Chandler v. Phx. Servs.
| Decision Date | 13 April 2020 |
| Docket Number | Civil Action No. 7:19-cv-00014-O |
| Parties | RONALD CHANDLER, et al., Plaintiffs, v. PHOENIX SERVICES, et al., Defendants. |
| Court | U.S. District Court — Northern District of Texas |
Before the Court are Plaintiffs Ronald Chandler's, Chandler Manufacturing, LLC's, Newco Enterprises, LLC's, and Supertherm Heating Services, LLC's (collectively, the "Chandler Plaintiffs") Motion for Partial Summary Judgment, Brief in Support, and Appendix in Support (ECF Nos. 61-63), filed February 13, 2020; Defendants Phoenix Services, LLC's and Mark H. Fisher's (collectively, the "Phoenix Defendants") Response, Brief in Support, and Appendix in Support (ECF Nos. 67-69), filed March 5, 2020; and the Chandler Plaintiffs' Reply (ECF No. 73), filed March 14, 2020. Also before the Court are the Phoenix Defendants' Motion for Summary Judgment, Brief in Support, and Appendix in Support (ECF Nos. 64-66), filed February 14, 2020; the Chandler Plaintiffs' Response, Brief in Support, and Appendix in Support (ECF Nos. 70-72), filed March 6, 2020; and the Phoenix Defendants' Reply and Appendix in Support (ECF Nos. 74-75), filed March 20, 2020. Having considered the motions, briefing, and applicable law, the Court DENIES the Chandler Plaintiffs' Motion for Partial Summary Judgment and GRANTS the Phoenix Defendants' Motion for Summary Judgment.1
The Chandler Plaintiffs do not have standing to bring their claims against the Phoenix Defendants. Moreover, the Chandler Plaintiffs' claims are barred by the Clayton Act's four-year statute of limitations, and no exception applies to toll the limitations period. Finally, the Chandler Plaintiffs cannot establish Phoenix's or Fisher's liability for HOTF's allegedly anticompetitive conduct. Accordingly, the Chandler Plaintiffs' claims for Walker Process fraud and sham patent litigation are DISMISSED with prejudice.
After years of litigation regarding the validity and enforcement of United States Patent No. 8,171,993 (the "'993 Patent"), the Federal Circuit affirmed the District of North Dakota's finding that the '993 Patent is unenforceable due to patent owner Heat On-The-Fly's ("HOTF") inequitable conduct. See Energy Heating, LLC v. Heat On-The-Fly, LLC, 889 F.3d 1291 (Fed. Cir. 2018). Relying on the Federal Circuit's ruling, the Chandler Plaintiffs then brought Walker Process fraud and sham patent litigation claims against the Phoenix Defendants. See First Am. Compl., ECF No. 23. The Chandler Plaintiffs allege that Phoenix and Fisher—HOTF's parent company and CEO, respectively—are liable for HOTF's and their own unlawful attempts to exploit the cross motions for summary judgment, the Court must first return to "'the heart' of both this antitrust litigation . . . and several related patent-infringement suits"—the acquisition and enforcement of the '993 Patent. Chandler v. Phoenix Servs., LLC, 419 F. Supp. 3d 972, 977 (N.D. Tex. 2019) ).
In 2006, HOTF founder Ransom Mark Hefley created a fracking2 process to heat water "on demand or inline" or, as HOTF puts it, to heat water "on-the-fly." First Am. Compl. ¶ 11, ECF No. 23. HOTF began using the process on fracking jobs Hefley claimed were "experimental." Pls.' App. Supp. Resp. 17, ECF No. 72. When, on September 18, 2009, Hefley filed an application to patent his "Water Heating Apparatus for Continuous Heated Water Flow and Method for Use in Hydraulic Fracturing," Defs.' App. Supp. Resp. 155, ECF No. 69, Hefley knew he was required to "file within one year" of inventing the process, Pls.' App. Supp. Resp. 14, ECF No. 72. See also 35 U.S.C. § 102. Yet, when Hefley filed the first application for the Br. Supp. Mot. Summ. J. 2, ECF No 65 (citing First Am. Compl. P 11, ECF No. 23); Pls.' App. Supp. Resp. 9, 14, ECF No. 72. On May 8, 2012, the United States Patent and Trademark Office ("USPTO") approved and issued the '993 Patent. Defs.' App. Supp. Resp. 155, ECF No. 69.
