Official Subject to Final Review
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` IN THE SUPREME COURT OF THE UNITED STATES
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`HIGHMARK INC.,
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`:
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` Petitioner,
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`: No. 121163
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` v.
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`ALLCARE HEALTH MANAGEMENT
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`SYSTEMS, INC.
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`:
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`:
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` x
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` Washington, D.C.
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` Wednesday, February 26, 2014
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` The aboveentitled matter came on for oral
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`argument before the Supreme Court of the United States
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`at 11:10 a.m.
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`APPEARANCES:
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`NEAL K. KATYAL, ESQ., Washington, D.C.; on behalf of
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` Petitioner.
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`BRIAN H. FLETCHER, ESQ., Assistant to the Solicitor
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` General, Department of Justice, Washington, D.C.;
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` for United States, as amicus curiae, supporting
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` Petitioner.
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`DONALD R. DUNNER, ESQ., Washington, D.C.; on behalf of
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` Respondent.
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`Alderson Reporting Company
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` IN THE SUPREME COURT OF THE UNITED STATES
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` x
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`HIGHMARK INC.,
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`:
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` Petitioner,
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`: No. 121163
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` v.
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`ALLCARE HEALTH MANAGEMENT
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`SYSTEMS, INC.
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`:
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`:
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` x
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` Washington, D.C.
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` Wednesday, February 26, 2014
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` The aboveentitled matter came on for oral
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`argument before the Supreme Court of the United States
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`at 11:10 a.m.
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`APPEARANCES:
`
`NEAL K. KATYAL, ESQ., Washington, D.C.; on behalf of
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` Petitioner.
`
`BRIAN H. FLETCHER, ESQ., Assistant to the Solicitor
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` General, Department of Justice, Washington, D.C.;
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` for United States, as amicus curiae, supporting
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` Petitioner.
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`DONALD R. DUNNER, ESQ., Washington, D.C.; on behalf of
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` Respondent.
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`Official Subject to Final Review
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` C O N T E N T S
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`ORAL ARGUMENT OF
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`
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`PAGE
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`NEAL K. KATYAL, ESQ.
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` On behalf of the Petitioner
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`ORAL ARGUMENT OF
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`BRIAN H. FLETCHER, ESQ.
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` For United States, as amicus curiae,
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` supporting the Petitioner
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`ORAL ARGUMENT OF
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`DONALD R. DUNNER, ESQ.
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` On behalf of the Respondent
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`REBUTTAL ARGUMENT OF
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`NEAL K. KATYAL, ESQ.
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` On behalf of the Petitioner
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` P R O C E E D I N G S
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` (11:10 a.m.)
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` CHIEF JUSTICE ROBERTS:
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`We'll hear argument
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`next in Case 121163, Highmark v. Allcare Health
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`Management Systems.
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` Mr. Katyal.
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` ORAL ARGUMENT OF NEAL K. KATYAL
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` ON BEHALF OF THE PETITIONER
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` MR. KATYAL:
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`Thank you, Mr. Chief Justice,
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`and may it please the Court:
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` The Federal Circuit applied a de novo
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`withoutdeference standard to objective baselessness in
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`Section 285 cases. That was wrong for three reasons.
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` First, this Court has already held that a
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`unitary abuseofdiscretion standard should be applied
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`in closely analogous cases in the Pierce and Cooter
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`cases. Those cases, like this one, were ancillary
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`appeals over attorneys' fees concerning the supervision
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`of litigation, which is precisely what Section 285
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`addresses.
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` Second, the text of the Act, and in
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`particular its key words, "may" and "exceptional
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`cases," imbued district courts with discretion. Indeed,
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`up until this case, that was the way the Act applied for
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`60 years.
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` And, third, the other factors this Court has
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`looked to, such as a lack of law clarifying benefits,
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`the positioning of the decisionmaker, efficiency in
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`avoiding distortion, cut in favor of unitary
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`abuseofdiscretion review.
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` For those reasons, the case for such review
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`even stronger here than it was in Pierce and Cooter. In
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`Pierce and Cooter, this Court looked to for in
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`Pierce, for example, this Court looked to EAJA and
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`determined that, even though the text of the statute
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`didn't compel the result, nonetheless, unitary
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`abuseofdiscretion review was the appropriate standard.
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` And here
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` CHIEF JUSTICE ROBERTS:
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`How how does
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`abuse of discretion work with respect to a pure legal
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`question?
