text:
    STRYKER CORPORATION, Stryker Puerto Rico, Ltd., Stryker Sales Corporation, Plaintiffs-Appellees v. ZIMMER, INC., Zimmer Surgical, Inc., Defendants-Appellants Zimmer Orthopaedic Surgical Products, Defendant
    2013-1668
    United States Court of Appeals, Federal Circuit.
    Decided: September 12, 2016

      ShaRon HwaNG, McAndrews, Held & Malloy, Ltd., Chicago, IL, for plaintiffs-appellees. Also represented by DeboRah Laughton, StephaNie Samz.
    Seth P. Waxman, Wilmer Cutler Pickering Hale and Dorr LLP, Washington, DC, for defendants-appellants. Also represented by Thomas Saundees; Rebecca A. Baot, MaRK Christopher Fleming, Boston, MA; Donald Robeet Dunner, Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, Washington, DC.
    Before PROST, Chief Judge, NEWMAN and HUGHES, Circuit Judges.
   PROST, Chief Judge.

This case returns to us on remand from the Supreme Court of the United States. Halo Elecs., Inc. v. Pulse Elecs., Inc., — U.S. —, 136 S.Ct. 1923, 195 L.Ed.2d 278 (2016). In the original appeal, Zimmer, Inc., Zimmer Surgical, Inc., and Zimmer Orthopaedic Surgical Products (collectively “Zimmer”) appealed from the final judgment of the United States District Court for the Western District of Michigan that U.S. Patent Nos. 6,022,329 (“’329 patent”), 6,179,807 (“’807 patent”), and 7,144,383 (“’383 patent”) were valid and willfully infringed.

We affirmed the jury’s findings that the patents were valid and infringed, and the jury’s award of damages to plaintiff-appel-lees Stryker Corporation, Stryker Puerto Rico, Ltd., and Stryker Sales Corporation (collectively “Stryker”). Stryker Corp. v. Zimmer, Inc., 782 F.3d 649, 653 (Fed.Cir. 2014). However, applying the then-controlling test for willful infringement and enhanced damages under In re Seagate Technology, LLC, 497 F.3d 1360 (2007) (en banc), we reversed the jury’s willfulness finding and vacated the associated award of treble damages and attorneys’ fees. Stryker Corp., 782 F.3d at 660-62.

Stryker petitioned for rehearing en banc, which this court denied. Stryker then filed a petition for a writ of certiorari in the Supreme Court. The Supreme Court granted certiorari to determine whether the Seagate test regarding willfulness and enhanced damages was consistent with the Patent Act. Halo Elecs., Inc., 136 S.Ct. at 1928.

In its decision, the Supreme Court determined that the Seagate test “unduly confines the ability of district courts to exercise the discretion conferred on them.” Id. at 1935. Because we decided the willfulness question under the Seagate framework, the Supreme Court vacated our pri- or decision and remanded the case for further proceedings. Id. at 1935-36.

On remand, we recalled our mandate and reopened the case. Because Halo was limited to the questions of willfulness and enhanced damages, it left the judgments on other issues 'undisturbed. For the reasons stated below, we therefore reaffirm the jury’s Endings that Stryker’s patents were valid and infringed. In light of the new willfulness standard articulated by the Supreme Court, we'also affirm the jury’s Ending of willful infringement. However, we vacate and remand the district court’s award of treble damages. Finally, we vacate and remand the district court’s finding that this was an exceptional cáse and its award of attorneys’ fees.

I

The patents at issue concern pulsed lavage devices. Pulsed lavage devices deliver pressurized irrigation for certain medical therapies, including orthopedic procedures and cleaning wounds. The particular devices at issue in this case are portable, battery powered, and handheld. They include both suction and discharge tubes, so they both spray fluid from an external source and also suction off fluid and debris. These devices represent an improvement over older pulsed lavage systems that required a central power source and external' mechanical pumps, which meant that they needed to be wheeled around the hospital.

Stryker and Zimmer are the two main competitors in the orthopedic pulsed lavage device market. Stryker began bringing battery-powered, handheld pulsed lavage devices to the marketplace in 1993. That same year, Stryker filed the application which eventually gave rise to the patents at issue. In February 2000, the first of these patents, the ’329 patent, issued. Later that year Stryker sued another manufacturer, Davol Inc., for infringement. That suit settled in 2001, and Davol took a license on the ’329 patent. The ’807 patent subsequently issued in January 2001, and the ’383 patent issued in December ,2006.

Zimmer introduced its first portable pulsed lavage device, the Var-A-Pulse, in 1996. In 1998, Zimmer began to develop a new design, which came to market soon thereafter as the Pulsavac Plus range of products. Zimmer’s Pulsavac Plus products achieved a.peak of $55 million in annual sales in late 2007 before they were withdrawn. from the marketplace due to a product recall, after which sales resumed in December 2008.

In 2010, Stryker sued Zimmer, alleging that Zimmer’s Pulsavac Plus devices infringed various claims of the ’329, ’807, and ’383 patents. The district court granted partial summary judgment in- favor of Stryker, finding infringement of the ’807 and ’383 patents’ asserted claims. The question of whether Zimmer infringed the single asserted claim of the ’329 patent, as well as Zimmer’s invalidity defenses against all of the asserted claims, went to trial. The jury found that the products infringed claim 2 of the ’329 patent and that all of the asserted claims were valid. The jury also awarded $70 million in lost profits. It further found that Zimmer had willfully infringed all three patents. The jury also found that Stryker had marked substantially all of its products that commercially embodied the patents-in-suit during the period it sought damages, pursuant to 35 U.S.C. § 287(a).

In August 2013, the district court issued an order rejecting Zimmer’s motions for judgment as a matter of law (“JMOL”) on various issues, affirming the jury’s verdict, awarding trebled damages for willful infringement, finding the case exceptional and thus awarding attorneys’ fees to Stryker, and imposing a permanent injunction. The district court subsequently entered final judgment pursuant to its order.

Zimmer appeals. We have jurisdiction under 28 U.S.C. § 1295(a)(1).

II

We turn first to Zimmer’s appeal on the issues of claim construction, infringement, and validity.

Claim construction is an issue of law based on underlying factual considerations. Teva Pharm. USA, Inc, v. Sandoz, Inc., — U.S. —, 135 S.Ct. 831, 838, — L.Ed.2d — (2015). We review the district court’s ultimate construction de novo, and any underlying factual determinations for clear error. Id. at 840-41. In construing a claim term, we look at the term’s plain and ordinary meaning as understood by a person of ordinary skill in the art. Phillips v. AWH Corp., 415 F.3d 1303, 1313 (Fed. Cir.2005) (en banc). There is an exception to this general rule when a patentee sets out a definition and acts as her own lexicographer. Thorner v. Sony Computer Entm’t Am., LLC, 669 F.3d 1362, 1365 (Fed.Cir.2012). Infringement is a question of fact. Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1309 (Fed.Cir.2009). Invalidity by reason of anticipation under 35 U.S.C. § 102 is a question of fact. Atlas Powder Co. v. Ireco, Inc., 190 F.3d 1342,

1346 (Fed.Cir.1999). Invalidity by reason of obviousness under 35 U.S.C. § 103 is a legal conclusion based on underlying-facts. Allergan, Inc. v. Sandoz Inc., 726 F.3d 1286, 1290 (Fed.Cir.2013). Zimmer has the burden to prove invalidity by clear and convincing evidence. Galderma Labs., L.P. v. Tolmar, Inc., 737 F.3d 731, 736 (Fed. Cir.2013).

Gn the issues of infringement and validity that the jury decided, Zimmer appeals the district court’s denials of its motion for JMOL. Generally, a district court grants JMOL and sets aside the jury’s verdict if it “finds that a reasonable jury would not have a legally sufficient eviden-tiary basis to find for the party on that issue.” Fed. R, Civ. P. 50(a). We apply the law of the regional circuit to our review of the district court’s grant or denial of a motion for .JMOL. ClearValue, Inc. v. Pearl River Polymers, Inc., 668 F.3d 1340, 1343 (Fed.Cir.2012). The Sixth Circuit reviews the district court’s decision on a motion for JMOL de novo. Barnes v. City of Cincinnati,. 401 F.3d 729, 736 (6th Cir. 2005). “Judgment as a matter of law may only be granted if, when viewing the evidence in a light most favorable to the non-moving party, giving that party the benefit of all reasonable inferences, there is no genuine issue of material fact for the jury, and reasonable minds could .come to but one .conclusion in favor of the moving party.” Id.

For the reasons stated below, we affirm the district court’s judgment on the various defenses of noninfringement and invalidity that Zimmer raises across the three asserted patents.' However, we also, find that each of these defenses was not unreasonable.

The ’329 Patent

The only asserted claim of the ’329 patent, claim 2, ■ describes features, of a pulsed irrigation surgical handpiece. According to this claim, the handpiece comprises a “hollow housing,” which includes a “handle,” and, in relevant part in this case, “an electric motor spaced between the top and bottom of said handle and located in said handle” adjacent to an irrigation tube within the housing. ’829 patent col. 2211. 5-7 (emphases added). Zimmer contends that this limitation is critical for the purposes of infringement because, as indicated by the arrows below, the motor in its accused Pulsavac Plus device is not located in the handle — rather, it is located in the “nub” of the handpiece, the protrusion behind the barrel.

Appellees’ Br. 11 (red arrows added).

During claim construction, Zimmer took the position that no construction was necessary and that the claim term “handle” could be understood as having its plain and ordinary meaning to a person of ordinary skill in the art. Stryker Corp. v. Zimmer, Inc., No. 10-1223, slip op. at 6, 2012 WL 333814, at *4 (W.D. Mich. Feb. 1, 2012), EOF No. 106 (“Claim Construction Order”). Stryker proposed to construe the term “handle” as “a portion of a device designed to be held by a hand or hands.” Id. The district court adopted Stryker’s proposed construction.

