Free Statement - District Court of Arizona - Arizona

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PETER E. HEUSER, admitted pro hac vice ELIZABETH A. TEDESCO, admitted pro hac vice Kolisch Hartwell, P.C. 200 Pacific Building, 520 SW Yamhill Street Portland, OR 97204 Telephone: (503) 224-6655 Facsimile: (503) 295-6679 [email protected] [email protected] DANIEL R. MALINSKI (#005911) Burch & Cracchiolo, P.A. 702 East Osborn, Suite 200 Phoenix, Arizona 85014 Telephone: (602) 274-7611 Facsimile: (602) 234-0341 [email protected] Attorneys for Plaintiffs Richard G. Krauth and R.M. Wade & Co.

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA ) ) No.04-544 PHX PGR ) ) Plaintiffs, ) ) v. STATEMENT OF FACTS IN SUPPORT ) OF PLAINTIFFS' MOTION FOR ) Phelps Dodge Corporation, a New York SUMMARY JUDGMENT THAT NO ) corporation; Phelps Dodge Bagdad Inc., a PURPORTED SETTLEMENT ) Delaware corporation; Phelps Dodge Chino AGREEMENT IS ENFORCEABLE ) Inc., a Delaware corporation; Phelps Dodge Morenci Inc., a Delaware corporation; Phelps ) Dodge Sierrita Inc., a Delaware corporation; ) ) Phelps Dodge Tyrone Inc., a Delaware corporation; and Phelps Dodge Miami Inc., a ) ) Delaware corporation, ) ) Defendants. Richard G. Krauth, an individual; and R.M. Wade & Co., an Oregon corporation,

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STATEMENT OF FACTS SUPPORTING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT THAT NO PURPORTED SETTLEMENT AGREEMENT IS ENFORCEABLE

Case 2:04-cv-00544-PGR

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Plaintiffs Richard G. Krauth and R.M. Wade & Co. (collectively, "plaintiffs") submit the following Statement of Facts in support of their Motion for Summary Judgment that No Purported Settlement Agreement is Enforceable, and incorporate the concurrently filed Declaration of Peter E. Heuser in Support of Plaintiffs' Summary Judgment Briefing ("Heuser Decl.") and Declaration of Elizabeth A. Tedesco in Support of Plaintiffs' Summary Judgment Briefing ("Tedesco Decl.") by reference: 1. On August 16, 2004, the Court stayed this action pending the result of a

reexamination of the patents-in-suit, and plaintiffs filed the Request for Reexamination on September 30, 2004. [Declaration of Peter E. Heuser Regarding Settlement Negotiations in Support of Plaintiffs' Summary Judgment Briefing ("Heuser Decl.") at ¶ 2]. 2. In January 2005, the parties began to discuss settling the lawsuit, knowing that the

claims of the patents-in-suit could be invalidated, narrowed, or affirmed by the PTO. [Id. at ¶¶ 4, 5]. After the parties determined the basic value of a license to the patents-in-suit in mid-January 2005, they began to circulate drafts of the agreement. Heuser emailed a first draft agreement to Kittredge on January 19, 2005. [Id. at ¶ 8, Exh. D]. His email stated, "As I indicated to you, neither of my clients has seen this document, so this should not be considered an offer that is in condition to be accepted." [Id.]. Often several weeks or more passed between the time counsel for each party reviewed the draft and the time a revised draft was submitted to the other party. [Id. at ¶¶ 4-11]. 3. Counsel for plaintiffs, Peter E. Heuser ("Heuser") called Kittredge on April 5,

2005. [Id. at ¶ 12]. Kittredge asked Heuser if plaintiffs had heard anything from the PTO. [Id., Exh. I]. Heuser and Kittredge agreed that if the PTO rejected the claims of the patents-in-suit, it would not change the settlement they were working on. [Id.] Heuser stated, however, that if the PTO did not reject all of the claims of the patents-in-suit, the settlement negotiations would change directions entirely. [Id.] 4. Heuser then called Edward Newbegin, president of R.M. Wade & Co.

("Newbegin") to report this conversation with Kittredge. [Id. at ¶ 13]. Newbegin told Heuser that Wade wished to sell product to Phelps Dodge and asked Heuser to be more positive with Kittredge about the progress of the negotiations. [Id.] As a result of this conversation, Heuser sent an email to Kittredge asking, to be encouraging, if it would be appropriate for Wade to
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contact Phelps about doing business in the future "now that we have been able to put the case to bed." [Id., Exh. H]. 5. Heuser emailed Kittredge on May 10, 2005 asking whether he was obtaining

information about the emitters Phelps Dodge was using. [Id. at ¶ 15, Exh. J]. Kittredge called Heuser soon after the email was sent. [Id.] The parties discussed the reexamination of the patents-in-suit, and Heuser told Kittredge the longer they waited the more likely it became that there would be a ruling by the PTO. [Id.] Heuser said that if the PTO does any other than reject all the claims before the agreement was signed, it "could entirely change the direction of the negotiation." [Id.] Kittredge said he felt the parties had a deal and Heuser said he did know that that was so clear. [Id.] The parties agreed that "a mess could be avoided" if Kittredge got back to Heuser quickly so they could finalize the agreement. [Id.] Right after speaking with

Kittredge, Heuser recounted the conversation in an email to Newbegin. [Id.] 6. Kittredge remembers a single conversation "at no time prior to late summer

