IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION
March 29, 2011
TRADING TECHNOLOGIES INTERNATIONAL, INC., PLAINTIFF,
ESPEED, INC., ESPEED INTERNATIONAL, LTD., ECCO LLC, AND ECCOWARE, LTD., DEFENDANTS.
The opinion of the court was delivered by: Judge Robert M. Dow, Jr.
MEMORANDUM OPINION AND ORDER
This patent action comes before the Court following the entry of a Report and Recommendation  entered on September 8, 2010 by Magistrate Judge Schenkier following this Court's referral [see 1334] of Plaintiff's motion to enforce money judgment and for sanctions  to Judge Schenkier's docket pursuant to 28 U.S.C. § 636. Defendants eSpeed, Inc., eSpeed International, Ltd., Ecco LLC, and Eccoware, Ltd. ("eSpeed") and Plaintiff Trading Technologies International, Inc. ("TT") both have filed objections [1342 (eSpeed), 1343 (TT)] to Judge Schenkier's Report and Recommendation. For the reasons stated below, the Court overrules both parties' objections [1342, 1343] and adopts Judge Schenkier's report and recommendation (with one very minor exception on a factual point). Accordingly, the motion to enforce money judgment and for sanctions  is respectfully denied, and the judgment entered on June 13, 2008 (nunc pro tunc to May 22, 2008)  will be amended (also nunc pro tunc to May 22, 2008) to reflect -- in addition to the injunctive relief already set forth -- the jury verdict and post-remittitur damages award in the amount of $2,539,468.00, plus prejudgment interest at the prime rate, compounded monthly.
In his September 8, 2010 Report and Recommendation , Judge Schenkier (1) determined that Plaintiff is not entitled to an order enforcing the money judgment or sanctions and (2) recommended that the Court enter a corrected final judgment order pursuant to Federal Rule of Civil Procedure Rule 60(a). Both parties filed timely objections. eSpeed objects to Judge Schenkier's second recommendation -- namely, that the 2008 judgment order be corrected under Rule 60(a) -- on the ground that any such relief cannot be granted at this late date and would unfairly benefit TT and prejudice eSpeed. TT accepts Judge Schenkier's second recommendation, but contends that sanctions in the form of attorneys' fees and costs also should have been granted.
In considering the parties' objections, this Court reviews de novo the portions of the Report and Recommendation to which objections have been made. See 28 U.S.C. § 636(b)(1); see also Delgado v. Bowen, 782 F.2d 79, 82 (7th Cir. 1986). After undertaking a de novo analysis of the record, this Court may accept, reject, or modify the Magistrate Judge's recommendations. 28 U.S.C. § 636(b)(1).
As a prelude to addressing the parties' objections, the Court notes (as did Magistrate Judge Schenkier) that the "historical facts" leading up to the entry of judgment by Judge Moran in 2008 are undisputed. In October 2007, at the conclusion of a month-long trial, the jury returned a verdict in TT's favor and awarded $3.5 million in damages. On February 5, 2008, Judge Moran entered an order granting eSpeed's motion for a remittitur, thereby leaving TT with the option of accepting a reduced verdict ($2.539 million) or proceeding to a new trial. On February 12, 2008, TT timely notified Judge Moran that it accepted the remittitur. On May 22, 2008, Judge Moran granted TT's motion for a permanent injunction -- a ruling that, in Judge Moran's view, ended the case in the district court. On June 12, 2008, TT submitted a proposed final judgment order that included the damages awarded by the jury, as reduced by the remittitur. The following day, the parties appeared before Judge Moran. Counsel for eSpeed inquired whether Judge Moran was inclined to enter the proposed order (as to which eSpeed had an objection). Although eSpeed never identified the nature of its objection, Judge Moran indicated that he would use his own form for the judgment document. Later that day, Judge Moran entered a judgment order, but that order omitted any reference to the damage award to TT.
The initial question raised by TT's motion is: what accounts for the failure of the judgment order to accurately reflect the disposition of all of the issues litigated in the district court? This Court agrees with Judge Schenkier that "the best explanation is likely the fallibility of human beings (judges included)." [1341, at 6.] Indeed, there really is no other plausible explanation. Every indication in the record -- before, on, and after June 13 -- shows that the parties and the judge believed the case to be over in the trial court.
In a brief filed on June 3, 2008, eSpeed expressed the view that "all issues are now resolved and ready for appeal, giving the Federal Circuit the benefit of a full record." [1252, at 5.] TT obviously concurred in that view; on June 12, 2008, it submitted a proposed final judgment order that incorporated the jury verdict (as reduced by the remittitur) as well as the permanent injunction order entered by the court.
