Supreme Court Action Today - Attorney Fees, Sentencing, Securities, and Patents

The Supreme Court issued four opinions today as it marches to the end of the current term.  Three of these four are unanimous decisions.  The first is Fox v. Vice (10-114).  This case concerns attorney fees awarded to defendants under 42 U.S.C. §1988 after having defended frivolous counts in a §1983 case.  Fox ran for chief of police in Vinton, La., and was subjected to dirty tricks in the campaign.  He sued the incumbent police chief (Vice) and the town for state claims such as defamation and federal civil rights claims.  His federal claims were dismissed and the state claims were remanded to the state courts.  Vice claimed attorney fees and submitted records that encompassed the entire suit in federal court.  The District Court did not require separate accounting for the frivolous and non-frivolous claims and did not reduce the award to reflect the difference.  The Fifth Circuit affirmed.

The Supreme Court held that attorney fees for only frivolous claims should be awarded under the statute.  The Court stated that if fees were awarded based on both types of claims, there could be a windfall to the prevailing party.  The correct question the courts have to ask in these situations is whether the costs would have been incurred in the absence of the frivolous claim.  The fact that work would overlap between the two does not justify the award under the statute just because of the overlap.  Quite the contrary.  Fees can only be awarded for work exclusive to the frivolous claims.  Justice Kagan wrote the opinion.

The next case is McNeill v. United States (10-5258).  McNeill was sentenced under the Armed Career Criminal Act (ACCA).  It's terms require a 15-year minimum sentence when a defendent has three prior convictions for a violent felony or srious drug offense.  The statute defines a serious drug offense as one where a maximum term of imprisonment of ten years or more is proscribed by law.  McNeill was subject to the enhancement as he had six prior North Carolina drug trafficking convictions that qualified under the statute.  North Carolina later reduced the penalty for the crimes which McNeill was convicted and he argued the sentencing court should have looked at the current penalty rather than the historical penalty.

The Supreme Court held that his sentence under the ACCA was proper.  The sentencing court should look at his convictions under the state statute sentencing scheme at the time they occurred, not as subsequently changed.  The ACCA is backward-looking in its language, focusing on convictions that have already taken place.  Justice Thomas wrote the opinion.

The Third case is Erica P. John Fund, Inc. v. Halliburton Co. (09-1403).  The Erica P. John Fund (EPJ Fund) sued Halliburton over alleged misrepresentations designed to inflate its stock price in violation of the Securities Exchange Act of 1934.  There were allegations that Halliburton made later disclosures that corrected the misrepresentations causing the stock price to fall and causing investors to lose money.  The EPJ Fund sought class action status but was denied at the District Court because it could not satisfy the requirement for certification that the deceptive conduct caused the investors' claimed economic loss.  The Fifth Circuit affirmed.

The Supreme Court held that securities fraud plaintiffs need not prove loss causation to receive class certification.  The question turns on the element of reliance.  Precedent states that requiring individual proof for every class member is not practical.  Plaintiffs are allowed to invoke a rebuttable presumption, called the “fraud-on-the-market” theory, that the investor relies on public misstatements whenever stocks are bought and sold at the price set by the market.  Loss causation is not necessary to invoke that rebuttable presumption.  The Court rejected other Halliburton arguments as to what the Court of Appeals opinion meant.  Chief Justice Roberts wrote the opinion.

The fourth case is Board of Trustees of Leland Stanford Junior Univ. v. Roche Molecular Systems, Inc. (09-1159).  This case tests the reach of the University and Small Business Patent Procedures Act of 1980, also known as the Bayh-Dole Act, in sorting out who owns the rights to patents reduced to practice using federal funds.  Dr. Holodniy worked with Stanford on HIV research, and, as a condition of employment, assigned his rights to inventions developed from his employment.  While at Stanford, he did some work and research at Cetus, later acquired by Roche.  A condition of access required him to assign inventions based on his research there.  Working with Cetus employees, Dr. Holodniy developed a procedure for measuring the amount of HIV in a patient's blood.  He tested the procedure at Stanford, who received three patents for the process.

After Roche acquired Cetus, it commercialized the HIV measurement process and sold kits that are extensively used.  Some of the work at Stanford was subsidized by the National Institutes of Health, which triggered the Act's provision allowing Stanford to retain title to the invention.  The government was licensed to use the patent.  Stanford then sued Roche for patent violation.  Roche said Holodniy's agreement with them gave co-ownership to the procedure, depriving Stanford of the right to sue.  The District Court agreed with Stanford, but the Court of Appeals for the Federal Circuit disagreed, stating that Holodniy wasn't barred by the Act from assigning rights to Cetus.  

The Supreme Court affirmed, holding that the Act did not automatically vest title to federally funded inventions in contractors or authorize them to take title.  The Court disputed Stanford's interpretation of the word "retain" as used in the Act.  Taken with precedent interpreting patent law, the Act does not extinguish third party rights.  Chief Justice wrote the opinion with Justices Breyer and Ginsburg dissenting.  [MG]