Supreme Court Rejects “Wholly Groundless” Arbitrability Exception – Arbitrators Alone Are To Decide Threshold Question Of Arbitrability When Parties Delegate Arbitrability Decision To Arbitrator

On January 8, 2019, the Supreme Court issued its unanimous opinion in Henry Schein v. Archer & White (available here). At issue was whether, when the parties to an arbitration agreement have agreed that an arbitrator, rather than a court, will resolve the threshold arbitrability question (i.e., the question of whether the parties agreed to arbitrate the particular dispute at issue), a court may decide the question if it finds that a party’s argument in favor of arbitrability is “wholly groundless.” The Supreme Court noted that some federal courts, including the Fifth Circuit in the instant case, had adopted a “wholly groundless” exception:

Even when a contract delegates the arbitrability question to an arbitrator, some federal courts nonetheless will short-circuit the process and decide the arbitrability question themselves if the argument that the arbitration agreement applies to the particular dispute is “wholly groundless.”

That is what happened in the instant case—the district court, relying on Fifth Circuit precedent, agreed that a “wholly groundless” exception existed and ruled that Schein’s argument for arbitration was wholly groundless, thus denying Schein’s motion to compel arbitration. The Fifth Circuit affirmed.

The Supreme Court reversed. The Court ultimately held that the Federal Arbitration Act did not allow for a “wholly groundless” exception—i.e., when the parties’ contract delegates the arbitrability question to an arbitrator, courts must respect the parties’ decision and send the case to arbitration, regardless of whether the court believes that a party’s argument that the dispute is arbitrable is wholly groundless:

When the parties’ contract delegates the arbitrability question to an arbitrator, a court may not override the contract. In those circumstances, a court possesses no power to decide the arbitrability issue. That is true even if the court thinks that the argument that the arbitration agreement applies to a particular dispute is wholly groundless.

The Court’s decision raises the related issue of determining when the parties have delegated the arbitrability question to an arbitrator. Many courts have found that, where the parties have specified that a particular arbitrable body’s rules will govern the arbitration (such as the AAA or JAMS), this constitutes a delegation to the arbitrator where the rules provide that the arbitrator has the power to resolve arbitrability questions. See, e.g., Cooper v. WestEnd Capital Mgmt., L.L.C., 832 F.3d 534, 546 (5th Cir. 2016) (adoption of JAMS Rules in parties’ agreement, where JAMS Rules provide that arbitrability disputes shall be submitted to and ruled on by the arbitrator, constitutes “clear and unmistakable evidence that the parties agreed to arbitrate arbitrability”); Petrofac, Inc. v. DynMcDermott Petroleum Operations Co., 687 F.3d 671, 675 (5th Cir. 2012) (same with respect to AAA Rules). The lesson from Henry Schein is that parties to an arbitration agreement should clearly specify in their contract whether the arbitrator has the authority to resolve disputes concerning arbitrability. Parties should assume that, if the arbitration provision references an arbitral body’s rules (such as the AAA or JAMs) that contain rules stating that the arbitrator has authority to resolve arbitrability disputes, the parties will have delegated the arbitrability question to the arbitrator such that a court will not rule on it, no matter how “groundless” an argument in favor of arbitrability may be.

Posted in U.S. Supreme Court | Comments Off on Supreme Court Rejects “Wholly Groundless” Arbitrability Exception – Arbitrators Alone Are To Decide Threshold Question Of Arbitrability When Parties Delegate Arbitrability Decision To Arbitrator

December 2018 Amendments to Federal Rules of Civil Procedure

On December 1, 2018, the Federal Rules of Civil Procedure were amended (amendments available here). Rules 5, 23, 62, and 65.1 were amended.

Rule 5

  • Service of a paper may be made on a registered electronic-filing user by filing it with the court’s electronic-filing system. (Service by e-mail, as before, is only permissible under Rule 5 if done with the person’s written consent.)
  • Certificates of service are no longer required when filing papers with the court’s electronic-filing system. This is a nice change, as the court’s Notice of Electronic Filing lists who has been served and at what e-mail address. For papers that are not served through the electronic-filing system, a certificate of service is still required.
  • Electronic filing is now required in all non-pro se cases (unless nonelectronic filing is allowed by the court for good cause or is allowed or required by local rule).
  • A filing made through a person’s electronic-filing account and authorized by that person, together with the person’s name on a signature block, constitutes the person’s signature.

