Reese v. Verizon California, Inc. , 498 F. App'x 980 ( 2012 )

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
__________________________
MORRIS REESE,
Plaintiff-Appellant,
v.
VERIZON CALIFORNIA, INC.,
Defendant-Appellee,
AND
AT&T CALIFORNIA,
Defendant-Appellee.
__________________________
2012-1048
__________________________
Appeal from the United States District Court for the
Central District of California in Case No. 11-CV-1934,
Judge S. James Otero.
____________________________
Decided: December 21, 2012
____________________________
RACHEL CLARK HUGHEY, Merchant & Gould, P.C., of
Minneapolis, Minnesota, argued for plaintiff-appellant.
MICHAEL J. SONGER, Crowell & Morning, LLP, of
Washington, DC, argued for both defendants-appellees.
REESE v. VERIZON CALIFORNIA 2
With him on the brief were JENNIFER H. BURDMAN, for
defendant-appellee, AT&T California; and KEVIN P.
ANDERSON and JAMES H. WALLACE, Wiley Rein LLP, of
Washington, DC, for defendant-appellee Verizon Califor-
nia.
__________________________
Before LOURIE, DYK, and MOORE, Circuit Judges.
Opinion for the court filed by Circuit Judge LOURIE.
Dissenting opinion filed by Circuit Judge MOORE.
LOURIE, Circuit Judge.
Morris Reese (“Reese”) appeals from the judgment of
the United States District Court for the Central District
of California dismissing his first amended complaint
against Verizon California Inc. (“Verizon”) and AT&T
California (“AT&T”) (collectively, “Appellees”) based on
the doctrine of collateral estoppel. Order Granting Defs.’
Mot. to Dismiss, Reese v. Verizon Cal. Inc., No. 11-01934
(C.D. Cal. Aug. 11, 2011), ECF No. 26. Because collateral
estoppel was applicable and the district court did not
abuse its discretion in applying collateral estoppel, we
affirm.
BACKGROUND
Reese owns U.S. Patent 6,868,150 (the “’150 patent”),
directed to methods for providing landline telephone
Caller ID with Call Waiting. In May 2007, Reese asserted
the ’150 patent against Southwestern Bell Telephone Co.
(AT&T’s operating telephone company in Texas) and GTE
Southwest Inc. (Verizon’s operating telephone company in
Texas) in the United States District Court for the Eastern
District of Texas; parent companies AT&T, Inc. and
Verizon Communications Inc. were voluntarily dismissed
3 REESE v. VERIZON CALIFORNIA
from that litigation. Reese v. Sw. Bell Tel., L.P., No. 07-
219 (E.D. Tex. Dec. 22, 2008) (Reese I).
In Reese I, Reese alleged that the defendants in-
fringed at least claims 1, 7, 13, 18, 23, 25, 32, and 36 of
the ’150 patent, but following an unfavorable claim con-
struction order, Reese stipulated to the entry of final
judgment of noninfringement of claims 1, 7, 13, 18, 25,
and 36.1 Stipulation & Joint Mot. for Dismissal & Final
J., Reese v. Sw. Bell Tel., L.P., No. 07-219 (E.D. Tex. Dec.
19, 2008), ECF No. 15 (“Stipulation”). Article 2 of the
Stipulation states that “[t]he parties also stipulate to the
dismissal with prejudice of all infringement claims and
assertions by Plaintiff with respect to claims 23 and 32 of
the ’150 patent.” Id. Article 4 of the Stipulation states:
As this stipulation resolves all claims and coun-
terclaims, the Parties stipulate to the entry of fi-
nal judgment. The parties stipulate that the
entry of final judgment resulting from this stipu-
lation shall constitute a final judgment on the
merits of Plaintiff’s claims for purposes of res ju-
dicata, collateral estoppel, issue preclusion and
claim preclusion.
Id.
In March 2011, Reese sued AT&T and Verizon in the
United States District Court for the Central District of
California, reasserting that the same landline telephone
services offering so-called Call Waiting ID, which were at
issue in Reese I, infringed claims 23 and 32 of the ’150
patent. AT&T then filed a motion to dismiss Reese’s first
amended complaint under Fed. R. Civ. P. 12(b)(6), which
1
Reese later appealed the Eastern District of
Texas’s claim construction ruling, which we affirmed in
all respects. Reese v. Sw. Bell Tel., L.P., 333 F. App’x 570
(Fed. Cir. 2009).
