Advance Products & Systems Inc v. C C I Piping Systems L L C
Filing
90
MEMORANDUM RULING re 72 Cross MOTION for Partial Summary Judgment Dismissing CCI's Res Judicata and Settlement Affirmative Defenses filed by Advance Products & Systems Inc and 57 MOTION for Summary Judgment filed by C C I Piping Systems L L C. Signed by Judge Terry A Doughty on 3/29/2018. (crt,Crawford, A)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
LAKE CHARLES DIVISION
ADVANCE PRODUCTS & SYSTEMS,
INC.
* CIVIL ACTION NO. 2:14-CV-2456
*
*
VERSUS
* JUDGE TERRY A. DOUGHTY
*
CCI PIPING SYSTEMS, L.L.C. D/B/A/
*
CCI PIPELINE SYSTEMS
* MAG. JUDGE KATHLEEN KAY
*
*
******************************************************************************
RULING
Before the Court is a Motion for Summary Judgment filed by Defendant CCI Piping
Systems, L.L.C. d/b/a CCI Pipeline Systems (“CCI”). [Doc. No. 57]. CCI seeks dismissal of all
claims against it brought by Plaintiff Advance Products & Systems, Inc. (“APS”) in this patent
infringement suit based on the doctrine of res judicata, or alternatively, pursuant to a prior
settlement agreement. Id. Also before the Court is a Cross-Motion for Partial Summary
Judgment filed by APS. [Doc. No. 72]. APS seeks dismissal of CCI’s affirmative defenses based
on the doctrine of res judicata and pursuant to a prior settlement agreement. Id. Both motions are
opposed. [Doc. No. 67; Doc. No. 76]. For the following reasons, both motions will be DENIED.
I. FACTS & PROCEDURAL HISTORY
On March 8, 2004, APS filed suit in the 15th Judicial District Court for the Parish of
Lafayette, State of Louisiana. [Doc. No. 56-1, pp. 5–13, Petition for Injunctive Relief]. In its
petition, APS sought to enjoin CCI and its employees from, inter alia, engaging in unfair trade
practices, and utilizing APS’s confidential and proprietary information such as, inter alia, APS
drawings and designs. Id. at p. 11. On May 18, 2004, the United States Patent and Trademark
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Office issued to APS its Patent No. US 6,736,166 B2 (hereinafter the “‘166 Patent”), which
governs multiple claims pertaining to a casing spacer design. [Doc. No. 56-2, p. 10].
APS filed an Amended and Restated Petition in December 2004, alleging, inter alia,
breach of confidentiality claims, misappropriation of trade secret claims, and duplication of
APS’s designs for casing spacers. [Doc. No. 56-1, pp. 24–41]. On May 4, 2005, after briefings
and a hearing, the trial court granted CCI’s motion for summary judgment and dismissed with
prejudice all claims brought by APS against CCI. Id. at pp. 56–57, state court Judgment
(hereinafter the “2005 Judgment”). The Third Circuit Court of Appeal affirmed the trial court’s
grant of summary judgment and dismissal of APS’s claims. Id. at pp. 58–71. APS filed an
application for supervisory writ of certiorari with the Supreme Court of Louisiana. Id. at pp. 72–
102. While the writ application was pending, the parties executed a “Mutual Release of All
Claims” on November 13, 2007, (hereinafter the “2007 Release Agreement”), whereby the
parties released:
any and all claims, demands, causes of action, rights of action,
reconventional demands, known and unknown, anticipated and
unanticipated, which includes all claims whatsoever existing at any
time in the past and/or existing at present, up to, and through, the
date that is hereinabove first written, including but not limited to
those claims and reconventional demands asserted, or which could
have been asserted, or which could have been asserted, in [the
previous state court actions].
Id. at pp. 103–06.
On August 8, 2014, APS filed the instant suit alleging, inter alia, that CCI was infringing
one or more claims of APS’s ‘166 Patent “by continuing to make, use, offer to sell and/or sell
casing spacers and/or practice methods of use of same, embodying the patented invention.” [Doc.
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No. 1, para. 4]. APS filed an answer raising affirmative defenses, including that CCI’s claims are
barred “under the doctrines of res judicata, settlement and compromise.” [Doc. No. 10, p. 3].
On July 14, 2017, CCI filed the instant motion for summary judgment, claiming that the
doctrine of res judicata barred APS’s patent infringement claims because these claims existed at
the time of the 2005 Judgment in the state court action and also existed at the time the parties
executed their 2007 Release Agreement. [Doc. No. 57]. APS opposes the motion, claiming there
are disputed issues of material fact as to whether APS’s patent infringement claims existed at the
time of the 2005 Judgment and 2007 Release Agreement, and whether the patent infringement
claims arose out of the transaction or occurrence that was the subject matter of the earlier
litigation. [Doc. No. 67, p. 5]. APS also claims that there are exceptional circumstances that
justify relief from the res judicata effect of an earlier judgment and settlement. Id.
