Case 1:20-cv-00393-LO-TCB Document 763 Filed 06/30/21 Page 1 of 23 PageID# 20553
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`
`
`UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF VIRGINIA
`ALEXANDRIA DIVISION
`
`
`
`RAI STRATEGIC HOLDINGS, INC. and
`R.J. REYNOLDS VAPOR COMPANY,
`
`
`Plaintiffs,
`
`v.
`
`
`
`
`ALTRIA CLIENT SERVICES LLC; PHILIP
`MORRIS USA INC.; and PHILIP MORRIS
`PRODUCTS S.A.
`
`Defendants.
`
`Civil Action No. 1:20-cv-393
`
`
`
`
`
`
`COUNTERCLAIM PLAINTIFFS’ OPPOSITION TO REYNOLDS’
`MOTION TO DISMISS INEQUITABLE CONDUCT COUNTERCLAIM AND
`AFFIRMATIVE DEFENSES AND MEMORANDUM IN SUPPORT OF THEIR
`CROSS-MOTION FOR ATTORNEYS’ FEES AND COSTS
`
`
`
`
`
`
`
`

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`Case 1:20-cv-00393-LO-TCB Document 763 Filed 06/30/21 Page 2 of 23 PageID# 20554
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`
`
`I.
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`II.
`
`III.
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`IV.
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`TABLE OF CONTENTS
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`
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`Page
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`INTRODUCTION ...............................................................................................................1
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`FACTUAL BACKGROUND ..............................................................................................3
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`A.
`
`B.
`
`C.
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`RJR’s Inequitable Conduct Counterclaim ...............................................................3
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`RJR’s Affirmative Defenses ....................................................................................4
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`RJR Waited Until The Summary Judgment Deadline To Demand A
`Stipulated “Withdrawal” Of Its Claims ...................................................................5
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`Relevant LEGAL STANDARDS ........................................................................................7
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`OPPOSITION TO MOTION TO DISMISS ........................................................................7
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`A.
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`The Court Should Deny RJR’s Motion To Dismiss ................................................8
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`1.
`
`2.
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`RJR’s Bad Faith Conduct Precludes Dismissal And Instead
`Warrants Summary Judgment ......................................................................8
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`RJR’s Motion Should Be Governed By Rule 15(a)(2) But Also
`Fails Under Rule 41(a)(2) ............................................................................9
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`V.
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`MEMORANDUM IN SUPPORT OF PMP/ALTRIA’S CROSS-MOTION FOR
`FEES AND COSTS ...........................................................................................................13
`
`A.
`
`B.
`
`Relevant Legal Standards ......................................................................................14
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`Argument ...............................................................................................................16
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`VI.
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`CONCLUSION ..................................................................................................................17
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`i
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`Case 1:20-cv-00393-LO-TCB Document 763 Filed 06/30/21 Page 3 of 23 PageID# 20555
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`
`
`TABLE OF AUTHORITIES
`
`CASES
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`
`
`Page(s)
`
`Bond Opportunity Fund II, LLC v. Heffernan,
`340 F. Supp. 2d 146 (D.R.I. 2004) ...................................................................................... 11, 12
`
`Briggs v. City of Norfolk,
`42 F. App’x 585 (4th Cir. 2002) .......................................................................................... 15, 17
`
`Carroll v. E One Inc.,
`893 F.3d 139 (3d Cir. 2018) ...................................................................................................... 17
`
`Chambers v. NASCO, Inc.,
`501 U.S. 32 (1991) .................................................................................................................... 15
`
`City of New York v. A-1 Jewelry & Pawn, Inc.,
`247 F.R.D. 296 (E.D.N.Y. 2007) ............................................................................................... 11
`
`Davis v. USX Corp.,
`819 F.2d 1270 (4th Cir. 1987) ................................................................................................... 13
`
`DirecTV, Inc. v. Benson,
`333 F. Supp. 2d 440 (M.D.N.C. 2004) ...................................................................................... 12
`
`Ellett Brothers, Inc. v. U.S. Fidelity & Guaranty Co.,
`275 F.3d 384 (4th Cir. 2001) ..................................................................................................... 13
`
`Master Craft v. Stanley Works,
`No. 04-132 (JMR/JSM), 2006 WL 8438190 (D. Minn. Apr. 27, 2006) ..................................... 7
`
`Mulugeta v. Ademachew,
`No. 1:17-cv-649, 2019 WL 7945712 (E.D. Va. Nov. 6, 2019) ..................................... 15, 16, 17
`
`Naden v. Saga Software, Inc.,
