Federal Judge Shortages Take Toll on Business Litigation

By Nancy Ognanovich

Aug. 10 —The Senate's sluggish pace in filling federal judicial vacancies hits hardest in states where many of the largest U.S. businesses are based and threatens to delay resolution of key cases, including contract and patent disputes.

Civil litigation brought to redress grievances among top U.S. companies is more likely than criminal cases to be delayed in the federal courts, where suits continue to increase but many judicial vacancies remain unfilled, legal experts said.

Business litigation is particularly affected in the federal district courts and the appellate courts, much of it long-standing, they said. As of Aug. 10, there were more than 90 vacancies affecting the federal court system, with a third of those considered “emergencies,” an official designation based on both the size of a district's caseload and the length of the vacancies.

The vacancies, in part, reflect the Senate's failure to confirm more than eight district court judges and one circuit judge so far this year and a similar small number last year (See previous story, 08/02/16). In addition, Republican leaders' practice of not confirming judges of the opposition party after the political conventions raises doubts that the Senate will act on more judges in the fall.

Amar Sarwal, vice president and chief legal strategist for the Association of Corporate Counsel, told Bloomberg BNA that business recognizes that in recent years both political parties have used similar tactics to ensure judicial candidates they favor are confirmed. But the practice has grown to the point that in-house counsel at large U.S. companies increasingly view the federal court system as unpredictable.

“The business community doesn't want to see the law gyrate from one side to the other,” said Sarwal, whose association includes counsel at most of the Fortune 100 firms, from Lockheed Martin Corp. to General Electric Co. “It's not a game you want to play.”

Unfilled Judgeships, Budget Pressures

As the elections approach, the Senate is on track to have confirmed only 30 civilian judges over the entire two-year period of the 114th Congress. About 29 of President Barack Obama's judicial nominees that were cleared in committee remained pending on the Senate's executive calendar when lawmakers left in July for a long recess (See previous story, 07/15/16). In addition, the nomination of Merrick Garland to serve on the U.S. Supreme Court and more than two dozen other judges still are awaiting action at the Senate Judiciary Committee (See previous story, 08/02/16).

During the past two years, judicial vacancies have nearly doubled and judicial emergencies have nearly tripled. The Administrative Office of the Courts reported Aug. 9 that there are now 92 vacancies and 31 of those are classified as emergencies. The latter figure includes 26 at the district courts and five at the federal appellate courts.

Criminal cases are said to be less threatened by vacancies because speedy trial obligations under the U.S. Constitution and statutory law protect defendants' rights. Business cases in which judges have to go through exhaustive records and schedule lengthy trials are seen as more vulnerable to delay.

Sarwal said ongoing budget battles—on federal and state levels—also have had their effect on the courts.

Sarwal said courts, however, have taken their own steps to address delays, such as by amending their discovery rules. Senior judges, he said, also are taking on additional work.

But business lawyers increasingly also are looking for alternatives to the federal court system, Sarwal said.

“A lot of the businesses have moved out of the courts entirely and moved into arbitration,” Sarwal said. “That’s the big move.”

Patent Cases Proliferate

Overall figures released in late March by the Administrative Office of the U.S. Courts showed stability in the numbers of filings over a recent five-year period, though pending cases were steadily rising.

But the figures vary widely among the courts, particularly those deemed to have a judicial emergency. An emergency is designated when weighted filings exceed 600 per judgeship or when any vacancy has lasted more than 18 months and weighted filings number 430 to 600 per judgeship. It also is found in any court with more than one authorized judgeship and only one active judge.

Of the 31 emergencies, 10 are in Texas. Obama nominated five judges to serve on Texas district courts in March but none of them have yet been put to a vote in the Senate Judiciary Committee, led by Chairman Charles Grassley (R-Iowa). Nominees for the five other spots have yet to be sent to the Senate. Three of those emergencies are in the predominantly rural Eastern District of Texas, a venue that has become a popular venue for U.S. companies to litigate patent disputes. In the 1990s, Texas Instruments Inc. found it a less busy alternative to the Dallas court in the Northern District and led the way in using it to sue foreign competitors in patent cases.

But foreign businesses now are joining U.S. firms in using the court to pursue patent disputes. Recently, Chinese telecommunications equipment manufacturer Huawei sued wireless carrier T-Mobile US Inc. in the Eastern District Huawei Technologies Co. v. T-Mobile US, Inc., No. 2:16-cv-00057, lawsuit filed 1/15/16 .

