Andrew Schmidt received a multi-million dollar settlement after a diving accident accident where he reported a brain injury. According to Mr. Schmidt, he was unable to do anything more than lie down for more than two to three hours a day. The life-care plan involved 24/7 care. Surveillance produced nothing for two and a half years, but after the settlement, it turned out the plaintiff’s injuries were grossly overstated. He applied for and received a driver’s license without qualification just before the settlement. He bought a house in Texas just after, and when he met with the realtor he standing without issue.
Cal-Dive sought to upset the settlement on the basis of fraud under Rule 60(b)(3), filing a suit against Schmidt and his counsel. The trial judge, Haik, dismissed the complaint on Rule 12(b)(6), without permitting Cal-Dive to amend their complaint.
The Fifth Circuit recently heard oral argument, on December 2, 2015. Cal-Dive had a tough reception in the Court, particularly from Judges King and Stewart. The Court’s questioning suggests Cal-Dive had experts who indicated the plaintiff had no brain injury. Because Cal-Dive had experts who evaluated him and concluded he wasn’t injured, it was “not amateur week,” and Cal-Dive, two of the three members of the panel seem likely to conclude, was bound by the terms of their deal.
Judge Higginson questioned the plaintiff’s counsel at length, suggesting that he didn’t want to allow fraud. He suggested the plaintiff ought to want to allow an evidentiary hearing to prove his case.
The Court suggested that if Cal-Dive’s experts had bought the plaintiff’s story and concluded he was unable to stand up, there might be a case for fraud. It also suggested that if they could prove the plaintiff was malingering before the settlement by more than a few days, then they would have a better case. However, it very much appears the panel will affirm the 12(b)(6) and prohibit Cal-Dive from even pursuing a fraud claim. The anticipated result affirms the importance of settlements. However, it also tends to encourage fraud, At least in this case it will either allow Mr. Schmidt the benefit of settlement despite his miraculous recovery, or it will allow Mr. Schmidt to complete a well-orchestrated fraud. Ultimately, if this case comes out as expected, it will be difficult for any defendant who pays money to a malingering plaintiff to recover it.