Rule 23

  • Rule 23, dealing with class actions, has been amended with respect to notice requirements, settlement procedures, class-member objections, and appeals.

Rule 62

  • Rule 62, dealing with stays of proceedings to enforce judgments, has been amended to provide that execution on a judgment and proceedings to enforce a judgment are stayed for 30 days after the judgment’s entry (unless the court orders otherwise or as provided in Rule 62(c) or (d)). Previously, the stay only lasted 14 days after entry of the judgment.

Rule 65.1

  • Rule 65.1 has been amended to make clear that the rule applies to all security providers, not simply sureties.
Posted in Federal Rules | Comments Off on December 2018 Amendments to Federal Rules of Civil Procedure

Judge O’Connor Strikes Down Patient Protection And Affordable Care Act (aka Obamacare)

On December 14, 2018, Judge O’Connor issued an Order (available here) in Texas v. United States. In the case, plaintiffs argued that, following passage of the Tax Cuts and Jobs Act of 2017 (TCJA), the “individual mandate” (i.e., the requirement that, with limited exceptions, all Americans obtain health insurance) in the Patient Protection and Affordable Care Act (ACA) was unconstitutional. Judge O’Connor agreed, finding that the individual mandate could no longer be supported as an exercise of Congress’ Tax Power (because the TCJA no longer imposed any tax on failure to obtain health insurance). (The Supreme Court had previously found that the ACA was unconstitutional under the Interstate Commerce Clause, but constitutional under Congress’ Tax Power because it triggered a tax.)

With the individual mandate held unconstitutional, Judge O’Connor needed to determine whether the entire ACA fell. Because Judge O’Connor found that the individual mandate was not severable from the ACA, he invalidated the entirety of the ACA.

The issue in this case is likely one of the most important issues to be taken up by a judge in the Northern District of Texas in the last decade. The decision will be appealed to the Fifth Circuit and the case will likely reach the Supreme Court if the Fifth Circuit agrees with Judge O’Connor (which would be the third time the Supreme Court weighs in on the ACA).

Posted in Judge O'Connor | Comments Off on Judge O’Connor Strikes Down Patient Protection And Affordable Care Act (aka Obamacare)

Judge Kinkeade Transfers Bumble v. Match Case To Western District Of Texas

On November 28, 2018, Judge Kinkeade issued an Order (available here) transferring the Bumble v. Match case to the Western District of Texas. Defendant Match sought transfer to the Western District, where Match’s current action against Bumble for patent and trademark infringement was pending. Judge Kinkeade found a likelihood of substantial overlap between the Northern District and Western District cases and accordingly granted the transfer motion.

Posted in Judge Kinkeade | Comments Off on Judge Kinkeade Transfers Bumble v. Match Case To Western District Of Texas

Northern District of Texas’ Bench/Bar Conference – Friday, January 11, 2019

The Third Annual Northern District of Texas Bench/Bar Conference will be held this year on Friday, January 11, 2019, at the Four Seasons in Irving, Texas. This year’s luncheon speaker will be Dean Erwin Chemerinsky of UC Berkeley Law School. The conference is in honor of Judge Fitzwater.

Numerous Northern District of Texas judges will speak on various panels, including Chief Judge Lynn, and Judges Boyle, Fitzwater, Scholer, Lindsay, and Godbey. Magistrate Judges Rutherford, Horan, Reno, Toliver, Bryant, Ramirez, Frost, Cureton, and Ray will also speak.

The conference should be fantastic, and more details about the conference may be found here.

Posted in Dallas Legal Community | Comments Off on Northern District of Texas’ Bench/Bar Conference – Friday, January 11, 2019

New Patent Cases

Over the last couple of months, there have been numerous new patent cases filed in the Northern District of Texas, including:

