Gust, Inc. v. AlphaCap Ventures, LLC
Filing
126
OPINION & ORDER......AlphaCaps January 3, 2017 motion for reconsideration is denied. (Signed by Judge Denise L. Cote on 7/6/2017) Filed In Associated Cases: 1:15-cv-06192-DLC, 1:16-cv-01784-DLC(gr)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-------------------------------- X
:
GUST, INC.,
:
:
Plaintiff,
:
-v:
:
ALPHACAP VENTURES, LLC and
:
RICHARD JUAREZ,
:
:
Defendants. :
:
-------------------------------- :
:
ALPHACAP VENTURES, LLC,
:
:
Plaintiff,
:
-v:
:
GUST, INC.,
:
:
Defendant.
:
:
-------------------------------- X
15cv6192 (DLC)
OPINION & ORDER
16cv1784 (DLC)
APPEARANCES:
For AlphaCap Ventures, LLC and Richard Juarez:
Marie A. McCrary
Gutride Safier LLP
100 Pine Street, Suite 1250
San Francisco, CA 94111
For Gust, Inc.:
Frank A. Bruno
White and Williams LLP
1650 Market Street
One Liberty Place, Suite 1800
Philadelphia, PA 19103
DENISE COTE, District Judge:
The core litigation between these parties consumed roughly
two years and spanned two jurisdictions.
AlphaCap Ventures, LLC
(“AlphaCap”) sought to extract a quick settlement from Gust,
Inc. (“Gust”) while eschewing any defense of its business method
patents (the “AlphaCap Patents”).
Gust refused to cooperate
with that plan and pressed its contention that the AlphaCap
Patents were demonstrably invalid in light of Alice Corp. Pty.
Ltd. v. CLS Bank International, 134 S. Ct. 2347 (2014).
Ultimately, even though AlphaCap unilaterally issued Gust a
Covenant Not to Sue (“Covenant”), Gust pursued its contention
that the patents at issue were invalid and that AlphaCap and its
attorneys had pursued the litigation in bad faith.
On December 8, 2016, the Court awarded $508,343 in
attorneys’ fees and costs, as well as prejudgment interest,
pursuant to 35 U.S.C. § 285 (“Section 285”) against AlphaCap.
See Gust, Inc. v. AlphaCap Ventures, LLC, 15cv6192 (DLC),
16cv1784 (DLC), 2016 WL 7165983 (S.D.N.Y. Dec. 8, 2016)
(“Gust”).
Gust held AlphaCap’s counsel jointly and severally
liable pursuant to 28 U.S.C. § 1927 (“Section 1927”) for
vexatiously and unreasonably multiplying the proceedings in this
case.
On January 3, 2017, AlphaCap filed this motion to
reconsider, alter, amend, and grant relief from judgment
pursuant to Rules 59(e) and 60, Fed. R. Civ. P.
For the reasons
set forth below, AlphaCap’s motion for reconsideration is
denied.
2
BACKGROUND
On June 19, 2014, the Supreme Court issued its decision in
Alice.
Alice expounded upon the longstanding rule that “[l]aws
of nature, natural phenomena, and abstract ideas are not
patentable.”
134 S. Ct. at 2354 (citation omitted).
Alice
applied the two-step analytical framework set forth in Mayo
Collaborative Services v. Prometheus Laboratories, Inc., 132 S.
Ct. 1289 (2012), to determine the eligibility of certain patents
under 35 U.S.C. § 101 (“Section 101”), which defines the subject
matter eligible for patent protection.
Because the claims at issue in Alice were directed to an
abstract idea -- the use of a third party to mitigate settlement
risk -- the Court proceeded to analyze whether the claims
recited an “inventive concept” sufficient to “transform” the
abstract idea into a patent-eligible application.
Ct. at 2357.
Alice, 134 S.
Of particular interest to the instant litigation,
the Court noted that “the mere recitation of a generic computer
cannot transform a patent-ineligible abstract idea into a
patent-eligible invention.
