Composite Resources, Inc. v. Parsons

Filing 36

ORDER signed by Chief District Judge Kimberly J. Mueller on 01/17/2023 DENYING 27 Motion to Amend the Judgment. (Rodriguez, E)

Case 2:21-cv-02352-KJM-DMC Document 36 Filed 01/18/23 Page 1 of 5
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UNITED STATES DISTRICT COURT

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FOR THE EASTERN DISTRICT OF CALIFORNIA

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Composite Resources, Inc.,

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Plaintiff,

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No. 2:21-cv-02352-KJM-DMC
ORDER

v.
Derek R. Parsons,

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Defendant.

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The court previously granted defendant Derek Parsons’s motion to dismiss without leave

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to amend. See Prev. Order, ECF No. 26. Plaintiff Composite Resources, Inc. now moves to alter

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or amend the judgment under Rule 59(e). As explained in this order, Composite has not

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identified relevant changes in the law or evidence, has not shown the court’s decision rested on

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clear error, and has not established the court’s order was manifestly unjust, as would be necessary

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to obtain relief under Rule 59(e), so its motion is denied.

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I.

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BACKGROUND
Composite originally pursued claims against a different defendant, Recon Medical, LLC,

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in the United States District Court for the District of Nevada. See Compl. ¶¶ 7–25, ECF No. 1.

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The Nevada court found Recon liable for unfair competition and trademark infringement. Id.

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¶¶ 19–20. Then, as the trial on Composite’s remaining claims was beginning, Recon filed for

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Chapter 11 bankruptcy. Id. ¶¶ 26–27. The case went forward, however, and the jury found that
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Recon’s tourniquets infringed Composite’s patents. Id. ¶ 35. The district court then permanently

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enjoined Recon and anyone affiliated with Recon from using, selling, importing, or monetizing its

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infringing tourniquets. Perm. Inj. Order at 13, ECF No. 16-1.

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Recon filed this case against Parsons, Recon’s CEO, after the trial but before the Nevada

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District Court entered the permanent injunction. See generally Compl., ECF No. 1. After the

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Nevada District Court issued the permanent injunction, Parsons moved to dismiss this action

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under Federal Rule of Civil Procedure 12(b)(6), arguing the Nevada case was preclusive. See

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generally Mot. to Dismiss, ECF No. 13-1. The court agreed the Nevada case was preclusive and

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granted Parsons’s motion to dismiss without leave to amend. Prev. Order at 10.

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This court first rejected Composite’s argument that its claims against Parsons could move

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forward because Parsons was not a defendant in the Nevada lawsuit. Id. at 4–6, see also Opp’n at

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8–12, ECF No.16. Composite’s complaint “conclusively demonstrate[d] privity between Parsons

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and Recon for claim preclusion purposes: Composite repeatedly allege[d] that Parsons ‘controls

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Recon’ and has ‘ultimate authority’ over all of Recon’s business activities; it describe[d] Parsons

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as the ‘moving force’ and the person ‘responsible for all of [Recon’s] relevant decisions’ that led

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to its ‘tortious acts of patent infringement.’” Prev. Order at 6 (quoting Compl. ¶ 2). Composite

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also alleged Parsons was bound by the judgment against Recon. Id. (citing Compl. ¶¶ 50, 62, 74).

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The court then rejected Composite’s argument that it could rely on two exceptions to the

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ordinary claim preclusion rules. These exceptions allow plaintiffs to assert otherwise precluded

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claims if “temporal” or “formal jurisdictional or statutory barriers” prevented them from asserting

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those claims in the original case. See id. at 7–10. First, the court interpreted the Federal Circuit’s

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relevant decisions as requiring a “new right” for the temporal exemption to apply. Id. at 7

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(quoting Gillig v. Nike, Inc., 602 F.3d 1354 (Fed. Cir. 2010)). Composite had not pointed to any

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such “new rights.” Both cases concerned the same products and the same patents. Second, the

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court held the exception for “formal jurisdictional or statutory barriers” did not apply. Id. at 9.

