In a brief filed with the Supreme Court on September 29, 2015 in the case Kingdomware Technologies, Inc. v. United States, 14-916, the government abandoned the restrictive interpretation of the 2006 Veterans Act that it pressed before the U.S. Court of Appeals for the Federal Circuit (background on the case may be found here). The 2006 Veterans Act requires that the VA prioritize competitive bidding by veteran-owned small businesses, but the VA has for years declined to follow that mandate to the full extent Congress required. In briefing before various courts, including the Supreme Court, the government had for several years (and as recently as May 1, 2015) contended that the VA was allowed to limit competitive bidding by veteran-owned small businesses for VA contracts, but the government has now – six weeks before oral argument before the Supreme Court – abandoned that position. Instead, the government now contends that VA “orders” that may be filled through the Federal Supply Schedule should be excluded from mandatory competitive bidding, while VA “contracts” should not. Continue reading Government Abandons Prior Interpretation of 2006 Veterans Act in New Brief to the Supreme Court
Duane Morris is pleased to announce that partner Robert L. Byer has been selected as the “Lawyer of the Year” in Pittsburgh Appellate Practice, an honor he previously received in 2011. Only one lawyer in each practice area and city is given this honor. Lawyers are selected based on high marks received during peer-review assessments conducted by Best Lawyers each year.
Mr. Byer is head of the Appellate division of Duane Morris’ Trial Practice Group. His appellate work and legal-issues litigation experience covers a wide variety of legal areas, including corporate governance, intellectual property, administration law, tax cases, Constitutional law, insurance coverage, contracts, professional liability, products liability and toxic torts.
Duane Morris partner Paul J. Killion of the firm’s San Francisco office has recently been appointed chair of the California State Bar’s Committee on Appellate Courts for the term commencing at the close of the 2015 State Bar Annual Meeting on October 11, 2015.
Killion is a Certified Appellate Specialist and practices in the area of complex civil litigation. He has argued or briefed over 100 appellate matters, including appeals, writs, petitions for review, merits briefing and amicus curiae briefing. He has handled a variety of litigation and appeals, including significant national experience in asbestos, pollution, toxic tort insurance coverage litigation and large personal injury claims. He has a broad range of appellate experience, with a particular focus on appeals from complex jury trials. Killion has appeared before all Districts of the California Courts of Appeal and before the California Supreme Court, as well as the Ninth and Tenth Circuits and the Supreme Courts of Washington and Oregon. He also represents clients as amici counsel in the California Supreme Court and Courts of Appeal.
For 20 years, the District of Columbia has been the sole Circuit that fails to recognize the imposition of a constructive trust to benefit victims of fraud. See United States v. BCCI Holdings (Luxemborg), S.A., 46 F.3d 1185, 1190 (D.C. Cir. 1995).
Under a constructive trust theory, “whenever a party has obtained property which does not belong to him, and which he cannot in good conscience withhold from another who is beneficially entitled to it,” either through theft, embezzlement, larceny, trickery, etc., that property is held in a constructive trust for the true owner, and that constructive trust preserves the true owner’s legal entitlement to the property. Blake Constr. Co. v. American Vocational Assoc., 419 F.2d 308, 311 (D.C. Cir. 1969). The legal entitlement preserved through a constructive trust is the mechanism by which the true owner can seek return of his property from the Government after it has been seized by law enforcement as the proceeds of criminal activity. Under BCCI, however, victims of fraud were relegated to the status of general creditors, and the Government kept the property out of which those victims had been defrauded. BCCI, 46 F.3d at 1190.
Scholars have lambasted BCCI’s constructive trust analysis as “tortured and wrong,” “a truly appalling display,” and a “mischaracteriz[ation]” of the RICO statute and constructive trust theory itself. Rossbacher, Henry H. and Young, Tracy W., BCCI: The Priority of Kings, or What’s More Dangerous, the Cavalry or the Indians? 5 J. Financial Crime 365, 365-66 (May 1998) (citing cases and law review articles); Blakey, G. Robert and Roddy, Kevin P., Reflections on Reves v. Ernst & Young: Its Meaning and Impact on Substantive, Accessory, Aiding Abetting and Conspiracy Liability under RICO, 33 Am. Crim. L. Rev. 1345 (1996). Nonetheless, the D.C. Circuit persisted in its outlier position.
