Error: Bad annotation destination
 United States Court of Appeals for the Federal Circuit

                                        05-1537


              VENTURE INDUSTRIES CORPORATION, VEMCO, INC.,
              PATENT HOLDING COMPANY, and LARRY J. WINGET,

                                                      Plaintiffs-Appellees,

                                           v.


             AUTOLIV ASP, INC. (successor to Morton International, Inc.),

                                                      Defendant-Appellant,

                                          and

                             AUTOLIV, INCORPORATED,

                                                      Defendant.




        John E. Anding, Drew, Cooper & Anding, of Grand Rapids, Michigan, argued for
plaintiffs-appellees. With him on the brief was Thomas V. Hubbard. Of counsel on the
brief was Richard W. McLaren, Jr., Welsh & Katz, Ltd., of Chicago, Illinois.

       Peter G. Greene, Skadden, Arps, Slate, Meagher & Flom LLP, of New York, New
York, argued for defendant-appellant. With him on the brief was Cyrus Amir-Mokri. Of
counsel on the brief was William H. Horton, Cox, Hodgman & Giarmarco, P.C., of Troy,
Michigan.

Appealed from: United States District Court for the Eastern District of Michigan

Senior Judge Avern Cohn
 United States Court of Appeals for the Federal Circuit

                                        05-1537


              VENTURE INDUSTRIES CORPORATION, VEMCO, INC.,
              PATENT HOLDING COMPANY, and LARRY J. WINGET,

                                                             Plaintiffs-Appellees,

                                           v.

             AUTOLIV ASP, INC. (successor to Morton International, Inc.),

                                                             Defendant-Appellant,

                                          and

                             AUTOLIV, INCORPORATED,

                                                             Defendant.


                           ___________________________

                              DECIDED: August 7, 2006
                           ___________________________

Before LINN, DYK, and PROST, Circuit Judges.

DYK, Circuit Judge.

      Autoliv ASP, Inc. (“Autoliv”) appeals the decision of the United States District

Court for the Eastern District of Michigan denying Autoliv’s motion for relief from

judgment in favor of Venture Industries Corp., Vemco, Inc., Patent Holding Co., and

Larry J. Winget (collectively “Venture”), pursuant to Federal Rule of Civil Procedure 60,

sections (b)(2) and (b)(3). Venture Indus. Corp. v. Autoliv ASP, Inc., No. 99-75354
(E.D. Mich. July 15, 2005) (Judge Avern Cohn).1 We conclude that the district court did

not err in denying Autoliv’s request under Rule 60(b)(2), but that the district court erred

in failing to address whether Venture’s use at trial of financial statements containing

false information constituted “fraud, misrepresentation, or other misconduct” warranting

relief under Rule 60(b)(3). Accordingly, we affirm in part, vacate in part, and remand.

                                     BACKGROUND

       This appeal presents the issue of whether the use of falsified information in

financial statements by Venture’s damages expert at trial entitles Autoliv to relief from

judgment under either Rule 60(b)(2) or 60(b)(3) of the Federal Rules of Civil Procedure.

       As part of the 1995 settlement of a patent dispute between Venture and Autoliv,

Venture and Autoliv executed a supply agreement.2          Under the supply agreement,

Autoliv was obligated to purchase airbag covers from Venture so long as Venture was

capable of filling the order and Venture’s bids were “reasonably competitive” with the

bids of other suppliers. In the period after 1995, Autoliv purchased some covers from

Venture, but also acquired covers from other sources.

       On November 3, 1999, Venture filed suit against Autoliv alleging that Autoliv

breached the supply agreement with respect to 38 airbag cover projects either by not

allowing Venture to bid on the projects or by rejecting Venture’s reasonably competitive

bids. Venture’s complaint also stated several patent law claims, including claims for

       1
              On August 4, 2005, the district court issued an opinion explaining its
reasons for denying Autoliv’s Rule 60(b) motion. Venture Indus. Corp. v. Autoliv ASP,
Inc., No. 99-75354 (E.D. Mich. Aug. 4, 2005) (“Rule 60(b) Opinion”).
       2
              The supply agreement and two other agreements that were part of the
settlement were executed by Venture and Morton International, Inc. (Autoliv ASP’s
predecessor in interest). Morton was acquired by and merged into Autoliv ASP in 1997.
For convenience, we refer to both Morton International, Inc. and Autoliv ASP as
“Autoliv.”


05-1537                                     2
correction of inventorship, declaratory judgment of unenforceability of patents Autoliv

claimed to own, and declaratory judgment of infringement of patents Venture claimed to

own. These claims were stayed by the district court pending the outcome of arbitration

of these claims as required by a cross-license agreement, also executed as part of the

settlement of the 1995 litigation. Other claims relating to the supply agreement were

either stayed by stipulation of the parties or voluntarily dismissed.3 Discovery and other

pretrial proceedings took place for the next several years.

