Ceats, Inc. v. Continental Airlines, Inc. , 755 F.3d 1356 ( 2014 )

United States Court of Appeals
for the Federal Circuit
______________________
CEATS, INC.,
Plaintiff-Appellant,
v.
CONTINENTAL AIRLINES, INC., ALASKA
AIRLINES, INC., HORIZON AIR INDUSTRIES, INC.,
DELTA AIR LINES, INC., JETBLUE AIRWAYS
CORPORATION, UNITED AIR LINES, INC.,
VIRGIN AMERICA, INC., US AIRWAYS, INC.,
TICKETMASTER, LLC, TICKETSNOW.COM, INC.,
AND LIVE NATION WORLDWIDE, INC.,
Defendants-Appellees,
AND
AIRTRAN AIRWAYS, INC.,
Defendant.
______________________
2013-1529
______________________
Appeal from the United States District Court for the
Eastern District of Texas in No. 10-CV-120, Judge
Michael H. Schneider.
______________________
Decided: June 24, 2014
______________________
2 CEATS, INC. v. CONTINENTAL AIRLINES, INC.
DEAN A. DICKIE, Miller, Canfield, Paddock, and Stone
P.L.C., of Chicago, Illinois, argued for plaintiff-appellant.
With him on the brief was RYAN C. WILLIAMS. Of counsel
on the brief were GEORGE L. HAMPTON IV and COLIN C.
HOLLEY, HamptonHolley LLP, of Corona del Mar, Cali-
fornia.
MARK A. LEMLEY, Durie Tangri LLP, of San Francisco,
California, argued for defendants-appellees. With him on
the brief were CLEMENT S. ROBERTS and ZAC A. COX.
______________________
Before PROST, * Chief Judge, RADER, ** and O’MALLEY,
Circuit Judges.
O’MALLEY, Circuit Judge.
CEATS, Inc. (“CEATS”) brought this patent infringe-
ment suit against Continental Airlines, Inc.; Alaska
Airlines, Inc.; Horizon Air Industries, Inc.; Delta Airlines,
Inc.; Jetblue Airways Corp.; United Airlines, Inc.; Virgin
America, Inc.; US Airways, Inc.; Ticketmaster, LLC.;
Ticketsnow.com, Inc.; Live Nation Worldwide, Inc.; and
Airtran Airways, Inc. (collectively, “Continental”) in the
United States District Court for the Eastern District of
Texas. After the parties failed to reach a settlement
during court ordered mediation, the case went to trial
where a jury found that CEATS’s patents were infringed,
but invalid. We affirmed the jury’s finding of invalidity in
a prior appeal. CEATS, Inc. v. Continental Airlines, Inc.
(“CEATS I”), 526 F. App’x 966 (Fed. Cir. Apr. 26, 2013).
* Sharon Prost assumed the position of Chief Judge
on May 31, 2014.
** Randall R. Rader vacated the position of Chief
Judge on May 30, 2014.
CEATS, INC. v. CONTINENTAL AIRLINES, INC. 3
While its first appeal was pending, CEATS filed a mo-
tion for relief from the judgment pursuant to Federal Rule
of Civil Procedure 60(b) (2012) (“Rule 60(b)”) based on an
alleged relationship between the court-appointed media-
tor and the law firm representing most of the accused
infringers. This alleged relationship was brought to light
in an unrelated case (“the Karlseng litigation”). After we
affirmed the invalidity of CEATS’s patents in CEATS I,
the district court denied CEATS’s Rule 60(b) motion. This
appeal followed.
Although we disagree with the district court’s finding
that the mediator had no duty to disclose his dealings
with one of the firms involved in the litigation, we none-
theless agree that relief from judgment under Rule 60(b)
was not warranted. See CEATS, Inc. v. Continental
Airlines (“Rule 60(b) Order”), Inc., No. 6:10-cv-120, ECF
No. 1101, slip op. at 16 (E.D. Tex. June 28, 2013). There-
fore, we affirm.
I. BACKGROUND
A. The District Court Trial and Mediation
On April 5, 2010, CEATS sued Continental in the
United States District Court for the Eastern District of
Texas for infringement of four patents. The district court
ordered the parties to participate in mediation and ap-
pointed former Magistrate Judge Robert Faulkner as the
mediator on September 28, 2010. The parties conducted
two mediation sessions before Faulkner—one on June 21,
2011 and another on June 30, 2011. 1 Because the parties
failed to reach a settlement during mediation, the matter
1 The parties refer to the mediator as Judge Faulk-
ner, presumably to provide due respect to his former
position. Because we draw distinctions between the role
of a mediator and that of a judge, we refer to former
Judge Faulkner as simply Faulkner, to avoid confusion.