Criticisms of the reasoning and holding in BCCI arise not only from scholars. The constructive trust portion of the opinion in that case has also been directly criticized and rejected by every circuit court opinion to consider the issue since BCCI was handed down. See, e.g., Willis Mgmt. (Vermont), Ltd. v. U.S., 652 F.3d 236, 244 (2d Cir. 2011) (rejecting the analysis, logic, and statutory interpretation of BCCI); United States v. Salti, 579 F.3d 656, 670-71 (6th Cir. 2009) (rejecting BCCI and noting that its reasoning has been subject to criticism); United States v. Shefton, 548 F.3d 1360, 1366 (11th Cir. 2008) (rejecting BCCI because “[o]ne of its premises is incorrect. . .”); United States v. $4,224,958.57, 392 F.3d 1002, 1004 (9th Cir. 2004) (characterizing the holding in BCCI as an “elementary mistake.”) Nonetheless, the D.C. Circuit persisted in its outlier position.
Until, perhaps, now. The D.C. Circuit could be on the brink of a major about-face, following some strong signaling in the panel opinion in the criminal forfeiture ancillary proceeding United States v. SunRise Academy, No. 13-3071 (Slip. Op. May 5, 2015). In this proceeding, SunRise Academy, a private school for special needs children in the District of Columbia, was swindled out of over $2 million by its own founder and director. The Government arrested the director for embezzlement and wire fraud, and seized the money from the director’s bank account. SunRise first attempted to intervene in the criminal proceeding to get its money back, but was precluded as a non-party. SunRise then attempted to get its money back via an ancillary civil proceeding, but was again precluded, in part, under BCCI. Several financially-strapped years later, SunRise finally had its day in court on appeal to the D.C. Circuit.
In its opinion, the panel observed that overturning BCCI Holdings “would have support,” as “[e]very circuit to consider the constructive trust question in the context of criminal forfeiture has rejected the analysis in BCCI Holdings,” but nonetheless found that it was bound by that precedent until an en banc rehearing presented the opportunity to change it. Slip Op. at 21 (collecting cases). Such a clear call to action for an en banc rehearing is rare among appellate opinions.
Accordingly, the panel reversed-in-part the district court decision precluding SunRise’s claim on other grounds, affirmed-in-part the portion of the lower court opinion dismissing SunRise’s constructive trust theory, and remanded the case for a hearing on the merits. As though the panel’s call for en banc was not loud enough, the panel issued along with the opinion an order delaying issuance of the mandate for a week beyond the expiration of time in which the parties could file petitions for rehearing—presumably to allow the panel to take an en banc vote sua sponte.
Not surprisingly, SunRise Academy took the not-so-subtle hint and filed a petition for rehearing en banc regarding the constructive trust issue. The petition was filed on July 20, 2015, and raises the expected arguments regarding the resounding rejection of BCCI among the regional circuits, and the need to bring D.C.’s heavily-criticized opinion in line with the strong consensus regarding constructive trust jurisprudence.
The Government was invited to respond within 15 days on July 27, 2015. Responses to en banc petitions are not invited often, and indicate that at least one judge is in favor of granting the petition. Such an invitation is a prerequisite for granting rehearing en banc. Keep your eyes peeled for the next few weeks to see if the D.C. Circuit finally changes course and joins the rest of the circuits in providing for constructive trusts as a legal theory under which victims can petition the Government for the return of their fraudulently taken property.
This year, Law360 recognized Duane Morris as a Pennsylvania Powerhouse. Leaders from the firm suggested that the high court’s reliance on the 111-year-old firm during the high-profile scandal was a testament to the firm’s status as a major player in a state well-known for a deep bench of legal talent. Duane Morris’ appellate practice and its chair, Robert L. Byer were a focus of this article on the firm as a Pennsylvania Powerhouse.
To read the full text of the article, please visit the Duane Morris website.
Duane Morris LLP is pleased to announce that Robert M. Palumbos, a partner in the firm’s Philadelphia office, has been appointed to serve on the Pennsylvania Supreme Court’s Appellate Court Procedural Rules Committee. Palumbos’ three-year term will commence on July 15, 2015. The committee’s principal function is to make recommendations to the state Supreme Court for refining and updating the rules of appellate procedure in light of experience, developing case law and new legislation.
To read the full text, please visit the Duane Morris website.
Today the Supreme Court granted certiorari in Kingdomware Technologies, Inc. v. United States (14-916), a case involving competitive bidding by veteran-owned small businesses and service-disabled veteran-owned small businesses.
