Centrip v. Cisco Sys., Inc.

• Decision Date: 02 October 2020
• Docket Number: Civil Action No. 2:18cv94
• Citation: 492 F.Supp.3d 615
• Court: U.S. District Court — Eastern District of Virginia
• Parties: CENTRIPETAL NETWORKS, INC., Plaintiff, v. CISCO SYSTEMS, INC., Defendant.

492 F.Supp.3d 615

CENTRIPETAL NETWORKS, INC., Plaintiff,

v.CISCO SYSTEMS, INC., Defendant.

Civil Action No. 2:18cv94

United States District Court, E.D. Virginia, Norfolk Division.

Signed October 2, 2020

Jeffery Thomas Martin, Jr., Kevin Martin O'Donnell, Henry & O'Donnell, P.C., Alexandria, VA, Stephen Edward Noona, Kaufman & Canoles, P.C., Norfolk, VA, Aaron Mark Frankel, Pro Hac Vice, Cristina Lynn Martinez, Pro Hac Vice, Eileen Patt, Pro Hac Vice, Jeffrey Eng, Pro Hac Vice, Jonathan Caplan, Pro Hac Vice, Julian Pymento, Pro Hac Vice, Shannon Hannah Hedvat, Pro Hac Vice, Kramer Levin Naftalis & Frankel LLP, New York, NY, Gregory Carl Proctor, Pro Hac Vice, Hannah Yunkyung Lee, Pro Hac Vice, Hien Khanh Lien, Pro Hac Vice, James Russell Hannah, Pro Hac Vice, Kristopher Benjamin Kastens, Pro Hac Vice, Linjun Xu, Pro Hac Vice, Lisa Kobialka, Pro Hac Vice, Melissa Theresa Giorgi Brenner, Pro Hac Vice, Michael Hao Lee, Pro Hac Vice, Paul Joseph Andre, Pro Hac Vice, Phuong Diem Nguyen, Pro Hac Vice, Yuridia Caire, Pro Hac Vice, Kramer Levin Naftalis & Frankel LLP, Menlo Park, CA, for Plaintiff.

Dabney Jefferson Carr, IV, Troutman Pepper Hamilton Sanders LLP, Richmond, VA, Neil Harvey MacBride, Davis Polk & Wardwell LLP, Christopher Joseph Tyson, John Matthew Baird, Kevin Paul Anderson, Duane Morris LLP, Heath Brooks, Pro Hac Vice, Wilmer Hale LLP, Washington, DC, Christopher Joseph Letkewicz, Pro Hac Vice, Joel Erik Connolly, Pro Hac Vice, Benesch, Friedlander, Coplan & Aronoff LLP, Chicago, IL, James Youngmin Park, Pro Hac Vice, Davis Polk & Wardwell LLP, New York, NY, Jennifer H. Forte, Pro Hac Vice, Louis Norwood Jameson, Pro Hac Vice, Matthew Christopher Gaudet, Pro Hac Vice, John Robert Gibson, Duane Morris LLP, Atlanta, GA, Joseph A. Powers, Pro Hac Vice, Duane Morris LLP, Philadelphia, PA, Mark Christopher Fleming, Pro Hac Vice, Wilmer Cutler Pickering Hale & Dorr LLP, Boston, MA, Micah Galvin Block, Pro Hac Vice, Davis Polk & Wardwell LLP, Menlo Park, CA, Nicole Elizabeth Johnson, Pro Hac Vice, Duane Morris LLP, Palo Alto, CA, for Defendant.

OPINION AND ORDER

Henry Coke Morgan, Jr., Senior United States District Judge This matter is before the Court on Cisco Systems, Inc.’s, ("Cisco") Motion for Miscellaneous Relief. In its motion, Cisco argues that recusal is mandatory under 28 U.S.C § 455(a) and (b)(4).

I. BACKGROUND

While presiding over this case, the Court has made Cisco and Centripetal's counsel aware of any possible conflict. The first disclosure came on March 2, 2020, where the Court's former law clerk, Neil McBride, entered the case on behalf of Cisco. The Court promptly notified the parties and disclosed that the Court had "visited Neil's home and he has visited mine and we have had family dinners together many times over the years." Counsel for both parties responded that recusal was not necessary as a result of Mr. McBride's representation of Cisco. Next, during the pre-trial conference, the Court disclosed that it had purchased 200 shares of Zoom stock based on a recommendation by a service over the internet. At that time, neither party objected to the ownership of Zoom stock. Thereafter, the Court conducted a bench trial "spanning nearly eight weeks over Zoom, producing a 3,507-page record with twenty-six witnesses and over 300 exhibits." Doc. 564 at 2. As a result of an enormous variation in damages calculations by the opposing damages experts, the Court request additional data relevant to damages and after receipt of this information the Court heard final arguments on June 25, 2020.