      Discovery proved to be contentious. For this reason, on March 5, 2002, the

district court appointed a Special Master to oversee discovery. On November 14, 2002,

Autoliv submitted to Venture the following request for production of documents:

      Please produce each and every one of Venture’s monthly, quarterly, and
      annual internal and external financial statements for the years 1995 to the
      present, whether reviewed, compiled or audited, and all documents relied
      upon, referred to, consulted or generated in preparing such statements,
      including your general ledgers, subsidiary ledgers, accounts payable and
      receivable ledgers, trial balances, accountants’ work papers, bank
      statements, check registers and bank records. The term financial
      statements shall include, but is not limited to your balance sheets, income
      statements, profit and loss statements, cash flow statements, statements
      of net worth, statements of retained earnings and all notes to such
      financial statements.

J.A. at 648.   Autoliv also requested financial information regarding the relationship

between Venture and its subsidiaries. Venture responded that these requests “lack[ed]

foundation in that Defendants have never contended Plaintiffs’ financial condition was

the basis for withholding the award of any program.” J.A. at 668. Unsatisfied, Autoliv



      3
             The other claims related to the supply agreement were for fraudulent
inducement and misrepresentation, termination and cancellation of contract, accounting,
unjust enrichment, and unfair competition. Venture also asserted claims for fraudulent
inducement of the settlement of the 1995 litigation and misappropriation of trade
secrets.


05-1537                                     3
filed a motion to compel further responses on January 27, 2003. On March 10, 2003,

the Special Master denied Autoliv’s motion, concluding that “[r]equests for financial

information in this lawsuit are appropriate, but these requests are overbroad.” Rule

60(b) Opinion, slip op. at 6 (quoting Special Master report and recommendation).

       On April 9, 2003, Autoliv, seeking additional financial information, filed a motion

to compel the depositions of representatives of Venture and two of its subsidiaries

pursuant to Rule 30(b)(6) of the Federal Rules of Civil Procedure. On September 23,

2003, the district court orally denied Autoliv’s motion, concluding that “[a]ll of [Venture’s]

financial statements, its annual statements and its quarterly statements and its monthly

statements should be produced,” but that Autoliv’s proposed deposition topic (“the basis

for [the deponent’s] contention that Venture’s bid on each [project] would have been

reasonably competitive with those quotes submitted by others”) was “actually asking for

Venture’s position in the litigation.” Id. at 6-7. The district court explained: “I prefer to

wait until the final pretrial statement is prepared and we see which witnesses Venture is

going to offer and the nature of their testimony . . . and then if there’s some basis for

asking that because you don’t already have that, that’s okay . . . .” Id. at 7.

       Autoliv did not challenge or seek reconsideration of either the Special Master’s or

the district court’s discovery rulings. Autoliv also did not submit further requests for the

documents or alert the district court to any further problems with the discovery of

Venture’s financial information.

       On November 4, 2003, trial began in Venture’s action against Autoliv for breach

of the Supply Agreement.       Venture’s expert witness on damages at trial was Aron

Levko. To calculate Venture’s damages, Levko relied on financial information from a




05-1537                                       4
manufacturing facility in Grand Blanc, Michigan, operated by a Venture subsidiary,

Vemco, Inc., which would have produced the airbag covers for the projects awarded to

Venture under the supply agreement with Autoliv. Levko utilized Venture’s actual bids,

some third party bids, and two independent production cost studies commissioned by

Venture in 1997 and 1998. The cost estimates in the bids on which Levko relied did not

separate variable costs (e.g., the costs of material and labor) from fixed costs (e.g.,

general overhead). Levko needed to separate fixed from variable costs for two reasons:

(1) In addition to claiming lost profits, Venture claimed the right to recover the fixed

costs attributable to the contracts; and (2) Levko needed to assign the correct amount of

variable costs to the hypothetical bids he constructed for programs where no bid was

submitted. To do this, Levko used the ratio of fixed to variable costs reflected in Grand

Blanc’s plant-wide financial statements.

      In order to compute the material cost component of the variable costs, Levko

needed to calculate the amount of the purchased raw material that would become

unusable scrap. To verify the accuracy of the material (scrap) costs reflected in the

bids, Levko compared the scrap rate reflected in the bids (15 percent), against the scrap

rate discernable from actual production data (approximately 11 percent), and the scrap

rate reflected in Grand Blanc’s plant-wide financial statements (12.4 percent). To be

conservative, Levko used the bid scrap rate of 15 percent in his calculations. Based on

the bid data, Levko calculated a contribution margin of 25 percent.

      On December 4, 2003, the jury found that Autoliv had breached the supply

agreement and awarded Venture $27,576,001 in damages. The district court entered




05-1537                                     5
final judgment against Autoliv in the amount of the jury’s verdict on January 20, 2004,

pursuant to Rule 54(b) of the Federal Rules of Civil Procedure.

