[00:00:00] Speaker 04: Before we begin our arguments today, we have a motion that Judge Stahl would like to make. [00:00:08] Speaker 04: Judge Stahl. [00:00:09] Speaker 00: Thank you. [00:00:10] Speaker 00: I move for the admission of Gia Lu, who is a member of the bar and is in good standing with the highest courts of the Commonwealth of Virginia. [00:00:19] Speaker 00: I have knowledge of her credentials and am satisfied that she possesses the necessary qualifications. [00:00:26] Speaker 00: I'm able to say this because Gia has worked as a law clerk in my chambers for the last year. [00:00:32] Speaker 00: During that time, she's exhibited tremendous technical skills, diligent attention to detail, and passion for the law in this court's mission. [00:00:43] Speaker 00: I will miss her unique perspective on both cases in life. [00:00:48] Speaker 00: I am confident that she'll serve the court well as a member of the bar. [00:00:54] Speaker 04: Judge Chen, should we grant the motion? [00:00:58] Speaker 04: Yes. [00:01:00] Speaker 04: Judge Scully, your motion is granted. [00:01:02] Speaker 04: And Ms. [00:01:04] Speaker 04: Liu, welcome to this bar. [00:01:05] Speaker 04: And thank you for all your contributions to this court. [00:01:11] Speaker 01: Please raise your right hand. [00:01:13] Speaker 01: Do solemnly swear that you will comport yourself as an attorney and counselor of this court, up-rightly and according to law, and that you will support the Constitution of the United States of America. [00:01:23] Speaker 01: I do. [00:01:23] Speaker 01: Congratulations. [00:01:31] Speaker 04: And now we have three argued cases this morning. [00:01:33] Speaker 04: The first of these is number 171316, Luke's LLC versus Phoenix Trading, Inc., Mr. Holcomb. [00:01:56] Speaker 02: Good morning. [00:01:58] Speaker 02: May it please the court, I'm Stephen Hogan. [00:02:01] Speaker 02: And together with Robert Steele, who is present here today, I represent the Appellant Loops and Loops FlexCrush LLC. [00:02:11] Speaker 02: We've raised four issues in this appeal. [00:02:13] Speaker 02: It is the second time that we've been before this court. [00:02:18] Speaker 04: Judge Deigen? [00:02:19] Speaker 04: How is it that having failed to raise [00:02:23] Speaker 04: fraud claim in the first appeal, you're not barred by the mandate for raising it now. [00:02:29] Speaker 02: Because the issue on the first appeal was the outcome of the prior motion. [00:02:46] Speaker 02: So when this court remanded the case, [00:02:52] Speaker 02: It set aside the default. [00:02:55] Speaker 02: It reopened the entire case. [00:03:00] Speaker 02: And at that point, we went forward with the case. [00:03:07] Speaker 04: You had every piece of evidence relating to the fraud claim, including the 2012 testimony, the time when this case was here before you didn't cross appeal on the fraud claim. [00:03:19] Speaker 04: Why aren't you barred by demanding? [00:03:22] Speaker 02: Well, because the first appeal, the result of that and the result of the mandate was to reopen the... We didn't reopen the fraud claim. [00:03:37] Speaker 02: We didn't say anything about the fraud claim. [00:03:38] Speaker 02: But the court sent it back to the trial court on remand, set aside the default. [00:03:48] Speaker 04: The default was only on the patent claim. [00:03:50] Speaker 04: It wasn't on the fraud claim. [00:03:55] Speaker 02: The default, as I recall, was on the entire case, but the court had declined to set aside the summary judgment rule. [00:04:10] Speaker 03: Is there somewhere in the record that makes that clear, like the default judgment was for all of your complaints, claims? [00:04:19] Speaker 02: I will tell you, I don't know. [00:04:22] Speaker 03: I was just curious, how come you didn't cross-appeal the summary judgment of conclusion that your fraud claim had no merit? [00:04:36] Speaker 02: Well, my understanding is that when the original appeal was taken, [00:04:48] Speaker 02: The idea was that the existing judgment, if affirmed, the case would be over. [00:04:58] Speaker 02: If the existing judgment was reversed and the case was remanded, the case would be at large. [00:05:07] Speaker 04: Your first appeal had nothing to do with the fraud claim, right? [00:05:11] Speaker 02: The first appeal? [00:05:13] Speaker 04: Correct. [00:05:14] Speaker 04: Correct. [00:05:15] Speaker 04: And you didn't cross-appeal on the summary judgment as to the fraud. [00:05:20] Speaker 04: How can you raise it now? [00:05:23] Speaker 02: Because when the case goes back on remand, the entire case would be, again, at large, is my understanding, Your Honor. [00:05:35] Speaker 04: What case says that? [00:05:36] Speaker 02: I do not have one to cite to you off the top of my head. [00:05:40] Speaker 00: If you're wrong about everything being fair game when the case goes back, do you have an alternative argument, or is it just your understanding that when it would go back, you would have the chance to then challenge the earlier summary judgment that happened before your original notice of appeal? [00:05:56] Speaker 02: Yeah, I have no alternative argument on that point, Your Honors. [00:06:03] Speaker 02: was more focused today on the substance of the fraud claim and didn't expect to get a question as to whether or not the mandate foreclosed the position. [00:06:16] Speaker 02: I had not seen it argued in Pelley's brief. [00:06:22] Speaker 02: So I apologize for not having a much more thorough dig on this legal issue. [00:06:28] Speaker 02: I understand the concern. [00:06:30] Speaker 02: And I'm answering the best I can without having any notice that it was going to be raised. [00:06:39] Speaker 02: I'm not complaining to court, but it just wasn't raised in anybody's briefing. [00:06:45] Speaker 02: So I don't have an alternative argument. [00:06:49] Speaker 02: My belief was that on remand, the subject of what the court would do [00:06:59] Speaker 02: as for the Rule 37 sanction would include perhaps a reconsideration of whether or not the court's prior ruling on summary judgment ought to be revised in some way as part of the proceedings on remand. [00:07:27] Speaker 02: And we felt like that was in play. [00:07:31] Speaker 02: The remand, this court's decision didn't say it wasn't. [00:07:35] Speaker 02: It looked to us like, in fact, we argued... Of course it didn't say it wasn't, because nobody raised it. [00:07:40] Speaker 04: You didn't cross the bill. [00:07:41] Speaker 04: You didn't ask us to do anything about the fraud claim. [00:07:44] Speaker 04: Why would we discuss it? [00:07:46] Speaker 02: Well, that's true, but our belief is and was that if we go back [00:07:56] Speaker 02: And the question of Rule 37 sanctions is back on the table. [00:08:02] Speaker 02: The broad discretion of the trial court would include examining, it was clear that this court, based on the actual findings made, had concerns about a default sanction. [00:08:22] Speaker 02: Therefore, it was our anticipation that we would be back in court [00:08:26] Speaker 02: And the district court would be free to say, OK, I'm going to do something less than the default. [00:08:35] Speaker 03: Default judgment on patent infringement. [00:08:37] Speaker 02: Pardon me? [00:08:38] Speaker 03: Default judgment on patent infringement. [00:08:40] Speaker 03: Correct. [00:08:41] Speaker 03: Right. [00:08:42] Speaker 03: And at the bottom of page three of our slip opinion from 2014, it's at A61, we said in that opinion, the district court granted partial summary judgment to Americare [00:08:56] Speaker 03: 2010, determining that the defendants should prevail on all claims other than patent infringement, a ruling not contested on appeal. [00:09:07] Speaker 03: So I think from our vantage point, in the first go around, we made it pretty clear that everything, all other claims aside from the patent infringement, were now formally off the table, that they were never appealed. [00:09:21] Speaker 03: They were fully resolved. [00:09:24] Speaker 02: I understand the concern. [00:09:27] Speaker 02: Our understanding was, especially given the fact that the summary judgment, it was also granted on the infringement claim. [00:09:40] Speaker 02: And we now have the admissions from the defendants, which established that there was a fraudulent basis for that. [00:09:50] Speaker 04: That was in 2012. [00:09:52] Speaker 04: 2012, years before the first appeal. [00:09:55] Speaker 04: was the admission about the additional employee. [00:09:58] Speaker 02: It is, but this Court was examining the district court's findings that were made long before the admission. [00:10:08] Speaker 