United States: Separated At The District Court, Possibly Reunited On Appeal

Defendants Are Reunited Notwithstanding Plaintiff's Attempts To Keep Them Apart:  Order Denying Plaintiff's Motion to Stay and Granting Defendant's Motion for Summary Judgment, Emmanuel Gonzalez v. Tagged, Inc., Case No. 16-cv-00574 (Judge Yvonne Gonzalez Rogers)

In Shakespeare's The Comedy of Errors, twin brothers are separated at birth and reunited under amusing and confused circumstances many years later.

The scenario probably seems oddly familiar to plaintiff Emmanuel Gonzalez who, after stops in both Marshall, Texas and San Francisco, California, may be making a trip straight to the Howard Taft courthouse in Washington, D.C. sooner than expected in order to witness two defendants reunited under procedural circumstances he no doubt did not anticipate.

Plaintiff Emmanuel Gonzalez brought two patent infringement cases in the Eastern District of Texas in 2014. In a carefully timed series of events, defendant Tagged first filed a motion to transfer to the Northern District of California. After winning the transfer order on September 22, 2015, but before that case actually was administratively transferred, Tagged and the remaining Eastern District of Texas defendant—New Life Ventures ("NLV")—then filed a joint motion for summary judgment of invalidity under 35 U.S.C. § 101 of the six claims at issue. Things were not looking good for that § 101 motion when Magistrate Judge Payne in February 2016 recommended its denial. New Life objected to the recommendation, but in the interim, Tagged's claims were transferred to the Northern District of California. Then, on April 26, 2016, Eastern District of Texas Judge Rodney Gilstrap vacated Judge Payne's report and recommendation. Judge Gilstrap concluded that NLV was correct that the asserted patents were invalid for failing to claim patent eligible subject matter.

Here in San Francisco, the transferred case waited patiently until the plaintiff Gonzales moved for a stay of Tagged's case on the same day he lost the motion for summary judgment in Texas. Gonzalez asked that this case be stayed and remain in San Francisco pending his appeal to the Federal Circuit of the Eastern District of Texas order granting NLV summary judgment. Judge Yvonne Gonzalez Rogers roundly rejected that suggestion, however, noting that the Texas order was entitled to preclusive effect and also that Tagged would be entitled to judgment immediately. Judge Rogers acknowledged that under Supreme Court precedent, where separate proceedings are necessarily controlling of the action before court, a district court may, with propriety, find it is efficient for its own docket and the fairest course for the parties to enter a stay of an action before it, pending resolution of the other proceedings. One reason a Court might choose to do so is to control its own docket so that a just and speedy resolution of the case may be reached. And in making such a determination, the District Court may consider three factors:  (1) the stage of the case; (2) whether a stay will simplify the issues in question and trial of the case; and (3) whether a stay would unduly prejudice or present a clear tactical disadvantage of the non-moving party.

Here, Judge Rogers determined with respect to the first factor that the advanced stage of the case, including the fact it already had been pending for 18 months, weighed against a stay. The parties had engaged in discovery and filed motions for summary judgment. Moreover, the summary judgment ruling in the Eastern District of Texas served as final judgment for purposes of the application of res judicata and collateral estoppel, notwithstanding the pendency of an appeal to the Federal Circuit.

As to the second factor, Judge Rogers disagreed that a stay would simplify issues. The District Court could at any time apply collateral estoppel or res judicata to the Eastern District of Texas ruling, whereas a stay would prevent any appeal from judgment in Tagged's case from being consolidated with Gonzalez's appeal of the Eastern District of Texas ruling.

Finally, with respect to the third factor, Judge Rogers found that the potential prejudice to Tagged further weighed against a stay. A stay would prevent Tagged from participating in the appeal at the Federal Circuit. Judge Rogers rebuffed Gonzalez's suggestion that because the same counsel represented the defendants in the Texas and California matters, Tagged would not be prejudiced by staying its case, noting that Tagged "is entitled to present its own arguments on appeal regardless of its shared legal representation." And further, a stay would prevent Tagged from bringing a motion for attorney fees until after resolution of the Federal Circuit ruling. Moreover, Gonzalez would not be prejudiced in the absence of a stay, since he could appeal any Section 101 ruling by Judge Rogers, or seek later to vacate it pursuant to Federal Rule of Civil Procedure 60(b)(5).

Not surprisingly, having determined that a stay was not warranted, Judge Rogers proceeded to apply collateral estoppel and found the relevant claims invalid under Section 101. She elected not to address Tagged's independent argument that the claims were invalid under Section 102. Given this tortured route to the Federal Circuit of two actions originally filed together, Gonzalez might find strange wisdom in one of the more famous quotes from The Comedy of Errors: "Since mine own doors refuse to entertain me, I'll knock elsewhere, to see if they'll disdain me."

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