During September and October of 2013, HOTF determined that at least seventeen companies were using the patented process without obtaining licenses. Pls.' App. Supp. Mot. Partial Summ. J. 80-113, ECF No. 63. HOTF sent these non-licensed companies cease-and-desistletters stating that HOTF "received information that certain water heating contractors providing water heating services and equipment to [the companies] may be infringing the '993 Patent" and "ask[ing] that [the companies] undertake the necessary steps to ensure that any possible infringement by [their] water heating contractors or subcontractors ceases." Defs.' App. Supp. Mot. Summ. J. 43, ECF No. 66.
Hess Corporation ("Hess"), Supertherm's largest customer, received one such letter. Id. Hess informed Supertherm of the letter and continued to hire Supertherm to perform in-line frack water-heating jobs. Id. at 55, 117, 208. But Hess also hired two to three additional non-licensed vendors and gradually decreased its work with Supertherm. Pls.' App. Supp. Resp. 329, ECF No. 72. Supertherm was eager to make up the lost business, but it declined to perform jobs for new clients due to fear of potential patent-infringement litigation. Id. at 331. Supertherm went out of business in May of 2016, stating "[a] general business decline in that area ma[de] it impossible to justify keeping the office open." Defs.' App. Supp. Mot. Summ. J. 233, ECF No. 66.
On January 31, 2014, nearly two years after the Br. Supp. Resp. 138, ECF No. 72. Fisher has remained the head of all three companies, and he and Danny Shurden ("Shurden"), the vice president of Phoenix, are the only two remaining officers of HOTF. Defs.' App. Supp. Mot. Summ. J. 4, ECF No. 66. Thus, though "Heat On-The-Fly legally still exists, . . . it's controlled by Phoenix Services." Pls.' Br. Supp. Mot. Partial Summ. J. 11, ECF No. 62(emphasis omitted) . Phoenix's, Phoenix Consolidated's, and HOTF's finances are all encompassed by a single financial statement. Pls.' App. Supp. Mot. Partial Summ. J. 177, ECF No. 72. Phoenix Consolidated funds HOTF—including by paying its attorneys' fees—because HOTF "has always been [in] a negative cash position" since the acquisition. Id. at 88.
Under HOTF's new structure and leadership, HOTF and Phoenix employees continued discussions about the enforcement and validity of the Br. Supp. Mot. Partial Summ. J. 8, ECF No. 62 . He signed the email, "Mark Fisher CEO Phoenix Services, LLC." Id. During his deposition, Fisher stated that he would "certainly" try to capture the highest market share possible. Id. at 9 .
On March 10, 2014, a licensee complained to Fisher, Shurden, Cole, and the HOTF attorneys about several non-licensed companies infringing the '993 Patent. Pls.' App. Supp. Resp. 78, ECF No. 72. "Other heating providers . . . have no regard for the patent," the licensee wrote. Id. The licensee claimed its non-licensed competitors were "ruining the frac water heating business and . . . making [licensees] look like [they we]re gouging [their] customers when [they] charge[d] standard market rates." Id. Given the licensee was "losing work from customers who use[d non-licensed competitors]," the licensee worried that "the longer this [went] on the harder it w[ould] be to get that work back." Id.
The patent litigation also continued under Phoenix's ownership. On July 14, 2014, HOTF filed a counterclaim in Newco Enterprises, LLC v. Super Heaters North Dakota, LLC, 7:14-CV-87-O [hereinafter Newco], alleging that Chandler and Newco had "been actively and knowingly inducing infringement of the 993 Patent" by their customers. Defs.' App. Supp. Mot. Summ. J. 46, ECF No. 66. On October 24, 2014, the Energy Heating plaintiffs sought to amend their complaint—adding, for the first time, a claim that the '993 Patent was unenforceable due to Hefley's and HOTF's inequitable conduct. Id. at 118-29. HOTF also added claims for patent infringement against Energy Heating and against Supertherm in December 2014. Newco, 7:14-CV-87-O; Energy Heating, 4:13-CV-10-RRE-ARS.
Even after the Federal Circuit affirmed the App. Supp. Mot. Partial Summ. J. 27, ECF No. 72; see also Defs.' App. Supp. Mot. Summ. J. 149-52, ECF No. 66 (website screenshots). And the Newco patent-infringement claims remain stayed but pending in this Court.
The Court may grant summary judgment where the pleadings and evidence show "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED....
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