Raniere v. Microsoft Corporation
Opinion
*1300
Keith Raniere ("Raniere") appeals from the district court's decisions awarding attorney fees and costs to Microsoft Corporation and AT&T Corporation (together, "Appellees").
Raniere v. Microsoft Corp.
, Nos. 15-0540 & 15-2298,
BACKGROUND
Raniere sued Appellees for patent infringement, asserting five patents against AT&T ( U.S. Patent Nos. 6,373,936, 6,819,752, 7,215,752 ("the '5752 patent"), 7,391,856, and 7,844,041 ("the '041 patent") ) and two of these five patents against Microsoft (the '5752 patent and the '041 patent).
Fees Decision
,
In 1995, Raniere and the other named inventors of the patents at issue assigned all rights in these patents to Global Technologies, Inc. ("GTI"). Id. at *2. Raniere is not listed on GTI's incorporation documents as an officer, director, or shareholder. GTI was administratively dissolved in May 1996. Id.
In December 2014, Raniere executed a document on behalf of GTI, claiming to be its "sole owner," that purportedly transferred the asserted patents from GTI to himself. Id. Raniere's suits against Appellees identified himself as the owner of the patents at issue.
In 2015, Microsoft moved to dismiss Raniere's suit for lack of standing, noting that the PTO's records indicated that Raniere did not own the patents at issue. Raniere's counsel represented to the district court that GTI's ownership passed to Raniere in its entirety at some point, and that Raniere properly transferred ownership of the patents from GTI to himself. Id. The court ordered Raniere to produce documentation proving these representations. Id. Raniere produced various documents that, according to the district court, failed to indicate that Raniere had an ownership interest in GTI at any time or that Raniere had the right to assign the patents at issue from GTI to himself. Id. at *3. Given Raniere's failure to produce evidence to support his standing, the district court permitted Appellees to conduct limited discovery into the standing issue and stayed the cases pending its resolution. Id.
Appellees suspended discovery when the parties began negotiating terms of settlement, but Raniere refused to finalize the settlement. Id. AT&T then filed a motion for an order to show cause why the action should not be dismissed under Federal Rule of Civil Procedure 41(b) for lack of standing. Id. AT&T also noted that Raniere was seeking third-party discovery in violation of the district court's discovery order. Id. Raniere informed the district court that he could produce evidence to establish his standing, but he required a subpoena to obtain evidence from Alan Rubens, a Washington state attorney. Id. The district court permitted this limited discovery request and ordered Rubens to produce all relevant documentation. Id. Rubens's documents showed the GTI shareholders' consent to a transfer of shares from Raniere's ex-girlfriend-who owned 75% of GTI's shares-to Raniere.
*1301 The documents Raniere proffered did not indicate that any such transfer was ever completed, however, and did not establish that Raniere owned the patents at issue.
In light of these documents, Appellees filed a renewed motion to dismiss for lack of standing. Id. In response, Raniere filed a motion seeking the court's permission to submit additional evidence showing that he had sole ownership over GTI. Id. The district court granted-in-part and denied-in-part this motion, stating that Raniere had received "more than a fair opportunity to adduce evidence to establish his standing." J.A. 2340.
The district court held a hearing on Appellees' motion to dismiss.
Fees Decision
,
The district court concluded that Raniere was unlikely to be able to cure the standing defect, and dismissed the case
with prejudice
.
Raniere appealed the district court's decision on standing. We summarily affirmed the district court's dismissal with prejudice of Raniere's action for lack of standing.
Raniere v. Microsoft Corp.
,
While the merits appeal was pending, Appellees filed a motion seeking attorney fees and costs pursuant to
The district court next concluded that this case was exceptional because it stood out from other cases "with respect to the unreasonable manner in which it was litigated. [Raniere]'s conduct throughout this litigation, culminating in his untruthful testimony at the hearing on the motion to dismiss, demonstrates a pattern of obfuscation and bad faith." Id. at *5. The district court noted that Raniere promised repeatedly that he could produce evidence that would cure the standing defect identified by Appellees and the district court. Id. But Raniere failed to satisfy these promises, according to the district court, as "[d]espite numerous representations, [Raniere *1302 ] failed to produce any written document or other credible evidence that he had an interest in GTI that would allow him to transfer the patents to himself." Id. Raniere's conduct required Appellees "to expend significant resources to oppose [Raniere]'s arguments, which the Court now finds were made in bad faith to vexatiously multiply these proceedings and avoid early dismissal." Id. The district court rejected Raniere's attempts to recharacterize his conduct as "zealous pursuit of his good faith claim of ownership," noting its finding that Raniere "made false and misleading representations to Defendants and the Court that resulted in, among other things, prejudice to Defendants in the form of significant legal fees incurred in defending this action." Id. The district court awarded fees and non-taxable costs for the period of time between the Federal Rule of Civil Procedure 16 conference and the district court's order of dismissal. Id.