4 CEATS, INC. v. CONTINENTAL AIRLINES, INC.
proceeded to trial. Thomas Melsheimer, a partner at Fish
& Richardson P.C. (“Fish”), served as lead trial counsel.
Fish represented some, but not all, of the accused infring-
ers before the trial court. During the 8-day jury trial, the
parties conducted further mediation sessions, but again
failed to reach a settlement. On March 21, 2012, the jury
found CEATS’s patents infringed, but invalid.
B. The Karlseng Litigation
In an unrelated case that began three years before
CEATS filed its complaint in this case, Fish represented a
party in a partnership dispute before a Texas state court.
After the parties agreed to arbitration, the state court
appointed Faulkner to serve as the Judicial Arbitration
and Mediation Service (“JAMS”) arbitrator. See Karlseng
v. Cooke (“Karlseng I”), 286 S.W.3d 51, 53 (Tex. App.
2009). Pursuant to JAMS rules, Faulkner disclosed that
he previously had participated in arbitrations and media-
tions with the named Fish attorneys, but disclosed no
other contacts with them. Four days after this disclosure,
Brett Johnson, a partner at Fish, made his first appear-
ance in the case. Faulkner made no changes to his gen-
eral disclosure form when Johnson entered his
appearance. See id. During the arbitration, Faulkner
also acted as if he had not met Johnson previously. In
January 2008, Faulkner issued a ruling in favor of Fish’s
client for $22 million, including $6 million in attorney’s
fees. After learning that Faulkner and Johnson were, in
fact, previously acquainted, opposing counsel asked to
conduct discovery regarding the nature of their relation-
ship. The state court denied that request and confirmed
the award on February 22, 2008. See id. at 54.
On appeal, the Texas appellate court found that the
district court abused its discretion by refusing to grant a
continuance to conduct discovery because there was
sufficient evidence of a prior relationship between Faulk-
ner and Johnson to warrant further investigation. Id. at
CEATS, INC. v. CONTINENTAL AIRLINES, INC. 5
57. Because the opposing party had not been given
adequate opportunity to investigate—e.g., to seek the
testimony of Faulkner and Johnson—on April 21, 2009,
the appellate court vacated the order confirming the
arbitration award. The court remanded the case for the
trial court to allow further discovery regarding the Faulk-
ner-Johnson relationship. See id. at 57–58.
After remand, Faulkner and Johnson were both de-
posed. See Karlseng v. Cooke (“Karlseng II”), 346 S.W.3d
85, 87–88 (Tex. App. 2011). Fish continued representing
its client during remand. Despite this extra discovery and
what it revealed, the trial court again confirmed the
award on June 30, 2009, nine months before CEATS filed
its complaint in this case. The state court opponent
appealed for the second time. On November 30, 2010—
two months after Faulkner was appointed mediator in
this case and six months before the first mediation—
Melsheimer argued before the state court of appeals on
behalf of Fish’s client, urging that the court uphold the
arbitration award. 2 In doing so, Melsheimer defended
Faulkner’s decision not to disclose his relationship with
Johnson. On June 28, 2011—between the first two medi-
ation sessions in this case—the Texas court of appeals
issued its decision vacating the arbitration award, finding
that Faulkner’s failure to disclose his relationship with
Johnson violated his obligations as an arbitrator and
tainted the arbitration award. In its opinion, the appeals
court detailed both an enduring social relationship be-
tween Faulkner and Johnson, which it said included
expensive outings and gifts, and an active business rela-
tionship between Faulkner and the Fish firm. See id. at
87–94.
2 Melsheimer’s first appearance in this case was a
little over a year after he argued the Karlseng appeal.
