Court Opinion

ID: 1327
Source: CourtListenerOpinion
Date Created: 2010-04-07 01:00:18+00
Date Added: 2024-06-11T15:04:11.283918
License: Public Domain

NOTE: This disposition is nonprecedential.

 United States Court of Appeals for the Federal Circuit
                                        2009-1500

                          MEDPOINTE HEALTHCARE, INC.,
                     (doing business as Wallace Pharmaceuticals),

                                                       Plaintiff-Appellee,

                                            v.

                               WALTER E. KOZACHUK,

                                                       Defendant-Appellant.

       Richard H. Brown, III, Day Pitney LLP, of Morristown, New Jersey, for plaintiff-
appellee. With him on the brief was Anthony J. Marchetta.

      Walter E. Kozachuk, of Catonsville, Maryland, pro se.

Appealed from: United States District Court for the District of New Jersey

Judge Mary L. Cooper
                       NOTE: This disposition is nonprecedential.

United States Court of Appeals for the Federal Circuit
                                      2009-1500

                         MEDPOINTE HEALTHCARE, INC.,
                    (doing business as Wallace Pharmaceuticals),

                                                            Plaintiff-Appellee,

                                          v.

                               WALTER E. KOZACHUK,

                                                            Defendant-Appellant.

       Appeal from the United States District Court for the District of New
       Jersey in Case No. 3:04-CV-02019, Judge Mary L. Cooper.
                         ____________________________

                                DECIDED: April 6, 2010
                            ____________________________

Before LOURIE, GAJARSA, and MOORE, Circuit Judges.

PER CURIAM.

      Walter E. Kozachuk appeals from an order of the United States District Court for

the District of New Jersey enforcing a settlement agreement in which Dr. Kozachuk

agreed to transfer ownership of U.S. Patents 5,728,728 (“the ’728 patent”); 5,942,540

(“the ’540 patent”); and 6,515,019 (“the ’019 patent”) to MedPointe Healthcare, Inc.

(“MedPointe”). We affirm.

                                   BACKGROUND

      Between February 1, 1993, and October 4, 1994, Kozachuk worked for

MedPointe’s predecessor, Carter-Wallace, Inc., supervising clinical studies of the drug
Felbamate. Under the terms of his employment agreement, Kozachuk agreed to assign

to Carter-Wallace and its successors any and all inventions, discoveries, or

improvements made, discovered, or conceived by him during his employment.

Eighteen months after leaving Carter-Wallace, on April 10, 1996, Kozachuk filed the first

in a series of patent applications, which issued as the ’728, ’540, and ’019 patents, all of

which claim clinical uses of Felbamate to treat neurological indications. On April 28,

2004, MedPointe brought suit against Kozachuk claiming ownership of the ’728, ’540,

and ’019 patents based on Kozachuk’s breach of his employment agreement and duty

of loyalty and seeking to correct the patents’ inventorship under 35 U.S.C. § 256.

       After years of litigation and with trial set for May 19, 2008, the parties participated

in a settlement conference before Magistrate Judge Bongiovanni on May 14, 2008. The

parties negotiated for over four hours, after which the court placed the material terms of

a settlement agreement on the record. The terms included: (1) a $60,000 payment by

MedPointe to Kozachuk; (2) a transfer of all right, title, and interest in Kozachuk’s

patents to MedPointe; (3) an agreement to arbitrate any disputes over Kozachuk’s

ownership of a pending U.S. patent application related to Felamate; and (4) a

reservation of rights by MedPointe with respect to any foreign patents or patent

applications. Both MedPointe’s representative and Kozachuk assented to those terms

on the record, and the parties agreed that MedPointe’s counsel would incorporate them,

along with other ancillary terms, into a written settlement agreement.

       On June 16, 2008, MedPointe’s counsel provided Kozachuk with a draft

Settlement Agreement and Release and a draft Assignment (“the Settlement

Documents”). Kozachuk, however, refused to sign the Settlement Documents, accusing

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his counsel, Joseph Posillico, of inadequate representation and misleading him into a

settlement.    On October 29, 2008, having still not received executed Settlement

Documents from Kozachuk, MedPointe filed a motion to enforce the settlement

agreement and for sanctions against Kozachuk.

