Activision TV, Inc. v. Pinnacle Bancorp, Inc.

Filing 111

ORDER ON PRELIMINARY INJUNCTION - MPHJ's motions for preliminary injunction, Filing Nos. 53 and 85 , are granted, and defendants Bruning, Cookson and Lopez are enjoined from taking any steps to enforce the cease and desist order issued to F arney Daniels on July 18, 2013, in any manner that would prevent or impede the Farney Daniels firm from representing MPHJ in connection with licensing and litigation of U.S. patents owned by MPHJ with respect to companies based in, or having opera tions in, Nebraska. If, however, at some point during the investigation evidence supports a claim of bad faith, the Attorney General is free to revisit this preliminary injunction with the court. The parties shall attempt to draft an agreed upon fi nal permanent injunction and submit the draft to the court within fourteen (14) days of the date of this order. If that is not possible, the court will order the magistrate judge to enter an expedited progression order dealing with this part of the case, so that the case can proceed to the merits and the court can enter a permanent injunction or address the merits on motions for summary judgments. Ordered by Judge Joseph F. Bataillon. (AOA)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
ACTIVISION TV, INC.,
Plaintiff,
and
8:13CV215
MPHJ TECHNOLOGY INVESTMENTS
LLC,
Intervenor-Plaintiff,
vs.

ORDER ON PRELIMINARY
INJUNCTION

PINNACLE BANCORP, INC.,
Defendant,
and
JON BRUNING, Attorney General of
Nebraska; DAVID COOKSON, Chief
Deputy Attorney General of Nebraska; and
DAVID LOPEZ, Assistant Attorney General
of Nebraska (in their official capacities),
Defendants and
Intervenor-Defendants..

This matter is before the court on the preliminary injunction motions, Filing No. 53
and Filing No. 85, of intervenor MPHJ Technology Investments, LLC. (“MP

The

Nebraska Attorney General issued a cease and desist order against plaintiff Activision’s
counsel for attempting to send letters to potential patent infringers. Filing No. 7-11, Ex.
F. Activision filed a preliminary injunction which this court granted in two separate
orders and one amended order.

Filing Nos. 31, 38 and 41.

MPHJ then filed for

intervention and also asked for a preliminary injunction. Filing Nos. 50 and 53. The
court granted the motion to intervene. Filing No. 81. In the interim, the Nebraska
Attorney General filed an appeal to the Eighth Circuit. Filing No. 65. The Nebraska

Attorney General thereafter dismissed the appeal and withdrew the cease and desist
orders against any party or counsel to this litigation and represented the State would not
“issue any cease and desist order directed at or effective against any party or counsel to
this litigation without first providing notice to the affected party and an opportunity to be
heard.” Filing No. 90, p. 2. MPHJ still requests an injunction. The Attorney General
says the issue is now moot, Filing No. 91, as there are no pending cease and desist
orders.
I. Mootness
The court will first address the issue of mootness. The Attorney General argues
that because he has withdrawn the July 18, 2013, cease and desist order, there is no
issue left before the court with regard to either Activision or MPHJ. However, MPHJ
and Activision both disagree. MPHJ contends that the Attorney General did not issue a
withdrawal of the cease and desist order as it relates to Farney Daniel’s dealings on
behalf of MPHJ. The cease and desist withdrawal only dealt with Farney Daniels and
Activision. Further, Activision and MPHJ argue that merely withdrawing the cease and
desist order is insufficient.

Both of these parties filed claims alleging constitutional

violations of their rights.
The court agrees with Activision and MPHJ.

First, the withdrawal does not

address the rights of MPHJ and its representation by Farney Daniels. More importantly,
the withdrawal letter clearly does not admit to liability and indicates the Attorney General
might pursue further courses of action for violation of state law. See Filing No. 95.
Attachments A and B. Finally, the court agrees with Activision and MPHJ that the
Attorney General cannot claim this is a moot issue simply because he withdraw the

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cease and desist order.

Making a voluntary decision to stop the unconstitutional

conduct does not create a moot issue.

