Evidence a Party Controls, but Fails to Marshal at Trial, Falls Short of High Bar to Undo a Final Judgment Based on an Adversary’s Fraud
When a motion for reconsideration hearing features a plaintiff’s accusation that the court made arguments for the other side, the effort to flip a prior ruling – already a tough get – has gone a bit off the rails. In Bayport Holdings, Inc. v. Sisson, 2021 NCBC 39, the Business Court considered a Rule 60(b)(3) effort to undo a final judgment based on alleged fraud by the prevailing party. It ended with the Court’s concern about the “troubling” course plaintiff’s arguments had traveled.
Plaintiff claimed that defendant Brian Sisson had committed fraud and attempted to prove it up with boxes of documents he had left behind at the shooting range and firearms retail store he previously managed for them, as well as through emails found in the account of one of its shareholders. Id. ¶¶ 2, 15. The Rule 60(b)(3) bar is high, requiring a showing of a “meritorious defense” that a party was unable to put on because of its adversary’s fraud. See Milton M. Croom Charitable Remainder Unitrust v. Hedrick, 654 S.E.2d 716, 721 (2008). Tough work, for sure, but previously unknown documents are a good starting point for the plot.
The drama is considerably lessened when it turns out plaintiff had the documents all along. Plaintiff obtained the boxes during discovery but didn’t review them for over a year – despite its “unilateral access . . . without interference by Sisson” – on the assumption they were business records that predated the current dispute. NCBC 39, ¶¶ 16, 19-21. The shareholder’s emails were not reviewed or produced during the case because he “could not remember the password to his Gmail account,” only to recall it earlier this year with the help of family and a business colleague. Id. ¶¶ 23-25.
The atmospherics of plaintiff’s claims were not improved by its concession at hearing that defendant Sisson didn’t prevent it from presenting documents at trial that plaintiff, itself, controlled during the discovery period. Judge Robinson noted that plaintiff’s delay in reviewing the boxes, or in securing access to its own shareholder’s emails, could hardly be laid at a defendant’s doorstep:
“The Court finds it troubling that Plaintiff clearly failed to review relevant documents in its possession, both before and during the pendency of this litigation, which review would have alerted counsel to their existence, and now blames [a defendant] for withholding this information from the Court.”
Id. ¶ 54.
Without a North Carolina guidepost, the Court relied on interpretations of Fed. R. Civ. P. 60(b)(3) for the requirement that a moving party show the other side’s fraud by “clear and convincing” evidence. See Turner v. Duke Univ., 381 S.E.2d 706, 713 (N.C. 1989) (“Decisions under the federal rules are thus pertinent for guidance and enlightenment in developing the philosophy of the North Carolina rules.”). Judge Robinson dismissed each of plaintiff’s four contentions of fraud in turn, concluding that the newly surfaced materials did not meet the exacting burden for Rule 60 relief. NCBC 39, ¶¶ 36, 42, 46, 53. The Court hastened to add that, “even if a lesser burden of proof may apply” – whatever it might be – the plaintiff’s arguments and late-produced materials could not meet the mark for Rule 60(b)(3) relief. Id. ¶ 54.
The Business Court also cautioned against overloading a Rule 60 motion with claims appropriately brought through “timely appeal.” (Plaintiff’s motion was filed just within the one-year deadline for seeking Rule 60(b)(3) relief.) ¶¶ 13, 52. Where plaintiff’s motion sought to challenge an earlier court ruling subject to normal appeal deadlines, the Court reminded that later-arriving Rule 60 motions cannot remedy expired appeal windows:
“Erroneous judgments may be corrected only by appeal, and a motion under [Rule 60(b)(3)] cannot be used as a substitute for appellate review.”
Id. ¶ 52 (quoting Chicopee, Inc. v. Sims Metal Works, Inc., 391 S.E.2d 211, 216 (1990)).
- The standard to show an adversary’s fraud prevented a party from presenting evidence is an exacting one, whether it’s “clear and convincing” or something with a less stern sound to it.
Brad Risinger is a partner in the Raleigh office of Fox Rothschild LLP.