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` MR. KATYAL:
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`I think this Court answered
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`that both in Pierce and Cooter. It said if it's a truly
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`pure legal question, then it is a that it is a
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`that that there isn't deference given to that in that
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`circumstance.
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` Now, here the question presented is
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`objective baselessness. And in the context of
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`Section 285 determinations, that kind of retrospective
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`look was the attorney acting reasonably or not
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`Pierce and Cooter both say that's something that is
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`always contextdependent. It always depends on the
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`facts.
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` JUSTICE KAGAN:
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`Well, would you explain that
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`to me a little bit, Mr. Katyal. In a case in which the
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`district court just uses an erroneous claim
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`construction, you would concede that that's a pure legal
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`question, so that would be an abuse of discretion?
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` MR. KATYAL:
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`We would not, Your Honor. So
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`certainly on the merits, if the question of claim
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`construction went up to the Federal Circuit as it did
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`here, for example, in 2009 the question there would
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`be there would be no deference under the Federal
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`Circuit's precedent in a most recently, Friday in the
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`Lighting Ballast case.
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` But when the question is a 285 question, the
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`retrospective look at objective baselessness of which
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`claim construction forms a part
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` JUSTICE KAGAN:
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`No, but I I guess my
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`first question was just if what if the district court
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`says, Here's the appropriate claim construction, and
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`it's saying that, it's wrong.
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` MR. KATYAL:
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`Yes.
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` JUSTICE KAGAN:
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`Is that a legal question?
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` MR. KATYAL:
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`As it goes up to the Federal
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`Circuit under existing precedent, they treat that as a
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`legal question. We think this Court's decision in
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`Markman suggests otherwise. It said it was a mixed
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`question, a mongrel question of law and fact. And so
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`when if the Court were ever to get into that ultimate
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`question on the merits, we think that that the
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`Markman analysis would control.
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` But here the question is a 285 question.
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` JUSTICE KAGAN:
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`Okay. So let's just assume
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`for a moment that an erroneous claim construction would
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`be a mistake of law. Let's just assume that. And I
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`understand you say that there's a question.
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` But if that's right, why is it not also true
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`that a judge's statement that a litigant that a
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`litigant's claim construction was unreasonable is not a
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`similar mistake of law?
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` MR. KATYAL:
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`For for exactly the reason
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`that I think Pierce says, which is the question in a
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`retrospective attorneys' fees case is not what the is
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`not what was the law; it's rather, was the position that
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`the party took reasonable.
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` And so, for example, in Pierce the question
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`was under a certain statute, EAJA, do the words "shall"
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`and "authorized" do they mean mandatory? And Justice
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`White in dissent said that's a pure legal question.
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`That's something courts of appeals deal with all the
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`time, district courts don't deal with it; we should give
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`no deference to that. And Justice Scalia's opinion for
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`the Court said, No, even there, that is something we're
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`looking at that legal claim as situated within the
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`particular contours of the case overall in deciding was
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`that a reasonable argument or not.
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` JUSTICE KAGAN:
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`But isn't the main thing the
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`judge doing when it says that a claim construction is
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`unreasonable is essentially measuring the delta between
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`the actual the correct claim construction and the
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`mistaken claim construction? And doesn't that seem to
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`be, again, assuming that the claim construction itself
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`is a question of law? Doesn't that itself seem to be a
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`question of law?
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` MR. KATYAL:
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`We agree that's one of the
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`things the judge is doing there, but it's not the only
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`thing. Just as in Pierce, certainly the Court was
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`interpreting the meaning of the statute, but they were
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`doing it within the context of litigation. This case I
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`think is a helpful example and to remove it from the
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`abstract and just bring it down to here.
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` You've heard and you've read the brief on
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`the other side saying this is a claim construction
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`dispute. It's not a claim construction dispute. What
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`the district court found seven different times when it
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`imposed fees is that this is actually a dispute about
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`infringement and their inability to come up with any
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`theory whatsoever for why why there was a
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`infringement violation.
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` And what I think the logic of Pierce and
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`Cooter is, is that if you give clever appellate lawyers
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`like my friend the ability to go to the to go to a
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`court of appeals and repackage what were essentially
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`factual claims and claim they're legal here, claim
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`construction then you're going to you're going to
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`waste an enormous time of time and resources of the
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`Federal Circuit as they seek to disaggregate, is this
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`really, truly factual or is this really legal.
