Since statute bars the Court from considering entire cases on appeal where no federal question is presented for certification, the Court cannot accept a question seeking to resolve a conflict between earlier decisions where the entire record is included as that entails deciding the case without being asked to do so. Certiorari denied.
Graver v. Faurot, (162 U.S. 435), is a case decided in 1896 by the United States Court of Appeals for the Seventh Circuit on the issues of res judicata and fraud on the court. The Seventh Circuit had heard the case the preceding year but, like the district court that had previously heard it, was unable to decide which of two recent U.S. Supreme Court cases was controlling. After the Supreme Court denied certiorari to resolve the issue, on procedural grounds, the Seventh Circuit resolved the case itself.
The case had arisen from an 1889 investment made by Graver in a company recommended by Faurot, a banker he was acquainted with. Represented to Graver as promising, the company was actually worthless. After learning this, he suspected Faurot and the company's owner, Bailey, of having concealed the company's true condition from him and sued the two in federal court for securities fraud. Both defendants denied any scheme when questioned under oath, and Graver and the two agreed to dismiss the case. Three years later, when Faurot's bank failed, documents introduced in the bankruptcy proceedings and on file with the federal government revealed not only that both he and Bailey knew the stock's true value but that Faurot had had an interest in the company and had concluded an agreement with Bailey to divide the proceeds of Graver's purchase between them. Graver filed a new action in federal court seeking, as equitablerelief, to have the previous dismissal set aside since it had been obtained through perjured testimony.
Two recent decisions of the Supreme Court, United States v. Throckmorton and Marshall v. Holmes, addressed the relevant question of whether Graver could reopen the suit, but with contrary interpretations. The district judge said that while the facts of the case showed that Graver had been defrauded he could not distinguish the two cases, and certified the case to the Seventh Circuit, which in turn sought guidance from the Supreme Court. In a unanimous opinion written by Chief JusticeMelville Fuller, the Court denied certiorari, on the grounds that the appellate court had effectively certified the entire case to it, which the Judiciary Act of 1891 forbade them from accepting without a federal question to decide. Even though there was such a question, the Court preferred not to answer it without deciding a case whose facts might dictate a contrary conclusion. So later that year the Seventh Circuit held for Graver that the perjury constituted extrinsic fraud which had prevented him from having his case fairly heard and decided.
Since Graver the Supreme Court has considered some other cases where the factual question of whether a litigant's deception and misbehavior has constituted intrinsic fraud which under Throckmorton cannot be used as a basis for relief, cases in which observers hoped it would resolve the conflict they saw with Marshall, which suggested a court could grant relief from a prior judgement allegedly obtained by fraud if it was unconscionable not to. It has never reconsidered the question offered in Graver of which case controls. Lower federal, and state, courts that have done so have pointed to Graver as the reason they felt compelled to.
Background
Courts of equity, empowered to give orders as relief rather than award monetary judgements as courts of law do, in England and later the U.S., had long dealt with cases where unsuccessful litigants seeking to negate a judgement against them at law had come before alleged perjury or forgery by the other party during the original action, often supported by just the testimony of one witness. Since hearing these cases could easily ensure that the litigation continued for years, courts began requiring minimum standards to hear them. "New matter may in some cases be ground for relief," wrote Lord KeeperNathan Wright in Tovey v. Young, a 1702 English case, "but it must not be what was tried before; nor, when it consists in swearing only, will I ever grant a new trial, unless it appears by deeds, or writing, or that a witness on whose testimony the verdict was given was convicted of perjury, or the jury attainted."[1]
In 1813 the U.S. Supreme Court decided Marine Insurance Co. v. Hodgson, a case where the petitioner appealed a federal court's finding in favor of the respondent, who they alleged had submitted documentation that overstated the value of a ship and her cargo, leading the insurer to pay out a much larger claim than it should properly have. Chief JusticeJohn Marshall wrote for a unanimous Court that while a court of equity could consider an application for relief where a litigant alleged unconscionable conduct on an opposing party's part, "[o]n the other hand it may with equal safety be laid down as a general rule that a defence cannot be set up in equity which has been fully and fairly tried at law, although it may be the opinion of that Court that the defence ought to have been sustained at law." Since the insurer had decided to accept a certificate of the vessel's value from its captain even though Hodgson would not vouch for its accuracy, the Court held that they had lost their opportunity to make a case for fraud and seek an injunction against enforcement of the judgement against them.[2]
In 1878 the Supreme Court heard United States v. Throckmorton, in which the federal government appealed a California lower court decision that left undisturbed the government's acceptance of a settler's 1830s Mexican land claim two decades earlier. The government had later learned that a document filed with the claim had been falsely backdated and affidavits attesting to the document being signed on the supposed date were in fact perjured. It unanimously affirmed the lower court.[3]
