Integrated Claims Systems, LLC v. Old Glory Insurance Company

Filing 84

MEMORANDUM OPINION AND ORDER re 74 MOTION to Dismiss filed by Seton Health Plan, Inc.. Signed by District Judge Rodney Gilstrap on 3/3/2020. (nkl, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION
INTEGRATED CLAIMS SYSTEMS, LLC,
Plaintiff,
v.
OLD GLORY INSURANCE COMPANY,

SETON HEALTH PLAN, INC.
Defendants.

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CIVIL ACTION NO. 2:15-CV-00412-JRG
(Lead Case)
CIVIL ACTION NO. 2:15-CV-00427-JRG
(Member Case)

MEMORANDUM OPINION AND ORDER
Before the Court is the Motion to Dismiss filed by Seton Health Plan, Inc. (“Seton”). (Dkt.
No. 74). Having considered the Motion to Dismiss, for the reasons set forth herein, the Court finds
the Motion to Dismiss should be and hereby is DENIED WITHOUT PREJUDICE.
I.

Factual and Procedural Background

On March 24, 2015, Plaintiff Integrated Claims Systems, LLC (“ICS”) filed a complaint
alleging that Seton has infringed U.S. Patent No. 6,003,007 (“the ’007 Patent”); U.S. Patent No.
6,199,115 (“the ’115 Patent”), and U.S. Patent No. 8,676,609 (“the ’609 Patent”). (Case No. 2:15CV-427-JRG, Dkt. No. 1). Seton moved to stay this case after the Patent Trial and Appeal Board
(“PTAB”) instituted CBM review the ’609 Patent on July 30, 2015. (Dkt. No. 51). In support of
its motion to stay, Seton noted that the PTAB had also instituted CBM review on two other patents,
which Seton alleged were comparable to the remaining ’007 Patent and ’115 Patent in this case.
Without passing directly on that latter question of comparability, the Court granted Seton’s
motion to stay on September 25, 2015, and ordered the case stayed for six months. (Dkt. No. 63).
The Court extended the stay on June 29, 2016, after the PTAB issued a Final Written Decision

invaliding all claims in the ’609 Patent which were asserted by ICS in this case. (Dkt. No. 67).
After ICS appealed the Final Written Decision to the Court of Appeals for the Federal Circuit, the
Court extended the stay in this case by an order issued on August 29, 2016, (Dkt. No. 69), and the
Court extended the stay through the pendency of the proceedings before the Federal Circuit. (Dkt.
No. 72). The Court also denied, without prejudice, Seton’s then-pending motion to dismiss,
explaining “[i]f and when the stay is lifted in the future, within fourteen (14) days thereafter, the
parties may re-urge any motion denied without prejudice herein.” (Id.)
Without the stay being lifted, and without otherwise seeking or receiving leave of Court,
Seton “re-urge[d] its motion to dismiss” on March 16, 2018, (Dkt. No. 74 at 1), which Defendant
Old Glory Insurance Company (“OG”) joined. (Dkt. No. 75). In the Motion to Dismiss, Seton
does not address the Court’s prior order instructing Seton that it should only re-urge such a
motion after the stay is lifted. Further, in the most recent joint status report from the parties,
Seton affirmatively urges the Court not to lift the stay on the basis that the Court should instead
grant its Motion to Dismiss and thereby dispose of the case. (Dkt. No. 83 at 1–2).
Additionally, the Motion to Dismiss does not include any of the certifications related to
claim construction which are required by the Court’s Standing Order Regarding Motions Under
35 U.S.C. § 101 and Accompanying Certifications (“the § 101 Standing Order”). The § 101
Standing Order applies to all dispositive motions asserting the invalidity that a patent-in-suit is
invalid under 35 U.S.C. § 101. However, the § 101 Standing Order only applies to dispositive
motions which are filed before the Court holds a claim construction hearing in a given case. The
§ 101 Standing Order requires the movant to engage in a serious and substantial meet-and-confer
effort addressed to whether claim construction is necessary to evaluate patentability under § 101.
It also requires the movant include a certificate in the dispositive motion that reflects each party’s

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position with respect to whether claim construction would assist the Court in evaluating the
motion. However, the Motion to Dismiss does not include any such certification, and does not
explain the absence of such certification. Nor is there any basis in the record to conclude that Seton
engaged in the specific meet-and-confer required by the § 101 Standing Order.
II.

