Arunachalam v. IBM ( 2019 )

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
LAKSHMI ARUNACHALAM,
Plaintiff-Appellant
v.
INTERNATIONAL BUSINESS MACHINES
CORPORATION, SAP AMERICA, INC., J.P.
MORGAN CHASE & CO., RICHARD G. ANDREWS,
Defendants-Appellees
DOES 1-100,
Defendant
______________________
2018-2105
______________________
Appeal from the United States District Court for the
District of Delaware in No. 1:16-cv-00281-RGA, Judge
Richard G. Andrews.
______________________
Decided: January 28, 2019
______________________
LAKSHMI ARUNACHALAM, Menlo Park, CA, pro se.
MARK J. ABATE, Goodwin Procter LLP, New York, NY,
for defendant-appellee International Business Machines
Corporation. Also represented by CALVIN E. WINGFIELD,
2 ARUNACHALAM v. IBM
JR., AVIV ZALCENSTEIN; KEVIN J. CULLIGAN, Maynard,
Cooper & Gale, PC, New York, NY.
THARAN GREGORY LANIER, Jones Day, Palo Alto, CA,
for defendant-appellee SAP America, Inc. Also represent-
ed by JOSEPH BEAUCHAMP, Houston, TX.
DOUGLAS R. NEMEC, Skadden, Arps, Slate, Meagher &
Flom LLP, New York, NY, for defendant-appellee J.P.
Morgan Chase & Co. Also represented by EDWARD TULIN;
ROBERT SCOTT SAUNDERS, Wilmington, DE.
LAURA MYRON, Appellate Staff, Civil Division, United
States Department of Justice, Washington, DC, for de-
fendant-appellee Richard G. Andrews. Also represented
by MICHAEL S. RAAB; DAVID C. WEISS, Office of the United
States Attorney for the District of Delaware, United
States Department of Justice, Wilmington, DE.
______________________
Before DYK, WALLACH, and CHEN, Circuit Judges.
PER CURIAM.
Dr. Lakshmi Arunachalam, proceeding pro se, appeals
multiple decisions from the United States District Court
for the District of Delaware, including its dismissal of a
patent infringement claim, dismissal of civil claims under
the Racketeer Influenced and Corrupt Organizations Act
(RICO), denial of leave to file a second amended com-
plaint, denials of motions for recusal, and various other
rulings. For the reasons explained below, we affirm.
I. PROCEDURAL HISTORY
A. Complaint
Dr. Arunachalam filed an initial complaint on April
20, 2016, which she amended as of right on May 13, 2016.
The First Amended Complaint was filed against four
ARUNACHALAM v. IBM 3
named defendants, including International Business
Machines Corporation (IBM), SAP America, Inc. (SAP),
JPMorgan Chase & Co. (JPMorgan), Judge Richard G.
Andrews (the assigned judge) of the U.S. District Court
for the District of Delaware, as well as unnamed Does 1–
100. The First Amended Complaint listed four counts.
Count I alleged that IBM infringed claims 20 and 21 of
Dr. Arunachalam’s U.S. Patent No. 7,340,506 (’506 Pa-
tent). Counts II through IV alleged that all defendants
violated various provisions under §§ 1961 and 1962 of the
RICO Act based on a “pattern of racketeering activity”
and “conspiracy” to engage in such. These counts revolve
around alleged involvement of IBM, SAP, JPMorgan, and
Does 1–100 in the distribution of allegedly infringing
software code by the IBM Eclipse Foundation, and Judge
Andrews’s alleged actions depriving Dr. Arunachalam of
relief in the district court.
B. Motions for Recusal
Throughout the litigation, Dr. Arunachalam filed nu-
merous motions to recuse Judge Andrews for unfavorable
rulings issued in prior cases, but all were denied as hav-
ing “no valid basis for requesting recusal.”
On July 7, 2016, the Government filed a Statement of
Interest urging the district court to dismiss all claims
against Judge Andrews, to whom the case had been
initially assigned. Upon Judge Andrews’s request, the
case was reassigned to Chief Judge Stark for the limited
purpose of deciding the Government’s motion to dismiss
claims against Judge Andrews. Judge Andrews retained
jurisdiction over the claims against the other defendants.
Following reassignment, Dr. Arunachalam moved to
recuse Chief Judge Stark, alleging various acts that
purportedly warranted disqualification, such as Chief
Judge Stark’s previous mediation involving Dr. Arunacha-
lam, his prior work at one of the law firms representing
one of the defendants, and his alleged financial holdings
4 ARUNACHALAM v. IBM
in one or more of the Defendants and members of The
IBM Eclipse Foundation. This motion for recusal was
also denied.
Subsequently, Chief Judge Stark granted the Gov-
ernment’s motion to dismiss claims against Judge An-
drews on the basis of judicial immunity, explaining that
Dr. Arunachalam’s allegations against Judge Andrews
“sp[oke] to actions taken by him in the performance of his
judicial duties.” Appx13. 1 Chief Judge Stark also found
that Judge Andrews had not been stripped of judicial
immunity, given that the First Amended Complaint did
not show that his actions were taken in “clear absence of
his jurisdiction.” Appx14.