6 CEATS, INC. v. CONTINENTAL AIRLINES, INC.
On May 23, 2012, Faulkner was added as a co-
defendant with Fish, Johnson, and others in a state court
action. The complaint sought damages for breach of
contract and fraud, alleging that Faulkner, Johnson, Fish,
and the client breached the arbitration agreement and
fraudulently concealed the Faulkner-Johnson-Fish rela-
tionship. See id. at 92.
c. Post-Trial Activity
On March 27, 2012, the district court entered final
judgment in favor of Continental based on the jury’s
finding of invalidity. On May 24, 2012, CEATS claims to
have first found out about the Karlseng litigation because
of a news article related to the suit against Faulkner and
Fish. After the district court denied numerous post-trial
motions, CEATS filed its notice of appeal of the jury’s
finding of invalidity on August 13, 2012. Three days
later, CEATS also moved for relief from the final judg-
ment under Rule 60(b). 3 CEATS argued that it was
entitled to relief under Rule 60(b)(3) based on Fish’s
failure to disclose the facts surrounding the Karlseng
litigation. CEATS also asserted that, under Rule 60(b)(6),
Faulkner’s failure to disclose the Karlseng litigation and
the facts relating thereto warranted relief from judgment.
On April 26, 2013, we affirmed the district court’s finding
of invalidity. CEATS I, 526 F. App’x at 966. The district
court subsequently denied CEATS’s Rule 60(b) motion on
June 28, 2013. CEATS now appeals the district court’s
denial of the Rule 60(b) motion.
The ruling of a district court under Rule 60(b) is final
and appealable pursuant to 28 U.S.C. § 1292 (2012).
Venture Indus. Corp. v. Autoliv ASP, Inc., 457 F.3d 1322,
1327 (Fed. Cir. 2006). We have jurisdiction under 28
3 Melsheimer filed Continental’s responsive brief in
opposition to CEATS’s Rule 60(b) motion.
CEATS, INC. v. CONTINENTAL AIRLINES, INC. 7
U.S.C. 1295(a)(1) because the claims in this case were for
patent infringement.
II. DISCUSSION
Because the denial of a Rule 60(b) motion is a proce-
dural question not unique to patent law, we review the
district court’s denial under the law of the regional circuit,
in this case, the Fifth Circuit. Marquip, Inc. v. Fosber
Am., Inc., 198 F.3d 1363, 1369 (Fed. Cir. 1999). In the
Fifth Circuit, a district court’s denial of a motion under
Rule 60(b) is reviewed for an abuse of discretion. Patter-
son v. Mobil Oil Corp., 335 F.3d 476, 486 (5th Cir. 2003).
Rule 60(b) states in relevant part that:
On a motion and just terms, the court may relieve
a party or its legal representative from a final
judgment, order, or proceeding for the following
reasons:
...
(3) fraud (whether previously called intrinsic or
extrinsic), misrepresentation, or misconduct by an
opposing party;
...
(6) any other reason that justifies relief.
Fed. R. Civ. Proc. 60(b) (emphasis added).
On appeal, CEATS argues that the district court
abused its discretion by failing to grant relief from judg-
ment under both Rule 60(b)(3) and Rule 60(b)(6). CEATS
contends that Fish’s failure to disclose the facts surround-
ing the Karlseng litigation was improper and amounts to
“fraud (whether previously called intrinsic or extrinsic),
misrepresentation, or misconduct by an opposing party.”
Fed. R. Civ. Proc. 60(b)(3) (emphasis added). Because the
basis for relief under Rule 60(b)(6) must be mutually
exclusive from the other five grounds for relief under Rule
8 CEATS, INC. v. CONTINENTAL AIRLINES, INC.
60(b), Liljeberg v. Health Servs. Acquisition Corp., 486
U.S. 847, 863–64 (1988), CEATS argues that it is Faulk-
ner’s—not Fish’s—failure to disclose the facts surround-
ing the Karlseng litigation that entitles it to relief under
Rule 60(b)(6).
a. Rule 60(b)(3)
In the Fifth Circuit, the party seeking relief under
Rule 60(b)(3) must prove by clear and convincing evidence
“(1) that the adverse party engaged in fraud or other
misconduct, and (2) that this misconduct prevented the
moving party from fully and fairly presenting his case.”
Hesling v. CSX Transp., Inc., 396 F.3d 632, 641 (5th Cir.
2005) (citing Gov’t Fin. Servs. One Ltd. P’ship v. Peyton
Place, 62 F.3d 767, 772 (5th Cir. 1995)). CEATS conceded
at oral argument, however, that there is nothing in the
record that shows it was not given a full and fair oppor-
tunity to present its case. See Oral Argument at 6:54,
CEATS, Inc. v. Continental Airlines, Inc., 2013-1529,
available at http://oralarguments.cafc.uscourts.gov/
default.aspx?fl=2013-1529.mp3 (“There is no evidence,
and the 60(b)(3) standard clearly requires the movant to
have to be able to show and demonstrate some impact on
their ability to have a full and fair trial. And we were not
given that opportunity, nor was there time. That’s why I
think this case, however, can turn on 60(b)(6).”). Because
we are constrained to the record, we affirm the district
court’s finding that CEATS is not entitled to relief under
Rule 60(b)(3).
b. Rule 60(b)(6)
Rule 60(b)(6) gives federal courts authority to relieve
a party from a final judgment “upon such terms as are
just.” Liljeberg, 486 U.S. at 863–64; see Fed. R. Civ. Proc.