`11 F. App’x 381 (4th Cir. 2001) .......................................................................................... 10, 11
`
`Pfizer Inc. v. Teva Pharms. USA, Inc.,
`803 F. Supp. 2d 409 (E.D. Va. 2011) .................................................................................. 11, 13
`
`Six v. Generations Fed. Credit Union,
`891 F.3d 508 (4th Cir. 2018) ............................................................................................... 15, 16
`
`Skinner v. First Am. Bank,
`No. 93-2493, 1995 U.S. App. LEXIS 24237 (4th Cir. 1995) ...................................... 2, 7, 10, 11
`
`ii
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`

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`
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`Strag v. Board of Trustees,
`55 F.3d 943 (4th Cir. 1995) ................................................................................................. 15, 17
`
`TMM Data, LLC v. Braganza,
`No. 5:14-cv-729-FL, 2016 WL 1228595 (E.D.N.C. Mar. 28, 2016) .............................. 7, 12, 13
`
`Whitfield v. Forest Electric Corp.,
`772 F. Supp. 1350 (S.D.N.Y. 1991) .......................................................................................... 12
`
`Zhejiang Shenghui Lightning Co. v. TVL Int’l, LLC,
`No. 3:19-CV-00497-RJC-DCK, 2021 WL 926537 (W.D.N.C. Feb. 3, 2021) ............................ 9
`
`STATUTES
`
`28 U.S.C. § 1927 ..................................................................................................................... 14, 15
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`35 U.S.C. § 285 ............................................................................................................................. 18
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`RULES
`
`FED. R. CIV. P. 11(b) ..................................................................................................................... 16
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`FED. R. CIV. P. 15(a)(2) ................................................................................................................... 7
`
`FED. R. CIV. P. 41(a)(2) ....................................................................................................... 7, 10, 17
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`LOCAL R. CIV. P. 7(E) ................................................................................................................... 14
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`
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`iii
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`
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`I.
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`INTRODUCTION
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`RJR asserts that the Court should treat its motion to dismiss its inequitable conduct
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`counterclaim and Affirmative Defenses as a routine procedural issue. RJR hopes to avoid adverse
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`judgment and the Court’s scrutiny of its litigation conduct. The Court should enter judgment in
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`PMP/Altria’s favor pursuant to Rule 56 and deny RJR’s motion to dismiss as moot.
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`First, RJR’s bad faith conduct culminating in this motion compels its denial. Initially, to
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`obtain leave to amend its Answer, RJR represented to the Court that it had “discovered the true
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`facts” to support its inequitable conduct counterclaim. Dkt. 137 at 2. As confirmed by RJR’s
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`contention interrogatory response and its concession of all 45 material facts in PMP/Altria’s
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`motion for summary of no inequitable conduct, RJR affirmatively misled the Court because it had
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`no such facts and no intention to take discovery on even the most basic aspects of its claim, let
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`alone actually litigate it to trial. Likewise, with the Affirmative Defenses RJR now seeks to
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`dismiss, RJR has never identified any factual basis to substantiate them and never pursued them
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`in discovery.
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`The Court should view with a gimlet eye RJR’s eleventh-hour “offer” to dismiss its legally
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`deficient claims; it justifies judgment, not dismissal. After failing to pursue basic discovery on its
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`counterclaim and Affirmative Defenses, RJR waited until well after it knew PMP/Altria would
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`have incurred the expense of drafting a summary judgment motion to seek their dismissal. If RJR
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`had offered to dismiss its deficient claim and defenses in April or after discovery closed, its motion
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`may have made more sense. But RJR first offered to “withdraw” its claims after business hours
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`the evening before the Court’s summary judgment deadline. RJR’s experienced counsel knows
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`there is no justification to wait until 6:46 P.M. on the eve of the Court’s deadline to make that
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`offer. Indeed, RJR’s counsel knew that PMP/Altria would have already incurred the expense of
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`preparing a summary judgment motion for filing the next day.
