Trendsettah USA, Inc. v. Swisher International, Inc. ( 2022 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
TRENDSETTAH USA, INC.; No. 20-56016
TRENDSETTAH, INC.,
Plaintiffs-Appellants, D.C. No.
8:14-cv-01664-
v. JVS-DFM
SWISHER INTERNATIONAL, INC.,
Defendant-Appellee. OPINION
Appeal from the United States District Court
for the Central District of California
James V. Selna, District Judge, Presiding
Argued and Submitted January 14, 2022
Pasadena, California
Filed April 15, 2022
Before: Johnnie B. Rawlinson and Paul J. Watford, Circuit
Judges, and Jed S. Rakoff,* District Judge.
Opinion by Judge Rawlinson
*
The Honorable Jed S. Rakoff, United States District Judge for the
Southern District of New York, sitting by designation.
2 TRENDSETTAH USA V. SWISHER INT’L
SUMMARY**
Relief from Judgment
The panel affirmed in part and reversed in part the district
court’s grant of relief from a judgment entered in favor of the
plaintiff after a jury trial in an antitrust action.
The jury returned a verdict against Swisher International,
Inc., on Sherman Act and breach of contract claims brought
by Trendsettah USA, Inc. After trial, the district court
granted partial summary judgment in favor of Swisher on the
antitrust claims. This court reversed and remanded with
instructions for the district court to reinstate the jury’s
verdict. Following the remand, the district court granted
Swisher’s motion for relief from judgment on the grounds
that Trendsettah’s failure to disclose that its chief executive
officer Akrum Alrahib engaged in a scheme to fraudulently
avoid payment of federal excise taxes constituted fraud on the
court under Fed. R. Civ. P. 60(d), and newly discovered
evidence and fraud warranting a new trial pursuant to
Rule 60(b)(2) and (b)(3). The district court denied
Trendsettah’s motions for reconsideration and for Rule 60(b)
relief from the order granting Rule 60 relief. The district
court then granted Trendsettah’s motion to voluntarily
dismiss its claims with prejudice in order to take an
immediate appeal.
The panel held that Trendsettah’s voluntary dismissal of
its claims with prejudice did not deprive this court of
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
TRENDSETTAH USA V. SWISHER INT’L 3
jurisdiction. The panel followed Rodriguez v. Taco Bell
Corp., 896 F.3d 952 (9th Cir. 2018), which distinguished
Microsoft Corp. v. Baker, 137 S. Ct. 1702 (2017), and held
that a voluntary dismissal of remaining claims can render an
earlier interlocutory order appealable, so long as the
discretionary regime of Rule 23(f), governing review of class
action orders, is not undermined. The panel distinguished
Langere v. Verizon Wireless Servs., LLC¸983 F.3d 1115 (9th
Cir. 2020), which implicated a statutory jurisdictional
restriction imposed by the Federal Arbitration Act.
Reversing in part, the panel held that the district court
abused its discretion in granting Swisher’s Rule 60(d) motion
based on fraud on the court. The panel held that fraud on the
court must be established by clear and convincing evidence,
and the relevant inquiry is whether the fraudulent conduct
harmed the integrity of the judicial process, rather than
whether it prejudiced the opposing party. A party must show
willful deception, and mere nondisclosure of evidence is
typically not enough to constitute fraud on the court. The
panel concluded that Swisher presented no clear and
convincing evidence that either Trendsettah or its attorneys
was responsible for an intentional, material misrepresentation
directly aimed at the district court. Accordingly, the district
court erred in granting relief under Rule 60(d). The panel
reversed the district court’s dismissal of Trendsettah’s breach
of contract claims and remanded with instructions to reinstate
the jury’s verdict on those claims.
Affirming in part, the panel held that the district court did
not abuse its discretion in granting Swisher’s motion for relief
from judgment premised on newly discovered evidence and
fraud under Rule 60(b)(2) and (b)(3), with respect to
Trendsettah’s antitrust claims. Agreeing with other circuits,
4 TRENDSETTAH USA V. SWISHER INT’L
the panel held that the Rule 60(b) motion was timely under
Rule 60(c)(1)’s one-year limitation period, which restarted
because the prior appellate decision substantially altered the
district court’s judgment. The panel concluded that Swisher
met the standard for relief from judgment because
Trendsettah’s tax evasion was relevant to antitrust liability
and damages, and Swisher exercised reasonable diligence in
discovering the fraud.
COUNSEL
Thomas C. Goldstein (argued), Eric F. Citron, and Erica
Oleszczuk Evans, Goldstein & Russell PC, Bethesda,
Maryland; Mark Poe and Randolph Gaw, Gaw Poe LLP, San
Francisco, California; for Plaintiffs-Appellants.
Theodore J. Boutrous Jr. (argued), Daniel Glen Swanson, and
Samuel Eckman, Gibson Dunn & Crutcher LLP, Los
Angeles, California; Cynthia E. Richman, Gibson Dunn &
Crutcher LLP, Washington, D.C.; Joshua R. Mandell,
Akerman LLP, Los Angeles, California; Michael C. Marsh
and Ryan Alan Roman, Akerman LLP, Miami, Florida; for
Defendants-Appellees.
TRENDSETTAH USA V. SWISHER INT’L 5
OPINION
RAWLINSON, Circuit Judge:
Trendsettah USA, Inc. (Trendsettah) appeals the district
court’s order granting relief from judgment pursuant to
Federal Rule of Civil Procedure 60 (Rule 60) in favor of
Swisher International, Inc. (Swisher). After a jury trial,
Trendsettah was awarded $14,815,494 on its Sherman Act
claim, and $9,062,679 on its breach of contract claim. The
district court entered judgment in favor of Trendsettah,
trebling the antitrust damages to $44,446,482.00 and reducing
the contract damages to zero by stipulation. After trial, the
district court reconsidered Swisher’s motion for summary
judgment and granted partial summary judgment in favor of
Swisher on the antitrust claims. We reversed the district
court’s grant of summary judgment, and instructed the district
court to reinstate the jury’s verdict. See Trendsettah USA,
Inc. v. Swisher Int’l, Inc., 761 F. App’x 714, 718 (9th Cir.