REESE v. VERIZON CALIFORNIA 4
Verizon joined. The district court granted the motion to
dismiss on the ground that the case was barred by collat-
eral estoppel based on the judgment in Reese I. Order
Granting Defs.’ Mot. to Dismiss, Reese v. Verizon Cal. Inc.,
No. 11-01934 (C.D. Cal. Aug. 11, 2011), ECF No. 26.
The court concluded that AT&T and Verizon had es-
tablished all the elements of collateral estoppel required
under Ninth Circuit law: (1) there was an undisputed
identical issue because Reese alleged the same claims
regarding the same patent as in the Reese I proceeding,
such that the present action would involve the same rule
of law, similar evidence, and overlapping arguments; (2)
final judgment on the merits was reached in Reese I,
where Reese specifically agreed to dismiss claims 23 and
32 of the ’150 patent with prejudice and stipulated that
his dismissal would constitute a final judgment on the
merits for the purposes of collateral estoppel and issue
preclusion; and (3) there was undisputed privity between
the parties involved in Reese I and the instant action. Id.
at 3–5. In response, Reese filed a motion for reconsidera-
tion, which the district court denied. Order Den. Pl.’s
Mot. for Recons., Reese v. Verizon Cal. Inc., No. 11-01934
(C.D. Cal. Sep. 21, 2011), ECF No. 34.
Reese timely appealed the district court’s rulings. We
have jurisdiction under 28 U.S.C. § 1295(a)(1).
DISCUSSION
The grant of a motion to dismiss under Fed. R. Civ. P.
12(b)(6) is reviewed de novo, accepting all factual allega-
tions in the complaint as true and construing them in the
light most favorable to the nonmoving party. Skilstaf,
Inc. v. CVS Caremark Corp., 669 F.3d 1005, 1014 (9th Cir.
2012); Cambridge v. United States, 558 F.3d 1331, 1335
(Fed. Cir. 2009).
5 REESE v. VERIZON CALIFORNIA
Application of the principles of collateral estoppel is
not a matter within our exclusive jurisdiction; thus, we
apply the law of the circuit in which the district court sits,
here the Ninth Circuit. Applied Med. Res. Corp. v. United
States Surgical Corp., 435 F.3d 1356, 1360 (Fed. Cir.
2006); Pharmacia & Upjohn Co. v. Mylan Pharm., Inc.,
170 F.3d 1373, 1381 n.4 (Fed. Cir. 1999). In the Ninth
Circuit, the availability of collateral estoppel is a mixed
question of law and fact reviewed de novo. See In re
Lopez, 378 F. App’x 610, 613 (9th Cir. 2010); Dias v.
Elique, 436 F.3d 1125, 1128 (9th Cir. 2006); Plaine v.
McCabe, 797 F.2d 713, 718 (9th Cir. 1986). Once it is
determined that collateral estoppel is available, the Ninth
Circuit reviews a district court’s decision to accord preclu-
sion and apply collateral estoppel for an abuse of discre-
tion. Id; see also Applied Med. Res., 435 F.3d at 1360.
The Ninth Circuit also reviews de novo a district court’s
interpretation of a consent judgment. Skilstaf, 669 F.3d
at 1014.
Collateral estoppel, or issue preclusion, prevents a de-
fendant from having to relitigate issues that have been
fully and fairly litigated in a previous action. Pharmacia
& Upjohn, 170 F.3d at 1379. More specifically, collateral
estoppel in a patent case prevents a plaintiff who previ-
ously litigated a claim that certain technology infringed
its patent (and lost) from taking “another bite at the
apple” by again asserting that the same technology in-
fringes the same patent. See Transocean Offshore Deep-
water Drilling, Inc. v. Maersk Contractors USA, Inc., 617
F.3d 1296, 1312 (Fed. Cir. 2010) (finding collateral estop-
pel where the accused technology in the second case was
identical to that in the first case). The Ninth Circuit has
found collateral estoppel where: (1) the issue necessarily
decided at the previous proceeding is identical to the one
that is currently sought to be relitigated; (2) the first
REESE v. VERIZON CALIFORNIA 6
proceeding ended with a final judgment on the merits;
and (3) the party against whom collateral estoppel is
asserted was a party or in privity with a party in the first
proceeding. Skilstaf, 669 F.3d at 1021; Reyn’s Pasta
Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 (9th Cir.
2006).2 There is no dispute on appeal that the privity
required is found here;3 thus, the question before us is
whether the first two prongs of the test are satisfied.
Reese now argues that there is no identical issue be-
tween this action and the previous case because the
dispute at bar, i.e., infringement of claims 23 and 32 of
the ’150 patent, was not “actually litigated” and expressly
decided by the district court in Reese I. Similarly, al-
though Reese concedes that the stipulated dismissal with
prejudice in Reese I did constitute a final judgment, he
argues that it was not a final judgment for the purposes of
collateral estoppel as to claims 23 and 32 of the ’150
patent because the issue of infringement of those claims
was not decided. Reese further contends that Arizona v.
