United States District Court, Southern District of New York
April 17, 2003
STATE STREET BANK AND TRUST COMPANY, PLAINTIFF,
INVERSIONES ERRAZURIZ, LIMITADA (F/K/A INVERSIONES ERRAZURIZ S.A.), SUPERMERCADOS UNIMARC S.A. (F/K/A COMMERCIAL E INMOBILIARIA UNIMARC S.A.), PESQUERA NACIONAL S.A., UNIMARC ABASTECIMIENTOS S.A., CIDEF S.A., SALMONES UNIMARC S.A., INDUSTRIA FORESTAL REGIONAL S.A., CIDEF ARGENTINA S.A., CORPORACI&OACUTE;N DE INVERSIONES Y DESARROLLO FINANCIERO CIDEF S.A., AND SOCIEDAD CONTRACTUAL MINERA COMPA&NTILDE;IA DE SALITRE Y YODO PRIMERA REGI&OACUTE;N (F/K/A COMPA&NTILDE;IA DE SALITRE Y YODO PRIMERA PRIMERA REGI&OACUTE;N S.A.), DEFENDANTS.
The opinion of the court was delivered by: Robert L. Carter, United States District Judge.
On November 5, 2002, the court denied defendants' motion to vacate the default judgment entered against them, concluding that defendants' seven asserted counterclaim defenses lacked merit and that defendants failed to establish that vacation of the default judgment would not result in prejudice to plaintiff. Defendants now move for relief from the judgment, pursuant to Rule 60(b), F.R.Civ.P.
The facts relevant to this motion are as follows. Sometime in late December, 2002, approximately one-and-a-half months after the court's entry of the default judgment, defendants discovered in their files a 1999 letter signed by agents of plaintiff and defendants. Another version of the document, signed by defendants' agent but not signed by plaintiff's agent, was already part of the record in this case. Defendants claim that the countersigned version of the 1999 letter establishes a meritorious defense to their liability. Defendants further claim that plaintiff and plaintiff's counsel withheld and concealed this version of the letter, thereby committing a "fraud on the court."
I. Rule 60(b)
Under Rule 60(b), "the court may relieve a party or a party's legal representative from a final judgment, order, or proceeding for . . . (3) fraud . . ., misrepresentation, or other misconduct of an adverse party . . . or . . . set aside a judgment for fraud upon the court." In this Circuit, it is well established that a Rule 60(b) motion cannot be granted without clear and convincing evidence. Madonna v. United States, 878 F.2d 62, 64-65 (2d Cir. 1989). It is also clear that unless the allegedly concealed information was material to the determination made by the court, relief under Rule 60(b) will not lie. Fleming v. New York Univ., 865 F.2d 478, 484 (2d Cir. 1989).
Defendants' purported "evidence" does not even approach that which would warrant relief under the fraud provisions of 60(b), for two reasons. First, there is simply no evidence that plaintiff or its counsel committed fraud. Defendants assert, over and over again, that plaintiff, through its attorneys, concealed and withheld the 1999 letter. It is certainly unique to argue that plaintiff concealed a document from defendants that defendants possessed all along in their own files. Not surprisingly, defendants fail to provide clear and convincing evidence in support of their claim. There is no evidence that plaintiff is, or was at any time, in possession of a countersigned version of the letter. Nor is there evidence that plaintiff or its counsel somehow became aware of the document in defendants' files without defendants' knowledge, and then concealed the existence of the document from the defendants or the court.
Second, it is clear that this recently unearthed document would have had no bearing whatsoever on the court's determination to uphold the default judgment. In accordance with the terms of the parties' 1996 Credit Agreement, the purpose of the 1999 letter was to give written notice of the Guarantors' Attributable Liability within five business days of a Liability Calculation Date. What defendants seem to inexplicably ignore is that in February, 2000, a written notice was issued that superseded the 1999 letter, as it provided notice of each Guarantor's Attributable Liability as of January 1, 2000.*fn1
Furthermore, the 2000 letter of notice, identical in purpose and essentially identical in form to the 1999 letter, was considered in Judge Maas's Report and Recommendation ("R&R"). See R&R at 33-36. Judge Maas concluded that the 2000 letter was irrelevant to the question of liability, a conclusion that was adopted by the court upon de novo review in its November 5, 2002 opinion.*fn2 In finding Judge Maas's determinations to be correct both on the facts and the law, the court rejected the very argument with respect to the 2000 letter that defendants now assert in regard to the 1999 letter. In light of the court's previous disposition of this matter, it is difficult to comprehend how defendants could believe that they have a colorable claim for relief from the judgment based on the 1999 letter.*fn3
Defendants make two other equally baseless arguments for relief under 60(b). First, they argue for relief under 60(b)(6), pursuant to which relief may be granted for "any other reason justifying relief from the operation of the judgment." Rule 60(b)(6) is properly invoked only when the asserted grounds for relief are not recognized in clauses (1)-(5) of the Rule. Nemaizer v. Baker, 793 F.2d 58, 63 (2d Cir. 1986). Here, the alleged concealment falls within 60(b)(3) and the "fraud upon the court" clauses. Accordingly, defendants' argument under 60(b)(6) is rejected.
Finally, defendants argue that the default judgment should be deemed void and relief granted pursuant to 60(b)(4) because the court failed to conduct an inquest concerning the damages sought in the complaint prior to entering judgment. Defendants did not raise this argument at any point during the proceedings on the motion to vacate the judgment, although they had ample opportunity to do so. This failure alone is fatal to defendants' claim. Id. at 64-65.
The argument is meritless in any case. The court did not merely award the damages prayed for by plaintiff without investigation. Rather, the court rested its determination of damages on the affidavit of Fred Epstein, who detailed how damages were calculated in accordance with the agreements at issue.*fn4 Hence, even if the failure to conduct an inquest into damages could constitute a violation of 60(b)(4), which is not at all apparent, no violation occurred here.
Plaintiff urges the court to impose sanctions, pursuant to Rule 11, F.R.Civ.P. I am mindful of plaintiff's (and plaintiff's counsel's) frustration in dealing with this motion, and am also mindful of the fact that defendants' submissions probably amount to sanctionable conduct. This is not the first time that I have been forced to address defense counsel's improprieties, specifically Mr. Wolk's "constant repetition of untruths" in advancement of baseless claims. Nonetheless, I choose not to impose the drastic remedy of sanctions. Instead, I urge defense counsel in the strongest possible terms to use the utmost care when treading the outer bounds of zealous advocacy in future proceedings.
Defendants' Rule 60(b) motion is denied in its entirety. The court declines to impose sanctions under Rule 11, F.R.Civ.P.
IT IS SO ORDERED.