Securus Technologies Inc v. Global Tellink Corporation
676 F. App'x 996
| Fed. Cir. | 2017Background
- Securus settled a 2009 patent suit with PCS agreeing not to sue “PCS or its affiliates” for infringement until Sept. 18, 2014.
- In 2010 GTL acquired PCS (PCS became GTL’s wholly owned subsidiary).
- Securus sued GTL for patent infringement in 2013; GTL asserted the 2009 covenant as an affirmative defense and counterclaimed for breach of the covenant, seeking attorney fees it incurred defending the suit.
- The district court granted summary judgment to GTL on the infringement claim, finding GTL was an “affiliate” of PCS under Texas law and thus covered by the covenant.
- The district court granted summary judgment to Securus on GTL’s counterclaim damages, holding Texas law requires expert testimony (or an attorney designated as an expert) to prove the reasonableness and necessity of attorney fees sought as damages, and GTL failed to timely designate such an expert.
- The Fifth Circuit panel affirmed both rulings: (1) GTL is an affiliate of PCS and the covenant barred the suit; (2) GTL forfeited its claim to attorney-fee damages by failing to timely designate an expert to prove reasonableness and necessity.
Issues
| Issue | Plaintiff's Argument (Securus) | Defendant's Argument (GTL) | Held |
|---|---|---|---|
| Whether GTL is an “affiliate” of PCS such that the 2009 covenant bars suit | “Affiliate” in the covenant should not include PCS’s parent; clause language indicates parent is excluded | GTL, as PCS’s parent/owner, is an affiliate covered by the covenant | Court: “Affiliate” includes parent corporations under ordinary Texas meaning; GTL is an affiliate and the covenant barred the suit |
| Whether expert testimony (and timely expert designation) is required to recover attorney fees as damages for breach of the covenant | No expert designation required here; fee records and lay testimony showing fees paid suffice | Texas law requires expert testimony (or an attorney designated as an expert) to prove attorney fees were reasonable and necessary; timely designation was required | Court: Texas law requires expert testimony and timely disclosure; GTL failed to designate and thus cannot recover attorney fees as damages |
Key Cases Cited
- McLane Foodservice, Inc. v. Table Rock Rests., L.L.C., 736 F.3d 375 (5th Cir.) (contract interpretation: “affiliate” includes parent corporation)
- American Home Assurance Co. v. United Space Alliance, LLC, 378 F.3d 482 (5th Cir.) (distinguishes fees under Tex. Civ. Prac. & Rem. Code § 38.001 from attorney fees awarded as damages; reasonableness and necessity required for damages)
- Taurus IP, LLC v. DaimlerChrysler Corp., 726 F.3d 1306 (Fed. Cir.) (addressed expert testimony for fees under § 38.001; did not decide need for experts when fees are damages)
- E.F. Hutton & Co. v. Youngblood, 741 S.W.2d 363 (Tex.) (attorney testimony on fees constitutes expert testimony)
- Turner v. Turner, 385 S.W.2d 230 (Tex.) (awarding attorney fees as damages requires proof fees were reasonable and necessary)
- Lesikar v. Rappeport, 33 S.W.3d 282 (Tex. App.) (expert testimony required to prove reasonableness and necessity of attorney fees)
- Woodhaven Partners, Ltd. v. Shamoun & Norman, L.L.P., 422 S.W.3d 821 (Tex. App.) (confirming requirement of expert testimony and that testifying attorney must be designated as an expert)
- Texas Molecular Ltd. P’ship v. Am. Int’l Specialty Lines Ins. Co., [citation="424 F. App'x 354"] (5th Cir.) (affiliates defined by common ownership or control)