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` And you wouldn't want to have that, I think,
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`for the reasons that this Court has said repeatedly,
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`which is the whole goal in attorney fees cases is to
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`avoid a second major litigation. And that's precisely
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`what the Federal Circuit did here. It minted a whole
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`new theory under this de novo withoutdeference
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`standard. And that's the harm. That's the evil that I
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`think all of the attorney fees cases are trying to
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`address.
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` I'd also say that, you know, even if
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`beyond Pierce, beyond Pierce, we do think this is
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`essentially Pierceplus; that this is a case in which
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`the text of the statute and its key words, "may in
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`exceptional cases," give the Court, I think, further
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`reason to return the standard to the way it has always
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`been interpreted for 60 years.
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` And for 60 years:
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`From 1946 to 1952,
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`abuseofdiscretion deferential review was used in
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`objective baselessness cases; in 1952, the the
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`Congress codified, essentially, those that
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`interpretation; from 1952 to 1982, the regional circuits
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`used it, like the D.C. Circuit in the Oetiker case;
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`after 1982, the Federal Circuit used it time and again
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`in cases such as EonNet.
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` It's this case that really is a dramatic
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`departure from the way Section 285 has been interpreted,
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`and indeed the way all attorney fee litigation has been
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`interpreted.
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` JUSTICE SOTOMAYOR:
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`If we undo
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` JUSTICE GINSBURG:
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`On your reading,
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`Mr. Katyal, I take it that if the district court denies
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`fees, there would be slim to no chance of getting that
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`overturned on appeal if you're dealing with the abuse
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`of abuse of discretion.
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` MR. KATYAL:
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`We think that it is hard in
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`that circumstance, and that's the oneway ratchet. We
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`don't place a lot of emphasis on that in our brief.
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`It's our last argument. But we do think, essentially,
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`it is hard to overturn a district court's decision not
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`to award fees, whereas under the Federal Circuit's
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`interpretation, it's really quite easy for the Federal
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`Circuit to mint some new theory as to why the position
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`was reasonable that that the attorney took.
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` And, Justice Breyer, you said in the last
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`argument, you said clever patent attorneys can always
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`come up with a colorable argument, and you were
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`referring at the district court stage
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` JUSTICE GINSBURG:
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`But if leave it to the
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`district court that way and the district court denies
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`fees, isn't there a a risk of large disparities from
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`district judge to district judge. One will say, yes, I
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`think that this was uncommon, not run of the mine, so
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`I'm going to award fees, and another one of them will
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`say, no, I think it's pretty standard, so I won't award
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`fees.
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` MR. KATYAL:
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`We do think implicit in an
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`abuseofdiscretion standard or Congress committing this
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`to district court discretion will be some variation. We
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`think this Court answered that problem in Koon, I think
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`most particularly, in a case where the stakes were
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`you know, not to belittle this case but the stakes
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`were even higher there, criminal sentencing.
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` And what the Court said is, yes, there will
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`be some disuniformity, but district court judges are
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`better able to determine the minerun case than will the
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`court of appeals because they're able to assess the
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`entirety of the litigation, rather than than one
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`piece of it.
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` JUSTICE SOTOMAYOR:
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`Mr. Katyal, if we were
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`to overrule the Brooks Furniture standard you've just
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`heard the argument where that issue is being presented
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`to us in Octane. If we were to do that, how would that
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`affect this case? Wouldn't it essentially moot the
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`question because you wouldn't have this objective
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`reasonableness test controlling the outcome?
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` MR. KATYAL:
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`Well, it would certainly depend
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`on how on how you did it, but our brief at pages 34
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`to 37 say that if you adopt any variant of the
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`petitioner's theory in Octane, the case here only gets
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`stronger.
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` You have to, I think, ultimately reverse
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`what the Federal Circuit said at page 9a of the petition
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`appendix, which is objective baselessness must be
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`determined de novo. We think that that's wrong for all
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`the reasons we've been talking about. And even were you
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`to change the standard in Octane, so long as objective
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`baselessness formed any part of the Section 285
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`inquiry
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` JUSTICE SOTOMAYOR:
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`So when does that become
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`a pure question of law?
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` MR. KATYAL:
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`We think it never becomes a
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`pure question of law. There there are we don't
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`doubt that to answer the Chief Justice's question
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`from before we don't doubt that there are some
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`circumstances in which there are pure questions of law
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`in Section 285 cases. For example, what does the Patent
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`Act the Patent Clause in the Constitution mean, or
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`what does a particular statute mean?