2019).
Following the remand, Swisher filed a Rule 60 motion for
relief from judgment based on its discovery that Akrum
Alrahib (Alrahib), Trendsettah’s chief executive officer,
engaged in a scheme to fraudulently avoid payment of federal
excise taxes. The district court granted Swisher’s motion
after concluding that Trendsettah’s failure to disclose
Alrahib’s tax fraud constituted fraud on the court under Rule
60(d), and newly discovered evidence and fraud warranting
a new trial pursuant to Rule 60(b)(2) and (b)(3).
Trendsettah contends that the district court abused its
discretion in granting Swisher’s Rule 60 motion because:
(1) the district court failed to apply the correct standards to
6 TRENDSETTAH USA V. SWISHER INT’L
determine that there was fraud on the court, (2) Swisher’s
Rule 60(b) motion was untimely,(3) Swisher failed to
exercise reasonable diligence in discovering Alrahib’s fraud;
and (4) any fraud committed by Alrahib did not impact the
ultimate damages calculation presented by Trendsettah’s
expert.
We have jurisdiction under 28 U.S.C. § 1291, and we
hold that the district court abused its discretion in granting
Swisher’s Rule 60(d) motion based on fraud on the court.
However, the district court did not abuse its discretion in
granting Swisher’s motion for relief from judgment premised
on newly discovered evidence and fraud under Rule 60(b)(2)
and (b)(3), with respect to Trendsettah’s antitrust claims.
Accordingly, we reverse the district court’s dismissal of
Trendsettah’s breach of contract claims and remand with
instructions to reinstate the jury’s verdict on those claims.
We affirm the district court’s grant of Rule 60(b) relief as to
Trendsettah’s antitrust claims.
I. BACKGROUND
In this protracted litigation, Trendsettah alleged that
Swisher “maintain[ed] its monopoly of the market for the
small cigars known as cigarillos, through taking anti-
competitive actions targeting [Trendsettah,] a competitor in
the cigarillo market.” According to Trendsettah, it “entered
the cigarillo market by contracting with Swisher to have
Swisher exclusively manufacture [Trendsettah’s] cigarillos,
which [Trendsettah] marketed and sold under the brand name
Splitarillo.” Trendsettah alleged that “Swisher decided that
rather than compete in the open market with the Splitarillo
brand, it could best protect its monopoly by restricting the
supply of Splitarillos,” and that “Swisher began refusing to
TRENDSETTAH USA V. SWISHER INT’L 7
fulfill the orders for Splitarillos that [Trendsettah] placed, or
sabotaged such orders, in violation of the contract that it had
agreed to, which contained no limit as to the number of
cigarillos Swisher would manufacture.” Trendsettah alleged
various antitrust and contract claims against Swisher.
A jury found in favor of Trendsettah, awarding
$14,815,494 on its antitrust claim and $9,062,679 on its
contract claim. The district court entered judgment in favor
of Trendsettah, trebling the antitrust damages to
$44,446,482.00 and reducing the contract damages to zero by
stipulation. Following the verdict, the district court granted
summary judgment in favor of Swisher on the antitrust
claims, and entered judgment in favor of Trendsettah on the
contract claims.
On appeal, we affirmed in part and reversed in part the
district court’s judgment. See Trendsettah, 761 F. App’x
at 718. We held that, although the district court properly
reconsidered its prior summary judgment ruling, reversal was
warranted because the district court “failed to draw all
reasonable inferences in favor of” Trendsettah, and “cited
evidence that Swisher had introduced at trial [that] the jury
clearly had rejected.” Id. at 717 (citation omitted). We
“directed [the district court] to reinstate the jury’s verdict in
its entirety.” Id. at 718.
On remand, Swisher filed a motion for relief from
judgment pursuant to Rule 60 on the basis that Alrahib
“conspired with [Trendsettah’s] importer [Havana 59] to
evade millions of dollars in federal excise taxes due on
[Trendsettah’s] cigarillos. The criminal tax evasion scheme
entailed creating fake invoices and using [Trendsettah’s] bank
accounts to covertly transfer funds to [Trendsettah’s]
8 TRENDSETTAH USA V. SWISHER INT’L
Dominican Republic manufacturer so that the Customs and
Border Protection . . . could not detect the actual first sales
price of [Trendsettah’s] cigarillos and collect the full amount
of taxes due on them.”1
Swisher maintained that it “learned of [Trendsettah’s] tax
avoidance and illegal kickbacks when a grand jury indictment
in Mr. Alrahib’s criminal case became publicly available.”
Swisher also asserted that during the discovery phase of the
case between Swisher and Trendsettah, Trendsettah “refused
to produce its federal excise tax filings, claiming irrelevance
and undue burden,” and “falsely represented” that federal
excise tax information was reflected “in [Trendsettah’s] sales
records.” Swisher maintained that it was “now apparent that
the financial records [Trendsettah] passed off as accurate did
not account for its illegal tax avoidance.”
Swisher contended that it was entitled to relief from
judgment because Trendsettah’s conduct constituted fraud on
the court. Swisher also asserted that relief from judgment
was warranted under Rule 60(b) due to newly discovered
evidence and fraud.