In the alternative, the district court sanctioned Raniere's conduct under its inherent authority. Id. The district court reiterated that Raniere had "acted in bad faith and vexatiously multiplied these proceedings" by failing to seize on any of the multiple opportunities to correct the standing issue. Id. "From the inception of the litigation, [Raniere] engaged in a pattern of obfuscation, offering inconsistent theories and arguments and promising to produce evidence that never materialized." Id. The district court noted that Raniere failed to voluntarily dismiss the case when confronted with the fatal standing defect, instead imposing expenses on both Appellees and the district court. Id. According to the district court, "[t]his deplorable conduct constitutes an abuse of the judicial process and warrants an imposition of sanctions under the Court's inherent powers." Id.
Although Raniere argued that his conduct was not sufficiently egregious to justify imposition of sanctions under the district court's inherent powers, the district court rejected Raniere's characterization of his actions, noting that it "requires full candor on all matters from the parties who come to it seeking relief. [Raniere]'s submission of a document that contained a knowingly false representation constitutes an abuse of the judicial process that warrants sanctions." Id. The district court found "that an award of fees is the least severe sanction adequate to deter similar conduct by [Raniere] in the future and to preserve the integrity of the Court." Id.
In the order granting attorney fees, the district court directed Appellees to submit evidence of their reasonable fees and costs. Id. at *6. AT&T submitted evidence that it incurred $395,050.30 in attorney fees and $13,917.10 in costs, and Microsoft submitted evidence that it incurred $176,166.40 in attorney fees and $2,073.68 in costs. Raniere objected to these figures.
The district court applied the lodestar method to determine the appropriate amount of attorney fees. The district court found that the hourly rates Appellees' counsel charged were reasonable. Although Raniere argued that AT&T improperly redacted its invoices and included unintelligible time entries, thus justifying a lower fee award, the district court found that "[t]he allegedly objectionable time entries are not block billed, or so vague or unintelligible as to prevent meaningful review." J.A. 30. The district court found Appellees were not entitled to fees spent on certain matters after the district court issued its stay order. And, the district court reduced the lodestar for both Appellees by twenty percent due to duplication of efforts between Microsoft and AT&T attorneys. In view of these determinations, the district court awarded $300,295.71 to *1303 AT&T and $143,719.26 to Microsoft in attorney fees and costs. J.A. 33.
Raniere appeals the district court's fee award. We have jurisdiction to review this appeal under
DISCUSSION
A district court "in exceptional cases may award reasonable attorney fees to the prevailing party."
is simply one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. District courts may determine whether a case is "exceptional" in the case-by-case exercise of their discretion, considering the totality of the circumstances.
Octane Fitness, LLC v. ICON Health & Fitness, Inc.
, --- U.S. ----,
Raniere challenges the district court's decision on four grounds. First, he contends that the district court erred in finding that Appellees are prevailing parties under § 285. Second, he argues that the district court abused its discretion in finding this case "exceptional." Third, he asserts that the district court erred in sanctioning Raniere under its inherent authority, in the alternative to a fee award under § 285. Finally, he argues that the district court abused its discretion in determining the amount of the fee award.
We conclude that Appellees are prevailing parties, and that the district court did not abuse its discretion in finding this case exceptional under § 285 or in its fee award. We, thus, need not reach the district court's sanction under its inherent authority in the alternative.
A. Appellees Are Prevailing Parties
Raniere first disputes whether Appellees are prevailing parties under § 285. Raniere contends that dismissal with prejudice for lack of standing is not an adjudication on the merits, as he contends is required to find that a defendant is a "prevailing party" under our case law. Raniere also asserts that dismissal with prejudice, without adjudication of a patent infringement claim, should preclude finding that a defendant has prevailed in a litigation. We disagree with these statements, particularly in light of the Supreme Court's recent decision in
CRST Van Expedited, Inc. v. EEOC
, which held that a favorable judgment on the merits is not necessary for a defendant to be deemed a prevailing party for purposes of statutory fee-shifting. --- U.S. ----,
*1304
The Supreme Court has addressed the issue of what constitutes a "prevailing party" on several occasions. In
Buckhannon Board & Care Home, Inc. v. West Virginia Department of Health & Human Resources
,
Our "[r]espect for ordinary language requires that a plaintiff receive at least some relief on the merits of his claim before he can be said to prevail."
