The 5th Circuit Court of Appeals rules that a personal injury plaintiff is not entitled to vacate a judgment setting up a special needs trust to hold the proceeds from his settlement because he should have appealed the court order setting up the trust instead. Newsome v. National Casualty Company (5th Cir., No. 15-30573, Aug. 11, 2016).
Claude Allen Newsome was seriously injured in a car crash in 2010. When Mr. Newsome’s case was about to settle, his lawyer sent a letter to the court alleging that Mr. Newsome’s agent under a durable power of attorney was likely to “not use all of the settlement proceeds to benefit Mr. Newsome.” The court held a telephone conference with Mr. Newsome’s lawyer, without Mr. Newsome’s knowledge, and then entered an order on its own accord directing the settlement into a special needs trust that would be controlled by a bank that the court chose without any input from Mr. Newsome. Mr. Newsome did not appeal the court’s order, which became final on May 7, 2014.
In October, 2014, Mr. Newsome retained a new lawyer who contacted the bank and asked it to transfer the money to Mr. Newsome, as there was no legal basis for the trust to exist. The bank filed a request for instructions with the court. While that request was pending, in December 2014 Mr. Newsome filed a motion to vacate the order establishing the trust under Federal Rules of Civil Procedure 60(b)(4) and (6). Mr. Newsome claimed that the order was void because he did not have an opportunity to be heard and that this case fell within the exceptional circumstances required to vacate an order under 60(b)(6). The trial court denied both motions and Mr. Newsome appealed.
The U.S. Court of Appeals for the Fifth Circuit upholds the trial court’s decision. The court finds that “a Rule 60(b)(4) motion is not a substitute for a timely appeal. Thus, even if the district court erred, its orders ‘remain enforceable and binding’ on Newsome because he ‘had notice of the error and failed to object or timely appeal'” The court also upholds the district court’s 60(b)(6) ruling, finding that Newsome’s failure to pursue the appeal made the district court’s decision obvious.
To read the full text of the court’s opinion, go to: http://www.ca5.uscourts.gov/opinions/unpub/15/15-30573.0.pdf