On September 8, 2017, APS cross-moved for partial summary judgment seeking
dismissal of CCI’s affirmative defense that the patent infringement claims are barred by res
judicata as a result of the 2005 Judgment or by the parties’ 2007 Release Agreement. [Doc. No.
72]. APS asserts that res judicata (claim preclusion) does not bar APS from bringing its patent
infringement claims in federal court because the state court lacked subject matter jurisdiction to
hear patent infringement claims. Id. APS also asserts that the 2007 Release Agreement does not
bar APS from bringing patent infringement claims that arose after the date of the 2007 Release
Agreement because the agreement only released past and present claims that existed up to, and
including, the date the release was executed. Id. CCI opposes the motion arguing that res judicata
(issue preclusion) defeats summary judgment in favor of APS because the state court made
findings of fact that defeat APS’s current patent infringement claims. [Doc. No. 76, p. 5]. CCI
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also claims that the parties’ 2007 Release Agreement encompassed future claims, and therefore,
the current patent infringement claims are barred by that agreement. Id.
II. LAW & ANALYSIS
A. Standard of Review
Under Federal Rule of Civil Procedure 56, summary judgment is appropriate when the
pleadings, the discovery, and any affidavits show that “there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a),
(c). The moving party bears the initial burden of informing the Court of the basis for its motion
by identifying portions of the record which highlight the absence of genuine issues of material
fact. Topalian v. Ehrmann, 954 F.2d 1125, 1132 (5th Cir. 1992). A fact is “material” if proof of
its existence or nonexistence would affect the outcome of the lawsuit under applicable law in the
case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute about a material fact
is “genuine” if the evidence is such that a reasonable fact finder could render a verdict for the
nonmoving party. Id.
If the moving party can meet the initial burden, the burden then shifts to the nonmoving
party to establish the existence of a genuine issue of material fact for trial. Topalian, 954 F.2d at
1131. In evaluating the evidence tendered by the parties, the Court must accept the evidence of
the nonmovant as credible and draw all justifiable inferences in its favor. Anderson, 477 U.S. at
255. However, “a party cannot defeat summary judgment with conclusory allegations,
unsubstantiated assertions, or only a scintilla of evidence. Summary Judgment is appropriate if a
reasonable jury could not return a verdict for the nonmoving party.” Turner v. Baylor Richardson
Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007) (internal quotation marks and citations omitted).
B. Analysis
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Both parties move for summary judgment on CCI’s affirmative defense of: (1) res
judicata based on the prior state court judgment and (2) the preclusive effect of the parties’ 2007
Release Agreement. The Court considers each basis in turn.
1. Res Judicata
CCI moves for summary judgment based on the res judicata principles of claim
preclusion, claiming that all of the essential elements are satisfied under Louisiana law. [Doc.
No. 57-1, pp. 10–15]. APS disputes that all essential elements are satisfied, claiming that there
are genuine disputes as to whether APS’s patent infringement claims existed at the time of the
2005 Judgment and whether APS’s patent infringement claims arose out of the transaction or
occurrence that was the subject matter of the state court litigation. [Doc. No. 67, p. 5]. APS also
cross-moves for partial summary judgment on the issue of CCI’s affirmative defense of res
judicata, claiming that the state court did not have subject matter jurisdiction over claims arising
under patent laws, making the doctrine of res judicata inapplicable. [Doc. No. 72]. CCI opposes
the motion, arguing that APS does not show that res judicata is inapplicable under a theory of
issue preclusion. [Doc. No. 76, pp. 11–15]. In its reply to CCI’s opposition to the cross-motion,
APS further argues that the principles of res judicata on issue preclusion, likewise, do not apply.
[Doc. No. 80, pp. 7–11].
“The preclusive effect of a state court judgment in a subsequent federal lawsuit generally
is determined by the full faith and credit statute, which provides that state judicial proceedings
‘shall have the same full faith and credit in every court within the United States . . . as they have
by law or usage in the courts of such State . . . from which they are taken.’” Marrese v. Am.
Acad. of Orthopaedic Surgeons, 470 U.S. 373, 380 (1985) (citing 28 U.S.C. § 1738). A claim
arising under a law which provides exclusive jurisdiction to the federal courts does not
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necessarily make § 1738 inapplicable. Id. For example, the Supreme Court has held that a state
court judgment barred a subsequent patent suit based on the principles of issue preclusion. Id. at
381 (citing Becher v. Contoure Labs. Inc., 279 U.S. 388 (1929)).