60(b) (“[T]he Court may relieve a party . . . from a final
judgment . . . for . . . (6) any other reason that justifies
relief.”). In Liljeberg, the Supreme Court first held that
the district court judge violated 28 U.S.C. § 455(a) by
CEATS, INC. v. CONTINENTAL AIRLINES, INC. 9
failing to recuse himself. The plaintiff in Liljeberg sought
a declaration that it owned a hospital then under con-
struction. While the case was pending, the defendant in
the case engaged in negotiations with a third party to
purchase the hospital. The presiding judge sat on that
third party’s board of trustees. Id. at 852–56. The Su-
preme Court held that a reasonable observer would have
questioned the judge’s impartiality and have expected
him to recuse himself. Id. at 861. Because the judge
failed to recuse himself, he violated 28 U.S.C. § 455(a)
(“Any justice, judge, or magistrate of the United States
shall disqualify himself in any proceeding in which his
impartiality might reasonably be questioned.” (emphasis
added)).
That violation of § 455(a), however, did not automati-
cally entitle the movant to relief from judgment under
Rule 60(b)(6). Id. at 863–64 (“Rule 60(b)(6) relief is ac-
cordingly neither categorically available nor categorically
unavailable for all § 455(a) violations.”). A movant is
entitled to relief under Rule 60(b)(6)—the “catch-all”
provision—if “such action is appropriate to accomplish
justice” and only in “extraordinary circumstances.” Id. at
863–64 (quoting Klapprott v. United States, 335 U.S. 601,
614–15 (1949) (internal quotation marks omitted)). The
Supreme Court set forth three factors to consider “in
determining whether a judgment should be vacated for a
violation of §455(a)”: (1) “the risk of injustice to the par-
ties in the particular case;” (2) “the risk that the denial of
relief will produce injustice in other cases;” and (3) “the
risk of undermining the public’s confidence in the judicial
process.” Id. at 864.
Though CEATS argues that the district court was in-
correct to apply the Liljeberg test to mediators, Appel-
lant’s Br. 28–30, it nonetheless relies on the three
Liljeberg factors to argue for reversal and argues that
mediators are bound by the same neutrality requirements
as judges and arbitrators. Appellant’s Reply 11. Because,
10 CEATS, INC. v. CONTINENTAL AIRLINES, INC.
as explained below, we agree with CEATS that mediators
are bound by disclosure requirements similar to the
recusal requirements of judges, we find it proper to apply
the Supreme Court’s analysis in Liljeberg to mediators.
To apply that test, we first consider whether Faulkner
violated his duty to disclose by failing to disclose the facts
surrounding the Karlseng litigation. If Faulkner should
have disclosed—similar to how the judge in Liljeberg
should have recused himself—we would then turn to the
three factors to determine if relief under Rule 60(b)(6) is
warranted by virtue of that violation.
1. Mediators’ Neutrality Requirements
Although we recognize that mediators perform differ-
ent functions than judges and arbitrators, mediators still
serve a vital role in our litigation process. Courts depend
heavily on the availability of the mediation process to
help resolve disputes. Courts must feel confident that
they are referring parties to a fair and effective process
when they refer parties to mediation. And parties must
be confident in the mediation process if they are to be
willing to participate openly in it. Because parties argua-
bly have a more intimate relationship with mediators
than with judges, it is critical that potential mediators not
project any reasonable hint of bias or partiality. Indeed,
all mediation standards require the mediator to disclose
any facts or circumstances that even reasonably create a
presumption of bias. E.g., Am. Bar Ass’n Model Stand-
ards of Conduct for Mediators (“ABA Standards for Medi-
ators”) § III.C (2005) (“A mediator shall disclose, as soon
as practicable, all actual and potential conflicts of interest
that are reasonably known to the mediator and could
reasonably be seen as raising a question about the media-
tor’s impartiality.” (emphasis added)). 4 This duty to
4 Because the United States District Court for the
Eastern District of Texas has adopted the ABA’s stand-
CEATS, INC. v. CONTINENTAL AIRLINES, INC. 11
disclose is similar to the recusal requirements imposed on
judges. Compare ABA Standards for Mediators § III.C (“A
mediator shall disclose, as soon as practicable, all actual
and potential conflicts of interest that are reasonably
ards for mediators, we use that as the primary example of
governing disclosure obligations for mediators in this
decision. E.D. Tex. Civ. R. App’x H ¶ IV (“Any person
serving as a mediator pursuant to [the United States
District Court for the Eastern District of Texas’s] plan is
subject to the Model Standard of Conduct for Mediators
that were adapted by the American Bar Association in
August 2005 or similar ethical standards or guidelines.”).
