E. D. of Texas Refuses to Vacate Judgment Despite Mediated Settlement Agreement

The Eastern District of Texas has refused to grant a jointly filed motion for vacatur despite that provisions of the parties’ mandatory mediation settlement agreement required vacatur of portions of the court’s earlier judgment.

In Ohio Willow Wood Co. v. Thermo-Ply, Inc., No. 9:07-CV-274, (E. D. Tex., February 3, 2011), the Ohio Willow Wood Company (“OWW”) filed a lawsuit against Thermo-Ply, Inc. for alleged infringement of its patent, United States Patent No. 7,291,182 (“the ‘182 patent”), which was also in the process of being reexamined by the U.S. Patent and Trade Office. Thermo-Ply filed a motion for summary judgment based on obviousness of the claims in the patent. The Eastern District of Texas granted Thermo-Ply’s motion and entered Final Judgment. Both parties appealed.

The parties were ordered to mandatory mediation and reached a settlement agreement that required vacatur of portions of the Eastern District’s Final Judgment, including those portions “that rendered much of the ‘182 patent invalid.” The case was then remanded to the Eastern District of Texas in order to determine “whether its invalidity judgment should be vacated.” On remand, two additional parties also involved in a ‘182 patent dispute with OWW moved to intervene.

First, the Eastern District of Texas analyzed United States Bancorp Mortgage Co. v. Bonner Mall Partnership, 513 U.S. 18, 115 S. Ct. 386 (1994),

The Court stated that the “principal condition to which we have looked [in determining whether vacateur is appropriate] is whether the party seeking relief from the judgment below caused the mootness by voluntary action.” Id. at 24, 115 S. Ct. at 391. While exceptional circumstances can justify vacateur, “those exceptional circumstances do not include the mere fact that the settlement agreement provides for vacateur.” Id. at 29, 115 S. Ct. at 393. However, the Bancorp Court was very clear that it was not announcing a rule that “vacateur can never be granted when mootness is produced” by way of settlement agreement, id., and the court’s decision in this case should not be interpreted otherwise. Additionally, the Court was not addressing the policy considerations which have resulted in the development of mandatory mediation programs.

The court continued its analysis by stating,

In the present case the Federal Circuit placed OWW and Thermo-Ply in the mandatory mediation program. According to the Appellate Mediation Program Guidelines, “[t]he purpose of mediation is a settlement of the case. This may include a global settlement.” United States Court of Appeals for the Federal Circuit, Appellate Mediation Program Guidelines at 4 (emphasis added); see also id. at 6 (“The purpose of the mediation program is to help the parties achieve settlement.”).

According to the court,

Given the emphasis placed on alternative dispute resolution by Congress and the judiciary, a per se rule barring vacateur as part of the appellate mediator’s “tool box” seems short sighted. A more reasoned approach is to examine, on a case-by-case basis, the policy considerations and factors addressed in Bancorp and decisions that followed.

Next, the Eastern District discussed several factors in its vacatur analysis,

In addition to consideration of whether the parties have caused mootness by voluntary action, other factors considered by these courts include: the parties’ desire to avoid any potential preclusive effect; the parties’ interest in conserving their resources; the public interest in the orderly operation of the federal judicial system; and the potential to conserve judicial resources.

The court concluded by stating,

The invalidity judgment in this case did not require extensive time from this court, and did not require lengthy service from jurors. Given the value the judicial system places on mediation, a vacateur that affected only OWW and Thermo-Ply, saved the Federal Circuit from hearing the appeal, and finally disposed of the dispute could be justified. But this patent is the subject of litigation in other courts, and is involved in reexamination. The judgment of invalidity is now ripe for consideration by the Circuit Court. Vacating the judgment will impose costs on other parties and courts. It will only delay, not obviate the need for, consideration of the issue by the Federal Circuit. The court concludes that this is not a case where the circumstances justify vacating its summary judgment order that many of claims of the ‘182 patent are invalid as obvious.

The Eastern District of Texas denied the parties’ joint motion to vacate the court’s earlier judgment.

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