In support of its motion, Swisher submitted the
declaration of Dr. Alan Cox, who provided expert testimony
on behalf of Swisher during the trial. Dr. Cox observed that
1
As discussed more extensively later in the opinion, Trendsettah’s
fraudulent avoidance of federal excise taxes thwarted Swisher’s ability to
sufficiently defend against Trendsettah’s antitrust claim premised on its
inability to compete in the face of Swisher’s purported anticompetitive
conduct. According to Swisher, this deception “left [Trendsettah] free to
present to the jury and the [district court] a falsely inflated picture of the
profitability of its cigarillo sales out of which its expert constructed a
largely, if not entirely, sham claim for lost profits.”
TRENDSETTAH USA V. SWISHER INT’L 9
Alrahib’s fraud scheme “overlapped with most of the current
injury and damages period claimed by [Trendsettah]” at trial.
The fraud scheme affected the damages presentation by
artificially inflating profits through fraudulent evasion of
excise taxes. Dr. Cox opined that “[i]f one account[ed] for
the excise taxes [Trendsettah] should have paid, [the
damages] model—which the jury accepted in rendering its
award—would have estimated no damages.” “In addition,
[Trendsettah’s] tax evasion allowed [Trendsettah] to sell
product at a price that was artificially low.” Dr. Cox
concluded that “had [Trendsettah] paid its excise taxes, it
would have gone out of business by early 2014. Selling for
three years at a loss was possible because [Trendsettah] had,
in effect, taken an unlawful and unsanctioned subsidy from
the government through its excise tax fraud scheme.”
“Absent such fraud, [Trendsettah] would have had to increase
prices (and sell fewer products) or shut down. Its
demonstrated inability to compete effectively in the relevant
markets also indicate[d] that Swisher’s alleged actions could
not have harmed competition as [Trendsettah] alleged.”
The district court granted Swisher’s motion for relief
from judgment under Rule 60. The district court reasoned
that, prior to trial, Swisher sought discovery of Trendsettah’s
payment of federal excise taxes, but Trendsettah objected to
the requested discovery on the grounds of undue burden and
irrelevance. Trendsettah also informed Swisher that the
information was available in Trendsettah’s “financial records,
sales orders, and invoices.” Trendsettah’s “general counsel
subsequently testified that [Trendsettah] . . . produced all
documents responsive to Swisher’s discovery requests.”
The district court noted that, of course, Trendsettah never
disclosed Alrahib’s involvement in the scheme to evade
10 TRENDSETTAH USA V. SWISHER INT’L
federal excise taxes. The district court emphasized that
Trendsettah did not “disclose documents which demonstrated
what Alrahib admits were falsified invoices.” The district
court determined that “the documents produced did not reflect
the true cost of manufacturing and importing [Trendsettah’s]
cigarillos, even though they were presented to Swisher as an
accurate reflection of [Trendsettah’s] costs and profits.”
The district court determined the “misleading financial
records” were used by Trendsettah’s damages expert,
Dr. Deforest McDuff. The damages calculations were
predicated on the 2013–14 profit margins that “were
artificially inflated by the underpayment of federal excise
taxes, infecting Dr. McDuff’s entire analysis.”
The district court concluded that Trendsettah “presented
to the jury and to the Court a theory of lost profits premised
on inaccurate data which was a product of a fraudulent tax
evasion scheme,” and that Trendsettah’s “conduct tainted the
integrity of the trial and interfered with the judicial process.”
The district court was unpersuaded by Trendsettah’s
contention that Swisher failed to exercise reasonable
diligence in discovering the fraud. The district court recalled
that Trendsettah “successfully moved in limine to exclude any
evidence or argument regarding Alrahib’s past tax-related
enforcement actions, in part based on the argument that
Alrahib’s tax evasion was merely past conduct that had no
relevance to this trial.”
The district court concluded that Swisher exercised
reasonable diligence under Rule 60(d)(3) because Swisher
“was entitled to accept [Trendsettah’s] answers to its
discovery requests as accurate and not to seek additional
TRENDSETTAH USA V. SWISHER INT’L 11
discovery relating to the issue.” The district court concluded
that Trendsettah “cannot blame Swisher for the success of its
obstructionist conduct.”
The district court ultimately held that Swisher
demonstrated “by clear and convincing evidence that
[Trendsettah] engaged in misconduct that undermined the
judicial process,” resulting in fraud on the court.
The district court also granted relief from the judgment
under Rules 60(b)(2) and (b)(3) due to newly discovered
evidence and fraud. The district court determined that
Swisher’s motion was timely because “the evidence
demonstrating fraud—Alrahib’s May 2017 interview which
was revealed to the public in April 2019—was not available”
when Swisher was able to move for a new trial. Additionally,
the district court reasoned that “the Ninth Circuit’s [remand]
decision substantially altered the judgment,” and the time for
filing a motion for relief from judgment was “restart[ed].”
After the district court denied Trendsettah’s motion for
reconsideration, Trendsettah filed a Rule 60(b) motion for
relief from the district court’s order granting Swisher’s Rule
60 motion, which the district court also denied.
Trendsettah subsequently filed a motion for certification
of the district court’s November 12, 2019 order to allow an
interlocutory appeal, which the district court denied.
Trendsettah also filed a petition for mandamus with this
court, which was denied.
Finally, Trendsettah filed a motion to voluntarily dismiss
its claims with prejudice to take an immediate appeal of the
district court’s orders. The district court granted
12 TRENDSETTAH USA V. SWISHER INT’L
Trendsettah’s motion to dismiss with prejudice, and
Trendsettah filed a timely notice of appeal.
II. STANDARDS OF REVIEW
“We review questions of our own jurisdiction de novo.”
WhatsApp Inc. v. NSO Grp. Techs. Ltd., 17 F.4th 930, 934
(9th Cir. 2021) (citation omitted).
We review the district court’s rulings on Swisher’s Rule
60 motion for an abuse of discretion. See Irvine Unified Sch.