California, 530 U.S. 392, 414 (2000), establishes a general
rule that collateral estoppel does not apply to consent
judgments because in those situations there will not have
been a decision on an issue in the underlying case. Reese
thus seeks to characterize the Stipulation as a consent
judgment or settlement whereby the parties resolved the
2
Reese argues a four-part test for collateral estop-
pel, citing Syverson v. International Business Machines
Corp., 472 F.3d 1072, 1078 (9th Cir. 2007), but concedes
that the articulation of the test recited herein is function-
ally identical. Appellant Br. 14 n.6.
3
Reese does not acquiesce in the district court’s
finding that privity exists on both sides of the litigation,
but concedes that collateral estoppel requires only that
privity exist on the side of the party against whom estop-
pel is asserted. See Syverson, 472 F.3d at 1078. Reese
was a party to both suits.
7 REESE v. VERIZON CALIFORNIA
issue of infringement of six other claims of the ’150 patent
while merely dismissing the infringement assertions of
claims 23 and 32. Reese asserts that Appellees did not
stipulate to noninfringement of claims 23 and 32 as they
did the others, so there is no identical issue here, and that
it is also irrelevant that he dismissed his claims with
prejudice because doing so did not resolve the undecided
issue of infringement of claims 23 and 32 for the purposes
of collateral estoppel.
Appellees respond that Reese had a full and fair op-
portunity to litigate infringement in Reese I and did so; he
had his day in court and simply stopped after an adverse
claim construction ruling in the prior case. In the present
case, Reese has again accused precisely the same prod-
ucts, viz., Call Waiting ID of landline telephone services,
of infringing precisely the same patent claims, viz., claims
23 and 32 of the ’150 patent. Appellees argue that an
identical issue does not have to be “decided” to have
preclusive effect because Reese expressly agreed in the
Stipulation that the final judgment in Reese I would
preclude future patent infringement suits on Call Waiting
ID services. Moreover, Appellees assert that consent
judgments are routinely given preclusive effect when that
was the intent of the parties, and the present action is
distinguishable from Arizona because the parties in Reese
I did more than merely settle their case with a consent
judgment. The Stipulation ended Reese I with a final
judgment on the merits with Reese’s dismissal with
prejudice; although he could have reserved the right to
litigate infringement in the future, he expressly consented
otherwise. Consequently, Appellees contend that collat-
eral estoppel applies here because the intent and scope of
the Stipulation are specific and unambiguous, the accused
products and technology are the same, and the asserted
patent claims are the same. We agree.
REESE v. VERIZON CALIFORNIA 8
We have previously held that issue preclusion or col-
lateral estoppel may indeed arise by reason of stipulated
judgment or consent decree, under which the primary
consideration is the intent of the parties with respect to
its preclusive effect. Hartley v. Mentor Corp., 869 F.2d
1469, 1471 (Fed. Cir. 1989) (applying Ninth Circuit law to
an appeal from C.D. Cal.). In Yachts America, Inc. v.
United States, 673 F.2d 356, 361 (Ct. Cl. 1982), one of our
predecessor courts also held that broad, far-reaching
preclusive language in a consent decree terminating a
prior litigation and dismissing with prejudice “all other
issues” constituted a final judgment on an issue not
specifically addressed in the agreement, and therefore
that the doctrine of collateral estoppel precluded relitiga-
tion of that issue.
Subsequently, and contrary to Reese’s interpretation,
the Supreme Court in Arizona also indicated that settle-
ments may occasion collateral estoppel when it is clear
that the parties intended their agreement to have such an
effect. Arizona, 530 U.S. at 414. Indeed, the Court con-
cluded that collateral estoppel did not apply in that case
because the consent judgment in the first action was
“ambiguous as between mutually exclusive theories of
recovery” and therefore “too opaque to serve as a founda-
tion for issue preclusion.” Id. at 417–18. However, that is
not the case before us.
