Court Opinion

ID: 8914993
Source: CourtListenerOpinion
Date Created: 2022-11-27 04:38:24.807439+00
Date Added: 2024-06-11T17:08:53.722894
License: Public Domain

CARDAMONE, Circuit Judge
(concurring in part, dissenting in part).
The majority votes to affirm the dismissal of plaintiff’s first, second and third causes of actions and to affirm the dismissal of defendant’s counterclaim. I concur in those affirmances. However, the majority also votes to affirm the dismissal of plaintiff’s fourth and fifth causes of action. From those dispositions I respectfully dissent and vote to reverse and remand the fourth cause of action and to remand for trial the fifth cause of action which alleges fraud on the court.
Turning first to plaintiff’s fourth cause of action, Zack obtained a “final decision” sufficient to activate Newcastle’s liability under the terms of its written guarantee. That guarantee stated: “The undersigned company herewith guarantees to pay upon first request the agreed sum, plus interest *531and costs in the amount to which the plaintiff is entitled pursuant to a final decision of the German courts or on basis of a settlement agreement.” Appellant’s Appendix at 612. In my view the condition of the guarantee has been met and plaintiff is entitled to its benefit.
The majority does not dispute the finality of the German court judgment. It simply holds that since plaintiff has presented no evidence of an accounting of costs and interest there is a failure to prove that a “final decision” has been entered.
Concededly it is possible to construe the guarantee as requiring that the “final decision” include “interest and costs” as determined by the German 'courts because the reference to that court follows that language. It may, on the other hand, be understood that Newcastle guaranteed to pay the “agreed sum, plus interest” when determined by a “final decision” of the German courts and guaranteed to pay Zack its “costs” when they are finally determined. Interest was fixed in the German judgment at 5% per annum from February 10, 1961. Judicial and extrajudicial costs are ordinarily computed later under German law and are presently in litigation in Germany. Nothing in the guarantee requires that there be a final decision as to costs prior to enforcing the guarantee on the agreed sum plus interest. At most there is an ambiguity in the guarantee which, of course, must be construed against defendant Newcastle, its drafter, in favor of plaintiff, its beneficiary.
Once the Hanseatic Provincial Court of Appeals in Germany handed down its 60-page decision awarding plaintiff $33,000 plus interest, plaintiff had a right to bring suit on the guarantee in the United States District Court to enforce it. The German court had jurisdiction over the parties and subject matter. Its final judgment, unless tainted by fraud or barred by the rules of comity, is entitled to full credit and effect. Hilton v. Guyot, 159 U.S. 113, 16 S.Ct. 139, 40 L.Ed. 95 (1895). A final decision of a German court, under the rules of comity, should be enforced in the courts of the United States.
Further, this ease should be returned to the district court for trial on the independent equitable action for fraud on the court asserted in plaintiff’s fifth cause of action. Nothing corrupts the administration of justice so much as a deliberate fraud on a court. Its odiousness, undissipated by the passage of time, lingers like a miasma. It is alleged that we have such a case before us. While the affirmance by the majority of the trial court’s dismissal will end this case, it will not — if the allegations of plaintiff’s complaint are true — remedy the damaging effects of a claim of fraud now buried in the darkness of a dismissal.
Plaintiff’s fifth cause of action asserts an independent equitable action for fraud practiced on courts in the United States and Germany commencing in 1960. The action was instituted in the Southern District of New York on June 31, 1978. The district court and the majority relying upon United States v. Throckmorton, 98 U.S. 61, 25 L.Ed. 93 (1878), held that plaintiff’s fifth cause of action alleging fraud upon the court, which is characterized as essentially a collateral attack on the previously rendered decision, must be made in the various courts which were allegedly defrauded. Decisions of the Supreme Court since Throckmorton was decided in 1878 indicate that the rationale of that case is no longer persuasive. In Throckmorton the Supreme Court used res judicata as the legal device to defeat an action based on an old fraud practiced on a court. The rationale upon which the decision was based appears to be the Court’s view that suits may be immortal, but men are not. Id. 69. Thirteen years later the Supreme Court in Marshall v. Holmes, 141 U.S. 589, 12 S.Ct. 62, 35 L.Ed. 870 (1891), permitted an equitable action to be filed where it was against conscience to permit a judgment obtained by claimed fraud to be executed. This time the Court stated that a court, while not sitting in review, should scrutinize the conduct of the parties in a new proceeding to determine if one used fraud to obtain a judgment. If so, the court will deprive him of the benefit of that *532judgment and any inequitable advantage gained. Id. at 599, 12 S.Ct. at 65. The view that “truth is more important than the trouble it takes to .get it,” set forth in Publicker v. Shallcross, 106 F.2d 949, 952 (3rd Cir. 1939) is consistent with Marshall, which Publicker cites at 951.
These two Supreme Court cases afforded ample latitude to lower courts for over 50 years to decide equitable causes of alleged fraud on the courts in whatever way their own predilections led them. More recently the Supreme Court decided Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 64 S.Ct. 997, 88 L.Ed. 1250 (1944). In that case the trial in which the alleged fraud occurred took place in 1929, but the fraud was not fully brought to light until 1941. The Supreme Court said, in discussing the independent equitable action of fraud on the court, that “equitable procedure has always been characterized by flexibility which enables it to meet new situations which demand equitable intervention, and to accord all the relief necessary to correct the particular injustices involved in these situations.” Id. at 248, 64 S.Ct. at 1002. Based upon this historical progression, I conclude that the harsh rule of Throckmorton is not the current view of the Supreme Court.
Thus, it is now established that this type of action should be governed by flexibility to afford necessary relief. The district court in granting summary judgment dismissing this cause of action did not examine the facts, but merely concluded that plaintiff was in the wrong forum. However, its power to entertain this action is not limited where there is a claim of fraud upon a court. Fed.R.Civ.P. 60(b). In this case the fraud should have been explored at trial, particularly since on a motion to dismiss all of the plaintiff’s allegations of fraud are deemed to be true.
The majority depicts plaintiff as bringing a multitude of vexatious suits. However, Newcastle’s behavior from the outset of this saga over 20 years reveals a callous disregard for the truth. For example, it led the District Court in Hamburg to exercise in rem jurisdiction over a ship the court was told was sailing on the high seas when in fact Newcastle knew that the SEVERN RIVER was under the high seas — it had sunk. Its orchestrated tactics — extending even to buying the subrogation rights of Zack’s American insurer on the damaged cargo claim and using it as a basis to slap a lien on the German judgment to prevent Zack from executing on it, and then coolly arguing that Zack did not have a “final decision” from the German court because it had not entered judgment and executed on it — have frustrated plaintiff at each and every turn. In my view plaintiff is entitled on the law to have its day in court.