INVISTA TEXTILES: What does it take to make an offer to settle “unjust”?
INVISTA TEXTILES: What does it take to make an offer to settle “unjust”?
For businesses and individuals who find themselves in court proceedings in relation to a dispute, there is an ongoing duty on all parties to seek to achieve settlement. Indeed, settlement often means the parties can avoid incurring further legal fees and gives the stretched courts more time to deal with more pressing matters that cannot be settled.
As a firm of expert IP lawyers, we often advise clients who are in such a position the best route to settlement. It is a vital part of our job and most cases are settled amicably without the need for an expensive trial.
For a court to determine that such an offer to settle is “unjust” is incredibly rare. Indeed, the very definition of “unjust” includes those actions which are “not based on or behaving according to what is morally right and fair”.
On 8 May 2019, we announced a case where our IP Protect team had experienced an instance. Please see our earlier blog here.
Since our earlier blog, the reasoned judgment behind the court’s declaration that Invista Textile’s “Part 36” offer was “unjust” has been released (see the bottom of this post).
The Claimants in this case, “Invista” are part of the Koch Industries group based in Wichita, Kansas, USA,. Invista is one of the world’s largest producers of nylon and the chemical intermediates used to produce nylon.
Invista were represented by “trial lawyers” Quinn Emanuel Urquhart & Sullivan LLP, including their Managing Partner, Sue Prevezer QC.
The Defendants are three former employees of Invista (Drs Botes, Chokkathukalam and Chen) and a biotech start-up “VideraBio”. The former Invista employees are all leading biotechnology scientists. Until her departure, Dr Botes was the R&D director of Invista’s “Sustainability Group” where she led research into production of bio-based nylon intermediates via fermentation as an alternative to current petrochemical-based production.
The Virtuoso Legal IP Protect litigation team, led by directors Elizabeth Ward (a former biotech scientist and founder of the IP specialist firm) and Philip Partington (head of IP Protect and the London Office of Virtuoso Legal), acted for the Defendants.
The Costs Hearing
Following the Judgment, the parties attended hearings in relation to determining the parties’ liabilities to the other’s costs.
During the numerous hearings, Invista Textiles resisted paying the VideraBio and the Drs’ legal costs on the basis that they had been “successful” in relation to their “Central Claim” and that they had “beaten” their Part 36 Offer. Indeed, Invista Textiles claimed that they should be awarded 50% of their costs following the relevant period after making a Part 36 Offer.
Ultimately, both arguments were rejected and Mr Justice Birss ruled that VideraBio and the Drs’ had been the overall successful party in the proceedings and that, while Invista’s Part 36 Offer had been “triggered”, it was unjust to deprive VideraBio and the Drs’ costs in the circumstances of this case as it was not a “genuine” offer to settle the proceedings.
What makes an “Unjust” offer?
In this case, in June 2018, Invista had sent the Defendants a Part 36 offer asking them to delete 1367 documents of the over 7000 documents in the issue and pay Invista’s costs on the standard basis.
Mr Justice Birss considered that the offer represented “admission of defeat by Invista”, as Invista’s case was far wider than the forensic deletion of documents and included serious allegations of breach of confidence and misuse of confidential information, to name but a few.
Mr Justice Birss stated that the “refusal by the defendants to accept that they should shoulder the burden of all their costs of all these proceedings was legitimate in the circumstances and has been vindicated by the judgment”.
In July 2018, following a lengthy forensic disclosure process, the vast majority of the documents contained in the Part 36 offer were formally admitted to be Invista documents. As such, at that stage, Mr Justice Birss stated that following the admissions “the claimants had achieved a more advantageous position than what had been offered in the Part 36 offer.”
In order to assess whether the Part 36 offer consequences were triggered, Mr Justice Birss stated that all circumstances will need to be considered. In this particular case, Mr Justice Birss found that CPR 36.17(1)(b) was met:
“Once the claimants had offered in the Part 36 offer to abandon everything claimed except the 1367 documents, for them to then obtain relief for those documents as a result of the admission and for quite a number more, and to win some other minor causes of action at trial is, in a straightforward sense, a more advantageous position in terms of the relief actually sought. The value is inherently unquantifiable but that does not stop it from being more advantageous as long as it is tangible (which it plainly is).”
Mr Justice Birss then went on to consider whether the costs consequences ought to be applicable to this case or whether it would be “unjust” to do so. Indeed, the “party seeking to establish that it would be unjust faces what has been called a formidable obstacle”. It was an uphill struggle for the Defendants!
Nonetheless, Mr Justice Birss stated:
“To accept the offer, because it was made under Part 36, the defendants would have to pay all the costs to the case up to that date. That included not only the costs relating to documents but all the other costs too, relating to all the other issues. A reasonable litigant and litigation team in [Invista’s] position will have known when it made that offer that that aspect would make it wholly unacceptable.”Justice Birss
As such, Mr Justice Birss concluded that it would be “unjust” to enforce the consequences of the Part 36 Offer. Worse still, that:
“the Part 36 offer itself was not a genuine offer to settle. In fact, if anything, I think the offer has proved to be a barrier to settlement of this dispute because since the offer was made and not accepted and then the admissions were made, the claimants seem to have been approaching this case as if they were entirely protected as to costs.”Justice Birss
Invista Textiles vs Botes and others: Conclusion
The decision obtained by Virtuoso Legal is a landmark decision in relation to Part 36 offers and costs.
While Part 36 offers remain an important tactical step in litigation, the party proposing to settle will need to consider whether this is a genuine offer to settle and the unjust effects it might have on the other party.
Of the recent decision, Philip Partington, Virtuoso Legal’s director and head of IP Protect and the London office, said as follows:
“The team at Virtuoso Legal are delighted at the result in favour of Drs Adriana Botes, Unni Chokkathukalam and Changlin Chen.
It has been a pleasure to work with the Drs over the last two years, albeit at a particularly stressful time for them.
In my view, this case illustrates that former employees, who are in the same position as the Drs in this case, can successfully defend a case against a large multinational corporation such as Invista Textiles if they have the right legal team defending them.
We will be writing in further detail about this decision, both in relation real world consequences and lessons learnt on the substantive judgment; but also on Invista’s unjust Part 36 offer, as it is a decision which has potentially wide spread repercussion in the field IP litigation.”Philip Partington
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INVISTA TEXTILES: What does it take to make an offer to settle “unjust”? was written by Philip Partington