       During the discovery period, Venture filed for reorganization under the

Bankruptcy Code. The bankruptcy court appointed Doeren Mayhew & Company, P.C.

(“Doeren Mayhew”), a forensic accounting firm, to investigate certain aspects of

Venture’s financial condition, including “inter-company, shareholder and related party

transactions.” Rule 60(b) Opinion, slip op. at 3.4

       After the entry of final judgment in this case, on March 10, 2004, Doeren Mayhew

issued a report stating that “Venture had suffered multi-million dollar damages as a

result of fraudulent related party transactions.” Rule 60(b) Opinion, slip op. at 3-4. This

conclusion called into question the representations in Venture’s firm-wide financial

statements.

       On March 25, 2004, Doeren Mayhew issued a second report concerning the

results of its “preliminary investigation of potential accounting irregularities.” J.A. at 583.

The report focused on Vemco and the Grand Blanc facility.5 As noted, the books and

records of that facility had been used by Venture’s damages expert at trial. Doeren



       4
                The scope of Doeren Mayhew’s initial investigation included (1)
investigating “related party transactions that have taken place with Venture for the six-
year period, March 29, 1997 through March 28, 2003 . . . . to determine whether the
transaction was considered on no less favorable terms to the Debtor than would be
obtained if such transaction were an ‘arms-length’ transaction with a non-affiliated
entity[,]” J.A. at 185; and (2) reviewing and identifying “preferential transfers to insiders
or affiliated companies as defined by Code Section 547(b) of the United States
Bankruptcy Code” during the twelve-month period preceding Venture’s date of
insolvency, May 28, 2002. J.A. at 187.
        5
                Doeren Mayhew undertook this investigation after it was “notified in early
March 2004 regarding potential accounting irregularities discovered by Venture’s
management at the company’s Grand Blanc facility.” J.A. at 583. The scope of the
investigation was limited to the Grand Blanc facility’s internal financial information.


05-1537                                       6
Mayhew discovered “questionable accounting procedures and practices,” a “[l]ack of

proper accounting controls,” and “potential accounting irregularities” and “errors,” and

concluded (1) that Grand Blanc’s “material cost may have been understated by

approximately $700,000 on a monthly basis” during 2003, and (2) that “Grand Blanc had

overstated its inventory on its financial records as of December 31, 2002 and 2003 by

$2,800,000 and $2,500,000 respectively.” J.A. at 584-85, 588. These misstatements

resulted from an employee’s manipulation of entries in the Grand Blanc facility’s

computerized accounting system and were reflected in reports generated by that

system, including Grand Blanc’s plant-wide financial statements.      Doeren Mayhew’s

second report also called into question Venture’s firm-wide financial statements, insofar

as those statements were based in part on the inaccurate Grand Blanc plant-wide

financial statements.

      On April 5, 2004, Venture filed a Securities and Exchange Commission Form 8-K

disclosing the information in the Doeren Mayhew reports.        As to the related-party

transactions addressed in the March 10, 2004 Doeren Mayhew report, the 8-K stated

that Venture had filed a lawsuit seeking “[r]ecovery of payments to one or more of

Defendants aggregating in excess of [$300,000,000],” J.A. at 591, and that as a result

of the related-party transactions, “financial information previously publicly reported by

Venture Holdings as far back as at least 1998 is unreliable and should not be relied

upon by investors.” J.A. at 592. As to the Grand Blanc accounting issues addressed in

the March 25, 2004 Doeren Mayhew report, the 8-K stated that “[i]nvestigation by

[Venture] and Doeren Mayhew disclosed . . . [a]pparent understatement of payables at

the Grand Blanc facility during fiscal 2003 aggregating $8,000,000 -- $10,000,000 . . .




05-1537                                    7
[and] [o]verstatement of inventory at the Grand Blanc facility during fiscal 2002 and

2003 in the range of $2,500,000 -- $2,800,000.” J.A. at 592.

       The Doeren Mayhew investigation was not immediately called to the district

court’s attention by either party. On April 7, 2004, the district court entered an amended

final judgment in the amount of $33,459,134.84, adding prejudgment interest to the jury

award. Autoliv appealed to the United States Court of Appeals for the Sixth Circuit,

which transferred the appeal to this court on July 16, 2004. On October 4, 2004, we

stayed the appeal to allow Autoliv the opportunity to file with the district court a motion

for a new trial pursuant to Rule 60(b) based on the Doeren Mayhew reports. Autoliv

filed its Rule 60(b) motion on October 21, 2004.        Autoliv argued that the falsified

financial information identified in the Doeren Mayhew reports constituted: (1) newly

discovered evidence that could have affected the outcome of the trial, entitling Autoliv to

a new trial pursuant to Rule 60(b)(2); and (2) “fraud, misrepresentation, or other

misconduct of an adverse party” during discovery and the trial, entitling Autoliv to a new

trial under Rule 60(b)(3).