When determining whether a claim arising within the exclusive jurisdiction of federal
courts is barred by a prior state court judgment, the Supreme Court, in Marrese, directed courts
to first apply the state’s preclusion laws. Id. at 383. Only if the claim is barred by the state’s
preclusion laws should a court consider whether there is an exception to § 1783 to refuse the
preclusive effect to the state court judgment. Id. Accordingly, the Court looks to Louisiana’s res
judicata law to determine whether APS’s patent infringement claim is barred by the prior state
court judgment. Lafreniere Park Found. v. Broussard, 221 F.3d 804, 808 (5th Cir. 2000) (citing
Amica Mut. Ins. Co. v. Moak, 55 F.3d 1093, 1096–97 (5th Cir. 1995); Marrese, 470 U.S. at 383.
Louisiana’s res judicata statute provides, in relevant part:
Except as otherwise provided by law, a valid and final judgment is
conclusive between the same parties, except on appeal or other
direct review, to the following extent:
...
(2) If the judgment is in favor of the defendant, all causes of
action existing at the time of final judgment arising out of the
transaction or occurrence that is the subject matter of the litigation
are extinguished and the judgment bars a subsequent action on those
causes of action.
(3) A judgment in favor of . . . the defendant is conclusive,
in any subsequent action between [the same parties] with respect to
any issue actually litigated and determined if its determination was
essential to that judgment.
La. Rev. Stat. 13:4231. The statute, titled “Res Judicata,” “include[s] both claim preclusion (res
judicata) and issue preclusion (collateral estoppel).” Mandalay Oil & Gas, L.L.C. v. Energy Dev.
Corp., 2001-0993, p. 6 (La. App. 1 Cir. 7/3/02); 867 So.2d 709, 713. The Fifth Circuit has held
that federal jurisprudence may be consulted for guidance in interpreting Louisiana’s res judicata
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principles because the Louisiana statute is modeled on federal doctrine and the Restatement of
Judgments. Lafreniere, 221 F.3d at 808 (citing Terrebonne Fuel & Lube, Inc. v. Placid Refining
Co., 631-32, pp. 11–12 (La 1/16/96); 666 So. 2d 624, 631; Goodman v. Spillers, 28933, p. 8 (La.
App. 2 Cir. 12/23/96); 686 So. 2d 160, 166–69). The Court first considers the parties’ motions
for summary judgment on the issue of claim preclusion.
To prevail on an affirmative defense of res judicata under a theory of claim preclusion,
the party urging res judicata must prove by a preponderance of the evidence, St. Paul Mercury
Ins. Co. v. Williamson, 224 F.3d 425, 437 (5th Cir. 2000) (citing Greer v. Louisiana, 24,552 (La.
App. 2 Cir. 3/31/93); 616 So. 2d 811, 815), that: “(1) the judgment is valid; (2) the judgment is
final; (3) the parties are the same; (4) the cause or causes of action asserted in the second suit
existed at the time of final judgment in the first litigation; and (5) the cause or causes of action
asserted in the second suit arose out of the transaction or occurrence that was the subject matter
of the first litigation.” Wooley v. State Farm Fire and Cas. Ins. Co., 2004-0882, p. 36 (La.
1/19/05); 893 So. 2d 746, 771.
To be valid, a judgment “must have been rendered by a court with jurisdiction over the
subject matter.” Kelty v. Brumfield, 93-1142 (La. 2/25/94); 633 So. 2d 1210, 1215 (citing La.
Rev. Stat. 13:4231, cmt. (d)). Moreover, “[a] claim is not barred by res judicata if the court in
which the first action was brought lacked subject matter jurisdiction to adjudicate that claim.” Id.
(citing La. Rev. Stat. 13:4231, cmt. (d) and Restatement (Second) of Judgments § 26(1)(c)
(1982)). The Restatement (Second) of Judgments § 26(1)(c) provides an exception to the rule
that a claim is extinguished under a theory of claim preclusion when “[t]he plaintiff was unable
to rely on a certain theory of the case or to seek a certain remedy or form of relief in the first
action because of the limitations on the subject matter jurisdiction of the courts[.]”
