Giasson Aerospace Sci., Inc. v. Rco Eng'g Inc.

• Citation: 872 F.3d 336
• Decision Date: 20 September 2017
• Docket Number: No. 16-1769.,16-1769.
• Parties: GIASSON AEROSPACE SCIENCE, INC.; Giasson Design Inc., Plaintiffs–Appellants, v. RCO ENGINEERING INC., Defendant–Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

872 F.3d 336

GIASSON AEROSPACE SCIENCE, INC.; Giasson Design Inc., Plaintiffs–Appellants,

v.RCO ENGINEERING INC., Defendant–Appellee.

No. 16-1769.

United States Court of Appeals, Sixth Circuit.

Argued: August 3, 2017

Decided and Filed: September 20, 2017

ARGUED: Michael H. Perry, FRASER, TREBILCOCK, DAVIS & DUNLAP, P.C., Lansing, Michigan, for Appellants. A. Michael Palizzi, MILLER CANFIELD PADDOCK AND STONE, P.L.C., Detroit, Michigan, for Appellee. ON BRIEF: Michael H. Perry, FRASER, TREBILCOCK, DAVIS & DUNLAP, P.C., Lansing, Michigan, for Appellants. A. Michael Palizzi, Caroline B. Giordano, MILLER CANFIELD PADDOCK AND STONE, P.L.C., Detroit, Michigan, for Appellee.

Before: NORRIS, SUHRHEINRICH, and GRIFFIN, Circuit Judges.

OPINION

GRIFFIN, Circuit Judge.

Plaintiffs Giasson Aerospace Science, Inc. and Giasson Design Inc. (collectively referred to as "Giasson") appeal the district court's dismissal of their complaint against defendant RCO Engineering Incorporated pursuant to Federal Rule of Civil Procedure 12(b)(6). Giasson seeks to undo a settlement agreement the parties reached to resolve prior litigation between them, and argues this case should proceed as an independent action in equity for relief from judgment as permitted under Federal Rule of Civil Procedure 60(d)(1), the rule's so-called "savings clause." However, relief pursuant to such an action is "available only to prevent a grave miscarriage of justice." United States v. Beggerly , 524 U.S. 38, 47, 118 S.Ct. 1862, 141 L.Ed.2d 32 (1998). Because Giasson's allegations do not satisfy that "demanding standard [,]" id. , we affirm the district court's judgment.

I.

Giasson and RCO were once in business together, working to secure a contract to make airline seats for a luxury jet manufacturer. Then, according to Giasson, RCO cut it out of the deal, so Giasson sued RCO for breach of contract among other claims. During discovery, and in anticipation of settlement talks, Giasson submitted interrogatories to RCO requesting pricing and sales information for the airline seats RCO would be selling to the jet manufacturer. RCO's counsel acknowledged via email that Giasson "need[ed] the [financial] information to make an informed decision as to settlement[,]" and directed Giasson to its interrogatory responses.

In those responses, RCO disclosed its gross sales price, projected sales, and net profit information for its power, manual, and double airline seats. However, RCO noted that "the sales price may be subject to change as [the jet manufacturer] adjusts the technical requirements for the seats." As for its projected gross seat sales, RCO warned that its "estimates are speculative and subject to change." And RCO similarly advised that its estimated net profits "are speculative and subject to change as costs increase, for example." The parties entered into settlement talks soon after.

They settled the dispute in June 2010, and the district court entered a consent order of dismissal.

Under the settlement's terms, RCO agreed to pay Giasson a running royalty for ten years. For the first five years, RCO would pay Giasson 3.5% of the net sales price of each manual and power seat sold. For the remaining five years, Giasson would receive 4% of the net sales price of each manual, power, and double seat sold. The agreement defined a seat's net sales price as its gross sales price minus applicable taxes, and normal shipping and delivery costs. "For the avoidance of doubt," the parties agreed to fixed per-seat gross and net sales prices—thereby factoring out unpredictable market dynamics.

The parties executed the agreement without issue until 2014, when Giasson became aware that RCO was charging higher gross sales prices for two types of seats than the fixed prices the parties agreed to. Specifically, a 2011 invoice revealed a higher gross sales price for one power seat, and a 2014 invoice showed a higher gross sales price for one manual seat. Giasson inferred from these two invoices that RCO misrepresented seat pricing information during settlement talks, thereby cheating Giasson out of greater royalty payments.

Giasson brought this new lawsuit against RCO raising four claims. Thereafter, RCO filed a motion to dismiss, and the district court made short work of Giasson's claims for breach of contract, specific performance, and silent fraud.¹ However, the district court declined to immediately dismiss Giasson's claim of fraud in the inducement. In so ruling, the district court underscored that RCO never represented "the future prices of aircraft seats sold to [the jet manufacturer] would remain static." Accordingly, "the [discovery] inquiry going forward w[ould] be extremely narrow" because "[t]he underlying financial information behind RCO's interrogatory responses will quickly confirm or deny their veracity at the time they were made."

