Cleveland Demolition Co., Inc. v. Azcon Scrap Corp., Div. of Gold Fields American Industries, Inc.

• Decision Date: 04 September 1987
• Docket Number: Nos. 86-1141,s. 86-1141
• Citation: 827 F.2d 984
• Parties: CLEVELAND DEMOLITION COMPANY, INC., Plaintiff-Appellant, v. AZCON SCRAP CORPORATION, a DIVISION OF GOLD FIELDS AMERICAN INDUSTRIES, INC., Defendant-Appellee, and Richard Spine; Lawrence A. Demase, Defendant (Two Cases). (L), 86-1266.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 984

827 F.2d 984

8 Fed.R.Serv.3d 453

CLEVELAND DEMOLITION COMPANY, INC., Plaintiff-Appellant, v. AZCON SCRAP CORPORATION, a DIVISION OF GOLD FIELDS AMERICAN INDUSTRIES, INC., Defendant-Appellee and Richard Spine; Lawrence A. Demase, Defendant (Two Cases).

Nos. 86-1141(L), 86-1266.

United States Court of Appeals Fourth Circuit.

Argued April 9, 1987.

Decided Sept. 4, 1987.

Amy S. Berman, Washington, D.C., (Leonard W. Yelsky; Angelo F. Lonardo; Yelsky & Lonardo Co., L.P.A., Cleveland, Ohio, on brief), for plaintiff-appellant.

David G. Fiske (John P. Corrado; Peter A. Kraus; Thomas & Fiske, P.C., Alexandria, Va., on brief), Joel Jay Sprayregen (Clifford E. Yuknis; Shefsky, Saitlin & Froelich, Ltd., Chicago, Ill., on brief), for defendant-appellee.

Before HALL, SPROUSE and WILKINSON, Circuit Judges.

WILKINSON, Circuit Judge:

In this independent action in equity under Fed.R.Civ.P. 60(b), Cleveland Demolition seeks to set aside an earlier jury verdict for Azcon Scrap on the basis that Azcon's trial attorney conspired with a witness to present perjured testimony. The only evidence of this alleged conspiracy, however, is an evidentiary conflict between the witness's testimony and statements made by a different party in a subsequent lawsuit. This routine evidentiary conflict does not justify an action for fraud on the court or the serious allegations of attorney misconduct leveled in this case. We therefore affirm the district court's decision to grant summary judgment for Azcon and to impose Rule 11 sanctions on Cleveland and its attorneys.

I.

In 1983, Cleveland Demolition demolished a power plant for an electric company in West Virginia, leaving Cleveland with several tons of scrap material. In June 1983, Paul Haddad, who represented himself as the president of Cleveland, contacted Richard Spine, a vice-president of Azcon Scrap, to inquire whether Azcon was interested in buying the scrap. After inspecting the site and negotiating over terms, Spine and Haddad signed a contract on July 14th. When an Azcon crew arrived at the demolition site, however, it was prevented from removing the scrap by Cleveland employees, who informed them that Haddad was not the president of Cleveland and had no authority to sign the contract with Azcon. Azcon sued Cleveland for breach of contract.

A crucial issue at trial was whether Haddad had apparent authority to sell the scrap for Cleveland Demolition. Azcon presented a great deal of evidence to justify its belief that Haddad was the president of Cleveland. For example, Cleveland employees at the scrap site had treated Haddad as if he were the president and a representative of the electric company had told Spine that Haddad was the president of Cleveland. Haddad also testified that Phillip Schwab, the owner of Cleveland, had asked him to act as president in dealing with the West Virginia electric company because a different Schwab company had defaulted on an earlier contract with the same power company.

During the trial, Spine testified that on July 5th, before signing the contract with Haddad, he requested a verbal Dun & Bradstreet report on Cleveland Demolition from Azcon's Chicago office. According to Spine, Azcon's Chicago office reported that Haddad was listed as the president of Cleveland Demolition. After learning that Haddad was not the actual president, Azcon requested a print-out of the Dun & Bradstreet report. This report, dated August 2nd and introduced at trial, indicated that Haddad was the president of Cleveland. Based on this evidence, the jury returned a $500,000 verdict for Azcon. This court affirmed in an unpublished opinion, concluding that "sufficient evidence exists to support the jury's finding that Paul Haddad was acting as an agent of [Cleveland Demolition]." Azcon Scrap Corp. v. Cleveland Demolition Co., 758 F.2d 645 (4th Cir.1985).