Stating an abstract idea while
adding the words ‘apply it’ is not enough for patent
eligibility.”
Id. at 2358 (citation omitted).
Accordingly, the
Court held the following claims unpatentable for failing to
recite an inventive concept beyond application through a
computer: (1) a “method for exchanging [financial] obligations,”
3
(2) “a computer system configured to carry out the method for
exchanging obligations,” and (3) “a computer-readable medium
containing program code for performing the method of exchanging
obligations.”
Id. at 2353.
Notwithstanding Alice and its implications for the AlphaCap
Patents, in January 2015, AlphaCap sued Gust and nine similar
defendants in the Eastern District of Texas (the “Texas
Action”).
The ten defendants represented nearly every major
provider of internet crowdfunding services.
The Texas Action
alleged infringement of three business method patents.
The
AlphaCap Patents claim computer-implemented methods of managing
information related to “equity and debt financing” through the
use of “data collection templates” and “semi-homogenous
profiles.”
These ten actions were pursued on a contingency fee basis
By June 23, 2015, AlphaCap had settled each action
by counsel.
it filed in the Eastern District of Texas, except for the action
against Gust.
None of the settlements exceeded $50,000 and some
settlements were for substantially less money.
Gust answered AlphaCap’s complaint on March 26 by asserting
six counterclaims seeking a declaratory judgment of noninfringement and invalidity for each of the three AlphaCap
Patents.
On June 19, AlphaCap’s counsel called Gust’s attorney
to present AlphaCap’s opening demand to settle the Texas Action.
4
Gust rejected the demand.
On June 22, Gust filed a motion to
transfer venue to the Southern District of New York pursuant to
28 U.S.C. § 1404 or, in the alternative, 28 U.S.C. § 1406.
The
ensuing negotiations and litigation between the parties is
described in Gust, 2016 WL 7165983, at *2-4, which is
incorporated by reference.
Only those events of particular
significance to the pending motion for reconsideration are
described here.
Even though neither Gust nor AlphaCap had any apparent
connection with the Eastern District of Texas, and Gust sought
to transfer the action to its home jurisdiction, AlphaCap
pursued extensive and expensive discovery as it opposed the
motion.
At the end of the day, AlphaCap was only able to
identify, although not by name, some end users of the
purportedly infringing product who resided in the Eastern
District of Texas.
was granted.
On March 2, 2016, Gust’s motion to transfer
In doing so, the federal court in Texas observed
that New York was “clearly a more convenient venue” than the
Eastern District of Texas.
Pending the decision on the transfer
motion, and pursuant to the Eastern District of Texas rules for
automatic discovery in patent cases, the parties engaged in
expensive claim construction discovery.
Meanwhile, with its motion to transfer AlphaCap’s action to
the Southern District of New York pending, Gust filed its own
5
action against AlphaCap in the Southern District of New York
(the “New York Action”).
The New York Action, which was filed
on August 6, 2015, sought a declaratory judgment of noninfringement and invalidity of the AlphaCap Patents, among other
things.
Following the transfer of the Texas Action to this
jurisdiction the two lawsuits were consolidated.
The parties
were ordered to provide a report to the court by May 20, 2016
describing, inter alia, contemplated motions.
On May 18, two
days before the report was due, AlphaCap unilaterally provided
Gust with the Covenant.
In a May 20 report to the Court,
AlphaCap took the position that the Covenant required dismissal
of all of its infringement claims and Gust’s claims seeking a
declaratory judgment of non-infringement and invalidity.
Gust
asserted, however, that it would still seek to show that the
AlphaCap Patents were invalid to support its remaining claims
and to obtain an award of fees.
At a June 10 conference with
the Court, AlphaCap continued to assert that it was unnecessary
to address the validity of the AlphaCap Patents in light of the
Covenant, while Gust continued to assert that a validity
determination remained relevant and necessary.
On July 28, this Court issued an opinion granting
AlphaCap’s pending motions to dismiss since the Covenant
rendered moot the claims and counterclaims related to the
infringement and validity of the AlphaCap Patents.