Because Judge Falkner is a JAMS mediator, moreover,
and has agreed to be bound by its disclosure obligations,
we refer to those as well. See JAMS Int’l Mediation Rule
6 (2011) (“Any mediator . . . will disclose both to JAMS
International and to the parties whether he or she has
any financial or personal interest in the outcome of the
mediation or whether there exists any fact or circum-
stance reasonably likely to create a presumption of bias.”
(emphasis added)); see also Unif. Mediation Act § 9(a)(1)–
(2) (2001) (requiring disclosure of “facts that a reasonable
individual would consider likely to affect the impartiality
of the mediator” (emphasis added)); 1 Alt. Disp. Resol.
§ 4.44 (3d ed.) (Sep. 2013) (“A mediator must disclose all
actual and potential conflicts of interest reasonably
known to the mediator. After disclosure, the mediator
must decline to mediate unless all parties choose to retain
the mediator. The duty of disclosure governs conduct that
occurs during and after the mediation.” (emphasis add-
ed)); Tex. Mediator Standards of Practice and Codes of
Ethics § 4 (“[P]rior to commencing mediation, the media-
tor shall make full disclosure of any known relationship
with their parties or their counsel that may affect or give
the appearance of affecting the mediator’s neutrality.”
(emphasis added)).
12 CEATS, INC. v. CONTINENTAL AIRLINES, INC.
known to the mediator and could reasonably be seen as
raising a question about the mediator’s impartiality.”
(emphasis added)) with 28 U.S.C. § 455(a) (“Any justice,
judge, or magistrate judge of the United States shall
disqualify himself in any proceeding in which his impar-
tiality might reasonably be questioned.” (emphasis add-
ed)). 5
While mediators do not have the power to issue judg-
ments or awards, because parties are encouraged to share
confidential information with mediators, those parties
must have absolute trust that their confidential disclo-
sures will be preserved. See In re Grand Jury Subpoena
Dated Dec. 17, 1996, 148 F.3d 487, 492 (5th Cir. 1998)
(“Confidentiality is critical to the mediation process
because it promotes the free flow of information that may
result in the settlement of a dispute.”); 1 Alt. Disp. Resol.
§ 4.41 (3d ed.) (Sep. 2013) (“A mediator must be fair and
impartial to gain the trust and respect of the parties.”).
Indeed, mediation is not effective unless parties are
5 For additional support, see Unif. Mediation Act
Official Comments § 9(a)(1)–(2) (2001) (“This provides
legislative support for the professional standards requir-
ing mediators to disclose their conflicts of interest . . . . It
is consistent with the ethical obligations imposed on other
ADR neutrals.”); id. § 9(c) (“Section 9(a)(1) and 9(b) ex-
pressly state that mediators should disclose financial or
personal interests, and personal relationships, that ‘a
reasonable person would consider likely to affect the
impartiality of the mediator.’ . . . Prudence, professional
reputation, and indeed common practice would compel the
practitioner to err on the side of caution in close cases.”);
see also Commonwealth Coatings Corp. v. Cont’l Cas. Co.,
393 U.S. 145, 149 (1968) (requiring “that arbitrators
disclose to the parties any dealings that might create an
impression of possible bias” (emphasis added)).
CEATS, INC. v. CONTINENTAL AIRLINES, INC. 13
completely honest with the mediator. See In re Grand
Jury, 148 F.3d at 492; see also In re Teligent, Inc., 640
F.3d 53, 58 (2d Cir. 2011) (collecting cases).
Just as a judge is required to recuse himself under
§ 455(a) whenever “his impartiality might reasonably be
questioned,” mediators are required to disclose a potential
conflict whenever there are facts and circumstances that
“could reasonably be seen as raising a question about the
mediator’s impartiality.” 6 ABA Standards for Mediators §
III.C (emphasis added). Because mediators have disclo-
sure obligations which are similar to the recusal require-
ment imposed on judges, we find it appropriate to
examine Faulkner’s disclosure obligation under Liljeberg.
