Fourth Circuit Fails to Find “Fraud on the Court” (Fox ex rel. Fox v. Elk Run Coal Co., Inc., — F.3d —-, 2014 WL 26556 (4th Cir. Jan. 3, 2014))

On January 3, 2014, the Fourth Circuit ruled that, despite deliberately withholding medical evidence showing that Gary Fox had complicated pneumoconiosis and was, thus, entitled to black lung benefits, Elk Run’s actions were not sufficiently egregious to constitute a “fraud on the court.”  In so ruling, the Fourth Circuit failed to appreciate how difficult it is for miners like Gary Fox to find representation in their federal black lung benefits claims and that Elk Run’s withholding the truth about Mr. Fox’s disease harmed not only Mr. Fox, but also the black lung benefit program.

Gary Fox first brought his federal black lung claims in 1999.  He did not have a lawyer. Elk Run was represented by Jackson Kelly.  After a hearing before an ALJ, his claim was denied in 2001. In 2006, Mr. Fox filed a second claim.  This time he was able to obtain a lawyer to represent him.  The lawyer, John Cline, discovered additional evidence from Elk Run that predated the 2001 denial and showed that Mr. Fox had massive lesions of pneumoconiosis—large areas of diseased lung tissue caused by breathing coal mine dust. Under the federal black lung benefits program, the condition of massive lesions due to pneumoconiosis is called “complicated pneumoconiosis.”  A miner who has complicated pneumoconiosis is irrebutably presumed to be disabled due to pneumoconiosis and is therefore entitled to an award of black lung benefits.  Mr. Cline sought to set aside the 2001 denial and to reinstate benefits to 1997, when Mr. Fox was diagnosed with complicated pneumoconiosis.  Mr. Fox died of black lung disease while the action was pending before the ALJ.  Mr. Fox’s widow was substituted for him in his claim.  In 2011 the ALJ ruled in Mrs. Fox’s favor.

During the initial pro se claim, Elk Run’s attorneys at Jackson Kelly deliberately withheld evidence from Elk Run’s other experts and from the ALJ that showed that Mr. Fox had complicated pneumoconiosis.  Jackson Kelly obtained the tissue slides from a lung biopsy performed by Dr. Koh in 1998.  It had the tissue samples examined by two pathologists: Dr. Naeye and Dr. Caffrey, both of whom found that Mr. Fox had complicated pneumoconiosis.  Jackson Kelly then hired four more pulmonologists to report on Mr. Fox’s condition.  Jackson Kelly provided the pulmonologists Dr. Koh’s biopsy report, but did not give them or let them know of the reports by Drs. Naeye and Caffrey.  The four pulmonologists did not find pneumoconiosis.  Elk Run submitted the reports of those pulmonologists and were able to convince the ALJ in 2001 that Mr. Fox did not have pneumoconiosis.

In the 2011 decision, the ALJ determined that Elk Run’s failure to disclose the reports of Drs. Naeye and Caffrey to its other expert witnesses tainted their conclusions and that, while “perhaps initially not concocted as such,” Elk Run’s “actions, taken as a whole, constitute a scheme to defraud.”

The Fourth Circuit reached a different conclusion and found that Elk Run’s actions did not rise to the level of “fraud on the court.”  The Fourth Circuit stressed the need for finality in litigation, noting that under Federal Rule of Civil Procedure 60(b)(3), Mr. Fox had one year to move the court for relief if he believed Elk Run had obtained the ALJ ruling based on fraud or misrepresentation.  After one year, Mr. Fox could only rely on the court’s equitable powers to overturn a judgment obtained through “fraud on the court.”  According to the Fourth Circuit, demonstrating such “fraud on the court” is “a very high bar for any litigant” because it requires showing an egregious subversion of the legal process.

The court held that the lawyers’ conduct did not amount to “an intentional design aimed at undermining the integrity of the adjudicative process” under the Black Lung Benefits Act.  The court stated that while the conduct was “hardly admirable,” it didn’t constitute a fraud against the court. The court said Mrs. Fox’s argument that Elk Run’s nondisclosure of certain pathology reports to its own experts instilled uncertainty and cynicism into the black lung benefits system was not adequate to sustain finding fraud on the court.