Dist. v. K.G., 853 F.3d 1087, 1090 (9th Cir. 2017).
III. DISCUSSION
A. Jurisdiction
Relying on Microsoft Corp. v. Baker, 137 S. Ct. 1702(2017), Swisher contends that we lack jurisdiction over
Trendsettah’s appeal because there is no final judgment. But
Swisher’s jurisdictional challenge is unavailing. In
Microsoft, the Supreme Court considered whether jurisdiction
exists under 28 U.S.C. § 1291 and Article III of the United
States Constitution over “an order denying class certification
. . . after the named plaintiffs have voluntarily dismissed their
claims with prejudice.” 137 S. Ct. at 1712. The Supreme
Court held that, in the class action context, plaintiffs may not
“transform a tentative interlocutory order [denying class
certification] into a final judgment” by simply dismissing
those claims with prejudice while maintaining “the right to
revive those claims if the denial of class certification is
reversed on appeal.” Id. at 1715 (citations and internal
quotation marks omitted).
TRENDSETTAH USA V. SWISHER INT’L 13
Over twenty years ago, we held in a case not involving a
class action that a plaintiff may voluntarily dismiss claims
with prejudice “to secure[ ] review of an order that would not
ordinarily be reviewable until after a trial on the merits.”
Concha v. London, 62 F.3d 1493, 1508–09 (9th Cir. 1995).
We emphasized that unlike the situation in Microsoft, the
dismissal of his action with prejudice in this non-class action
context “runs a serious risk of losing [the] claim entirely.” Id.
at 1508. If the plaintiff loses on appeal, “the dismissal with
prejudice stands” and any future action for that claim is
forever forfeited. Id. We concluded in the non-class action
context, that permitting appeal following an unqualified
dismissal with prejudice “is not likely to undermine our
normal appellate practice.” Id.We have since clarified that the rule articulated in Concha
was not impacted by Microsoft, which “involved an attempt
to use the voluntary dismissal mechanism to obtain an appeal
as of right in order to review an earlier denial of class
certification.” Rodriguez v. Taco Bell Corp., 896 F.3d 952,
955 (9th Cir. 2018). In Rodriguez, we meticulously explained
that the plaintiffs in Microsoft attempted to thwart the
“careful[ly] calibra[ted]” class certification provisions of
Rule 23 of the Federal Rules of Civil Procedure. Id. at 955.
Specifically, in Microsoft, the Supreme Court “held the denial
of class certification was not reviewable because plaintiffs
had already been denied a discretionary appeal pursuant to
[Federal Rule of Civil Procedure] 23(f).” Id. (citing
Microsoft, 137 S. Ct. at 1714–15). We noted that Rodriguez
did not “involve an attempt to obtain review of a class
certification issue.” Id. Rather, Rodriguez involved “review
of a partial summary judgment order.” Id.
14 TRENDSETTAH USA V. SWISHER INT’L
In Rodriguez, see id., we cited with approval our post-
Microsoft decision in Brown v. Cinemark USA, Inc., 876 F.3d
1199 (9th Cir. 2017) that distinguished Microsoft on the same
basis—that allowing interlocutory appeal of the denial of
class certification would “subvert the balanced solution Rule
23(f) put in place for immediate review of class action
orders.” Brown, 876 F.3d at 1201.
In Rodriguez, we distilled our holding in Brown to this:
“a voluntary dismissal of remaining claims can render the
earlier interlocutory order appealable, so long as the
discretionary regime of Rule 23(f) is not undermined.”
Rodriguez, 896 F.3d at 955 (citation omitted). We ultimately
concluded that our pre-Microsoft precedent (Concha) and
post-Microsoft precedent (Brown) controlled, rendering the
voluntary dismissal with prejudice in Rodriguez “a valid final
judgment for purposes of 28 U.S.C. § 1291.” Id. at 956.
We are not persuaded that Langere v. Verizon Wireless
Servs., LLC, 983 F.3d 1115 (9th Cir. 2020) compels a
contrary conclusion. In that case, we held that voluntary
dismissal of claims with prejudice did not provide appellate
jurisdiction because the Federal Arbitration Act [FAA]
“endeavors to promote appeals from orders barring arbitration
and limit[s] appeals from orders directing arbitration.” Id. at
1118 (citation omitted). We recognized that the FAA
accomplishes this goal “by explicitly prohibiting the appeal
of orders compelling arbitration.” Id. (citation omitted); see
also Sperring v. LLR, Inc., 995 F.3d 680, 682 (9th Cir. 2021)
(dismissing an appeal because “Appellants, like Langere,
voluntarily dismissed their action with prejudice in an attempt
to obtain an appealable final judgment following an order
compelling arbitration”) (emphasis added). Trendsettah’s
appeal does not implicate any similar statutory restrictions
TRENDSETTAH USA V. SWISHER INT’L 15
that would be adversely affected by permitting voluntary
dismissal of claims with prejudice.2
The district court considered and acknowledged that
Trendsettah sought to dismiss its claims with prejudice in
order to appeal the court’s rulings on Swisher’s Rule 60
motion. But unlike the plaintiffs in Microsoft and Langere,
Trendsettah is not attempting to take an appeal midstream,
such that success on appeal would allow it to continue
litigating its claims in a preferred posture or forum.
Trendsettah’s claims have already been litigated and a final
decision on those claims has been reached. Thus, however
we decide this appeal, the case will be over—either the jury’s
prior verdict will be reinstated or the district court’s dismissal
of Trendsettah’s claims with prejudice will stand. Moreover,
“[a] district court’s involvement in the voluntary dismissal of
a plaintiff’s claims carries substantial weight in determining
whether appellate jurisdiction is proper. . . .” Galaza v. Wolf,
954 F.3d 1267, 1272 (9th Cir. 2020). In sum, under
applicable precedent, Trendsettah’s voluntary dismissal of its
claims with prejudice did not deprive this court of
jurisdiction. See Concha, 62 F.3d at 1507–08; see also
Brown, 876 F.3d at 1201.
