Eddings v. Glast, Phillips & Murray, Slip Copy 2008 WL 2522544 (N.D.Tex. 2008)
New Tek Mfg., Inc. v. Beehner, 275 Neb. 951, 751 N.W.2d 135 (2008)
Singh v. Duane Morris LLP, __ F.3d __, 2008 WL 2908912 (5th Cir. 2008)
Brief Summary
Despite two Federal Circuit decisions arguably to the contrary, three recent decisions have allowed state courts to hear legal malpractice claims in which the underlying matters involved intellectual property issues.
Complete Summary
In 2007 the Federal Circuit Court of Appeals, in two separate decisions, held that federal courts have jurisdiction over legal malpractice claims which turn on substantial issues of patent law. See Hinshaw & Culbertson LLP, Alert, Federal Circuit Finds Exclusive Federal Jurisdiction of Legal Malpractice Cases Arising From Patent Matters (Nov. 13, 2007). The substantial issues of patent law in those two cases were (1) an issue of attorney error in patent prosecution and (2) an issue of attorney error in patent claim drafting. More recently at least three decisions have diverged from, or at least expanded upon, the Federal Circuit holdings.
In the first of these three new decisions, Eddings v. Glast, Phillips & Murray, the District Court, Northern District of Texas, remanded a legal malpractice case to state court. Plaintiff Eddings had been defended by Glast, Phillips & Murray (“Glast”) in the underlying patent suit, but Eddings’ malpractice claims were largely based on Glast’s alleged procedural errors rather than mistakes involving substantive patent law. The court held that patent law was not essential to Eddings’ case because Eddings — which was the defendant in the underlying patent suit — was merely seeking to prove that the judgement against it would have been less but for Glast’s alleged procedural mistakes.
In differentiating Eddings from the Federal Circuit cases, the court noted that the Federal Circuit plaintiffs had also been plaintiffs in the underlying patent suits (unlike Eddings) and that one of the Federal Circuit holdings had noted a possible exception to federal jurisdiction if a legal malpractice plaintiff could prevail on a theory which did not involve a substantial patent law question. See Air Measurement Techs., Inc. v. Akin Gump Strauss Hauer & Feld, L.L.P., 504 F.3d 1262, 1270 (Fed. Cir. 2007).
In the second decision, New Tek Mfg., Inc. v. Beehner, the Nebraska Supreme Court flatly declined to heed, or even closely analyze, the Federal Circuit decisions. The malpractice case, which involved allegations of attorney negligence in letting a patent expire, had been moving through the state court system for over 10 years when the Federal Circuit decisions were handed down. Although the Nebraska Supreme Court had ordered supplemental briefing on the Federal Circuit decisions, the court concluded, without discussion, that the malpractice case arose entirely under state law and that the court therefore had subject matter jurisdiction.
In the third decision, Singh v. Duane Morris LLP, the Fifth Circuit Court of Appeals dismissed and remanded a legal malpractice case which had been removed from state court. The dismissal was based on lack of federal question jurisdiction. Malpractice plaintiff Singh alleged that Duane Morris had negligently failed to introduce evidence in the underlying trademark infringement suit — evidence which would have allegedly allowed Singh to prevail. The court adopted the test used in Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 312 (2005), for determining federal question jurisdiction:
[F]ederal question jurisdiction exists where (1) resolving a federal issue is necessary to resolution of the state-law claim; (2) the federal issue is actually disputed; (3) the federal issue is substantial; and (4) federal jurisdiction will not disturb the balance of federal and state judicial responsibilities.
Singh, at *2.
The court held that federal jurisdiction was improper under the third and fourth prongs of this test. The federal trademark issue was not substantial, the court held, because it was largely an issue of fact (i.e. whether Singh’s trademark had acquired secondary meaning), and therefore there was no need for the “experience, solicitude, and hope of uniformity that a federal forum offers.” Singh at *3 (quoting Grable, 545 U.S. at 312). The court further held that assuming jurisdiction would set a precedent that could “sweep innumerable state-law malpractice claims into federal court[,]” which would unacceptably upset the balance between federal and state judicial responsibilities. Singh, at *3.
In contrasting and differentiating Singh from the Federal Circuit decisions, the Fifth Circuit noted that those decisions failed to take into account the federalism concern implicit in prong four of the Grable test. But the court went on to note “[i]t is possible that the federal interest in patent cases is sufficiently more substantial [than in trademark cases], such that it might justify federal jurisdiction.” Singh, at *4.
Significance of Opinions
Of these three decisions, only New Tek (the Nebraska Supreme Court case) directly appears to contradict the Federal Circuit holdings. Eddings and Singh arguably go no further than clarifying the meaning of “substantial federal issue.” Regardless, the proper forum for deciding legal malpractice suits involving intellectual property issues is not presently clear.
This alert has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship.
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