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`1
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`Even then, RJR’s belated, after business hours “offer” came with multiple facially
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`unreasonable conditions. RJR’s proposed stipulated dismissal neglected to dismiss each of its
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`“withdrawn” Affirmative Defenses. Moreover, it demanded that PMP/Altria forgo any later
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`argument that the dismissal could be used in support of a petition to recover attorneys’ fees. In
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`light of RJR’s (i) misrepresentation to the Court that it had “true facts” it knew it lacked; (ii) failure
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`to take discovery; (iii) failure to supplement its interrogatory responses seeking “all facts” and
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`“documents”; and (iv) failure to offer to dismiss its knowingly deficient claims until its counsel
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`knew that PMP/Altria had already incurred the expense of preparing a summary judgment motion,
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`that was hardly a reasonable condition. The propriety of RJR’s conduct is an issue for the Court
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`to decide, not for RJR to dictate.
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`Second, RJR’s motion is legally deficient because the Fourth Circuit has expressly held
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`that Rule 15—not Rule 41—is the “proper vehicle” to decide a motion where a party seeks to
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`dismiss “some, but not all, of their claims.” Skinner v. First Am. Bank, No. 93-2493, 1995 U.S.
`
`App. LEXIS 24237, at *4 (4th Cir. 1995). And Rule 15 dismissal is not proper where the moving
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`party seeks to “avoid an adverse ruling in federal court” or where the opposing party has “already
`
`incurred significant time and expense . . . in preparation for a summary judgment motion.” Id.
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`at *8-9.1 That is dispositive. Regardless, whether under Rule 15 or Rule 41, RJR’s conduct
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`supports judgment in PMP/Altria’s favor—not mere dismissal.
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`RJR’s misrepresentations to the Court, failure to accept judgment, and insistence that
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`PMP/Altria stipulate that the Court may not consider RJR’s conduct at the end of the case was bad
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`enough. But its unnecessary multiplication of the proceedings by filing a unilateral, overlapping
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`motion to dismiss while failing to oppose (because it has no basis in fact or law to oppose)
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`1 All emphases added unless stated otherwise.
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`2
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`PMP/Altria’s motion for summary judgment is a step too far. For these reasons, PMP/Altria
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`respectfully cross-moves for the recovery of attorneys’ fees and costs incurred in litigating RJR’s
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`inequitable conduct counterclaim.
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`II.
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`FACTUAL BACKGROUND
`A.
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`RJR’s Inequitable Conduct Counterclaim
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`On June 29, 2020, PMP and Altria asserted infringement counterclaims. Dkts. 39, 40.
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`Shortly after RJR answered, PMP/Altria told RJR it intended to add an inequitable conduct
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`counterclaim against RJR’s U.S. Patent No. 9,814,268. On October 2, 2020, PMP/Altria moved
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`for leave to file that inequitable conduct claim. Dkts. 113, 115. PMP/Altria’s counterclaim
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`consists of 95 paragraphs that include detailed allegations and citations to RJR’s sworn inventor
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`testimony. Dkts. 193, 198.
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`RJR responded with a reflexive/retaliatory inequitable conduct counterclaim of its own
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`against Altria’s asserted U.S. Patent No. 6,803,545. Dkt. 110. PMP/Altria opposed RJR’s
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`amendment as futile, explaining that it did not “allege (1) ‘how’ the Examiner would have used
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`the undisclosed references to invalidate the patent, (2) ‘why’ the withheld information is material
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`and not cumulative, (3) ‘where’ the references disclosed each claim element, and (4) facts that
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`would permit” reasonable inferences of specific intent. Dkt. 130 at 1.