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Composite did not explain how “its inability to recover damages in the Nevada case stemmed

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from any limitations on the Nevada court’s jurisdiction or its continued use, if any, of older

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modes of procedure.” Id. Composite did not develop its claim of any barrier and cited no statute

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to support its claim of a “statutory barrier” in the bankruptcy code. Id. at 9–10.

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Composite now asks the court to reconsider under Federal Rule of Civil Procedure 59(e).

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ECF No. 27. Parsons opposes the motion, ECF No. 33, and Composite has replied, ECF No. 34.

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The court submitted the matter without hearing oral arguments.

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II.

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LEGAL STANDARD
A motion under Rule 59(e) may be granted (1) “to correct manifest errors of law or fact

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upon which the judgment rests”; (2) “to present newly discovered or previously unavailable

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evidence”; (3) “to prevent manifest injustice”; or (4) to account for “an intervening change in

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controlling law.” Allstate Ins. Co. v. Herron, 634 F.3d 1101, 1111 (9th Cir. 2011). The moving

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party bears the burden to show it is entitled to relief, and that burden is heavy. See S.E.C. v.

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Pattison, No. 08-4238, 2011 WL 2293195, at *1–2 (N.D. Cal. June 9, 2011). Absent clear error

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or changes in the evidence or controlling law, a Rule 59(e) motion “should not be granted absent

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highly unusual circumstances.” Orange St. Partners v. Arnold, 179 F.3d 656, 665 (9th Cir.

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1999). Rule 59(e) “may not be used to relitigate old matters, or to raise arguments or present

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evidence that could have been made prior to the entry of judgment.” Exxon Shipping Co. v.

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Baker, 554 U.S. 471, 485 n.5 (2008) (quoting 11 Charles Wright & Arthur Miller, Fed. Prac. &

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Proc. § 2810.1 at 127–28 (2d ed. 1995)).

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III.

ANALYSIS

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Composite first contends the court’s order was manifestly unjust. See Pls.’ Mem. at 2–4,

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ECF No. 27-1. Similarly, it urges the court to consider the equitable implications of its previous

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order. See id. at 10–12. District courts have described manifest injustice as “a catch-all factor.”

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Galen v. Redfin Corp., No. 14-05229, 2015 WL 7734137, at *4 (N.D. Cal. Dec. 1, 2015). It can

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capture a variety of “situations that strike the court as unfair.” Id. But “a disappointed litigant”

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cannot claim manifest injustice in an “attempt to persuade the court to change its mind.” Young v.

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Thomas, No. 14-02550, 2015 WL 3397193, at *2 (D.S.C. May 26, 2015) (quoting Abdur-Rahiim

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v. Holland, No. 17-0079, 2015 WL 859117 (E.D. Ky. Feb. 27, 2015)). Composite’s motion fits

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that mold. It reiterates its argument that uncited provisions of the Bankruptcy Code prevented it
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from recovering damages in the Nevada case, so it argues it would be unfair to preclude it from

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asserting damages claims in this action. Pl.’s Mem. at 3, ECF No. 27-1. Composite’s motion

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does not show manifest injustice, but rather attempts to “relitigate old matters” improperly.

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Exxon Shipping Co., 554 U.S. at 485 n.5 (citation omitted).

