ARCONIC INC. v. NOVELIS INC. et al
Filing
686
MEMORANDUM OPINION re 685 Order on Motion to Sever, Order on Motion to Stay, Order on Motion for Entry of Judgment under Rule 54(b), Order on Motion to Vacate. Signed by Judge Joy Flowers Conti on 6/8/21. (mh)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
ARCONIC INC.,
Plaintiff,
v.
NOVELIS INC. and NOVELIS CORP,
Defendants.
) CIVIL ACTION NO. 17-1434
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) JUDGE JOY FLOWERS CONTI
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OPINION
I. Introduction
There are two motions pending: a motion filed by Arconic, Inc. (“Arconic”) (ECF No.
666), which seeks two unrelated forms of relief: (a) entry of final judgment under Rule 54(b) on
Arconic’s trade secret and confidential information claims; and (b) termination of the
appointment of the special master. Novelis Inc. and Novelis Corp. (collectively, “Novelis”)
filed a response to that motion, in which Novelis: (a) agreed to entry of judgment and
certification under Rule 54(b); and (b) opposed removal of the special master (ECF No. 680).
Arconic filed a reply brief (ECF No. 684). The other pending motion was filed by Novelis and
seeks to sever and stay its fifth counterclaim (ECF No. 658). Arconic filed a response opposing
that relief (ECF No. 665) and Novelis filed a reply brief (ECF No. 676). The motions are ripe
for disposition and will be resolved by the court.
II. Procedural Background
On December 9, 2020, the court issued an opinion and order which granted partial
summary judgment on Arconic’s trade secret claims at counts I, III, V and VI of the second
amended complaint in favor of Novelis and against Arconic (ECF Nos. 622, 623). Summary
judgment was not entered on the limited aspects of Arconic’s confidential information claims at
counts II and IV identified by the special master. Count VII of the second amended complaint,
in which Arconic seeks declaratory judgment that the 2012 Technology Access and License
Agreement (the “License”) does not include the “ion exchange patent,” remains in the case.
Also remaining in this case are numerous counterclaims asserted by Novelis against
Arconic. The parties agree that the counterclaims fall into two categories: (1) counterclaims 1, 2
and 5-9, which overlap with Arconic’s trade secret claims, i.e., the “Dependent Counterclaims”;
and (2) counterclaims 3, 4 and 10-13, which are related to Novelis’ antitrust theories, i.e., the
“Independent Counterclaims.” See Joint Statement Regarding Counterclaim Discovery (ECF
Nos. 567-3, 665-3). Discovery on the Independent Counterclaims is now complete, except for
one deposition. Discovery on the Dependent Counterclaims was stayed while the court
considered Arconic’s trade secret claims, because the parties believed that the issues were
intertwined. In the December 9, 2020 opinion, the court ordered that the remaining discovery
“commence forthwith and shall be completed as expeditiously as possible.” (ECF No. 623 at
40). The parties report that numerous disputes about the scope of that discovery remain pending
before the special master.1
On December 15, 2020, the court issued an opinion and order denying Novelis’ motion to
seek partial summary judgment (ECF Nos. 631, 632). The court explained that completion of all
remaining discovery followed by expert discovery and one round of comprehensive summary
judgment motions is the most efficient manner to proceed.
The parties’ present discovery disputes were referred to the special master. The court observes that the scope of
discovery should be determined based upon the claims and counterclaims remaining in the case, not the Arconic
claims on which judgment was entered.
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III. Analysis
A. Arconic’s Motion
1. Certification issue
a. Policy against piecemeal appeals
There is a longstanding federal policy against piecemeal appeals. Curtiss–Wright Corp.
v. General Elec. Co., 446 U.S. 1, 8 (1980). “Certification of a judgment as final under Rule
54(b) is the exception, not the rule, to the usual course of proceedings in a district court.” Elliott
v. Archdiocese of New York, 682 F.3d 213, 220 (3d Cir. 2012). The power conferred upon the
trial judge by Rule 54(b) “should be used only in the infrequent harsh case as an instrument for
the improved administration of justice.” Panichella v. Pa. R.R. Co., 252 F.2d 452, 455 (3d Cir.
1958).
