475 F. App'x 65
6th Cir.2012Background
- General sued Horizon in the Eastern District of Michigan for contract-based medical director services; Horizon terminated early in 1996.
- HealthSouth acquired Horizon in 1997; Horizon later sold to Meadowbrook Healthcare Corporation, which defended Horizon in the contract dispute.
- In 2004, General and Horizon/Meadowbrook settled, including a draft consent judgment for 376 million and provisions limiting collection from Horizon; the settlement did not disclose the non-party HealthSouth’s involvement or its liability exposure.
- May 3, 2004 draft consent judgment was entered, ordering Horizon to pay General 376 million plus 10% interest, with General covenanted not to enforce beyond a $300,000 payment under the separate settlement.
- HealthSouth later learned of the consent judgment and moved to intervene and set it aside under Rule 60(d); the district court vacated the judgment in May 2009 for fraud on the court but left unresolved issues about the settlement and consent judgment.
- In 2010 the district court held the settlement agreement remained in effect, severance precluded a new consent judgment, and General appealed the May 2009 and February 2010 orders; HealthSouth cross-appealed on timeliness of relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Finality and appealability of the May 2009 order | General argues the May 2009 order was final and appealable as a fraud-on-the-court ruling. | HealthSouth argues the May 2009 order was not final and thus not appealable; only the February 2010 order mattered. | May 2009 order not final; February 2010 order proper to review on appeal. |
| Standard of review for fraud-on-the-court under Rule 60(d)(3) | General contends abuse-of-discretion review is appropriate under the savings clause. | HealthSouth argues de novo review is appropriate based on different authority. | Abuse-of-discretion standard governs fraud-on-the-court rulings under Rule 60(d)(3). |
| Whether there was fraud on the court (scienter and duty to disclose) | General asserts no clear and convincing evidence of scienter or duty to disclose; settlement terms were not disclosed but did not subvert the court. | HealthSouth contends counsel acted with reckless disregard and failed to disclose material settlement terms to the court. | District court erred; no clear and convincing evidence of scienter or duty to disclose; fraud-on-the-court reversed. |
| Effect and enforceability of the settlement agreement after vacating the judgment | General maintains the settlement and its covenant limited enforcement, but the verdict should reflect the actual damages and not preclude recovery. | HealthSouth argues the settlement terms and non-disclosure affected the consent judgment’s legitimacy and related claims. | Settlement agreement remains operative but does not bar consideration of damages; Alabama action remains able to challenge the damages figure. |
| Timeliness and scope of HealthSouth's Rule 60(b) relief (b)(3) vs (b)(6)) | HealthSouth seeks relief under 60(b)(6) as a catchall to avoid strict 1-year limit of (b)(3). | Courts should not bypass (b)(3)’s time limits; (b)(6) applies only in extraordinary circumstances not present here. | HealthSouth cannot bypass (b)(3)’s limitations via (b)(6); delay in filing was unreasonable; Rule 60(b)(3) timely relief denied. |
Key Cases Cited
- Demjanjuk v. Petrovsky, 10 F.3d 338 (6th Cir.1993) (fraud-on-the-court requires specific elements, including deceit or reckless disregard)
- Coopers & Lybrand v. Livesay, 437 U.S. 463 (Supreme Court, 1978) (final judgment concept for appeals)
- Mallory v. Eyrich, 922 F.2d 1273 (6th Cir.1991) (finality of Rule 60(b) order under certain circumstances)
- In re Saffady, 524 F.3d 799 (6th Cir.2008) (fraud on the court; Rule 60 standards; finality considerations)
- Hopper v. Euclid Manor Nursing Home, Inc., 867 F.2d 291 (6th Cir.1989) (Rule 60(b)(6) extraordinary circumstances; catchall limitations)
- Demjanjuk v. Petrovsky, 10 F.3d 338 (6th Cir.1993) (see above)
- Carter v. Anderson, 585 F.3d 1007 (6th Cir.2009) (fraud-on-the-court standard components)