Opinion ID: 2680234
Heading Depth: 2
Heading Rank: 2

Heading: The Karlseng Litigation

Text: 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 mediations 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 appearance in the case. Faulkner made no changes to his general 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 relationship. 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 Faulkner 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 Faulkner-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 mediation 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 between Faulkner and Johnson, which it said included expensive outings and gifts, and an active business relationship 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 relationship. 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 judgment 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.