6
See Gust,
Inc. v. AlphaCap Ventures, LLC, 15cv6192 (DLC), 16cv1784 (DLC),
2016 WL 4098544, at *3 (S.D.N.Y. July 28, 2016).
The Opinion
noted that the parties were in agreement that the Covenant did
not affect Gust’s requests for attorneys’ fees and costs.
Id.
at *3-4.
On August 19, 2016, Gust moved for attorneys’ fees and
costs against AlphaCap and its counsel pursuant to 35 U.S.C.
§ 285 and 28 U.S.C. § 1927.
On December 8, 2016, the Court
largely granted Gust’s motion for attorneys’ fees, finding the
case “extraordinary” under 35 U.S.C. § 285 and finding
AlphaCap’s counsel jointly and severally liable under 28 U.S.C.
§ 1927.
On January 3, 2017, AlphaCap filed the present motion for
reconsideration pursuant to Rules 59(e) and 60, Fed. R. Civ. P.1
Also on January 3, AlphaCap filed an emergency motion to stay
enforcement of the December 8 judgment.
On January 4, the Court
Pursuant to Local Rule 6.3, which addresses motions for
reconsideration or reargument, “[n]o affidavits shall be filed
by any party unless directed by the court.” AlphaCap did not
seek the Court’s permission when it filed several affidavits in
support of its motion for reconsideration. Moreover, there is
nothing in the affidavits which AlphaCap could not have included
in its opposition to the 2016 motion for an award of fees.
Accordingly, the affidavits submitted in connection with the
motion for reconsideration are hereby stricken from the record.
See Giannullo v. City of N.Y., 322 F.3d 139, 146 (2d Cir. 2003)
(“[A] district court has broad discretion to determine whether
to overlook a party’s failure to comply with local court rules.”
(citation omitted)).
1
7
entered a stay of judgment pending resolution of AlphaCap’s
motion for reconsideration.2
DISCUSSION
The standard for granting a motion for reconsideration
pursuant to Rule 59 is “strict.”
Analytical Surveys, Inc. v.
Tonga Partners, L.P., 684 F.3d 36, 52 (2d Cir. 2012) (citation
omitted).
“[R]econsideration will generally be denied unless
the moving party can point to controlling decisions or data that
the court overlooked.”
Id. (citation omitted).
“A motion for
reconsideration should be granted only when the defendant
identifies an intervening change of controlling law, the
availability of new evidence, or the need to correct a clear
error or prevent manifest injustice.”
Kolel Beth Yechiel Mechil
of Tartikov, Inc. v. YLL Irrevocable Tr., 729 F.3d 99, 104 (2d
Cir. 2013) (citation omitted).
It is “not a vehicle for
relitigating old issues, presenting the case under new theories,
securing a rehearing on the merits, or otherwise taking a second
bite at the apple.”
Analytical Surveys, 684 F.3d at 52
(citation omitted).
The decision to grant or deny the motion
for reconsideration is within “the sound discretion of the
AlphaCap’s January 3, 2017 motion for attorneys’ fees, as well
as Gust’s January 24, 2017 motion to lift the emergency stay and
for attorneys’ fees are addressed in an accompanying Memorandum
Opinion.
2
8
district court.”
Aczel v. Labonia, 584 F.3d 52, 61 (2d Cir.
2009) (citation omitted).
Federal Rule of Civil Procedure 60(a) permits the Court to
“correct a clerical mistake or a mistake arising from oversight
or omission.”
Rule 60(b) permits the Court to “relieve a party
or its legal representative from a final judgment, order, or
proceeding” if “applying [the judgment] prospectively is no
longer equitable” or for “any other reason that justifies
relief.”
Rule 60(b)(5), (6), Fed. R. Civ. P.
Rule 60(b)(6)
applies only “when the asserted grounds for relief are not
recognized in clauses (1)-(5) of the Rule and there are
extraordinary circumstances justifying relief.”
Tapper v.
