PRECEDENTIAL

UNITED STATES COUR'I` OF APPEALS
FOR THE THIRD CIRCUIT

No. 16-3 244

IN RE: ANDREW E. BRESSMAN,
Debtor

JAMES A. BAXTER; ANDREW BAXTER;
J.A. BAXTER LIFE INVESTMENT TRUS'I`;
RICHARD KATZ; ROBERT THOMAS;
EGI 1985 RE'I`IREMENT BENEFIT 'I`RUS'I`

V.

ANDREW E. BRESSMAN

JAMES A. BAXTER, individually and as successor-in-
interest to the J ames A. Baxter Life Investment Trust;
RICHARD KATZ; ROBERT THOMAS,

Appellants

On Appea| from the United States District Court
for the District of New Jersey
(D. N.J. No. 2-14-cv-053 14)
District Judge: I-Ionorable Kevin McNulty

Argued on March 20, 2017
Before: AMBRO, JORDAN and ROTH, Circuit Judges

(Opinion filed: October 18, 2017)

Max Folkenflik [Argued]
Folkenflik & McGerity
1500 Broad Street
21st Floor
New York, NY 10036
Counselfor Appellants

Ryan '1`. Jareck

Cole Schotz

1325 Avenue of the Americas
New York, NY 10019

Michael D. Sirota [Argued]
Warren A. Usatine
Cole Schotz
25 Main Street
Court Plaza North, P.O. Box 800
Hackensack, NJ 07601

Counselfor Appellee

OPINION

ROTH, Circuit Judac

ln this appeal we arc asked to decide whether Max
FolkenHik, Esq., committed fraud on the court. The
Banl<ruptcy Court determined that l?olkcn'flik had intentionally
deceived the court. As a result, the court vacated the default
judgment it had previously entered in favor of Folkenflik’s
clients. rI`he District Court afflrmcd. Finding no error, we will
affirm.

This action was commenced as an adversary complaint
in a Chapter 11 bankruptcy proceeding brought by Andrew
Bressman. The Plaintiffs arc victims of fraudulent activities
by Bressman. ln the 1990’s, Brcssman and others had engaged
in manipulation of stock priccs. 'l`he Plaintiffs brought civil
securities fraud and Rackctcer Intlueneed and Corrupt
Organizations Aet (RICO) claims against Bressman and his eo-
defendants in the Unitcd Statcs District Court for the Southern
District of New York. 'l`he Plaintiffs were represented by
Folkenilik. These civil actions against Bressman were stayed
when Bressrnan filed for bankruptcy in the Bankruptcy Court
for the District of Nc\v Jcrsey. In response_. the Plaintit`fs filed
the adversary complaint against Brcssman.

rfhe civil securities fraud and RICO claims continued
against Brcssman’s cci-defendants before Judge John Koeltl in
the Southcrn District of Ne\v York. On August 13, 1998.
claims a ainst the co-defendants in one ofthe suits were settled
for On August 28, lioll<enllil<, as attorney for
Plaintiffs, received the full settlement amount, minus a $75,000
prompt payment discountl 'l`hc parties’ Settlcment Agreement,

approved by Judge Koeltl, was subject to a confidentiality
order, which incorporated the following language from the
parties’ stipulated confidentiality agreement:

It is hereby stipulated, consented and agreed to
by counsel for the parties in this action, that they
will not disseminate and/or publicize the
existence of or disclose the financial terms of any
settlement agreement with any defendants,
except as further set forth in this Stipulation and
order; that this confidentiality provision does not
prohibit or restrict the parties from responding to
any inquiry about the documents produced or
their underlying facts and circumstances by any
state or federal regulatory agency, including the
Securities and Exchange Commission or any
self-regulatory organization . . ..'

The adversary proceeding continued against Bressman in the
Bankruptcy Court.