2005" in which "Heuser told Kittredge that if the Patent Office issued a favorable Office Action before the written settlement agreement was signed, then he thought his clients' position would be that all bets would be off." [Declaration of Elizabeth A. Tedesco in Support of Plaintiffs' Summary Judgment Briefing ("Tedesco Decl."), Exh. A at 7; Exh. B at 3]. Phelps Dodge contend that Kittredge responded by stating that "defendants believed they already had a binding settlement agreement." [Id., Exh. A at 7]. Kittredge has no notes, emails or other memoranda to help him place the date. [Id., Exh. C at 88:8-90:18]. 7. Phelps Dodge also describes "one subsequent telephone conversation" in which

"Heuser and Kittredge acknowledged they would like to finalize the settlement documentation before the Patent Office issues an Office Action to avoid any dispute as to whether a binding settlement agreement already existed." [Tedesco Decl., Exh. A. at 8]. 8. On June 17, 2005, Kittredge emailed Heuser revisions to the draft settlement

agreement he received on March 24, 2005. [Heuser Decl. at ¶ 16, Exh. K]. Although the parties had not discussed any such provision, the draft also included a license to Phelps Dodge under the U.S. Patent No. 6,817,548 ("the `548 patent"), owned by Wade, as to the products identified in "Exhibit C." [Id.]
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9.

The parties spent the next several months negotiating these provisions and a

related exhibit directed to which models of emitters Phelps Dodge would be permitted to use in light of the `548 patent. [Id. at ¶¶ 17-22]. 10. In early September, plaintiffs momentarily thought the parties had reached

agreement on contract language and signed a draft of the agreement. [Id. at ¶ 20]. Before Heuser received the signed copies, he received a voicemail from Kittredge stating in pertinent part: "I wanted to chat with you briefly, and make sure we don't get ahead of ourselves, because it looks like you're already gathering signatures. There is going to be a review process that I need to go through here with my client to make sure we are comfortable with this, because Exhibit C looks a lot different than what we had before." [Id. at ¶ 21, Exh. N]. The document plaintiffs had signed was never transmitted to Phelps Dodge, and--prior to discovery in this case--Phelps Dodge was never told the draft had been signed. [Id. at ¶ 20]. 11. October 9, 2005, Kittredge sent by email what would be a final draft of the

proposed settlement agreement, and stating, "Now that we are finally here, I would really like to see what we can do to get the agreement executed this week." [Id. at ¶ 22, Exh. O]. 12. On October 19, 2005, Kittredge reported that Phelps Dodge had signed the final

draft of the agreement. [Id. at ¶ 23, Exh. P]. Plaintiffs had not and have not signed it. [Id.] 13. On October 20, 2005, Heuser called Kittredge to inform him that plaintiffs had

just received an Office Action from the PTO confirming the validity of both patents-in-suit. [Id. at ¶ 24, Exh. Q]. During the conversation, Kittredge acknowledged that Heuser had said the agreement needed to be executed before Wade received a favorable ruling from the PTO or the parties would be back to negotiating. [Id.] As the conversation concluded, Heuser and Kittredge agreed that they wanted to--as Phelps Dodge's discovery responses state--"resolve the issue of the disputed settlement" before proceeding with other aspects of the case. [Tedesco Decl., Exh. A at 8]. 14. Phelps Dodge contends that an oral contract was formed when plaintiffs

"manifested assent to settle this Action through the voice mail message left by Heuser on the evening of January 11, 2005" and "Defendants manifested assent to be bound during the January 12, 2005 telephone conversation" between Heuser and Kittredge in which "Kittredge told Heuser
STATEMENT OF FACTS SUPPORTING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT THAT NO PURPORTED SETTLEMENT AGREEMENT IS ENFORCEABLE

Case 2:04-cv-00544-PGR

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that the offer made by plaintiffs in that voicemail message was accepted by Phelps Dodge." [Id., Exh. B at 3]. 15. Phelps Dodge contends that an oral "modification" to the purported January 12,

2005 oral agreement took place "sometime between February 14, 2005 and April 5, 2005" to "take into consideration the Plaintiff's newly issued `548 patent." [Id.] The "modification" included the parties' agreement "that (i) defendants would identify the subject emitters; (ii) plaintiffs would review that information with respect to the new patents; and (iii) all emitters that do not infringe the new patent would be expressly identified in and covered by the agreement." [Id., Exh. A at 6]. 16. In scheduling conference on December 12, 2005, the Court stated "Well, this is a

most unusual set of circumstances. The Court has been asked to evaluate a settlements before, but not when it's claimed that there are genuine issues of material fact based on caveats entered into with attorneys--I'm going to determine that there--I probably have to determine there's a genuine issue of material fact, which is whether or not there were reservations attached to the settlement agreement." [Tedesco Decl. at Exh. E at 6:4-17].

Dated: March 31, 2006. By s/Elizabeth A. Tedesco PETER E. HEUSER ELIZABETH A. TEDESCO Kolisch Hartwell, P.C. 520 SW Yamhill Street, Suite 200 Portland, Oregon 97204 Phone: 503-224-6655 Facsimile: 503-295-6679

DANIEL R. MALINSKI Burch & Cracchiolo, P.A. 702 East Osborn, Suite 200 Phoenix, Arizona 85014 Telephone: (602) 274-7611

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STATEMENT OF FACTS SUPPORTING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT THAT NO PURPORTED SETTLEMENT AGREEMENT IS ENFORCEABLE

Case 2:04-cv-00544-PGR

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