Hearn, 833 F.3d 166, 172 (2d Cir. 2016) (citation omitted).
“Rule 60(b) strikes a balance between serving the ends of
justice and preserving the finality of judgments.
Although it
should be broadly construed to do substantial justice, final
judgments should not be lightly reopened.”
Id. at 170 (citation
omitted).
AlphaCap’s motion for reconsideration presents new
arguments that could have been but were not made in opposition
to Gust’s motion for an award of fees, or repeats arguments that
were previously made and rejected.
use of a motion for reconsideration.
9
This is not an appropriate
None of the arguments made
in this motion have merit.
The most prominent arguments
presented in this motion are addressed and dismissed below.
I.
Section 285
AlphaCap argues that Gust erred in awarding fees pursuant
to Section 285.
Section 285 of the Patent Act provides that
“[t]he court in exceptional cases may award reasonable attorney
fees to the prevailing party.”
35 U.S.C. § 285.
An
“exceptional” case is “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.”
Octane Fitness, LLC v. ICON Health & Fitness, Inc.,
134 S. Ct. 1749, 1756 (2014).
Factors that courts may take into
consideration when assessing the exceptionality of a case
include: “frivolousness, motivation, objective unreasonableness
(both in the factual and legal components of the case) and the
need in particular circumstances to advance considerations of
compensation and deterrence.”
omitted).
Id. at 1756 n.6 (citation
Applying the Octane Fitness factors, Gust held that:
(1) AlphaCap’s infringement claims were frivolous and
objectively unreasonable in light of Alice and its progeny; (2)
its motivation in pursuing the lawsuit was inappropriate; and
(3) awarding attorneys’ fees would deter litigation misconduct.
Gust, 2016 WL 7165983, at *5-9.
10
AlphaCap asserts that, in filing this litigation, its
counsel relied upon the Federal Circuit’s opinion in DDR
Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir.
2014), to justify its belief in the validity of the AlphaCap
Patents.
In opposition to Gust’s motion for attorneys’ fees,
however, AlphaCap never mentioned DDR Holdings.
It is too late
to do so now.3
AlphaCap claims that the Court erred by failing to apply a
presumption of validity in its Section 101 analysis.
AlphaCap
did not suggest in opposing Gust’s motion for fees either that
it had relied on the existence of such a presumption in filing
this litigation, or that one existed.
Again, it is too late to
do so now.4
AlphaCap’s failure to previously mention DDR Holdings raises a
serious question regarding the reliability of its
representations on this motion for reconsideration. DDR
Holdings also provides no comfort to AlphaCap. In DDR Holdings,
the Federal Circuit addressed the Section 101 eligibility of
patents directed to “systems and methods of generating a
composite web page that combines certain visual elements of a
‘host’ website with content of a third-party merchant.” 773
F.3d at 1248. In upholding their patent-eligibility, DDR
Holdings explained that the DDR patents do not “broadly and
generically claim ‘use of the Internet’ to perform an abstract
business practice.” Id. at 1258. While DDR Holdings recognized
that the line between patent-eligible and ineligible claims “is
not always clear,” id. at 1255, the AlphaCap Patents do not fall
in that interstitial area where doubt may reasonably exist.
Attorneys’ fee awards may not be appropriate where the
application of Alice to the patents in suit is arguable, but
this is not such a case.
3
4
There is no basis in the law to find that a presumption of
11
While AlphaCap argues that Gust should have contained a
more in-depth analysis of its patents’ claim language, none was
required.
Gust, 2016 WL 7165983, at *5-8.5
Gust recited key
provisions from the AlphaCap Patents and explained why AlphaCap
could have had no reasonable expectation of success on the
merits in the patent infringement lawsuit it filed in 2016
against Gust.
The AlphaCap Patents do no more than “recite a
series of steps for storing and organizing investment data that
could all be performed by humans without a computer.”
*6.
Id. at
The computer functions they describe “namely, data
collection, classification, recognition, and storage -- are
well-understood, routine, conventional activities previously
known” to the computer industry.
