The Federal Circuit held that a global settlement of all issues in a case, including mutual release which was joined by the attorneys, divested the court of jurisdiction of an appeal by the attorneys of judicial reprimands in connection with sanctions that were issued against their client. During the underlying litigation, issues arose as to whether certain brochures existed that would potentially invalidate the patents at issue. The attorneys represented to the court that they had spoken with two former employees who communicated that the brochures at issue did not show the patented invention, thereby allegedly excusing the failure to produce the brochures. As a result, the district court reversed the burden of proof on the issue of invalidity and the jury found in favor of the patentee. Following the verdict, the court allowed discovery into the brochure and the defendant deposed the two former employees. Their testimony refuted, however, refuted the attorneys’ representations at trial. The district court then sua sponte dismissed the case with prejudice under the court’s inherent authority based on the inaccurate representations during trial.
The attorneys appealed, claiming that: (1) the statements made in the district court’s opinions constitute a sanction against the attorneys and specifically caused reputational harm, (2) the court erred by issuing sanctions without giving them notice and an opportunity to be heard, and (3) on the merits, the attorney had not acted with bad faith, because they relied on one of the witness’ statements and that witness was equivocal during his deposition.
The Federal Circuit held that the settlement divested the court of jurisdiction to hear an appeal by the attorneys of statements made in connection with sanctions against a party. The court held that, once the settlement was entered, no party, except the attorneys had any enduring interest in the underlying order dismissing the case and the sanctions were against the party, not the attorneys. Therefore, no Article III case or controversy exists.
In her dissent, Judge Newman argued that the precedent from this and other circuits allowed the attorneys to seek appellate review of their sanctions even after a settlement.
Tesco Corp. v. National Oilwell Varco, L.P., Case No. 2015-1041 (October 30, 2015); Opinion by: O’Malley, joined by Chen; dissent by Newman; Appealed From: District Court for the Southern District of Texas, Ellison, J. Read the full opinion here.