....
A defendant's voluntary change in conduct, although perhaps accomplishing what the plaintiff sought to achieve by the lawsuit, lacks the necessary judicial imprimatur on the change. Our precedents thus counsel against holding that the term "prevailing party" authorizes an award of attorney[ ] fees without a corresponding alteration in the legal relationship of the parties
....
We cannot agree that the term "prevailing party" authorizes federal courts to award attorney[ ] fees to a plaintiff who, by simply filing a nonfrivolous but nonetheless potentially meritless lawsuit (it will never be determined), has reached the "sought-after destination" without obtaining any judicial relief.
We have interpreted
Buckhannon
and its application to jurisdictional dismissals in prior cases. We interpreted
Buckhannon
to require that, "[i]n determining whether a party is a prevailing party in patent litigation, we apply the general principle that 'to be a prevailing party, one must receive at least some relief on the merits, which alters ... the legal relationship of the parties.' "
Inland Steel Co. v. LTV Steel Co.
,
Raniere argues that Appellees cannot be prevailing parties because Appellees did not prevail on the merits. In his view, Appellees only "won" a judgment that Raniere did not possess standing to bring his suit, which is merely jurisdictional. And, he contends that we have previously made clear that a dismissal for lack of standing is generally to be without prejudice because it is not an adjudication on the merits.
Univ. of Pittsburgh v. Varian Med. Sys., Inc.
,
In
CRST
, the Court first summarized its prior precedent on the issue of prevailing parties, noting that the "touchstone of the prevailing party inquiry must be the material alteration of the legal relationship of the parties."
The Court explained, though, that, before
CRST
, it had "not set forth in detail how courts should determine whether a defendant has prevailed."
The Court further noted that, in the context of 42 U.S.C. § 2000e-5(k), the fee-shifting provision of Title VII of the Civil Rights Act of 1964:
[C]ongressional policy regarding the exercise of district court discretion in the ultimate decision whether to award fees does not distinguish between merits-based and non-merits-based judgments.... [O]ne purpose of the fee-shifting provision is to deter the bringing of lawsuits without foundation.... The Court, therefore, has interpreted the statute to allow prevailing defendants to recover whenever the plaintiff's "claim was frivolous, unreasonable, or groundless." It would make little sense if Congress' policy of sparing defendants from the costs of frivolous litigation[ ] depended on the distinction between merits-based and non-merits-based frivolity. Congress must have intended that a defendant could recover fees expended in frivolous, unreasonable, or groundless litigation when the case is resolved in the defendant's favor, whether on the merits or not.
Id. at 1652 (emphasis in original) (internal quotations and citations omitted).
Although
CRST
considered the fee-shifting provision of Title VII, the Court explained there that "Congress has included the term 'prevailing party' in various fee-shifting statutes, and it has been the Court's approach to interpret the term in a consistent manner."
Id.
at 1646 (citing
Buckhannon
,
Our sister circuits have interpreted
CRST
to mean that, if a defendant succeeds on a jurisdictional issue, it may be a prevailing party. The First Circuit recently examined a similar issue: whether a defendant that prevailed because plaintiffs failed to demonstrate their standing can be a "prevailing party" under
Similarly, the Ninth Circuit concluded that
CRST
overruled its earlier holding in
Branson v. Nott
,
We reach the same conclusion our sister circuits have reached regarding
CRST
, which clarified the application of
Buckhannon
to defendants seeking prevailing-party status. The relevant inquiry post-
CRST
, then, is not limited to whether a defendant prevailed on the merits, but also considers whether the district court's decision-"a judicially sanctioned change in the legal relationship of the parties"-effects or rebuffs a plaintiff's attempt to effect a "material alteration in the legal relationship between the parties."
CRST
,
Raniere has not persuasively explained why we should make a distinction between § 285 and other statutory provisions that award attorney fees to "prevailing parties," and we see no reason to make such a distinction in light of the Supreme Court's clear command to construe the term "prevailing party" consistently across fee-shifting regimes. We hold CRST applies to our analysis of prevailing-party status under § 285, and that defendants need not prevail on the merits to be classified as a "prevailing party." To the extent inconsistent with this conclusion, our prior case law to the contrary- Inland Steel and its progeny-is abrogated accordingly.
Even if the district court's decision to dismiss with prejudice for lack of standing is not based on the substantive merits of a plaintiff's case, CRST makes clear that a merits decision is not required. Appellees spent significant time and resources to prevail in this action, as reflected by their request for attorney fees and costs. And here, Appellees "won" through the court's dismissal of Raniere's case with prejudice-they prevented Raniere from achieving a material alteration of the relationship between them, based on a decision marked by "judicial imprimatur ."