Justice Samuel Freeman Miller balanced two principles in his opinion. On the one hand, while he agreed that "there is no question of the general doctrine that fraud vitiates the most solemn contracts, documents, and even judgments", it became more difficult to prove a past fraud over time. It was also equally important that, per the legal Latin maxim interest rei publicae, ut sit finis litium, litigation not be allowed to continue indefinitely and that no one be punished or tried twice for the same offense.[4]
Miller thus distinguished two types of fraud on the court for purposes of deciding whether equitable relief could be granted, if the fraud were proven, where the case was otherwise beyond reopening. Fraud such as that in the instant case, which "was founded on a fraudulent instrument, or perjured evidence, or for any matter which was actually presented and considered in the judgment assailed" (subsequently called intrinsic fraud) would not be eligible for relief. But in cases where the fraud was "extrinsic", where it never touched any of the evidence presented at trial, or where "there has never been a real contest in the trial or hearing of the case" because the fraud prevented the injured party from making a full and fair presentation, then courts could grant relief, Miller wrote.[4]
Thirteen years after Throckmorton, the Court heard Marshall v. Holmes, another case where past fraud on the court had been uncovered and the defeated litigant sought equitable relief from the judgement. In 1887, petitioner Sarah Marshall, a New York woman who owned a large Louisiana plantation, had been sued in state court by Mayer, a supplier, along with her tenants for nonpayment. Since all the cases Mayer brought presented the same issues, the parties agreed to save time and money by trying them singly. According to a document purportedly signed by Marshall that Mayer presented at trial in her absence, their defaults entitled him to payment apportioned between cash and raw cotton at the equivalent market value; based on this, the court held in his favor.[5]
With an appeal pending, Marshall saw the document Mayer claimed she had signed for the first time and recognized it as a forgery. The Louisiana Supreme Court declined to hear the appeal on the grounds that none of the cases presented a large enough amount in controversy and the law did not allow it to aggregate the cases.[5] Marshall then sought equitable relief from the original judgement in federal court for the Southern District of New York, but the Louisiana state court refused to follow the removal order, so she appealed to the Supreme Court.[6]
Again the Court was unanimous. After establishing that Marshall's case was properly before a federal court in diversity jurisdiction, and that the aggregate value of the judgement was enough to justify a federal case, Justice John Marshall Harlan's opinion considered whether she was entitled to relief. Observing that, in the instant case, "the judgments in question would not have been rendered against Mrs. Marshall but for the use in evidence of the letter alleged to be forged",[7] he found the case to be among those that Hodgson allowed courts to grant relief in,[2] quoting from that decision at some length. Harlan appended to the quotation other cases that supported the finding, including Throckmorton[7] and later distinguished the case further from two the respondents had relied on, on the grounds that in those cases the party seeking relief could have found evidence of the fraud at trial, whereas Marshall had not known of the forged letter until after the trial.[8]
Underlying dispute
In 1889 Graver, an Illinois man who had been enticed by Faurot, an Ohio banker he had deposited money with, to buy stock at an apparent discount; it was actually worthless. He came to believe his banker had an interest in the company and had thus benefited materially from the fraudulent sale, and filed suit in state court. Before trial, Graver deposed both Faurot and Bailey, the company owner, asking them both under oath about details of the alleged scheme. They denied it, and with no evidence of the alleged fraud, the judge dismissed the case.[9][10]
Three years later, the bank failed, and from records disclosed during the bankruptcy proceedings, including records filed with the federal government two years prior to the transaction, Graver was able to confirm his original suspicions of fraud. Faurot had represented himself as a disinterested party when Graver bought the stock, but he actually had owned a portion of the company, and he and Bailey had made a written agreement to divide the profits from the sale between them.[10] With this evidence in hand, Graver filed suit in federal court for the Northern District of Illinois, seeking equitable relief and a chance to retry the case.[9]
District court
Judge James Graham Jenkins
Judge James Graham Jenkins found Graver's petition to be an original suit that he could consider. "Assuming the facts to be as stated in this bill, I have been impressed with the conviction that the complainant has been grievously defrauded", he wrote in his 1894 decision. But he found himself conflicted between Throckmorton and Marshall as to which case controlled and thus whether he could grant Graver relief:[11]
I am unable to distinguish those two cases upon the facts. The nature of the fraud was the same in both cases. In both the fraud was in the use of forged documents and false evidence offered by the successful party. In the one case the bill was dismissed, and in the other sustained. Both decisions were by a unanimous court. Three of the justices who were members of the court when the former case was decided were members of the court when the latter case was decided, including the justice who delivered the opinion of the court. I do not see how both can stand, and yet the former case is approvingly referred to in the latter. Possibly the fault is mine, that I am unable to distinguish them. In the doubtful frame of mind in which I am left: by these two apparently conflicting decisions, I might have recourse to the maxim that the greater regard should be given to the latter decision, were it not for the fact that in the latter case the former decision is approvingly referred to, and apparently sought to be followed.