Cleveland now claims that the earlier verdict should be vacated because Spine deliberately lied when he testified that he requested a Dun & Bradstreet report on July 5th. To support this charge of perjury, Cleveland claims that Spine's pretrial deposition, in contrast to his specific trial testimony, was ambiguous and did not clearly reveal that he requested a July report. Moreover, Cleveland notes that Dun & Bradstreet has no internal record of a request by Azcon for information on July 5th. Cleveland concludes that Spine lied about the July request to help Azcon's case.

Cleveland does not stop at alleging perjury by Spine. It claims that Azcon's trial attorney, Lawrence Demase, conspired with Spine to present this perjured testimony. In an attempt to prove Demase's involvement, Cleveland notes that he prepared two affidavits for Spine, but neither affidavit mentioned a July 5th request for a Dun & Bradstreet report. Nonetheless, Demase questioned Spine about the July 5th report at the trial and used this testimony in his opening and closing statements. Cleveland cites as further evidence of Demase's participation his acknowledgement that he and Spine reviewed Spine's deposition statements and concluded that they did not completely reflect what Spine had intended to say. Finally, Cleveland claims that Demase should have known that Spine did not request a report on July 5th because Dun & Bradstreet has no record of this request.

In sum, Cleveland believes that Spine must have perjured himself because his deposition is unclear and his trial testimony conflicts with Dun & Bradstreet's records. Cleveland concludes that Demase must have actively participated in this perjury because he was Azcon's trial attorney. Relying on such conclusory allegations, Cleveland brought this independent action to set aside the earlier verdict, claiming that it was obtained by a fraud on the court. The district court granted Azcon's motion for summary judgment, finding that there was "no evidence here that either Spine gave false testimony or that Demase participated." The district court noted that Cleveland had produced no "smoking gun", nor even so much as a "singed paperclip." Because Cleveland's attorneys did not adequately investigate the factual or legal basis for this lawsuit, the district court also assessed attorney fees and costs under Rule 11.

II.

A verdict may be set aside for fraud on the court if an attorney and a witness have conspired to present perjured testimony. The only evidence that Spine committed perjury, however, is the conflict between his trial testimony and Dun & Bradstreet's version of the July 5th report; the only evidence of Demase's involvement is that he was Azcon's trial attorney. This meager evidence falls woefully short of proving a fraud on the court. More importantly, if a losing party could attack a verdict whenever two witnesses disagreed and an attorney was involved, no verdict would be final. The district court properly granted summary judgment for Azcon.

As Rule 60(b) recognizes, district courts may entertain an independent action in equity to set aside a judgment for fraud on the court. Fraud on the court is a serious allegation, however, involving "corruption of the judicial process itself." In re Whitney-Forbes, 770 F.2d 692, 698 (7th Cir.1985). A verdict will be vacated only in the "most egregious cases ... in which the integrity of the court and its ability to function impartially is directly impinged." Great Coastal Express, Inc. v. International Brotherhood of Teamsters, 675 F.2d 1349, 1356 (4th Cir.1982). Although perjury by a witness will not suffice, the "involvement of an attorney, as an officer of the court, in a scheme to suborn perjury should certainly be considered fraud on the court." Great Coastal Express, 675 F.2d at 1357; H.K. Porter Co., Inc. v. Goodyear Tire & Rubber Co., 536 F.2d 1115, 1118-19 (6th Cir.1976). Thus, if Spine deliberately lied and Demase participated in the fraud, the earlier verdict for Azcon should be set aside.

According to Cleveland, Spine must have committed perjury because his deposition is vague and Dun & Bradstreet has no record of a July 5th request. Cleveland, however, overestimates the ambiguity of the deposition. Although not a model of clarity, Spine's deposition does state that he requested a verbal Dun & Bradstreet report when the Azcon employees inspected the demolition site, which was in late June or early July. The deposition also shows that Spine claimed that Azcon's Chicago office reported that Haddad was listed as the president on the Dun & Bradstreet report. The deposition is not inconsistent with Spine's subsequent testimony; the trial testimony is simply more specific.

The lack of a Dun & Bradstreet record also fails to show that Spine committed perjury. Cleveland did not learn that there was no record until it sued Dun & Bradstreet for negligently...