Gust, Inc. v. AlphaCap Ventures, LLC
MEMORANDUM OPINION AND ORDER... AlphaCaps January 3, 2017 motion for attorneys fees is denied. Gusts January 24, 2017 motion for additional attorneys fees is denied. The Clerk of Court shall lift the stay entered on January 4, 2017. (Signed by Judge Denise Cote on 7/6/2017) Filed In Associated Cases: 1:15-cv-06192-DLC, 1:16-cv-01784-DLC(hm)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
ALPHACAP VENTURES, LLC and
ALPHACAP VENTURES, LLC,
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:
On December 8, 2016, Gust, Inc. (“Gust”) was awarded over
$500,000 in fees and costs jointly and severally against
AlphaCap Ventures, LLC (“AlphaCap”) and its counsel Gutride
Gust, Inc. v. AlphaCap Ventures, LLC, 15cv6192
(DLC), 16cv1784 (DLC), 2016 WL 7165983 (S.D.N.Y. Dec. 8, 2016)
On January 3, 2017, AlphaCap filed both a motion for
reconsideration and its own motion for attorneys’ fees pursuant
to 28 U.S.C. § 1927 (“Section 1927”) against Gust’s counsel.
January 4, the Court entered a stay pending resolution of
On January 24, Gust filed a motion to lift the stay entered
on January 4 or, in the alternative, for an order requiring
AlphaCap to pay a bond in order to continue the stay.
January 24 motion also sought additional attorneys’ fees from
AlphaCap pursuant to Section 1927 and the Court’s inherent
Today, AlphaCap’s motion for reconsideration was denied.
This Memorandum Opinion addresses AlphaCap’s January 3 motion
for attorneys’ fees and Gust’s January 24 motion for additional
It relies on the facts, procedural history and
analysis set forth in today’s Opinion denying AlphaCap’s motion
for reconsideration, as well as Gust.
They are incorporated by
For the reasons set forth below, both motions are
The stay is lifted.
AlphaCap’s Motion for Attorneys’ Fees
The underlying litigation between the parties essentially
ended with the issuance of an Opinion in July of 2016 on
AlphaCap’s motion to dismiss.
Gust, Inc. v. AlphaCap Ventures,
LLC, 15cv6192 (DLC), 16cv1784 (DLC), 2016 WL 4098544 (S.D.N.Y.
July 28, 2016).
In August, Gust filed its motion for fees to be
awarded against both AlphaCap and its counsel.
no motion for fees at that time.
AlphaCap’s November 6, 2015
motion for Rule 11 sanctions was denied on July 28, 2016, and
AlphaCap brought no motion for reconsideration of that denial.
It was only after the December 2016 Opinion awarding fees to
Gust that AlphaCap brought its own motion for fees against
AlphaCap’s motion for fees was filed along with
a motion for reconsideration, and is best viewed as a component
of that motion for reconsideration.
But, as explained in both
the July 6 Opinion and Gust, it was AlphaCap’s attorneys -- not
Gust’s -- who unreasonably and vexatiously multiplied the
proceedings in this case.
At base, AlphaCap’s Section 1927 motion faults Gust for
refusing to settle in July 2015 without being reimbursed for its
attorneys’ fees and costs.
But, as Gust explained last
December, “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.”
Gust, 2016 WL 7165983, at *15.
AlphaCap also accuses Gust of unreasonably multiplying the
proceedings in this case by filing a counter-suit in the
Southern District of New York.
But, as the Court stated on the
record at a June 10, 2016 conference with the parties, “it’s
very common when someone is sued in the Eastern District of
Texas to file a counter lawsuit in the district where [the
defendants] think they should have been sued.
We have those
cases day in and day out in this court.”
Nor is it the case, as AlphaCap contends, that Gust’s
claims against it were so “objectively frivolous” as to imply
bad faith on the part of its attorneys.
Quite the contrary.