Echoing Hartley, this case presents a situation in
which a patentee clearly dismissed his claim with preju-
dice; such a stipulated judgment operates as an adverse
adjudication on the merits of his claim. To prevail, Reese
needed to show that the parties in Reese I did not intend
for their stipulated judgment to have any preclusive effect
on the issue of infringement. He did not make such a
showing. The Stipulation is not ambiguous: Article 4
specifically recites that “this stipulation resolves all
9 REESE v. VERIZON CALIFORNIA
claims.” Stipulation 2 (emphasis added). Reese’s only
theory of recovery in Reese I was infringement, and the
Stipulation explicitly states that the parties intended
their agreement to have preclusive effect: the dismissal
“shall constitute a final judgment on the merits of Plain-
tiff’s claims for purposes of res judicata, collateral estop-
pel, issue preclusion, and claim preclusion.” Id. Reese
argues that the “mere” dismissal of claims 23 and 32, as
opposed to the stipulation of noninfringement of the other
claims, avoids the effect of collateral estoppel. The an-
swer to that argument rests with the fact that Reese
agreed to dismiss claims 23 and 32 with prejudice and
stipulated that the dismissal would constitute a final
judgment for the purpose of collateral estoppel. The
district court here is simply enforcing Reese’s own agree-
ment. Accordingly, we conclude that collateral estoppel
was applicable here because Reese explicitly consented to
dismiss with prejudice his previous action involving the
same patent claims asserted against the same technology
and agreed to an entry of final judgment on the merits
regarding infringement for the express purpose of pre-
cluding future duplicative litigation.
Finally, having determined that collateral estoppel
was applicable, the district court did not abuse its discre-
tion in applying collateral estoppel. The Ninth Circuit
has held that a motion to dismiss may be supported by
collateral estoppel, particularly when the parties have
negotiated a consent judgment or settlement agreement
to have preclusive effect. Skilstaf, 669 F.3d at 1021–25;
Reyn’s Pasta, 442 F.3d at 745–47. All the required ele-
ments having been met, fairness does not weigh against
the application of collateral estoppel in this case. In re
Freeman, 30 F.3d 1459, 1467 (Fed. Cir. 1994).
REESE v. VERIZON CALIFORNIA 10
CONCLUSION
We have considered each of the parties’ remaining ar-
guments and find them unpersuasive. In view of the
foregoing, the judgment of the district court is affirmed.
AFFIRMED
NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
__________________________
MORRIS REESE,
Plaintiff-Appellant,
v.
VERIZON CALIFORNIA, INC.,
Defendant-Appellee,
AND
AT&T CALIFORNIA,
Defendant-Appellee.
__________________________
2012-1048
__________________________
Appeal from the United States District Court for the
Central District of California in case no. 11-CV-1934,
Judge S. James Otero.
__________________________
MOORE, Circuit Judge, dissenting.
The majority concludes that the language of a stipula-
tion in an earlier case (Reese I) against different parties
collaterally estops Mr. Reese from bringing his suit. I am
perplexed by the majority’s claim that the “extent and
scope of the Stipulation are specific and unambiguous.”
Maj. Op. at 7. With all due respect, I find that the Stipu-
lation unambiguously supports the opposite view—
REESE v. VERIZON CALIFORNIA 2
namely that the parties intended that collateral estoppel
would attach to the claims for which final judgment of
noninfringement on the merits was admitted, but not the
claims that were dismissed without decision. At a mini-
mum, the Stipulation is ambiguous, and if it is ambigu-
ous, under governing Ninth Circuit law, collateral
estoppel does not apply.
The Stipulation distinguishes between claims 1, 7, 13,
18, 25, and 36 of the ’150 patent which the parties stipu-
lated to final judgment of noninfringement, and claims 23
and 32 of the ’150 patent which the parties stipulated to
dismissal only, not final judgment on the merits. Walking
through the Stipulation, the distinctions are clear. To
begin, the Stipulation is titled, “Stipulation and Joint
Motion for Dismissal and Final Judgment”—two separate
things. The first sentence of the Stipulation explains that
the parties move for “entry of final judgment of non-
infringement by Defendants of certain asserted claims
and for dismissal of the remaining asserted claims.” J.A.
157.
In paragraph 1, the parties stipulate to “final judg-
ment of non-infringement of claims 1, 7, 13, 18, 25, and 36
of the ’150 patent.” Id. In paragraph 2, the parties stipu-
late to “dismissal with prejudice of all infringement
claims and assertions by Plaintiff with respect to claims
23 and 32 of the ’150 patent.” J.A. 158. Hence, para-
graphs 1 and 2 stipulate to different things—entry of final
judgment on the merits for some claims and dismissal for
others. There is no decision or stipulation to nonin-
fringement contained in paragraph 2. Never does the
patentee concede that claims 23 and 32 are not infringed.
In fact, as all parties agree, the patentee actually won the
claim construction arguments it made on claims 23 and
32. (The majority’s suggestion that Mr. Reese “simply
stopped after an adverse claim construction ruling in a
3 REESE v. VERIZON CALIFORNIA
prior case,” Maj. Op. at 7, is incorrect with regard to
claims 23 and 32.)