Several months after the Settlement Agreement was
reached and the funds received, the Plaintiffs sought a default
judgment in the Bankruptcy Court against Bressman. The
court ordered them to submit an affidavit detailing their
damages In March 1999, Folkenflik, as their attorney,
submitted an affidavit that recounted the history of the
proceedings against Bressman and his co-defendants. The
affidavit indicated that the damages totaled $5,195,081 plus
interest. Although Folkenflik’s affidavit provided a
comprehensive account of` the underlying proceedings, it made

 

' App. A38.

no mention of the usettlement that he had obtained

against Bressman"s eo-defendants or even of the fact of the
settlement Explicitly noting its reliance on l"`oll<eni'lik’s
aflidavit_. the Bankruptcy Court entered a default judgment
against Bressman for $5,195,031 on February 7._ 2000. The
Bankruptcy Court ordered Foll<enflik to submit a separate
application for RICO damages In September 2002, the
Plaintiffs filed an application for RICO damages and attorneys’
fees. No mention was made in that application that the
Plaintiffs had already been paid-on account of their
losses. In July 2003, still unaware of the Settlement
Agreement, the Bankruptcy Court entered a RICO judgment
for treble damages, totaling 515,585,243. 'l"hc court noted that
this "“amount constitute[d] treble the damages found and
awarded by this Court as Plaintist out-of-pockct losses . . ..”3
'I`hc court also awarded $910,855.93 in attorneys’ fees.3

Bressman was incarcerated from 2003 until 2006 in
connection with his conviction in Ne\v York state court for
enterprise corruption and grand larceny. During that time and
the seven years that followed, Folkenflik made no attempt to
recover on the default judgment because, in his view, the
likelihood of Bressman having substantial assets was remote
In 2013, however, Folkenflik learned that Bressman was going
to receive a potential payment of$lO million, so Folkcnllik set
out to have the 315,585,243 judgment satisfiedl l~Ic filed ex
parte applications on behalf of the Plaintiffs in the Southern
District of New Yorl< and in the District of Ncw .lersey to
appoint a receiver to search for and seize Bressman’s assets.

 

3 App. A26?-68.
3 App. A268.

The court in New Jersey expressed skepticism that
emergency ex parte relief was warranted, given Folkenflil<’s
failure to collect for ten years 'l`he application was denied in
open court and was withdrawn the same day. fn New York,
Judge Ramos granted the application on Scptember 26, 2013.
On October 2_. Folkenfiik filed a new application in the District
of New Jersey asking the court to authorize the receiver, who
had been appointed by the Southern District o'f`New York, to
act in New .lersey. Contrary to Loeal Rule, l*`olkenf'iik did not
mark on the civil cover sheet that this action was related to the
unsuccessful application that he had filed in the District of New
Jersey several days carlier.4 As a rcsult._ the case was assigned
to a different judge who granted the ex parte application
Searehes and seizures were executed in New York and New
Jersey on October 1 1.

ln declarations appended to Plaintiffs’ ex parte
applications, l*`olkenflik indicated that, as a result of post-
judgment interest, the judgment against Bressman totaled
530,895,913.39. Nothing in these submissions indicated that
Folkenfiik had already collected S_on behalf of the
Plaintit`fs. Indccd_. in his brief in support ofhis application in
the Southern District of New York, Folkenflik stated: “With
post judgment interest, the Judgment’s current value is
$30,895,913.39. ’fo date - more than ten years later - Plaintif`fs
have not seen a dime of this amount."'5

 

"‘ During a sanctions hearing before the Southern District of
New York, the court found “deeply troubling the suggestion
that [Folkenflik] did not completely, fairly, and accurately
disclose to [the District of New Jerscy] the application they had
previously made . . .."` App. A43.

