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JP Morgan Chase Bank, N.A. v. Datatreasury Corp.

United States Court of Appeals, Fifth Circuit

August 23, 2019

JP MORGAN CHASE BANK, N.A., Plaintiff - Appellant

          Appeal from the United States District Court for the Eastern District of Texas

          Before HIGGINBOTHAM, GRAVES, and WILLETT, Circuit Judges.


         Plaintiff-Appellant JP Morgan Chase Bank ("JMPC") appeals the district court's denial of its motion to compel certain post-judgment discovery. Finding no reversible error, we affirm.

         I. BACKGROUND

         A. The Underlying Case

         The merits of the underlying case were resolved in a previous appeal which resulted in a published decision. See JP Morgan Chase Bank, N.A. v. DataTreasury Corp., 823 F.3d 1006 (5th Cir. 2016) (hereinafter JPMC). Accordingly, we provide a summary of the merits only as necessary to understand the instant post-judgment dispute.

         Defendant-Appellee DataTreasury Corporation ("DTC") used to hold several patents relating to electronic check-processing systems. JPMC, 823 F.3d at 1008. To enforce its patents, DTC sued several banks, including JPMC, for alleged willful infringement. Id. In 2005, JPMC was the first bank to settle with DTC. Id. As part of the settlement, JPMC entered a license agreement with DTC wherein JPMC was allowed unlimited use of DTC's patented check-processing systems for a total consideration of $70 million. Id. The agreement included a most-favored licensee ("MFL") provision which entitled JMPC "to the benefit of any and all more favorable terms with respect to" subsequent licenses granted by DTC to any other persons. Id. at 1009. The MFL clause also outlined notice requirements concerning how DTC was to notify JPMC each time DTC entered a new license agreement with more favorable terms. Id.

         Over the course of several years, DTC entered numerous subsequent licensing agreements. JPMC, 823 F.3d at 1009. In November of 2012, JPMC filed suit against DTC, alleging DTC breached the MFL clause by failing to notify JPMC of the subsequent licenses, many of which "were granted on terms substantially more favorable than those afforded to JPMC." Id. Prior to trial, JPMC filed a motion for summary judgment specifically seeking the benefit of the more favorable terms granted to Cathay General Bancorp ("Cathay") on October 1, 2012, as well as the "other Subsequent Licenses." See id. Most notably, the Cathay agreement granted Cathay a license for a total consideration of $250, 000. Id. DTC responded with its own motions for summary judgment, requesting summary judgment in its favor on its affirmative defenses and the applicability of the MFL clause, and requesting a finding of no breach as to certain claims. Id.

         Because JPMC designated the Cathay license as the most favorable, the district court only considered the parties' claims with respect to that particular license, granting JPMC's motion in part and denying DTC's motions. See id. at 1010. The district court determined that DTC breached the contract by failing to notify JPMC of the Cathay license in accordance with the MFL clause and that the broadly worded MFL clause gave JPMC the right to incorporate retroactively the more favorable terms of the Cathay license agreement.[1] Id. The district court also found DTC's affirmative defenses meritless, but again only considered them as they applied to the Cathay license. Id. On appeal, this court affirmed the district court's interpretation of the MFL agreement and the dismissal of DTC's affirmative defenses. Id. at 1008.

         In the end, DTC was on the hook to JPMC for $69 million in damages. Id. at 1010.

         B. Post-Judgment Activity

         Shortly after the district court entered the $69 million judgment in June 2015, JPMC issued discovery requests and a subpoena to DTC and its law firm Nix, Patterson & Roach, LLP ("NPR") regarding the location of DTC's assets.[2]JPMC's initial interrogatories and subpoena did not include a timeframe, and DTC objected that such extensive discovery requests were unduly burdensome and overbroad because they were not related to the period after execution of the Cathay license agreement. DTC explained it would respond, but it would limit its answers to information dating back to June 9, 2011, as that was the earliest date it could have had "notice of a potential claim by or obligation to JPMC" because that was the date DTC received a letter from JPMC "raising a potential issue about the license between DTC and [JPMC]." DTC filed motions to quash and for protective orders, and JPMC filed a motion to compel.

         The district court held a status conference on the motions in March 2017. JPMC explained at the hearing that it sought all of DTC's financial records because DTC had paid nothing on the judgment and was showing bank statements reflecting insolvency, despite having received nearly $600 million in revenue from various license agreements. The district court declined to rule on the issues at the hearing and directed the parties to meet and confer and file updated status reports. The parties met and conferred but could not resolve the issues. JPMC continued to want discovery dating back to January 2006- DTC's first alleged breach of the MFL clause-to help it uncover any fraudulent transfers or improper payments to shareholders. Negotiations stalled, and JPMC renewed its motion to compel, requesting an order overruling DTC's objections.

         The district court ultimately sided with DTC. While the district court did not provide a detailed explanation for its ruling, the discovery order mentions June 2011 as the date DTC first had notice of JPMC's claim. It also asserts that JPMC relied on the 2012 Cathay agreement in its summary judgment motion and the judgment was based on that agreement. In light of these dates and the totality of the circumstances, the district court determined JPMC sought discovery into matters "well-before the appropriate time period and that [were] not relevant to the Judgment in this case." JPMC appealed.

         II. ...

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