Although the inquiry is flexible, certification “should not be entered routinely or as a
courtesy or accommodation to counsel.” Id. Even if both parties consent to Rule 54(b)
certification, as in this case, the court has an independent duty to examine whether the
certification standards are met. Otsuka Pharm. Co. v. Zydus Pharms. USA, Inc., 314 F.R.D. 372,
377 (D.N.J. 2016), aff'd, 694 F. App'x 808 (Fed. Cir. 2017).
b. Rule 54(b)
Rule 54(b) represents an attempt “to strike a balance between the undesirability of
piecemeal appeals and the need for making review available at a time that best serves the needs
of the parties.” Berckeley Inv. Grp., Ltd. v. Colkitt, 455 F.3d 195, 202 (3d Cir. 2006). To certify
a final decision under Rule 54(b), the court must make two separate findings: (1) there has been a
final judgment on the merits, i.e., an ultimate disposition on a cognizable claim for relief; and (2)
there is “no just reason for delay.” Id. (quoting Curtiss–Wright, 446 U.S. at 7–8). The district
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court’s decision is reviewed for abuse of discretion. Id.
i.
Lack of a final judgment
In this case, there are several claims on which Arconic seeks certification under Rule
54(b) on which there is no final judgment. Indeed, Arconic has not dismissed the remainder of
its confidential information claims at counts II and IV; instead, it offered to do so “if Rule 54(b)
judgment is entered.” (ECF No. 666 at 2) (emphasis added). Arconic states that it will “not
withdraw its pending confidential information claims if Rule 54(b) certification is denied.” (ECF
No. 666-1 at 5 n.1). In effect, Arconic is attempting to bargain with the court; i.e., it will dismiss
the remainder of counts II and IV after (and only if) the court grants its motion. The court is not
a party and it would be improper for the court to engage in negotiations with a party.
Novelis’ response attached a Joint [Proposed] Order for entry of judgment pursuant to
Rule 54(b) (ECF No. 677-1). Novelis’ responsive brief contains a footnote reference that “the
parties have since agreed on the Proposed Order attached to this brief.” (ECF No. 676 at 1 n.1).
There, however, is no filing on the record in which Arconic itself unequivocally instructed the
court to dismiss counts II and IV. As Arconic confirmed in its reply brief, the withdrawal of the
remainder of counts II and IV has not yet occurred. The only claims that were finally resolved in
the December 2020 order were counts I, III, V and VI, and the parties appear to recognize that
Rule 54(b) certification would not be appropriate on those claims alone. Count VII of Arconic’s
second amended complaint also remains in the case. In sum, at this stage of the case, there is not
an appropriate final judgment for the court to even consider Rule 54(b).
ii.
No just reason for delay
As an initial matter, Arconic waited six months before seeking Rule 54(b) certification.
See King v. Newbold, 845 F.3d 866, 868 (7th Cir. 2017) (“as a general rule it is an abuse of
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discretion for a district judge to grant a motion for a Rule 54(b) order when the motion is filed
more than thirty days after the entry of the adjudication to which it relates.”) (citation omitted).
In King, the court recognized that an untimely motion could be granted if the movant
demonstrated extreme hardship, but Arconic has not done so. Arconic merely states that it
recently became clear that the parties’ disputes about the scope of remaining discovery would
limit its ability to defend itself against Novelis’ counterclaims and may lead to a retrial if the
court’s decision is reversed. (ECF No. 666-1 at 9). For a complete analysis, the court will
assume for the sake of argument that the motion was timely filed.
Based upon the current record, even if Arconic were to dismiss counts II and IV, the
court cannot conclude that Rule 54(b) certification is appropriate after weighing the factors
regarding “no just reason for delay.” District courts should consider several factors when
assessing whether there is a “no just reason for delay” under Rule 54(b):
(1) the relationship between the adjudicated and unadjudicated claims;
(2) the possibility that the need for review might or might not be mooted by future
developments in the district court;
(3) the possibility that the reviewing court might be obliged to consider the same
issue a second time;
(4) the presence or absence of a claim or counterclaim which could result in set-off
against the judgment sought to be made final; [and]
(5) miscellaneous factors such as delay, economic and solvency considerations,
shortening the time of trial, frivolity of competing claims, expense, and the like.
Id. at 203.
