Professor Mark Lemley, Stanford Law School
Professor Mark Lemley, Stanford Law School (Jason Doiy / The Recorder)

SAN FRANCISCO — The U.S. Court of Appeals for the Federal Circuit ruled Tuesday that a court-appointed mediator should have disclosed “an enduring social relationship” with a Fish & Richardson partner before acting as a mediator in a case where Fish was counsel.

But the court stopped short of ordering a new jury trial because the time to appeal had long expired.

Even though mediators have no power to decide a case, they should be held to the same standards of neutrality as judges, Federal Circuit Judge Kathleen O’Malley wrote for a unanimous panel. “Just as a judge is required to recuse himself under Section 455(a) whenever ‘his impartiality might reasonably be questioned,’” O’Malley wrote, “mediators are required to disclose a potential conflict whenever there are facts and circumstances that ‘could reasonably be seen as raising a question about the mediator’s impartiality.’”

Chief Judge Sharon Prost and Judge Randall Rader concurred in a case that bore some semblance to the potential conflict that led to Rader’s recusal from two recent cases and his subsequent resignation from the court.

Rader is leaving June 30 after publicly apologizing last month for “transgressing limits on judges’ interactions with attorneys who appear before the court.” In particular, he apologized for relaying his own and a colleague’s enthusiasm for Weil, Gotshal & Manges partner Edward Reines’ advocacy skills via email and inviting Reines to share the email with others.

The conduct in CEATS v. Continental Airlines goes far beyond friendly emails. Fish & Richardson partner Brett Johnson clerked for a judge in the same Texas courthouse as Magistrate Judge Robert Faulkner, according to a Texas Court of Appeals decision. The two remained friendly after Faulkner retired and became a JAMS neutral, enjoying expensive dinners with their spouses and Dallas Mavericks basketball games.

Faulkner didn’t reveal the relationship when Johnson appeared before him at two arbitrations; in one instance, the two pretended to be strangers when introduced in front of other parties. Emails showed the two postponed a basketball outing when an arbitration was pending; afterward Johnson took Faulkner and their families to a Mavericks game and dinner with a tab over $1,500. On another occasion Faulkner treated the Johnsons and another couple to a $1,000 dinner at Mansion in Dallas. Faulkner also used his relationship with Johnson to pitch business to Fish & Richardson.

The Texas Court of Appeals threw out a $22 million award that Faulkner had entered, including $6 million in attorney fees, in a case where Johnson was lead counsel. The court said Faulkner should have disclosed the conflict of interest to the other parties.

Around the same time in 2011, Faulkner was mediating a patent dispute that CEATS and other ticket brokers had brought against a group of airlines represented by Fish & Richardson. The mediation was unsuccessful and in 2012 a jury found the patents were invalid. That ruling was upheld on appeal.

Last year CEATS moved to set aside the judgment, saying the Texas Court of Appeals decision had just come to its attention, and that Faulkner hadn’t disclosed his conflict to them either. CEATS argued—but admitted it had no clear proof—that Faulkner must have relayed its confidential information to Fish, helping the airlines develop their invalidity defense.

“Those involved in the administration of justice, whether judges, arbitrators or mediators, not only have to be impartial, they must appear to be impartial to the public and be perceived that way,” Miller Canfield partner Dean Dickie argued to the Federal Circuit on March 5.

O’Malley agreed with that much on Tuesday. “Because parties arguably have a more intimate relationship with mediators than with judges, it is critical that potential mediators not project any reasonable hint of bias or partiality,” she wrote.

It was “irrelevant” that Johnson had no involvement in the airline case, she added, because Fish partner Thomas Melsheimer was defending the propriety of the $22 million award at the same time he was litigating the airlines case.

But, O’Malley concluded, CEATS had not shown “a meaningful risk of injustice” or the “extraordinary circumstance” necessary to set aside a final judgment.

Or, as Mark Lemley, a professor at Stanford Law School and a partner at Durie Tangri, argued to the Federal Circuit for the airlines, “Plaintiffs got a full and fair opportunity to present their case and they lost.”

The court has now issued some 10 precedential opinions in the last month in which Rader heard arguments. At least one more big one remains: a $368 million patent infringement verdict against Apple over its FaceTime and VPN on demand features. Rader, Prost and Judge Raymond Chen heard argument in Virnetx v. Cisco on March 3. If nothing is forthcoming by June 30, the court is expected to issue the decision with only Prost’s and Chen’s votes, or assign a new third judge and possibly order rehearing.

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