       After conducting an evidentiary hearing at which Levko testified that Doeren

Mayhew’s conclusions had no effect on his trial testimony, the district court denied

Autoliv’s Rule 60(b) motion. As to Rule 60(b)(2), the district court concluded that Autoliv

failed to prove that the newly discovered financial information would have had an effect

on the jury’s decision on damages. As to Rule 60(b)(3), the district court held that

Venture did not commit discovery misconduct by failing to produce financial information

that Autoliv alleged would have disclosed the misrepresentations Doeren Mayhew

uncovered in time for use at trial. Because the district court had earlier denied Autoliv’s




05-1537                                     8
motions to compel such production, and Autoliv neither challenged those rulings nor

requested further disclosures of internal financial information from Venture, the district

court concluded that there had been no discovery misconduct. The district court did not

address Autoliv’s request for relief under Rule 60(b)(3) based on Levko’s trial testimony.

       Autoliv timely appealed from the district court’s disposition of the Rule 60(b)

issues.6 Because Venture’s complaint asserted claims under the patent laws, we have

jurisdiction pursuant to 28 U.S.C. § 1295(a)(1). The ruling of a district court under Rule

60(b) is final and appealable pursuant to 28 U.S.C. § 1292. Ashland Oil, Inc. v. Delta

Prods. Corp., 806 F.2d 1031, 1032 (Fed. Cir. 1984). At oral argument, we requested

supplemental briefing as to the legal standard applicable to Autoliv’s Rule 60(b)(3)

request.

                                     DISCUSSION

       The denial of a motion for a new trial under Rule 60(b) is reviewed for abuse of

discretion. Good v. Ohio Edison Co., 149 F.3d 413, 423 (6th Cir. 1998); Mallory v.

Eyrich, 922 F.2d 1273, 1279 (6th Cir. 1991). “An abuse of discretion will be found if the

district court relies on clearly erroneous findings of fact, improperly applies the law or

uses an erroneous legal standard.” United States v. Chambers, 441 F.3d 448, 455 (6th

Cir. 2006).

       We address Autoliv’s Rule 60(b)(2) and Rule 60(b)(3) arguments separately.




       6
         We lifted the stay, allowing Autoliv’s appeal from the jury verdict and final
judgment (nos. 04-1486 and 04-1488) to proceed. In an opinion also issued today, we
affirm the judgment on the merits, subject to the remand proceedings that we order in
this appeal. As to Venture’s cross appeal, we vacate the district court’s award of
prejudgment interest and remand to the district court. Venture Indust. Corp., et al. v.
Autoliv ASP, Inc., Nos. 04-1486, -1488 (Fed. Cir. August 7, 2006).


05-1537                                     9
                                             I

       As a threshold matter, we reject Venture’s contention that Autoliv’s motion was

untimely. Rule 60(b) provides that motions “shall be made within a reasonable time,

and for reasons (1), (2), and (3) not more than one year after the judgment, order, or

proceeding was entered or taken.” Autoliv filed its Rule 60(b) motion on October 21,

2004, nine months after the entry of judgment on January 20, 2004. Though the district

court accepted Autoliv’s motion without comment, Venture argues here that the nine-

month delay was unreasonable under Rule 60(b).

       The Sixth Circuit has held that whether the time of filing a Rule 60(b) motion was

reasonable “is dependent upon the facts in a case, including length and circumstances

of delay in filing, prejudice to opposing party by reason of the delay, and circumstances

warranting equitable relief.” In re G.A.D., Inc., 340 F.3d 331, 334 (6th Cir. 2003).7

Here, Venture makes no colorable claim that it was prejudiced by Autoliv’s delay.

Further, Venture itself was likely under an obligation to promptly notify the district court

of the inaccuracies in Levko’s testimony.        See Mich. R. Prof’l Conduct 3.3(a)(4),

adopted by reference E.D. Mich. Local R. 83.22(b) (“If a lawyer has offered material

evidence and comes to know of its falsity, the lawyer shall take reasonable remedial

measures.”); see also Schreiber Foods, Inc. v. Beatrice Cheese, Inc., 402 F.3d 1198,

1205 (Fed. Cir. 2005) (“Once counsel became aware that highly material false

statements had been made by a witness, in pleadings submitted to the court and in




       7
             One exception (not pertinent here) applies to Rule 60(b)(1) motions
predicated upon alleged errors of law, for which the Sixth Circuit has held that the
“reasonable time” is limited to the time for filing a notice of appeal. Barrier v. Beaver,
712 F.2d 231, 234-35 (6th Cir. 1983).


05-1537                                     10
response to discovery requests . . . Schreiber and its counsel were under an obligation

to promptly correct the record.”).

       Rule 60(b)(2) provides, in pertinent part: “On motion and upon such terms as are

just, the court may relieve a party . . . from a final judgment, order, or proceeding for the

following reasons: . . . (2) newly discovered evidence which by due diligence could not

have been discovered in time to move for a new trial under Rule 59(b)[.]” Fed. R. Civ.