5 App. A4 l.

Then, on October 13, 2013, Bressman’s attorney, David
Wander, wrote to Folkenflik, asking if anyone had made
payments on thejudgment.6 Folkenf`lik certified that it was not
until then that he looked at the docket sheet and saw that the
settlement was listed. On October 16, Folkenflik replied to
Wander, stating “[t]he complete and accurate response to your
specific question is no, there have not been any payments from
any source regarding the Bressman Judgment.”7 Polkenf`lik
added, in connection with this letter: “I . . . advised him of all
of the facts 1 thought I was allowed to advise him of, given the
public disclosure of the existence of the settlement, and that
was what I was able to say,”8 namely, that certain defendants
were dismissed from one of` the civil actions, “subject to a
settlement agreement that was submitted to Judge Koeltl with
the confidentiality ‘so ordered’ and the agreement sealed by
the order of the Court in or about October 1998.”9 That action
Was then marked closed. Folkenflik certified that he Was not
aware of the reference to the settlement in the court docket until
October 2013.10

October 2013 was the first time that the Bankruptcy
Court, the District Courts in New York and New Jersey, and

 

6 App. A368.

7 App. A41.

3 App. A368.

9 App. A509-10.
'° App. A42.

Bressmanll learned that Folkenf`lik had successfully negotiated
a settlement agreement with Bressman’s co-defendants. The
orders granting the Plaintiffs’ ex parte applications were then
vacated in both courts and the seized materials were returned.

On January 7, 2014, Judge Koeltl in the Southern
District of New York held a hearing to determine whether
Folkenflik was obligated to disclose the Settlement Agreement
and to whom. Folkenflik argued that, absent the confidentiality
order, he would have informed the Bankruptcy Court of the
Settlement Agreement even though he believed it was
“immaterial” and irrelevant to the underlying default
judgement.'2 By oral order, the court instructed the parties to
provide counsel and all involved judges With details of the
Settlement Agreement

 

" Although Bressman claims he was unaware of the Settlement
Agreement until October 16, 2013, Folkenflik argues
Bressman was aware of the Agreement as early as “sometime
in the 90’s.” Folkenflik also contends that Bressman had
constructive notice of` the Settlement Agreement’s existence
because it was inadvertently disclosed on the Southern District
of New York’s public docket. The Bankruptcy Court did not
credit this assertion because “Folkenflik certifie[d] that he,
himself, was not aware of this public reference until October
2013.” App. A42. In any event, the date When Bressman
became aware of the Agreement is not germane to the merits
of our discussion. The inquiry here is primarily focused on the
representations that Folkenflik made to the Bankruptcy Court
when he appeared ex parte in 1999 and which he continued to
present to the Bankruptcy Court and the District Courts in the
following years.

'2 App. A384.

On January 9, 2014, a hearing was held by Judge Ramos
in the Southem District of New York to determine whether
Folkenflik’s decision to file the ex parte application to collect
on the default judgment with no mention of the Settlement
Agreement constituted sanctionable misconduct The judge
noted that the validity of the default judgment against
Bressman was not at issue in that hearing.13 At the conclusion
of the hearing, the court declined to impose sanctions.

Bressman then asked the Bankruptcy Court for the
District of New Jersey to reopen the proceeding related to the
Plaintiffs’ adversary complaint, vacate the underlying default
and RICO judgments, and dismiss the Plaintiffs’ complaint
with prejudice on the grounds that the judgment Was
fraudulently obtained. On March 20, 2014, the Bankruptcy
Court held a hearing. Bressman’s counsel argued that “if` there
were ever a case to vacate a judgment based upon fraud on the
Court, it’s this case. There is no question that Mr. Folkenflik
intentionally concealed and affirmatively misrepresented
critical facts to this Court in an effort to obtain undeserved
double recovery for his clients and enormous fees for
himself.”14

Folkenflik urged that he would have informed the
Bankruptcy Court of the Settlement Agreement if doing so had
not been prohibited by the confidentiality order, In the
alternative, Folkenflik argued that Bressman’s motion was
untimely. The Bankruptcy Court rejected Folkenflik’s
contentions. Finding that Folkenflik’s conduct was intentional

 

13 App. A497-98.
14 App. A617.

and was the type of egregious misconduct that constitutes fraud
on the court, the Bankruptcy Court vacated the default
judgment and dismissed the adversary complaint with
prejudice. The District Court affirmed the Bankruptcy Court’s
order, and this appeal followed.

