IA Labs Ca, LLC v. Nintendo Co.

Decision Date23 April 2013
Docket NumberCivil No. PJM 10–833.
Citation946 F.Supp.2d 429
PartiesIA LABS CA, LLC, Plaintiff, v. NINTENDO CO., LTD., et al., Defendants.
CourtU.S. District Court — District of Maryland

OPINION TEXT STARTS HERE

Robert Scott Brennen, Katherine B. Hill, Miles and Stockbridge PC, Baltimore, MD, Adam G. Price, Andrew G. DiNovo, Jay David Ellwanger, Raymond W. Mort, III, Stefanie T. Scott, DiNovo, Price, Ellwanger and Hardy LLP, Austin, TX, John Minh Tran, DiMuro Ginsberg PC, Alexandria, VA, for Plaintiff.

Marie Celeste Bruce, Rifkin, Livingston, Levintan and Silver LLC, Bethesda, MD, Terrance Jay Wikberg, C. Mark Kettredge, Jerry A. Riedinger, Jessica Lynn Rossman, Steven R. Stark, Tyler C. Peterson, Vincent Ajay Sing, Perkins Coie LLP, Washington, DC, for Defendants.

MEMORANDUM OPINION

PETER J. MESSITTE, District Judge.

The background of this patent infringement case has been laid out in two prior opinions. See IA Labs CA, LLC v. Nintendo Co., Ltd., 863 F.Supp.2d 430 (D.Md.2012); IA Labs CA, LLC v. Nintendo Co., Ltd., 2012 WL 1565296 (D.Md. May 1, 2012). IA Labs CA, LLC (IA Labs) sued Nintendo Co., Ltd. and Nintendo of America, Inc. (collectively, Nintendo) for infringement of two patents. The Court granted Nintendo's motion for summary judgment, finding that there was no infringement as a matter of law. IA Labs, 863 F.Supp.2d at 433. Nintendo then moved for attorneys' fees on the ground that IA Labs had brought one of its two infringement claims in bad faith and without a reasonable basis. IA Labs, 2012 WL 1565296, at *2. The Court agreed and entered judgment against IA Labs in the amount of $218,159.25 in attorneys' fees and $17,924.82 in litigation expenses, for a total award of $236,084.07. Id. at *4. IA Labs noted an appeal to the United States Court of Appeals for the Federal Circuit, and filed a Motion for Stay of Execution of Judgment Pending Appeal and to Post Alternate Security (Paper No. 396). Nintendo opposed the Motion and, at a minimum, sought limited discovery to determine whether IA Labs in fact had the wherewithal to post bond. The Court permitted Nintendo to take discovery, following which the parties filed supplemental briefs. The Court orally advised the parties that it had DENIED IA Labs' Motion, indicating that a written opinion would follow. Here, then, is that Opinion.

The specific issue currently before the Court is whether IA Labs may be excused from posting a supersedeas bond or be permitted to post some alternative bond. It may avail itself of neither.

As a rule, an appeal does not automatically stay a judgment, but an appellant may obtain a stay of the judgment by posting supersedeas bond. Fed.R.Civ.P. 62(d). The requirement of posting bond performs two functions: first, it protects the prevailing party “against any loss sustained as a result of being forced to forgo execution on a judgment during the course of an ineffectual appeal”; and second, it gives the losing party the option of avoiding “the risk of satisfying the judgment only to find that restitution is impossible after reversal on appeal.” Poplar Grove Planting and Refining Co., Inc. v. Bache Halsey Stuart, Inc., 600 F.2d 1189 (5th Cir.1979). “Unless otherwise ordered by the Court, the amount of any supersedeas bond filed to stay execution of a money judgment pending appeal shall be 120% of the amount of the judgment plus an additional $500 to cover costs on appeal.” Local Rule 110( l )(a). In some cases, courts may excuse the requirement of posting bond and stay execution of a judgment. The Federal Rules of Appellate Procedure specifically authorize parties to move for “a stay of the judgment or order of a district court pending appeal.” Fed. R.App. P. 8(a)(1)(A). A party may make that request in the district court, and may only request a stay from the circuit court once the request was made in the district court, unless the movant can make a showing “that moving first in the district court would be impracticable.” Id.;S.E.C. v. Dunlap, 253 F.3d 768, 774 (4th Cir.2001).

Rather than post bond consistent with the requirements of Rule 62 and Local Rule 110, IA Labs has requested the Court stay the judgment pending appeal without bond or permit it to post its patents as alternative security. It argues that posting a full bond would render it insolvent, relying on Poplar Grove for the proposition that a court may excuse the requirement to post bond or permit an alternative if posting full bond “would impose an undue financial burden.” Id. at 1191.

Unconvinced by IA Labs' representations regarding its inability to post bond, Nintendo filed a Motion for Leave to Take Expedited Limited Discovery in Preparation of its Response to IA Labs' Motion for Stay of Execution of Judgment Pending Appeal (Paper No. 400). The Court granted Nintendo's Motion and deferred ruling on IA Labs' Motion pending completion of limited discovery. With discovery complete, Nintendo filed its opposition to IA Labs' Motion.

The Court rejects IA Labs' request for two reasons. First, IA Labs points to no Fourth Circuit case authorizing a district court to stay a judgment in lieu of posting supersedeas bond on the ground of “undue financial burden.” Indeed, a review of the relevant case law suggests that in the more than 30 years since the Fifth Circuit's decision, the Fourth Circuit has never adopted the reasoning of Poplar Grove. This Court is not prepared to chart a new course in this circuit, especially given the Fourth Circuit's longstanding silence on this issue.1

Second, assuming that Poplar Grove is authoritative, IA Labs has failed to meet its burden of establishing that its “financial condition is so impaired that it would have difficulty in securing a supersedeas bond in an amount sufficient to fully protect the rights” Nintendo acquired against it. Id. True, IA Labs provided balance sheets that indicate that it has almost no assets. By itself, however, that is not enough to establish an undue financial burden, otherwise every plaintiff lacking assets sufficient to obtain a bond would be excused from the requirement. IA Labs, it turns out, has access to other resources.

The deposition testimony taken during limited discovery revealed that IA Labs' patent litigation against Nintendo is being funded by a third-party litigation financier, a private equity fund. The consequence is that IA Labs has deliberately structured itself so that it could draw on sources of revenue from its financier when its litigation against Nintendo looked profitable, but made itself effectively judgment-proof—and supposedly incapable of posting bond—in the event of a successful counter-claim or award of attorneys' fees against it. The ethics of this...

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2 cases
  • U.S. Home Corp. v. Settlers Crossing, LLC, Civil Action No. DKC 08-1863
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Maryland)
    • June 29, 2015
    ...a motion to alter that amount before the Court grants the stay.").8 As noted by Judge Messitte in IA Labs CA, LLC v. Nintendo Co., 946 F.Supp.2d 429, 430 (D.Md. 2013), "[t]he requirement of posting bond performs two functions: first, it protects the prevailing party 'against any loss sustai......
  • Profiles, Inc. v. Bank of Am. Corp.
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Maryland)
    • April 17, 2020
    ...the Court will not enter a stay pending appeal, Plaintiffs are not required to provide a bond. See IA Labs Ca, LLC v. Nintendo Co., Ltd., 946 F. Supp. 2d 429, 430-31 (D. Md. 2013) (explaining the purposes of a supersedeas bond under Fed. R. Civ. P. 62(d)); see also Fed. R. Civ. P. 65(c) ("T......

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