P. 60(b)(2) (West 2006). “In order to prevail on a Rule 60(b)(2) motion, a movant must

demonstrate . . . that the evidence is material and controlling and clearly would have

produced a different result if presented before the original judgment.” Good, 149 F.3d

at 423 (internal quotation marks, brackets, and citation omitted).

       Autoliv argues that the Doeren Mayhew reports constitute newly discovered

evidence that undercut the accuracy of Levko’s testimony, entitling Autoliv to a new trial

under Rule 60(b)(2). At the evidentiary hearing on Autoliv’s motion, Levko testified in

detail that Doeren Mayhew’s findings had no effect on his assessment of Venture’s

damages because, in making his calculations, he did not rely primarily on information

from the Grand Blanc facility’s main accounting system or the plant-wide financial

statements. Instead, he relied principally on information from the Grand Blanc facility’s

“bid” (or “quote”) system. Both Levko and Autoliv’s expert, Glenn Sheets, testified that

the bid system was separate and independent from the accounting system and that the

information from the bid system was not called into question by the Doeren Mayhew

reports. The district court found that “Autoliv has not made out a case for a finding that

had the accounting irregularities described in the March 25 Doeren Mayhew report been




05-1537                                      11
known prior to trial, Levko’s opinion and conclusion on damages would have produced a

different result at trial with regard . . . to damages.” Rule 60(b) Opinion, slip op. at 18.

       Autoliv insists that the district court, in making findings of fact and determinations

of the weight and credibility of the evidence, rejected Autoliv’s Rule 60(b)(2) motion

based on the district court’s own judgment rather than the probable effect of the

evidence on the jury. We disagree. The district court expressly assessed the probable

effect on the jury, stating: “It cannot be said that if the jury was presented with the

Doeren Mayhew reports . . . its decision on damages would have been any different.”

Id. at 20.   The district court reviewed the factual record in the light of the newly

discovered evidence and made findings as to the weight of that evidence to determine

what the effect on the jury likely would have been. Analysis of the record is necessary

to resolve a Rule 60(b)(2) request.8

       Autoliv also challenges several of the district court’s specific findings regarding

the effect of the accounting irregularities on Levko’s testimony. Autoliv questions the

bid system information that Levko used primarily in calculating Venture’s damages. The

bid information was obtained from the Grand Blanc facility’s separate bid system. The

district court found that this information “was separate and independent from the Grand

Blanc facility plant-wide financial data” implicated by the Doeren Mayhew reports, id. at

18, and “was specific and reliable.” Id. at 10. Levko relied on Venture’s bids on Autoliv

projects that were submitted before 2002, whether accepted or not. For projects that

       8
              See, e.g., Daniels v. Pipefitters’ Ass’n Local Union No. 597, 983 F.2d 800,
802-03 (7th Cir. 1993) (“[I]t is only logical that a district court weigh the credibility of
evidence before granting or denying a Rule 60(b)(2) motion. Rule 60(b)(2) motions are
decided by judges; not by juries. Credibility determinations are necessary to these
decisions. To hold otherwise would mean that the district court would have to order a
new trial no matter how incredible the new evidence.”).


05-1537                                       12
Venture did not actually bid on, Levko created hypothetical bids using data from

submitted bids and five third-party bids.

       Autoliv points out that the erroneous Grand Blanc financials were the result of a

“lack of proper accounting controls.” J.A. at 588. It argues that because there were

errors in the Grand Blanc facility’s financial statements for 2002-2003, “[t]he only

reasonable inference to be drawn . . . is that [Venture’s accounting] controls were not

appropriate during that earlier time period either.” Reply Br. of Autoliv at 25. Autoliv

contends that this inference undercuts the reliability of the pre-2002 bid data Levko

used. The district court concluded, however, that “Levko’s opinion on damages was

grounded on bids that antedated December 31, 2001,” and that “[t]here is no evidence

to suggest that the accounting irregularities at the Grand Blanc facility . . . affected

Venture’s 1996-2001 financial statements.” Rule 60(b) Opinion, slip op. at 20. We see

no clear error in these factual conclusions.

       Autoliv also contends that a new trial should have been granted because Levko

relied, in some of his testimony, on the fact that the Grand Blanc facility’s plant-wide

financial statements were audited and therefore presumptively reliable. Levko testified

at trial that the fact that Grand Blanc had independently certified plant-wide financial

statements “tells me [that] what’s being reported is fair . . . [and that] the internal

controls are appropriate and adequate . . . .” Rule 60(b) Opinion, slip op. at 11 n.4. At

the Rule 60(b) hearing, the district court questioned Levko about whether having the

information in the Doeren Mayhew reports concerning the Grand Blanc financial

statements would have altered his trial testimony. Levko responded “I couldn’t say that




05-1537                                        13
the certified statements were accurate, but it wouldn’t change my conclusions.” J.A. at

130.