The transcript of the proceedings before Judge Moran on June 13, 2008 (the date on which the judgment order was entered, nunc pro tunc to May 22) similarly reflects Judge Moran's view that the case was over in the district court. On that date, Judge Moran discussed various aspects of the appeal and noted that the parties were engaged in "jockeying for position before the Federal Circuit." 6/13/08 Tr.  at 3. He presciently observed that "you people are perfectly capable of trying to influence the Federal Circuit, and the Federal Circuit is perfectly capable of making up its own mind as to how it wants to proceed." Id. at 3-4. And in indicating his inclination to use his own form of judgment rather than entering the proposed order submitted by TT, Judge Moran in no way suggested that the judgment would not include the damages award. See id. at 4.
Notably, the post-judgment proceedings before Judge Moran also are fully consistent with Judge Schenkier's surmise, shared by this Court, that the omission of the damages award from the judgment was the result of human error. A week after the entry of judgment, eSpeed filed a motion for a stay of judgment pending appeal without the posting of a supersedeas bond. [See 1268.] In his July 24, 2008 opinion granting eSpeed's request, Judge Moran referenced the extent to which eSpeed's revenue and assets exceeded the "amount of the judgment" and concluded that "eSpeed has more than enough cash on hand to satisfy TT's judgment." [1292, at 2-3.] That discussion plainly supports the view that the omission of the amount of damages was an inadvertent oversight. Had Judge Moran not believed that there was a money judgment, there would have been no reason for him to address -- and, indeed, no reason for eSpeed to have asked for -- a waiver of the bond requirement.
The record thus overwhelmingly confirms that there was an oversight or omission in the judgment order. As Judge Schnekier observed [see 1341, at 4, 6, 12], the parties must share some of the blame for the failure to correct the oversight. TT obviously knew that the judgment as entered differed in a material way from the one that TT itself had proposed. And the omission was not lost on eSpeed, as its filings in the Federal Circuit make clear.
Having delved into the archaeology to comprehend the omission from the judgment, Judge Schenkier went on to address the appropriate consequences. He concluded that "the most straightforward and sensible course of action here is to correct the final judgment order so that it reflects the damages award that plaintiff obtained." [1341, at 1-2.]
A. eSpeed's objections
eSpeed raises three basic objections, which can be summed up as follows: (1) it is too late to alter the judgment to incorporate the damages amount; (2) the amendment would prejudice eSpeed because it never had an opportunity to raise issues regarding damages in the prior appeal to the Federal Circuit; and (3) the amendment would unjustly reward TT's tactical choice to ignore the omission in pursuit of tactical advantages on appeal. The Court addresses below each of the objections, all of which are respectfully rejected.
1. The recommendation to enter an amended judgment under Rule 60(a)
eSpeed first objects on the ground that because Rule 59(e), and not Rule 60(a), controls in the present circumstances, it is too late to enter an amended judgment. Judge Schenkier rejected that argument and recommended that the Court invoke its authority under Rule 60(a) to correct the oversight in the existing judgment. As Judge Schenkier noted, the judgment should have recited the monetary relief awarded, but did not do so. [1341, at 8.] Everyone in the case plainly understood the terms of the award of money damages. Indeed, as noted above, even after entry of the judgment that omitted any reference to damages, the parties (and the court) proceeded as if a money judgment had been entered. For example, eSpeed filed a motion in which it, among other things, asked Judge Moran to waive the usual requirement for a supersedeas bond -- a request that makes sense only if the parties (and the court) believed that a money judgment had been entered. In all of the circumstances, Judge Schenkier correctly determined that this case fits cleanly within the plain language of Rule 60(a), which permits corrections to a judgment at any time in the event of "mistake from oversight or omission." FED. R. CIV. P. 60(a).
The Seventh Circuit case law cited by the parties is easily reconciled with that outcome, and eSpeed's contention that Herzog Contracting Corp. v. McGowen Corp., 976 F.2d 1062 (7th Cir. 1992), compels a different result is not persuasive. To begin with, Herzog involved an invocation of Rule 59(e) and only made passing reference to Rule 60(a). Id. at 1064-66. In addition, in its brief mention of Rule 60(a), the court focused only on the "clerical" mistake prong of the rule, not the "oversight or omission" prong that applies here. Id. at 1065. Herzog also makes clear that the line between a "substantive" motion (under Rule 59) and a "procedural" one (under Rule 60) is a fuzzy one that depends on context. Id. This case presents a stronger case for application of Rule 60(a) than Herzog, for the indicia of "oversight or omission" in this case go well beyond the grant of a motion without specifying in the judgment order the consequences of the court's ruling -- even if the consequences were easily ascertainable from documents in the record, as was the case in Herzog. Here, the amount not only was ascertainable, but actually was ascertained -- after a jury verdict, a remittitur, and the formal acceptance of the remittitur. For all of these reasons, the Court respectfully disagrees with eSpeed's reading of Herzog and its contention that Herzog somehow is controlling.
