United States Ex Rel. Jacobs v. Lambda Research, Inc.

622 F. App'x 477
CourtCourt of Appeals for the Sixth Circuit
DecidedMay 1, 2015
Docket14-3705
StatusUnpublished

This text of 622 F. App'x 477 (United States Ex Rel. Jacobs v. Lambda Research, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States Ex Rel. Jacobs v. Lambda Research, Inc., 622 F. App'x 477 (6th Cir. 2015).

Opinion

KETHLEDGE, Circuit Judge.

In October 2009, an Ohio state-court jury found that Terry Jacobs had stolen trade secrets from his former employer, Lambda Research. The Ohio court ordered him to pay Lambda $9.4 million in damages and attorney’s fees. Two months later, Jacobs sued Lambda in federal court under the False Claims Act, alleging that Lambda had defrauded the Navy. Given the timing of the two suits, the district court was concerned that Jacobs had filed his suit in retaliation for Lambda’s. The court repeatedly cautioned Jacobs and his lawyer that, if they proceeded to the end of discovery without evidence to back up Jacobs’s claim, the court would sanction them for filing a frivolous lawsuit. Jacobs persisted in the suit. After discovery, the court granted summary judgment to Lambda and imposed sanctions on Jacobs and his lawyer. We affirm and order counsel to show cause why he should not be sanctioned for filing a frivolous appeal.

I.

A.

Lambda is a small business in Cincinnati that develops technological processes to strengthen metal components. One of its *478 processes, called low-plasticity burnishing, strengthens aircraft parts by inducing “residual compressive stress,” a feature that makes the metal more resistant to fatigue. “[T]he process involves passing a computer-controlled tool containing a spherical roller ball suspended in viscous fluid over the surface of the metal and exerting pressure [on the metal], thereby creating compression deep in the metal and making the material stronger.” R. 75 at 2.

During the burnishing process, pressure from the roller ball deforms the surface of the metal. The process of deforming the metal in this way is called “cold work.” (The opposite of cold work is “hot work”: the process of deforming a piece of metal at high temperatures, e.g., forging a hot piece of metal by striking it with a blacksmith’s hammer.) Like the deformation process itself, the resulting deformities are also called “cold work.” If a part has too many deformities — that is, too much cold work — then the part is more likely to break when used at extremely high temperatures. If the part is designed for use at lower temperatures, however, then the amount of cold work does not matter much. Lambda’s patents assert that its burnishing process produces cold-work levels of “about” five percent.

Lambda’s competitors also offer technologies that strengthen metal parts. According to Lambda, low-plasticity burnishing is better for three reasons: it produces less cold work; it produces more residual stress (which makes the metal stronger); and it produces more-precise levels of residual stress.

B.

The United States Navy uses a fighter known as the Harrier Jump Jet. Harriers operate like the Navy’s other warplanes during flight, but they can take off and land vertically — much like a helicopter— allowing them to operate from smaller ships and runways. In the 1990s, several Harriers crashed after a metal vane in their engines failed. The Navy thus began looking for a technology that could strengthen the vanes and prevent future crashes. In 2000, the Navy began exploring whether Lambda’s process would work.

For the next seven years, Lambda and the Navy jointly researched and tested the process. The Navy’s lead compression-systems engineer, Ravi Ravindranath, was Lambda’s primary point of contact. Ra-vindranath was intimately involved in the research and testing process; indeed, he and Lambda co-authored several scientific papers on low-plasticity burnishing.

In 2007, the Navy hired Lambda to use its process to strengthen vanes for the Harrier fleet. Lambda’s contracts with the Navy stated that the burnishing process would “minimiz[e]” cold-work levels, but did not specify the precise cold-work levels that the process would produce. Even so, the Navy knew that the process often produced cold-work levels above five percent: Ravindranath had co-authored papers showing that the process sometimes produced cold-work levels much higher than that — between 20 and 30 percent. But since the vanes were designed for use in the front of the engines rather than the rear — and thus did not need to operate at extremely high temperatures— the Navy was not concerned about the exact cold-work levels. R. 52-4 at 647. In the seven years since the Navy started using Lambda-burnished parts, no Harriers have crashed as a result of faulty vanes. R. 52-8 at 703.

C.

Terry Jacobs worked at Lambda from 2000 to 2002, first as a senior engineer, *479 later as vice-president. Jacobs left Lambda to become vice-president of Ecoroll Corporation, a German competitor. While at Ecoroll, Jacobs repeatedly emailed Ra-vindranath to tell him that Lambda’s process produced cold-work levels above five percent, and that the. Navy should thus hire Ecoroll to do the vane work instead. R. 52-8 at 705. Ravindranath replied that his office did not entertain direct solicitations. Jacobs later attempted to invalidate Lambda’s patent by informing the Patent Office that Lambda’s process produced higher cold-work levels than Lambda’s patent suggested. R. 63-6. The Office rejected Jacobs’s request and confirmed Lambda’s patent.

Around the same time, Lambda sued Jacobs in Ohio state court, alleging that he had breached his confídéntiality agreement, stolen Lambda’s trade secrets, and given them to Ecoroll. A jury found Jacobs liable and awarded Lambda $8 million in damages. The judge found that Jacobs had misappropriated Lambda’s trade secrets willfully, and thus awarded Lambda an additional $1.4 million in attorney’s fees.

Two months later, Jacobs filed this lawsuit against Lambda under the False Claims Act. 31 U.S.C. § 3730. In support, Jacobs alleged that Lambda had induced the Navy to use Lambda’s burnishing process by falsely telling the Navy that the process always produced cold-work levels of less than five percent. Jacobs filed his complaint under seal, as required- by law, but later told his associates at Ecoroll about the complaint. R. 63-1 at 1476-79. Indeed, Jacobs believes that he was terminated by Ecoroll because he filed this suit.

In August 2011, Lambda filed a motion to dismiss. The court held a hearing on that motion, during which it warned Jacobs and his attorney, James DeRoche, that “if you are using this [lawsuit] to vent some spleen against these folks, you’re going to end up getting sanctioned.” R. 52-2 at 17-18. DeRoche assured the court that the lawsuit was legitimate. The court reiterated its warning:

Now, I want to caution you again. If this is a frivolous suit, as has been implied, you’re subject to be sanctioned. Rule 11 is there and it’s there- for a reasonL] ... If it. turns out that [this case] is frivolous or as soon as you discover that it is frivolous or without merit ... you should dismiss it.

Id. at 21. DeRoche assured the court that he understood. The court ultimately denied Lambda’s motion to dismiss, but repeated its warning for a third time in its order: ' •

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622 F. App'x 477, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-ex-rel-jacobs-v-lambda-research-inc-ca6-2015.