Judge Leonard Davis (Danny Hurley)
According to law professor Eric Posner, “chutzpah” never appeared in a U.S. court decision until the 1970s, but judges have since adopted the term enthusiastically. It could get another workout in the coming weeks, when U.S. District Judge Leonard Davis in Tyler, Texas, considers the latest brief filed in LBDS Holding Company’s rollercoaster of a case against the medical imaging company ISOL Technology Inc.
LBDS, you may recall, is the tiny software company that was accused of falsifying evidence just weeks after winning a $25 million verdict in a trade secrets case against ISOL earlier this year. In a motion filed on Friday, LBDS openly admitted to using faked evidence to support its bid for damages at trial—but urged Davis to uphold the verdict anyway.
Confirming the suspicions of its former attorneys at Akin Gump Strauss Hauer & Feld, LBDS admitted in the seven-page brief that it “produced unauthentic documents in discovery and that it used such documents as evidence at trial.” LBDS’ new lawyer wrote that the company is sorry for its actions, but boldly argued that Davis should preserve the liability portion of the company’s March 2014 verdict against ISOL, if not the entire thing.
ISOL “requests sanctions in excess of what is necessary to remedy this issue,” LBDS wrote. “The court should only vacate the jury’s verdict, if at all, strictly as to damages.”
LBDS is a small Texas-based company that develops software for magnetic resonance imaging (MRI) machines. It alleges that it partnered with ISOL, an MRI manufacturer, only to have ISOL steal its ideas. LBDS initially sought more than $80 million in damages, arguing that ISOL’s actions caused it to miss out on a lucrative business opportunity with a health care company called Cerner Corporation. LBDS’ principal, Bert Davis, backed up the damages theory with a purported written contract with Cerner and communications between Davis and a Cerner executive. A federal jury in Tyler returned a $25 million verdict for LBDS on March 12.
Akin Gump partner Sanford Warren Jr., who brought the case to the firm, headed LBDS’ trial team along with Charles “Chad” Everingham IV, a former judge in the Eastern District of Texas. James Walker of Cole Schotz Meisel Forman & Leonard represented ISOL.
LBDS’ apparent deceit became public in May, after Walker advised the court that an anonymous caller had tipped him off that federal prosecutors were investigating whether LBDS’ Davis and his colleagues had fabricated a wide range of documents in 2009 and 2010. Walker concluded that they’d faked the communications with Cerner at the heart of LBDS’ damages case against ISOL.
Walker approached Akin Gump with his evidence on May 14. The firm sought to withdraw from representing LBDS a few days later, asserting that it would never have brought the case if it knew about the forged documents. Judge Davis approved Akin Gump’s withdrawal on June 4.
Now represented by Samuel Johnson of Frisco, Texas-based Johnson Broome, LBDS admits that some sanction is warranted for its misconduct. But it argues that jury verdicts are “virtually sacrosanct absent a showing that the evidence presented at trial was not sufficient to support the jury’s findings.” Because the forged documents pertain to damages rather than liability, “the court’s imposition of sanctions—based on defendants’ complaints and plaintiff’s forthcoming admission regarding the subject documents—should be limited to setting aside the jury’s findings solely as to damages.”
An Akin Gump spokesperson told us the firm has no comment on the motion.