Kingdomware seeks reversal of a 2-1 decision by the United States Court of Appeals for the Federal Circuit that limits the opportunities for veteran-owned small businesses to competitively bid for contracts with the Department of Veterans Affairs (“VA”). Duane Morris LLP filed an amicus brief on behalf of a coalition of veteran-owned small businesses in support of Kingdomware. The American Legion also filed an amicus brief in support of Kingdomware. Continue reading Supreme Court Grants Certiorari In Case Involving Competitive Bidding by Veteran-Owned Small Businesses
We have blogged about the increasing disfavor with which federal courts regard cy près awards in class action settlements. Cy près awards, and the related “fluid recovery,” are structures in which some class members receive no actual award, but are deemed to have benefited indirectly. For example, in consumer class actions with low individual value the device may be used to distribute any remainder of a common fund that is left unclaimed by the class. How it usually works is, after awards are made to the class, a donation is made to a third party charity or some group that is identified as similarly situated to the class members.
There may be many reasons why cy près or “fluid recovery” is proposed in any given class action. In some class actions, individual distributions might be so small that mailing them out make no economic sense. In others, an individual award viable, but if the parties do not have good address information, some or all individual class members must make a claim before they can receive anything. In cases involving such a claims process, it is almost certain that only a relatively small percentage of the class will file a claim. Counsel on both sides know this from experience. One side has an interest in basing a fee award on the total projected liability (or the total amount of a settlement fund) regardless of how many class members actually make claims. The other side – beyond the obvious incentive to limit the total amount paid – might seek to benefit from the positive public relations value in a cy près award to charity, and, at the same time, bind the largest possible number of persons to the judgment. Federal courts have criticized class action resolutions that provide funds to non-class-members unconnected to the plaintiff class, especially when fee awards to counsel are based on funds that the class does not receive. It has also been observed that the cy près mechanism can test the virtue of class counsel, because it tempts counsel to bargain away potentially greater direct benefit to class members. The cases generally hold that binding a class member who receives no award to a judgment is acceptable, as long as that person had notice and an opportunity to opt out of the class action and preserve his or her claim. Recently, federal courts have asked whether it is fair to the defendant to certify a class when membership cannot be ascertained except perhaps by an individual’s “say so.” Continue reading Class Action “Ascertainability” in New Jersey
It is a recurring mantra from appellate practitioners to their trial co-counsel that every decision and action made throughout the course of a trial has appellate consequences that must be considered. Properly preserving issues for review, as well as planning for the standard of review that those issues will receive on appeal, are crucial tasks that often go unappreciated during the whirlwind and drama of a trial. Nowhere is appellate planning more underappreciated, however, than in the context of filing patent challenges under the new post-grant provisions of the America Invents Act.
The America Invents Act changed several procedures within the Patent and Trademark Office for disputes related to issued patents. Among these changes was the creation of three new avenues for Defendants (or other interested parties) to challenge the validity of an issued patent, and a new administrative body within the agency, the Patent Trial and Appeal Board (PTAB), to adjudicate those challenges. The three avenues for challenging patent validity correspond to three types of petitions that a challenger can file: (1) a petition for Inter Partes Review (IPR), (2) a petition for Post Grant Review, and (3) a petition for Covered Business Method Review. The scope and timing of the filing dictate which kind of petition is available under a given set of circumstances. IPR petitions are by far the most common.
Petitions challenging patents are typically filed by Defendants in the course of patent litigation, hoping to secure a faster and less costly way of invalidating a patent asserted against them. As a result, co-pending patent infringement litigation is often stayed by district courts upon the filing or institution of a petition, pending a final written decision on the merits from the PTAB. Many defendants find filing a PTAB petition to be an attractive strategy, not only because it appears to be faster and cheaper than district court litigation (there is some debate as to whether it is actually faster or cheaper), but because the PTAB has a reputation for being a patent-hostile forum. (Former Federal Circuit Chief Judge Rader has famously referred to PTAB panels as “patent death squads” in his remarks at the AIPLA Annual Meeting in October 2013).
Regardless of one’s view of the PATB, it certainly provides a challenger-friendly forum with respect to the standard of proof and the claim construction standards that it applies to the patents it reviews. A district court must treat patents with a presumption of validity, and review challenges to validity under a clear and convincing evidence standard of proof. District courts also construe claim terms according to the standard articulated by the Federal Circuit in Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc), while the PTAB gives disputed claims their “broadest reasonable construction,” a scope more likely to ensnare the cited prior art.