2
Swisher’s reliance on ICTSI Oregon, Inc. v. Int’l Longshore &
Warehouse Union, 22 F.4th 1125 (9th Cir. 2022) is misplaced. In ICTSI
Oregon, Inc., we addressed certification requirements for an interlocutory
appeal under 28 U.S.C. § 1292(b), and did not consider the voluntary
dismissal of claims with prejudice. See id. at 1129.
16 TRENDSETTAH USA V. SWISHER INT’L
B. The District Court’s Grant of Swisher’s Rule 60
Motion Based On Fraud On The Court
Trendsettah contends that the district court failed to
properly apply the requisite factors in determining whether
Trendsettah engaged in fraud on the court.
Initially, it bears emphasizing that a party seeking to
establish fraud on the court must meet a high standard. See
Latshaw v. Trainer Wortham & Co., Inc., 452 F.3d 1097,
1104 (9th Cir. 2006). “We exercise the power to vacate
judgments for fraud on the court with restraint and discretion,
and only when the fraud is established by clear and
convincing evidence.” United States v. Estate of Stonehill,
660 F.3d 415, 443 (9th Cir. 2011) (citations and internal
quotation marks omitted).
Our precedent “emphasize[s] that not all fraud is fraud on
the court.” United States v. Sierra Pacific Indus., Inc.,
862 F.3d 1157, 1167 (9th Cir. 2017) (citation and internal
quotation marks omitted). “In determining whether fraud
constitutes fraud on the court, the relevant inquiry is not
whether fraudulent conduct prejudiced the opposing party,
but whether it harmed the integrity of the judicial process.”
Id. at 1167–68 (citations and internal quotation marks
omitted); see also Levander v. Prober (In re Levander),
180 F.3d 1114, 1119 (9th Cir. 1999), as amended (explaining
that “[f]raud upon the court should . . . embrace only that
species of fraud which does or attempts to, defile the court
itself, or is a fraud perpetrated by officers of the court so that
the judicial machinery can not perform in the usual manner
its impartial task of adjudging cases that are presented for
adjudication.”) (citation and internal quotation marks
omitted).
TRENDSETTAH USA V. SWISHER INT’L 17
Additionally, “mere nondisclosure of evidence is typically
not enough to constitute fraud on the court, and perjury by a
party or witness, by itself, is not normally fraud on the court.”
Sierra Pacific Indus., Inc., 862 F.3d at 1168 (citation,
alteration, and internal quotation marks omitted). “However,
perjury may constitute fraud on the court if it involves, or is
suborned by, an officer of the court. . . .” Id. (citations and
internal quotation marks omitted). “Under the high standard
for a Rule 60(d)(3) motion, a mere discovery violation or
non-disclosure does not rise to the level of fraud on the
court. . . .” Id. at 1171 (citation omitted). “[O]ur case law
requires that a party show willful deception rather than
simply reckless disregard for the truth . . .” Id. at 1172
(citation omitted).
Despite the exacting standard applicable to the
determination of fraud on the court, the district court did not
extensively address whether the purported fraud on the court
involved an “intentional, material misrepresentation” in
support of “an unconscionable plan or scheme which [was]
designed to improperly influence the court in its decision.”
Id. at 1168 (citations omitted) (emphasis added). The district
court briefly mentioned the requirement for an intentional
misrepresentation, but characterized the trial testimony and
evidence as “false” and “misleading,” rather than an
intentional misrepresentation. However, “mere nondisclosure
of evidence is typically not enough to constitute fraud on the
court, and perjury by a party or witness, by itself, is not
normally fraud on the court.” Id. at 1168 (citation, alteration,
and internal quotation marks omitted). Notably, neither the
district court nor Swisher identified any specific statements
or testimony during the trial that amounted to perjury.
18 TRENDSETTAH USA V. SWISHER INT’L
Moreover, “[a] fraud connected with the presentation of
a case to a court is not necessarily a fraud on the court.”
Estate of Stonehill, 660 F.3d at 444 (citation and internal
quotation marks omitted). Instead, we have recognized that
“[m]ost fraud on the court cases involve a scheme by one
party to hide a key fact from the court and the opposing
party.” Id. Such a scheme was found in Pumphrey v. K.W.
Thompson Tool Co., 62 F.3d 1128, 1130 (9th Cir. 1995), a
wrongful death case resulting from a gun being dropped and
misfiring while the safety was on. During trial, the defendant
introduced a video demonstrating that “the safeties performed
as designed, and the gun never fired.” Id. at 1130. However,
discovery in a different lawsuit revealed the existence of an
earlier video, prepared at the same time as the trial video,
“showing that the [gun] fired when dropped during testing.”
Id. This earlier video was never provided to Pumphrey. See
id.We concluded that introduction of the video depicting the
safeties performing as designed constituted fraud on the court
because the video shown at trial was made when “the original
video did not turn out as planned.” Id. at 1131. We reasoned
that defendant Thompson Tools, through in-house counsel
“undermined the judicial process” through failure to disclose
the earlier video, affirmatively mischaracterizing the test
results, and letting stand uncorrected “the false impression
created by” the witness who performed the tests. Id. at 1133.
Importantly, the defendant previously “answered a request for
production by stating that defendant [was] not presently
aware of any records relating to the testing of the . . .
handguns,” and “[i]f records [were] later discovered, they
[would] be made available pursuant to this request.” Id.
at 1131. But the earlier video was “never disclosed.” Id.TRENDSETTAH USA V. SWISHER INT’L 19
Similarly, In re Levander involved fraud on the court
because the bankruptcy court granted attorneys’ fees against
a corporation without “know[ing] of the existence of” a
partnership to which the corporation had transferred its assets.