       On     March   4,   2009,   Magistrate   Judge   Bongiovanni     issued   an   order

recommending that the district court grant MedPointe’s motion to enforce the

settlement, concluding that an enforceable settlement had been reached on May 14,

2008, despite the lack of a written document. MedPointe Healthcare, Inc. v. Kozachuk,

No. 04-2019, 2009 WL 540680, at *4-*5 (D.N.J. Mar. 4, 2009) (“Report and

Recommendation”). Judge Bongiovanni found that Kozachuk’s claims that he did not

understand the proceedings and did not intend to settle “lack credibility,” as he is a well-

educated and sophisticated individual who is familiar with the litigation process and the

court had made clear the proceedings’ purpose before putting the settlement terms on

the record. Id. at *4. The judge also rejected Kozachuk’s claim that a voir dire was

necessary. Id. at *5. Kozachuk filed an objection to the Report and Recommendation

pro se.

       On June 15, 2009, the district court, after a de novo review of the record,

adopted the findings and conclusions of the Report and Recommendation. MedPointe

Healthcare, Inc. v. Kozachuk, No. 04-2019, 2009 WL 1662226 (D.N.J. June 15, 2009).

And on June 30, 2009, the court ordered Kozachuk to execute the Settlement

Documents and imposed sanctions on Kozachuk of $32,555.13, representing

MedPointe’s reasonable attorneys’ fees and costs incurred enforcing the settlement.

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                                         -3-
MedPointe Healthcare, Inc. v. Kozachuk, No. 04-2019, slip op. at 1-2 (D.N.J. June 30,

2009). Kozachuk appealed. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).

                                       DISCUSSION

       This court reviews a decision to enforce a settlement agreement, an issue not

unique to patent law, under the law of the appropriate regional circuit. See Schaefer

Fan Co. v. J & D Mfg., 265 F.3d 1282, 1288 (Fed. Cir. 2001). Under Third Circuit law,

we review the district court’s factual findings regarding the existence of an enforceable

settlement agreement for clear error. See Tiernan v. Devoe, 923 F.2d 1024, 1031 n.5

(3d Cir. 1991). “A factual finding is clearly erroneous when the reviewing court on the

entire evidence is left with the definite and firm conviction that a mistake has been

committed.” Brisbin v. Superior Valve Co., 398 F.3d 279, 285 (3d Cir. 2005) (internal

citations omitted).

       Kozachuk makes three arguments on appeal. First, he argues that because he

did not understand the proceedings on May 14, 2008, and had no intention of settling,

there was no “meeting of the minds” necessary to effectuate a settlement agreement.

Kozachuk contends that the transcript of the proceedings does not clearly reflect his

agreement to the settlement terms, faults the court for failing to engage him in a

comprehensive voir dire, and claims that his actions demonstrate that he did not believe

he had settled.       Alternatively, Kozachuk next argues that the settlement terms are

unconscionable, requiring him to transfer patents assertedly worth millions of dollars to

MedPointe for a paltry $60,000 simply because MedPointe’s predecessor briefly

employed him over a decade ago. Finally, Kozachuk alleges that the settlement is

unenforceable because of unseemly conduct by his attorney, and specifically because,

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                                         -4-
after inadequately preparing the case for trial, Posillico coerced him into settling by

adopting an overwhelmingly negative assessment of the case and threatening to

withdraw as counsel.

       MedPointe responds that the district court did not clearly err in finding that

Kozachuk entered into an enforceable settlement agreement at the conference on May

14, 2008. Specifically, MedPointe contends that the transcript of the conference, in

addition to Kozachuk’s e-mails and sworn statements, demonstrate that the parties

agreed to the essential terms of a settlement on May 14, 2008. Further, according to

MedPointe, a voir dire was unnecessary given the Magistrate Judge’s active

participation in the negotiations and Kozachuk’s sophistication and familiarity with the

litigation process. With regard to the enforceability of the settlement terms, MedPointe

argues that Kozachuk did not make the argument below, but regardless, the argument

lacks merit as there is no evidence that $60,000 in exchange for the transfer of

Kozachuk’s three patents is in any way disproportionate, let alone unconscionable.

Finally, MedPointe argues that there is no evidence that Kozachuk’s counsel intended

to or did in fact pressure Kozachuk into settling by threatening to withdraw.

       We agree with MedPointe and reject all three of Kozachuk’s arguments. Under

New Jersey law, which governs a settlement agreement made in New Jersey, a

settlement agreement is a binding contract that is enforceable regardless whether it has

been reduced to writing. United States v. Lightman, 988 F. Supp. 448, 459 (D.N.J.