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Finding that the challenged claim was subject to the exclusive statutory jurisdiction of an
administrative agency, and not within the jurisdiction of the courts, the Supreme Court of
Louisiana, in Kelty, held that the prior state court judgment was invalid and had no res judicata
effect. Kelty, 93-1142 (La. 2/25/94); 633 So. 2d at 1219. Although Kelty involved a state court
judgment that disposed of claims outside of its jurisdiction, the Court finds its reasoning and
reliance on the Restatement (Second) of Judgments § 26(1)(c) is equally applicable to render a
judgment invalid as to a previously un-litigated claim that could not have been litigated in the
chosen forum due to lack of subject matter jurisdiction. Therefore, the Court determines that
Louisiana’s res judicata law does not bar subsequent federal claims that could not have been
brought in state court. Accordingly, the Court need not move to the next step outlined in
Marrese.
Applying this law to the facts of the instant case, claims arising under the patent laws of
the United States are within the exclusive jurisdiction of federal courts. 28 U.S.C. § 1338(a).
Accordingly, Louisiana state courts do not have jurisdiction over patent infringement claims,
and, therefore, any state court judgment would not be valid to preclude subsequent patent claims
under a theory of claim preclusion.
CCI agrees that the state court did not have subject matter jurisdiction over APS’s patent
claims, and, rather than dispute the issue in its opposition to APS’s cross-motion for partial
summary judgment, instead argues that issue preclusion is a viable affirmative defense under
Louisiana’s res judicata statute. [Doc. No. 76, p. 5]. Moreover, in its motion for summary
judgment on the same issue, CCI makes no argument that the 2005 Judgment is valid as to APS’s
patent infringement claims. See [Doc. No. 57-1, p. 11]. The Court need not consider the parties’
arguments as to the other elements because the invalidity of the 2005 Judgment as to patent
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infringement claims cannot be cured by a finding that the other elements are satisfied.
Accordingly, CCI has not carried its burden to show that there is no genuine dispute as to a
material fact on the issue of res judicata under a theory of claim preclusion and that judgment
should be entered in its favor. Therefore, the Court will DENY CCI’s motion for summary
judgment in this respect.
However, this conclusion does not require the Court to grant APS’s cross-motion for
partial summary judgment because an affirmative defense of res judicata may also be viable
under a theory of issue preclusion. La. Rev. Stat. 13:4231. In its cross-motion and supporting
memorandum, APS only advances arguments that res judicata claim preclusion is not applicable,
but makes no mention of issue preclusion. [Doc. No. 72; 72-1]. CCI responds in opposition that
APS “focuses narrowly on the facet of res judicata known as claim preclusion” without
considering the applicability of issue preclusion under Louisiana’s res judicata statute. [Doc. No.
76, p. 11].
Pursuant to Federal Rule of Civil Procedure 56(a), “[a] party may move for summary
judgment, identifying each claim or defense – or the part of each claim or defense – on which
summary judgment is sought.” However, the Fifth Circuit has stated that “Rule 56(c) merely
requires the court to give the non-movant an adequate opportunity to respond prior to a ruling.”
Vais Arms, Inc. v. Vais, 383 F.3d 287, 292 (5th Cir. 2004) (citing Sw. Bell Tel. Co. v. City of El
Paso, 346 F.3d 541, 545 (5th Cir. 2003)) (internal quotations omitted).
Here, CCI raised the issue of issue preclusion in its memorandum in opposition to the
motion and provided arguments as to the applicability of issue preclusion. [Doc. No. 76, pp. 11–
15]. APS, in turn, responded to this issue in its reply brief, claiming that issue preclusion was
inapplicable. [Doc. No. 80, pp. 7–11]. Finally, CCI was granted leave to file a sur-reply in
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opposition, responding further on the issue of issue preclusion. [Doc. No. 84, pp. 3–5].
Accordingly, the Court finds that CCI, as the non-movant, was afforded an adequate opportunity
to respond and argue its position on the issue of issue preclusion. Therefore, the Court will
consider whether the issue is appropriate for summary judgment. However, as the movant, APS
retains the initial burden of showing that there is no genuine dispute as to any material fact on the
issue of issue preclusion. Fed. R. Civ. P. 56(a).
To prevail on an affirmative defense of res judicata under a theory of issue preclusion, the
following criteria must be met: “(1) the parties must be identical; (2) the issue to be precluded
must be identical to that involved in the prior action; (3) the issue must have been actually
litigated; and (4) the determination of the issue in the prior action must have been necessary to
the resulting judgment.” In re Keaty, 397 F.3d 264, 270–71 (5th Cir. 2005) (citing Charpentier v.
BG Wire Rope & Slings, Inc. 174 B.R. 438, 441 n. 1 (E.D. La. 1994)). “[T]he scope of collateral
estoppel is circumscribed by the particularized findings of the state court.” Id. at 271 (citing
Matter of Miller, 156 F.3d 598, 602 (5th Cir. 1998)).