There are pitfalls to filing petitions at the PTAB, however, in that adverse decisions and waivers can give rise to estoppel in co-pending district court litigation. Additionally, if a court is not willing to stay the co-pending litigation, a Defendant has merely added another layer to its litigation costs, rather than securing an expedient alternative.
But there is another reason that filing a PTAB petition is a strategic boon for a defendant; a reason often overlooked at the early stages of trial when such petitions are due—the standard of review on appeal. Final written decisions on the validity of a patent as issued by the PTAB are appealable directly to the Court of Appeals for the Federal Circuit, the same forum to which all district court patent cases are appealed. But the standard of review applied to PTAB appeals is more deferential than the standard applied to district court decisions in several ways.
First, the decision of the PTAB on whether to institute a review is not appealable at all. In re Cuozzo Speed Technologies, LLC, No. 2014-1301 (Fed. Cir. 2015). Additionally, mandamus relief is not available for PTAB evidentiary and discovery rulings, the way it would be in a district court environment. In re Telefonaktiebolaget LM Ericsson, 2014 WL 1760009, *1 (Fed. Cir. May 5, 2014); In re Redline Detection, LLC, 547 Fed. Appx. 994, 995 (Fed. Cir. 2013). These rules have benefitted challengers so far, since the patentee has more to lose in an improperly instituted or administered review.
On the merits, the standard of review that the Federal Circuit applies to PTAB decisions on obviousness and claim construction is more deferential than that applied to district court decisions on those same questions. Smith & Nephew v. Rea, 12-1343 (Fed. Cir. 2013). The standard applied to factual findings underlying PTAB decisions is “substantial evidence,” which can be satisfied by anything beyond a scintilla of evidence on which the PTAB could have relied in arriving at their conclusion. By contrast, the standard of review of factual findings underlying district court decisions on those same questions is “clear error.” A decision is clearly erroneous if, in light of all of the evidence, the appellate court is left with the definite and firm conviction that a mistake has been made. That standard can be satisfied even if there is just over a scintilla of evidence supporting the lower tribunal’s determination.
In addition, administrative patent judges on the PTAB must have degrees in technical sciences, while typical district court judges do not. As a result, PTAB judges may be more inclined than generalist judges to render scientifically fact-intensive analyses on obviousness and claim construction. District court judges might be more inclined to rely less on the scientific details and more on the guiding legal principles in making their determinations. Legal questions for both bodies are reviewed de novo. Those differing tendencies thus stand to amplify the effect of the more deferential standard of review for factual determinations of the PTAB, while implicating more de novo review of district court decisions.
In the course of the few years that these petitions have existed, many thousands have been filed, thousands have been decided, and hundreds have been appealed. So far only a few of these appeals have been decided. None have been reversed. The patent litigation community is thus poised on the crest of a wave of new case law coming out of the Federal Circuit. As the bulk of these decisions start coming down, the appellate implications of PTAB filings will become clearer.
Nonetheless, strategic decisions regarding whether and when to file an IPR (or other PTAB petition), as well as the scope and content of that IPR, have already become some of the most important decisions a Defendant can make in the course of a patent infringement litigation. Whether counseling a client on the associated fees or coordinating the selection of prior art references with co-counsel, the appellate implications of each decision made need to be part of the conversation now.
Duane Morris of counsel Thomas R. Newman co-authored an article that was recently published in the New York Law Journal. “Urging a Change in the Law: When to Set Aside Precedent?” explores the common law doctrine of stare decisis, which provides that once a court has decided a legal issue, subsequent cases presenting similar facts should be decided in conformity with the earlier decision. But the doctrine is not an inflexible rule. Judicial decisions simply determine the rights of the parties to an action that is before the court at a particular time in history. They are not, and are not meant to be, immutable laws governing the conduct of mankind and designed for the ages, such as the Ten Commandments. Rather, opinions “must be read in the setting of the particular cases and as the product of preoccupation with their special facts.” The “precedential value of a judicial opinion is limited to the question presented by the facts of the case before the court.”
To read the article in its entirety, please visit: http://www.duanemorris.com/articles/urging_a_change_in_the_law_when_to_set_aside_precedent_5578.html.