It’s Delaware ‘Show Case’ Time – Lawsuits, Appeals and Compensation

In mid-April, Delaware District Chief Judge Colm F. Connolly issued two new standing orders related to this courtroom’s disclosure requirements: a compel litigants to disclose details related to any non-recourse financing arrangements with third parties and a second requiring full disclosure of corporate control. The first has a timeline associated with its mandates, while the second is open-ended; however, Judge Connolly has now issued at least one “show cause” order blaming a plaintiff for ignoring new requirements for litigants assigned to his courtroom.

RPX previously reported on the revelations Judge Connolly’s standing orders had about the operations of prolific monetization firm IP Edge LLC. However, IP Edge and other litigants were less than thorough in their responses. On May 13, four days after oral argument on a motion to dismiss, Judge Connolly ordered Nimitz Technologies LLC (patent proprietor) and CNETMedia, Inc. (Defendant) to “certify within five days that they have complied with Chief Justice Connolly’s standing order dated April 18, 2022 regarding disclosure statements”.

The defendant complied on May 18, disclosing that:

CNET is a wholly owned Delaware company. No public entity owns 10% or more of CNET’s stock. CNET is owned by Red Ventures Hermana UK Ltd, which is owned by Red Ventures Porto International UK Ltd, which is owned by Red Ventures International UK Ltd, which is owned by RV US Pondview Inc, which is owned by New Imagitas, Inc. New Imagitas, Inc is owned by Red Ventures Intermediate, LLC. The sole member of Red Ventures Intermediate, LLC is Ruby Sub, LLC. The sole member of Ruby Sub, LLC is Ruby Intermediate 2, LLC. Members of Ruby Intermediate 2, LLC holding more than 5% of its shares are Ruby Intermediate 1, LLC and GA RV, LLC. The sole member of Ruby Intermediate 1 LLC is Red Ventures Holdco, LP.

Nimitz Technologies, on the other hand, did not file anything. On May 23, Judge Connolly issued a show cause order giving the plaintiff three days to “show good cause why he should not be held in contempt for failing to comply with the May 13, 2022 order of the courtyard”. This order caught Nimitz’s attention. Toot following, Nimitz filed an amended corporate statement stating that Mark Hall is its sole owner and member, with the caveat that he “understands that the Court’s standing order regarding disclosure statements required by rule Federal Civil Procedure 7.1 requires parties to identify direct or indirect proprietary interest statements, and does not require disclosure of entities that may have a financial interest in the outcome of the litigation (such as, for example, agreements of ’emergency with attorneys)’ (To explore the implications of such disclosure, in line with others by IP Edge plaintiffs, see here.)

On the same day, Nimitz also filed a statement certifying that it “has not entered into any agreement with a third-party funder, as defined in the Court’s Standing Order Regarding Third-Party Litigation Funding Agreements.” . Plaintiff also responded to Judge Connolly’s show cause order, saying he simply and inadvertently missed the five-day deadline to update his disclosures in the previous oral order because he “acted immediately to collect the information necessary to comply with the two standing orders”. . (George Pazuniak of O’Kelly & O’Rourke, LLC submitted these documents on behalf of Nimitz of IP Edge.)

IP Edge is not the only litigant to respond – voluntarily or under duress – to Justice Connolly’s new standing instructions. For example, the defendant Glanbia Nutritionals (NA), Inc.made the following disclosure, detailing its ownership under Judge Connolly’s first permanent order above: “Glanbia is 100% owned by Glanbia, Inc.itself 100% owned by Glanbia plca public company listed on Euronext Dublin and the London Stock Exchange.
Glanbia Co-operative Society Limited (owned by around 13,000 farmers) owns around 30% of the shares of Glanbia plc. No other shareholder or entity holds more than 5% of the shares of Glanbia plc”. The plaintiff in this case, Vitaworks IP, LLC, must still comply with any of the new standing orders. Any event requiring the Judge Connolly’s direct attention to this dispute could trigger another to substantiate such non-compliance.

Many litigants have yet to respond to Judge Connolly’s standing orders, risking judicial wrath, while still others have complied, albeit initially under seal. Personal Audio, LLC, in a pending case against
Alphabet (Google), revealed on June 10 that it was receiving third-party litigation funding, from a redacted funder:

However, on June 17, following a status conference with Judge Connolly, Personal Audio filed a longer version of this disclosure, this time without redaction. The unredacted record identified its third-party funder as Medigo Associates, a New Jersey LLC “managed, directed and controlled by LexShares” through an investment fund. By personal audio,
LexShares is “a technology platform that allows investing in legal claims”. The filing also gives more information about the plaintiff’s decision to seek funding, indicating that Personal Audio did so to cover his legal costs.”[d]due to the unusual length of this case” and detailing the broader contours of its funding agreement with “Third-Party Funder” (an undefined term, but in context an apparent reference to Medigo Associates):

On January 23, 2019, the third-party funder purchased an interest to receive the greater of 2.5 times the purchase price or 20% of Personal Audio, LLC’s gross recovery in this case. In the event that Personal Audio does not prevail, the third party funder will receive nothing. In exchange, Personal Audio received funds to deploy for legal fees and expenses. The funds can be used to “reimburse 100% of reasonable disbursements actually incurred by counsel of record”, including expert fees, deposition costs and travel expenses. The funds were not used to pay legal fees for lead counsel or local counsel.

While the full impact of Judge Connolly’s new permanent orders on intellectual property litigation remains to be seen, expect more such cases to draw his ire, prompting a stand-by order or an order. justification, akin to those entered into the Nimitz case, as plaintiffs adjust to this new (and evolving) territory.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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