In paragraph 4, upon which the majority’s collateral
estoppel decision largely rests, the Stipulation says:
As this stipulation resolves all claims and coun-
terclaims, the Parties stipulate to entry of final
judgment. The Parties stipulate that the entry of
final judgment resulting from this stipulation
shall constitute a final judgment on the merits of
Plaintiff’s claims for purposes of res judicata, col-
lateral estoppel, issue preclusion and claim pre-
clusion.
J.A. 158. This paragraph unambiguously results in
collateral estoppel with regard to the claims upon which
final judgment on the merits is entered. It clearly and
unambiguously says so. But what it does not say is that
the parties stipulate that collateral estoppel will bar
future cases involving the claims that were dismissed.
Claims 23 and 32 were dismissed—this is not disputed.
Paragraph 4 is silent as to the dismissed claims. By its
clear language it applies only to the claims upon which
the parties stipulate to judgment on the merits. Final
judgment on the merits is not entered upon the dismissed
claims.
The Final Judgment in Reese I reinforces this distinc-
tion:
IT IS ORDERED that Plaintiff’s claims for in-
fringement of claims 23 and 32 of U.S. Patent No.
6,858,150 (the ’150 patent) are DISMISSED
WITH PREJUDICE;
IT IS FURTHER ORDERED that, based upon
the claim construction issued by this Court on
September 24, 2008, claims 1, 7, 13, 18, 25 and 36
REESE v. VERIZON CALIFORNIA 4
of the ’150 patent are found to be NOT
INFRINGED by Defendants and for that reason,
judgment is entered against Plaintiff on those
claims.
J.A. 166 (emphasis in Final Judgment). The court did not
order any judgment on the merits for claims 23 and 32.
With regard to claims 23 and 32, the order did not refer-
ence the claim construction or make any determinations
regarding infringement. I simply do not understand from
these straightforward documents how the majority could
fail to recognize the distinction between claims 1, 7, 13,
18, 25, and 36 on the one hand and claims 23 and 32 on
the other.
If there was ambiguity in paragraph 4 with regard to
which claims collateral estoppel attaches, we cannot
affirm. Ninth Circuit law is clear that for a stipulated
judgment to give rise to claim preclusion, the language of
the Stipulation must unambiguously evince the parties’
intent for it to have that effect. See Foster v. Hallco Mfg.
Co., 947 F.2d 469, 481 (Fed. Cir. 1991) (applying Ninth
Circuit law that courts should avoid “speculat[ing] as to
the intent of the parties based on broad, general and
ambiguous language”); Sekaquapetwa v. MacDonald, 575
F.2d 239, 246 (9th Cir. 1978) (holding that the default
rule is that “an issue is not deemed to be actually litigated
if it is the subject of a stipulation between parties”) (in-
ternal quotation mark omitted); see also Arizona v. Cali-
fornia, 530 U.S. 392, 414 (2000).1 Paragraph 4 clearly
applies to the claims upon which final judgment of nonin-
fringement on the merits was entered; but that paragraph
equally clearly does not evidence an intent to agree to
1 Yachts America, Inc. v. United States, 673 F.2d
356 (Ct. Cl. 1982), a case relied upon by the majority, does
not apply Ninth Circuit law.
5 REESE v. VERIZON CALIFORNIA
collateral estoppel of the claims that were dismissed
without judgment.
Finally, I do not understand why the majority places
the burden on Mr. Reese “to show that the parties . . . did
not intend for their stipulated judgment to have any
preclusive effect on the issue of infringement.” Maj. Opp.
at 8. Ninth Circuit law makes clear that “[t]he party
asserting preclusion bears the burden of showing with
clarity and certainty what was determined by the prior
judgment.” Hydraunautics v. Filmtec Corp., 204 F.3d 880,
885 (9th Cir. 2000) (quoting Offshore Sportswear, Inc. v.
Vuarnet Int’l, B.V., 114 F.3d 848, 850 (9th Cir. 1997)).
The majority’s burden-shifting is especially odd given that
we must construe all factual allegations in the complaint
in the light most favorable to the nonmoving party, Mr.
Reese. See Skilstaf, Inc. v. CVS Caremark Corp., 669 F.3d
1005, 1014 (9th Cir. 2012).
The Stipulation is clear. The judgment is clear. The
parties intended collateral estoppel to apply to the claims
upon which judgment of noninfringement was entered,
not the dismissed claims. The district court thus erred by
dismissing Mr. Reese’s complaint, and I would reverse.