Stryker argued that nothing in the patent’s specification otherwise limited the meaning of “handle,” and that its definition for “handle” was consistent with general dictionaries. Zimmer argued that Stryker’s express construction of the term, however, was too broad and read out the specification’s consistent distinction between the “handle” and “barrel” portions of the claimed device.

The ’329 patent generally describes various embodiments, all ⅛ of which comprise a “hand-held housing having a handle and a barrel which extends from the upper end of the handle.” ’329 patent col. 3 11. 28-31. Zimmer further supported its position with the language of claim 4, which depends on claim 2. Claim 4 separately describes both a “handle” and a “barrel,” which Zimmer argued meant that the patentee. maintained the distinction between the two parts of the handpiece.

However, the district court ultimately agreed with the Stryker that a device that met claim 2 did not need to have a discrete barrel joined to the handle, since this claim could cover wand-shaped devices that existed in the prior art in which the entire handpiece functioned like a handle and no separate barrel was joined at an angle. The district court reasoned that since claim 4 is a dependent claim, it could cover the pistol-shaped design described in the specification, while claim 2 would more broadly cover wand-shaped devices as well.

On appeal, Zimmer also raises the prosecution history of U.S. Patent Application No. 08/559,133 (“’133 application”), the parent of the application that issued as the ’329 patent. During the ’133 application’s prosecution, Stryker sought to overcome a rejection of claim 39 based on a prior art reference which described a pistol-shaped device with a barrel and a handle. Stryker traversed the rejection by arguing that the motor of the prior art handpiece was “not in the handle or at an angle to the barrel.” Zimmer contends that claim 39 included the limitation “locating said motor in said handle,” which is the same limitation at issue in the construction of “handle” in claim 2 of the ’329 patent. Therefore, Zimmer argues, Stryker’s statement disclaimed designs in which the motor is located in the barrel or nub of a pistol-shaped handpiece. See Gemalto S.A. v. HTC Corp., 754 F.3d 1364, 1371 (Fed.Cir.2014) (“[W]hen multiple patents derive from the same initial application, the prosecution history regarding a claim limitation in any patent that has issued applies with equal force to subsequently issued patents that contain the same claim limitation.”); Microsoft Corp. v. Multi-Tech Sys., Inc., 357 F.3d 1340, 1349 (Fed. Cir.2004); Elkay Mfg. Co. v. EBCO Mfg. Co., 192 F.3d 973, 980 (Fed.Cir.1999).

Zimmer did not raise its prosecution history argument during its claim construction briefing and the Markman hearing before the district court. The district court indicated that it would not alter the claim construction but, nevertheless, determined that it would still consider this argument in deciding Zimmer’s motion for summary judgment of noninfringement. Stryker Corp. v. Zimmer, Inc., No. 10-1223, slip op. at 3 (W.D. Mich. Nov. 29, 2012), ECF No. 248 (“Summary Judgment Order /”). The district court nevertheless denied Zimmer’s motion, finding that the prosecution disclaimer was insufficiently “clear and unmistakable” because claim 39 of the T33 application had additional limitations that were absent in claim 2 of the ’329 patent. Id. at 4-5.

The district court’s analysis was flawed, however, because this was not a case in which the “purported disclaimers are directed to specific claim terms that have been omitted or materially altered in subsequent applications (rather than to the invention itself).” Saunders Grp., Inc. v. Comfortrac, Inc., 492 F.3d 1326, 1333 (Fed.Cir.2007). There was no difference in the language describing the limitations as between the two claims at issue, rather, the limitation of claim 2 was included within claim 39. There is no reason why a disclaimer on a limitation within a narrower claim would not apply to the identical limitation within the broader claim, as the same concerns about the prior art would relate to both. See, e.g., Gemalto, 754 F.3d at 1371 (applying a common disclaimer to both an independent and narrower dependent claim containing the same term). That said, the district court did not err in rejecting Zimmer’s argument as it related to claim construction, while still entertaining it in the context of infringement. See SuperGuide Corp. v. DirecTV Enters., Inc., 358 F.3d 870, 889-90 (Fed.Cir.2004) (affirming the district court’s construction on the grounds that a proffered alternative construction was untimely raised). Therefore, we review Zimmer’s argument only as it relates to infringement.

Infringement is a question of fact, and we must give a substantial degree of deference to the jury’s verdict. At trial, Stryker presented evidence indicating that a medical professional could hold Zimmer’s Pulsavac Plus by the nub behind the barrel, where the motor was located. In addition, Stryker presented evidence that the barrel of the Pulsavac Plus was called a “barrel grip” in an associated patent application, and the barrel included indentations that would allow the device to be used while held by the barrel. Stryker also persuaded the jury that it was reasonable to infer that if the nub behind the barrel was also shaped such that it was at least capable of being held, then it would be “a portion of the device designed to be held by hand,” in accordance with the district court’s construction of “handle” in the claim at issue. In light of the evidence presented at trial as a whole, along with the prosecution history, we do not find that “reasonable minds could come to but one conclusion” that Zimmer did not infringe claim 2 of the ’329 patent. Barnes, 401 F.3d at 736. Accordingly, we affirm.

The ’807 Patent

Infringement

Zimmer argues that the district court erred in granting summary judgment of infringement of the ’807 patent’s asserted claims. We review the district court’s grant of summary judgment de novo. Dixon v. Univ. of Toledo, 702 F.3d 269, 273 (6th Cir.2012). “Summary judgment is proper whére there exists no issue of material fact and the moving party is entitled to judgment as a matter of law.” ETW Corp. v. Jireh Publ’g, Inc., 332 F.3d 915, 920 (6th Cir.2003) (citing Fed. R. Civ. P. 56(c)). All reasonable factual inferences are drawn in favor of the nonmoving party. Id.

Zimmer’s argument on appeal centers on whether its products include, as required for all the asserted claims, “a front end for receiving the discharge tube and the suction tube.” ’807 patent col. 27 11. 35-37 (emphasis added). This limitation describes the interface between the nozzles at the front end of the handpiece and the nozzles of a removable tip that includes discharge and suction tubes. Zimmer argues that the claim language requires that there be male openings on the tip that fit into the female nozzles on the handpiece. Therefore, Zimmer contends that the accused devices do not infringe because they are. designed with female openings on the tip that fit into tapered male nozzles on the handpiece. To support its position, Zimmer relies on various dictionary definitions of “receive,” which it argues all have some variant of the verbs “to contain” or “to hold.” See Appellants’ Br. 57. Zimmer argues that this meaning is consistent with the specification, which discloses a single embodiment in which the neck of the suction tube “seats in” the drain tube — and, specifically, that this configuration is designed to avoid “leakage of the fluid and material as it flows in the drain tube.” ’807 patent col. ,11 11. 29-34; see also id. fig.8.

As an initial matter, Stryker’s argument that Zimmer waived a narrower construction of the term “receive” is unavailing. The parties and the district court directly addressed this issue during the summary judgment proceedings. Moreover, unlike the dispute ' concerning the meaning of “handle” in the ’329 patent, the district court did not note any waiver and expressly considered the scope of “receive” in evaluating whether Zimmer’s design infringed. See Pfizer, Inc. v. Teva Pharm., USA, Inc., 429 F.3d 1364, 1377 (Fed.Cir. 2005) (contemplating “rolling claim construction,- in which the court revisits and alters its interpretation of the claim terms as its understanding of the technology evolves”).

Stryker further argues that the specification provides a broader disclosure of “an irrigation handpiece to which complementary tips can be readily coupled." ’807 patent col. 1 11. 10-12 (emphasis added); see also col. 2 11. 45-47 (disclosing “a tip assembly [that] readily seals to a complementary handpiece”) (emphasis added). Stryker also points to Zimmer’s own lay witnesses, who admitted that its Pulsavac Plus handpiece “receives” the tips.

The district court noted that, in its view, “Zimmer’s reading of ‘receive’ is artificially narrow.” Stryker Corp. v. Zimmer, Inc., No. 10-1223, slip op. at 8 (W.D. Mich. Nov. 29, 2012), EOF No. 247 (“Summary Judgment Order II”). Instead, the district court reasoned that “[t]he word “receives” in this context can only mean that one part of the device connects directly with another part of the device.” Id. Thus, the district court found that Zimmer infringed. While it is a close case, we do not find that the district court erred in granting summary judgment of infringement based on the record before it.

Invalidity

Zimmer also appeals the district court’s holding that the asserted claims of the ’807 patent were anticipated by its prior art Var-A-Pulse device, the predecessor of the Pulsavac Plus.' Stryker argues that the Var-A-Pulse device does not anticipate because it is missing the “lock assembly” limitation of the asserted claims, which require that there be “a lock assembly mounted to the front end of said body for releasably securing the discharge tube and the suction tube to said body.” ’807 patent col. 27 11. 35-37. The district court adopted Stryker’s proposed construction of the term “lock assembly” as “components that work together to secure or fasten the tip to the handpiece.” Claim Construction Order at 16. In the Var-A-Pulse device, the tip was attached to the handpiece in such a way that the tip nozzles fit into interior housing grooves at the front of the handpiece, which were then held together by friction. Zimmer argues that under the district court’s construction, the limitation was present in the prior art because the nozzles were “secured or fastened” when they were fit in the interior housing groove.

At trial, Zimmer presented evidence that included the Var-A-Pulse’s technical documentation, which indicated that the tip should be “secured” to the handpiece, as well as testimony from various Stryker witnesses admitting that the tip nozzles were fastened to the handpiece when they were inserted. Stryker argued that, unlike the accused Pulsavac Plus devices, which include a locking ring to secure the tip, there is no separate part or assembly in the Var-A-Pulse. Stryker also contended the prior art device did not include the full claim limitation, which requires that the lock assembly be “mounted” to the front end of handpiece. Stryker argued that because Zimmer identified a “lock assembly” that itself included the housing groove that is part of the front end, Zimmer was essentially arguing that the lock assembly was'mounted to itself, thus nullifying the limitation. Stryker also presented evidence to the jury showing that the Var-A-Pulse tips readily fell off the front end of the handpiece, and that this led the development of the locking ring in the Pulsavac Pulse.