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`In response, RJR told the Court:
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`Having begun the investigation that Defendants failed to conduct,
`Reynolds discovered the true facts, and now seeks leave to amend
`its answer to assert an affirmative defense and counterclaim of
`inequitable conduct.
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`Dkt. 137 at 2. Accepting RJR’s representation that its investigation had uncovered the purported
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`“true facts” supporting inequitable conduct, the Court granted RJR leave to add its inequitable
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`3
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`
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`conduct counterclaim, which has been pending since October 30, 2020. Dkt. 274 at Counterclaim
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`I, ¶¶ 1-31.
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`In the seven months since RJR told the Court it had “discovered the true facts” to support
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`its inequitable conduct counterclaim, RJR has failed to pursue basic discovery on it—let alone
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`litigate it or identify any such “true facts.” Dkt. 137 at 2. Early in discovery, PMP/Altria served
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`a contention interrogatory requesting RJR to “identify all factual bases for [its] affirmative
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`defenses, and identify all Documents [it] may rely upon as evidence in support of [its] affirmative
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`defenses,” including the inequitable conduct counterclaim. Ex. 1 at 9. RJR responded by copying
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`and pasting the conclusory allegation from its pleading without any citations to testimony,
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`documents, or any other evidence, and without reference to the purported “true facts.” Ex. 2 at
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`16-21. RJR said that it would “supplement its response if it learns additional information as
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`discovery progresses.” Id. at 21. Throughout discovery, RJR gave no indication that it intended
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`to drop its inequitable conduct counterclaim. Discovery is now closed. RJR never supplemented
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`its contention, despite having a duty to do so under Rule 26(e) “if [RJR knew] that in some material
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`respect the disclosure or response is incomplete or incorrect.” Ex. 3 at 1-11.
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`RJR’s expert reports fared no better. As detailed in PMP/Altria’s summary judgment
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`briefing, those reports undisputedly lacked a single opinion supporting its inequitable conduct
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`allegations. See, e.g., Dkt. 694 at 6. By contrast, PMP/Altria’s technical expert opined that neither
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`of RJR’s purported inequitable conduct references were material. See, e.g., Dkt. 694-6 at ¶¶ 458-
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`469.
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`B.
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`RJR’s Affirmative Defenses
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`On August 8, 2020, RJR served its initial answer to PMP/Altria’s infringement
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`counterclaims, asserting the Affirmative Defenses that it now seeks to withdraw: Equitable
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`Defenses of estoppel, acquiescence, waiver, and unclean hands (Fifth Affirmative Defense);
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`4
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`Limitation of Damages (Sixth Affirmative Defense); Ensnarement (Eighth Affirmative Defense);
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`and Extraterritorial Claims (Eleventh Affirmative Defense) (collectively, RJR’s “Affirmative
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`Defenses”). Dkts. 69, 70. Id. RJR took weeks to prepare its answer. Yet each of RJR’s
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`Affirmative Defenses is pled as a single conclusory sentence and without any factual allegations.
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`Dkt. 69 at 19-20; Dkt. 70 at 18-19.
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`PMP/Altria’s contention interrogatory required RJR to state the basis for its Affirmative
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`Defenses, including identification of all relevant evidence. Ex. 3 at 4-7. RJR responded to this
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`interrogatory just once for the Affirmative Defenses at issue. Id. at 2-11. RJR’s contentions lacked
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`citation to any record evidence.2 Id. As with inequitable conduct counterclaim, RJR represented
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`that it would “supplement its response if it learns of additional information” related to each
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`Affirmative Defense. Id. As with inequitable conduct, RJR never did. Id. at 7-11.
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`C.
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`RJR Waited Until The Summary Judgment Deadline To Demand A
`Stipulated “Withdrawal” Of Its Claims
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`On May 14, 2021, following the close of discovery, PMP/Altria sought confirmation that
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`RJR would not pursue its unsupported Affirmative Defenses at trial. Ex. 4. Four days later, RJR
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`responded: “[W]e are still considering your request and will get back to you.” Ex. 5. RJR never
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`did “get back” to PMP/Altria. Consequently, PMP/Altria prepared its summary judgment briefing
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`for filing. On June 1, 2021, PMP/Altria requested to meet and confer regarding the substance of
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`its summary judgment motions. Ex. 6. At 6:46 P.M. on the day before the Court’s dispositive
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`briefing deadline, RJR emailed that it “will not pursue a claim of inequitable conduct on the ’545
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`[P]atent,” and would be withdrawing portions of the Affirmative Defenses at issue. Ex. 7.