         Autoliv contends that even if Levko’s conclusions would have remained the

same, these alterations to Levko’s testimony might have “colored” the trial. While the

district court’s Rule 60(b) opinion did not expressly address this possibility, the district

court specifically recognized it during the Rule 60(b) hearing, and we are convinced that

the district court considered the question and rejected Autoliv’s contention utilizing the

Rule 60(b)(2) standard for prejudice. We see no error in that conclusion.

         Although Autoliv agrees that the Grand Blanc accounting system was separate

from the bid system, Autoliv argues that financial information directly called into

question by Doeren Mayhew was utilized by Levko in two respects: (1) to determine the

ratio of fixed to variable costs; and (2) to test the accuracy of the scrap rate reflected in

the bids.

         As to the first, Autoliv contends that Levko’s separation of the fixed and variable

costs was affected because Doeren Mayhew found that inventory was overstated and

recommended a downward inventory adjustment. Levko explained that a downward

inventory adjustment would increase the cost of sales to the Grand Blanc facility,

potentially altering the ratio of fixed and variable production costs. Levko stated in an

affidavit that Doeren Mayhew’s findings did not affect his allocation of fixed and variable

costs in the bid data because the inventory adjustment would not materially affect the

ratio.    The district court explained that of the $2.5 million inventory adjustment,

“$888,000 consisted of non-air bag inventory which had no effect on the cost of sales

related to air bag covers. Of the $1.6 million dollar balance, approximately 25% could




05-1537                                      14
be attributed to the cost of sales of air bag cover products.” Rule 60(b) Opinion, slip op.

at 5. The district court concluded that, while Levko determined the fixed-to-variable cost

ratio from Grand Blanc’s plant-wide financial statements, “any change in the financial

statements as a consequence of the Doeren Mayhew reports did not affect the

allocation.” Id. at 12. We see no error in this conclusion.

       As to the scrap rate, Levko used a scrap rate of 15 percent in his calculations.

He derived that scrap rate from the bid information. Levko checked the bid-based scrap

rate against the plant-wide scrap rate reported in Grand Blanc’s plant-wide financial

statements. That figure was 12.4 percent. He nevertheless used the 15 percent rate

from the bids in order to make his calculations conservative.        Autoliv relies on the

affidavit of Kevin Dages, an accounting consultant, to argue that the inventory

adjustments recommended by the Doeren Mayhew reports would have resulted in

increased scrap rates for 2002 and 2003. Levko testified, however, that even assuming

the inventory adjustment, the plant-wide scrap rate (only partially attributable to airbag

cover production) would increase to 13.4 percent, still well below the 15 percent rate

Levko used. The district court explained in detail that it rejected Dages’ analysis on the

basis of several methodological flaws, including Dages’ calculation of increases in

“[p]roduction costs based on plant-wide financial data [which] does not particularize air

bag production costs.” Rule 60(b) Opinion, slip op. at 19. The district court found that

even after making the inventory adjustment called for by the Doeren Mayhew reports,

“the plant-wide scrap rate would be 13.4%, still below the 15% rate Levko used,” id. at

13, and thus concluded that the Doeren Mayhew reports’ effect on the scrap rate would

not have altered the jury’s decision. We find no clear error in this determination. The




05-1537                                     15
district court also did not err in failing to consider the totality of the allegedly prejudicial

evidence.

       Clear error only exists if we are “’left with a definite and firm conviction that a

mistake has been committed.’” United States v. Monumental Life Ins. Co., 440 F.3d

729, 732 (6th Cir. 2006) (quoting Alexander v. Local 496, Laborers’ Int’l Union of N.

Am., 177 F.3d 394, 402 (6th Cir. 1999)). Here, we are left with no such conviction. We

conclude that the district court did not abuse its discretion in denying Autoliv’s motion for

a new trial pursuant to Rule 60(b)(2).

                                               II

       We now address Autoliv’s Rule 60(b)(3) motion. Rule 60(b)(3) provides: “On

motion and upon such terms as are just, the court may relieve a party . . . from a final

judgment, order, or proceeding for the following reasons: . . . (3) fraud (whether

heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of

an adverse party . . . .”

                                               A

       Autoliv argues that Venture engaged in discovery misconduct by withholding

“Venture’s non-public financial information—the data that ultimately disclosed Venture’s

fraud.” Autoliv’s Rule 60(b) Motion at 2. Autoliv contends that Venture should have

disclosed the information in response to Autoliv’s document-production requests and

through the deposition testimony of representatives of Venture and pertinent Venture

subsidiaries. In particular, Autoliv contends that it was denied the opportunity to depose

the controller at the Grand Blanc facility who, according to Doeren Mayhew,




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manipulated the accounting system to cause the misrepresentations in the financial

statements.