S. Ct. at 2359).
Id. at *7 (citing Alice, 134
Gust also addressed each of the three cases on
eligibility attends the Section 101 inquiry. See Ultramercial,
Inc. v. Hulu, LLC, 772 F.3d 709, 720-21 (Fed. Cir. 2014) (Mayer,
J., concurring) (“Although the Supreme Court has taken up
several section 101 cases in recent years, it has never
mentioned -- much less applied -- any presumption of
eligibility. The reasonable inference, therefore, is that . . .
no . . . presumption of eligibility applies in the section 101
calculus.” (citation omitted)).
There can be no dispute that Gust preserved its right to attack
the validity of the AlphaCap Patents after receiving notice of
the Covenant. It did so in the parties’ May 2016 report to the
Court and again at the June 10, 2016 conference with the Court,
where counsel for Gust reiterated that it would be submitting
evidence that AlphaCap had filed “objectively baseless”
litigation against Gust.
5
12
which AlphaCap relied to defend the validity of its patents.6
decision issued since Gust casts doubt on its analysis.7
No
See,
e.g., Intellectual Ventures I LLC v. Erie Indem. Co., 850 F.3d
1315, 1327 (Fed. Cir. 2017) (holding abstract the idea of
“creating an index and using that index to search for and
retrieve data” in part because “organizing and accessing records
through the creation of an index-searchable database” involves
“longstanding conduct that existed well before the advent of
computers and the Internet.”).
AlphaCap cannot plausibly
dispute that its patents are directed to the abstract and
patent-ineligible idea of collecting, displaying, syndicating,
manipulating, and storing data.
AlphaCap contends that Gust was required to undertake an
analysis of a reasonable royalty rate before finding that
AlphaCap had settled the nine other contemporaneously filed
actions for “nuisance” amounts.
AlphaCap did not oppose Gust’s
AlphaCap’s opposition to the motion for fees relied solely on a
discussion of Alice, 134 S. Ct. 2347, Enfish, LLC v. Microsoft
Corp., 822 F.3d 1327 (Fed. Cir. 2016), and Kickstarter, Inc. v.
Fan Funded, LLC, No. 11cv6909 (KPF), 2015 WL 3947178 (S.D.N.Y.
June 29, 2015), to support the validity of its patents. As
noted above, it did not refer to DDR Holdings. AlphaCap has not
shown that Gust’s analysis of any of the three cases on which it
explicitly relied in opposing the motion for fees was flawed.
6
To the extent AlphaCap has relied in its motion for
reconsideration on decisions addressed to software patents, they
are inapposite to its business method patents.
7
13
motion for fees on this ground, and it is untimely to do so now.8
In any event, a royalty analysis would be irrelevant since
AlphaCap takes the position that there is nothing exceptional
about agreeing to settle early at a “steep discount” and it is
undisputed that the settlement amounts were correctly described
in Gust.9
II.
Section 1927
AlphaCap and its attorneys also challenge the award of fees
entered in Gust against AlphaCap’s counsel Gutride Safier LLP.
The arguments raised are also inappropriate for a motion for
reconsideration.
They do not identify any error of law or
evidence that was overlooked, or provide any other meritorious
ground for altering Gust.
Under 28 U.S.C. § 1927,
[a]ny attorney or other person admitted to conduct
cases in any court of the United States . . . who so
multiplies the proceedings in any case unreasonably
and vexatiously may be required by the court to
satisfy personally the excess costs, expenses, and
attorneys’ fees reasonably incurred because of such
conduct.
Gust’s motion for fees pointed out that AlphaCap’s strategy in
all of its cases was to “use the cost of defense to force quick,
low value settlements.”
8
Nor did Gust overlook, as the motion for reconsideration
suggests, the assertion by AlphaCap’s principal that he had
decided to pursue quick settlements because his investment bank
employer “insinuated” that he would be fired if he continued the
litigation. Gust, 2016 WL 7165983, at *2 n.3.