APS argues that issue preclusion is inapplicable because “issues related to the ‘166 Patent
were neither ‘actually decided’ nor ‘essential’ to the prior judgment.” [Doc. No. 80, p. 7]. In
support, APS contends that, in dismissing APS’s claims, the trial court did not mention whether
CCI had duplicated APS’s casing spacer designs. Id. at 10 (citing Doc. No. 80-1, pp. 18, 25).
APS further argues that there is no evidence that the casing spacers referenced in the state court
suit are the same type of casing spacers at issue in the instant suit because “APS manufactured
numerous types of casing spacers, including models that did not incorporate the design from the
‘166 Patent” and because the state court petition did not refer to casing spacers that “utilize the
‘166 Patent.” Id. (citing Doc. No. 28-1, paras. 6–7).
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Contrary to APS’s assertions, CCI claims that the 2005 Judgment stated that “there is no
genuine issue of material fact as to any claim presented by [APS],” which means that the court:
(1) rejected APS’s argument that CCI ‘duplicated’ APS designs, and (2) found that CCI did not
breach an employment agreement by allegedly taking proprietary and confidential information.”
[Doc. No. 76, p. 13 (citing Doc. No. 56-1, p. 56)]. CCI further cites APS’s application for a
supervisory writ of certiorari to the Supreme Court of Louisiana where it claims APS “raised this
issue in its appeal briefs as a patent issue, which further illustrates that the allegation was
actually litigated.” Id. (citing Doc. No. 56-1, pp. 84–85).
An issue is “actually litigated” when it is “raised, contested by the parties, submitted for
determination by the court, and determined.” In re Keaty, 397 F.3d at 272 (citing McLaughlin v.
Bradlee, 803 F.2d 1197, 1201 (D.C. Cir. 1986); James Talcott, Inc. v. Allahabad Bank, Ltd., 444
F.2d 451, 459 – 60 (5th Cir. 1971); Restatement (Second) of Judgments § 27 cmt. d (1982)).
Louisiana courts of appeal have stated that “[i]dentification of issues actually litigated shall be
determined not solely from the pleadings but also by examining the entire record in the first
suit.” Lee v. Twin Bros. Marine Corp., 2003-2034 (La. App. 1 Cir. 9/17/04), 897 So.2d 35, 37)
(citing Ebey v. Harvill, 26,373, p. 3 (La. App. 2 Cir. 12/7/94), 647 So.2d 461, 464).
The 2005 Judgment dismissed all of APS’s claims after “[c]onsidering the pleadings,
memoranda of law, affidavits, exhibits, law, and arguments of counsel.” [Doc. No. 56-1, p. 56].
APS’s application for a supervisory writ of certoriari shows that it argued that the trial court and
the court of appeal erred by not viewing the evidence in the light most favorable to APS,
referencing an APS patent for a casing spacer with which, it contends, some of the defendants
had been involved and that there was evidence that CCI duplicated plastic runners and a casing
spacer. Id. at 84–85. Considering these portions of the state court record, the Court finds that
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there is a genuine dispute as to whether the issue of whether CCI duplicated APS’s designs
protected by the ’166 Patent was actually litigated in the state court lawsuit.
Next, APS claims that a finding that CCI duplicated APS’s casing spacer design was not
an essential element because the elements for a claim of misappropriation of a trade secret and
the elements for a claim of patent infringement are different and the prior judgment could have
been “for any number of reasons, but that would not translate to a finding that there was no
duplication of a patented design.” [Doc. No. 80, p. 11 (citing Innovative Manpower Sols., LLC v.
Ironman Staffing, LLC, 929 F.Supp. 2d 597, 612 (W.D. La. 2013) (citing La. Rev. Stat. §
51:1431(2); Laitram Corp. v. Rexnord, Inc., 939 F.2d 1533, 1535 (Fed. Cir. 1991)]. CCI claims
that in dismissing all of APS’s claims, the trial court “necessarily rejected APS’s argument that
CCI ‘duplicated’ APS designs.” [Doc. No. 76, p. 13 (citing Doc. No. 56-1, p. 56)].
As CCI points out, the transcript of the hearing on the motion for summary judgment at
issue in the state court proceeding provides minimal discussion on the issue of whether CCI
duplicated APS’s casing spacer designs. See [Doc. No. 80, p. 5, n. 13]. However, the transcript
shows that the parties had briefed the court and introduced evidence and pleadings related to the
motion for summary judgment. [Doc. No. 80-1, pp. 2–3]. The state court judge denied APS more
time for discovery on any of its claims of misappropriation of trade secrets or breach of
confidentiality, which included claims that CCI misappropriated “copies of drawings and
manufacturing drawings.” Id. at p. 18.