       Failure to produce material in response to legitimate discovery requests can

constitute misconduct under Rule 60(b)(3). Abrahamsen v. Trans-State Express, Inc.,

92 F.3d 425, 428 (6th Cir. 1996).9 However, the question is not whether Venture failed

to comply with Autoliv’s initial discovery requests; it is whether Venture complied with

Autoliv’s requests as limited by the Special Master and the district court. There is no

contention that Venture failed to comply with the discovery ordered by the district court.

As the district court stated, “Autoliv had ample opportunity to ask the Court to require

further of Venture if it felt that its discovery requests [were] not being met.” Rule 60(b)

Opinion, slip op. at 7. Autoliv did not request further action from the district court in this

regard. We conclude that the district court did not abuse its discretion in holding that

Venture did not engage in discovery misconduct within the meaning of Rule 60(b)(3).10

                                              B

       We now turn to Autoliv’s contention that reliance on the financial statements by

Venture’s damages expert warrants relief under Rule 60(b)(3). As a threshold matter,

Venture insists that Autoliv failed to raise this ground before the district court. Based on

our examination of the record, we conclude that the issue was properly raised in

Autoliv’s Rule 60(b)(3) motion.




       9
              See also Summers v. Howard Univ., 374 F.3d 1188, 1193 (D.C. Cir.
2004); Cummings v. Gen. Motors Corp., 365 F.3d 944, 955 (10th Cir. 2004); Schultz v.
Butcher, 24 F.3d 626, 630 (4th Cir. 1994); Stridiron v. Stridiron, 698 F.2d 204, 207 (3d
Cir. 1983); Rozier v. Ford Motor Co., 573 F.2d 1332, 1339 (5th Cir. 1978).
       10
              We note that Autoliv does not contend that Venture engaged in any
misconduct in opposing the discovery requests.


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       Autoliv’s contention here is based on the same grounds as its request under Rule

60(b)(2): (1) Levko’s reliance on the bid data; (2) Levko’s testimony that the Grand

Blanc facility’s certified financial statements gave him comfort about Venture’s

accounting controls; and (3) Levko’s reliance on the Grand Blanc plant-wide financial

statements to derive the fixed/variable cost ratio and check the bid-based scrap rate for

his damage calculations.

       The district court did not address Autoliv’s Rule 60(b)(3) contention with respect

to Levko’s testimony. The district court did, however, hold that Autoliv failed to establish

prejudice according to the Rule 60(b)(2) standard. Thus, even if Autoliv could establish

fraud, misrepresentation, or other misconduct, the district court’s failure to address

Autoliv’s Rule 60(b)(3) contention as to Levko’s testimony could only constitute harmful

error if the standard for prejudice under Rule 60(b)(3) is different from the standard for

prejudice under Rule 60(b)(2). We conclude that the standard for prejudice is indeed

different under the two rules, and thus that the district court’s error was potentially

harmful.

       At oral argument, we requested supplemental briefing from both parties

addressing the appropriate standard for relief under Rule 60(b)(3) in the Sixth Circuit.

Venture argues that the issue is controlled by the Sixth Circuit’s decision in

Abrahamsen. While the court stated that relief is appropriate where a witness testifies

falsely and “without [the false testimony], a jury might have reached a different

conclusion,” Abrahamsen, 92 F.3d at 428 (internal quotation marks omitted), the court




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did not clearly articulate a general standard for determining prejudice.11 Nor does any

other published Sixth Circuit decision.

       Autoliv contends that the appropriate rule is stated in Jordan v. Paccar, Inc., No.

95-3478, 1996 WL 528950 (6th Cir. 1996), an unpublished decision.             In the Sixth

Circuit, only published decisions are binding on the court;12 unpublished decisions may

be persuasive authority depending on their pertinence and depth of reasoning. Harper

v. Autoalliance Int’l, Inc., 392 F.3d 195, 205 n.3 (6th Cir. 2004).13 Autoliv urges that we

should rely on Jordan because the court in Jordan thoroughly analyzed the question of

the proper legal standard under Rule 60(b)(3). See 1996 WL 528950, at *6-*9. We

agree. The court in Jordan set forth the legal standard applicable under Rule 60(b)(3)

based on thorough analysis of the language of the rule and its treatment by other

circuits.   Thus, we conclude that relying on Jordan is appropriate under the

circumstances.

       In some circuits, the standard for prejudice under Rule 60(b)(3) requires the

movant to demonstrate that the fraud or misconduct “prevented the moving party from

fully and fairly presenting his case.” Schultz, 24 F.3d at 630; see also Anderson v.