The jury ultimately found that there was no clear and convincing evidence that the Var-A-Pulse device anticipated the ’807 patent’s asserted claims. In light of the evidence that was presented, we find that a reasonable jury could have reached this verdict. Accordingly, we affirm.

The ’383 Patent

At trial, Zimmer argued that the asserted claims of the ’383 patent were obvious at the time of the invention in light of U.S. Patent. No. 5,046,486 (“Grulke”), U.S. Patent No. 4,817,599 (“Drews II”), and U.S. Patent No. 5,350,356 (“Bales”). Zimmer contends that all of the limitations of the ’383 patent’s asserted claims were collectively present in the prior art references. Stryker does not directly dispute this point. Instead, it principally argues that because the designs claimed by Grulke and Drews II each exclude certain components described in the claims, one of ordinary skill in the art would not have been motivated to combine these refer-énces. In brief, Grulke disclosed a pulsed lavage system that uses a pneumatic, rather than an electric, motor. Drews II disclosed a pulsed irrigation system, powered by an electric motor, that is used as an eye wash.

At trial, Zimmer argued that it would have been obvious to one of ordinary skill to try to replace the pneumatic motor of Grulke with the electric motor in Drews II. Zimmer further argued that any reconfiguration of Grulke to accommodate an electric motor could be done by one of ordinary skill. See In re ICON Health & Fitness, Inc., 496 F.3d 1374, 1382 (Fed.Cir. 2007) (“[W]e do not ignore the modifications that one skilled in the art would make to a device borrowed from the prior art.”). Zimmer also argued that even though the Grulke reference was directed to orthopedic pulsed lavage systems, and the Drews II reference was directed to eyewash systems, they both described pressured water irrigation in hospitals and clinics. Zimmer contended that that a person of ordinary skill in the art of pulsed lavage devices would thus be aware of the art in both fields and would be motivated to combine features from each of them. See KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 420, 127 S.Ct. 1727, 167 L.Ed.2d 705 (2007) (“Common sense teaches, however, that familiar items may have obvious uses beyond their primary purposes, and in many cases a person of ordinary skill will be able to fit the teachings of multiple patents together like pieces of a puzzle.”).

Zimmer also presented evidence of the examiner’s rejection of certain claims in Stryker’s prosecution of U.S. Patent Application No. 11/563,504 (“’504 application”), a continuation, of the ’383 patent,.which occurred during the discovery phase of this case. During that, patent application’s prosecution, the examiner issued a non-final office action, rejecting certain claims of the ’504 application as obvious over Grulke “and further in view of Drews II.” J.A. 17226. Stryker did not attempt to traverse the rejection and instead ultimately abandoned the application. Stryker principally argued that because the claim at issue in the ’504 application included certain different limitations, the examiner’s rejection did not have any relevance to the ’383 patent’s claims. We note, however, that the difference in the .detail of the claims is immaterial as to whether it would have been obvious to combine Grulke and Drews II. While persuasive, the examiner’s proffered rejection is not on its own dispositive, in large part because the U.S. Patent and Trademark Office (“PTO”) and district courts “take different approaches in determining invalidity and on the same evidence could quite correctly come to different conclusions.” Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1428 (Fed.Cir.1988).

Stryker also argued that the Grulke device differed substantially from the Drews II device. For example, it was designed for surgery rather than eyewashing. Grulke also disclosed a large device that was wheeled into an operating room that had many components that differed from those in the portable device disclosed Drews II. Stryker presented expert testimony rebutting Zimmer’s evidence that it would have been obvious to combine these references.

On the basis of the record presented at trial, we agree with the district court that a reasonable jury could conclude that one of ordinary skill in the art would not have been motivated to combine the Grulke and Drews II references, even in light of the examiner’s rejection of related claims on the basis of this combination. This is sufficient to affirm the district court’s determination that Zimmer did not show, by clear and convincing evidence, that the ’383 patent’s claims were obvious.

For this reason, we need not reach other issues, including the evidence of secondary considerations of non-obviousness. Therefore, we affirm the district court’s determination that the ’383 patent’s asserted claims were not obvious over the combination of Grulke, Drews II, and Bales.

Ill

Enhanced Damages

After taking into consideration the circumstances of a particular case, a court may exercise its discretion and award enhanced damages under 35 U.S.C. § 284. Halo Elecs., Inc., 136 S.Ct. at 1933. “[H]owever, such punishment should generally be reserved for egregious cases typified by willful misconduct.” Id. at 1934.

In making its willfulness determination, the district court applied the standard we had previously articulated in Seagate, which required a patentee to establish, by clear and convincing evidence, both that there was an objectively high likelihood that the accused infringer’s actions constituted patent infringement, and that the risk was “either known or so obvious that it should have been known to the accused infringer.” See 497 F.3d at 1371. The Supreme Court rejected this approach and explained that “[t]he subjective willfulness of a patent infringer, intentional or knowing, may warrant enhanced damages, without regard to whether his infringement was objectively reckless.” Halo Elecs., Inc., 136 S.Ct. at 1932. The Supreme Court also rejected the use of a clear and convincing standard in favor of a preponderanee of the evidence standard. Id. at 1934.

On appeal, Zimmer did not appeal the jury’s finding of subjective willfulness under the Seagate test. On the record in this ease, willful misconduct is sufficiently established by the jury’s finding. The jury made its determination under the clear and convincing evidence standard, which is a higher standard than is now necessary. We therefore affirm the jury’s finding of willful infringement.

In doing so, we think the best course is to vacate the award of enhanced damages and remand to the district court for consideration of this issue. As Halo makes clear, the decision to enhance damages' is a discretionary one that the district court should make based on the circumstances of the case, “in light of the longstanding considerations ... as having guided both Congress and the courts.” Id. at 1934. Thus, it is for the district court to determine whether, in its discretion, enhancement is appropriate here. We therefore vacate the district court’s award of enhanced damages and remand to the district court so that it may exercise its discretion.

Attorneys’ Fees

The district court’s award of attorneys’ fees was based solely on its determination that Zimmer was liable of willful infringement. Though we uphold the district court’s willfulness determination, it does not necessarily follow that the case is exceptional. As with the determination of whether enhanced damages are appropriate, “[district courts may determine whether a case is ‘exceptional’ in the case-by-case exercise of their discretion, considering the totality of the circumstances.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., — U.S. —, 134 S.Ct. 1749, 1756, 188 L.Ed.2d 816 (2014). Because there exist further allegations of litigation misconduct in this case and because the standard for finding an exceptional case has changed since the district court issued its ruling regarding attorneys’ fees, we also remand'this issue for further consideration by the district court.

IV

For the aforementioned reasons, we affirm the jury’s verdict:of infringement and validity of all three patents at issue, as well as its award of lost profits and its willfulness determination. However, we vacate and remand the district court’s award of trebled damages. We also vacate and remand the district court’s finding of an exceptional case and its award of attorneys’ fees. The case is remanded for further proceedings consistent with this opinion.

AFFIRMED-IN-PART, VACATED-IN-PART, AND REMANDED

Costs

Each party shall bear its own costs.

      . The limitation at issue in the original claim 39 of the '133 application was, in full: "a handpiece housing containing said pump and shell, said handpiece housing being elongate [sic] and bent and comprising a handle and a barrel, said barrel being open to and extending forward from an intersection with the top of the handle at an angle thereto, said hollow shell extending lengthwise along and within said handle into said angled intersection of said handle and barrel and locating said motor in said handle remote from said angled intersection, said link extending at said angle from said shell and handle forwardly into and along the length direction of said barrel, said pump movable member extending along the length direction of said barrel and being re-ciprocatingly driven by said link in said length direction of said barrel.” J.A. 16672 (emphasis added).

      . This is unlike the case cited by Stryker and the district court for the contrary proposition, Middleton, Inc. v. Minnesota Mining and Man

        ufacturing. Co., in which the term at issue, “uniform” in the context of floor coverings, would potentially have a different meaning if it applied to the narrower claim — limited to smooth sporting surfaces — and a subsequent, broader claim that contemplated other kinds of surfaces. 311 F.3d 1384, 1388-89 (Fed.Cir. 2002). Here, a limitation on the location of the motor within the handpiece would mean the same thing in the context of either claim,

      . Stryker asserted claim 45 and certain of its dependent claims.

      . Stryker also argues that Zimmer’s invalidity argument relies on the prior art Var-A-Pulse device including the "receive” limitation— even though it has the same kind of tip assembly as the Piilsavac Plus. We note, however, that nothing precludes Zimmer from arguing for a narrower application of the limitation on the infringement context, while also arguing, in the alternative, that — if the district court were to disagree — the patent claim would be so broad as to be invalid.

