Different Burden Of Proof For Relief From Judgment For Newly Discovered Evidence And For Fraud

In Venture Industries Corp. v. Autoliv ASP, Inc., (No. 05-1537; August 7, 2006), the Federal Circuit affirms in part, vacates in part and remands the district court's denial of Autoliv's request for relief from judgment. Venture filed suit against Autoliv for breach of a supply agreement and several patent-based claims. Venture's damages expert at trial relied upon financial information from its Grand Blanc manufacturing facility. A jury found that Autoliv breached the supply agreement and awarded Venture damages. Subsequent to final judgment, a forensic accounting firm found that the Grand Blanc facility had questionable accounting procedures, and lacked proper accounting controls along with potential accounting irregularities and errors.

In view of the damages expert's testimony that he did not rely upon the faulty data identified by the forensic accounting firm, the district court's holding that Autoliv did not satisfy its burden of proof that the forensic accounting firm's findings, which was newly discovered evidence, would have altered the jury's decision is affirmed. In the Sixth Circuit, whose law governs this issue, prejudice is presumed when a party proves by clear and convincing evidence that the non-moving party's behavior constituted fraud, misrepresentation or other misconduct, and the non-moving party must show that the misbehavior did not have a prejudicial effect on the outcome of the litigation. Since the district court did not address the possibility of prejudice of the damages expert's testimony, its denial of relief from judgment for fraud is vacated.