       11
               Prejudice was obvious in Abrahamsen because the district court expressly
held that it would not have found the plaintiffs contributorily negligent absent the false
testimony. Id. at 428-29.
       12
               United States v. Wood, 364 F.3d 704, 725 (6th Cir. 2004); S.J. v. Hamilton
County, Ohio, 374 F.3d 416, 423 n.5 (6th Cir. 2004); Sheets v. Moore, 97 F.3d 164, 167
(6th Cir. 1996); see also Sixth Cir. R. 206(c) (“Reported panel opinions are binding on
subsequent panels.”).
       13
               See also Sixth Cir. R. 28(g) (citation of unpublished opinions is
“disfavored,” but permissible “[i]f a party believes . . . that an unpublished disposition
has precedential value in relation to a material issue in a case, and that there is no
published opinion that would serve as well . . . .”); Oviedo v. Jago, 809 F.2d 326, 329
n.3 (6th Cir. 1987) (relying on unpublished decision because “the panel’s reasoning [is]
sound and its decision supported by the existing law”).


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Cryovac, Inc., 862 F.2d 910, 924 (1st Cir. 1988).14         The Sixth Circuit in Jordan,

however, “dispens[ed] with any requirement that the moving party demonstrate

prejudice,” Jordan, 1996 WL 528950, at *8, holding that “prejudice should be

presumed[ ] once the moving party has shown by clear and convincing evidence that

misbehavior falling into one or more of the three categories set out in Rule 60(b)(3) has

occurred.” Id. The burden then shifts to the non-moving party “to demonstrate by clear

and convincing evidence that the misbehavior which occurred had no prejudicial effect

on the outcome of the litigation.” Id.

       As we noted earlier, under Rule 60(b)(2) the moving party must show that the

newly discovered evidence, if introduced at trial, “clearly would have produced a

different result if presented before the original judgment.” Good, 149 F.3d at 423. The

prejudice standards of Rule 60(b)(3) and Rule 60(b)(2) thus differ as to the party that

initially bears the burden of proof, and as to the nature of the necessary showing. The

district court analyzed the possibility of prejudice from Levko’s testimony only under the

Rule 60(b)(2) standard.15 It did not apply the standard for prejudice that we conclude is

applicable to Autoliv’s Rule 60(b)(3) request with respect to Levko’s testimony.




       14
               See also Cummings, 365 F.3d at 955; Sellers v. Mineta, 350 F.3d 706,
715 (8th Cir. 2003); Tobel v. City of Hammond, 94 F.3d 360, 362 (7th Cir. 1996); Diaz v.
Methodist Hosp., 46 F.3d 492, 496 (5th Cir. 1995); In re M/V Peacock, 809 F.2d 1403,
1404-05 (9th Cir. 1987); Stridiron, 698 F.2d at 207; GAF Corp. v. Transamerica Ins. Co.,
665 F.2d 364, 371 (D.C. Cir. 1981).
        15
               “Autoliv has not made out a case for a finding that had the accounting
irregularities described in the March 25 Doeren Mayhew report been known prior to trial,
Levko’s opinion and conclusion on damages would have produced a different result at
trial with regard . . . to damages.” Rule 60(b) Opinion, slip op. at 18; see also id. at 20
(“It cannot be said that if the jury was presented with the Doeren Mayhew reports,
particularly the March 25 Doeren Mayhew report, its decision on damages would have
been any different.”).


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       We conclude that we must vacate in part the district court’s denial of Autoliv’s

Rule 60(b)(3) motion as it concerned Levko’s testimony and remand for adjudication

under the proper legal standard.      In doing so, we do not address the question of

whether Levko’s testimony constitutes “fraud, misrepresentation, or other misconduct”

within the purview of Rule 60(b)(3); that is a question best addressed by the district

court in the first instance.16 On remand, the district court must decide whether Autoliv

has established, by clear and convincing evidence, that reliance upon Venture’s

financial   information   by    Venture’s    damages      expert   constituted   fraud   or

misrepresentation. If Autoliv makes such a showing, the district court must consider

whether Venture established, by clear and convincing evidence, that the misbehavior

had no prejudicial effect on the outcome of the litigation.

                                             III

       In summary, we affirm the district court’s denial of Autoliv’s motion for a new trial

pursuant to Rule 60(b)(2). We also affirm the district court’s conclusion that Autoliv is

not entitled to a new trial under Rule 60(b)(3) on the basis of discovery misconduct. But

because the district court did not consider Autoliv’s allegation with respect to Levko’s

testimony as a ground for relief under Rule 60(b)(3), we vacate the district court’s denial

of Autoliv’s Rule 60(b)(3) motion and remand for further proceedings consistent with this

opinion.



       16
              In this connection, we do not decide—one way or the other—whether, as
the district court correctly held in connection with the alleged discovery misconduct
issue, “there is no evidence that Venture was aware of the accounts payable
understatement or inventory overstatement that Doeren Mayhew describes . . . in its
March 25 report.” Rule 60(b) Opinion, slip op. at 8. We have rejected the discovery
argument on a different ground—that the failure to produce documents that would
reveal the fraud was not misconduct.


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                                     CONCLUSION

     The decision of the district court is

     AFFIRMED IN PART, VACATED IN PART, AND REMANDED.

                                         COSTS

     No costs.




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