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` But when you're dealing with, for example,
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`claim construction, that looks very much like the EAJA
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`question that the Court was dealing with in Justice
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`Scalia's opinion in Pierce. It's a retrospective
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`collateral question about how reasonable was this
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`argument at this particular time, in this particular
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`case, with these particular parties, with this
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`particular patent.
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` And what Justice Scalia's opinion in Pierce
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`says is that's not the type of question that we should
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`be spending a lot of court of appeals' resources on.
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`That's something that is dealt with on the merits, as it
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`was here. The Federal Circuit dealt with the question
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`on the merits in 2009 but not something that you
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`should have a second major litigation over.
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` If there are no further questions.
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` CHIEF JUSTICE ROBERTS:
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`Thank you, counsel.
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` Mr. Fletcher.
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` ORAL ARGUMENT OF BRIAN H. FLETCHER
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` FOR UNITED STATES, AS AMICUS CURIAE,
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` SUPPORTING PETITIONER
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` MR. FLETCHER:
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`Mr. Chief Justice, and may it
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`please the Court:
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` In this morning's first case, you will
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`decide what principles should guide a district court's
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`award of attorneys' fees under Section 285. Whatever
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`standard you choose to adopt in that case, we believe
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`that a district court's application to the particular
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`facts of a case before it ought to be reviewed under a
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`unitary abuseofdiscretion standard.
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` That approach is consistent with this
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`Court's repeated statements that decisions about the
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`supervision of litigation ought to be reviewed under a
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`deferential standard. And in this particular context,
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`it's also supported by the text and history of
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`Section 285, by 60 years of consistent appellate
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`practice, and by the same sorts of practical
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`considerations that led this Court to adopt a similar
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`approach to very similar questions in Pierce and in
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`Cooter & Gell.
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` I'd like to start, if I could, by focusing
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`on a point that hasn't come up so far in the argument,
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`which is we've heard a lot about why district courts are
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`best situated to make the determination in a particular
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`case that they've lived with, often for years at a time,
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`of whether or not a particular litigating position is
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`unreasonable. And we think that's true and a very good
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`reason to accord deference here.
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` But we think another good reason to accord
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`deference in this context is that applying de novo
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`review requires a substantial expenditure of appellate
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`resources. I think this case is a good example.
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` The Federal Circuit affirmed the district
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`court's decision on the merits in an unpublished
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`decision and, in fact, without written opinion. But
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`when it reviewed the district court's award of fees
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`under a de novo standard, it was required to engage in a
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`lengthy analysis that produced a lengthy written
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`opinion. And we think applying a de novo standard and
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`requiring appellate courts, and the Federal Circuit in
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`particular, to engage in that kind of review encourages
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`collateral appeals and encourages the expenditure of
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`resources on decisions that don't actually produce the
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`law
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` JUSTICE ALITO:
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`Well, you can make you
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`can make that argument with respect to every legal issue
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`that's raised on appeal. Well, if you have to decide
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`whether the lower court was right, that's a lot of work.
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`But if all you have to decide is whether the lower court
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`abused its discretion in deciding if the law means what
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`the lower court said it means, that's a lot less work.
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` MR. FLETCHER:
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`Well, that
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` JUSTICE ALITO:
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`So that argument is a
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`strange argument, unless there's something really
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`special about the attorneys' fees context. And I guess
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`that's your argument, there's something really special.
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` But why should it?
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`I mean, you've got a lot
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`of money involved. Why should we say, this is
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`collateral litigation, even though it involves millions
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`of dollars more than the claim in many other types of
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`cases?
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` MR. FLETCHER:
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`So let me say a couple of
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`things about that, and one is, I think ordinarily when
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`an appellate court applies a de novo standard and
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`determines what the right answer is, that has benefits
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`not just for the particular litigants before it, but
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`also in clarifying the law for everyone going forward.
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` But what the Court said in Pierce and in
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`Cooter & Gell and what's also true here is that when the
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`question that the appellate court is answering is not
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`what is the law actually, but rather what could a party,
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`when it initiated this case and continued to litigate it
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`several years ago, could that party have a reasonably
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`believed the law to be, that doesn't yield the same sort
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`of lawclarifying benefit. In fact, in Pierce, this
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`Court said those sorts of determinations are never going
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`to be made clear under any sort of review standard.
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` JUSTICE ALITO:
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`It can't clarify what the
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`law is. What's the difference between that situation
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`and, let's say, deciding an issue of qualified immunity
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`in a civil rights case or applying the applying AEDPA
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`in a habeas case? The court can say this is what the
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`law is, and then after that, as the second step,
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`determine whether a particular interpretation of the law
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`was reasonable. You could do the same thing here.