II.

The District Court had jurisdiction to consider
Folkenflik’s appeal of the Bankruptcy Court’s order under 28
U.S.C. § 158(a)(1). We have jurisdiction pursuant to 28 U.S.C.
§ 158(d) and 28 U.S.C. § 1291.

The Plaintiffs raise three arguments on appeal. First,
they contend that Bressman’s motion to vacate the default
judgment was time barred. Whether the underlying motion
was barred is a question of law, and as such our review is
plenary.'s Second, the Plaintiffs contend that Folkenflik’s
conduct does not rise to the level of egregious misconduct that
constitutes intentional fraud on the court. Because the facts are
not in dispute, we exercise plenary review of whether
Folkenflik committed intentional fraud.16 Finally, the
Plaintiffs claim that that the sanction of dismissal with
prejudice was an abuse of the Bankruptcy Court’s discretion.
As with other forms of equitable relief, our review of the
Bankruptcy Court’s decision to vacate the underlying default

 

15 Um'ted States v. Hull, 456 F.3d 133, 137 (3d Cir. 2006)
(citation omitted).
16 Id. (citation omitted).

10

judgment is for abuse of discretion.17 We review its findings
of fact for clear error.18

III.
A.

The Plaintiffs first contend that the Bankruptcy Court’s
grant of relief was procedurally barred because Bressman’s
motion was filed more than ten years after the alleged
fraudulent conduct. In the alternative, the Plaintiffs assert that
the action was barred by the doctrine of laches. We disagree
with both contentions

Federal Rule of Civil Procedure 60(b) authorizes relief
from a finaljudgment on six separate grounds. '9 Rule 60(b)(3)
specifically permits a court to relieve a party from a final
judgment for “fraud[,] . . . misrepresentation, or
misconduct[,]”20 and subsection 6 permits courts to do so for
“any other reason thatjustifies relief.”21 As the Plaintiffs note,
Rule 60 motions alleging fraud are ordinarily subject to a one-
year limitations period.22 Although they correctly recite the
Rule’s time bar, they do so to no avail. Rule 60 has no
applicability where, as here, a party requests relief from a final

 

'7 Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S.
23 8, 248 (1944); Groupe SEB USA, Inc. v. Euro-Pro 0perat1'ng
LLC, 774 F.3d 192, 197 (3d Cil‘. 2014).

18 Chemetron Corp. v. Jones, 72 F.3d 341, 345 (3d Cir. 1995).
'9 Fed. R. Civ. P. 60(b).

20 Fed. R. Civ. P. 60(b)(3).

2' Fed. R. civ. P. 60(b)(6).

22 Fed. R. civ. P. 60(¢)(1).

11

judgment in response to an opponent’s alleged fraud on the
court. We settled this issue in Averbach v. Rival Mfg. Co.,
where we held that “the one year time limit in the rule, by virtue
of the rule’s very text, does not apply to independent actions”
such as those for fraud on the court.23 Our decision in Herring
v. Um'tea’ States reaffirmed our holding in Averbach: “an
independent action alleging fraud upon the court is completely
distinct from a motion under Rule 60(b).”24

This concept that the inherent power of federal courts to
vacate a fraudulently obtained judgment-even years after the
judgment was entered-has long been recognized by the
Supreme Court,25 Consistent with this precedent, the
bankruptcy court here granted the requested relief because it
found that Folkenflik committed fraud on the court. We
therefore see no basis to conclude that the time limits of Rule
60 barred the court’s consideration of the appellee’s motion to
vacate the underlying defaultjudgment.