1997). “Where the parties agree upon the essential terms of a settlement, so that the

mechanics can be ‘fleshed out’ in a writing to be thereafter executed, the settlement will

be enforced notwithstanding the fact the writing does not materialize because a party

2009-1500
                                        -5-
later reneges.” Lahue v. Pio Costa, 623 A.2d 775, 788 (N.J. Super. App. Div. 1993). In

this case, the district court did not clearly err in finding that the transcript of the May 14,

2008, settlement conference established that Kozachuk had entered into an enforceable

settlement agreement with MedPointe. Report and Recommendation at *4.

       The transcript of the proceedings clearly evinces both parties’ intent to settle the

suit brought by MedPointe on specific terms. At the conclusion of the May 14, 2008,

conference, the Magistrate Judge summarized the purpose of the day’s proceedings,

concluding that “it appears that we have terms that we’d like to place on the record.”

J.A. 75. Judge Bongiovanni then went on to describe the process, explaining how

MedPointe’s counsel would state the terms of the settlement for the record and that the

court would then ask each party for its agreement. Specifically, the court stated:

       So, Mr. Brown [MedPointe’s counsel], as plaintiff, I would ask you [to place
       the terms on the record].           And then, Ms. French [MedPointe’s
       representative] I would ask you if you concur in the terms. And then I
       would turn to you, Mr. Posillico, likewise ask you if – make sure we have
       all of our bases covered and then ask Dr. Kozachuk if he agrees as well.

Id. After assent by MedPointe’s counsel, MedPointe’s representative, and Kozachuk’s

counsel, the court asked Kozachuk, “Do you agree as well?”               Id. at 75-78.    And

Kozachuk replied, “Yes.” Id. at 78. At no time did Kozachuk ask for clarification or in

any way indicate that he did not understand that he was agreeing to a settlement on the

terms stated by MedPointe’s counsel. In light of Kozachuk’s high level of education, his

obvious familiarity with the litigation process, and his failure to express any lack of

understanding except after the fact, the court did not clearly err in finding that a binding

settlement agreement had been formed.

2009-1500
                                          -6-
      Moreover, Kozachuk’s assertions that he never intended to settle and did not

realize that he had settled are directly contradicted by evidence of record. For example,

in a sworn declaration, Kozachuk recalls a conversation between Judge Bongiovanni

and his counsel on the day of the conference and states, “I was prepared to negotiate a

settlement, if possible.”   Id. at 274.    And, after receiving a bill from his counsel,

Kozachuk replies that, “We settled this case for $60K.” Id. at 182. Thus, both before

and after the settlement conference, Kozachuk clearly understood the purpose and

consequences of the proceedings.

      We also reject Kozachuk’s claim that the settlement terms are unconscionable.

Although Kozachuk raised the issue for the first time on appeal, and thus it is not

properly before us, Sage Prods., Inc. v. Devon Indus., Inc., 126 F.3d 1420, 1426 (Fed.

Cir. 1997), we note that the argument is wholly without merit. Courts ordinarily do not

set aside a settlement for inadequate consideration unless “the inadequacy of

consideration is grossly shocking to the conscience of the court.” Pascarella v. Bruck,

462 A.2d 186, 190 (N.J. Super. App. Div. 1983). Kozachuk asserts that the ’728, ’540,

and ’019 patents are worth millions of dollars, but he presents no evidence to establish

their worth. Simply nothing in the record evinces an inadequacy of consideration, let

along an inadequacy that shocks the conscience.

      Finally, we reject Kozachuk’s claim that his attorney’s behavior coerced him into

accepting the settlement. The transcript of the May 14, 2008, conference lacks any

indication that Kozachuk and his counsel differed over the settlement or its terms.

Furthermore, it strains credibility to think that Kozachuk, who had already retained new

counsel once during the litigation and who worked with sophisticated business advisors,

2009-1500
                                          -7-
felt that he had no choice but to settle because his counsel indicated a desire to

withdraw in light of their disagreements over the merits of the case. Moreover, to the

extent that Kozachuk claims inadequate representation by his chosen counsel, it is well-

established that a party is bound by the actions of his counsel and may not after the fact

disavow counsel’s actions on his behalf. Link v. Wabash R.R. Co., 370 U.S. 626, 633-

34 (1962).

      Accordingly, we affirm.

2009-1500
                                        -8-