The Third Circuit upheld the trial court’s grant of summary judgment on the
misappropriation of trade secrets and breach of confidentiality claims, stating:
[i]t was clear at the hearing that APS had no factual basis, nor any
proof that there were any trade secrets involved, much less if they
were misappropriated[.] Simply, there is no evidence, only
unsubstantiated allegations, and that is simply insufficient. There is
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no doubt that APS will be unable to meet its burden of proving that
a trade secret existed, was misappropriated, or that any
confidentiality was breached.
[Doc. No. 56-1, pp. 69–70]. According to the Third Circuit Court of Appeal, one way to
misappropriate a trade secret is by “use of a trade secret of another without express or implied
consent by a person,” under certain circumstances. Id. at p. 68 (citing La. Rev. Stat. 51:1431(2)).
In its state court petition, APS had claimed that its product designs were trade secrets and
confidential information and that CCI was duplicating its designs for casing spacers. [Doc. No.
56-1, pp. 33, 34].
Considering the fact that: (1) in its petition, APS raised the issue of its product designs as
trade secrets and confidential information and alleged that CCI was duplicating its designs for
casing spacers; (2) there is evidence that the parties briefed the trial court on APS’s pending
claims; (3) the trial court found that APS did not meet its burden to survive summary judgment
on any claim; and (4) the Third Circuit stated that there was no proof to support a
misappropriation of a trade secret claim or breach of confidentiality, the Court finds that there is
a disputed question of material fact as to whether the 2005 Judgment was based on a
determination that CCI did not duplicate casing spacers. Therefore, the Court finds that there are
disputed questions of fact as to whether res judicata issue preclusion is available as an
affirmative defense. Accordingly, the Court will DENY APS’s cross-motion for partial summary
judgment on the issue of res judicata based on the prior state court judgment.
2. Preclusion Pursuant to the 2007 Release Agreement
Additionally, or in the alternative, CCI moves the Court to enter summary judgment
finding that APS’s patent infringement claims are barred based on the parties’ 2007 Release
Agreement. [Doc. No. 57]. CCI claims that APS’s patent infringement claims existed at the time
that the parties entered into the 2007 Release Agreement, citing the declaration of Eugene
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Cazayoux with attached exhibits purporting to show CCI’s manufacturing of the accused
infringing product prior to 2007. [Doc. No. 57-1, p. 17 (citing Doc. No. 29-1)]. Therefore, CCI
contends those claims were released pursuant to the language “known and unknown, anticipated
and unanticipated,” including “all claims whatsoever existing at any time in the past and/or at
present, up to, and through” the date that the settlement was executed. [Doc. No. 57-1, pp. 18–19
(citing Doc. No. 56-1, pp. 103–06)]. In opposition, APS claims that CCI has failed to prove that
it was manufacturing and selling the accused infringing product prior to the 2007 Release
Agreement. [Doc. No. 67, p. 5, 12]. APS asserts that none of the exhibits that CCI cites in
support prove that CCI was manufacturing and selling the accused infringing product before the
2007 Release Agreement. Id. at pp. 12–19.
In its cross-motion for partial summary judgment, APS moves the Court to find that a
defense of preclusion pursuant to the 2007 Release Agreement is inapplicable to claims postdating the execution date. [Doc. No. 72]. APS asserts that each act of patent infringement gives
rise to a separate claim, and the parties only released past and present claims existing up to, and
through, the date of execution of the 2007 Release Agreement, November 13, 2007. Id. CCI
opposes the motion, arguing that the 2007 Release Agreement bars APS’s patent infringement
claims because the agreement contained language that “encompassed future claims, and APS
failed to expressly reserve its patent infringement claims based on future conduct.” [Doc. No. 76,
p. 5].
Because APS states that “[its] present suit does not allege that CCI’s infringement
occurred before November 13, 2007 [and that it is not] seeking damages from any infringement
prior to November 2007,” [Doc. No. 72-1, p. 8], the Court will first determine whether the 2007
Release Agreement precludes patent infringement claims arising after November 13, 2007.
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“The interpretation of a Settlement Agreement, i.e., a contract, is a question of law,”
which requires the court to apply state contract law. Augustine Med., Inc. v. Progressive
Dynamics, Inc., 194 F.3d 1367, 1370 (Fed. Cir. 1999). Pursuant to its terms, the 2007 Release
Agreement is governed by Louisiana law, [Doc. No. 56-1, p. 105], and the parties do not dispute
that Louisiana law applies.