180 F.3d at 1117. “The reason the court so believed was that
when one of the Corporation’s officers was asked during a
. . . deposition whether the Corporation’s assets had been
sold, he answered: No. The assets haven’t been sold.” Id.
(internal quotation marks omitted). However, it was later
revealed that “a former employee of the Corporation . . .
owned what had been the Corporation’s assets in the bank.”
Id. The bill of sale revealed that the Partnership had
transferred ownership of all corporate assets “for one dollar.”
Id. We determined that fraud on the court occurred because
“the court relied on the Corporation’s depositions to impose
attorneys’ fees on the Corporation, rather than on the party
with the assets—the Partnership.” Id. at 1120 (citations
omitted) (emphasis added).
In contrast to the facts in Pumphrey and Levander, no
clear and convincing evidence was presented that either
Trendsettah or its attorneys was responsible for “an
intentional, material misrepresentation directly aimed at the
court.” In re Napster, Inc. Copyright Litig., 479 F.3d 1078,
1097 (9th Cir. 2007), abrogated on other grounds by Mohawk
Indus., Inc. v. Carpenter, 558 U.S. 100, 114 (2009) (citation
and internal quotation marks omitted). Although the district
court observed that Trendsettah’s attorneys objected to
Swisher’s discovery requests for federal excise taxes as
“burdensome” and “irrelevant,” there was not clear and
convincing evidence that Trendsettah’s counsel had
knowledge of or intended to conceal Alrahib’s fraudulent tax
20 TRENDSETTAH USA V. SWISHER INT’L
evasion.3 While the district court concluded that
Trendsettah’s financial records were “misleading” because
they did not reveal Alrahib’s conduct, it is not clearly evident
that Trendsettah’s discovery responses were “directly aimed
at the court.” In re Napster, 479 F.3d at 1097 (citation and
internal quotation marks omitted). As the Tenth Circuit
illuminated,
Fraud on the court is fraud which is directed
to the judicial machinery itself and is not
fraud between the parties or fraudulent
documents, false statements or perjury. It has
been held that allegations of nondisclosure in
pretrial discovery will not support an action
for fraud on the court. . . .
Generally speaking, only the most egregious
misconduct, such as bribery of a judge or
members of a jury, or the fabrication of
evidence by a party in which an attorney is
implicated will constitute a fraud on the court.
Less egregious misconduct, such as
nondisclosure to the court of facts allegedly
pertinent to the matter before it, will not
ordinarily rise to the level of fraud on the
court.
3
Although a party may commit fraud on the court, see In re
Levander, 180 F.3d at 1120, our cases often involve misconduct by an
attorney. See, e.g., Pumphrey, 62 F.3d at 1133. In this case, the district
court determined that “counsel acted in good faith and was not a party to
the other activities of the Trendsettah principal.”
TRENDSETTAH USA V. SWISHER INT’L 21
United States v. Buck, 281 F.3d 1336, 1342 (10th Cir. 2002)
(citations and alterations omitted).
Our review of relevant case authority persuades us that
the district court erred in granting relief from judgment under
Rule 60(d) based on fraud on the court. See Sierra Pacific
Indus., Inc., 862 F.3d at 1171–72.
C. The District Court’s Grant of Swisher’s Motion
for Relief from Judgment Due To Newly
Discovered Evidence and Fraud
Trendsettah asserts that the district court abused its
discretion in granting Swisher’s motion for relief from
judgment as to Trendsettah’s antitrust claims pursuant to
Rules 60(b)(2) and (b)(3) based on fraud and newly
discovered evidence. Trendsettah posits that Swisher’s
motion was untimely under the one-year limitation period
imposed by Rule 60(c)(1), and that no equitable exceptions
applied to toll the limitations period.
In Nevitt v. United States, 886 F.2d 1187 (9th Cir. 1989),
a case relied on by Trendsettah, we explained that “[a] motion
for relief from judgment based on a mistake (Rule 60(b)(1)),
newly discovered evidence (Rule 60(b)(2)), or fraud (Rule
60(b)(3)) shall be made not more than one year after the
judgment, order, or proceeding was entered or taken.” Id. at
1188 (citation and internal quotation marks omitted). The
“one-year limitation period is not tolled during an appeal.”
Id. (citation omitted).
The present appeal is distinguishable from Nevitt because
Swisher did not seek to toll the time limitations imposed by
Rule 60(c)(1) while its appeal was pending. Rather, the
22 TRENDSETTAH USA V. SWISHER INT’L
district court determined that Swisher’s motion was timely
because “the Ninth Circuit’s decision substantially altered the
judgment, and the time for bringing a Rule 60(b) motion
restart[ed].”
Although we have not extensively addressed this issue,
other courts have concluded that the limitations period
imposed by Rule 60(c)(1) may be restarted subsequent to an
appeal. For example, in Jones v. Swanson, 512 F.3d 1045,
1048 (8th Cir. 2008), the Eighth Circuit explained that courts
“have recognized that a new, one-year period under Rule
60(b) might be triggered if a subsequent appellate ruling
substantially alters the district court’s judgment in a manner
that disturbs or revises the previous, plainly settled legal
rights and obligations of the parties.” (citations and alteration
omitted); see also Martha Graham Sch. and Dance Found.,
Inc. v. Martha Graham Ctr. of Contemporary Dance, Inc.,
466 F.3d 97, 100–01 (2d Cir. 2006), as amended (concluding
that the one-year limitations period for a Rule 60(b) motion
was not restarted because its prior “ruling made no
substantive change in [the] legal position from that
established by the judgment of the district court”) (citation
omitted); The Tool Box, Inc. v. Ogden City Corp., 419 F.3d
1084, 1089 (10th Cir. 2005) (acknowledging that a new “one-
year period under Rule 60(b) might be triggered if the
subsequent appellate ruling substantially alters the district
court's judgment”) (citations omitted).