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`2 RJR purported to state a basis for its Sixth Affirmative Defense (Limitation on Damages). Ex. 3
`at 6. But the parties have stipulated that RJR would drop its Sixth Affirmative Defense as to the
`’374 patent, and that PM USA would drop its claim for pre-suit damages for infringement of the
`’545 patent. Dkt. 549.
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`5
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`Given the circumstances, PMP/Altria proposed a stipulation of judgment. Dkt. 720-5, 720-
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`6. RJR rejected it, necessitating PMP/Altria’s summary judgment motion. Ex. Dkt. 720-7 at 1.
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`After business hours on the Court’s June 2, 2021 deadline for PMP/Altria’s motion for summary
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`judgment, RJR proposed—for the first time—a counter-draft stipulation. Dkt. 720-8. RJR’s
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`proposed stipulation made no mention of the Affirmative Defenses RJR intended to drop. Dkt.
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`720-9. Instead, the stipulation demanded that PMP/Altria waive any future claim to fees and costs.
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`Id.
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`PMP/Altria emailed back: “The stipulation as drafted is unduly slanted in RJR’s favor. It
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`does not reflect the meritless nature of the defenses you have decided to drop on the eve of the
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`Court’s summary judgment deadline. Your timing is unfortunate as you knew we would have to
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`spend our client’s resources preparing summary judgment briefing to dispose of these defenses.”
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`Ex. 8. PMP/Altria’s email also asked that the parties keep talking to try to reach agreement that
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`would obviate taking up the Court’s time with this issue. Id. As required by the Court’s June 2,
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`2021 scheduling order deadline, PMP/Altria filed its summary judgment motion. That motion is
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`pending and set for argument on July 16, 2021. Dkt. 695.
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`Despite PMP/Altria’s request to “keep an open line of communication to get a stipulation”
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`filed, RJR remained silent while the parties drafted their oppositions to summary judgment. Ex.
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`8. In a now familiar pattern, two days before summary judgment oppositions were due, RJR
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`indicated for the first time that it intended to file a unilateral motion to dismiss its deficient
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`Affirmative Defenses and baseless inequitable conduct counterclaim. Ex. 9.
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`On June 16, 2021, RJR filed its motion to dismiss and simultaneously opposed
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`PMP/Altria’s motion for summary judgment. Dkts. 716, 718, 728. Both RJR’s motion and its
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`summary judgment opposition fail to dispute any of the material facts that PMP/Altria contend are
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`6
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`dispositive – not one. See Dkt. 728 at 1-3, 6-8, 18; see also Dkt. 751. RJR’s motion to dismiss is
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`also noticed for argument on July 16.
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`III. RELEVANT LEGAL STANDARDS
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`Contrary to RJR’s assertion, Rule 41(a)(2) does not govern its motion. Rule 15(a)(2) does.3
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`As the Fourth Circuit has expressly stated, where—as here—a party seeks to dismiss “some, but
`
`not all, of their claims[,] . . . Rule 15 is technically the proper vehicle.” Skinner, 1995 U.S. App.
`
`LEXIS 24237, at *4. Rule 41, by contrast, applies to dismissal of actions, not claims. FED. R.
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`CIV. P. 41(a)(2) (“[A]n action may be dismissed at the plaintiff’s request only by court order . . .
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`.”).
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`Rule 15(a)(2) requires RJR to obtain the Court’s leave to “withdraw” its counterclaim and
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`defenses. FED. R. CIV. P. 15(a)(2). “[L]eave to amend is not to be granted automatically, and the
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`decision whether to do so rests within the sound discretion of the district court.” Skinner, 1995
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`U.S. App. LEXIS 24237, at *5. The Court may deny leave “in light of undue delay, bad faith, or
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`prejudice to the opposing party.” Id. at *6. “In particular, the court may take into account the
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`stage of the proceedings when deciding whether to grant leave.” Id.
