 1993) (quoting Great Coastal Express, Inc. v. Int'l Bhd. of Teamsters, 675 F.2d 1349, 1356 (4th Cir. 1982)).
First Nat. Bank of Louisville v. Lustig, 96 F.3d 1554, 1573 (5th Cir. 1996) (citations omitted).
Id . at 1573 (citations omitted).
Id .
In Hazel-Atlas Glass Co. v. Hartford Empire Co., the Supreme court ordered that the judgment be set aside after a fraud on the court was uncovered nine years after the final judgment was entered. The court found that a fraudulent article created by the attorneys and company officials had been urged upon the court as the basis for establishing the validity of the patent. In ordering the court's judgment set aside, the Supreme court based its decision on three grounds: (1) the clear establishment of the fraud; (2) the public's concern in hindering fraud which has effects extending beyond the parties to the litigation, as especially demonstrated in patent cases; and (3) the court's inability to adequately assess the effects of the fraudulent conduct upon the jury.
Hazel-Atlas Glass Co. v. Hartford Empire Co., 322 U.S. 238 (1944).
Id.
Signtech also requests discovery under the theory that Vutek perpetrated a fraud upon this court. There is little case law directly addressing reopening discovery after a final judgment has been entered by the court. However, the cases on point have held that the parties should not be given the opportunity to reopen discovery for the purpose of discovering information which could have been gained before trial. Furthermore, the case law also indicates that the court should disallow discovery after a final judgment has been entered in furtherance of society's interest in the finality of judgments unless the movant has made a prima facie demonstration of success on the merits. While discovery in these cases was not granted, it was implied that renewed discovery would be permitted for good cause.
H. K. Porter Co., Inc., v. Goodyear Tire Rubber Co., 536 F.2d 1115, 1118 (6th Cir. 1976) (stating that the movant was "plainly not entitled to discovery of documents it did not request in pretrial discovery").
Goldy v. Beal, 91 F.R.D. 451, 455 (M.D. Pa. 1981) (citing H. K. Porter Co., Inc., v. Goodyear Tire Rubber Co., 536 F.2d 1115 (6th Cir. 1976); Valerio v. Boise Cascade Corp., 80 F.R.D. 626 (N.D. Cal. 1978), aff'd 645 F.2d 699 (9th Cir. 1981)).
Valerio, 80 F.R.D. at 647.
Under the circumstances in the case at hand, reopening discovery is not appropriate. Signtech's evidence of fraud is quite tenuous. Signtech alleges that the evidence supplied by Mr. Gandy indicates that Mr. Ferran was in fact a biased witness, that Mr. Ferran did not find the documents he produced at trial at his home but was given them by Vutek, and that he misrepresented the significance of the fax purportedly sent by Mr. Gandy. However, Signtech had an opportunity to cross-examine Mr. Ferran at trial on the issue of his bias. Furthermore, Signtech has misrepresented to the court why it did not obtain this information from Mr. Ferran during the discovery period. Signtech claims in its motion that it subpoenaed Mr. Ferran for both his deposition and all documents relevant to the infringement action, when in fact Signtech did not notice Mr. Ferran's deposition during discovery, did not subpoena any documents from Mr. Ferran, and did not ask any questions of Mr. Ferran during his deposition. Signtech claims that Mr. Ferran was not forthcoming during the discovery period, when in fact it appears that Signtech simply overlooked taking the appropriate discovery before trial. Signtech's oversight does not justify reopening discovery now.
See Docket Entry No. 181, Exhibit B.
Significantly, Signtech continues to withhold meaningful evidence of its own legitimate development of the schematics for the printer in question. This would have been the most effective defensive evidence to the infringement claim at trial, as it would be the most effective affirmative evidence of Vutek's supposed fraud. Curiously, Signtech remains silent on this key point. Without this evidence, Signtech's theories of fraud are absolutely unpersuasive.
Finally, even if Mr. Ferran did perjure himself and was supplied the documents by Vutek, the alleged misconduct would not establish fraud upon the court. While allegations of fraud should never be taken lightly, this fraud is not sufficiently severe to meet the Fifth Circuit's standards for fraud on the court. Signtech makes no allegations that this fraud extended to the attorneys or to any other officer of the court. Furthermore, under the Hazel-Atlas analysis, there is no clear evidence of fraud and no evidence that Vutek defrauded the patent office when it initially received its patent. Signtech's evidence of fraud is simply too tenuous to subject the parties to a new round of discovery. If courts reopened discovery every time one party accused the other of wrong doing at trial, litigation would never cease.
Signtech's motion to take discovery is not timely under Rule 60(b) nor do its allegations rise to the level of establishing that a fraud was perpetrated on this court. Furthermore, an oral hearing is not necessary.
Accordingly, it is ORDERED that Plaintiff's Motion to Take Discovery Related to Fraud on the court and Motion for Oral Hearing are DENIED. In addition, Vutek's request for sanctions is DENIED as having been presented without reference to authority.
SIGNED on August 9, 1999.