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Triffin v. Automatic Data Processing, Inc.

411 N.J. Super. 292, 986 A.2d 8 (App. Div. 2010)

FRAUD — Just because one party may not be liable to the other on the grounds of fraud because the second party may not have relied on the statements of the first party, this does not mean that if the statements are made in court, the party making the statements might not be liable for a “fraud upon the court.”

A purchaser bought checks and then sought collection as the assignee of all rights and interests in those checks. He digitally cut and pasted the check sellers’ signatures on the assignment agreements and claimed they were the original sellers’ signatures. He sued when the bank to whom the checks were presented refused to pay. The bank countersued, alleging that the assignments were fraudulent.

The lower court initially found the check purchaser liable for common law fraud and awarded the bank compensatory and punitive damages. The purchaser appealed.

The Appellate Division reversed the lower court’s decision, holding that the common law fraud finding could not stand because the Court was unable to find that the bank at any point actually relied on the documents at issue. Although it vacated the verdict, it found that there had been a possible fraud on the court perpetrated by the check purchaser. The Court explained that a fraud on the court occurs where it can be clearly and convincingly demonstrated that “a party set in motion some unconscionable scheme calculated to interfere with the judicial system’s ability to impartially adjudicate a matter by improperly influencing the trier or unfairly hampering the presentation of the opposing party’s claim or defense.” In addition, it noted that, unlike common law fraud, fraud on a court does not require reliance. It remanded the matter to the lower court for further proceedings to determine if the check purchaser had committed a fraud on the court.

On remand, testimony was presented to establish the bank’s legal fees and costs associated with uncovering the fraud and with litigating in connection with the trial, appeal, and sanctions motion. Evidence presented during the two day trial included testimony from the bank’s in-house counsel who was responsible for determining whether outside counsel legal fees were reasonable. Testimony was also presented that described the check purchaser’s method of fabricating particular assignment agreements. The purchaser responded by claiming that the check seller’s signatures on the assignment agreements were immaterial so long as he was authorized to put that individual’s signature on the document. He testified that, at the time the respective documents were filed with the court, he believed the check sellers had given such authorization through oral conversations as well as by their course of conduct. He insisted that he did not believe his actions were wrong at the time he cut and pasted the signatures and that he was acting with a “pure heart [and an] empty head.” Accordingly, he argued he could not be liable for fraud as he lacked the “scienter” to commit fraud.

The lower court held that “when one makes a representation and presents a document to a court, *** as an attachment to a pleading *** and submit[s] to the court as legitimate and original or copies of original documents and they’re not. That is a fraud.” It added the fact that there was no reliance and no damages did not mean there was no fraud. The lower court then awarded damages to the bank for certain legal fees and costs (excluding those in pursuit of its own failed counterclaims). Moreover, the court’s order required the check purchaser to attach a certification to each document the check purchaser subsequently might file with a court. He would have to certify that he had in his possession the original, signed version of that document. The court required the order to be published in the New Jersey Law Journal and in the New Jersey Lawyer. The check purchaser appealed.

The Appellate Division affirmed. In doing so, it rejected the check purchaser’s contention that the lower court had merely relied on the Appellate Division’s findings and did not make any findings of its own. It noted that the lower court conducted a two day trial and heard testimony from numerous individuals, including from the check purchaser himself. Consequently, the Court concluded that the lower court had made its own independent finding of fraud on the court and expressly rejected the check purchaser’s assertion that he did not know what he was doing was wrong. It declared that the lower court rejected this argument based on substantial credible evidence in the record. Moreover, it stated that the check purchaser did not deny that he had cut and pasted the signatures onto the assignment agreements and then withheld this information from the lower court. The Court also rejected the check purchaser’s contention that he was entitled to a jury trial, holding that such a right was not absolute. It pointed out that the New Jersey Constitution protects the right to a trial by jury in legal, but not in equitable actions. It believed it was clear that a court’s power to levy sanctions against a litigant for fraud on the court is grounded in the court’s equitable powers. As such, it concluded that the check purchaser had no right to a jury trial. Finally, it upheld the lower court’s attorney’s fees award finding was within the lower court’s discretion to award attorney’s fees as a sanction for fraud on the court.

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