Under Louisiana law, “[i]nterpretation of a contract is the determination of the common
intent of the parties.” La. Civ. Code art. 2045. “A compromise is a contract whereby the parties,
through concessions made by one or more of them, settle a dispute or an uncertainty concerning
an obligation or other legal relationship.” La. Civ. Code art. 3071. “A compromise settles only
those differences that the parties clearly intended to settle, including the necessary consequences
of what they express.” La. Civ. Code. art. 3076 “A compromise precludes the parties from
bringing a subsequent action based upon the matter that was compromised.” La. Civ. Code art.
3080.
Although the meaning and intent of the parties to a written compromise is generally
determined from the four corners of the instrument, extrinsic evidence may be considered when
disputes arise as to the scope of the agreement. Brown v. Drillers, Inc., 93-1019 (La. 1/14/94);
630 So. 2d 741, 749 (citing Moak v. Am. Automobile Ins. Co., 45586 (La. 11/6/61); 134 So. 2d
911 (1961). This exception is limited “to cases in which substantiating evidence is presented
establishing[, inter alia,] that the releasor did not fully understand the nature of the rights being
released or that the releasor did not intend to release certain aspects of his or her claim.” Id.
(citing Higgins v. Spencer, 87-0030 (La. App. 1 Cir. 2/23/88); 531 So. 2d 768, 772, writ denied,
532 So. 2d 106 (La. 1988)).
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The parties dispute the scope of the agreement. The 2007 Release Agreement provides
for the release of:
any and all claims, demands, causes of action, rights of action,
reconventional demands, known and unknown, anticipated and
unanticipated, which includes all claims whatsoever existing at
any time in the past and/or existing at present, up to, and
through the date that is hereinabove first written, including but
not limited to those claims and reconventional demands asserted, or
which could have been asserted, in [the underlying actions in state
court].
[Doc. No. 56-1, p. 104 (emphasis added)].
APS contends that the alleged infringement had not occurred prior to the 2007 Release
Agreement, but even if it had, APS claims that the 2007 Release Agreement is limited to discrete
patent infringement claims that were ripe for adjudication prior to, and at the time of, the
execution of the agreement. [Doc. No. 72-1, p. 14]. APS cites the affidavit of APS President,
Thomas Forlander, to support its position that patent infringement claims relating to the ‘166
Patent were not known or discussed at the time of the 2007 Release Agreement. [Doc. No. 72-1,
p. 21 (citing Doc. No. 28-1)]. In his affidavit, Mr. Forlander states:
[a]t the time the mutual release was signed, there were no claims for
patent infringement in the lawsuit, and I was unaware of any
infringing activity on the part of CCI with respect to the ‘166 Patent.
Further, in diligently reviewing the trade materials available online
and at trade shows, I had seen no indication that CCI or any other
casing spacer manufacturer was infringing the ‘166 Patent.
[Doc. No. 28-1, p. 4].
CCI claims that the release of claims “in the past and/or existing at present” is modified
to include claims that are “anticipated and unanticipated,” which makes the release of claims
“prospective in nature.” [Doc. No. 76, p. 8]. CCI claims this “demonstrates the parties’ intent to
have full, future peace and to permanently be rid of the litigation related to whether CCI
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improperly ‘duplicated [APS’s] designs for casing spacers and mechanical pipe seals.’” Id. at p.
9.
The Federal Circuit has held patent infringement to be a continuing tort with each act of
infringement giving rise to a separate cause of action. Augustine, 194 F.3d at 1371 (citing Pall
Corp. v. Micron Separations, Inc., 66 F.3d 1211, 1221–22 (Fed. Cir. 1995); A.C. Aukerman Co.
v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1031 (Fed. Cir. 1992)). In Augustine, the Federal
Circuit stated that discrete acts of patent infringement post-dating a settlement agreement do not,
however, “override the unambiguous language of a Settlement Agreement that releases all
possible claims related to the matters settled by the agreement.” Id. at 1372. Further, “[g]eneral
[and broad] language . . . have consistently been held by the courts to constitute a waiver of all
claims and causes of action ‘arising under or by virtue of the contract,’ and of all ‘claims based
upon events occurring prior to the date of the release.’” Id. (citing United States v. William
Cramp & Sons Ship & Engine Bldg. Co., 206 U.S. 118, 128 (1907); Johnson, Drake & Piper,
Inc. v. United States, 209 Ct. Cl. 313, 531 F.2d 1037, 1047 (1976)). Moreover:
[c]onsistent . . . with judicial interpretations of general releases, it is
the burden of the parties entering into a settlement agreement to
expressly reserve in the agreement any rights that they wish to
maintain beyond the date of the settlement of agreement. The
Supreme Court stated in Cramp that “general language . . . indicates
an intent to make an ending of every matter arising under or by
virtue of the contract. If the parties intend to leave some things open
and unsettled, their intent so to do should be made manifest.”
[Cramp, 206 U.S. at 128.]
