Opinion ID: 2977818
Heading Depth: 3
Heading Rank: 2

Heading: Power to Vacate Judgment

Text: The Tennessee bankruptcy court recognized that it had the power to vacate its earlier judgment against Mrs. Gurley’s estate upon a sufficient showing that the judgment had been obtained by fraud, citing Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 244 (1944); Workman v. Bell, 245 F.3d 849, 852 (6th Cir. 2001).1 Yet, the power is exercised only with great caution, reserved for occasions where enforcement of the judgment is “manifestly unconscionable.” HazelAtlas, 322 U.S. at 244-45. The fraudulent conduct that Followell complains of is Mills’s assertion of the $22 million claim based on a judgment he knew to have been fraudulently obtained in the Florida bankruptcy court. The Florida bankruptcy court judgment is said to have been fraudulently obtained insofar as Mills knew the matter of Mrs. Gurley’s liability to Mr. Gurley’s estate had been settled prior to trial 1 Ordinarily, Followell would be expected to seek this fraud-on-the-court relief first in the Florida bankruptcy court, where the alleged fraud first took place. See Weisman v. Charles E. Smith Mgmt., Inc., 829 F.2d 511, 513 (4th Cir. 1987) (“[T]he proper forum in which to assert that a party has perpetrated a ‘fraud on the court’ is the court which allegedly was a victim of that fraud.”). If and when the Florida bankruptcy court judgment were vacated, then, Followell could legitimately move for similar relief in the Tennessee bankruptcy court. However, a bankruptcy court has broad equitable powers to inquire into the validity of any claim against the estate—even one reduced to judgment—and to disallow the claim if it is ascertained to have been unlawfully obtained. Heiser v. Woodruff, 327 U.S. 726, 736 (1946); Pepper v. Litton, 308 U.S. 295, 305 (1939); In re: XYZ Options, Inc., 154 F.3d 1262, 1267-71 (11th Cir. 1998). Hence, although the Tennessee bankruptcy court did not have jurisdiction to vacate the Florida bankruptcy court judgment because it was procured by fraud, it did have jurisdiction to inquire into the validity of the $22 million claim that formed the basis for its own prior judgment and, if that claim were found to have been corrupted by fraud, could have vacated its own judgment based on its retroactive refusal to allow the claim. -7- Nos. 07-6504, 07-6505 Followell v. Mills for a mere $1 million. In other words, the fraud-on-the-court showing needed to obtain relief in this action in the Tennessee bankruptcy court is entirely derivative of and dependent on the showing of the initial fraud-on-the-court in the Florida bankruptcy court. If the Florida bankruptcy court judgment was valid and enforceable, notwithstanding the pretrial settlement that undisputedly never quite received the required court-approval, Mills’s assertion of it in the Tennessee bankruptcy court action can hardly have been fraudulent. By all appearances, the Florida bankruptcy court judgment was and is valid and enforceable. Indeed, despite Mrs. Gurley’s exhaustion of her appellate remedies, including even a petition for certiorari to the U.S. Supreme Court, the Florida bankruptcy court judgment withstood every challenge. It is well-settled that a judgment rendered in a court of competent jurisdiction is presumed valid until proven otherwise. Pen-Ken Gas & Oil Corp. v. Warfield Natural Gas Co., 137 F.2d 871, 879 (6th Cir. 1943). To demonstrate that the judgment should be set aside for fraud on the court, Followell must present clear and convincing evidence. Cox Nuclear Pharmacy, Inc. v. CTI, Inc., 478 F.3d 1303, 1314 (11th Cir. 2007).