In a report made public in July, the U.S. Government Accountability Office told Congress that district court filings of new patent infringement suits increased from about 2,000 in 2007 to more than 5,000 in 2015. At the same time, it said, the number of defendants named in the suits rose from 5,000 to 8,000.

“In 2007, about 20 percent of all defendants named in new patent infringement lawsuits were sued in the Eastern District of Texas, and by 2015 this had risen to almost 50 percent,” GAO said in the report (See previous story, 07/21/16).

Patent Lawyers Complain

A group of leading patent lawyers urged Congress in a July 31 letter to take steps to discourage litigants with no connection to the district from filing suits there. While 2,541 patent cases were filed in the Eastern District of Texas in 2015, the Northern District of California, home of Silicon Valley, had only 228 cases filed that year, the group told Grassley and other lawmakers.

“A single judge in the Eastern District of Texas had 1,686 of the patent cases filed assigned to his docket in 2015—in other words, a single judge handled two-thirds of the patent cases in that district, and nearly one-third of all patent cases nationwide,” they said. “If all those cases were to go to trial, that single judge would have to complete four to five trials every day of the year (including weekends) not counting any time for motions other hearings.”

Geographic Challenges

Four judicial emergencies have also been designated in the Northern District of Texas and two others in the Southern District.

However, only one emergency has been identified in the Western District of Texas. But the district, home to companies that include Dell Technologies Inc. and Valero Energy Corp., has its own challenges. It covers 92,000 square miles and includes cities as far apart as Austin and El Paso.

Mark Sessions, a civil litigator with Strasburger & Price in San Antonio, told Bloomberg BNA that cases there are managed with the help of senior judges and those visiting from other areas.

“Vacancies in Texas have necessitated judges traveling to handle dockets in other cities and this takes time away from their principal dockets,” said Sessions, who focuses on business and banking litigation. “Also, this extra travel is a burden on each of these judges, particularly given the travel distances often required in our state.”

Sessions said the court always has to handle a significant criminal case load. Filings for criminal felony cases far outweigh those for civil cases in that jurisdiction.

Sessions said he can't point to any instances of delayed timelines, cut corners, or questionable outcomes due to pressure to clear a docket or move a case along. But he said he shares others' concerns about the funding and staffing of the judiciary.

Sessions spoke shortly after the conclusion of this year's American Bar Association annual meeting. Sessions, who serves on the Lawyers Conference of the Judicial Division, said the group met earlier this year with members of Congress and their aides to discuss the status of the federal judiciary.

“Chief among the topics covered was encouragement of the Congress to diligently work on decreasing the number of judicial vacancies,” Sessions said.

Sessions said he heard speculation at the ABA meeting that it's possible some judges still could be considered by the Senate this fall.

“This would be an excellent development if it happens this deep into a presidential election year,” he said.

New Short Cuts Popular

High volume and corresponding backlogs aren't being seen in the federal district courts of Michigan, where Frank Angileri represents automotive giant Ford Motor Co. as well as clients in other industries. But Angileri, a leading intellectual property lawyer at Brooks Kushman PC in Detroit, also tries patent and other cases in federal courts nationwide, including in Texas. The firm also has represented General Motors Co. in patent disputes.

Angileri told Bloomberg BNA that while lawmakers may not be filling judicial vacancies elsewhere quickly, changes that Congress enacted in 2011 still are helping to expedite some cases.

Angileri said the America Invents Act (Pub. L. No. 112-29) has allowed businesses to challenge or defend patents through new administrative trial procedures created by the act. Specifically it recognizes challenges to patentability before the Patent Trial and Appeal Board of the Patent Trademark Office. Among others, Ford used such a proceeding to successfully challenge a hybrid vehicle technology patent owned by Paice LLC.

“These new [inter partes review] procedures may have a bigger impact than vacancies,” Angileri said. “There have been more filings than expected.”

Angileri said the options include going to court or using the procedure with the new board. He said a case can also be filed and then stayed by a judge while issues are considered by the board. The process can often reduce time and costs.

“[O]nce the board decides the issue, it focuses the case and allows it to settle or proceed [to trial] more efficiently,” Angileri said.

Five-Year Cases

Sean Casey, a member of the ACC's intellectual property committee, said a patent trial in the federal courts now can run anywhere from two to five years. He said business is well served by looking for alternatives to traditional litigation.

The use of post-grant proceedings may resolve matters much faster, possibly in a year or 18 months, he said.

“That’s the only way to have predictability because once you go to a jury or a finder of fact if it’s a bench trial, you’re looking at the potential for a Solomon to split the baby,” Casey said.

To contact the reporter on this story: Nancy Ognanovich in Washington at nognanov@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com

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