On August 11, 2020, the Court's administrative assistant discovered during preparation of the Court's judicial financial disclosure reporting that the Court's spouse owned 100 shares of Cisco stock valued at $4,687.99 and advised the Court. The Court promptly investigated the issue and confirmed that the shares were purchased as a result of her brokers recommendation. The Court's spouse had no independent recollection of approving the transaction. The next day, August 12, 2020, the Court disclosed the existence of the shares to the parties. See Court's Email to Counsel [Attached as Ex. One]. The Court detailed that "full draft of my opinion had been prepared before I received this information yesterday. Virtually every issue was decided prior thereto." Id. Also explaining that the shares "did not and could not have influenced my opinion on any of the issues in this case." Id. Centripetal quickly notified the Court that it had no objection based on the representations by the Court. Cisco responded, nine days later, by filing the instant motion for recusal. The Court ordered a response by Centripetal, if they be so advised. Centripetal responded by objecting to Cisco's motion and Cisco filed a rebuttal brief. The Court conducted a hearing on the motion and heard oral argument on September 9, 2020. At the hearing, the Court informed the parties that he had discussed the issue with his spouse and, as a result, the Court contacted their personal attorney to request the creation of a blind trust to divest the shares. The Court provided the completed trust documents to the parties at the hearing

Moreover, at the hearing on Cisco's current motion, the Court disclosed a previous purchase by the Court and his spouse of 100 shares each of Crowdstrike stock. Similar, to Zoom, Crowdstrike was purchased on the basis of a recommendation of an internet service. The Court later discovered that Crowdstrike primarily engaged in the business of developing cybersecurity technology and had a previous intelligence sharing agreement with Centripetal. See PTX-1600. After learning of this information, the Court and his spouse divested their shares in Crowdstrike. Due to the indirect nature of Crowdstrike as a potential competitor of both parties, the Court did not disclose this transaction until the hearing date.

II. LEGAL STANDARD AND ANALYSIS

28 U.S.C § 455(a) requires that a judge of the United States "shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned." 28 U.S.C. § 455(a). The next section of the statute, 455(b) lays out specific circumstances where recusal is required. Section 455(b)(4) lays out one of these circumstances at issue here where:

He knows that he, individually or as a fiduciary, or his spouse or minor child residing in his household, has a financial interest in the subject matter in controversy or in a party to the proceeding, or any other interest that could be substantially affected by the outcome of the proceeding

28 U.S.C § 455(b)(4) (emphasis added). In its rebuttal brief, Cisco argues that the Court should have immediately recused itself and it should not have been required to file its initial motion to recuse.

Under section 455, "[a] judge is as much obliged not to recuse himself when it is not called for as he is obliged to when it is." Muchnick v. Thomson Corp. (In re Literary Works in Elec. Databases Copyright Litig.), 509 F.3d 136, 140 (2d Cir. 2007). Therefore, in deciding a motion for recusal under section 455, judges "must balance our duty to appear impartial against several practical considerations, including the availability of other judges, the cost in judicial resources of recusal and reassignment of the case to different judges, and the interest of the parties and the public in a swift resolution of the dispute." Id. (citation omitted).

In analyzing section 455, the Supreme Court in Liljeberg v. Health Services Acquisition Corp., held that scienter is not a requirement of 455(a), but is a requirement of 455(b)(4). Liljeberg v. Health Services Acq. Corp., 486 U.S. 847, 859, 108 S.Ct. 2194, 100 L.Ed.2d 855 (1988). Therefore, recusal under section 455(b)(4) imposes "actual knowledge" of the disqualifying financial interest. C. Tel. Co. of Virginia v. Sprint Commun. Co. of Virginia. Inc., No. 3:09CV720, 2011 WL 6178652, at *5 (E.D. Va. Dec. 12, 2011) (collecting cases imposing the "actual knowledge" test), aff'd, 715 F.3d 501 (4th Cir. 2013) (on other grounds). However, the test for recusal under section 455(a), is "when a reasonable person, knowing the relevant facts, would expect that a justice, judge, or magistrate knew of circumstances creating an appearance of partiality." Id. at *7 (quoting Liljeberg, 486 U.S. at 850, 108 S.Ct. 2194 ). Therefore, for section 455(a), "recusal is required even when a judge lacks actual knowledge of the facts indicating his interest or bias in the case if a reasonable person, knowing all the circumstances, would expect that the judge would have actual knowledge." Liljeberg, 486 U.S. at 860-61, 108 S.Ct. 2194. The Court will first address recusal under 455(a) and then turn to 455(b)(4).

i. Section 455(a)

The Second Circuit, in Chase Manhattan explained that disqualification is required when "(i) a reasonable person, knowing all the facts, would conclude that the judge has a disqualifying interest in a party under Section 455(b)(4), and (ii) such a person would also conclude that the judge knew of that interest yet heard the case." Chase Manhattan Bank, 343 F.3d at 128. Accordingly, recusal under section 455(a) is an objective test looking at "what a reasonable person knowing all the facts would conclude." C. Tel. Co. of Virginia, 2011 WL 6178652, at *7 (quoting Chase Manhattan Bank v. Affiliated FM Ins. Co., 343 F.3d 120, 127 (2d Cir. 2003) ).

Cisco, in its motion for recusal, contends that in light of "the Court's decision to order it to trial in unusual circumstances, and its featuring as a topic of marital conversation, a reasonable observer is likely to conclude that, at the very least, the Court ‘should have known’ of the ownership of Cisco stock when the purchase occurred in October 2019 ...." Doc. 557 at 8. Moreover, Cisco avers that the requirement of a judge to take "reasonable efforts inform himself about the personal financial interests of his spouse" under section 455(c) would have allowed the Court to uncover...