Offer of judgment providing full recovery mooted case, preventing opinion regarding spoliationMay 1, 2008

In a decision Tuesday, the Federal Circuit vacated a district court's order denying a declaratory judgment plaintiff attorney fees, but including a scathing description of alleged spoliation by the patentee/DJ defendant. The Federal Circuit held that the district court's decision was an improper advisory opinion, and therefore vacated with instructions to dismiss.The patentee, before bringing suit against several defendants, shredded over two million documents on what it called "shred day." In an effort to avoid having a formal court opinion holding it had engaged in spoliation, the patentee offered to pay the DJ plaintiff's full attorneys' fees in the litigation, and provided an offer of judgment under Rule 68. The plaintiff declined, and ultimately the court did not award attorney fees, but issued the spoliation order anyway. On appeal, the Federal Circuit held that when a party essentially "throws in the towel," there is nothing left for the court to decide and therefore no jurisdiction exists. In this case, the Federal Circuit determined that as soon as attorneys' fees were offered by a party, the case became moot and the trial court lacked any further jurisdiction to hear it or determine issues. As a result, the order regarding spoliation was vacated.More on Samsung Elecs. Co. v. Rambus, Inc. after the jump.The present suit originated when Rambus filed a complaint alleging patent infringement against Samsung in the Northern District of California. The following day, Samsung filed a declaratory judgment action in the Eastern District of Virginia, requesting a declaration that the same patents were invalid, unenforceable, and not infringed. The four patents at issue were involved in a related litigation between Rambus and Infineon, including a trial where the district court heard arguments regarding the spoliation of evidence. It was determined that Rambus had "unclean hands" due to spoliation of evidence, based on its shredding of 2 million documents shortly before commencing its infringement suits. In the related case, Rambus quickly settled with Infineon and the case was properly dismissed before an order regarding spoliation could be issued. It was five months from the date of this settlement that Rambus filed suit against Samsung, and Samsung subsequently filed the declaratory judgment action.Meanwhile, Rambus had brought suit against Hynix in the Northern District of California and a similar analysis into the spoliation of evidence was heard by the court. Based on these related litigations and the prospect of having a court rule it had engaged in spoliation, Rambus eventually filed a covenant not to sue Samsung on the patents at issue, voluntarily dismissed its infringement counterclaims, and had made an offer of judgment under Rule 68 to pay Samsung's requested attorneys' fees; however Samsung did not accept the offer for full relief and instead pursued its claim for attorneys' fees with the court. As a result, the Virginia district court dismissed the case, but retained jurisdiction to determine whether Samsung should be awarded fees under § 285. Ultimately, the court found the case exceptional, but did not award fees. However, as part of its order denying fees, the court issued the previously unreleased spoliation findings from the Infineon litigation.Rambus appealed the district court's order denying Samsung's attorney's fees request because the court had simultaneously entered findings adverse to Rambus relating to the spoliation of evidence. On appeal, Rambus requested the court to find the district court lacked subject matter jurisdiction under Article III, as there was no "case or controversy" once it offered to pay Samsung's requested fees in full. Therefore, the Federal Circuit was presented with the question as to whether Rambus' offer to pay Samsung's attorneys' fees rendered the case moot, so that the district court did not have jurisdiction to enter the orders relating to attorneys' fees and the spoliation of evidence.The court held the case was mooted by the offer of full judgment. Quoting a Seventh Circuit case, the court observed that a party "can't persist in suing when you have actually won." Here, the offer of judgment in the full amount sought would have given Samsung all it had asked for: its full attorneys' fees. As a result, the case was mooted, and no further case or controversy existed, divesting the district court of subject matter jurisdiction.This was not a situation where the remaining issue was a collateral issue, such as one of imposing sanctions or a finding of contempt. Here, the attorney fee issue was under § 285, which is not a "separate sanctions statute," so it could not grant the district court continuing jurisdiction over the issue. As a result, the Federal Circuit held the district court lacked subject matter jurisdiction and therefore should not have made a determination of attorney's fees after a matter was complete. Similarly, as the district court lacked jurisdiction to determine the attorneys' fees motion it also lacked jurisdiction to provide a ruling on the spoliation of evidence issue. This rendered the opinion on spoliation an impermissible advisory opinion. As a result of both issues, the court vacated the order of the district court that denied Samsung's application for attorneys' fees and entered findings related to the spoliation of evidence, as both were issued without jurisdiction.To read the full decision in Samsung Elecs. Co. v. Rambus, Inc., click here.

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