9
14
An award of attorneys’ fees under Section 1927 is only
appropriate “when there is a finding of conduct constituting or
akin to [subjective] bad faith.”
Zurich Am. Ins. Co. v. Team
Tankers A.S., 811 F.3d 584, 591 (2d Cir. 2016) (citation
omitted).
To constitute bad faith, “[t]he attorney’s actions
must be so completely without merit as to require the conclusion
that they must have been undertaken for some improper purpose
such as delay.”
Id. (citation omitted).
AlphaCap contends that Gust erred in its analysis of its
attorney’s bad faith in opposing the motion to transfer venue.
Specifically, AlphaCap asserts that Gust was wrong in observing
that “AlphaCap could not identify a single piece of evidence
located in or near the Eastern District of Texas.”
WL 7165983, at *12.
Gust, 2016
This sentence accurately describes
AlphaCap’s submissions to the Court in connection with the
motion for fees.
AlphaCap’s memorandum in opposition to the
motion for fees did not identify a single witness who resided in
the Eastern District of Texas, nor did AlphaCap’s memorandum in
opposition to the motion to transfer venue, which AlphaCap
included as an exhibit.
In contending that Gust erred, AlphaCap refers for the
first time to the transcript from the February 26, 2016 venue
hearing before the Honorable Robert W. Schroeder III in the
Eastern District of Texas.
That transcript references the fact
15
that in a sur-reply brief, AlphaCap was able to identify
individual third-party customers of Gust who resided in the
Eastern District of Texas.10
The sur-reply brief was filed under
seal in the Eastern District of Texas and was not cited or
attached as an exhibit to AlphaCap’s memorandum in opposition to
the motion for fees.
AlphaCap also claims that Gust erred in imposing Section
1927 sanctions against counsel based on their filing of the
Texas Action since the statute only permits such an award when
counsel engage in actions that multiply proceedings.
misconstrues Gust.
This
Fees under Section 1927 were not awarded
based on the filing of the litigation.
But, the filing of
frivolous litigation was not irrelevant to the decision to
impose fees.
The filing of frivolous litigation was one of
several actions taken by AlphaCap’s counsel that supported
Gust’s finding that counsel acted in bad faith when it
unreasonably and vexatiously multiplied the proceedings.
*13-14.
Id. at
That bad-faith filing drove or colored virtually every
decision counsel made during the litigation.
This discovery of third-party customers was made after Gust
produced approximately 37,000 pages of documents in discovery,
which included Excel spreadsheets of Gust’s users. The
existence of those residents on that spreadsheet did nothing to
identify relevant witnesses or to make AlphaCap’s resistance to
the venue motion more meritorious.
10
16
In addition, AlphaCap misstates the record to argue that
AlphaCap’s principal (and not its counsel) was the person
responsible for prolonging this litigation.
In awarding fees
against AlphaCap’s counsel, Gust recited the many steps the
attorneys took to multiply the proceedings in this case while
trying to evade litigation of the AlphaCap Patents’ validity.
In that discussion, the timing of the service of the Covenant
was highlighted.
Id.
Among other things, Gust noted that the
Covenant could have been issued months earlier than it was.
In
this motion for reconsideration, AlphaCap’s counsel argues that
only its client could decide when to grant the Covenant, and
that the client reasonably chose not to grant the Covenant until
the tort claims filed against AlphaCap had been dismissed.
This
argument is not only untimely but also misstates the record.
First, Gust’s motion for fees, which was brought to recover
fees from both AlphaCap and AlphaCap’s counsel, emphasized the
timing of the Covenant.
Any argument that AlphaCap’s counsel
wished to make about the timing of the Covenant, and who
controlled the decision on that timing, should have been made in
opposition to that motion.
That opposition did not make the
argument AlphaCap presents here.
Second, the explanation
AlphaCap now offers misstates the record.
17
The tort claims that
Gust filed again AlphaCap were not dismissed until months after
the Covenant was issued.11
Finally, AlphaCap’s counsel seeks to relitigate the amount
of attorneys’ fees awarded to Gust.