02: And so the idea that when the district court received the case on remand and it would reconsider sanctions, it would remove the default [00:10:26] Speaker 02: And then the entire case, the court would have discretion to deal with the case anew was my understanding. [00:10:38] Speaker 02: If I am wrong about that. [00:10:39] Speaker 04: But there seems to be no basis, whatever, for such an understanding. [00:10:42] Speaker 04: That's the problem. [00:10:43] Speaker 04: I mean, this seems to me to come close to making a frivolous argument. [00:10:50] Speaker 02: I really don't believe. [00:10:54] Speaker 02: I am being as honest with the court. [00:10:57] Speaker 02: I did not have an opportunity to review the law on this. [00:11:03] Speaker 02: It wasn't raised. [00:11:04] Speaker 02: Nobody has suggested until now that we were foreclosed by the prior mandate from the argument. [00:11:12] Speaker 04: I think the court suggested that it's foreclosed from addressing this because of the mandate. [00:11:22] Speaker 02: I don't know what to say. [00:11:25] Speaker 02: I did not say. [00:11:27] Speaker 04: Why don't you go on and address the other issues in the case? [00:11:32] Speaker 02: The other three issues that we did raise is on remand, this court last time I think correctly said that the trial court's findings [00:11:51] Speaker 02: that there may have been material misstatements in the record was not sufficient to support sanctions. [00:11:59] Speaker 02: On remand, we presented the admissions that did come later that the court had not previously considered and made no findings on. [00:12:07] Speaker 04: What is the point here? [00:12:08] Speaker 02: Pardon me? [00:12:09] Speaker 04: What point are you making? [00:12:10] Speaker 04: What are you directing yourself to? [00:12:12] Speaker 02: Our second issue, which is the trial court's failure to exercise discretion. [00:12:17] Speaker 02: With respect to the fraud claim? [00:12:19] Speaker 02: With respect to [00:12:21] Speaker 02: on remand with respect to the correct sanction to impose on remand. [00:12:35] Speaker 02: You're not contesting the amount of the sanctions award, right? [00:12:38] Speaker 02: We are not contesting the amount of the monetary sanctions award. [00:12:44] Speaker 02: Our argument is that that was... And you stipulated to the patented damages, right? [00:12:52] Speaker 02: After the court made this ruling, we were able to reach an agreement as to what the damages would be in light of the limitations that the court put on us as to what would be allowed at trial. [00:13:07] Speaker 02: We asked to vacate. [00:13:09] Speaker 03: On remand, the judge awarded $190,000. [00:13:14] Speaker 03: of attorney's fee sanctions, as I understand it. [00:13:17] Speaker 02: I believe it was 187. [00:13:18] Speaker 02: 187. [00:13:19] Speaker 03: So what more is it that you are seeking now beyond that 187? [00:13:26] Speaker 02: What we were asking for was that the trial court reopen the infringement case and allow us to go forward and prove as best we can, given the misconduct of the defense, [00:13:43] Speaker 02: the damages on the infringement. [00:13:46] Speaker 02: We focused on what we finally had obtained, the admission that they had been... Did you ask for further discovery on the infringement question? [00:13:57] Speaker 02: I think that was where we intended to go, but the court... But you didn't ask. [00:14:01] Speaker 02: And the court did not allow anything except the one admitted infringing [00:14:09] Speaker 04: Yeah, but did you ask the court to conduct further discovery on whether there were additional infringements? [00:14:18] Speaker 02: I don't know the answer to that. [00:14:21] Speaker 02: There was no motion where we came in and said, can we do more discovery? [00:14:29] Speaker 02: On remand, what we did do is we first asked to file a brief to explain what we thought the [00:14:37] Speaker 02: appropriate remedy on remand was. [00:14:41] Speaker 02: The trial court was apparently unaware of the remand. [00:14:46] Speaker 02: It put it over. [00:14:47] Speaker 02: Then it said it didn't need any briefing. [00:14:50] Speaker 02: It made its ruling. [00:14:52] Speaker 02: And then we filed a new motion seeking what we thought were the appropriate sanctions, given this [00:15:05] Speaker 