Jenkins chose to resolve that question by procedurally ruling for the defendants and suggesting the problem might be resolved on appeal.[12]
Supreme Court
The Seventh Circuit Court of Appeals decided to certify the question to the Supreme Court before attempting to decide the case. In 1896 the Court unanimously declined. As part of the record, the Seventh Circuit had submitted the entire case, which, Chief Justice Melville Fuller wrote, put the Supreme Court in a difficult position. The Judiciary Act of 1891 forbid the appellate circuits from submitting an entire case to the Court without a specific question or questions to resolve. And while that was not technically the case with Graver, as a practical matter it was.[13]
"[I]f we should find that the bill was insufficient when tested by principles accepted in both the cases referred to, we should be indisposed to return an answer not required for the disposition of the case," Fuller observed. "This practically requires us to pass upon the whole case as it stands, and to decide whether the demurrer was properly sustained or not." Thus, he said, the Court would not consider the question unless the whole case was appealed to it.[13]
Respondents' concealment of ownership interest and true condition of investment sold to petitioner, and perjured denial under oath in original lawsuit were both unconscionable and extrinsic fraud; therefore it is not necessary to decide which of two possibly precedential Supreme Court decisions apply. Equitable relief granted
On remand, the Seventh Circuit issued its decision, holding provisionally for Graver, later that year. Judge William Allen Woods wrote for a unanimous three-judge panel that carefully considered the distinction drawn in the two cases. "[M]anifestly it is not true of a complainant in equity that when he brings his bill he must come prepared with proof to maintain it, and to meet any defense which may be interposed", he wrote. "It is his privilege to search the conscience of his adversary by requiring him to answer under oath, and if possessed of no other evidence, or means of obtaining it, he must accept or at least yield to the answer as true."[14]
In the original case, Graver had strongly suspected the scheme but had no documentary evidence or witnesses other than the two defendants, both of whom swore falsely that there was no deceitful intent, interest or agreement between them. That perjury constituted an original fraud in addition to the one Graver alleged, not only victimizing him but the court as well. Because of the false testimony the case could not go to trial, bringing it under Throckmorton's exception for extrinsic fraud. "The present case does not come within the strict letter, and certainly not within the spirit or reason, of the rule", Woods wrote.[14]
Ultimately, Woods concluded, it was not necessary to reconcile the two cases; in fact both of them justified holding for Graver. "In reason and good conscience a decree obtained as this one is alleged to have been ought to be annulled", he wrote. "There can be no consideration of public policy or of private right on which it ought to stand. There can be and ought to be no repose of society where for such wrongs the courts are incapable of giving redress."[15]
Subsequent jurisprudence
In several cases over the next two decades, the Supreme Court cited Graver when refusing cases from the appellate circuits that were certified in their entirety or with only questions of fact.[16][17][18][19]
In 1909's Boring v. Ott, the Wisconsin Supreme Court decided to follow Marshall rather than Throckmorton. Dissenting justice Roujet D. Marshall noted that Graver was supposed "to settle the matter" but did not. A clear statement from the Court was not necessary; Marshall believed that the Supreme Court's rejection of two later cases that asked it to do the same thing as the Seventh Circuit had in Graver, and its restatement of Throckmorton's rule in Hilton v. Guyot, were to be taken as indications of support for that case from the Supreme Court.[20]
During the 1930s, federal courts seeking resolution of the apparent conflict between Throckmorton and Marshall took note of Graver's refusal to resolve the issue. The Southern District of Florida characterized Graver as a refusal to decide the question in 1935,[21] and four years later, the Third Circuit, quoting that decision, observed that Graver "must have discouraged others".[22] It chose to follow Marshall, holding that "truth is more important than the trouble it takes to get it."[23] The Supreme Court denied certiorari on that case as well.[24]
Around that time, the Federal Rules of Civil Procedure were introduced, with Rule 60(b) allowing a petition for equitable relief regardless of the type of fraud alleged within a year of the judgement to be attacked.[25] Commentators hoped that when Hazel-Atlas Glass Co. v. Hartford-Empire Co., a complex case on the issue, came before the Court in 1944, it would choose between Throckmorton and Marshall. But while citing both cases, Justice Hugo Black's opinion for a narrow majority instead created an exception for fraud committed by officers of the court.[26] State courts in more recent decisions have noted that the issue remains unresolved.[27]
Intrinsic fraud is an intentionally false representation that goes to the heart of what a given lawsuit is about, in other words, whether fraud was used to procure the transaction. Intrinsic fraud is distinguished from extrinsic fraud which is a deceptive means of keeping a person from discovering and/or enforcing legal rights. It is possible to have both intrinsic and extrinsic frauds.