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` MR. FLETCHER:
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`A court could do that here,
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`and I suppose the Federal Circuit, if the case came to
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`it on the the question was the District Court did
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`it abuse its discretion or did it get it right in
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`deciding that the party's position was unreasonable, the
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`could the court Federal Circuit could decide the
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`underlying question itself and then decide whether or
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`not the district court was correct in concluding that a
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`party's position was reasonable or unreasonable.
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` But we think there's there's good reason
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`not to do that here, and we think that, in these
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`contexts, unlike in qualified immunity, unlike in AEDPA,
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`the district court has particular expertise in the case
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`and a long experience with the case, and and that
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`requiring the Federal Circuit to engage in a thorough
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`review of the entire record of the litigation and the
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`entire proceedings of the litigation imposes a burden
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` JUSTICE ALITO:
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`Well, I'm just wondering, if
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`you put together your two arguments about what the
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`standard should be and what the standard of review
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`should be, whether there really is going to be any
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`meaningful review of what district courts do in this
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`situation.
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` Maybe you could just describe for me what an
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`appellate decision would look like, saying that applying
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`the totality of the circumstances, the district court
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`abused its discretion in awarding or not awarding fees.
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`What would an appellate court say.
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` MR. FLETCHER:
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`So I think one thing that an
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`appellate court might say, as Justice Kagan alluded to
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`earlier, is that if the district court has based its fee
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`award on a misunderstanding of the law, if it got the
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`claim construction wrong, if it misinterpreted the
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`relevant patent statutes, that would obviously be an
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`abuse of discretion.
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` But if think even if the district court
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`correctly conceived of the law, abuseofdiscretion
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`review still leaves room for an appellate court to say
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`that, although the district court had a wide range of
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`options and has flexibility, this particular decision on
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`these particular facts strays too far from that range.
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`I think courts of appeals do that in the sentencing
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`context, they do that in other contexts where they
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`review district court decisions for abuse of discretion,
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`and we think that performing that role, which
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`abuseofdiscretion review comfortably accommodates,
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`leaves plenty of room for the Federal Circuit to rein in
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`any outlier district court decisions.
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` I think another point that's useful to keep
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`in mind is the extent to which applying a de novo
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`standard of review encourages collateral appeals. I
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`think a theme of this Court's decisions about attorneys'
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`fees has been that a dispute over fees should not give
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`rise to a second major litigation, and I think applying
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`a de novo standard encourages that, both in encouraging
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`parties to take marginal appeals and also in leading to
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`fights about which parts of the district court's
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`decision are factual, which parts are legal, which
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`standard of review applies to different parts of a
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`district court's decision.
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` I think all of those things are add to
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`the burden of the collateral fee litigation in a way
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`that does isn't justified by the benefit that de novo
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`review provides.
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` The last point that I think I'd like to
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`leave you with is the notion that I think there
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`Justice Alito, earlier you suggested that the Federal
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`Circuit has expertise in patent law and special
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`expertise in patent law. And I frankly think that's the
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`strongest argument that the other side has.
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` But I'd urge you to look at Judge Moore's
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`dissent from the denial of rehearing en banc in this
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`case, where she and four of her colleagues on the
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`Federal Circuit explained that when you're asking
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`whether or not a party's litigating position was
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`objectively reasonable, the Federal Circuit's expertise
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`in patent law actually isn't the relevant expertise.
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`And she explains at length and she cites a number of
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`prior Federal Circuit decisions, recognizing as well
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`that the district court who's lived with the case and
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`who's decided on the merits and who's seen the parties
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`and has spent sometimes years with the parties is really
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`in a better position to decide whether or not the
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`party's litigating position was reasonable.
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` For that reason, if the Court has no further
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`questions, we'd urge it to vacate the judgment below and
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`remand the case to the court of appeals, with
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`instructions to consider the district court's award of
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`fees under the correct standard.
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` Thank you.
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` CHIEF JUSTICE ROBERTS:
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`Thank you, counsel.
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` Mr. Dunner.
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` ORAL ARGUMENT OF DONALD R. DUNNER
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` ON BEHALF OF RESPONDENT
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` MR. DUNNER:
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`May it please the Court, and
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`Mr. Chief Justice I've got that reversed. My
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`apologies.
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` Allcare agrees that Pierce and Cooter are
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`highly relevant to this case, but we feel that those
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`cases support Allcare and not Highmark, and let me
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`explain.
