Thursday, June 23, 2022

Federal Circuit Vacates $2.75 Billion Verdict Against Cisco

Here is the opinion in Centripetal Systems, Inc. v. Cisco Systems, Inc., Judge Dyk writing for the panel.  Without going into greater detail than necessary here, the district judge discovered that his wife owned stock in Cisco after having drafted an opinion in this bench trial but before having finalized it.  He thereafter entered judgment against Cisco in the amount of $2.75 billion, which included an enhancement for willful infringement.  The judge and his wife had put the stock into a blind trust after learning of her ownership, and the judge had expressed concern that if the family sold the stock after his having indicated that he might award Centripetal enhanced damages, that in itself would “'would defeat the very purpose of the Rules,' implying concern about insider trading" (p.6).

The Federal Circuit nevertheless concludes that, under the applicable federal statute, "the district court judge was disqualified from hearing the case once he became aware of his wife’s ownership of Cisco stock on August 11, 2020" (p.2).  The fact that the judge entered judgment against Cisco doesn't matter, says the court:  "Where a judge becomes aware of a possible appearance of impropriety, there is a substantial risk that he or she might bend over backwards to rule against that party to try to prove that there is no bias" (p.23). (The court also disagrees on the insider trading point, see p.14 n.9.)  The court therefore "reverse[s] the Opinion & Order denying Cisco’s Motion for Miscellaneous Relief (ECF No. 619), see Recusal Op., 492 F. Supp. 3d 615, we vacate the Opinion & Order re Infringement and Damages (ECF No. 621), see Merits Op., 492 F. Supp. 3d 495, and the Opinion & Order Denying Post-Judgment Motions & Declaring the Case Final (ECF No. 638), and remand[s] for further proceedings before a newly appointed judge, who shall decide the case without regard for the vacated opinions and orders" (p.27).  

The court also notes at the end of the opinion that the district judge died last month.  Judge Morgan, a graduate of Washington & Lee Law School, was 87.

For further discussion, see this story on Bloomberg Law.

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