See, e.g., Center for Special Needs Trust

Administration, Inc. v. Olson, 676 F.3d 688, 697 (8th Cir. 2012) (holding that “[m]ere
voluntary cessation of allegedly illegal conduct does not moot a case; otherwise the
courts would be compelled to leave the defendant . . . free to return to his old ways”).
This is true particularly where the party could repeat the same conduct at a later date.
See Buckhannon Bd. & Care Home v. W. Va. Dep’t of Health & Human Res., 532 U.S.
598, 609 (2001) (“‘It is well settled that a defendant’s voluntary cessation of a
challenged practice does not deprive a federal court of its power to determine the
legality of the practice’ unless it is ‘absolutely clear that the allegedly wrongful behavior
could not reasonably be expected to recur.’”) (citations omitted). It is clear based on the
language of the withdrawal of the cease and desist order that the Attorney General has
not made it “absolutely clear” that further enforcement measures will not occur. For all
of these reasons, the court finds the motion for preliminary injunction is not moot.
II. Preliminary Injunction
The issue, then, is whether MPHJ is entitled to a preliminary injunction in this
case. MPHJ argues that the issues presented in this motion are identical to those
presented previously in the motion by Activision for a preliminary injunction. 1 The court
agrees. The court incorporates by reference the background set forth in Filing No. 41,
pp. 1-3.

Likewise, the court incorporates by reference those sections dealing with

standing, ripeness, and the First Amendment, as it applies to MPHJ and its

1

The court notes for the record that the Attorney General responded to the motion for a
preliminary injunction with his argument about mootness. He filed no additional arguments regarding the
motion for preliminary injunction.
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representation by Farney Daniels and Kutak Rock. Id., pp.3-9. The court now turns to
the Dataphase requirements.
The extraordinary remedy of a preliminary injunction should not be granted
unless the movant has demonstrated: (1) the threat of irreparable harm to it; (2) the
state of the balance between this harm and the injury that granting the injunction will
inflict on other parties; (3) the probability that it will succeed on the merits; and (4) the
public interest. Dataphase Systems, Inc. v. C L Systems, Inc., 640 F.2d 109, 113-14
(8th Cir. 1981) (en banc). No single factor is determinative, although the failure to
demonstrate the threat of irreparable harm is, by itself, a sufficient ground upon which to
deny a preliminary injunction. See Adam-Mellang v. Apartment Search, Inc., 96 F.3d
297, 299 (8th Cir. 1996); see also Modern Computer Sys., Inc. v. Modern Banking Sys.,
Inc., 871 F.2d 734, 738 (8th Cir. 1989) (en banc). The burden on a movant to
demonstrate that a preliminary injunction is warranted is heavier when, as here,
granting the preliminary injunction will in effect give the movant substantially the relief it
would obtain after a trial on the merits. Calvin Klein Cosmetics Corp. v. Lenox Lab., 815
F.2d 500, 503 (8th Cir. 1987). “A preliminary injunction is an extraordinary remedy
never awarded as of right. In each case, courts must balance the competing claims of
injury and must consider the effect on each party of the granting or withholding of the
requested relief.” Winter v. Natural Resources Defense Council, 555 U.S. 7, 24 (2008).
In exercising their sound discretion, courts of equity should pay particular regard for the
public consequences in employing the extraordinary remedy of injunction.

Id.

“No

single factor in itself is dispositive; rather, each factor must be considered to determine
whether the balance of equities weighs toward granting the injunction.” United Indus.

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Corp. v. Clorox Co., 140 F.3d 1175, 1179 (8th Cir. 1998). “At base, the question is
whether the balance of equities so favors the movant that justice requires the court to
intervene to preserve the status quo until the merits are determined . . . .” Dataphase,
640 F.2d at 113.
At the early stage of a preliminary injunction motion, the speculative nature of the
inquiry into the probability of ultimate success on the merits militates against any
wooden or mathematical application of the test; instead, a court should flexibly weigh
the case’s particular circumstances to determine whether the balance of equities so
favors the movant that justice requires the court to intervene to preserve the status quo
until the merits are determined. Clorox, 140 F.3d at 1179.
1. Merits
MPHJ argues it has a likelihood of success as it relates to the July 18, 2013,
order.

This court has already determined that Activision will likely succeed on the

merits, as the Nebraska Attorney General has not shown any bad faith on the part of
Activision. The court further determined that the letters related to patent infringement
were likely preempted by the federal government. Finally, the court determined that the
cease and desist order operated as a prior restraint against Activision and violated its
right to choose its own counsel. The court has carefully reviewed the complaint filed by
MPJH as well as the motion for a preliminary injunction. The facts are very similar to
those alleged by Activision. For the reasons set forth in the preliminary injunctions
granted as to Activision, based on the facts as applied to MPHJ which are virtually the
same as Activision, the court likewise finds that MPHJ is likely to win on the merits of
this case.