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`Though inapplicable, Rule 41(a)(2) also gives the Court discretion to deny dismissal. TMM
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`Data, LLC v. Braganza, No. 5:14-cv-729-FL, 2016 WL 1228595, at *3 (E.D.N.C. Mar. 28, 2016);
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`Master Craft v. Stanley Works, No. 04-132 (JMR/JSM), 2006 WL 8438190, at *3 (D. Minn. Apr.
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`27, 2006). Even where a party asks to dismiss an action with prejudice, the Court properly denies
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`dismissal where there is evidence of “an imminent decision on the merits, or other extraordinary
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`circumstances.” TMM Data, 2016 WL 1228595, at *3 (citation omitted).
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`IV. OPPOSITION TO MOTION TO DISMISS
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`3 As explained below, regardless of which rule the Court applies, RJR’s motion should be denied.
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`7
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`A.
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`The Court Should Deny RJR’s Motion To Dismiss
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`RJR’s motion for leave to “withdraw” its inequitable conduct counterclaim and Affirmative
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`Defenses should be denied. Dkt. 720 at 3-6. RJR raised and persistently maintained meritless
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`defenses without intent to litigate them through trial. PMP/Altria has been prejudiced by RJR’s
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`litigation conduct. RJR’s motion for leave to “withdraw” should be denied in favor of
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`PMP/Altria’s motion for summary judgment.
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`1.
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`RJR’s Bad Faith Conduct Precludes Dismissal And Instead Warrants
`Summary Judgment
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`RJR’s conduct compels denial of RJR’s motion to dismiss, and the grant in PMP/Altria’s
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`favor of judgment on the merits. First, RJR’s maintenance of its knowingly baseless inequitable
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`conduct counterclaim and other Affirmative Defenses through 6:46 P.M. the eve of the Court’s
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`summary judgment deadline evidences bad faith. Ex. 7. Seven months have passed since RJR
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`represented to the Court that it had purportedly “discovered the true facts” to support its
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`inequitable conduct counterclaim. Dkt. 137 at 2. Since that troubling statement, RJR failed to
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`conduct even basic discovery to substantiate its serious allegations of fraud. In retrospect, RJR’s
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`strategy is transparent: to plead a meritless counterclaim without intending spend resources to
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`substantiate it.
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`RJR’s Affirmative Defenses fare no better. RJR pled each Affirmative Defense with a
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`single, conclusory sentence. Dkt. 69 at 19-20; Dkt. 70 at 18-19. And RJR’s response to
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`PMP/Altria’s contention interrogatory for the Affirmative Defenses at issue lacks citation to any
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`record evidence—document, testimony, or expert opinion. Ex. 3 at 4-10. It is now apparent that
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`RJR never intended to pursue these defenses, or substantiate them through discovery, either.
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`Second, RJR’s “offer” to dismiss its legally deficient counterclaim and Affirmative
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`Defenses the evening before the summary judgment deadline concedes their meritless nature. And
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`8
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`because (i) RJR took no steps after completing fact discovery or during expert discovery to
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`substantiate the claims, and (ii) never responded to PMP/Altria’s attempt to narrow the issues for
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`dispositive briefing weeks before on May 14, 2021, the only reason for RJR’s late offer was to
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`ensure it was made after PMP/Altria incurred the substantial cost of briefing summary judgment
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`on an issue that RJR must have known did not belong in the case. RJR’s delay can only be
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`explained as tactically intended to impose unnecessary expense.
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`Third, RJR (again) misleads the Court, contending that the stipulation of dismissal it
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`proposed after 7 P.M. the day of the Court’s summary judgment deadline would have obviated
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`any dispute. Dkt. 720 at 3; 720-8, 720-9. But RJR’s stipulation was facially unreasonable because
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`(i) it included no provision for its “withdrawn” Affirmative Defenses, and (ii) demanded that
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`PMP/Altria to waive all future ability to recover fees and costs. Dkt. 720-9. RJR’s effort to twist
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`its misconduct into a favorable exclusion of post-trial arguments by demanding that PMP/Altria
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`waive future rights to recover fees and costs confirms the vexatious nature of RJR’s actions.