  • Akoloutheo v. Citrix Systems (complaint available here)
  • Altair Logix v. ZTE (complaint available here)
  • Complex Memory v. STMicroelectronics (complaint available here)
  • Endurance Lift Solutions v. Finalrod IP (complaint available here)
  • Hearing Lab Technology v. Auditory Licensing Company (complaint available here)
  • Hertl Media v. Amazon.com (complaint available here)
  • Inergetic v. Murata Electronics (complaint available here)
  • Lexor Manufacturing v. Luraco (complaint available here)
  • Magnacross v. A.B.P. International (complaint available here)
  • Netsoc v. Match Group (complaint available here)
  • QC Manufacturing v. Ventamatic (complaint available here)
  • Radio Tower Networks v. Oncor (complaint available here)
  • Radio Tower Networks v. Crosspoint Communications (complaint available here)
  • Ring Protection v. NEC (complaint available here)
  • Reigntek IP v. Vivint (complaint available here)
  • Reef Mountain v. Schneider Electric (complaint available here)
  • Sendsig v. Tabletop Media (complaint available here)
  • Tabletop Media v. Sendsig (complaint available here)
  • Super Interconnect Technologies v. ZTE Corporation (complaint available here)
  • Ubiquitous Connectivity v. TXU Energy (complaint available here)
  • Uniloc v. LG Electronics (two cases) (complaints available here and here)
  • Uniloc v. ZTE (three cases) (complaints available here, here, and here)
Posted in New Lawsuits Filed | Comments Off on New Patent Cases

Judge Kinkeade Strikes Pleadings Requesting $40 Million In Attorney’s Fees As Discovery Sanction

On June 27, 2018, Judge Kinkeade issued a post-trial Order in Zenimax v. Oculus (available here). The Court had previously entered orders requiring the Plaintiffs to produce certain documents relating to their financial status and business valuations, including an order during trial. After trial, the Plaintiffs produced certain responsive documents.

The Court found that “the record clearly establishes the Plaintiffs willfully violated the Court’s discovery Orders and that sanctions are appropriate under the circumstances of this case.” Defendants asked the Court to find the Plaintiffs in civil contempt, impose a monetary fine to compel the remaining documents to be produced, and grant a partial new trial on several of the Plaintiffs’ claims. The Court rejected these as sanctions, and concluded that “the most appropriate sanction for the Plaintiffs’ conduct is striking their pleadings that seek recovery of their attorneys’ fees, thereby precluding the Plaintiffs from recovering these additional sums.”

The Court noted that the Plaintiffs had sought approximately $40 million in attorney’s fees in their post-trial briefing.

Posted in Attorney's Fees, Judge Kinkeade, Sanctions | Comments Off on Judge Kinkeade Strikes Pleadings Requesting $40 Million In Attorney’s Fees As Discovery Sanction

Voluntary Dismissal of Lawsuit Without Prejudice Triggers 1 Year IPR Bar Date

35 U.S.C. § 315(b) provides that an inter partes review “may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner . . . is served with a complaint alleging infringement of the patent.” The Federal Circuit, in Click-to-Call Technologies v. Ingenio, Inc. (decision available here), ruled that the 1-year bar date is triggered by the service of a complaint, even where the plaintiff voluntarily dismisses the complaint without prejudice.

The Court found that the statute does not contain any exceptions or exemptions for complaints served in civil actions that are subsequently dismissed, with or without prejudice. “Simply put, § 315(b)’s time bar is implicated once a party receives notice through official delivery of a complaint in a civil action, irrespective of subsequent events.”

This decision will likely lead to more petitions for IPRs being filed, as defendants served with complaints that are voluntarily dismissed must now file their IPR petitions within 1 year (i.e., the Federal Circuit reversed relatively longstanding PTAB authority on this point).

Posted in Federal Circuit Court of Appeals | Comments Off on Voluntary Dismissal of Lawsuit Without Prejudice Triggers 1 Year IPR Bar Date

Moving For Attorney’s Fees? Judge Kinkeade Lays Out A Road Map For Your Proof On Reasonableness

On May 15, 2018, Judge Kinkeade denied (without prejudice to refiling) SAP’s Motion for Recovery of Attorneys’ Fees (Order available here). In this patent case, SAP prevailed against InvestPic, and Judge Kinkeade found the case exceptional, such that SAP was entitled to recover its attorney’s fees.  SAP sought $614,568.56. But Judge Kinkeade denied the motion “because SAP has failed to provide the Court with sufficient reliable evidence to show that the requested fees are reasonable and necessary.”

