A Blog About Intellectual Property Litigation and the District of Delaware

Better $200/day than cell block 200, I suppose.
Better $200/day than cell block 200, I suppose. Kenny Eliason, Unsplash

When we last wrote about Mavexar, Chief Judge Connolly had held a civil contempt hearing after he ordered the sole member of Backertop, a Mavexar-related LLC, to appear in-person in Delaware and she failed to appear (she instead initiated a head-on challenge to the authority of the Court). She likewise failed to appear for her contempt hearing.

Today, the Court issued its opinion and order, holding the witness in contempt. It handily dispatched with each of the witness' arguments against the hearing.

It easily rejected their first argument—that the Court lacks jurisdiction after the entity, Backertop Licensing LLC, dismissed it's complaint. The Court reiterated the same ruling it made last time.

Next, the Court easily rejected the idea that civil contempt is "meant to benefit the complainant," citing multiple U.S. Supreme Court opinions to the contrary. It also rejected the idea that a party can re-litigate the underlying order in context of a contempt proceeding.

I found the Court's discussion of the alleged Fifth Amendment violation interesting, particularly when the Court attempts to identify exactly which Fifth Amendment right it could possibly have violated:

Backertop and [the witness] insinuate that I violated their Fifth Amendment due process rights by not apprising them of their "rights as regards to criminal proceedings." I say this because they fault me for "rais[ing] the possibility of fraud on the court, a criminal offense, without first advising either Backertop or [the witness] of her [sic] rights as regards to criminal proceedings." . . . Backertop and [the witness] do not identify what "rights as regards to criminal proceedings" they have in mind. The only "advice of rights" obligation that comes to my mind is the requirement under Miranda v. Arizona that law enforcement officers inform the subject of a custodial interrogation of the subject's Fifth Amendment privilege against self-incrimination and the right to have an attorney present during the interrogation. . . . Putting aside the fact that Backertop, as a corporate entity, does not enjoy a Fifth Amendment right against compelled self-incrimination, . . . "Miranda warnings are not required in civil court proceedings" . . . . In any event, even if Miranda were somehow violated here (as silly as it sounds to say that), "a violation of Miranda is not itself a violation of the Fifth Amendment," . . . and the sole remedy for a Miranda violation is the suppression of the defendant's statements and the fruits thereof in criminal cases.

Backertop Licensing LLC v. Canary Connect, Inc., C.A. No. 22-572-CFC, D.I. 56 at 8 (D. Del. Aug. 21, 2023). The Court also found the argument moot, as it would have advised the witness of her right to an attorney, had she appeared.

The Court next dispatched with her argument that it "cannot serve as both investigator and judge," noting that the case they cite dealt with a judge "adjudicating a case where he was also an investigator for the government."

Thus, the Court held the witness in contempt for failure to appear.

Attend or Pay $200/Day

The Court next addressed the remedy for civil contempt, noting that indefinite confinement is an option. It found that a fine is the best option, and set the amount at $200 per day until the witness attends:

Given these circumstances, I find that a $200 per day fine is appropriate and will impose that fine against [the witness] starting August 23, 2023. Beginning on that date, [the witness] will be fined $200 every day that the Court is open and [the witness] does not appear in court. [The witness] can purge her contempt by notifying the Court that she is prepared to appear at a hearing and then attending that hearing in person. (After [the witness] notifies the Court that she is prepared to appear in person at a hearing, the Court will endeavor to promptly schedule that hearing.)

Courts Can, In Fact, Conduct Investigations

Finally, the Court addressed and rejected two other arguments from the briefing, including that the Court cannot act as an investigator:

Backertop and [the witness] purport to quote from Kisor v. Wilkie, 139 S. Ct. 2400, 2413 (2019), the statement that "[c]ourts cannot conduct factual investigations." . . . There is, however, no such statement in Kisor. What Justice Kagan actually wrote on page 2413 of Kisor is: "Agencies (unlike courts) can conduct factual investigations, can consult with affected parties, can consider how their experts have handled similar issues over the long course of administering a regulatory program." 139 S. Ct. at 2413 (plurality opinion). Putting aside the fact that Justice Kagan was not writing for a majority of the Court when she wrote this sentence, Justice Kagan was speaking here of "factual investigations" in the context of policy-driven fact finding that federal agencies (and not courts) engage in before promulgating regulations. As she noted in the immediately preceding sentences in her opinion: "Congress ... is attuned to the comparative advantages of agencies over courts in making such policy judgments. Agencies (unlike courts) have unique expertise, often of a scientific or technical nature, relevant to applying a regulation to complex or changing circumstances." . . . To be clear, Justice Kagan was not saying in her plurality opinion in Kisor that courts are prohibited from conducting factual inquiries. And in any event, a majority of the Supreme Court explicitly held in Chambers v. NASCO, Inc. that " a court has the power to conduct an independent investigation in order to determine whether it has been the victim of fraud." 501 U.S. 32, 44 (1991).

The Court rejected the idea that it had improperly read privileged documents in open court, noting that counsel only once objected, and that objection occurred in the context discussion that did not involve disclosure of privileged material. It also rejected the ideas that (1) it had represented to the Federal Circuit that the materials would be reviewed in camera, simply noting that it never had, and (2) that the proceedings should be halted while Backertop appeals the Court's privilege determination.

Where Do We Go from Here? Will She Appear?

I have no idea what will happen next! Will the witness appear? How long will she hold out? Will she request a stay pending appeal, and will the Court grant it? If she never appears, how will the Court collect—and will it escalate? Who knows!

The $200/day fine may seem low, but it will add up quickly. The Court said that it applies only on days the Court is open, so around 245 days per year. That would add up to $49,000 for each year she fails to appear.

And, don't forget, her husband may be subject to a fine as well. He was an attorney at Mavexar, and he owns the Creekview IP LLC, another Mavexar-related entity. He too refused to appear, although the Court has not yet held him in contempt (that may be coming soon).

We'll keep you updated!

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