The court absolutely failed to recognize or account for the difficulty black lung claimants face in finding legal representation.  The court was dismissive of the realities faced by miners with black lung litigating pro se.

The court likewise minimized the difficulty of uncovering the deception, stating simply that  “after some foot dragging, Elk Run admitted liability for (that) claim and disclosed the slides and . . . documents.”  However, in the ALJ’s 2011 decision the description of Elk Run’s resistance to discovery of its misconduct reveals how difficult it would be to expose:

Thus, Employer’s strategy in this subsequent claim was to continue to withhold Drs. Caffrey’s and Naeye’s pathology reports from Claimant and its own expert witnesses. It vigorously fought against turning over the reports. It provided the reports to Claimant only after Claimant filed Interrogatories to Employer and Requests for Production of Documents, and followed the request with a Motion to Compel Discovery and Amend Pre-Hearing Order, and after the undersigned issued an Order Granting Motion to Compel Discovery, the Benefits Review Board issued an Order dismissing Employer’s interlocutory appeal, and the undersigned issued an Order Denying Reconsideration, and an Order Granting Request to Retain Jurisdiction.

Fox v. Elk Run Coal Co., No. 2007-BLA-5984, at 12 (ALJ July 20, 20112), available at http://www.oalj.dol.gov/Decisions/ALJ/BLA/2007/FOX_GARY_NELSON_v_ELK_RUN_COAL_CO_DIR-_2007BLA05984_(JUL_20_2011)_120444_CADEC_SD.PDF

The court stated that Elk Run was under no obligation to advance the reports of Drs. Naeye and Caffrey because “the [Administrative Procedures Act] contains no requirement that a party present the most probative evidence in its possession; instead, it is permitted to offer any evidence it would like so long as that evidence is relevant.”  The probative value of the excluded evidence was not the issue.  The issue in the case is that Jackson Kelly deliberately misled the ALJ.  Jackson Kelly submitted inaccurate and deceptive reports from pulmonary experts, who had been intentionally misinformed, to mislead the ALJ.  Jackson Kelly knew the opinions of the pulmonary experts were not true and accurate. The submission of this evidence was a misrepresentation of the facts intended to be relied on by the ALJ.  According to the ABA’s Model Rule 3.3 regarding a lawyer’s duty of “Candor to the Tribunal,” a lawyer “shall not knowingly: . . . (2) fail to disclose a material fact to a tribunal when disclosure is necessary to avoid assisting a criminal or fraudulent act by the client.”  The ABA’s comment on the rule says, “There are circumstances where failure to make a disclosure is the equivalent of an affirmative misrepresentation.”   To the court, however, this was at most a fraud between Elk Run and Mr. Fox to be uncovered through discovery or during the hearing.  Although the lawyers’ conduct misled the ALJ and resulted in the denial of Mr. Fox’s original claim, the Fourth Circuit said it did not subvert the legal process so it was not fraud on the court.

The court fails to reconcile its own misgivings about withholding the reports of Drs. Naeye and Caffrey from Elk Run’s pulmonary experts to mislead the ALJ. At one point in the opinion the court said that Elk Run’s lawyers’ conduct was “not exemplary” and at the end of the decision the court expressed its displeasure: “We bestow no blessing and place no imprimatur on the company’s conduct, other than to hold that it did not, under a clear chain of precedent, amount to a fraud upon the court.”

While the court stated that the facts in this case were insufficient, it never clearly articulates a test for finding fraud on the court.  Rule 60(d)(3) is an equitable rule and one intended to be used in the discretion of the trier of the case.  Absent a determination that there was an abuse of discretion by the ALJ, the court should have deferred to the ALJ.

The Fourth Circuit’s decision was narrow, but it was wrong.  The court should have acknowledged that the obfuscation that Elk Run’s lawyers engaged in harmed not only Mr. Fox, but the entire black lung benefits program.  The court should also have acknowledged the burden its holding places on miners who are unable to obtain legal counsel.  Instead, the decision ensures that pro se miners are at even greater risk of injustice.  The court should have ensured that its holding furthers the goal of the Black Lung Benefits Act, to compensate miners who are disabled by black lung. The black lung benefits program has been repeatedly held to be a remedial program intended to benefit miners. Mr. Fox was the very type of miner the Act was intended to benefit—a miner whose exposure to excessive dust resulted in a severe respiratory disease.

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