Judge Kinkeade first outlined the standard for judging the reasonableness of fees:

The applicant for fees has the burden of establishing entitlement to an award of fees, documenting the appropriate hours expended, and the appropriate billing rates. The applicant for fees can only meet this burden by presenting adequate evidence to the court so that the court can determine what hours and rates should be used to determine the lodestar. The court must not only determine whether or not the total hours claimed are reasonable but must also determine whether particular hours claimed were reasonably expended. Vague time entries and time entries that do not illuminate the subject matter of what was done do not assist a court in making a determination that the claimed time was reasonably expended. Litigants take their chances when submitting such fee applications. To determine reasonable rates, a court considers the attorneys’ regular rates as well as the prevailing rates in the area. The applicant has the burden to show that rates used in determining the lodestar are reasonable rates, which can be shown through affidavits of the attorneys involved in the case and through affidavits of other attorneys practicing in the relevant area.

(citations and quotations omitted).

The Court found SAP’s evidence insufficient to award fees:

  • Beyond the general statements in SAP’s attorney-fee declaration that the lodestar, hours and rates were reasonable, there was “[no] information to support these conclusory statements.” The declarant did not provide a “description of the number of hours and rates that he used to determine his asserted lodestar. Instead, [the declarant] simply concludes that this lodestar amount is reasonable. The declaration is totally lacking as to any description of the methodology used to calculate the asserted lodestar and how [the declarant] came to this lodestar is not readily apparent from the submitted invoices.”
  • “[M]any of the time entries are too vague for the Court to determine if this time was reasonably expended on this matter. For example, after redaction some time entries read: ‘Research re a XXXXXX’; ‘Research applicability of XXXXXX’; Attention to XXXXXX’; and ‘Confer with team re XXXXXX’. Entries like these are so vague that the Court cannot make a determination that the time claimed was reasonably expended. In certain situations, it might be appropriate for a Court to reduce a lodestar to account for vague entries like this.”
  • “There is also insufficient evidence for the Court to make a determination of the reasonableness of the rates charged by the various people who worked on this matter. The [] Declaration provides information about [the declarant]’s qualifications and experience. This is some indication of what his reasonable hourly rate should be. This is not an indication of what the reasonable rate for all the other individuals involved should be. [The declaration] is silent as to the background and experience of any of these other people who spent time on this case and what their reasonable rate should be based on that background and experience. [The declarant] does not even refer to having any particular knowledge of this information or as to the person’s role in the matter. This information is also not readily apparent from the submitted invoices. For example, the [first law firm’s] invoices list hourly rates for the people with time entries, which range from $200.00 per hour to 1,100.00 per hour, but they do not give any indication as to if those people are partners, associates, paralegals, or other support staff. The [second law firm’s] invoices suffer from the same problem. The [third law firm], on the other hand, suffer from the opposite problem. These invoices identify the roles of the people who worked on the matter, but they do not provide the hourly rates charged by these people. Without further evidence, the Court is unable to determine the reasonableness of the rates charged in this matter.”

Judge Kinkeade gave SAP 20 days to refile its Motion for Attorneys’ Fees.

Posted in Attorney's Fees, Judge Kinkeade | Comments Off on Moving For Attorney’s Fees? Judge Kinkeade Lays Out A Road Map For Your Proof On Reasonableness

Federal Circuit Sees Through Purchase of Tribal Sovereign Immunity, Finds that Tribes Cannot Assert Sovereign Immunity in Inter Partes Reviews

In Saint Regis Mohawk Tribe v. Mylan (decision available here), the Federal Circuit rejected Allergen’s attempt to purchase sovereign immunity from an Indian tribe—i.e., Allergen paid millions of dollars to an Indian tribe to allow the tribe to own Allergen’s patents (such that, per Allergen, tribal sovereign immunity would apply thereby shielding the patents from inter partes review). The Federal Circuit held that, because sovereign immunity does not extend to actions brought by the federal government (including where the federal government acts through an agency in an investigation or an adjudicatory-agency action), and IPRs are “more like an agency enforcement action than a civil suit brought by a private party,” tribal sovereign immunity cannot be asserted in IPRs. Simply put, “tribal immunity does not extend to these administrative agency reconsideration decisions.” (Somewhat notably, the Federal Circuit “[left] for another day the question of whether there is any reason to treat state sovereign immunity differently”, but if you ask me, it seems clear that state sovereign immunity will fare no better.)

Posted in Federal Circuit Court of Appeals | Comments Off on Federal Circuit Sees Through Purchase of Tribal Sovereign Immunity, Finds that Tribes Cannot Assert Sovereign Immunity in Inter Partes Reviews