Our predecessor court by which we are bound also spoke to this
issue and expanded the coverage to possible claims that should have
been known at the time of a settlement agreement:
The rule for releases is that absent special vitiating
circumstances, a general release bars claims based upon
events occurring prior to the date of the release. And no
exception to this rule should be implied for a claim whose
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facts were well enough known for the maker of the release to
frame a general description of it and request an explicit
reservation. Johnson, Drake & Piper, 531 F.2d at 1047.
Augustine, 194 F.3d at 1373 (emphasis in original). “[W]hen dealing with post-settlement claims,
the issue becomes not one of when a claim is ripe, but rather whether the ‘claimant had or
possessed a claim, sufficiently to reserve it from a general release.’” Id. (citing Johnson, Drake,
& Piper, 531 F.2d at 1047).
Applying the precepts set forth by the Federal Circuit under the guidance of Louisiana
contract law, the Court finds there is a genuine dispute as to the material fact of whether the
parties’ intended the scope of the 2007 Release Agreement to include future claims of
infringement of the ‘166 Patent. The 2007 Release Agreement releases unknown and known
claims that existed prior to and at the time of the execution of the release agreement. Thus, if
APS knew or should have known that it had patent infringement claims sufficient to reserve
them from a general release, APS would be barred from bringing the post-settlement claims. See
Augustine, 194 F.3d at 1373. However, if APS did not or should not have known that it had
patent infringement claims at the time of the settlement agreement, that may be sufficient to find
“special vitiating circumstances” relieving APS from the preclusive effect of failing to reserve its
rights as to claims arising after the execution of the 2007 Release Agreement. See id. (citing
Johnson, Drake & Piper, 531 F.2d at 1047).
APS cites evidence that it was unaware of any patent infringement claims relating to the
‘166 Patent prior to the 2007 Release Agreement. However, the Court has found, supra, that
there is a question of material fact as to whether a claim that CCI was duplicating APS’s casing
spacer design relating to the ‘166 Patent was actually litigated in the state court lawsuit.
Accordingly, the Court will DENY APS’s cross-motion for partial summary judgment seeking
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dismissal of CCI’s affirmative defense that the 2007 Release Agreement bars APS’s pending
patent infringement claims.
Because the Court has determined that the 2007 Release Agreement only bars APS’s
patent infringement claims arising after November 13, 2007, if it knew or should have known
that it had a claim sufficient to reserve it from a general release, and because APS has stated that
it does not allege, or seek damages for, claims that may have arisen prior to November 13, 2017,
the only material issue to determine as to CCI’s motion for summary judgment on the issue of
the preclusive effect of the 2007 Release Agreement is whether APS knew or should have known
about the existence of its patent infringement claim at the time of execution. Therefore, the Court
assumes for the limited purposes of this Ruling that APS’s patent infringement claims existed at
the time of the 2007 Release Agreement.
As previously shown, APS President, Thomas Forlander, has stated in his affidavit that:
[a]t the time the mutual release was signed, there were no claims for
patent infringement in the lawsuit, and I was unaware of any
infringing activity on the part of CCI with respect to the ‘166 Patent.
Further, in diligently reviewing the trade materials available online
and at trade shows, I had seen no indication that CCI or any other
casing spacer manufacturer was infringing the ‘166 Patent.
[Doc. No. 28-1, p. 4]. However, again, as previously found by the Court, there is a question as to
whether CCI was duplicating APS’s casing spacer design relating to the ‘166 Patent was actually
litigated in the state court lawsuit. Although CCI submits its own affidavits that state that its
casing spacer designs have not materially changed since 2001 and that the type of casing spacer
at issue has been manufactured and sold for decades, [Doc. No. 57-1, p. 9 (citing Doc. No. 29-2;
Doc. No. 29-1)], it is not appropriate for the Court to make credibility determinations at the
summary judgment stage, Anderson, 477 U.S. at 255. The Court also notes that a claim
construction hearing has yet to take place in this matter. Accordingly, the Court will DENY
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CCI’s motion for summary judgment on the issue of the preclusive effect of the 2007 Release
Agreement to claims of patent infringement arising after November 13, 2007, finding a question
of material fact exists as to whether APS knew or should have known that its patent infringement
claims existed at the time it entered into the 2007 Release Agreement.
III. CONCLUSION
For the foregoing reasons, the Court will DENY CCI’s motion for summary judgment
[Doc. No. 57], and will DENY APS’s cross-motion for partial summary judgment. [Doc. No.
72].
Monroe, Louisiana, this 29th day of March, 2018.
____________________________________
TERRY A. DOUGHTY
UNITED STATES DISTRICT JUDGE
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