The reasoning of these cases informs our agreement with
the district court that Swisher’s motion under Rule 60(b)(2)
and (b)(3) was timely because our remand decision
“substantially alter[ed] the district court’s judgment in a
manner that disturb[ed] or revise[d] the previous, plainly
settled legal rights and obligations of the parties.” Jones,
TRENDSETTAH USA V. SWISHER INT’L 23
512 F.3d at 1048 (citations omitted). The jury rendered a
verdict in favor of Trendsettah on its antitrust and breach of
contract claims. On Swisher’s motion for judgment as a
matter of law, the district court entered judgment in favor of
Trendsettah on the breach of contract claims, but entered
judgment “in favor of [Swisher] and against [Trendsettah] on
all of [Trendsettah’s] other claims, including [Trendsettah’s]
claims for violation of Section 2 of the Sherman Act.” On
appeal, we ruled that in pertinent part:
The district court’s grant of summary
judgment to Swisher as to its antitrust claims
is REVERSED. The district court’s grant of a
new trial to Swisher as to the attempted
monopolization claim is REVERSED. . . . The
district court’s grant of [judgment as a matter
of law] to Swisher as to the monopolization
claim is REVERSED. . . . On remand, the
district court is directed to reinstate the jury’s
verdict in its entirety. . . .
Trendsettah USA, Inc., 761 F. App’x at 718. Our remand
decision “substantially alter[ed]” the district court’s judgment
in favor of Swisher regarding the antitrust claims, rendering
Swisher’s Rule 60 motions timely as to those claims. Jones,
512 F.3d at 1048 (citations omitted).
Contrary to Trendsettah’s assertions, construing Swisher’s
motion as timely does not contravene Rule 60(c)(1) or Rule
6(b)(2) of the Federal Rules of Civil Procedure. Rule
60(c)(1) provides that “[a] motion under Rule 60(b) must be
made within a reasonable time—and for [Rule 60(b)] (1), (2),
and (3) no more than a year after the entry of the judgment or
order or the date of the proceeding.” Fed. R. Civ. P. 60(c)(1).
24 TRENDSETTAH USA V. SWISHER INT’L
The rule that we apply in conformity with our sister circuits
is consistent with Rule 60(c)(1) because it is tethered to the
judgment itself, and substantial alterations in the judgment
from an appellate ruling. This rule is also consistent with
Rule 6 of the Federal Rules of Civil Procedure, which
prohibits a court from “extend[ing] the time to act under”
Rule 60(b). Fed. R. Civ. P. 6(b)(2). We are not extending the
time for filing a Rule 60(b) motion, but recognizing the
beginning of a new limitations period as a result of an
appellate decision that has “substantially alter[ed] the district
court’s judgment in a manner that disturbs or revises the
previous, plainly settled legal rights and obligations of the
parties.” Jones, 512 F.3d at 1048.
Addressing the merits of Swisher’s motion, Trendsettah
contends that the district court erred in granting Swisher’s
Rule 60(b) motion because issues relating to federal excise
taxes were irrelevant at trial, and Swisher did not exercise
reasonable diligence in discovering Alrahib’s fraud. We
disagree.
“Rule 60(b) allows for relief from a final judgment, order,
or proceeding for any of six reasons: (1) mistake,
inadvertence, surprise, or excusable neglect; (2) newly
discovered evidence that could not have been discovered in
time to move for a new trial; (3) fraud, misrepresentation, or
misconduct; (4) the judgment is void; (5) the judgment has
been satisfied; or (6) any other reason that justifies relief.”
Hanson v. Shubert, 968 F.3d 1014, 1017 n.1 (9th Cir. 2020)
(citation and internal quotation marks omitted).
“Relief from judgment on the basis of newly discovered
evidence is warranted if (1) the moving party can show the
evidence relied on in fact constitutes newly discovered
TRENDSETTAH USA V. SWISHER INT’L 25
evidence within the meaning of Rule 60(b); (2) the moving
party exercised due diligence to discover this evidence; and
(3) the newly discovered evidence must be of such magnitude
that production of it earlier would have been likely to change
the disposition of the case.” Feature Realty, Inc. v. City of
Spokane, 331 F.3d 1082, 1093 (9th Cir. 2003) (citation and
internal quotation marks omitted).
“Rule 60(b)(3) permits a losing party to move for relief
from judgment on the basis of fraud, misrepresentation, or
other misconduct of an adverse party.” De Saracho v.
Custom Food Mach., Inc., 206 F.3d 874, 880 (9th Cir. 2000)
(citation, alteration, and internal quotation marks omitted).
“To prevail, the moving party must prove by clear and
convincing evidence that the verdict was obtained through
fraud, misrepresentation, or other misconduct and the conduct
complained of prevented the losing party from fully and fairly
presenting the defense.” Id. (citations omitted). “Rule
60(b)(3) is aimed at judgments which were unfairly obtained,
not at those which are factually incorrect. . . .” Id. (citation
and internal quotation marks omitted).
Trendsettah contends that Swisher failed to meet the
standard for relief from judgment premised on fraud and
newly discovered evidence due to “the facial irrelevance of
excise taxes” to the damages calculations performed by
Trendsettah’s expert. As previously noted, however,
Trendsettah’s tax evasion allowed it to set artificially low
prices and continue to compete effectively in the relevant
markets, thereby incurring its asserted damages.