The first factor, whether the certified claims can be separated from the remaining claims,
weighs heavily against certification. Even assuming, arguendo, Arconic’s trade secret and
confidential information claims were dismissed, Novelis’ Dependent Counterclaims remain
unadjudicated. The parties agreed, and represented, that the Dependent Counterclaims are
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intertwined with the claims on which they seek Rule 54(b) certification, such that discovery was
stayed on the Dependent Counterclaims while the court considered the appropriate sanction for
Arconic’s failure to identify properly its trade secrets and confidential information. See Joint
Statement Regarding Counterclaim Discovery (ECF Nos. 567-3, 665-3). Novelis proposes that
the Dependent Counterclaims be stayed pending the Rule 54(b) certification, and reasons that the
parties may have to engage in duplicative discovery if the court’s decision is reversed on the
interlocutory appeal. The court is not convinced. If this court’s decision is reversed, discovery
will still be needed on the counterclaims and, if affirmed on the interlocutory appeal, the case
would need to be remanded for additional discovery and other proceedings on Novelis’
counterclaims.
The second factor, whether future developments may moot the need for appellate review,
weighs against certification. If Arconic prevails on the antitrust claims (or if the parties reach a
settlement), the case may be over. If Arconic takes an appeal on the trade secret issues,
whichever party loses on the antitrust issues may also appeal. In that scenario, judicial efficiency
will be promoted by a consolidated appeal -- rather than piecemeal appeals that would result
from Rule 54(b) certification.
The third factor, whether the appellate court might be obliged to consider the same issue
a second time, weighs against certification. The parties agree that Novelis’ counterclaims –
which remain in the case – are intertwined with the claims on which the parties are seeking Rule
54(b) certification. Similar issues may be presented when those counterclaims are finally
adjudicated. The policy against piecemeal appeals teaches that judicial economy is enhanced by
considering all appellate issues in a case in one consolidated appeal.
The fourth factor, setoffs, was not addressed by the parties.
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The fifth factor, miscellaneous considerations, weighs against certification. An
interlocutory appeal might not expedite the end of this litigation. This case is near to becoming
trial ready. The court ordered all remaining discovery to be promptly concluded. The court
denied Novelis’ request for piecemeal summary judgment briefing and contemplates a finite
period to resolve dispositive motions, followed by trial. Novelis’ proposal to stay its Dependent
Counterclaims would further delay final resolution of this case, which is already four years old,
and could cause additional legal expense. Arconic’s proposal to stay all proceedings during the
interlocutory appeal would result in even more delay because the interlocutory appeal will not
resolve all the claims and counterclaims. 2 Economic and solvency considerations are not a
factor, because both parties are large corporations and have made millions of dollars from the
A951 technology at issue in this case. (See ECF No. 665 at 2).
iii.
Conclusion about Rule 54(b) certification
The court acknowledges that if Arconic were to prevail on an appeal of the trade secret
issues, additional discovery and perhaps retrial may have to be done on remand.3 But that
consideration arises in all cases in which a party seeks to preserve a legal challenge to a district
court ruling; it cannot be sufficient to overcome the well-established policy against piecemeal
appeals. In Flynn & Emrich Co. v. Greenwood, 242 F.2d 737 (4th Cir. 1957), the court of
appeals explained: “It would doubtless be convenient to the parties for us to pass upon this
affirmative defense in advance of the trial of the case, but it would establish a precedent which
might be very harmful in the administration of justice.” Id. at 741.
The court disagrees with Arconic’s attempt to portray the relevant issue for certification
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Arconic contends that the entire case, including the antitrust claims, should be stayed pending resolution of the
certification.
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On the other hand, if this court’s decision was affirmed, the case would have remained needlessly stuck in its
current posture, but for the additional delay and expense caused by the interlocutory appeal.
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as one of first impression regarding the contours of its duty to describe its trade secrets with
reasonable particularity (ECF No. 661-1 at 15-16). Arconic waived any arguments about the
applicable legal standard by its repeated failures to object to the special master’s reports and
recommendations about those duties, which the court adopted. Arconic was well-aware of its
duty to object. See Arconic’s reply brief (ECF No. 684 at 5) (“Indeed, the Order appointing the
Special Master states that ‘[t]he failure to file a timely objection shall constitute a waiver of any
objection.’ Dkt. 50 at 4.”). Indeed, Arconic’s trade secret and confidential information claims
were dismissed, without objection by Arconic, for failure to properly identify them. See ECF
No. 623 at 9 (summarizing procedural history). In the court’s view, one issue that would be
presented in an interlocutory appeal does not involve the merits of the claims at issue; rather, the
issue is the appropriate sanction for a party who repeatedly fails to comply with the court’s
orders. (ECF No. 623 at 34-37) (discussing Rule 37(b)).
