This case stems from a long-running dispute involving Harry Stonehill, a businessman whose records were seized during a 1962 raid in the Philippines. The IRS later used these documents in a civil tax case against Stonehill, which resulted in a final judgment in 1980. Decades later, in 2008, a district court issued a judgment in a separate Freedom of Information Act (FOIA) lawsuit brought by Stonehill's successor, Pauline Stonehill, regarding the IRS's handling of records related to that raid. The 2008 judgment approved some withholdings and ordered disclosures but denied other requests. Sixteen years after that 2008 judgment, Dr. Patrick Lenz, the current executor of the estate, moved to set aside the judgment. He alleged that IRS attorneys had fraudulently represented to the court that two specific boxes of records were missing, thereby depriving the estate of access to them. The district court denied the motion, ruling that the alleged conduct did not constitute fraud on the court and that the motion was time-barred.
The D.C. Circuit addressed two primary legal issues: whether the district court erred in denying relief under its inherent power for fraud on the court, and whether the motion was properly denied as untimely under the Federal Rules of Civil Procedure. First, regarding fraud on the court, the court reiterated that this doctrine applies only to 'very unusual cases' involving the corruption of the judicial machinery itself, such as the bribery of a judge, and not merely to nondisclosure or false statements between parties. The court affirmed the district court's finding that Dr. Lenz failed to meet the 'clear and convincing evidence' standard required to prove that IRS attorneys knowingly made false representations about the missing boxes. The appellate court found that evidence showing the boxes were later found or refiled did not prove the attorneys knew their location during the 2006-2008 litigation. Second, the court addressed the procedural posture of the motion. Although Dr. Lenz filed under Rule 60(b)(6), the court agreed with the district court that the motion 'sounds in fraud' and must be treated as a Rule 60(b)(3) motion. The court emphasized that Rule 60(b)(3) motions must be filed 'no more than a year after the entry of the judgment.' Because the 2008 judgment was entered sixteen years prior to the motion, the claim was time-barred. The court rejected the argument that the deadline should start when the fraud was discovered, stating the rule is clear that the clock starts at the entry of judgment.
The 2008 FOIA judgment remains in full force, and the IRS is not required to produce the disputed boxes based on this motion. The decision reinforces the high evidentiary bar for proving fraud on the court and clarifies that the one-year deadline for Rule 60(b)(3) motions is strict and not tolled by the discovery of fraud. Parties seeking to vacate judgments based on alleged fraud must act within one year of the judgment's entry, regardless of when they uncover the alleged misconduct.
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