This Court agrees with Judge Schenkier that the more instructive Seventh Circuit analysis comes from Talley v. U.S. Dep't of Agriculture, 595 F.3d 754 (7th Cir. 2010), vacated on grant of reh'g en banc (7th Cir. June 10, 2010).*fn1 In Talley, as here, there was no doubt that the amount of damages (and attorneys' fees) that clearly and unequivocally had been awarded in the district court after trial was not incorporated into the Rule 58 judgment order. Id. at 757. The Seventh Circuit noted the district judge's "failure to perform his ministerial duties," yet concluded that "[b]ecause the parties agree that proceedings are over in the district court, the failure to enter a proper judgment does not prevent an appeal."*fn2 Id. The court of appeals further expressed its "trust that the district court will correct its judgment if greater specificity is necessary to enforcement." Id. At least implicit in that observation is the availability of Rule 60(a) to accomplish such a correction, for the Seventh Circuit's opinion in Talley was issued on February 12, 2010, more than a year after the entry of the flawed judgment in the district court on February 4, 2009. Here, too, the amount had been finally and formally ascertained after extensive proceedings: a lengthy jury trial, post-trial motion practice, an order granting a remittitur, and the written acceptance of the remittitur. TT even submitted a proposed order incorporating the money damages award. And, as in Talley, it was abundantly clear that the proceedings in the district court had come to an end and there is no plausible explanation other than oversight for why the judgment order did not track what everyone understood to be the disposition of the case.
The foregoing analysis leads the Court to agree with Judge Schenkier that the circumstances of this case fit well within the meaning of Rule 60(a)'s authorization to correct "a mistake arising from oversight or omission whenever one is found in a judgment" and thus to accept his recommendation that an amended final judgment order be entered, nunc pro tunc to May 22, 2008, that reflects -- in addition to the injunctive relief -- the jury verdict and a damages award of $2,539,468.00, plus prejudgment interest at the prime rate, compounded monthly.
2. The scope of the prior appeal
In regard to eSpeed's second objection -- namely, that it would be unfairly prejudiced by the entry of an amended judgment -- the Court notes that the Federal Circuit indisputably treated the appeal of Judge Moran's rulings as an appeal from a final judgment under 28 U.S.C. § 1295, rather than as an appeal from an injunction order under 28 U.S.C. § 1292. See Trading Tech. Int'l, Inc. v. eSpeed, Inc., 595 F.3d 1340, 1357-61 (Fed. Cir. 2010). That necessarily means that the Federal Circuit believed that all claims as to all parties had been adjudicated in the district court. See, e.g., Catlin v. United States, 324 U.S. 229, 233 (1945) (explaining that a final judgment appealable under § 1295 "ends the litigation on the merits and leaves nothing for the court to do but execute the judgment"); Pandrol USA, LP v. Airboss Ry. Prods., Inc., 320 F.3d 1354, 1362 (Fed. Cir. 2003) (explaining that a case must be "fully adjudicated as to all claims for all parties" before appellate jurisdiction is proper under § 1295). Judge Moran certainly thought that as well; indeed, eSpeed itself told him so shortly before the entry of the final judgment. Had the Federal Circuit granted eSpeed's motion to dismiss or somehow otherwise indicated that it was considering the case under § 1292, eSpeed would have a stronger point. But the denial of the motion to dismiss, the clear indication that the appeal would proceed under § 1295, and the fact that issues arising out of the jury verdict were both raised and decided confirms Judge Schenkier's spot-on assessment that the jury issues were "fair game for appeal." [1341, at 8.] Indeed, given how eSpeed (and TT, for that matter) pulled out all of the stops in litigating the appeal -- including, for example, the filing of a protective notice of appeal and the request to realign the parties under Federal Rule of Appellate Procedure 28.1 -- it is difficult to believe that eSpeed held back an argument that it wished to make because it was concerned that the issue was not within the scope of the appeals. If that was eSpeed's concern, the prudent course would have been to advance the argument on appeal, at least provisionally, rather than risk forfeiting it.