*1307
CRST
,
Even without the benefit of CRST 's clarification of Buckhannon , moreover, we still would conclude that the district court did not err in finding that Appellees are prevailing parties. The district court's dismissal with prejudice of Raniere's infringement suit was tantamount to a decision on the merits, making it sufficient to establish Appellees as prevailing parties.
Raniere objects to this conclusion, arguing that
Varian
makes clear that a dismissal for lack of standing is not an adjudication on the merits under Rule 41(b). But
Varian
examined whether dismissal with prejudice is appropriate when jurisdictional defects exist, and explained that "a dismissal for lack of standing should generally be without prejudice, particularly when the defect is curable."
As we noted in
Highway Equipment Co. v. FECO, Ltd.
, a voluntary dismissal with prejudice under Federal Rule of Civil Procedure 41(a)(2)"has the necessary judicial imprimatur to constitute a judicially sanctioned change in the legal relationship of the parties, such that the district court properly could entertain [the defendant's] fee claim under
*1308
Raniere objects, but does not explain why this principle would not apply to dismissals under Rule 41(b). To the contrary, the Supreme Court has explained, in the context of discussing the differences between Rule 41(a) and Rule 41(b), that "an 'adjudication upon the merits' is the opposite of a 'dismissal
without prejudice
.' "
Semtek Int'l Inc. v. Lockheed Martin Corp.
,
The district court's dismissal with prejudice of Raniere's action gave Appellees the full relief to which they were legally entitled. Thus, to the extent any relief on the merits remains a necessary predicate to prevailing-party status after CRST , the dismissal with prejudice here was such a judgment. This suffices to make Appellees "prevailing parties."
For these reasons, we conclude the district court did not err in finding Appellees are "prevailing parties" for the purposes of § 285. We affirm this determination accordingly.
B. The District Court Did Not Abuse Its Discretion in Finding This Case "Exceptional"
Raniere also contends that the district court abused its discretion in finding this case exceptional. We disagree, and affirm the district court's well-reasoned determination on this issue. Many of Raniere's objections to the district court's exceptionality determination raise factual disputes with the underlying merits ruling, which we cannot review at this stage of the proceeding. The attorney fee award is separately appealable here, and thus collateral, because it cannot "alter the [merits] order or moot or revise decisions embodied in the [merits] order."
Budinich v. Becton Dickinson & Co.
,
The district court specifically found that Raniere's behavior throughout the litigation employed "a pattern of obfuscation and bad faith," and that this behavior caused Appellees to incur significant fees and costs to oppose Raniere's positions. These positions, in the district court's view, "were made in bad faith to vexatiously multiply these proceedings and avoid early dismissal"-in effect, to stall the termination of the proceedings.
Fees Decision
,
*1309
SFA Sys., LLC v. Newegg Inc.
,
Raniere requests that, if we affirm the district court's finding of exceptionality, we reduce the amount of the fee and costs award. We conclude, however, that the district court's discretionary determination of fees and costs is well-supported and reflects the court's careful consideration of the relevant billing rates, invoices, and records. The district court explicitly found that various time entries to which Raniere objected were "not block billed, or so vague or unintelligible as to prevent meaningful review." J.A. 30. The district court exercised its discretion in electing to not accept Appellees' fee request in its entirety-it made modifications to the lodestar for duplication in effort between Microsoft and AT&T's lawyers, and it also declined to allow Appellees to recover all requested fees and costs. J.A. 30-33. On this record, we decline to modify the district court's discretionary award.
CONCLUSION
For the foregoing reasons, we affirm the district court's award of attorney fees and costs under
AFFIRMED
COSTS
Costs to Appellees.
Other circuits also have applied
CRST
to conclude that a defendant need not prevail on the merits to be a "prevailing party."
See
LeFande v. Mische-Hoeges
,
To the extent Raniere's objection to the district court's prevailing party determination relies on a dispute with the district court's dismissal of his case with prejudice, Raniere cannot challenge that finding at this stage of the proceeding-we have already affirmed that finding in the appeal of the merits proceeding.
Raniere
,
We have treated the prevailing party issue under Rule 54 and § 285 in a similar fashion.
See
Highway Equip. Co.
,
Reference
- Full Case Name
- Keith RANIERE, Plaintiff-Appellant v. MICROSOFT CORPORATION, AT&T Corp., Defendants-Appellees.
- Cited By
- 64 cases
- Status
- Published