Bench Memos

District Judge Denies Motion to Set Aside Settlement for Moonlight Fire

Last Friday, and after exhaustive briefing, Judge William B. Shubb, the federal judge handling the Moonlight Fire litigation denied the defendants’ motion to set aside their multi-million-dollar settlement with the government as a fraud on the court.

The court concluded that the government’s failure to turn over important information and documents undermining its case did not rise to the level of a fraud on the court:

Defendants made a calculated decision to settle this case almost two years ago, and a final judgment was entered pursuant to their agreement. To set that judgment aside, the law requires a showing of fraud on the court, not an imperfect investigation. Defendants have failed to identity even a single instance of fraud on the court, certainly none on the part of any attorney for the government. They repeatedly argue that fraud on the court can be found by considering the totality of the allegations. Here, the whole can be no greater than the sum of its parts. Stripped of all its bluster, defendants’ motion is wholly devoid of any substance.

Harsh words from a district judge. And not quite fair to the defendants, either, who spent nearly 70 pages of their initial motion and 20 pages of their reply brief explaining the “substance” behind their allegations.

Although this is the last step in the trial court, it’s probably not the end of the litigation. If the defendants appeal, they will likely renew their argument that the Brady v. Maryland (1963) standard for production of exculpatory information in criminal cases applies to civil cases. 

They’ll also be able to argue that the district court misapplied the standard for “fraud on the court.” In general, a “fraud on the court” takes place when a fraud is conducted by officers of the court or is directed at the court itself. The Ninth Circuit has said that “fraud on the court” includes “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.” As a result, “Most fraud on the court cases involve a scheme by one party to hide a key fact from the court and the opposing party.” Although finding a “fraud in the inducement” makes it easier to find “fraud on the court,” one does not necessarily imply the other.

The district court’s opinion appears to conflate the two categories, concluding that no fraud on the court could have occurred because “defendants possessed and understood the purported significance of the very documents and testimony they now rely on.” Any factual revelations that occurred after settlement, the court said, were ether a failure of diligence or the sort of problem that could have been brought up in cross-examination at trial.

If the defendants appeal, we’ll find out if the appeals court agrees with that interpretation of the facts. 

Jonathan KeimJonathan Keim is Counsel for the Judicial Crisis Network. A native of Peoria, Illinois, he is a graduate of Georgetown University Law Center and Princeton University, an experienced litigator, and ...

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