2. Faulkner’s Duty to Disclose the Facts Surrounding the
Karlseng litigation
Similar to Liljeberg, where the Supreme Court first
considered whether the presiding judge violated § 455(a),
here, we first consider whether Faulkner should have
disclosed the facts surrounding the Karlseng litigation. 7
The district court decided that a reasonable observer
would not have questioned Faulkner’s impartiality be-
6 Of course mediators are not subject to the full ar-
ray of ethical restrictions and obligations imposed upon
judicial officers. What we consider today are only the
similarities between their respective disclosure and
recusal obligations.
7 The district court considered whether Faulkner
had a duty to disclose the facts surrounding the Karlseng
litigation as part of the first Liljeberg factor: the risk of
injustice in this case. As mentioned, however, the Su-
preme Court considered whether the presiding judge
should have recused himself before turning to the three
Rule 60(b)(6) factors. Liljeberg, 486 U.S. at 861–62. We
do the same.
14 CEATS, INC. v. CONTINENTAL AIRLINES, INC.
cause, unlike the presiding judge in Liljeberg, Faulkner:
(1) had no fiduciary interest in Karlseng; (2) was not
compelled to disqualify himself by statute; and (3) did not
act as the presiding judge and final fact-finder. Based on
these distinctions, the district court refused to find that a
reasonably objective person would have expected Faulk-
ner to disclose the facts surrounding the Karlseng litiga-
tion. On this ground, the district court ruled that
Faulkner did not violate his disclosure duty as a media-
tor.
On appeal, CEATS argues that, as a neutral media-
tor, Faulkner had a duty to disclose the facts surrounding
the Karlseng litigation because they gave “the appearance
of affecting the mediator’s neutrality.” Appellant’s Br. 23
(quoting Tex. Mediator Standards of Practice and Codes
of Ethics § 4). CEATS insists that the facts of the Karls-
eng litigation reasonably affect the appearance of Faulk-
ner’s neutrality and impartiality.
Continental responds that Faulkner did not have a
duty to disclose because Johnson was not involved in this
case and Melsheimer was not involved in the case at the
time of the first mediation. Continental further argues
that no disclosure was necessary because Fish did not
actually represent Faulkner in the Karlseng matter.
Instead, Fish represented its client by arguing that
Faulkner’s arbitration award should be upheld.
We find that the district court erred in finding that a
reasonably objective person would not have wanted to
consider circumstances surrounding the Karlseng litiga-
tion when deciding whether to object to Faulkner’s ap-
pointment as mediator in this case. The district court’s
reasons for distinguishing Liljeberg are unpersuasive.
Mediators are required to disclose not only financial
interests, but all potential conflicts of interests as well.
See ABA Standards for Mediators § III.C. Furthermore,
Faulkner does not have to be “compelled by statute to
CEATS, INC. v. CONTINENTAL AIRLINES, INC. 15
disqualify himself” for disclosure to be necessary. Rule
60(b) order, slip op. at 16; see ABA Standards for Media-
tors § III.C. To the extent the district court seems to
imply a different disclosure requirement for mediators
and judges because Faulkner “had no authority to make
or influence legal or factual rulings in this case,” we reject
that implication. Rule 60(b) order, slip op. at 16. As
discussed, a mediator’s duty to disclose potential conflicts
where impartiality might reasonably be questioned is
analogous to a judge’s duty to recuse under § 455(a).
Compare ABA Standards for Mediators § III.C with 28
U.S.C. § 455(a).
In this case, at the same time Faulkner served as the
court-appointed mediator, the Faulkner-Johnson-Fish
relationship was directly at issue in a state appellate
court. Importantly, this meant that Fish, as a firm, was
actively defending Faulkner’s personal disclosure deci-
sions while he was mediating this case. Despite the
absence of a formal attorney-client relationship, Fish’s on-
going defense of Faulkner’s award reasonably could give
rise to the appearance impropriety. After the Texas
appellate court remanded the case for discovery regarding
the Faulkner-Johnson relationship in Karlseng I, moreo-
ver, Faulkner was compelled to provide testimony.
Though the record does not reveal any coordination
between Fish and Faulkner, the mere fact that Faulkner
testified in support of the arbitration award and was
asked, not just about his relationship with Johnson, but
with the Fish firm and its clients as well, further empha-
sizes the need for disclosure on these facts.