The Plaintiffs’ contention that the doctrine of laches
counsels against vacating the underlying default judgment
similarly fails. “Laches is ‘a defense developed by courts of

 

25 809 F.2d 1016, 1020 (3d Cir. 1987). Although Averbach
was an independent action, we noted there that “the elements
for a cause of action for such relief in an independent action
are not different from those elements in a Rule 60(b)(3) motion
. . ..” Id. at 1022-23.

24 424 F.3d 384, 389 (3d Cir. 2005) (citation omitted).

25 See Hazel-Atlas Glass Co., 322 U.S. at 248-49 (recognizing
that federal courts possess inherent power to vacate a judgment
obtained by fraud on the court); see also Plaut v. Spendthrift
Farm, Inc., 514 U.S. 211, 233-34 (1995) (same).

12

equity’ to protect defendants against ‘unreasonable, prejudicial
delay in commencing suit.”’26 The defense “applies in those
extraordinary cases where the plaintiff ‘unreasonably delays in
filing a suit,’ and, as a result, causes ‘unjust hardship’ to the
defendant. Its purpose is to avoid ‘inequity.”’27 The Plaintiffs
bear the burden of proving that the elements of laches-
“inexcusable delay in instituting suit and prejudice resulting to
the respondent from such delay”-are met.28 Arguing that
Bressman unjustifiany slept on his rights for ten years, the
Plaintiffs challenge the District Court’s conclusion that the
elements of laches are not present. However, because “[b]y its
very nature the doctrine [of laches] addresses itself to the sound
discretion of the trial judge[,] . . . absent an abuse of discretion,
we will not disturb the court’s determination.”29

The Bankruptcy Court did not credit Folkenflik’s
assertion that Bressman was aware of the payment as early as
1999. On appeal, the District Court affirmed that laches were
not applicable here, stating:

 

26 SCA Hygz`ene Proa'. Aktiebolag v. First Quality Baby Prod.,
LLC, 137 S. Ct. 954, 960 (2017) (citing Petrella v. Metro-
Goldwyn-Mayer, Inc., 134 S. Ct. 1962, 1967, 1973 (2014)).

27 Petrella, 134 S. Ct.at 1979 (Breyer, J., dissenting) (citations
omitted).

28 Kane v. Union of Soviet Socialist Republics, 189 F.2d 303,
305 (3d Cir. 1951) (en banc); see also Waddell v. Small Tube
Prod., Inc., 799 F.2d 69, 74 (3d Cir. 1986) (“The party
asserting the defense . . . bears the burden of proof.” (citation
omitted)).

29 Gruca v. U.S. Steel Corp., 495 F.2d 1252, 1258 (3d Cir.
1974) (citation omitted).

13

A vague statement about what Bressman
“heard” at some unspecified time and place
during the decade of` the 1990’s is not much to
go on. But in any event, l find that [the
Bankruptcy Court] acted here within the law

and the bounds of his discretion, . . . This was
not an adversarial proceeding but an
application for a default judgment. . . . Under

the circumstances, [the Bankruptcy Court]
could permissibly make an equitably based
ruling “that a fraud committed upon the court
could be time barred offends all notions of
integrity and equity. There can be no
protections against such intentional conduct.”30

We agree. Accordingly, we cannot say the Bankruptcy Court
abused its discretion in concluding that Bressman’s motion
was not barred by the doctrine of laches.

B.

We next address whether Folkenflik’s failure to disclose
the Settlement Agreement rises to the level of intentional fraud.
As officers of the court, attorneys are required “to conduct
themselves in a manner compatible with the role of courts in
the administration of justice.”3' This responsibility is
sometimes_-albeit rarely-disregarded. When, however,

 

30 App. A9-10, citing the Bankruptcy Court, App. A45.

3' In re Snyder, 472 U.S. 634, 644-45 (1985); see also
Demjanjuk v. Petrovsky, 10 F.3d 338, 352 (6th Cir. 1993) (“AS
an officer of the court, every attorney has a duty to be
completely honest in conducting litigation.”).