      . Zimmer also appeals the jury’s finding that Stryker’s products were sufficiéntly marked by the '383 patent during part of the period for which it sought damages. We need not reach this issue, because we affirm the find- ' irig that Zimmer infringed the '807 and '329 patents, which is sufficient to support all of Stryker’s award of damages for lost profit. However, we note that the jury was indeed incorrectly instructed that it should consider "whether some portion of the Stryker products not marked with a particular patent number were marked with other related patent notices." Stryker Corp. v. Zimmer, Inc., No. 10-1223, slip op. at 18, 2013 WL 6231533, at *10 (W.D. Mich. Aug. 7, 2013), ECF No. 537 (“Post-Verdict Order") (emphasis added). Because of this instruction, the jury could have been misled to consider a product marked with the number of a patent related to the '383 patent — but not with the '383 patent number itself — as being sufficiently marked. While the district court appears to have relied on cases that suggest that there is some flexibility in what constitutes sufficient marking, the statute is not so broad ás to allow marking with a different patent — with different claims — to provide sufficient notice to the public. Rather, the plain language of the marking statute provides that the patented article be marked with the “number of the patent.” 35 U.S.C § 287(a) (emphasis added).


source: Caselaw Access Project

author:
      LOURIE, Circuit Judge.
      WALLACH, Circuit Judge,

license: Public Domain

text:
    DYNAMIC 3D GEOSOLUTIONS LLC, Plaintiff-Appellant Acacia Research, Corporation, Acacia Research Group LLC, Nonparties-Appellants v. SCHLUMBERGER LIMITED (SCHLUMBERGER N.V.), Schlumberger Holdings Corporation, Schlumberger Technology Corporation, Defendants-Appellees
    2015-1628, 2015-1629
    United States Court of Appeals, Federal Circuit.
    Decided: September 12, 2016

      Michael James Collins, Collins, Ed-monds, Pogorzelski, Schlather & Tower PLLC, Houston, TX, argued for plaintiff-appellant. Also represented by John J. Ed-monds, Shea Neal Palavan.
    Steven Mare Hanle, Stradling Yocca Carlson & Rauth, P.C., Newport Beach, CA, argued for nonparties-appellants. Also represented by Marc J. Schneider, Travis Phillip Brennan.
    Maximilian A. Grant, Latham & Watkins LLP, Washington, DC, argued for defendants-appellees. Also represented by Gabriel Bell, Thomas J. Humphrey; Terrence J. Connolly, New York, NY; Ann Maeie Wahls, Chicago, IL.
    Before LOURIE, WALLACH, and HUGHES, Circuit Judges.
   Concurring opinion filed by Circuit Judge WALLACH.

LOURIE, Circuit Judge.

Dynamic 3D Geosolutions LLC (“Dynamic 3D”), along with Acacia Research Corporation and Acacia Research Group LLC (collectively, “Acacia”), appeal from the decision of the United States District Court for the Western District of Texas disqualifying counsel and dismissing its patent infringement complaint without prejudice. Dynamic 3D Geosolutions LLC v. Schlumberger Ltd., No. A-14-CV-112LY, 2015 WL 4578681 (W.D. Tex. Mar. 31, 2015) (“Order”). Because the district court did not err in disqualifying Dynamic 3D’s counsel and in dismissing the complaint, we affirm.

Backgeound

In 2006, Schlumberger hired Charlotte Rutherford in a senior counsel position as Manager of Intellectual Property Enforcement, in licensing and litigation; promoted her to Director of Intellectual Property in 2009; and then promoted her again to Deputy General Counsel for Intellectual Property. Her job duties included “developing and implementing the worldwide IP strategy,” “protecting and preserving [Schlum-berger’s] IP assets including patents, trademarks and trade secrets,” and “ad-vis[ing] senior [Schlumberger] executives regarding risk issues relating to IP.” Joint App. (“J.A.”) 958. She was also responsible for the company’s worldwide program for enforcing intellectual property, including litigation, and directed and supervised outside counsel on intellectual property legal matters. Id.

As part of her work at Schlumberger, Rutherford managed a copyright lawsuit involving Petrel, Schlumberger’s software platform for three-dimensional visualization, mapping, and reservoir modeling of oil wells. She was also involved in a “Goldstar” project that evaluated further patentable aspects of Petrel and assessed the risk of lawsuits against it. One competitor’s product analyzed during this project was Austin Geomodeling’s RECON software. Austin Geomodeling filed a patent application in 2007 that eventually issued as U.S. Patent 7,986,319 (“the ’319 patent”) in 2011. RECON is supposedly the commercial embodiment of the ’319 patent, which is directed to systems and methods of combining seismic and well log data into a real-time, interactive three-dimensional display.

In mid-2013, after seven years at Schlumberger, Rutherford left Schlumber-ger and soon thereafter began working as Senior Vice President and Associate General Counsel at Acacia Research Group LLC. Acacia Research Group LLC is a wholly-owned subsidiary of Acacia Research Corporation, the parent company of various patent-holding entities, including Dynamic 3D.

Shortly after joining Acacia, Rutherford twice met with the inventors of the ’319 patent to discuss Acacia’s acquisition of the patent and possible future litigation. J.A. 755-56, 760, 762. She also participated in a telephone call with the law firm of Collins, Edmonds, Pogorzelski, Schlather & Tower PLLC (“CEP”) and one of her subordinates, Gary Fischman, regarding the ’319 patent. J.A. 765. Schlumberger’s Petrel product was discussed as a potential target of patent infringement litigation, at the meetings and in the call. See, e.g., J.A. 759-761, 764, 766, 828-829, 831. Fischman and CEP then prepared a recommendation to Acacia’s CEO to acquire the ’319 patent and to sue Schlumberger and others, and Rutherford “approved” or “concurred” in that recommendation. J.A. 769-71, 774-77. Rutherford and Fischman also jointly made the decision to hire CEP as outside counsel. J.A. 784-85. Acacia subsequently retained CEP for all ’319 patent-related litigation and acquired the patent. Dynamic 3D was formed as a. wholly-owned subsidiary of Acacia, and days later was assigned the ’319 patent on December 9, 2013. Order at *1. Dynamic 3D, at least as of May 201.4, had no employees.

In February 2014, Dynamic 3D filed several lawsuits, including one asserting that Schlumberger, in its use and sale of Petrel, infringed the ’319 patent. The complaint alleges actual knowledge of the ’319 patent by Schlumberger as early as the issuance of the patent in July 2011. The district court stayed the case except for limited claim construction discovery. Schlumberger raised Rutherford’s potential conflict of interest to the court in April 2014. After a stay was lifted in August, Schlumberger filed a motion to disqualify Dynamic 3D’s counsel. The district court granted Schlumberger’s motion, disqualifying Rutherford, other in-house counsel for Acacia Research Corporation and its subsidiaries, and the CEP firm from representing Dynamic 3D in the instant case.

Relatedly, Schlumberger sued Rutherford' in Texas state court in March 2014, presenting evidence that she retained copies of confidential and privileged information, including that relating to Petrel, for purposes of providing it to Acacia. The court dismissed all but the breach-of-contract claim for violating her confidentiality agreement, finding that the Texas anti-SLAPP statute protected Rutherford’s First Amendment rights to petition and association, viz., her “communication” of a “concurrence with the recommendation by outside counsel and in-house counsel to acquire the [’]319 patent and to sue Schlumberger.” J.A. 825, 828. The court sanctioned Schlumberger for bringing the suit, ordering payment of $600,000 in attorneys’ fees and sanctions. Schlumberger challenged the decision to dismiss almost all of the claims, but the state appellate court dismissed that appeal for lack of jurisdiction over an- interlocutory appeal. These issues are not before us in this appeal.

The district court in this case first found that Rutherford’s work at Schlumberger was substantially related to her current work at Acacia. The court found that because the accused features of Petrel existed in the older versions that Rutherford was exposed to, and because she was .involved at Schlumberger in efforts to license Petrel to other companies, the evidence created an irrebuttable presumption that she acquired confidential information requiring her disqualification. Order at *5.

The district court then determined that the acquired knowledge should be imputed to all Acacia attorneys for purposes of participating in Dynamic 3D’s suit against Schlumberger. The court noted that conflict rules for “firms” also apply to corporate legal departments, and that Dynamic 3D depended entirely on Acacia’s legal department for its strategy and litigation conduct.: Order at *5-6. The court was persuaded by evidence of Rutherford’s involvement in acquiring the ’319 patent, in deciding to sue Schlumberger, and in retaining CEP. Order at *6. The court found that Dynamic 3D failed to rebut the presumption of disclosure of Schlumberger’s confidential information, and thus disqualified in-house counsel for Acacia Research Corporation and its subsidiaries. Id.

The district court lastly extended' the disqualification to CEP, interpreting Fifth Circuit case law on disqualifying co-counsel as shifting the evidentiary burden to Dynamic 3D to prove non-disclosure after Schlumberger met its burden to create a rebuttable presumption of disclosure. Order at *7. The court found that the evidence showed multiple communications among Rutherford, Fischman, and CEP while preparing to file suit against Schlum-berger. Id.- As Fischman continued to not only actively work with CEP in this case but also communicate information regarding the litigation to Rutherford, the court also disqualified CEP. Id.

Consequently, because the pleadings were drafted by counsel presumed to possess Schlumberger’s confidential information, the district court dismissed all of Dynamic 3D’s claims against Schlumber-ger without prejudice. Id.

Dynamic 3D and Acacia timely appealed from the district court’s decision to this court. Shortly before the scheduled oral argument on August 3, 2016, Dynamic 3D and Acacia submitted a motion to dismiss the appeal, asserting that the case had been settled. Dynamic 3D Geosolutions, LLC v. Schlumberger Ltd., No. 2015-1628, ECF No. 76 (Fed. Cir. Aug. 1, 2016). Schlumberger, however, opposed the motion. Id., ECF No. 77. Acacia subsequently submitted the supposed settlement agreement to us under seal. The agreement appears to consist of hastily handwritten notes on two sheets of notebook paper along with a typed cover sheet containing minimal clarifying language and a signature page dated June 17, 2016. Id., ECF No. 84- (Fed. Cir. Aug. 4, 2016). Although a settlement need not be effectuated by a formal document, upon review of the submission, we agree with Schlumberger that the appeal was not concluded by the agreement as submitted to this court and, based on the status of the appeal as of the date of oral argument, decline to terminate the appeal under Federal Rule of Appellate Procedure 42(b). We have jurisdiction over this appeal pursuant to 28 U.S.C, § 1295(a)(1).