Moreover, Alrahib stated in his interview with an internal
revenue agent that he was aware of the tax evasion and
“that’s how we could compete in the marketplace.” Alrahib
26 TRENDSETTAH USA V. SWISHER INT’L
explained that “there’s no way [they] could compete” without
the benefits bestowed by the fraudulent evasion of federal
excise taxes. Trendsettah does not dispute that, in support of
Trendsettah’s antitrust claim, Alrahib testified about the
impact of Swisher’s purported anticompetitive behavior on
Trendsettah’s business. Alrahib’s concealment of his excise
tax fraud scheme and its impact on Trendsettah’s competitive
viability precluded Swisher’s defense to the antitrust claims
“from being fully and fairly presented.” Wharf v. Burlington
N. R.R. Co., 60 F.3d 631, 638 (9th Cir. 1995). Tellingly,
Trendsettah does not advance any contention that the jury
would have reached the same verdict for antitrust liability and
damages if it were fully apprised of Alrahib’s fraudulent
evasion of federal excise taxes.
We are also unpersuaded by Trendsettah’s contentions
that Swisher did not exercise reasonable diligence in
discovering the fraud. First, Trendsettah maintains that
Swisher belatedly realized the import of federal excise taxes
relative to the damages calculation for the antitrust claims.
However, Trendsettah’s reliance on this hypertechnical aspect
of damages calculations, which it describes as “a
methodological criticism that was available all along,” misses
the point. Trendsettah’s fraud implicated more than “a
methodological criticism.” Instead, it undermined
Trendsettah’s allegations that its business was constrained by
Swisher’s anticompetitive acts. Dr. Cox explained that
“[a]bsent such fraud, [Trendsettah] would have had to
increase prices (and sell fewer products) or shut down. Its
demonstrated inability to compete effectively in the relevant
markets [absent the tax fraud] also indicates that Swisher’s
alleged actions could not have harmed competition as
[Trendsettah] alleged.”
TRENDSETTAH USA V. SWISHER INT’L 27
Second, Trendsettah maintains that Swisher had in its
possession invoices “showing that [Trendsettah] paid Havana
59 nearly $40,000 per container in excise tax,” “hundreds of
copies of the tax filings themselves,” “along with the details
of the calculations and the canceled checks showing those
payments.” According to Trendsettah, Swisher was
compelled to wade through these documents and piece
together the fraudulent tax evasion scheme concealed by
Alrahib. But Swisher was not required to engage in a fishing
expedition to establish reasonable diligence. Indeed, it bears
noting that Trendsettah’s own expert did not detect the fraud
that Trendsettah posits was hidden in plain sight.
Finally, Trendsettah asserts that the district court
“adopted Swisher’s factual premise that any line of
questioning about excise-tax evasion would likely have led to
the disclosure of the fraudulent scheme.” Trendsettah
apparently maintains that the district court made a factual
finding that Swisher could have discovered Alrahib’s tax
fraud scheme if only it had asked questions about excise taxes
at trial. But this notion is not supported by the district court’s
order. The district court explained that:
based on [Trendsettah’s] inaccurate arguments
that Alrahib’s federal excise tax violations
were merely past wrongs, Swisher was
foreclosed from asking Alrahib about excise
tax evasion, a line of questioning that, absent
perjury, would likely have led to the
disclosure of the fraudulent scheme he later
disclosed to federal . . . agents.
In context, the district court’s observation was related to
Alrahib’s deposition testimony and Trendsettah’s motion in
28 TRENDSETTAH USA V. SWISHER INT’L
limine. In his deposition, Alrahib acknowledged that he
failed to pay state excise taxes for a business in Arizona.
However, Swisher was unable to pursue this issue at trial
because the district court granted Trendsettah’s motion in
limine “to exclude evidence that Trendsettah’s principal
Akrum Alrahib . . . failed to pay excise taxes on tobacco
products purchased through an Arizona company and later
resold in California.” Far from making a factual
determination that “any line of questioning about excise-tax
evasion” would have revealed Alrahib’s fraud, the district
court concluded that Swisher’s failure to further question
Alrahib concerning tax fraud was due to the grant of
Trendsettah’s motion in limine rather than a lack of diligence
by Swisher. As a result, the district court correctly concluded
that “the evidence demonstrating fraud—Alrahib’s May 2017
interview which was revealed to the public in April
2019—was not available” when Swisher could have filed a
motion for new trial.
We conclude that Swisher timely filed its Rule 60(b)
motion and exercised reasonable diligence in discovering
Alrahib’s fraudulent evasion of federal excise taxes. If
Swisher had been able to present evidence of Alrahib’s fraud
to the jury, it “would have . . . likely . . . change[d] the
disposition of the case,” Feature Realty, Inc., 331 F.3d at
1093 (citation omitted), and enabled Swisher to “fully and
fairly present[ ]” its defense to the antitrust claims, Wharf, 60
F.3d at 638. The district court, therefore, properly vacated
the judgment in accordance with Rules 60(b)(2) and (b)(3).4
4
Because we affirm the district court’s order granting Swisher’s
motion for relief from judgment under Rule 60(b), we decline to grant
Trendsettah’s request that this case be reassigned to a different district
court judge.
TRENDSETTAH USA V. SWISHER INT’L 29
IV. CONCLUSION
Swisher was unable to meet the high threshold to
establish fraud on the court under Rule 60(d). See Sierra
Pacific Indus., Inc., 862 F.3d at 1168. However, relief from
judgment on Trendsettah’s antitrust claims is warranted under
Rule 60(b)(2) and (b)(3) based on newly discovered evidence
and fraud.
Swisher’s motion brought pursuant to Rule 60(b)(2) and
(b)(3) based on newly discovered evidence and fraud was
timely, and Swisher acted with reasonable diligence in
discovering Alrahib’s tax fraud scheme, which, if disclosed,
would have likely altered the jury’s verdict.
AFFIRMED in part and REVERSED in part. Each
party shall bear its costs on appeal.