02: evidence that had not been previously considered. [00:15:08] Speaker 02: Up to that point, the district court had just said, I'm considering whatever's on the table. [00:15:14] Speaker 03: OK, so then what specifically were those additional sanctions that you wanted beyond the $187,000? [00:15:20] Speaker 03: What did you specifically ask the court to give you beyond that? [00:15:25] Speaker 02: What we were seeking was that the trial court would I guess I'm looking for something in the JA. [00:15:31] Speaker 03: What in the JA can I look at? [00:15:34] Speaker 03: that shows me what you sought from the district court below beyond $187,000? [00:15:40] Speaker 02: It would be in the motion that we filed seeking terminating sanctions after the remand. [00:15:52] Speaker 02: What does that mean? [00:15:54] Speaker 02: That's my shorthand for what we were seeking was that the court set aside the summary judgment [00:16:03] Speaker 02: that the court reopened the infringement claim so that we could prove it as best we could, and that the... Okay, where in the J.A. [00:16:10] Speaker 03: does it say all that? [00:16:17] Speaker 02: Let me find that. [00:16:22] Speaker 02: I'm running out of time. [00:16:49] Speaker 02: I think it's around 818 of the Joint Appendix would be where our motion on that is. [00:17:25] Speaker 02: But what did you ask for? [00:17:28] Speaker 02: And what we were asking for was that the court... Let me get this right. [00:17:54] Speaker 02: We were asking for the court to vacate the summary judgment, I recall that, on fraud and infringement and let us go forward and prove the case as best we could. [00:18:10] Speaker 02: And we were also saying that given that we could now prove that for years the defense had been falsely asserting repeatedly [00:18:24] Speaker 02: What do you now prove? [00:18:25] Speaker 04: That you knew that in 2012, that there was an additional infringement. [00:18:31] Speaker 02: But that was after the district court had made the Rule 37 ruling, which we were here last time to discuss. [00:18:44] Speaker 03: Maybe on reply you'll be able to show me where in this motion for terminating sanctions you specifically asked [00:18:51] Speaker 03: to reopen your infringement claim so you could try to get more discovery for other possible infringing shipments. [00:18:58] Speaker 00: I see what you asked for on the bottom of page JA825. [00:19:04] Speaker 00: Is that helpful at all? [00:19:06] Speaker 00: Do I understand correctly that that's what you asked for? [00:19:11] Speaker 02: Yes, that's what I was looking for. [00:19:14] Speaker 02: And [00:19:22] Speaker 03: Yes, so we were we were seeking to vacate the order on summary judgment in full and then we were Based upon a fraud on the court Correct and then enter a reward of patent infringement damages of 54,000 with treble that's exactly what you got You even get the Treble, but you got to 54,000. [00:19:45] Speaker 02: Well, that's correct. [00:19:45] Speaker 04: Well someone [00:19:47] Speaker 04: I don't understand the point. [00:19:48] Speaker 04: Where did you ask to conduct further discovery to see whether there were additional damages? [00:19:54] Speaker 04: It seems to me, in this motion, you're accepting the $54,000 as the correct measure. [00:20:00] Speaker 02: Well, I don't necessarily disagree with that. [00:20:09] Speaker 02: I was mistaken. [00:20:10] Speaker 02: I remember that we were looking to reopen [00:20:17] Speaker 02: the case. [00:20:18] Speaker 02: And I had frankly forgotten that the request specifically said we'll take what was previously given. [00:20:25] Speaker 02: But we wanted on top of that the enhanced damages and the attorney's fees. [00:20:30] Speaker 02: And I apologize for missing that. [00:20:33] Speaker 02: It was my lack of preparation. [00:20:36] Speaker 02: I apologize to the court for that. [00:20:39] Speaker 04: OK. [00:20:40] Speaker 04: Well, I think we're out of time. [00:20:41] Speaker 04: We'll give you a minute for rebuttal. [00:20:43] Speaker 02: Thank you. [00:20:53] Speaker 01: Good morning. [00:20:54] Speaker 01: May it please the Court, Brooks Cooper, for Appellee Defendants Hemming and Phoenix Trading Group. [00:21:00] Speaker 01: I'd like to first add a little bit of clarity to the record just to help the Court. [00:21:04] Speaker 