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` The Pierce case starts out by talking about
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`the the traditional rule. The traditional rule is
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`that legal issues are reviewed de novo. And this
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`Court's opinion in the Ornelas case reinforces that for
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`probable cause cases.
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` So the question is why why didn't the
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`Federal why didn't the Supreme Court apply the
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`traditional rule in Pierce and in Cooter? And the
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`answer certainly is not that they were fee cases,
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`because the Pierce case makes absolutely clear that it
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`was not enunciating a general rule for fee cases. It
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`said it couldn't enunciate a general rule.
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` On the other hand, what the what the
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`Court did was, it looked at the specifics involved,
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`which was the tribunal best qualified or best situated
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`to decide the issues in the case. And it dealt
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`specifically with three different points.
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` One, in the Pierce case, the EAJA statute
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`was involved and the text of that statute had been
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`changed from 1946 to 1952. It originally used the word
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`"discretion." It changed it to "exceptional case." My
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`colleagues on the other side argue that the word "may"
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`suggests discretion. Well, the word "may" is not
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`tethered to "exceptional"; it's tethered to award of
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`fees. And everybody agrees that the district court has
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`discretion in terms of what fees are are awarded.
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` JUSTICE SOTOMAYOR:
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`Even if I assumed that
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`ultimately the claim that you made might have been
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`might have had a basis, like the court below agreed, as
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`I read the district court's decision, it wasn't basing
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`its decision merely on that. What it was basing it on,
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`and it goes through a whole laundry list of things that
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`it thought constituted abusive litigation very little
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`prefiling investigation, continuous switch of claims
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`because of the lack of that investigation, pursuing a
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`theory that your expert didn't even agree with that
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`all sounds to me like a factual basis, basically saying
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`this litigation was abusive.
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` And I don't understand how that doesn't feed
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`into the objective unreasonableness, meaning that if you
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`had done the investigation you should have, you may have
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`had a claim or thought you had a claim, but you would
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`have learned much earlier that even your expert disputed
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`things and you're likely not to have brought the suit.
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`That's how I read the district court's decision.
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` MR. DUNNER:
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`Your Honor, with due deference,
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`there were four issues actually five because Allcare
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`lost on one of the issues, the 102 claim. There were
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`four issues that went up to the Federal Circuit, plus
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`the one we lost on. None of them involved prefiling
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`investigation.
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` What happened was the district court wrote a
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`long opinion based on Rule 11. We asked for
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`reconsideration. The district court dropped all the
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`charges against the lawyers, left the charges against
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`Allcare, and if you read the Federal Circuit opinion
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`starting at the appendix 19A and going through the
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`pages, you'll see there were four issues, one of which
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`was not prefiling investigation, none of which involved
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`the points you're making.
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` There were four issues.
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`Two of them
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`involved claim construction, and the third one involved
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`claim construction the one we lost on. The fourth
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`one was whether or not the the Allcare had a right
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`to rely on what happened in the Eastern District of
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`Virginia in which we had the same claim against a
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`different party and the two courts reached different
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`conclusions on the same issue on the same claim, which
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`alone should have should have found that it was
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`objectively reasonable but was not.
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` And the the last one was whether or not
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`alleged misconduct, misrepresentation to the Western
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`District of Pennsylvania before the case was
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`transferred, whether that was sanctionable, and the case
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`law made clear that was a legal question. The case law
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`made absolutely clear that you cannot look at conduct
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`before another tribunal to decide whether a different
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`tribunal should sanction you.
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` Every one of those issues the three claim
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`construction issues were legal issues; and the
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`whether the whether they could rely on res judicata
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`or collateral estoppel based on the Eastern District of
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`Virginia case was a legal issue; and the question of
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`whether the alleged misconduct in Pennsylvania could be
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`sanctionable was also a legal issue. We had no factual
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`issues in this case.
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` And I suggest you look at the pages starting
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`with 19A and read the Court's opinion and they basically
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`said, contrary to Mr. Katyal's comment, the issue was
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`one of claim construction, it was not one of
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`infringement. There was a special master in the case,
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`and the special master first gave a claim construction
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`favorable to Allcare. And then in a summary judgement
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`hearing, he changed his opinion, and Judge Dyk's opinion
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`for the majority of the court basically notes this, that
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`he changed his view and he came out with a different
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`view.
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` But the issue was, is, and always a claim
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`construction issue. And even they concede that claim
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`construction issues are reviewed de novo.
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` Now, a point has been made about pure issues
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`of la
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