In sum, despite the parties’ agreement, this case as presently postured does not meet the
difficult standard to justify a departure from the general policy against piecemeal appeals. The
motion to enter judgment under Rule 54(b) and stay some or all of the remaining proceedings
pending an interlocutory appeal will be DENIED.
2. Termination of the appointment of the special master issue
Arconic asks the court to vacate the appointment of the special master.4 Arconic argues
that this case is at an “inflection point,” after the ruling on the trade secret and confidential
information claims.5 Arconic contends that because several new district judges were confirmed
Arconic refers to “withdrawal of the reference,” which in essence is seeking to terminate the appointment of the
special master.
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As the court noted above, the “inflection point” is not complete because portions of Arconic’s confidential
information claims and Novelis’ “Dependent Counterclaims” remain in the case.
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to the United States District Court for the Western District of Pennsylvania, this case may be
effectively and timely addressed by the court, such that the continued appointment of the special
master is not warranted.
The court recognizes its discretion to modify or terminate the appointment of a special
master. See Fed. R. Civ. P. 53(b)(4) (“The order [appointing a master] may be amended at any
time after notice to the parties and an opportunity to be heard.”). The court declines to terminate
the appointment at this stage of the case, for the reasons set forth below.
Contrary to Arconic’s suggestion, the primary consideration in deciding to appoint a
special master in this case was not the number of active judges on the court. The court decided to
appoint a special master in December 2017, at the inception of this case, correctly perceiving the
large scale of this litigation and the litigiousness of the combatants. The court also anticipated
that complex issues of trade secret and intellectual property law may arise. See Order
Appointing Discovery Special Master (ECF No. 50). This is an exceptional case, by any
measure. Arconic did not object to appointment of a special master and suggested several
candidates to serve in that capacity (ECF No. 45). In its pending motion, Arconic does not
challenge the initial appointment of the special master or the work performed to date; rather, it
contends that a special master is no longer needed. The court does not agree.
The special master, a former federal court judge, has extensive experience in trade secret
and antitrust litigation. The special master has been, and continues to be, of great benefit to the
court in this litigious case with 680 docket entries (as of June 3, 2021). In addition, and not
reflected on the docket, the parties litigated a vast number of discovery disputes before the
special master. For example, in April 2019, they submitted a 101-page Redfern chart listing 70
issues in dispute, supported by over 1000 pages of materials. (See ECF No. 426). After
extensive proceedings with the special master and the filing of R&R #29, only three issues
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required resolution by the court (See ECF No. 499). Given the issues raised in this litigation, the
number and complexity of the disputes and the resources of the parties, the expenses associated
with the special master are reasonable.
The special master possesses invaluable, detailed knowledge about this litigation,
acquired over three and a half years of service, particularly about the numerous discovery
disputes that were resolved without court intervention. Arconic’s suggestion that a magistrate
judge could be appointed to oversee the remaining discovery is not persuasive. The magistrate
judges in this district have full, independent case loads and are assigned to civil cases based upon
an automated random selection process. Local Rule 72.G. Only approximately one-third of a
district judge’s cases are assigned to a magistrate judge. This case was not assigned to a
magistrate judge. This court cannot unilaterally change the local rules or deviate from these
procedures and, in any event, there is no reason to do so because discovery is nearing its end.
Numerous discovery disputes remain pending before the special master. On April 5,
2021, the parties represented that they agreed on a case schedule, with all fact discovery to be
completed by July 1, 2021; expert reports and responsive expert reports to be done by September
16, 2021; and expert discovery to be completed by October 21, 2021 (ECF No. 663-1). The
court concludes that the just, speedy and inexpensive determination of this proceeding can best
be achieved by adhering to this schedule, including the resolution of all remaining discovery
disputes by the special master (subject to de novo review by the court).
B. Novelis’ motion to sever counterclaim
Novelis asks the court to sever and stay counterclaim 5, in which it contends that Arconic
breached the 2012 License by filing a derivation proceeding with the United States Patent and
Trademark Office (“USPTO”). Counterclaim 5 is identified as one of the Dependent
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Counterclaims. To the extent that Novelis’ motion is under consideration by the special master,
the court will withdraw that motion and resolve it in this opinion in order for the discovery to
close as soon as possible.