14

counsel has failed to act with candor, preservation of the
integrity of the judicial process may require courts to depart
from their usual adherence to the principle that final judgments
should be left undisturbed.32 We confront one such situation
here.

A court may set aside ajudgment based upon its finding
of fraud on the court when an officer of the court has engaged
in “egregious misconduct.”"’3 We have said that such a finding
“‘must be supported by clear, unequivocal and convincing
evidence”’34 of “(1) an intentional fraud; (2) by an officer of
the court; (3) which is directed at the court itself . . ..”35 In
addition, fraud on the court may be found only where the
misconduct at issue has successfully deceived the court.36
Folkenflik contests the Bankruptcy Court’s findings on two

 

32 See Hazel-Atlas Glass Co. , 322 U.S. at 244 (recognizing that
that “under certain circumstances, one of which is afier-
discovered fraud,” a court may exercise its equitable powers to
vacate judgments “to fulfill a universally recognized need for
correcting injustices which, in certain instances, are deemed
sufficiently gross to demand a departure from rigid adherence”
to the finality of judgments).

53 Herring v. United States, 424 F.3d 384, 390 (3d Cir. 2005)
(quoting In re Coordinated Pretrial Proceedings in Antibiotic
Antitrust Actions, 538 F.2d 180, 195 (8th Cir. 1976) (intcrnal
quotation marks omitted)).

34 Id. at 387 (quoting In re Coordinated Pretrial Proceedings
in Anlibiotlc Antitrust Actions, 538 F.2d at 195).

35 Id. at 390.

36 lai

15

grounds: First, he claims that any fraud was not intentional,55

and seeond, he argues that the alleged deceit does not constitute
the kind of egregious misconduct that the fraud on the court
doctrine aims to address Both contentions arc belied by the
properly found factsl

Although direct evidence of intent will rarely be
available, it may be inferred from the surrounding
circumstances Folkenfiik’s intentions were clear: l~le set out
to recover the full amount of the default judgment without any
offset for the settlement with the co-dcfendants. li`olkenflik’s
scheme manifested itselfin early March of 1999 when he filed
an affidavit to support the del"aultjudgment he sought against
Bressman. The affidavitwas comprehensive: lt recounted the
history of the related proceedings, scrupulously detailed the
damages each Plaintiff` sought, provided a calculation of
interest, and carefully described Folkenflik"s involvement in
the matter. Conspicuously, the affidavit omitted any mention
of the $_Folkenflik recovered on behalf his clients
several months earlier. As Folkenflik was aware, the
Bankruptcy Court was not presented with any information
from Plaintiffs’ adversaries or from any nonparty because
Folkenflik was appearing ex parte

While Folkenflik claims that he never intended to
collect on the judgment without first ensuring that the
appropriate offset would be applied_. the record provides strong
support for a conclusion to the contrary. First, this contention
is discredited by Folkenflik"s own assertion that he was under
no obligation to inform the court of Bressman’s right to a set

 

55 By considering this argument, we are in no way conceding
that fraud is not an intentional tort.

16

off`.38 Second, Folkenflik indicated in his brief`, supporting his
ex parte application for a receiver in the Southem District of
New York that “[w]ith post-judgment interest, the Judgment’s
current value is $30,895,913.39” and that “[t]o date - more
than ten years later - Plaintiffs have not seen a dime of this
amount.”39 This declaration, as with Folkenflik’s other
attestations throughout the underlying proceedings, is grossly
misleading and illustrates an intent to receive an unjustified
recovery.

