Tuesday, April 10, 2007

Those aren't Graham Crackers

What happens after a jury awards plaintiff $19 million and the trial judge grants defendants' motion for a new trial? The answer is, naturally, a grant of summary judgment to defendant. This unusual scenario played out in the ongoing saga of insurance company William A. Graham against one of its former employees, Thomas P. Haughey, and his current employer, USI Holdings Corporation. The most recent opinion may be found at 2007 WL 1008403 (E.D. Pa. March 29, 2007). Earlier significant opinions may be found at 2006 WL 3386672 (E.D. Pa. Nov. 21, 2006), 2006 WL 1704539 (E.D. Pa. June 14, 2006), and 430 F. Supp.2d 458 (E.D. Pa. 2006). All are by Judge Harvey Bartle III, and contain meaty discussions of the law and detailed reviews of the facts. The opinions may also be downloaded for free on the Eastern District of Pennsylvania's website.

The most recent opinion is limited to statute of limitations issues. Due to its wiping out the jury award based on the jury's awarding damages beyond the three year limitations period set forth in Section 507, a new trial on damages is necessary. Plaintiff is reported to plan an appeal. An initial question is why the jury was permitted to award damages beyond the three year period if the court was willing to grant summary judgment to defendant on the issue. No satisfactory answer was provided.

Despite recent case law in the Supreme Court and by Judge Lewis Kaplan of the SDNY in his Auscape opinion emphasizing violation accrual rather than discovery accrual, the William Graham opinion proceeds as if there was no issue. That said, Judge Bartell's discussion of discovery accrual bears careful examination. First, he notes that assertion of a statute of limitationd bar is an affirmative defense (pp. 7-8), but adds that when plaintiff asserts continuing infringement and claims it was justifiably unaware of earlier acts of infringement, the burden shifts to plaintiff to show it exercised reasonable diligence that it could not have earlier discovered those acts. (p.8). If by burden, the court was referring to an evidentiary burden, he may be correct if defendant has first met its evidentiary burden, but if by burden he meant burden of persuasion, I think defendant always bears the burden of establishing its affirmative defense.

The part of the opinion that led to vacating the jury award dealt with the state of plaintiff's knowledge of infringement, i.e., whether it was reasonable for plaintiff not to have brought suit earlier. This is a highly fact-specific inquiry, and it must be pointed out that Judge Bartell engaged in a very thorough review of the evidence both in this opinion and in the predecessor November 21 opinion. Of interest to the rest of us are his comments about a duty to "investigate indications that infringement is in the offing, even if, in the course of the investigation, it learns that infringement has not yet occurred." (p. 22).

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