01: The trial court summarized exactly what it thought plaintiffs were seeking as a sanction at Appendix, Joint Appendix 34 and 35. [00:21:12] Speaker 01: That's an easy place to find that bullet pointed. [00:21:15] Speaker 01: I'd like to then address the contention that the trial court refused to consider evidence and thus never exercised discretion. [00:21:21] Speaker 03: justifying remand sanctions question i'll direct you to appendix twenty two so there was only one shipments uh... arrived after notice in june two thousand eight correct let me talk about the two shipments that were infringing and that will answer that question the answer is correct yes you can tell us now yes only one ship correct the ship you don't know of any others [00:21:48] Speaker 01: There is absolutely nothing in this record about any others. [00:21:50] Speaker 01: I personally know of no others. [00:21:53] Speaker 01: That shipment left China's shores June 23. [00:21:55] Speaker 01: It hit US shores July 8 and was released out of customs to my client on July 23. [00:22:01] Speaker 03: Or is it on your red brief then that you said that the shipment was already on the water at the time of the June 13, 2008 letter that gave your client notice? [00:22:12] Speaker 03: What does that mean that the shipment was already on the water when you're telling me it wasn't shipped until June 23rd? [00:22:18] Speaker 01: And that points out, I think, a central place where, as I've said in the Red Brief... Can you just answer it? [00:22:22] Speaker 01: Of course. [00:22:23] Speaker 01: There is nothing in your record to show when my client received that letter. [00:22:27] Speaker 03: Neither of us cite any place in... I'm asking... Look, you said, on page 16 of your brief, the shipment was already on the water at the time of June 13th. [00:22:38] Speaker 01: I'm sorry, Judge. [00:22:39] Speaker 03: Is that right, or is that wrong? [00:22:41] Speaker 01: That is not what I said, Judge, with all respect. [00:22:43] Speaker 03: Okay. [00:22:44] Speaker 03: What I said was... There is no question, but that Phoenix had knowledge of the existence of Patton at the time of the final shipment of Harald. [00:22:52] Speaker 03: But that shipment was already on the water at the time of the June 13, 2008 letter that gave them notice. [00:23:00] Speaker 03: At the time the letter... That's your... [00:23:02] Speaker 03: red brief at page 16. [00:23:04] Speaker 03: Correct. [00:23:04] Speaker 03: Am I wrong? [00:23:04] Speaker 03: Did I misread that? [00:23:06] Speaker 01: You did not. [00:23:07] Speaker 03: At the time my client... Then why did you say that that's not what you said? [00:23:11] Speaker 01: I said at the time my client received that notice from the letter that was written on June 13, the shipment was on the water. [00:23:17] Speaker 01: That is different than the shipment being on the water on June 13. [00:23:20] Speaker 01: That statement is not true. [00:23:22] Speaker 03: What? [00:23:22] Speaker 03: When you said that shipment was already on the water at the time of the June 13, 2008 letter? [00:23:28] Speaker 01: That is inartful drafting by me. [00:23:30] Speaker 01: I should have said at the time of my client's receipt of the letter, and that is bad drafting on my part. [00:23:35] Speaker 01: Because at the time of the letter, the shipment was not on the water. [00:23:38] Speaker 01: The day it was penned and the day it was signed, it wasn't. [00:23:40] Speaker 01: The record is clear in that regard. [00:23:46] Speaker 01: What I intended to say was, at the time my client learned of that from the letter that was issued on June 13, the shipment was on the water. [00:23:54] Speaker 01: She could do nothing other than do what she did, which is receive it, she can't turn the boat around, and put it in her warehouse because she knows that further use of that in commerce is further infringement. [00:24:04] Speaker 01: It's already an infringement when it hits the shores, which is why those brushes sat in her warehouse until the trial court ordered their donation. [00:24:15] Speaker 01: May I go on? [00:24:17] Speaker 03: It's your time. [00:24:18] Speaker 01: Thank you. [00:24:20] Speaker 01: I'd like to address the question of exemplary damages and attorney fees arising out of the trial. [00:24:25] Speaker 