Folkenflik made a deceptive representation to the court
in his affidavit, obtained a default judgment, had it trebled, and
was awarded interest and attorneys’ fees We have no trouble
concluding that his failure to disclose the settlement reflects his
intent to commit fraud on the court.40

Folkenflik also asserts_indefatigably_that he would
have informed the court of the settlement payment had he not

 

38 App. A384, A537-38.

39 App. A303-04.

40 The New York and New Jersey District Courts declined
Bressman’s invitation to impose sanctions in response to
Folkenflik’s lack of candor with respect to the 2013 ex parte
enforcement proceedings Folkenflik argues that the courts’
refusal to impose sanctions demonstrates that he did not act
with the requisite intent. This argument is of no moment since
our determination is based on the deceptive representations
Folkenflik made in the 1999 Affidavit and not with his ex parte
enforcement applications Further, it is not clear whether
considerations concerning sanctionable conduct are identical
or analogous to those concerning fraud on the court. We need
not make this determination today.

17

been barred from doing so by the confidentiality order, This
contention is unconvincing Folkenflik was not, as he
suggests, left only with the options of concealment or
impermissible disclosure. He was aware that relevant facts
were being omitted from his affidavit, Even if he believed that
the confidentiality order prohibited him from disclosing to the
Bankruptcy Court the existence of the Settlement Agreement,
he could have so stated in his affidavit and have asked either -
or both - the District Court in the Southem District of New
York and the Bankruptcy Court in New Jersey for guidance.
His failure to do so is consistent with an intent to defraud the
court in order to maximize the recovery.

Folkenflik’s alternative attempts to justify his
nondisclosure fare no better. He contends that he cannot be
held responsible for his omissions because he was not
obligated to inform the court of Bressman’s right to a setoff.‘"
In his view, Bressman had notice of the adversary proceedings,
failed to act, and therefore waived any defenses Bressman
denies that he had any knowledge of the settlement until
October 2013. However, Whether Bressman did or did not
have knowledge does not forgive Folkenfiik for his
misrepresentations to the court. Moreover in this regard, any
right to set off is not relevant to Folkenflik’s failure to inform
the court of the fact of the settlement. In addition, Folkenflik’s
position is further compromised by the fact that Bressman Was
absent. The ex parte nature of the proceedings was not a
license for Folkenflik to deceive the court by deliberately
failing to bring the material fact of the settlement to the court’s
attention.

 

‘" App. A537-38.

18

In fact, Folkenf1ik’s duty to deal with the court honestly
and with integrity was particularly important in light of the
non-adversarial nature of the ex parte proceedings In such a
proceeding, the court depends on the integrity of appearing
counsel because only he can ensure that the court has received
the full scope of information pertinent to the merits of its
considerations Folkenflik was not only obligated to submit
truthful inforrnation, but he was also required to disclose to the
court any material information of which he was aware.
Because his failure to do so has sufficiently undermined the
judicial process, we conclude that a finding of fraud on the
court will lie.

This determination brings us to Folkenflik’s next
argument that a “fraud on the court”-based claim can succeed
only when it is based on perjurious misconduct. This
suggestion is based on an incorrect reading of our Herring
opinion, which establishes that perjury by a witness does not,
by itself, constitute fraud on the court.42 Understood in its
proper context, Herring’s pronouncement was appropriately
narrow and has no relevance here since Bressman’s motion
does not pertain to a witness who has allegedly committed
perjury. There is an important distinction between perjury that
is committed by a witness and fraudulent conduct that is
directed at the court by one of its own officers The latter has
a much greater likelihood of undermining the working of the
normal process of adjudication because courts rely on the
integrity of their officers Folkenflik is a licensed attorney who
exploited his privilege to practice before the courts by not
revealing the details of a relevant settlement payment This

 

42 424 F.3d at 390.