It was required to present
any argument regarding the proper measurement of the award of
fees, and the conduct that was appropriate to consider in
setting the award, in opposing the motion for fees.
It
identifies no argument in this regard that it made but that Gust
overlooked.
Its effort to shift blame for the course of this
litigation and the accumulation of fees to the defendant it sued
was not meritorious then and it presents no ground to change
that analysis.
As Gust explained,
AlphaCap’s assignment of blame is misdirected. Gust
was not required to walk away from the lawsuit
AlphaCap filed against it and bear its own attorneys’
fees, at least where it believed that lawsuit to be
frivolous and conducted in bad faith. If AlphaCap
wanted to avoid running up costs in this litigation,
it could have promptly applied to dismiss its claims
in the Texas Action with prejudice and it could have
issued a covenant not to sue in July 2015, thereby
mooting Gust’s counterclaims in the Texas Action and
preempting the declaratory judgment claims in the New
York Action.
In its reply to this motion for reconsideration, AlphaCap
switches course and proffers that the Covenant was issued based
on conclusions its counsel reached at the June 10, 2016
conference. But, again, the Covenant was issued weeks earlier,
in May 2016. Moreover, at the June 2016 conference, AlphaCap’s
counsel made no reference to the pending tort claims to explain
its “thought process” behind the unilateral issuance of the
Covenant.
11
18
Id. at *15.
II.
Prejudgment Interest
AlphaCap claims it was error to impose prejudgment interest
at the New York interest rate of nine percent.
The Federal
Circuit has held that “a district court [has] authority, in
cases of bad faith or other exceptional circumstances to award
prejudgment interest on the unliquidated sum of an award made
under Section 285.”
Cir. 1988).
Mathis v. Spears, 857 F.2d 749, 761 (Fed.
“The decision whether to grant prejudgment interest
and the rate used if such interest is granted are matters
confided to the district court’s broad discretion, and will not
be overturned on appeal absent an abuse of that discretion.”
SEC v. First Jersey Sec., Inc., 101 F.3d 1450, 1476 (2d Cir.
1996) (citation omitted).
In assessing prejudgment interest,
courts must look to the source of the law underlying a party’s
claims to determine the applicable prejudgment interest rate:
“claims that arise out of federal law are governed by federal
rules, claims arising out of state law are governed by state
rules.”
In re Palermo, 739 F.3d 99, 107 (2d Cir. 2014).
While
Gust’s claims arise out of federal law, there is no applicable
federal statute establishing a prejudgment interest rate.
AlphaCap nevertheless argues that the Treasury rate constitutes
a more appropriate rate for awards made under Section 285.
there is no reason to think that the Treasury rate more
19
But
accurately captures the time value of money in New York or the
true loss to Gust.
AlphaCap further contends that because the award is a
sanction, and because there is no evidence as to when (or if)
Gust actually paid the fees, interest should be awarded only
from the date the fees were awarded, i.e., December 8, 2016.
The case that AlphaCap cites in support of this argument is
inapposite, as it is confined to Rule 37, Fed. R. Civ. P., which
does not authorize recovery of prejudgment interest.
See
Remington Prods., Inc. v. N. Am. Philips, Corp., 763 F. Supp.
683, 685 (D. Conn. 1991) (“On its face, Rule 37(a) doe[s] not
authorize recovery of prejudgment interest.” (citation
omitted)).
By contrast, the Federal Circuit has held that
prejudgment interest may be awarded under Section 285.
857 F.3d at 761.
Mathis,
Moreover, in a December 19, 2016 letter to the
Court, counsel for Gust certified that he had been paid in full
all invoices due in the amount of $508,343 on a substantially
quarterly basis.
Accordingly, AlphaCap’s request to change the
rate or start date of prejudgment interest is denied.
20
CONCLUSION
AlphaCap’s January 3, 2017 motion for reconsideration is
denied.
Dated:
New York, New York
July 6, 2017
____________________________
DENISE COTE
United States District Judge
21
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