3. The designation of TT as appellant in the Federal Circuit
eSpeed's final objection -- that TT's stands to benefit unfairly from an amended judgment that it earlier eschewed in pursuit of strategic advantage in the Federal Circuit -- fares no better. As Judge Moran noted, even before the entry of the June 13 judgment order, it was quite evident that the parties were engaged in "jockeying for position" in the court of appeals. 6/13/08 Tr.  at 3. But eSpeed places far too much weight on TT's alleged ulterior motive in remaining silent in the district court lest TT place "in jeopardy" its designation as appellant in the court of appeals. [See 1330, at 11.] In the first place, there was no guarantee that any machinations on TT's part to secure its place as appellant would succeed. In fact, the rules provide only a default position -- first to file -- which is subject to revision in the discretion of the court of appeals under Federal Rule of Appellate Procedure 28.1. TT's position thus was "in jeopardy" from the moment that eSpeed availed itself of the opportunity to spell out the circumstances and ask the Federal Circuit to realign the parties in the event that the court declined to dismiss TT's appeal altogether. As Judge Moran observed, the Federal Circuit was "perfectly capable of making up its own mind as to how it wants to proceed" (6/13/08 Tr.  at 3-4), as it did in issuing a written order denying both eSpeed's motion to dismiss and its request, in the alternative, for a realignment of the parties such that eSpeed would be designated the appellant. See Trading Techs. Int'l, Inc. v. eSpeed, Inc., et al., Order, Nos. 2008-1392, -1393, -1422 (Fed. Cir. Aug. 19, 2008) (Schall, J.) (attached to eSpeed's objections as Ex. 12 [1342-4, pp. 14-15]).
B. TT's objection
TT's lone objection pertains to Judge Schenkier's denial of TT's request for sanctions -- essentially, an award of its attorneys' fees and costs for bringing the motion to enforce the judgment. TT's basic contention is that it should be awarded its fees and costs because it had a good faith belief that the wording of the final judgment entered by Judge Moran was sufficient, even though it made no reference to the amount of damages awarded to TT. This Court overrules the objection. To begin with, in the totality of the circumstances of this case, both sides could (and should) have taken steps to avoid the circumstances that gave rise to the motion. See, e.g., Health Cost Controls v. Washington, 187 F.3d 703, 708 (7th Cir. 1999) ("When a defective judgment is entered, the parties' lawyers have a duty, not here fulfilled, as officers of the court to advise the judge of the need to enter a proper, amended judgment"). It should have been evident immediately to all parties and counsel that a critical aspect of the judgment -- a damages award of more than $2.5 million -- was omitted from the formal judgment order without explanation.
In any event, that TT may have had a good faith belief that further proceedings in the district court to correct the judgment were unnecessary is not enough to shift the costs of bringing and briefing the motion to eSpeed. In briefing the motion, both sides took positions that Judge Schenkier correctly rejected as lacking merit. Most significantly for purposes of addressing TT's objections, this Court fully concurs in Magistrate Judge Schenkier's assessment [see 1341, at 8-9] that TT overreached in requesting an order requiring eSpeed to pay the judgment (plus prejudgment interest) within five business days. TT sensibly has not objected to Judge Schenkier's analysis or conclusion in that regard, but the fact that the parties were compelled to brief -- and Judge Schenkier had to decide -- the issue undermines TT's request for its fees and costs. In sum, as with the rest of the report and recommendation, this Court concludes that in ruling that each side should bear its own fees and costs incurred in briefing the motion, Judge Schenkier got it right.
Having thoroughly reviewed the record, the briefs submitted by the parties (both on the motion to enforce and on the objections), the Court overrules the parties' objections and adopts Magistrate Judge Schenkier's Report and Recommendation (incorporated as Exhibit A to this memorandum opinion and order) in its entirety (save for one minor factual correction*fn3 ). Accordingly, the motion to enforce money judgment and for sanctions  is respectfully denied. In addition, pursuant to Fed. R. Civ. P. 60(a), the judgment entered on June 13, 2008 (nunc pro tunc to May 22, 2008)  will be amended (also nunc pro tunc to May 22, 2008) to reflect -- in addition to the injunctive relief already set forth -- the jury verdict and post-remittitur damages award in the amount of $2,539,468.00, plus prejudgment interest at the prime rate, compounded monthly.
Robert M. Dow, Jr. United States District Judge
Attachment: Exhibit A (Magistrate Judge Schenkier's Report and Recommendation , dated September 8, 2010