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`RJR’s actions here rise to the level of litigation misconduct. That misconduct compels
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`denial of RJR’s motion and grant of judgment in PMP/Altria’s favor on RJR’s counterclaim.
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`2.
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`RJR’s Motion Should Be Governed By Rule 15(a)(2) But Also Fails
`Under Rule 41(a)(2)
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`RJR’s conduct precludes dismissal under Rule 15(a)(2) or Rule 41(a)(2).4 RJR hopes to
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`blur which rule applies in its attempt to avoid an adverse judgment. Specifically, RJR contends
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`that Rule 41(a)(2) provides a basis to dismiss its inequitable conduct claim. But as the Fourth
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`4 RJR cites Rule 41(c) without explaining why or how the Rule supports dismissal. Dkt. 720 at 4.
`It does not. Rule 41(c) simply provides that Rule 41(a)(2) can extend to dismissal of counterclaims
`where a party seeks to dismiss an action. See Zhejiang Shenghui Lightning Co. v. TVL Int’l, LLC,
`2021 WL 926537 at *3 (W.D.N.C. Feb. 3, 2021) (stating that Rule 41(c) indicates that the rule
`applies to dismissals of counterclaims as well as claims).
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`Case 1:20-cv-00393-LO-TCB Document 763 Filed 06/30/21 Page 14 of 23 PageID# 20566
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`Circuit has expressed, Rule 15(a)(2) provides the correct legal framework to partially remove a
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`claim, rather than an action. Skinner, 1995 U.S. App. LEXIS 24237, at *4. Rule 41 relates to
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`voluntary dismissal of actions, not claims. Fed. R. Civ. P. 41(a)(2). Regardless, RJR’s motion
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`fails under both Rules.
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`a.
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`Rule 15(a)(2) Does Not Support Dismissal
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`RJR asks the Court to excuse its behavior and dismiss its now admittedly baseless
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`counterclaim under Rule 15(a)(2). Dkt. 720 at 3-4. The Court should decline.
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`RJR relies on the Skinner case. Dkt. 720 at 3-4. PMP/Altria agree that the decision in
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`Skinner is particularly instructive. First, it states that “leave to amend is not to be granted
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`automatically” under Rule 15(a)(2). 1995 U.S. App. LEXIS 24237, at *5. Second, the Fourth
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`Circuit’s ruling affirmed an order denying a party leave to amend, stating that amendment is
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`improper where the non-moving party has “already incurred significant time and expense in
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`discovery and in preparation for a summary judgment motion.” Id. at *8. Third, the court
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`recognized that a party may not amend its pleadings where the effect of the amendment would be
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`“to permit [the moving party] to dismiss [a claim] and thereby avoid an adverse ruling in federal
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`court.” Id. at *8-9. Thus Skinner, like other courts applying Rule 15(a)(2), stands for the
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`proposition that trial courts should deny motions for leave to amend where the moving party
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`exhibited undue delay and inflicted discovery time and expense on the non-moving party. See,
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`e.g., Naden v. Saga Software, Inc., 11 F. App’x 381, 382-83 (4th Cir. 2001) (affirming denial of
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`motion to amend pleadings where the motion came after the non-moving party filed for summary
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`judgment). This authority compels denial of RJR’s motion for three reasons.
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`First, as described, RJR delayed notifying PMP/Altria of its plans to drop the inequitable
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`conduct counterclaim and Affirmative Defenses until after business hours the eve of the Court’s
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`summary judgment deadline. See Discussion at Section II.C., supra; see also Dkt. 696-1 at 3.
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`Case 1:20-cv-00393-LO-TCB Document 763 Filed 06/30/21 Page 15 of 23 PageID# 20567
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`That delay was undue, tactical, and alone warrants denial of RJR’s motion. Skinner, 1995 U.S.