01: And I would point out what is uncontradicted on the record. [00:24:29] Speaker 01: The party stipulated that the finding of damages from the default damage hearing where the trial court heard evidence from experts, the $54,000, would be the measure of damage at trial. [00:24:39] Speaker 01: Defendant did not contest that there were two infringing importations, one of which was sold to New York, completed, she received the money, one of which we just discussed sat in her warehouse. [00:24:49] Speaker 01: Defendant did not contest that each of those were infringements. [00:24:53] Speaker 01: She did not oppose any of that. [00:24:56] Speaker 01: Further, Defendant herself, prior to this trial, had moved for the imposition of a permanent injunction against Defendant. [00:25:03] Speaker 01: The plaintiff believes Defendant continued and perhaps believes she continues today. [00:25:08] Speaker 01: to continue to infringe the patent. [00:25:10] Speaker 01: For that reason, to give plaintiff as much surety as the Court can, she said, please enjoin me. [00:25:14] Speaker 01: I won't do it again. [00:25:16] Speaker 01: The trial court saw her testify and listened to her testify, and this is Appendix 1021. [00:25:21] Speaker 01: And the trial court specifically found that her testimony was credible. [00:25:25] Speaker 01: That is the record that brings you here today. [00:25:27] Speaker 01: I don't see how that can be squared with the cases telling you that exemplary damages and attorney fee shifts happen [00:25:34] Speaker 01: in egregious and willful cases where the conduct of the infringer is like a pirate. [00:25:38] Speaker 01: What we have here is someone who, from the testimony in your record, intended to stop infringing what would be an issued patent when the patent issued. [00:25:47] Speaker 01: And that's why she didn't sell the final shipment. [00:25:50] Speaker 01: She just didn't learn of it, and that is her fault, when the patent issues. [00:25:53] Speaker 01: It was on the Federal Register. [00:25:55] Speaker 01: Everyone has constructed notice. [00:25:56] Speaker 01: She made two infringing shipments, and then she stopped. [00:25:59] Speaker 01: And she did what she could to resolve this timely and appropriately. [00:26:03] Speaker 01: This is not a case for exemplary damages or attorney fees. [00:26:07] Speaker 01: On the terminating sanctions, on the sanctions motion, plaintiff put everything it wanted to in the record to ask for the relief it sought. [00:26:15] Speaker 01: The trial court at Appendix 23 said that it had considered all of that. [00:26:18] Speaker 01: That is a trial court's exercise of its discretion. [00:26:21] Speaker 01: And the decision to say not good enough motion denied is one well within the trial court's discretion, which I would ask you to affirm. [00:26:29] Speaker 01: Final point, unless this panel has any other questions from me. [00:26:32] Speaker 01: I did not see the procedural argument you, Judge Vindike, have identified on the fraud claim. [00:26:37] Speaker 01: This record is procedurally a bit twisty. [00:26:41] Speaker 01: I'm not going to address that, because I didn't raise it. [00:26:43] Speaker 01: But as to the fraud claim, I will tell you that I believe Washington state law correctly supports the summary judgment. [00:26:49] Speaker 01: Clearly, there's another basis for affirmance if you choose to follow the questioning that you outlined with the Appellants' Council. [00:26:55] Speaker 01: Unless this court has any other questions, I would just be listening to myself talk. [00:26:59] Speaker 01: Thank you, Mr. Vindike. [00:27:00] Speaker 01: Thank you, Judge. [00:27:06] Speaker 02: On the question of did we request further discovery on remand, we did not and the reason for that is that through the years of the litigation we had gone as far as we could go and that was why the [00:27:33] Speaker 02: relief was fashioned the way it was. [00:27:36] Speaker 02: And I apologize for not having that information right off the top of my head. [00:27:41] Speaker 02: With that, if the court has any other question or concern for me, I'm happy to address it. [00:27:49] Speaker 04: Okay. [00:27:49] Speaker 04: Thank you, Mr. Hogan. [00:27:50] Speaker 04: Thank both counsel, the case is submitted. [00:27:52] Speaker 04: Thank you.