RESPONDENT:Adams USA, Inc.
LOCATION:Erie City Council
DOCKET NO.: 99-502
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Sixth Circuit
CITATION: 529 US 460 (2000)
ARGUED: Mar 27, 2000
DECIDED: Apr 25, 2000
Debra J. Dixon – Argued the cause for the petitioner
Jack A. Wheat – Argued the cause for the respondents
Facts of the case
The Ohio Cellular Products Corporation (OCP) sued Adams USA, Inc. (Adams), for patent infringement. After the District Court ruled in Adams’ favor by dismissing the suit, Adams motioned for attorney fees and costs. In granting the motion, the court found that Donald Nelson, who was at all relevant times president and sole shareholder of OCP, had acted in a way that constituted inequitable conduct chargeable to OCP. Fearing it would be unable to collect the award, Adams moved under Rule 15 of the Federal Rules of Civil Procedure to amend its pleading to add Nelson, personally, as a party from whom fees could be collected. Additionally, Adams asked the court, under Rule 59(e), to amend the judgment to make Nelson immediately liable for the fee award. The District Court granted the motion in full. The Court of Appeals affirmed the decision simultaneously making Nelson a party and subjecting him to judgement.
May a party, who has been made a party to a civil action, be simultaneously made personally liable?
Media for Nelson v. Adams USA, Inc.
Audio Transcription for Opinion Announcement – April 25, 2000 in Nelson v. Adams USA, Inc.
The opinion of the Court in No. 99-502, Nelson v. Adams USA, Inc. will be announced by Justice Ginsburg.
Ruth Bader Ginsburg:
This case presents the question of the process due to a person against to whom a claim is asserted after judgment in the action has issued.
The question stems from patent litigtion between two corporations; respondent Adams USA and the company called OCP.
Adams prevailed and the Court ordered OCP to pay Adams attorney fee.
Adams suspected for good reason that OCP might not have the money in its corporate till to pay the fee award, that that was sought payment from the private purse of the President and sole shareholder of OCP, petitioner Nelson.
To that end, Adams moved to amend its pleading to add Nelson as a party.
Adams also moved to alter the judgment to subject Nelson to personal liability for the fee award.
The istrict Court granted both requests simultaneously thus making Nelson a party and subjecting him to judgment at a single stroke.
A divided panel of the Federal Circuit correctly noted that it was uncommon to add a party after the entry of judgment and then subject that party to immediate liability.
But the panel nontheless affirmed saying that Nelson was not prejudiced by the unusual time and manner in which he was named the party.
In the Federal Circuit’s view nothing different would have been done to stay off the fee award, had Nelson been named as a party in his personal capacity earlier in the proceedings.
In an opinion filed today we reverse.
Due process of law and the requirements of the Federal Rules of Civil Procedure specially Rule 15 governing pleading amendments, chart our course.
They demand that a party joined in litigation have a fair opportunity to air its side of the story after it is made a party and before judgment is entered against it.
A court’s forecast that a party would be unsuccessful in a voting liability that any defense he raises would fail does not warrant denial of an actual opportunity to defend.
We express no view on the likelihood that Nelson will ultimately be liable for the award of attorney fees; we hold only that the District Court acted out of bounds when it subjected Nelson to judgment at the very instant it added him as the party to the proceeding.
The opinion is unanimous.