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Composite argues similarly that the court’s order unfairly forces patent holders to “sue not

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only the infringing company, but also every single officer, employee, and agent of the company,

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or else run the risk that the corporate defendant could wait until the eve of trial to file for

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bankruptcy and leave the patent owner without any remedy for damages.” Pl.’s Mem. at 3. This

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argument relies on too many unsupported assumptions to be persuasive. It assumes, for example,

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that Composite could not have amended or supplemented its complaint in the Nevada case after

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learning about the bankruptcy. Cf. Fed. R. Civ. P. 15(a)(2) (“The court should freely give leave

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[to amend the complaint] when justice so requires.”); Fed. R. Civ. P. 15(d) (“On motion and

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reasonable notice, the court may, on just terms, permit a party to serve a supplemental pleading

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setting out any transaction, occurrence, or event that happened after the date of the pleading to be

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supplemented.”). It assumes Composite had no recourse under the Bankruptcy Code. And it

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assumes Composite was unaware of Parsons’s integral role in the company earlier in the case, and

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could not previously have pled that he “controls” Recon and “took part in” Recon’s infringing

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actions, as it now alleges. Compl. ¶¶ 2, 33, 47.

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Composite’s second argument for reconsideration rests on its claim that the court clearly

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erred. See Pl.’s Mem. at 4–9. The Ninth Circuit has not defined “clear error” in the specific

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context of a Rule 59(e) motion. District courts within the Ninth Circuit ordinarily use “clear

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error” to refer to situations in which they have a “definite and firm conviction that a mistake has

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been made,” adopting the standard commonly applied in the appellate context. U.S. Ethernet

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Innovations, LLC v. Acer, Inc., No. 10-3724, 2015 WL 1478636, at *2 (N.D. Cal. Mar. 31, 2015)

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(quoting United States v. Ruiz–Gaxiola, 623 F.3d 684, 693 (9th Cir. 2010)).

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Composite argues the court clearly erred in finding privity between Parsons and Recon

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and in concluding the Nevada court had jurisdiction over Parsons. Composite could have raised

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these arguments in its opposition to Parsons’s motion to dismiss and at hearing on that motion,
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but it did not. The court declines to consider them now. See Banister v. Davis, 140 S. Ct. 1698,

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1703 (2020) (“[C]ourts will not address new arguments or evidence that the moving party could

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have raised before the decision issued.”); Kona Enters., Inc. v. Est. of Bishop, 229 F.3d 877, 890

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(9th Cir. 2000) (“A Rule 59(e) motion may not be used to raise arguments or present evidence for

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the first time when they could reasonably have been raised earlier in the litigation.”).

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Composite also reiterates its argument that Parsons’s acts following the filing of the

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Nevada lawsuit fit the temporal exception to the ordinary claim preclusion rules. Pl.’s Mem. at 9.

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The court declines to reopen this debate. See Exxon Shipping, 554 U.S. at 485 n.5. Composite

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argues similarly the court clearly erred by “limiting the Gillig v. Nike case to ‘new rights’

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acquired by the plaintiff.” Pl.’s Mem. at 9. Conflicting readings of Gillig may be plausible, but

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the court perceives no “clear error,” i.e., a mistake “beyond debate,” in its previous conclusions.

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United States v. Wanland, No. 13-02343, 2017 WL 3712908, at *3 (E.D. Cal. Aug. 28, 2017). As

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the court noted in its previous order, another district court has persuasively rejected the reading of

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Gillig that Composite now advances. Prev. Order at 7 (citing Adaptix, Inc. v. Amazon.com, Inc.,

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No. 14-01379, 2015 WL 4999944, at *7–8 (N.D. Cal. Aug. 21, 2015)).

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Finally, Composite argues in its reply brief that the court clearly erred by granting the

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motion to dismiss without leave to amend. Reply at 2–3. Composite could have requested leave

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to amend in opposition to the motion to dismiss or at hearing, but it did not. A post-judgment

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motion is not an appropriate way to raise arguments and evidence that could have been raised

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earlier. Banister, 140 S. Ct. at 1703. But in any event, the court perceives no clear error in its

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previous determination that an amendment would be futile. See Prev. Order at 10. The

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amendments Composite now proposes would not allow it to rely on exceptions to claim

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preclusion rules.

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IV.

CONCLUSION

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The court denies Composite’s motion to alter or amend the judgment (ECF No. 27).

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IT IS SO ORDERED.

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DATED: January 17, 2023.

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