Discussion

We review a district court’s disqualification and dismissal order under the law of the regional circuit in which the district court sits, here, the Fifth Circuit. Atasi Corp. v. Seagate Tech., 847 F.2d 826, 829 (Fed. Cir.1988). Because motions to disqualify counsel “are substantive motions affecting the rights of the parties,” we apply standards developed under federal law. In re Dresser Indus., Inc., 972 F.2d 540, 543 (5th Cir.1992); see also In re Am. Airlines, Inc., 972 F.2d 605, 609 (5th Cir. 1992) (“Federal courts may adopt state or ABA rules as their ethical standards, but whether and how these rules are to be applied are questions of federal law.”). Applying the law of the Fifth Circuit, the standard of review is for abuse of discretion, with the underlying factual findings reviewed for clear error and the interpretation of the relevant rules of attorney conduct reviewed de novo. F.D.I.C. v. U.S. Fire Ins., 50 F.3d 1304, 1311 (5th Cir. 1995); In re Am. Airlines, 972 F.2d at 609. We also review the grant of a. motion to dismiss without prejudice for abuse of .discretion. See United States ex.rel. Holmes v. Northrop Grumman Corp., 642 Fed.Appx. 373 (5th Cir.2016) (noting that “abuse of discretion standard applies in [an appellate court’s] review of a district court’s dismissal of a complaint as a result of ethical violations”); cf. Marts v. Hines, 117 F.3d 1504, 1506 (5th Cir.1997) (en banc) (noting that “trial court’s exercise of discretion” for dismissal without prejudice would be focus of appellate review).

Three applicable sets of rules govern the grant of the motion to disqualify counsel in this case: (1) the ABA Model Rules of Professional Conduct, the legal profession’s national ethical rules; (2) the Texas Disciplinary Rules of Professional Conduct, the state-specific adaptation of the ABA Model Rules; and (3) the Local Rules for the Western District of Texas, which adopt the Texas Disciplinary Rules. See, e.g., In re ProEducation Int’l, Inc., 587 F.3d 296, 299 (5th Cir.2009); Nat'l Oilwell Varco LP v. Omron Oilfield & Marine, Inc., 60 F.Supp.3d 751, 758 (W.D.Tex. 2014).

•I. Disqualification of Counsel

A. The Disqualification of Rutherford

Texas Disciplinary Rule 1.09(a) provides that:

(a) Without prior consent, a lawyer who personally has formerly represented a client in a matter shall not thereafter represent another person in a matter adverse to the former client:
(2) if the representation in reasonable probability will involve a violation of [the rule regarding Confidentiality of Information]; or
(3) if it is the same or a substantially related matter.

Tex. Disciplinary Rules of Profl Conduct (“Texas Disciplinary Rules”) r. 1.09 (emphases added).

Comment 4 to Rule 1.09 notes that representation would be improper “if there were a reasonable probability that the subsequent representation would involve either an unauthorized disclosure of confidential information ... or an improper use of such information to the disadvantage of the former client," and that “[wjhether such a reasonable probability exists in any given case will be a question .of fact.” Id. cmt. 4.

Comment 4B further elaborates that “‘substantially related’ primarily involves situations where a lawyer could have acquired confidential information concerning a prior client that could be used either to that prior client’s disadvantage or for the advantage of the lawyer’s current client or some other person.” Id. cmt. 4B; cf. In re Am. Airlines, 972 F.2d at 618-19 (noting that an attorney’s representation “does not need to be ‘relevant’ in the evidentiary sense to be ‘substantially related,”’ but rather' “need only be akin to the present action in a way reasonable persons would understand as important to the issues involved” (quoting In re Corrugated Container Antitrust Litig., 659 F.2d 1341, 1346 (5th Cir.1981))).

The corresponding ABA Model Rule similarly prohibits representation that presents a conflict of interest with a former client:

(a) A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client....
(c) A lawyer who has formerly represented a client in a matter or whose present or'former firm has formerly represented a client in a matter shall not thereafter:
(1) use information relating to the representation to the disadvantage of the former client....

Model Rules of Profl Conduct (“ABA Model Rules”) r. 1.9 (Am. ,Bar Ass’n 1983) (emphasis added).

Dynamic 3D argues that the district court clearly erred in finding that Rutherford’s former representation was substantially related to her alleged representation in this case. Dynamic 3D characterizes her involvement in the acquisition of the ’319 patent and enforcement against other parties as “limited,” ■ and denies any such involvement in the instant suit against Schlumberger. Dynamic 3D asserts that the court based its finding on descriptions of privileged documents rather than on a review of the actual documents, and ignored Rutherford’s testimony that, she was not directly involved in the Goldstar projects. Thus, Dynamic 3D contends, the court failed to fully analyze the facts or properly apply Fifth Circuit precedent. Dynamic 3D lastly argues that Schlumberger failed to establish that Rutherford played anything beyond a limited supervisory role, with some general exposure to earlier versions of Petrel in the copyright lawsuit.

Schlumberger responds that Fifth Circuit precedent imposes an irrebuttable presumption that relevant confidential information was acquired once prior and present representations are shown to have been substantially related. Schlumberger argues that the district court’s factual finding that Rutherford’s prior work is substantially related to this suit is based on Rutherford’s personal representation of Schlumberger in litigation and licensing matters, including leading a team that evaluated intellectual property rights and risks relating to Petrel. Moreover, Schlum-berger counters, the court correctly declined to credit self-serving testimony in light of the contrary evidence presented. Schlumberger notes that Rutherford admitted that she acted in a legal capacity for Acacia at the initial meetings concerning the ’319 patent, and that the assessment of Petrel as being a possible litigation target was clearly related to her prior work. Schlumberger further points out that Rutherford would have had access to material sensitive information even in her more remote supervisory role during her previous employment.

We agree with Schlumberger that the district court did not clearly err in finding that Rutherford’s work for Schlumberger, and for Acacia and Dynamic 3D, were substantially related. Rutherford occupied senior counsel, director, and deputy general counsel positions in a large company’s intellectual property department. The record documents her involvement at Schlum-berger in a project specifically evaluating a product later accused of infringement by Acacia, and the risks of such an infringement suit. Rutherford’s representation at Schlumberger included efforts to license Petrel when the later-accused features of the product existed in the older versions with which Rutherford was involved. We will therefore not disturb the district court’s finding that Rutherford’s employment with Schlumberger was more than tangentially related to the issues in the present suit.

We recognize that there are important societal rights implicated by attorney disqualification, such as the right of a party to counsel of its choice and an attorney’s right to freely practice his or her profession. However, there is an overriding countervailing concern suffusing the ethical rules: a client’s entitlement to an attorney’s adherence to her duty of loyalty, encompassing a duty of confidentiality. See In re Am. Airlines, 972 F.2d at 616-20; Texas Disciplinary Rules r. 1.06 emts. 1, 2; ABA Model Rules r. 1.9 cmts. 4, 7; see also Brennan’s Inc. v. Brennan’s Restaurants, Inc., 590 F.2d 168, 172 (5th Cir.1979) (“The obligation of an attorney not to misuse information acquired in the course of representation serves to vindicate the trust and reliance that clients place in their attorneys. A client would feel wronged if an opponent prevailed against him with the aid of an attorney who formerly represented the clients in the same matter.... [TJhis would undermine public confidence in the legal system as a means for adjudicating disputes.”). Accordingly, the obligation to protect a client’s confidential information exists as part of the larger duty of loyalty owed to clients to maintain the integrity of the attorney-client relationship.

Rutherford herself admitted attending, as legal counsel for Acacia, meetings with the inventors of the ’319 patent, other in-house counsel, and outside counsel regarding the acquisition of the ’319 patent, and admitted that Schlumberger’s Petrel product was a topic of discussion at those meetings. Her admitted “communication,” particularly the “concurrence with the recommendation by outside counsel and in-house counsel to acquire the [’]319. patent and to sue Schlumberger,” J.A. 825-28, would have entailed assessing the patent’s value as a litigation tool against Schlum-berger with knowledge of her former employer’s confidential information. See also J.A. 3648, 3651-57 (privilege logs from Dynamic 3D and Acacia describing litigation-related communications that involved Rutherford). Even if we were to reweigh the evidence, which in our role as an appellate court would be inappropriate, Dynamic 3D’s arguments' that Rutherford was not involved in the current suit are thus way wide of the mark. Acacia itself admitted that it failed to screen her from the case, Oral Arg. at 4:48-5:30, and both Dynamic 3D and Acacia provided privilege logs evincing Rutherford’s involvement in the present suit, J,A. 3648, 3651-52. Rutherford is therefore irrebuttably presumed to have possessed Schlumberger’s relevant confidential information and was properly found to have been disqualified.

The district court affirmed, the sound principle of not suborning the disloyalty of attorneys. It was inappropriate to hire a senior attorney, one intimately knowledgeable concerning a particular product, its competitors, and its associated business strategies and intellectual property, into a position in which she not only participated in but in fact played a significant role in acquiring a patent used to accuse her former employer’s product of patent infringement.

B. The Disqualification of Other In-House Counsel

Texas Disciplinary Rule 1.09(b) provides that “when lawyers are or have become members of or associated with a firm, none of them shall knowingly represent a client if any one of them practicing alone would be prohibited from doing so by paragraph (a).” Texas Disciplinary Rules r. 1.09(b). Comment 5 explains that this paragraph “extends paragraph (a)’s limitations on an individual -lawyer’s freedom to undertake a representation against that lawyer’s former client to all other lawyers who are or become members of or associated with the firm in which that lawyer is practicing.” Id, cmt.-5. The comment exemplifies the imputation rule as: “[I]f a lawyer severs his or her association with a firm and that firm retains as a client a person whom the lawyer personally represented while with the firm, that lawyer’s ability thereafter to undertake a representation against that client is governed by paragraph (a); and all other lawyers who are or become members of or associates with that lawyer’s new firm are treated in the same manner by paragraph (b),” Id. (emphasis added).

The corresponding ABA Model Rule similarly extends the prohibition to members of a lawyer’s new “firm”:

(a) While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rules 1.7 or 1.9, unless
(2) the prohibition is based upon Rule 1.9(a) or (b) and arises out of the disqualified lawyer’s association with a prior firm, and
(i) the disqualified lawyer is timely screened from any participation in the matter ...; [and]
(ii) written notice is promptly given to any affected former client....

ABA Model Rules r. 1.10. Comment 2 emphasizes that each lawyer.at a “firm” is “vicariously bound by the obligation of loyalty.” Id. cmt. 2.