Gust’s claims of non-infringement and invalidity were dismissed
because they were rendered moot by AlphaCap’s unilaterally
issued Covenant Not to Sue (“Covenant”).
See id. at *3.
while Gust’s Sherman Act, abuse of process, and patent misuse
claims did not survive the motion to dismiss, a lawyer “is not
liable for his adversary’s attorneys’ fees simply because his
Oliveri v. Thompson, 803 F.2d 1265, 1277
(2d Cir. 1986).
Finally, AlphaCap argues that Gust acted unreasonably and
vexatiously for the reasons set forth in its Rule 11 motion.
AlphaCap’s Rule 11 motion -- which had been filed on November 6,
2015 -- was denied on July 28, 2016.
Any request for
reconsideration of that ruling is untimely.
Moreover, for the
same reasons the Rule 11 motion was denied, the request to award
fees for the conduct that prompted the filing of that motion is
Gust’s Motion for Additional Attorneys’ Fees
Gust seeks an additional $57,255 in attorneys’ fees,
pursuant to 21 U.S.C § 1927 and the Court’s inherent power, for
the work performed in response to AlphaCap’s motions for
reconsideration, attorneys’ fees, and a stay.
A court “may
exercise its inherent power to sanction a party or an attorney
who has acted in bad faith, vexatiously, wantonly, or for
Ransmeier v. Mariani, 718 F.3d 64, 68 (2d
Cir. 2013) (citation omitted).
“Bad faith may be found, not
only in the actions that led to the lawsuit, but also in the
conduct of the litigation.”
Hirschfeld v. Bd. of Elections in
City of N.Y., 984 F.2d 35, 40 (2d Cir. 1993); see also id.
(“Where a losing litigant has acted vexatiously or in bad faith,
it is within [the] Court’s inherent powers to award attorneys’
fees.” (citation omitted)).
While there are several aspects of AlphaCap’s
reconsideration motion that are concerning, including the two
statements described below, the Court declines to award an
additional amount in fees.
It was not inappropriate for
AlphaCap to, at the very least, address the rate at which
prejudgment interest would be awarded in its motion for
The prejudgment interest rate was not an issue
that the parties had addressed in their underlying motion
One statement in AlphaCap’s motion for reconsideration
that raises particular concern is its repeated assertion that,
in filing this litigation, its counsel relied upon 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.
But, AlphaCap never once cited DDR Holdings in opposition to
Gust’s motion for attorneys’ fees.
It relied on other cases to
explain why it believed it could bring patent infringement
claims based on the AlphaCap Patents despite the Supreme Court’s
decision in Alice Corporation Pty. Ltd. v. CLS Bank
International, 134 S. Ct. 2347 (2014).
Second, AlphaCap claimed in its motion for reconsideration
that it chose not to grant the Covenant “until the tort claims
were dismissed, as it did not want to lose its leverage to
settle the frivolous tort claims by unilaterally dropping its
own meritorious patent claims.”
The record contradicts this
explanation, as AlphaCap provided Gust the Covenant in May 2016
-- more than two months before tort claims were dismissed.
Gust, 2016 WL 4098544, at *5-6.
AlphaCap’s attempt to switch
course in its reply to the motion for reconsideration fares no
In its revised explanation, AlphaCap claims that the
Covenant was issued after it had “become confident that Gust’s
tort claims would be dismissed” based on “AlphaCap’s review of
Gust’s brief in opposition to the motion to dismiss and its
perceptions of the Court from the initial case management
But the initial case management conference did not
occur until June 10, 2016.
Moreover, when asked to explain its
“thought process” in executing the Covenant during the June 10
conference, AlphaCap’s counsel made no reference to the pending
Despite these concerns, Gust’s motion for
additional fees is denied.
AlphaCap’s January 3, 2017 motion for attorneys’ fees is
Gust’s January 24, 2017 motion for additional
attorneys’ fees is denied.
The Clerk of Court shall lift the
stay entered on January 4, 2017.
New York, New York
July 6, 2017
United States District Judge
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