19

deceit maximized his clients’ recovery-and, in tum, his fee.
Herring is distinguishable

Having determined that the record evidences an
intentional scheme to improperly influence the court, we next
address whether Folkenflik’s ploy is the kind of misconduct
that the fraud on the court doctrine seeks to address We
conclude that it is The Supreme Court has warned that fraud
on the court actions must be “reserved for those cases of
‘injustices which, in certain instances are deemed sufficiently
gross to demand a departure’ from rigid adherence to the
doctrine of res judicata.”43 Taking heed of this instruction, we
held in Herring that only “‘egregious misconduct . . . such as
bribery of a judge or jury or fabrication of evidence by
counsel”’ can be characterized as the kind of fraud that
warrants relief from a judgment.44

The facts here demonstrate “a deliberately planned and
carefully executed scheme to defraud . . ..” 45 In his affidavit
supporting his petition for a default judgment, Folkenflik
omitted that Bressman’s co-defendants had settled their claims
in one of the New York actions: conduct which is incapable of
innocent explanation Folkenflik, in his capacity as an officer
of the court, made sworn averments to obtain a default
judgment and damages Knowing that the averments had
omitted a material fact, Folkenflik nevertheless allowed the
Bankruptcy Court to rely upon their truthfulness The court’s
reliance on the affidavit impugned its integrity.

 

43 Um'ted States v. Beggerly, 524 U.S. 38, 46 (1998) (citing
Hazel-Atlas Glass Co., 322 U.S. at 244).

44 424 F.3d at 390 (citation omitted).

45 See Hazel-Atlas Glass, 322 U.S. at 245.

20

We conclude that the misconduct at issue here is
sufficiently egregious Because there is clear, unequivocal,
and convincing evidence showing that Folkenflik committed
fraud on the court, we will affirm the judgment of the District
Court,

C.

Finally, Plaintiffs contend that the Bankruptcy Court
could not grant relief from the default judgment without first
weighing the factors set forth in Poulis v. State Farm Fire &
Casualty C0.46 This argument requires little discussion. “In
Poulis, we held that a district court must consider six factors
before it may dismiss a case as a sanction . . ..”4" We have
since required consideration of Poulis in only a limited number
of additional contexts.48 “Our application of Poulis in those
contexts comports with the underlying concern that Poulz`s
sought to address, namely that dismissal as a sanction before
adjudication of the merits deprives a party of her day in
court.”49 Our precedents have reaffirmed that the Poulz's
factors are required to “preserve the ability of the parties to try
their cases on the merits.”50 These concerns are not present
here. In fact, the principle underlying Poulis, that disputes
should be decided on their merits, is the very basis for our

 

46 747 F.2d 863 (3d Cir. 1984).

47 Knoll v. City of Allentown, 707 F.3d 406, 408 (3d Cir. 2013).
43 Id. at 409 (listing cases).

49 [d.

50 Id. at 410.

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disfavor of default judgments5l As set forth above, our review
of the decision to vacate a default judgment under the
circumstances presented here asks whether a court has abused
its discretion, Because the Bankruptcy Court has not done so,
we will affirm.52

IV.

“Membership in the bar is a privilege burdened with
conditions.”53 Among the most oft-cited is the condition that
attorneys will honor the duty of loyalty they owe to each of
their clients In so doing, attorneys must not-and in most
cases do not-disregard their inherent obligation to the system
of justice.54 Because Folkenflik has conducted himself in a
way that has improperly interfered with the administration of
justice, protection of the court’s integrity requires us to act, In
light of this responsibility, we Will affirm the judgment of the
District Court.

 

5' Harad v. Aetna Cas. & Sur. Co., 839 F.2d 979, 982 (3d Cir.
1988) (noting that we have “adopted a policy disfavoring
default judgments and encouraging decisions on the merits”
(citation omitted)).

52 To the extent that Plaintiffs seek to use Poulis to challenge
the Bankruptcy Court’s decision to dismiss their underlying
action with prejudice, the Poulis factors are plainly satisfied.
In Poulis, we developed factors to consider when determining
if misconduct is grave enough to warrant the drastic sanction
of dismissal. Poulis, 747 F.2d at 868. A fraud on the court is
unquestionably such misconduct.

53 In re Snyder, 472 U.S. at 644 (citation and internal quotation
marks omitted).

54 Id.

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