The writ of coram nobis is a legal order allowing a court to correct its original judgment upon discovery of a fundamental error that did not appear in the records of the original judgment's proceedings and would have prevented the judgment from being pronounced. The term "coram nobis" is Latin for "before us" and the meaning of its full form, quae coram nobis resident, is "which [things] remain in our presence". The writ of coram nobis originated in the courts of common law in the English legal system during the sixteenth century.
Edelman v. Jordan, 415 U.S. 651 (1974), was a United States Supreme Court case that held that the sovereign immunity recognized in the Eleventh Amendment prevented a federal court from ordering a state from paying back funds that had been unconstitutionally withheld from parties to whom they had been due.
Scheidler v. National Organization for Women, 547 U.S. 9 (2006), was a lengthy and high-profile U.S. legal case interpreting and applying the federal Racketeer Influenced and Corrupt Organizations Act (RICO): a law originally drafted to combat the mafia and organized crime, the Hobbs Act: an anti-extortion law prohibiting interference with commerce by violence or threat of violence, and the Travel Act: a law prohibiting interstate travel in support of racketeering.
Aetna Health Inc. v. Davila, 542 U.S. 200 (2004), was a United States Supreme Court case in which the Court limited the scope of the Texas Healthcare Liability Act (THCLA). The effective result of this decision was that the THCLA, which held Case Management and Utilization Review decisions by Managed Care entities like CIGNA and Aetna to a legal duty of care according to the laws of The State of Texas could not be enforced in the case of Health Benefit plans provided through private employers, because the Texas statute allowed compensatory or punitive damages to redress losses or deter future transgressions, which were not available under ERISA § 1132. The ruling still allows the State of Texas to enforce the THCLA in the case of Government-sponsored (Medicare, Medicaid, Federal, State, Municipal Employee, etc., Church-sponsored, or Individual Health Plan Policies, which are saved from preemption by ERISA. The history that allows these Private and Self-Pay Insurance to be saved dates to the "Interstate Commerce" power that was given the federal Government by the Supreme Court. ERISA, enacted in 1974, relied on the "Interstate Commerce" rule to allow federal jurisdiction over private employers, based on the need of private employers to follow a single set of paperwork and rules for pensions and other employee benefit plans where employers had employees in multiple states. Except for private employer plans, insurance can be regulated by the individual states, and Managed Care entities making medical decisions can be held accountable for those decisions if negligence is involved, as allowed by the Texas Healthcare Liability Act.
Extrinsic fraud is fraud that induces one not to present a case in court or deprives one of the opportunity to be heard or is not involved in the actual issues. More broadly, it is defined as:
fraudulent acts which keep a person from obtaining information about his/her rights to enforce a contract or getting evidence to defend against a lawsuit. This could include destroying evidence or misleading an ignorant person about the right to sue. Extrinsic fraud is distinguished from intrinsic fraud, which is the fraud that is the subject of a lawsuit.
Glover v. United States, 531 U.S. 198 (2001), was a United States Supreme Court case decided in 2001. The case dealt with a technical question of law relating to whether a showing of prejudice in incorrect sentencing decisions is required for a correction of that sentence.
American Electric Power Company v. Connecticut, 564 U.S. 410 (2011), was a United States Supreme Court case in which the Court, in an 8–0 decision, held that corporations cannot be sued for greenhouse gas emissions (GHGs) under federal common law, primarily because the Clean Air Act (CAA) delegates the management of carbon dioxide and other GHG emissions to the Environmental Protection Agency (EPA). Brought to court in July 2004 in the Southern District of New York, this was the first global warming case based on a public nuisance claim.
Cleveland v. United States, 531 U.S. 12 (2000), was a United States Supreme Court case that concerned the definition of "property" under the federal mail fraud statute. In a unanimous decision, the Court held that "property" for the purposes of federal law did not include state video poker licences because such transactions were not a vested right or expectation.
Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213 (1985), is a United States Supreme Court case concerning arbitration. It arose from an interlocutory appeal of a lower court's denial of brokerage firm Dean Witter Reynolds' motion to compel arbitration of the claims under state law made against it by an aggrieved former client. The Court held unanimously that the Federal Arbitration Act required that those claims be heard that way when the parties were contractually obligated to do so, even where parallel claims made under federal law would still be heard in federal court.
Reyes Mata v. Lynch, 576 U.S. 143 (2015), is a United States Supreme Court case in which the Court ruled that the federal courts of appeals have jurisdiction to review the orders of the Board of Immigration Appeals to reject motions to reopen.
Menominee Tribe of Wis. v. United States, 577 U.S. ___ (2016), was a case in which the Supreme Court of the United States clarified when litigants are entitled to equitable tolling of a statute of limitations. In a unanimous opinion written by Justice Samuel Alito, the Court held that the plaintiff in this case was not entitled to equitable tolling of the statute of limitations because they did not demonstrate that "extraordinary circumstances" prevented the timely filing of the lawsuit.
Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238 (1944), is a much cited 1944 decision of the United States Supreme Court dealing with fraud on the Patent Office. A widely quoted statement in the Court's opinion is: "The public welfare demands that the agencies of public justice be not so impotent that they must always be mute and helpless victims of deception and fraud." Although the fraud occurred in the late 1920s, the facts became public only much later in the Government's antitrust trial in United States v. Hartford-Empire Co.
Rotkiske v. Klemm, 589 U.S. ___ (2019), was a decision by the Supreme Court of the United States involving the statute of limitations under the Fair Debt Collection Practices Act of 1977. The Court ruled that the statute of limitations begins one year after the alleged FDCPA violation took place, not one year after the violation was discovered by the plaintiff. This ruling affirmed a decision by the 3rd Circuit Court of Appeals. It is noteworthy for being the first signed opinion released from the 2019 term. It is also noteworthy for resolving a circuit split regarding a major consumer protection law.
Romag Fasteners, Inc. v. Fossil, Inc., 590 U.S. ___ (2020), was a United States Supreme Court case related to trademark law under the Lanham Act. In the 9-0 decision on judgement, the Court ruled that a plaintiff in a trademark infringement lawsuit is not required to demonstrate that the defendant willfully infringed on their trademark to claim lost profit damages.
Liu v. Securities and Exchange Commission, 591 U.S. ___ (2020), was a US Supreme Court case related to disgorgement awards sought by the Securities and Exchange Commission (SEC) for fraudulent activities. The Court ruled in an 8–1 decision that such disgorgement awards can be awarded by the courts as equitable relief under the Securities Act of 1933, 15 U.S.C. § 77u(d)(5), but they are limited to the wrongdoer's net profits.
Tanzin v. Tanvir, 592 U.S. ___ (2020), was a United States Supreme Court case involving legal remedies that could be sought by litigants against federal officials for violations of the Religious Freedom Restoration Act. In a unanimous decision issued December 10, 2020, the court ruled that the Act allowed for litigants to seek not only injunctive relief but also monetary damages.
AMG Capital Management, LLC v. FTC was a U.S. Supreme Court case dealing with the ability of the Federal Trade Commission (FTC) to seek monetary relief for restitution or disgorgement from those it found in violation of trade practices. The Court ruled unanimously that the FTC misused its authority granted by the Federal Trade Commission Act under Section 13(b) to obtain monetary relief.
United States v. Throckmorton is an 1878 decision of the U.S. Supreme Court on civil procedure, specifically res judicata, in cases heard at equity. A unanimous Court affirmed an appeal of a decision by the District Court for California upholding a Mexican-era land claim, holding that collateral estoppel bars untimely motions to set aside the verdict where the purportedly fraudulent evidence has already been considered and a decision reached. In the opinion it distinguished between that kind of fraud, which it called intrinsic, and extrinsic fraud, in which deceptive actions exterior to the proceeding prevented a party, or potential party, to the action from becoming aware of the possibility they could vindicate their rights in court.
Marshall v. Holmes, 141 U.S. 589, is an 1891 decision of the United States Supreme Court on equitable relief, res judicata and fraud on the court in diversity jurisdiction. Justice John Marshall Harlan wrote for a unanimous Court that held it unconscionable to allow a state court's decision to stand that had been based on documents later exposed as forgeries. It permitted a federal case seeking to set that verdict aside to go forward.
References
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