■' Dynamic 3D argues that any presumption of disclosure to Acacia’s other in-house attorneys is questionable under Fifth 'Circuit law. If it exists, Dynamic 3D contends, that presumption was rebutted by uncontroverted evidence that there was no actual disclosure of confidential information from Rutherford to other Acacia attorneys. Dynamic 3D notes that Rutherford, Fischman, and Acacia’s CEO all testified that Rutherford’s involvement- with the patent at Acacia was very limited, and unrelated to Schlumberger. Dynamic 3D also faults the district court for failing to balance the parties’ interests as Dynamic 3D contends is required under Fifth Circuit law; no specific, harm to Schlumberger was ever identified, compared with the time and resources spent by Dynamic 3D on preparing for and prosecuting this case.

Acacia similarly argues that Fifth Circuit law does not require a presumption of disclosure for in-house attorneys because that presumption should only be grounded in the duty of loyalty resulting from personal representation. Because none of Acacia’s “licensing executives” have worked for Schlumberger and thus evidence no appearance of disloyalty, Acacia contends, there is no rationale for a presumption, and thus imputation should be analyzed as for co-counsel, ie., requiring actual disclosure. Acacia also asserts that the court’s factually unsupported findings contradict sworn statements and corroborating evidence that Rutherford did not actually disclose Schlumberger’s confidential information. Acacia further faults the court for shifting the burden of persuasion to Acacia. According to Acacia, Schlumberger never proved that Rutherford acquired confidential information; she was only presumed to have it. Moreover, Acacia argues, the disqualification unduly burdens its right to counsel; specifically, the decision effectively enjoins Acacia from ever asserting the patent against Schlumberger.

Schlumberger responds that under Fifth Circuit law on imputation to other in-house counsel, the analysis turns on whether the conflicted attorney’s representation is personal. Schlumberger notes that the district court found that, rebuttable or not, Dynamic 3D failed to rebut the presumption of disclosure with any evidence that Acacia screened Rutherford from work she performed at Schlumberger with others by instructing her not to work on related matters. Schlumberger additionally responds that Texas law does not require actual disclosure, only a genuine threat of disclosure.- Schlumberger further argues that Rutherford’s prior work made her privy to information relating to her later actions for Acacia, and thus her communications — in the form of approvals and concurrence with recommendations — tacitly disclosed her belief, based on Schlumber-ger’s confidential information, that Dynamic 3D’s claims had merit and that Schlum-berger’s defenses, including invalidity, were meritless.

Schlumberger also Contends that a balancing of interests is not reqúired when imputing a conflict to other in-house counsel. Even if the court were ’ to explicitly balance the parties’ interests, Schlumber-ger argues that the prejudice to Schlum-berger greatly outweighs the harm that Dynamic 3D inflicted on itself. The potential source of the conflict of interest was flagged early on in the case, but Acacia’s attorneys continued to work on the suit and delayed the filing of Schlumberger’s disqualification motion by opposing lifting the stay.

We agree with the district court that regardless whether the presumption was irrebuttable or rebuttable, there was a presumption that was not rebutted. Dynamic 3D and Acacia failed to show that knowledge of Schlumberger’s confidential information should not be imputed to Acacia’s other in-house counsel. The ethical standards are clear that lawyers similarly associated have had conflicts • imputed to them. See Texas Disciplinary Rules r. 1.10; ABA Model Rules r. 1.9(b). Although the Fifth Circuit does not subscribe to the “taint” theory.for imputing conflicts, it focuses-on remaining “sensitive to preventing conflicts of interest” and “rigorously applies] the relevant ethical standards,” See In re Am. Airlines, 972 F.2d at 611. Acacia, admitted at oral argument that there was no ethical screening wall or other objective measures implemented to prevent confidential information from being used,' to disadvantage Schlumberger. Here, there was a clear conflict of interest for Rutherford, and the principles underlying the ethical standards mandate extending the disqualification to Acacia’s other in-house attorneys.

Even without imputation, Fischman himself reported solely to Rutherford until after the potential conflict was raised to the court. In fact, all four Acacia employees in the Energy Group in Acacia’s Houston office reported to Rutherford. In attending meetings and making decisions such as retaining CEP as outside counsel, Rutherford communicated to the other in-house counsel that she supported the litigation strategy and thereby disclosed confidential information to the other Acacia attorneys.

Moreover, we disagree with Dynamic 3D and Acacia that a balancing test is required under Fifth Circuit law. Although some situations present facts in which, an analysis balances the competing interests of the parties in order to determine whether disqualification would be too , harsh a remedy, those situations are inherently fact-specific or presented in different procedural postures, e.g., in a petition for a .writ of mandamus. Even so, we find no error when the case was barely litigated before Dynamic 3D was on notice that Schlumberger identified the conflict. The complaint was filed in February; the case was stayed from April to August; the potential issue was brought to the court’s attention in April during the stay; and the motion was filed days after the stay was lifted in August. Dynamic 3D and Rutherford should have known that their actions were inappropriate.

C. The Disqualification of CEP

Dynamic 3D lastly disputes the “double imputation” of the conflict of interest to CEP on the ground that only actual disclosure warrants the disqualification of outside counsel under Fifth Circuit law. Dynamic 3D argues that Rutherford is only presumed to have acquired relevant confidential information, and that there is no record evidence of any disclosure of such information to CEP or any substantive communications between Rutherford and CEP. Dynamic 3D faults the district court for failing to identify any specific disclosures actually made, and for ignoring Dynamic 3D’s rebuttal evidence showing the absence of disclosures to CEP. Dynamic 3D further asserts that the decision to sue Schlumberger was made by Acacia’s CEO alone, and that Rutherford’s concurrence with that decision was not a communication substantive enough to constitute actual disclosure of confidential information. Dynamic 3D thus contends that the district court erred because Fifth Circuit law does not provide for a presumption of disclosure to co-counsel if there is no attorney-client relationship.

Schlumberger responds that the evidence supports the district court’s findings of substantive contacts and communications among Rutherford, Fischman, and CEP, which created a rebuttable presumption of disclosure. No such rebuttal was found by the court. Schlumberger contends that under the Texas Supreme Court’s interpretation of the Texas Disciplinary Rules, once Schlumberger showed sufficient contact or communication between Rutherford and CEP, the burden shifted to Dynamic 3D to show that there was no reasonable prospect that confidential information was disclosed, and no actual disclosure. Schlumberger further responds that even without a presumption of disclosure, there was actual disclosure to CEP by Rutherford’s concurring in various recommendations. Given her knowledge of Petrel, Schlumberger asserts, her opinion carried weight and was not merely “a wink and a nod” to encourage Acacia’s business and litigation decisions. See S.E.C. v. Rocklage, 470 F.3d 1 (1st Cir. 2006) (finding that “a wink and a nod” communicated confidential information constituting unlawful tipping).

We thus agree that the district court did not err in concluding that the disqualification should extend to CEP. Even beyond presumptions, there was sufficient evidence of Rutherford’s involvement in the selection of CEP as outside counsel and in the litigation against Schlumberger to support a finding of communication by conduct.

Dynamic 3D and Acacia’s arguments focus on presumptions and actual disclosure, ignoring the totality of the duty owed to clients. Here, Rutherford disregarded the duty of loyalty and communicated confidential information not only to other in-house counsel but also to outside counsel, and thus the district court did not clearly err in imputing the conflict of interest to outside counsel as well as to in-house counsel.

We accordingly find no error in the district court’s conclusion that Rutherford, Acacia’s other in-house counsel, and CEP were properly disqualified from representing Dynamic 3D in this case.

II. Dismissal Without Prejudice

Dynamic 3D argues that the district court lacked the legal authority to dismiss its case as a result of disqualifying its counsel. Dynamic 3D faults the district court for not specifying what “significant prejudice” to ■ Schlumberger justified dismissal. Moreover, Dynamic 3D asserts, there was no record evidence of any actual disclosure and thus the case could not have been “tainted” from Rutherford’s supposed breaches of confidence. The dismissal, Dynamic 3D avers, was overly harsh and constituted an abuse of discretion for not instead granting the company time to retain new counsel. Dynamic 3D distinguishes other cases that have been dismissed as a result of disqualified counsel as grounded in facts that the disqualified attorney was acting in some capacity as a party or that disclosure was clearly and specifically proven.

Schlumberger responds that the Fifth Circuit previously affirmed a district court’s decision to dismiss a case without prejudice after disqualifying an attorney based on an irrebuttable presumption of using confidential information to a former client’s disadvantage. In support of the district court’s decision, Schlumberger cites various cases in the Second Circuit and one in the Western District of Louisiana that were similarly dismissed without prejudice based on the disqualification of counsel.

Based on the facts of this case, we find that the district court in its abbreviated analysis on this point did not abuse its discretion in dismissing all pleaded claims without prejudice. The court did not err in finding that Dynamic 3D’s pleadings were drafted by lawyers presumed to possess Schlumberger’s confidential information and that the significant prejudice that Schlumberger would face, if the case were to continue, outweighed the harsh result of dismissal. We do not dispute the court’s conclusion. All aspects of the case were contaminated by Rutherford’s actions, from the purchase of the ’319 patent, to preparation for suit against Schlumberger, to the actual filing of the suit.

The district court’s decision is not without precedent In Doe v. A Corp., the Fifth Circuit affirmed a district court’s decision disqualifying counsel and dismissing part of the case without prejudice. 709 F.2d 1043, 1045, 1050-51 (5th Cir.1983). Some district courts have granted a period of time for a party to retain new counsel after disqualification, which appears to be typically 45 days. See, e.g., McIntosh v. State Farm Fire & Cas. Co., No. 1:06-cv-1080, 2008 WL 941640, at *2 (S.D. Miss. Apr. 4, 2008) (granting 45 days to retain new counsel after attorney disqualification, after which failure to do so or to proceed pro se would make case “eligible for dismissal without prejudice”); see also Sumpter v. Hungerford, No. 12-717, 2013 WL 2181296, at *11 (E.D. La. May 20, 2013) (ordering new counsel within 45 days after attorney disqualification). Others, however, have found that continuing a case after disqualification without dismissal would greatly prejudice a party because “the case would be tried oh a record developed primarily through the fruits of [the disqualified attorneyj’s unethical labor.” United States ex rel. Holmes v. Northrop Grumman Corp., No. 1:13-cv-85, 2015 WL 3504525 (S.D. Miss., June 3, 2015), aff'd, 642 Fed.Appx. 373, 378 (5th Cir.2016).