Under Federal Rule of Civil Procedure 21, the court may “sever any claim against a
party.” Pursuant to Federal Rule of Civil Procedure 42(b), “[f]or convenience, to avoid
prejudice, or to expedite and economize, the court may order a separate trial of one or more
separate issues, claims, crossclaims, counterclaims, or third-party claims.” “Severance pursuant
to Rule 21 essentially creates a separate case, the disposition of which is final and appealable,”
while “Rule 42(b) does not create a new case, but bifurcates issues or claims within a single case
for separate trials.” Karlo v. Pittsburgh Glass Works, LLC, No. 2:10-CV-1283, 2015 WL
6134052, at *1 (W.D. Pa. Oct. 16, 2015) (citing Graudins v. Retro Fitness, LLC, 921 F.Supp.2d
456, 468 (E.D. Pa. 2013)).
The decisions to sever and stay a claim are within the court’s discretion. Id. at *2. In
exercising that discretion, courts consider the following factors: (1) whether the claims arise out
of the same transaction or occurrence; (2) whether the claims present some common questions of
law or fact; (3) whether settlement of the claims or judicial economy would be facilitated; (4)
whether prejudice would be avoided if severance were granted; and (5) whether different
witnesses and documentary proof are required for the separate claims. Id. (citations omitted).
Courts avoid severing claims because a single trial will generally minimize the delay, expense
and inconvenience to the parties and the court. Id.
Arconic filed the derivation proceeding in November 2017, the day before it initiated this
case. That proceeding is not resolved, and there is no statutory deadline for the USPTO to act
within a set time frame. Novelis, therefore, is seeking an open-ended delay. Novelis’ contention
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that counterclaim 5 “turns on a predicate ruling” by the USPTO (ECF No. 676 at 4) begs the
question whether counterclaim 5 is ripe.
Counterclaim 5 arises out of the same transaction or occurrence as numerous other
counterclaims, namely the 2012 License. Common questions of law and fact exist about the
parties’ duties under that License and the development of the technology that led to Novelis’
patent application and Arconic’s derivation proceeding. Common witnesses may exist. Novelis’
attempt to distinguish counterclaim 5 from its other counterclaims, in that they turn on whether
Novelis breached the License, is unconvincing. Severance is not likely to promote settlement
and will not advance judicial economy. Instead, severance will simply prolong a piece of this
litigation for resolution at some indeterminate later date. The court cannot perceive any
prejudice to Novelis if severance is not granted; Novelis knew about the derivation proceeding
years ago, when it chose to assert counterclaim 5.
One of Novelis’ primary objectives in seeking severance was to avoid disputes about the
scope of remaining discovery. In its reply brief, Novelis acknowledges that severance will not
achieve that laudable objective because Arconic still intends to pursue the same broad discovery
on six other counterclaims (ECF No. 676 at 8). Delaying resolution of the discovery disputes
will not facilitate the just, speedy or inexpensive determination of this case. Instead, severance
would likely result in undertaking duplicative discovery, motions practice and trial at some later
date. In sum, severance and stay of counterclaim 5 are not warranted.
IV. Conclusion
To reiterate, this case must be brought to an end and is currently postured to achieve that
result. The court is not persuaded by the efforts of either side to certify, sever, stay or otherwise
defer resolution of separate claims or counterclaims. All remaining fact discovery must be
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expeditiously completed. Counsel are reminded of their obligation to meet and confer to attempt
reasonably to resolve their disputes. See Fed. R. Civ. P. 37(a)(1) (discovery motion must include
certification that movant has in good faith conferred with the opposing party in an effort to
obtain discovery without court action). The special master will continue to oversee discovery,
including disputes with respect to scope, with de novo review by the court -- if necessary. The
parties will complete expert discovery on all remaining claims and counterclaims, followed by
dispositive motions and, if necessary, trial.
In accordance with the foregoing discussion, Arconic’s motion to certify and withdraw
the reference to the special master (ECF No. 666) will be DENIED and Novelis’ motion to sever
and stay counterclaim 5 (ECF No. 658) will be DENIED.
An appropriate order follows.
Dated: June 8, 2021
/s/ Joy Flowers Conti
Joy Flowers Conti
Senior United States District Judge
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