Furthermore, the Texas appeals court’s decision hold-
ing that Faulkner breached his disclosure obligations in
the Karlseng litigation was released on June 28, 2011—
between the first two mediation sessions in this case, and
well before the third. See Joint Appendix (“J.A.”) 1095
(explaining that the parties engaged in official mediations
on June 21, 2011 and June 30, 2011). Thus, the state
16 CEATS, INC. v. CONTINENTAL AIRLINES, INC.
court found that the Faulkner-Johnson-Fish relationship
was a disqualifying, social and business relationship,
which “could reasonably be seen as raising a question
about the mediator’s impartiality” while this case was
ongoing. ABA Standards for Mediators § III.C; see Karls-
eng II, 346 S.W.3d at 87–94 (detailing the lengthy Faulk-
ner-Johnson relationship, including lavish gifts and
outings and discussing matters in which Fish retained
Faulkner as a neutral, and the fact that Faulkner re-
quested and was granted an opportunity to make a
presentation to Fish attorneys, which the state court
characterized as a business development pitch by Faulk-
ner); see also Potashnick v. Port City Const. Co., 609 F.2d
1101, 1114 (5th Cir. 1980) (recognizing that a partner in a
participating law firm will always have some interest in
the outcome of a case handled by his firm).
We find it irrelevant that Johnson was not counsel of
record in this litigation. While the personal relationship
with Johnson is what spurred the inquiry in the Karlseng
litigation, the continuing and intrusive nature of that
inquiry, the Fish firm’s and Melsheimer’s role in defend-
ing against claims that Judge Falkner violated his disclo-
sure obligations, and the state court’s findings regarding
Faulkner’s business dealings with the Fish firm generally,
make clear that Faulkner’s obligation to disclose at that
point in time extended beyond Johnson alone. See ABA
Standards for Mediators § III.C.
We need not decide whether any one of the facts re-
garding Faulkner’s interaction with the Fish firm was
sufficient to require disclosure on its own. We merely
hold that, based on the totality of the facts and circum-
stances surrounding the Karlseng litigation, Faulkner
breached his duty as a mediator to disclose “all actual and
potential conflicts of interest that are reasonably known
to the mediator and could reasonably be seen as raising a
question about the mediator’s impartiality.” ABA Stand-
ards for Mediators § III.C (emphasis added).
CEATS, INC. v. CONTINENTAL AIRLINES, INC. 17
3. The Three Liljeberg Factors
Faulkner’s failure to disclose does not automatically
entitle CEATS to relief from judgment under Rule
60(b)(6), however. Liljeberg, 486 U.S. at 863–64. We still
must consider the three Liljeberg factors to determine
whether this case presents an “extraordinary circum-
stance” where relief from judgment is warranted. See id.
In Liljeberg, the Supreme Court first turned to the
risk of injustice in the particular case and identified four
facts that might reasonably have caused an objective
observer to question the judge’s impartiality in the par-
ticular case: (1) the judge regularly attended board meet-
ings of the third party and the third party had long been
interested in acquiring a hospital in the specific location
of the hospital at issue; (2) before he entered judgment,
the judge received (but did not examine) board minutes
that specifically noted the conflict of interest; (3) the judge
failed to recuse himself even after he acquired actual
knowledge of his financial interest in the case; and (4) the
judge denied the movant’s motion to vacate the judgment
without acknowledging that he had known about the
third party’s interest shortly before and shortly after trial.
Id. at 865–867. The Supreme Court further explained
that relief under Rule 60(b)(6) “may prevent a substantive
injustice in some future case by encouraging a judge or
litigant to more carefully examine possible grounds for
disqualification and to promptly disclose them when
discovered.” Id. at 868. Avoiding this seeming improprie-
ty would also promote the public confidence in the judicial
process. Id. at 865.
CEATS argues that the first factor—the risk of injus-
tice in this case—supports relief because mediators are
required to disclose any potential conflicts of interest that
could reasonably be seen as raising a question about the
mediator’s impartiality. In this case, CEATS insists that,
because “there are real questions regarding the risk that
18 CEATS, INC. v. CONTINENTAL AIRLINES, INC.
[confidential] information was released to [Continental’s]
counsel,” there is a risk of injustice in this case. Appel-
lant’s Br. 32. Continental counters that there is simply
no evidence that Faulkner impermissibly disclosed any
confidential information. Continental further argues that
CEATS had an opportunity to fully and fairly litigate its
claims at a trial in which Faulkner played no role.
