Hazel-Atlas Glass Co. v. Hartford-Empire Co.
1944 U.S. LEXIS 1200, 64 S. Ct. 997, 322 U.S. 238 (1944)
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Rule of Law:
A Circuit Court of Appeals has the inherent power and duty, under settled equitable principles, to vacate its own judgment entered at a prior term and direct the vacation of a District Court’s decree entered pursuant to its mandate, when that judgment was procured by a deliberately planned and carefully executed scheme to defraud the court and the Patent Office.
Facts:
- In 1926, Hartford-Empire Co. (Hartford) had a pending patent application for a “gob feeding” glass pouring machine but faced significant opposition from the Patent Office.
- To aid its application, Hartford officials and attorneys secretly created an article, signed by William P. Clarke (a prominent union president), to appear as an independent expert's endorsement of the “gob feeding” device.
- The fraudulent article was published in July 1926 and subsequently introduced into the Patent Office record in October 1926, leading to the grant of Patent No. 1,655,391 in January 1928.
- In 1929, during a District Court infringement trial against Hazel-Atlas Glass Co. (Hazel), Hazel’s attorneys received hearsay information that a Hartford lawyer was the true author of the Clarke article but did not attempt to verify it, relying on other defenses.
- After the Circuit Court of Appeals ruled in Hartford's favor in May 1932, prominently quoting the Clarke article, Hazel hired investigators, while Hartford’s representatives secretly met with Clarke, obtaining an affidavit from him on May 24, 1932, attesting to his authorship, despite Clarke having told Hazel's investigator the same day he would not sign any affidavit.
- Following the Circuit Court's decision and the continued concealment of fraud, Hazel capitulated, paying Hartford $1,000,000 and entering into licensing agreements.
- Hartford's representative subsequently paid Clarke $500 in cash and an additional $7,500 in cash, stating a “moral obligation” but denying a prior agreement.
- In 1941, indisputable proof of the fraud (correspondence, expense accounts, and testimony) emerged during the trial of United States v. Hartford-Empire Company et al., an anti-trust prosecution, leading Hazel to commence the present suit.
Procedural Posture:
- Hartford-Empire Co. (Hartford) initiated an infringement suit against Hazel-Atlas Glass Co. (Hazel) in the District Court for the Western District of Pennsylvania on June 6, 1928.
- The District Court dismissed Hartford's bill, finding no infringement, on March 31, 1930.
- Hartford appealed the District Court's judgment to the Third Circuit Court of Appeals.
- The Third Circuit Court of Appeals reversed the District Court's judgment, holding the patent valid and infringed, and directed the District Court to enter a decree accordingly on May 5, 1932.
- Hazel sought and was granted five extensions for filing a petition for rehearing with the Third Circuit Court of Appeals.
- The Third Circuit Court of Appeals issued its mandate to the District Court on July 30, 1932.
- Pursuant to the mandate, the District Court entered a final judgment against Hazel for an injunction and an accounting.
- On November 19, 1941, Hazel filed a petition in the Third Circuit Court of Appeals for leave to file a bill of review in the District Court to set aside the 1932 judgment, alleging fraud.
- The Third Circuit Court of Appeals, after a hearing, denied the petition as framed but granted Hazel leave to amend its prayer to ask the Circuit Court itself to hear and determine the issue of fraud, concluding the fraud was practiced on it.
- Hazel amended its petition, praying the 1932 judgments against it be vacated; Hartford replied with additional exhibits and affidavits.
- The Third Circuit Court of Appeals, with one judge dissenting, denied relief, finding the fraud not newly discovered, the article not primary to its 1932 decision, and that it lacked power to set aside the decree due to the expiration of the term during which the 1932 decision had been rendered.
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Issue:
Does a Circuit Court of Appeals have the power and duty, even after the expiration of the term in which its judgment was rendered, to vacate its own judgment and direct a District Court to vacate its decree if the Circuit Court's judgment was procured by fraud perpetrated on the court and the Patent Office?
Opinions:
Majority - Mr. Justice Black
Yes, a Circuit Court of Appeals does have the power and duty to vacate its own judgment and direct a District Court to vacate its decree, even after the term's expiration, when the judgment was obtained through a deliberately planned scheme to defraud the court and the Patent Office. The Court affirmed the inherent equitable power of federal courts to grant relief against judgments procured by fraud, stating that this power exists irrespective of the expiration of the term during which the judgment was entered, as the equity rule was fashioned to correct injustices demanding a departure from rigid adherence to the term rule. The fraud in this case was not merely a matter of disputed evidence but a "deliberately planned and carefully executed scheme to defraud not only the Patent Office but the Circuit Court of Appeals." The Court rejected the Circuit Court's reasoning that Hazel lacked proper diligence in uncovering the fraud, emphasizing that the issue concerned not only private parties but also the public interest in the integrity of the judicial process. Tampering with justice is a "wrong against the institutions set up to protect and safeguard the public," and therefore, "preservation of the integrity of the judicial process must always wait upon the diligence of litigants." It also dismissed the argument that the Clarke article was not "basic" to the 1932 decision, stating that Hartford's efforts to create and promote the article demonstrated its perceived materiality, and Hartford was in no position to dispute its effectiveness now. The deception of attributing authorship, not the truth of the article's content, was the fraud. Finally, the Court held that the Circuit Court had both the power and duty to vacate its own judgment and issue appropriate directions to the District Court. This power stems from the historical flexibility of equitable procedure and the established practice for appellate courts to grant or deny petitions for bills of review, even long after term expiration, particularly when the fraud was perpetrated on the appellate court itself. The Court concluded that the total effect of the fraud called for nothing less than a complete denial of relief to Hartford for the claimed infringement, requiring the vacation of the fraudulently obtained patent judgments.
Dissenting - Mr. Justice Roberts
No, a Circuit Court of Appeals lacks the power to unilaterally try issues of fact or modify a judgment after its mandate has gone down and the term has expired, and such actions are contrary to established federal procedure. Justice Roberts argued that the majority's decision overrules long-settled principles governing the finality of judgments and the limited appellate jurisdiction of federal courts. He contended that federal courts are creatures of statute, and appellate courts are granted only appellate jurisdiction, not original jurisdiction to try issues of fact or hear new evidence. The proper, orderly remedy for relief from a judgment procured by fraud, especially after the term has expired, is a suit in equity (a bill of review) in the District Court, where issues of fact can be tried with "living witnesses instead of through the unsatisfactory method of affidavits." Roberts also questioned Hazel's diligence, highlighting that its counsel had received information about the article's true authorship years before the settlement but chose not to pursue it, perhaps deliberately foregoing disclosure in favor of a favorable licensing agreement with Hartford. He suggested that Hazel might be coming to the court with "unclean hands" and that a full trial would be necessary to resolve these controverted issues, rather than deciding on affidavits. He believed the Circuit Court should have permitted the filing of the bill in the District Court to preserve the rights of the parties to a deliberate and orderly trial.
Analysis:
This case significantly reinforced the inherent equitable power of federal courts, including appellate courts, to address and remedy fraud perpetrated on the judicial system, even after the expiration of normal procedural deadlines. It emphasized that the integrity of the judicial process and public welfare can override strict adherence to procedural rules like the "term rule" and litigant diligence requirements when egregious fraud against the court is discovered. The decision broadened the circumstances under which appellate courts could directly intervene to correct fraudulently obtained judgments, rather than remanding for trial, especially when the fraud was directed at the appellate court itself and the facts were undisputed. This ruling serves as a strong deterrent against attempts to subvert justice and ensures that courts are not powerless victims of deception.