Discovery continued. After a follow-up status conference, the district court ordered supplemental briefing on the question of whether it should adjudicate the remaining claim under Federal Rule of Civil Procedure 60. Following the briefing, the district court dismissed the case, ruling that Giasson's allegations did not rise to the level of a grave miscarriage of justice under Rule 60(d)(1). Giasson timely appeals.

II.

As a threshold matter, the parties dispute the proper standard of review. This court reviews de novo a district court's decision to grant a motion to dismiss a complaint pursuant to Rule 12(b)(6). Linkletter v. W. & S. Fin. Grp., Inc. , 851 F.3d 632, 637 (6th Cir. 2017). RCO maintains, however, that abuse of discretion review is appropriate here because the district court dismissed a Rule 60(d) equity action, citing Barrett v. Secretary of Health & Human Services , 840 F.2d 1259, 1263 (6th Cir. 1987), and Mitchell v. Rees , 651 F.3d 593, 595 (6th Cir. 2011). Giasson notes that neither of those actions was dismissed pursuant to Rule 12(b)(6). Because its independent action was dismissed under that rule, Giasson maintains de novo review is required, relying on Herring v. United States , 424 F.3d 384, 389–90 (3d Cir. 2005), and Computer Leasco, Inc. v. NTP, Inc. , 194 Fed.Appx. 328, 333 (6th Cir. 2006). We need not decide the issue, however, because Giasson's claim fails under either standard.

III.

"In seeking to undo this final judgment, [Giasson] faces a steep uphill climb." Cummings v. Greater Cleveland Reg'l Transit , 865 F.3d 844, 845 (6th Cir. 2017). Rule 60"prescribes the exclusive methods by which federal judgments may be attacked[.]" George P. Reintjes Co., Inc. v. Riley Stoker Corp ., 71 F.3d 44, 46 (1st Cir. 1995) ; see also Computer Leasco, Inc. , 194 Fed.Appx. at 334 ( Rule 60 is "a litigant's exclusive avenue when seeking relief from a [federal] judgment."). The rule provides for "Relief from a Judgment, Order, or Proceeding" by motion (Part (b)) or by independent action (Part (d)).² Typically, an aggrieved party seeking relief on the ground that the opposing party committed fraud will file a motion in the original action under Rule 60(b)(3), which provides that "the court may relieve a party or its legal representative from a final judgment, order, or proceeding for ... fraud (whether previously called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party[.]" Fed. R. Civ. P. 60(b), (b)(3). But such relief must be sought within one year of the original judgment. Fed. R. Civ. P. 60(c)(1).

Because Giasson filed its new lawsuit four years after the original judgment, it could seek relief on fraud grounds only via "an independent action to relieve a party from a judgment, order, or proceeding" pursuant to Fed. R. Civ. P. 60(d)(1). "[T]he reference to ‘independent action’ in the saving clause is to what had been historically known simply as an independent action in equity to obtain relief from a judgment." Barrett , 840 F.2d at 1262–63 (quoting 11 C. Wright & A. Miller, Federal Practice & Procedure § 2868, at 237–38 (1973) ). The rule therefore "does not limit a court's power to ... entertain" such an action regardless of the passage of time. Fed R. Civ. P. 60(d), (d)(1).

IV.

Giasson maintains that the district court should have "entertain[ed]" its independent action. However, such an independent action is available only under unusual and exceptional circumstances to prevent a "grave miscarriage of justice." See Mitchell , 651 F.3d at 595 ; see also Barrett , 840 F.2d at 1263. Relief is "reserved for those cases of injustices which, in certain instances, are deemed sufficiently gross to demand a departure from rigid adherence to the doctrine of res judicata." Beggerly , 524 U.S. at 46, 118 S.Ct. 1862 (citation and internal quotation marks omitted). In other words, the injustice must be so severe that enforcement of the original judgment would be "manifestly unconscionable." Mitchell , 651 F.3d at 599 (citing Pickford v. Talbott , 225 U.S. 651, 657, 32 S.Ct. 687, 56 L.Ed. 1240 (1912) ). These requirements stem from the "deep rooted policy in favor of the repose of judgments." Hazel–Atlas Glass Co. v. Hartford–Empire Co. , 322 U.S. 238, 244, 64 S.Ct. 997, 88 L.Ed. 1250 (1944) ; see also Blue Diamond Coal Co. v. Trs. of UMWA Combined Benefit Fund , 249 F.3d 519, 524 (6th Cir. 2001). "This is especially true for settlement agreements ... [otherwise] the key virtue of settling cases—letting the parties move on after they each get some of what they want—would be lost." Cummings , 865 F.3d at 845.

Few aggrieved parties have met this demanding standard, and, as such, a "grave miscarriage of justice" in the Rule 60 context has been defined largely by what it is not. See Computer Leasco, Inc. , 194 Fed.Appx. at 335 (collecting cases); see also Mitchell , 651 F.3d at 597–98. However, RCO relies on three cases involving claims of misconduct during settlement negotiations that are instructive here. First, in Info–Hold, Inc. v. Sound Merchandising, Inc. , this court rejected a claim very similar to Giasson's that was...