Dynamic 3D itself admits that, because of the disqualification of its attorneys, it would have to hire a new employee to manage the re-filing of the complaint, and retain new outside counsel. Dynamic 3D Br. 42-43. Not only would those actions likely take more than 45 days and effectively impact- the district court’s docket, but also the potential for prejudice would continue from the improper use of Schlum-berger’s confidential information in preparing the original pleadings. Based on the district court’s reasoning, forcing Dynamic 3D to break new ground with a fresh complaint and clean docket rather than to continue drawing from a poisoned well was not an abuse of discretion.

We also note that Dynamic 3D did not expressly request leave to amend its pleadings or substitute counsel, see J.A, 1317-18; even if it had, the district court would have had the discretion to deny that request, see Whitmore v. Victus, Ltd., 212 F.3d 885, 887 (5th Cir.2000). See also United States ex rel. Willard v. Humana Health Plan of Tex., Inc., 336 F.3d 375, 387 (5th Cir.2003) (finding no abuse of discretion in denying leave to amend when not expressly requested from district court).

We therefore conclude that the district court, did not abuse its discretion in dismissing all of the pleaded claims in Dynamic 3D’s complaint without prejudice.

CONCLUSION

We have considered the remaining arguments and conclude that they are unpersuasive. For the foregoing reasons, we conclude that the district court did not err in disqualifying Dynamic 3D’s counsel and in dismissing the complaint, and we therefore affirm the district court’s decision.

AFFIRMED

Costs

Costs to Schlumberger.

WALLACH, Circuit Judge,

concurring,

I concur entirely with the majority’s opinion, but write to briefly address the honor of our profession as attorneys. In the law, as in life, it is best if one’s conduct is such that when accused of malefaction, the community responds as one that “Ms. or Mr._simply doesn’t act that way,” The standard is always aspirational for we are human, but if we do not strive to reach- it, then perhaps we ought to consider that the game’s not worth the candle.

Ms. Rutherford’s conduct failed to meet minimal standards necessary to preserve public confidence in the legal system, and for that, she and others paid a price; That does not mean, however, that she should not, as a member of what is supposed to be an honorable profession, have held herself to a higher standard.


author: STOLL, Circuit Judge.

text:
    Cynthia G. NUTT, individually as surviving spouse and as the Executrix of the Estate of James N. Nutt, Sr., Deceased, James N. Nutt, Jr., Individually, Plaintiffs-Appellants v. UNITED STATES, Defendant-Appellee
    2015-5118
    United States Court of Appeals, Federal Circuit.
    Decided: September 12, 2016

      Andrew J. Maloney III, Kreindler & Kreindler LLP, New York, NY, argued for plaintiffs-appellants.
    Ryan Majerus, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by Deborah A. Bynum, Robert E. Kirschman, Jr., Benjamin C. Mizer, Alexander Orlando Cañizares. ' '
    Before DYK, MAYER, and STOLL, Circuit Judges.
   STOLL, Circuit Judge.

Cynthia Nutt and her son, James Nutt, Jr., (collectively, • “Appellants” or “Plaintiffs”) appeal a decision of the United States Court of Federal Claims granting the Government’s, motion for summary judgment that it did not breach an agreement to pay a claim arising under the Federal Tort Claims Act (“FTCA”). Nutt v. United States (Summary Judgment Order), 121 Fed.Cl. 579 (Fed.Cl.2015). For the reasons below, we affirm.

BACKGROUND

James Nutt, Sr. was hit and killed by a United States Army soldier driving an Army truck in 1983; Mr., Nutt’s wife, Cynthia Nutt — on behalf of herself as surviving spouse, the estate, and the cou-pie’s son, James Nutt, Jr. — filed a claim against the Government pursuant to 28 U.S.C. § 2674 of the FTCA. The parties entered into a settlement agreement (“the Agreement”) in 1985, in which Appellants received payments “in full satisfaction and final settlement of all claims.” Joint Appendix (“J.A.”) 25. The Agreement provided for payments resulting from the Government’s purchase of an annuity to benefit the Nutt family, as well as lump-sum payments from the Government to the family and its attorneys.

In particular, the Agreement set forth two obligations for the Government. First, in section I, it stated that the Government “agrees to purchase annuities which will pay the following amounts:” (a) $60,000 per year “commencing 30 days from the date of purchase of the annuity” to Cynthia Nutt, (b) lump-sum payments on specified “anniversaries of the purchase of the annuity” to Cynthia Nutt, and (c) lump-sum payments on specified “anniversaries of the purchase of the annuity” to James Nutt, Jr. Summary Judgment Order, 121 Fed.Cl. at 581-82; J.A. 25-26. Second, in section II, the Agreement stated that the Government “[a]s soon as practicable after approval of this agreement ... agrees to pay the sum of’ $240,000 to Cynthia Nutt and “twenty percent of the total cost to the United States of the entire settlement” to the Nutts’ attorneys. J.A. 26-27. The next paragraph of the Agreement provided that “[t]he payments by the United States set forth above shall operate as full and complete discharge of all payments to be made to and of all claims which might be asserted.” Summary Judgment Order, 121 Fed. Cl. at 582; J.A. 27.

In accordance with the Agreement, the Government purchased a structured annuity from Executive Life Insurance Company of New York (“ELNY”) in 1985. ELNY went into receivership in 1991. In 2011, the New York State Liquidation Bureau informed Appellants that “[d]ue to the liquidation, at this time it is anticipated that the amount of your benefit payments will ultimately be reduced.” Summary Judgment Order, 121 Fed.Cl. at 583. In 2013, Appellants began receiving payments reduced to approximately 45% of their expected benefits. Appellants were also informed that, as of 2015, they would not be receiving the anniversary payments.

In 2014, Appellants filed a complaint in the Court of Federal Claims alleging that the Government “breached its agreement to pay plaintiffs’ scheduled annuity payments and refused to pay future periodic and lump sum payments pursuant to the terms of the 1985 Settlement Agreement.” J.A. 20. The parties then cross moved for partial summary judgment on liability. Appellants argued that the Agreement “states that the future payments ‘shall be paid’ thereby rendering the future payments mandatory.” Summary Judgment Order, 121 Fed.Cl. at 585. The Government maintained that the Agreement only required it to purchase the annuity, not to guarantee the annuity’s future payments. Id. at 586.

The court granted summary judgment in the Government’s favor, determining that “[biased on the four corners of the Agreement, ... the Government was obligated to pay certain fixed sums to Plaintiffs and pay for an annuity.” Id. at 590. The court further concluded that the Government “was not obligated to guarantee or insure that annuity; its obligation ended at the initial purchase of the ELNY annuity.” Id. at 590-91. The court denied Appellants’ summary judgment motion and dismissed the complaint. The Nutts appealed to this court, and we have jurisdiction under 28 U.S.C. § 1295(a)(3).

Discussion •

“Summary judgment is appropriate when, drawing all justifiable inferences in the nonmovant’s favor, there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Amergen Energy Co. v. United States, 779 F.3d 1368, 1372 (Fed.Cir.2015) (internal citations and quotation marks omitted). We review the Court of Federal Claims’ grant of summary judgment de novo, applying the same standard applied by the court below. Barseback Kraft AB v. United States, 121 F.3d 1475, 1479 (Fed. Cir.1997):

I.

As a threshold issue, we first address the Government’s argument regarding alleged limits on how FTCA settlements may be paid by the Government. According to the Constitution’s Appropriations Clause, “funds may be paid out [by the Treasury] only on ... the express terms of a specific statute.” OPM v. Richmond, 496 U.S. 414, 432, 110 S.Ct. 2465, 110 L.Ed.2d 387 (1990); see U.S. Const, art. I, § 9, cl. 7. The Government contends that the FTCA constitutes a limited waiver of the Government’s sovereign immunity and, as such, only Congress can set the terms for paying claims that fall within that waiver of sovereign immunity. The Government argues that, in this settlement, it did not have authority from Congress to pay or guarantee future periodic payments under the FTCA.

The FTCA “waive[s] the sovereign immunity of the United States for certain torts committed by federal employees,” FDIC v. Meyer, 510 U.S. 471, 475, 114 S.Ct. 996, 127 L.Ed.2d 308 (1994), but restricts the type of remedy a court may order for injuries to a private person caused by the negligent or wrongful act of a Government employee. The FTCA states that federal district courts “have exclusive jurisdiction of civil actions on claims against the United States, for money damages.” 28 U.S.C. § 1346(b)(1) (emphasis added). The Government argues in this case that a court may only award money damages under the FTCA in the form of a lump-sum payment. The Government insists that cases from other circuits dictate that “[a]bsent an additional waiver of sovereign immunity or specific statutory authority granted by Congress, no authority exists for payment of damages in future installments under the FTCA.” Gov’t Br. 36-37. Several of the cases the Government relies on to support its position, however, reject its narrow interpretation of the FTCA and specifically acknowledge Appellants’ argument here that parties can agree to structure a damages plan to include future installment payments.

For example, in Reilly v. United States, 863 F.2d 149 (1st Cir.1988), it was the Government that proposed a . damages structure where the award would be payable over time in periodic installments, much like the damages plan Appellants seek in this case. In that case, the First Circuit stated that “[p]eriodic damage awards are permissible in lieu of lump sums in certain situations,” such as “if a controlling statute permits.” Id. at 169 n.16 (internal citations omitted). Relevant here, it also specified that ,“[s]uch an outcome can also be achieved by agreement of the parties in interest ... or where a trust, annuity, .or other prophylactic arrangement is necessary to ensure that the injured party will in fact receive his due.” Id. (emphasis added)- (internal citations omitted). Put another way, the First Circuit recognized that “[w]hen a tortfeasor loses at trial, then — absent a statute or the parties’ contrary agreement, ... — it must pay the judgment in one fell swoop.” Id. at 170 (emphasis added).