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2. Irreparable Harm
“‘The basis of injunctive relief in the federal courts has always been irreparable
harm and inadequacy of legal remedies.’” Bandag, Inc. v. Jack’s Tire & Oil, Inc., 190
F.3d 924, 926 (8th Cir. 1999) (quoting Beacon Theatres, Inc. v. Westover, 359 U.S.
500, 506-07 (1959)). Thus, to warrant a preliminary injunction, the moving party must
demonstrate a sufficient threat of irreparable harm. Id. A showing of irreparable harm
does not automatically mandate a ruling in the plaintiff’s favor; the court must proceed to
balance the harm to the defendant in granting the injunction. Hill v. Xyquad, Inc., 939
F.2d 627, 630-31 (8th Cir. 1991).
MPHJ contends it has and continues to suffer irreparable harm. The cease and
desist order, argues MPHJ, is unconstitutional. Thus its ability to enforce its patents
and hire counsel of its own choosing is impaired. As previously stated, the withdrawal
of the case and desist order does not denigrate the constitutional violations, nor does it
protect MPHJ from future review by the attorney general. The court agrees and finds
that MPHJ has suffered and continues to suffer irreparable harm.
3. Balance of Harm
The balance of harm clearly weighs in favor of MPHJ. As stated in the court’s
ruling on behalf of Activision, “The public has a right to protection from scams and unfair
trade practices. However, Activision’s constitutional right to hire counsel of its choosing
to pursue investigations and lawsuits against infringers is clearly impeded by the cease
and desist order. Further, the federal government has preempted to a great extent the
area of patent law. Allowing the attorney general to interfere might be harmful to the
patent process. Based on the facts as presented, which indicates no bad faith, the

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court finds this factor likewise weighs in favor of Activision.” Filing No. 41, at 15. This
same analysis applies to MPHJ. Accordingly, the court finds this factor weighs in favor
of MPHJ.
4. Public Interest
Again, the same analysis applies to this factor. “The public interest is served by
enforcing the Constitution of the United States. This means that Activision and others
have a right to counsel and a right to have counsel pursue their interests. It also means
that Activision and others have a due process right to a meaningful process prior to
issuance of a cease and desist order.” Id. at 15-16. The same analysis applies to
MPHJ, and accordingly, the court finds this factor weighs in favor of MPHJ.
III. Negotiation of a Final Injunction
The defendants have stated in their brief that they will agree to sign some type of
final injunction encompassing the findings this court previously made in conjunction with
the withdrawal of the cease and desist order and the Nebraska Attorney General’s
agreement not to further pursue the cease and desist orders in this case, if the court
determines an entry of a permanent injunction is appropriate. Id. Both Activision and
MPHJ contend that the defendants must agree to a finding that they committed an
unconstitutional violation under 42 U.S.C. § 1983 and must pay some amount of costs
and fees. The court does find that an order permanently enjoining the state defendants
from enforcing the cease and desist orders will likely occur in this case.
The court is ordering the parties to attempt to draft an agreed upon final
permanent injunction and submit the draft to the court within fourteen (14) days of the
date of this order. If that is not possible, the court will order the magistrate judge to

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enter an expedited progression order dealing with this part of the case as to both
Activision and MPHJ and the nonbank defendants, so that that this portion of the case
can proceed to the merits, and the court can enter a permanent injunction or address
the merits on motions for summary judgments.
THEREFORE, IT IS ORDERED:
1. MPHJ’s motions for preliminary injunction, Filing Nos. 53 and 85, are granted,
and defendants Bruning, Cookson and Lopez are enjoined from taking any steps to
enforce the cease and desist order issued to Farney Daniels on July 18, 2013, in any
manner that would prevent or impede the Farney Daniels firm from representing MPHJ
in connection with licensing and litigation of U.S. patents owned by MPHJ with respect
to companies based in, or having operations in, Nebraska. If, however, at some point
during the investigation evidence supports a claim of bad faith, the Attorney General is
free to revisit this preliminary injunction with the court.
2. The parties shall attempt to draft an agreed upon final permanent injunction
and submit the draft to the court within fourteen (14) days of the date of this order. If
that is not possible, the court will order the magistrate judge to enter an expedited
progression order dealing with this part of the case, so that the case can proceed to the
merits and the court can enter a permanent injunction or address the merits on motions
for summary judgments.
Dated this 14th day of January, 2014.
BY THE COURT:

s/ Joseph F. Bataillon
United States District Judge

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