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`App. LEXIS 24237, at *7-8 (affirming denial of a motion to amend where the “motion was made
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`after discovery had been completed and when the case was ripe for summary judgment”); Naden,
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`11 F. App’x at 382-83 (same).
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`Second, coming after PMP/Altria completed its briefing, RJR’s requested dismissal would
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`prejudice PMP/Altria. Skinner is again instructive and held that the non-moving party would be
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`prejudiced by the sought amendment because it “had already incurred significant time and expense
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`in discovery and in preparation for a summary judgment motion.” Id. at *8. That is exactly the
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`situation here. See Discussion at Section II.C., supra. Moreover, PMP/Altria are entitled to a
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`decision that clears their employees’ names from RJR’s serious allegation that PMP/Altria’s
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`personnel committed intentional fraud on the PTO. Absent affirmative judgment of no inequitable
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`conduct (proper here), PMP/Altria and specific employees will suffer harm to their reputation.
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`Pfizer Inc. v. Teva Pharms. USA, Inc., 803 F. Supp. 2d 409, 434 (E.D. Va. 2011) (“Inequitable
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`conduct is a serious charge against an individual, indeed it amounts to an allegation of fraud. It
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`can be a career-ending finding by the court for those against whom it is alleged, if proven on the
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`merits.”).
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`RJR’s case law is inapposite. Dkt. 720 at 4. In City of New York v. A-1 Jewelry & Pawn,
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`Inc., the court dismissed claims under Rule 15 where the parties agreed to an amendment that
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`dismissed a claim with prejudice. 247 F.R.D. 296, 306 (E.D.N.Y. 2007). Here, PMP/Altria
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`opposes RJR’s amendment. In Bond Opportunity Fund II, LLC v. Heffernan, the court permitted
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`a pleading amendment that removed a party from the action that was involved with co-pending
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`bankruptcy proceedings. 340 F. Supp. 2d 146, 151 (D.R.I. 2004). RJR omits, however, that the
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`court found no prejudice because the proceedings against the removed party would have been
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`stayed regardless by operation of the bankruptcy code. Id. Here, PMP/Altria have suffered
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`prejudice. In DirecTV, Inc. v. Benson, the court permitted an amendment to drop a claim that had
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`no private cause of action under federal law, and was improperly in the case from the start. 333
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`F. Supp. 2d 440, 444 (M.D.N.C. 2004). Here, inequitable conduct is a proper (and serious) claim.
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`And Whitfield v. Forest Electric Corp. did not involve a Rule 15(a)(2) motion where the parties
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`had already completed fact discovery and summary judgment briefing. 772 F. Supp. 1350, 1351
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`(S.D.N.Y. 1991). Here, fact discovery is complete and RJR offered no stipulation until 7 P.M. on
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`the day of the Court’s summary judgment deadline. Dkts. 720-8, 720-9.
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`Third, RJR mischaracterizes PMP/Altria’s request for judgment as one under Rule 54.
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`Dkt. 720 at 5-6. That is false; PMP/Altria have moved for summary judgment under Rule 56.
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`Dkts. 694, 695.
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`For these reasons, RJR’s own tactical delay and the prejudice imposed on PMP/Altria
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`compel denial of RJR’s motion under Rule 15(a)(2).
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`b.
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`Rule 41 Does Not Support Dismissal
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`As a backup, RJR loosely argues that Rule 41 “likewise provides a basis for dropping” its
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`baseless inequitable conduct counterclaim. Dkt. 720 at 4. That is incorrect. First, as noted, this
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`is the wrong Rule. See Discussion at Section III, supra. Second, and regardless, the Court may
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`deny a motion for voluntary dismissal with prejudice under Rule 41 where there is evidence of “an
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`imminent decision on the merits[] or other extraordinary circumstances.” TMM Data, 2016 WL
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`1228595, at *3 (citation omitted). Consequently, there are three reasons why—if the Court
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`considers the Rule 41 portion of RJR’s motion—the Court should deny it.
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`First, dispositive briefing on RJR’s inequitable conduct counterclaim is complete. Dkts.
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`748, 751