Legal Standard

Federal courts have the inherent authority to sanction litigants who violate court orders.
Sandifer v. Gusman, 637 F. App’x 117, 122 (5th Cir. 2015). In addition to orders directed at a
particular party, sanctions may be imposed for violation of a court’s standing orders or local rules.
See Fleming & Assocs. v. Newby & Tittle, 529 F.3d 631, 637 (5th Cir. 2008) (“[A] district court
always has jurisdiction to impose sanctions designed to enforce its own rules . . . .”); see also
Chambers v. NASCO, Inc., 501 U.S. 32, 57 (1991) (“[A] party may be sanctioned for . . .
disobeying the court’s orders.”). An appropriate measure of sanctions pursuant to “a court’s
inherent power” may include “an assessment of attorney’s fees.” Allstate Ins. Co. v. Mader, 201
F. App’x 261, 265 (5th Cir. 2006) (quoting Chambers v. NASCO, Inc., 501 U.S. 32, 45 (1991));
accord 28 U.S.C. § 1927 (authorizing statutory sanctions against attorneys); In re Black, No. CV
16-13200, 2017 WL 3034348, at *7 (E.D. La. July 18, 2017) (“Moreover, the Fifth Circuit has
held that violating a court order can constitute bad faith.”).
At the same time, this Court views the imposition of sanctions as a serious matter that
should only be done when no lesser remedy would suffice. Haas v. Woods, 54 F. App’x 412, 412
(5th Cir. 2002) (“It was the judge’s obligation to consider the least severe and effective
sanction.”). “Indeed, the Supreme Court has cautioned that ‘because of their very potency,
inherent powers must be exercised with restraint and discretion.’ ” Elliott v. Tilton, 64 F.3d 213,
217 (5th Cir. 1995) (quoting Chambers, 501 U.S. at 44); see also id. (“[T]he threshold for the use
of inherent power sanctions
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is high.” (quoting Chaves v. M/V Medina Star, 47 F.3d 153, 156 (5th Cir. 1995))); League of United
Latin Am. Citizens, Dist. 19 v. City of Boerne, 675 F.3d 433, 440 (5th Cir. 2012) (“A court should
invoke its inherent power to award attorney’s fees only when it finds that ‘fraud has been practiced
upon it, or that the very temple of justice has been defiled.’ ” (quoting Chambers, 501 U.S. at 46)).
III.

Discussion

In this case, the Court exercises its substantial discretion not to issue sanctions despite
Seton’s violation of two orders of this Court.1 Mindful of the obligation to exercise its inherent
powers “with restraint and discretion,” this Court typically reserves application of its sanction
authority for repeat offenders or other flagrant misconduct. Seton’s single motion, while a violation
of multiple orders, constitutes an individual instance of misconduct. No aggravating circumstances
are present which suggest that the violations were willful. Accordingly, the Court is confident that
the admonitions in this Order are sufficient to induce Seton to comply with this Court’s
orders. See Haas, 54 F. App’x at 412. If the Court is wrong, it can revisit sanctions at that time.
IV.

Conclusion

The Court issued a stay in this case to conserve the resources of the parties and the Court,
in view of the co-pending administrative actions in the PTAB. In contravention of that order, Seton
unduly induced the additional expenditure of resources in filing its Motion to Dismiss. Seton’s
Motion to Dismiss also violated the Court’s § 101 Standing Order, which is similarly aimed at
streamlining disputes related to patent-eligible subject matter that are raised prior to claim
construction.

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In filing the instant Motion to Dismiss, Seton violated two orders of this Court. First, Seton
violated the Court’s stay order, in which the Court instructed that Seton may re-urge its motion to
dismiss after the stay was lifted. Second, the instant Motion to Dismiss violated the Court’s § 101
Standing Order in that Seton failed to include the certificate required by such order.
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In view of the foregoing, Seton’s Motion to Dismiss is DENIED WITHOUT
PREJUDICE TO REFILING. Seton may re-urge a motion to dismiss only after the Court has
lifted the stay and only after the Court has issued a claim construction order addressed to any
asserted claims which remain at such time. See MyMail, Ltd. v. ooVoo, LLC, 934 F.3d 1373, 1379
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(Fed. Cir. 2019) (“Determining patent eligibility requires a full understanding of the basic
character of the claimed subject matter.”). Any motion to dismiss must comply with the Court’s
§ 101 Standing Order. Finally, the Court ORDERS that all deadlines in this case remain
STAYED until further order of this Court. Counsel for Seton shall file a notice in this case within
three days acknowledging they have carefully reviewed this order, including but not limited to the
admonitions and guidance, as to future practice, which are a part hereof.
So ORDERED and SIGNED this 3rd day of March, 2020.

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RODNEY GILSTRAP
UNITED STATES DISTRICT JUDGE

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