In Vanhoy v. United States, 514 F.3d 447, 454 (5th Cir.2008), the Fifth Circuit “refuse[d] to deviate from a conventional lump-sum award” by ordering that the district court create a reversionary trust. The Fifth Circuit, however, expressly recognized that “particular circumstances,” including “agreement of the parties in interest,” could warrant periodic damage awards. Id. at 454 & n.34 (quoting Reilly, 863 F.2d at 169 n.16). The propriety of periodic damage awards when agreed to by the parties is explicitly contemplated by our sister circuits, but notably left out of the Government’s discussion of these cases here. Gov’t Br. 36-37. The Government’s persistence in this case — that no authority exists for paying damages in periodic installments — fails to account for circumstances where the parties expressly agree to such payments. Like the .FTCA cases from the First and Fifth Circuits, we reiterate that periodic damage awards under the FTCA may be permissible in lieu of lump-sum payments with one of the recognized exceptions, including by agreement of the parties. See Reilly, 863 F.2d at 169 n.16; Vanhoy, 514 F.3d at 454.

II.

We next turn to the language of the Agreement itself, which both parties argue is unambiguous in supporting their respective positions. Appellants argue that the terms of the Agreement “unambiguously obligate the Government to ensure full payment of all annual payments and periodic lump sums it promised.” Appellant Br. 11, The Government argues that the terms of the Agreement “unambiguously require[ ] only the purchase of annuities.” Gov’t Br. 18. Where the language is unambiguous, as the court determined, the “inquiry ends and the plain language of the Agreement controls,” so extrinsic evidence need not be considered. Coast Fed. Bank, FSB v. United States, 323 F.3d 1035, 1041 (Fed.Cir.2003). We thus determine whether the plain language of the Agreement is unambiguous, and if so, which party’s position it supports.

' The relevant provisions of the Agreement state as follows:

[3] As soon as practicable after approval of this settlement, the United States of America agrees to purchase annuities which will pay the following amounts:
I.
[4] 1. a. [$60,000 per year] to Cynthia G. Nutt, her estate or designated beneficiary for as long as [she] shall live or for thirty (30) years certain, whichever is later.
[5] b. On each of the following anniversaries of the purchase of the annuity, the following specified lump sum payments shall be paid to Cynthia G. Nutt, her estate or designated beneficiary:
[listing anniversaries and amounts]
[6] 2. On each of'the following anniversaries of the purchase of the annuity, the following specified lump sum payments shall be paid to James N. Nutt, Jr., his guardian, his estate or designated beneficiary.
[listing anniversaries and amounts]
⅜ # *
II...
[10] As soon as practicable after approval of this agreement, the United States of America further agrees to pay [$240,-000.00] to Cynthia G. Nutt ... and a sum equal to twenty percent of the total cost to the United States of the entire settlement distributed to the [Plaintiffs’ attorneys].
[11] The payments by the United States set forth above shall operate as full and complete discharge of all payments to be made to and of all claims which might be asserted on behalf of [Plaintiffs,] ... provided, however, that if the insurance company hereinafter referred to defaults in the performance of its obligations under the annuity agreement with the United States, [Plaintiffs] ... shall have standing to sue the said insurance company for breach of contract. In such event, the United States shall assist [Plaintiffs], their heirs or personal representatives, in the prosecution of said suit to the extent permitted by applicable laws and regulations.
[12] The United States represents to [Plaintiffs] that the insurance company it selects for the purchase of the annuities will be one which is generally regarded as very sound in the insurance industry and to be among the class or group of insurance companies which are rated Excellent or better by Best’s Guide to Life Insurance Companies, 1982 Edition, published by A.M. Best Company, Oldwick, New Jersey 07880.
[14] The United States will furnish to [Plaintiffs] ... a certificate of insurance or other evidence of the purchase by the United States of annuities in an amount sufficient to satisfy those obligations of the Unitéd States under this Settlement Agreement which are to be satisfied by the purchase of the annuities.

J.A. 25-27.

At.the outset, the Agreement provides that-“the United States of America agrees to purchase annuities which will pay [certain periodic amounts].” J.A. 25 ¶ 3. We agree with the Court of Federal Claims that the “fairest reading” of this provision is that the Government did not agree to pay future sums, but agreed only to purchase annuities. Summary Judgment Order, 121 Fed.Cl. at 588. As the sentence’s syntax dictates, the phrase “which will pay” modifies “annuities,” signaling that the annuities (and not the Government) will pay the future amounts.

Appellants point to paragraph 11 of the Agreement, which states that the’ “payments by the United States set forth above shall operate as full and complete discharge of all payments to be made.” J.A. 27. Appellants argue that this reference to “payments by the United States” covers the future sums of paragraphs 4-6, meaning that the Government promised to guarantee the payments resulting from the annuities. Appellants’ reading of paragraph 11, however, conflicts with the overall framework and context of the Agreement.

First, the provision “payments by the United States set forth above” more naturally refers to the purchase of the annuity referenced in paragraph 3 and the lump-sum payments in paragraph 10. These two paragraphs designate that “the United States of America agrees to purchase annuities” and “the United States of America further agrees to pay’-’ the lump sums. J.A. 25-27. The Agreement does not provide for any other “payments” by the United States. The future payments set out in section- i, paragraphs 4-6, are specified as being paid by the annuity, and the Agreement does not indicate that the United States agreed to guarantee these future payments. J.A. 25-26. The United States is not mentioned in the paragraphs specifying the future payments to be paid out by the annuity. In contrast, section 2 of the Agreement sets out an obligation to pay, requiring the Government to “pay” -certain lump-sum payments directly to Appellants. It is the fulfillment of the Government’s obligation to perform in section 1 and, the obligation to pay in section 2 that, discharge the Government’s responsibility under the Agreement, as evident .by interpreting these provisions together.

Appellants’ view that “payment by the United States” includes the future sums paid out by the annuity conflicts with other provisions of the Agreement. Paragraph 11, for example, provides that if the insurance company defaults, Appellants have standing to sue the insurance company, and the Government will assist Appellants in such suit. J.A. 27. If “payments by the United States” referred to the future sums, making the Government a guarantor of the insurance company, it would be nonsensical for the Government to agree to assist Appellants in a suit against the insurance company. Similarly, the Government agreed in paragraph 12 to select a “very sound” insurance company rated “excellent or better.” Id. The Government’s agreement to select an insurance company of a certain quality, at minimum, suggests that Appellants sought to reduce their risk by having the Government select a “very sound” insurance company, rather than requiring that the Government act as a guarantor.

In addition, paragraph 14 of the Agreement provides clear support for the court’s interpretation of “payments by the United States.” Id. It states that the Government will furnish to Appellants “a certificate of insurance or other evidence of the purchase by the United States of annuities in an amount sufficient to satisfy those obligations under the settlement agreement which are to be satisfied by the purchase of the annuities.” Id. (emphases added). This provision shows that the Government’s obligations with respect to the future sums that were to be made by the annuities were satisfied “by the purchase of the annuities.” Id.

The plain language of the Agreement makes clear that the Government agreed to purchase annuities and pay certain lump-sum payments to Appellants, not to make future payments or guarantee that the future payments be made if the insurance company defaulted. Under the Agreement’s terms, the Government’s obligations were satisfied upon making the lump-sum payments and purchasing the annuity. Furthermore, the Court of Federal Claims’ interpretation of the Agreement and its analysis of the principle of sovereign immunity are in line with the FTCA cases discussed above. The court properly concluded that, in addition to the Agreement’s plain language, the “principle [of sovereign immunity] further compels a finding that the Agreement did not obligate the Government to guarantee future payments, because it did not unequivocally promise to do so.” Summary Judgment Order, 121 Fed.Cl. at 590 (emphasis added). Because the terms of the Agreement unambiguously show that the Government agreed to purchase annuities, not to guarantee future periodic payments, we need not address the parties’ arguments on extrinsic evidence. See Coast Fed. Bank, 323 F.3d at 1040-41.

III.

Finally, we address the effect of Massie v. United States, 166 F.3d 1184 (Fed.Cir. 1999), on this case. In Massie, this court reversed the Court of Federal Claims’ grant of summary judgment that the Government did not breach an agreement to pay a claim made under the Military Claims Act (“MCA”). We concluded that the Agreement “requires [the Government] to guarantee all the annuity disbursements,” pointing to language that the annuity “will result in distributions” and that the payments were “guaranteed” and “shall be paid.” Id. at 1190-91. The court in this case determined that Massie did not control because it involved an MCA claim, whereas this case involves an FTCA claim. Summary Judgment Order, 121 Fed.Cl. at 588. We are not persuaded that this distinction makes a difference in the applicability of Massie.

Nonetheless, we distinguish Massie on different grounds. In Massie, the agreement expressly stated that the “deferred lump-sum payments ... are guaranteed” and the annuity payments “are guaranteed for fifteen (15) years.” 166 F.3d at 1186-87. With these express guarantee provisions, we reversed the trial court’s holding that the Government did not agree to guarantee the annuity payments. But the Agreement here does not have similar guarantee language. Moreover, unlike the Massie settlement agreement, the Agreement here contemplates that in the event of a default by the insurance company, the plaintiffs “shall have standing to sue the said insurance company for breach of contract” and “the United States shall assist ... in the prosecution of said suit.” J.A. 27. The Agreement says nothing about the Government’s obligations to pay the annuity in the event of a default. As such, we decline to extend Massie to the facts of this case, where the Agreement’s language does not unambiguously show that the Government agreed to guarantee the future payments by the annuity.

Conclusion

For the reasons above, we affirm the judgment of the Court of Federal Claims.

AFFIRMED

Costs

No Costs