We agree with Continental that CEATS has failed to
show a meaningful risk of injustice in this case. Although
we conclude that Faulkner should have disclosed the
circumstances surrounding the Karlseng litigation and his
relationship with the Fish firm relating thereto, we find
that CEATS ultimately was able to fully and fairly pre-
sent its case before an impartial judge and jury. As
CEATS admitted at oral argument, moreover, there is no
evidence in the record that suggests that Faulkner wrong-
fully disclosed confidential information, and CEATS never
sought discovery of Faulkner in an effort to determine if
any such disclosure occurred. See Oral Argument at 6:54.
Because of this, we find no risk of injustice in this case
based on Faulkner’s failure to disclose.
Turning to the second Liljeberg factor—the risk of in-
justice in other cases—CEATS argues that, by failing to
provide a remedy for Faulkner’s non-disclosure of the
Karlseng litigation, mediators in future cases will have
less incentive to disclose potential conflicts of interest and
parties will lose faith in the mediation process. Indeed,
CEATS also contends that, if the district court’s ruling is
allowed to stand, the mediator’s disclosure requirement
would be meaningless. Continental responds that there is
no risk of injustice in other cases because there was no
duty for Faulkner to disclose in this case, an argument we
have already rejected. Continental asserts, moreover,
that far more injustice and disruption would result from
allowing losing parties to throw out unfavorable judg-
ments by challenging a mediator’s disclosure require-
ment.
CEATS, INC. v. CONTINENTAL AIRLINES, INC. 19
We too have concerns about failing to provide a reme-
dy for a mediator’s non-compliance with his or her disclo-
sure obligations. We certainly do not want to encourage
similar non-disclosures. On this record, however, we do
not believe there is a sufficient threat of injustice in other
cases to justify the extraordinary step of setting aside a
jury verdict. We find it unlikely that mediators will
simply ignore their disclosure obligations if we deny relief
here. To the contrary, our decision serves to reinforce the
broad disclosure rules for mediators by holding that
Faulkner had a duty to disclose in this case. The mere
fact that the final judgment after a full jury trial will not
be overturned every time a mediator fails to disclose a
potential conflict is not likely to affect the disclosure
decisions of other mediators. Accord Liljeberg, 486 U.S. at
863–64 (holding that relief from judgment is not automat-
ic even if the presiding judge violates § 455 by failing to
recuse himself). Beyond his failure to disclose, moreover,
there is no evidence that Faulkner acted inappropriately
or ineffectively when mediating this case. See Oral Ar-
gument at 6:54. We therefore find that the denial of relief
in the circumstances of this case will not risk injustice in
other cases.
Regarding the third Liljeberg factor—the risk of un-
dermining public confidence—CEATS asserts that Faulk-
ner’s non-disclosure undermines public confidence in the
neutrality of court-appointed mediators. Again, Conti-
nental’s only response is that, because Faulkner did not
have a duty to disclose anything, there can be no danger
of undermining public confidence.
While we find that public confidence in the mediation
process will be undermined to some extent by our failure
to put greater teeth in the mediators’ disclosure obliga-
tions, we do not find that fact justifies the extraordinary
relief CEATS seeks. Because CEATS had the opportunity
to present its case to a neutral judge and jury, we do not
believe that refusing to grant the relief CEATS seeks will
20 CEATS, INC. v. CONTINENTAL AIRLINES, INC.
undermine public confidence in the judicial process as a
whole. As the Supreme Court explained, Rule 60(b)(6)
“should only be applied in ‘extraordinary circumstances.’”
Liljeberg, 486 U.S. at 864 (quoting Ackermann v. United
States, 340 U.S. 193, 199 (1950)). CEATS is seeking relief
from judgment by an impartial jury after litigating the
matter before an unbiased judge; granting that relief is
what would be most extraordinary. Because we find
insufficient risk to public confidence in the justice process
as a whole, we hold that the third Liljeberg factor does not
weigh heavily in favor of relief under Rule 60(b)(6).
Because, on balance, we find that the Liljeberg factors
do not justify relief in this case, we hold that the district
court correctly denied CEATS relief from judgment under
Rule 60(b)(6), despite what we deem to be a failure of the
mediator’s disclosure obligations.
III. CONCLUSION
For the foregoing reasons, we affirm the denial of re-
lief from judgment under Rule 60(b).
AFFIRMED