Opinion
Case No. CV 98-963-AS
September 8, 2000
FINDINGS AND RECOMMENDATION
Shortly before the instant patent infringement and slander action was filed, plaintiff and his wife divorced. During the course of dissolution proceedings in a South Carolina Family Court, plaintiff listed his assets and included a valuation of $2250 for "office equipment and patents." Defendant claims that this representation is entirely inconsistent with plaintiff's claims in this action that he holds patents for a shoe feature which Nike has infringed and thus, plaintiff is entitled to millions. At a minimum, defendant notes that it had offered plaintiff $20,000 for his patent and thus, plaintiff's failure to include any valuation for either the patents themselves or the impending legal action constituted a fraud on the Family Law court such that plaintiff should now be judicially estopped from seeking damages in this action in excess of $2250.
Plaintiff's amended complaint asserts two claims: (1) patent infringement; and (2) slander per se. Plaintiff's patent infringement claim is premised upon his claimed invention in Patent No. 5,060,401 ('401) issued October 29, 1991, and Patent No. 5,279,051 ('051) issued March 20, 1992, of an angled strip attached to the exterior portion of an athletic shoe near the arch. Plaintiff claims that his invention acts as a "cushion" and that several models of Nike's Air Max shoes infringe.
Plaintiff claims that he failed to value his patents or his patent litigation based upon a good faith belief and upon the advice of counsel that he need not do so under South Carolina law. Plaintiff explains that he and his wife both knew about the patents and plaintiff's wife, Joanne, believes that the marital settlement was fair. Joanne Whatley has submitted a sworn affidavit confirming these assertions. Plaintiff relies upon Woodward v. Woodward, 294 S.C. 210 (Ct.App. 1987) to support his contention that he need not have valued his patents as a contingent asset. In Woodward, the appellate court affirmed a trial court's refusal to award a husband an interest in his wife's patent that was concededly "worthless" at the time.
Defendant argues that any agreement between Whatley and his wife is irrelevant since the judicial estoppel inquiry focuses upon protecting the integrity of the court. Defendant further argues that plaintiff committed fraud by failing to disclose the existence of his patent infringement claim against Nike, something plaintiff was aware of since he had already hired attorneys and was preparing to file the instant action at the time of his divorce. Defendant argues that plaintiff's failure was directly contrary to South Carolina law under Mears v. Mears, 305 S.C. 150 (1991), aff'd, 308 S.C. 196 (1992), which held that a husband's post-divorce wrongful termination action against his former employer constituted marital property even though the claim was unliquidated until after the marriage ended. The court relied upon South Carolina Code Section 20-7-73 which defines marital property as "all real and personal property which has been acquired by the parties during the marriage and which is owned as of the date of filing or commencement of marital litigation."
The deposition of plaintiff's divorce attorney, Bobby Mann, Jr., reveals that plaintiff did not disclose to Mann that Nike had offered $20,000 for his patents. Mann testified that he wasn't even aware of the fact that plaintiff had retained patent lawyers. Thus, defendant asserts that plaintiff's attempt to rely upon an "advice of counsel" defense should be unavailing.
A party is judicially estopped from asserting a position in the course of litigation only if that position is inconsistent or incompatible with an earlier position. Rissetto v. Plumbers and Steamfitters Local 343, 94 F.3d 597, 600-01 (9th Cir. 1996). The doctrine applies where a litigant "is playing fast and loose with the court." See Yanez v. United States, 989 F.2d 323, 326 (9th Cir. 1993). The doctrine preclude a party from gaining an advantage in litigation by initially taking one position and then seeking a second advantage by later taking an incompatible position. Rissetto, 94 F.3d at 600. Judicial estoppel should not be applied if the party's change in position was justified. See Morris v. California, 966 F.2d 448, 453-54 (9th Cir. 1991).
In Kale v. Obuchowski, 985 F.2d 360 (7th Cir. 1993), the plaintiff intervened in a bankruptcy proceeding and attempted to assert an interest in an industrial park. The trustee opposed the plaintiff's intervention on grounds that the plaintiff had specifically denied any interest in any real property during the course of a divorce proceeding. The court applied the judicial estoppel doctrine to preclude the plaintiff from attempting to assert any interest in the real property. The court reasoned that, "having won a favorable allocation or property in the divorce case by insisting that he had no interest in real property other than the marital home, Kale is stuck with the proposition in subsequent litigation." Id. at 362. The court further reasoned that "[s]tatements about the non-existence of real assets affected the court's exercise of that authority." Id. at 363.
While the inconsistency in Kale was clear since it involved an outright question of ownership versus non-ownership, the inconsistency presented in this case is more tenuous since it involves a variable and unknown question of valuation. Commentators have emphasized that the judicial estoppel doctrine should be limited to those instances in which statements made to different courts or in different proceedings are "truly inconsistent and mutually exclusive." David S. Coale, A New Framework for Judicial Estoppel, 18 Rev. Litig. 1, 6 (1999). Further, commentators have urged caution in applying the doctrine and have noted that courts should be "admonished to consider lesser sanctions, such as fines, before applying the doctrine in order to avoid the risk of foreclosing a meritorious claim." Kelly L. Morron, Time for the Federal Circuit to Take a Judicious Approach to Judicial Estoppel, 28 AIPLA Q.J. 159, 164 (2000).
Although I am convinced that it was an error on plaintiff's part to place a virtually zero value on his patents by combining them with office equipment ($2250), I fail to see how plaintiff actually gained a tactical advantage by doing so, such that it should preclude his claims in this action. Unlike Kale, plaintiff did not deny an ownership interest; he simply didn't place a value on the asset. Thus, the challenged representation differs, but is not an actual "contradiction" to the earlier representation; plaintiff is seeking damages for allegedly wrongful conduct in this action rather than attempting to place a value on a potentially divisible marital asset. The value of plaintiff's patents remains contingent and, depending upon the outcome of the currently pending patent re-examination proceeding, plaintiff's patents could be worthless.
Further, while judicial estoppel focuses upon the integrity of the court, Joanne Whatley is the only potentially injured party and she has affirmatively stated that she does not feel injured. Thus, to the extent that equitable considerations are even marginally relevant to application of the doctrine of judicial estoppel, the harsh sanction of dismissal that results from the imposition of the doctrine would be inappropriate in these circumstances.
Based upon the foregoing, I recommend that defendant's motion for summary judgment (#187) based upon the doctrine of judicial estoppel should be DENIED. I further recommend that a lesser sanction should be imposed relative to the admission of evidence at the time of trial: plaintiff's patent valuation in his marital property division should be relevant, admissible evidence at trial in the same manner and with an appropriate jury instruction comparable to a case involving spoliation of evidence.
SCHEDULING ORDER
Objections to these Findings and Recommendation(s), if any, are due September 18, 2000. If no objections are filed, the Findings and Recommendation(s) will be referred to a district court judge and go under advisement on that date.
If objections are filed, the response is due no later than October 2, 2000. When the response is due or filed, whichever date is earlier, the Findings and Recommendation(s) will be referred to a district court judge and go under advisement.