C. RICO Claims (Counts II–IV)
On March 21, 2017, the district court dismissed, with-
out prejudice, Counts II through IV (corresponding to all
RICO allegations) against the remaining defendants
under Fed. R. Civ. P 12(b)(6). The district court found
that there were “no allegations of any racketeering activi-
ty.” Appx25. Further, the district court found that Dr.
Arunachalam’s factual allegations were directed to patent
infringement, which could not legally serve as a predicate
act for RICO claims. Recognizing that Dr. Arunachalam
was a pro se litigant, however, the court offered Dr. Aru-
nachalam an opportunity to cure the pleading deficiencies
by allowing her to move for leave to file further amend-
ments to the complaint, specifically directing her to
comply with D. Del. LR 15.1.
1 “Appx” refers to the “Plaintiff-Appellants’ Appen-
dix of Exhibits for Appeal Filed as Informal Opening
Appeal Brief” filed on June 24, 2018.
ARUNACHALAM v. IBM 5
D. Proposed Second Amended Complaint
On April 17, 2017, Dr. Arunachalam timely filed a
proposed Second Amended Complaint. However, the
district court denied leave to amend. It based its denial
on two independent reasons, finding that Dr. Arunacha-
lam: 1) failed to comply with D. Del. LR 15.1, which the
court had explicitly directed her to follow in any proposed
second amended complaint; and 2) failed to cure the
pleading deficiencies in the previous amended complaint.
Given the course of the proceedings, the court additionally
noted that “any further attempt to amend would be fu-
tile.” Appx29. As a result, the case proceeded with only
the patent infringement claim against IBM.
E. Patent Infringement Claim (Count I)
On December 21, 2017, while the district court case
was still pending, the Patent Trial and Appeal Board
(Board) issued a Final Written Decision invalidating both
asserted claims of the ’506 Patent in a parallel Covered
Business Method (CBM) proceeding. Final Written
Decision, CBM2016-00081, at 58.
The deadline to appeal the Board’s decision was Feb-
ruary 22, 2018. 37 C.F.R. § 90.3(a). But Dr. Arunacha-
lam never filed an appeal. On February 28, 2018, IBM
moved to dismiss the sole pending claim of patent in-
fringement based on the Board’s decision rendering all
asserted patent claims invalid. On May 22, 2018, the
district court dismissed the case with prejudice, explain-
ing that because the PTAB’s decision was “now final,”
“IBM cannot infringe an invalid patent.” Appx6.
Having dismissed all counts in the First Amended
Complaint, the district court deemed the case closed.
This appeal followed. We have jurisdiction under 28
U.S.C. § 1295(a)(1).
6 ARUNACHALAM v. IBM
II. DISCUSSION
A. RICO Claims
The district court dismissed without prejudice the
RICO claims in the First Amended Complaint for failure
to state a claim and denied Dr. Arunachalam’s motion for
leave to file a Second Amended Complaint. Dr. Arunacha-
lam appeals both decisions.
1. First Amended Complaint
We review a district court’s “order granting a motion
to dismiss for failure to state a claim . . . under the appli-
cable law of the regional circuit.” K-Tech Telecomms., Inc.
v. Time Warner Cable, Inc., 714 F.3d 1277, 1282 (Fed. Cir.
2013). In the Third Circuit, such decisions are reviewed
de novo. Sulima v. Tobyhanna Army Depot, 602 F.3d 177,
184 (3d Cir. 2010). Pleadings made by pro se litigants are
“held to less stringent standards than formal pleadings
drafted by lawyers.” Erickson v. Pardus, 551 U.S. 89, 94
(2007). A motion to dismiss may only be granted if the
court, accepting all well-pleaded allegations in the com-
plaint as true and viewing them in the light most favora-
ble to the plaintiff, concludes that those allegations “could
not raise a claim of entitlement to relief.” Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 558 (2007). “Though ‘detailed
factual allegations’ are not required, a complaint must do
more than simply provide ‘labels and conclusions’ or ‘a
formulaic recitation of the elements of a cause of action.’”
Davis v. Abington Mem’l Hosp., 765 F.3d 236, 241 (3d Cir.
2014).
In the First Amended Complaint, Dr. Arunachalam
alleged that IBM and its customers JPMorgan and SAP
were “illegally distributing Eclipse code which includes
Dr. Arunachalam’s inventions, through the IBM Eclipse
Foundation,” the alleged RICO “enterprise.” SAppx30–
ARUNACHALAM v. IBM 7
31. 2 She also alleged that the “predicate acts” for her
RICO claims “cluster around patent infringement, traf-
ficking in certain goods bearing counterfeit marks, tam-
pering with a Federal Witness, interstate transportation
of stolen property and obstruction of justice.” SAppx2.
The district court dismissed the claims as insufficiently
pleaded. We agree.
The only plausible inventions discussed in the First
Amended Complaint are Dr. Arunachalam’s patents. But
patent infringement is not a recognized predicate “racket-
eering activity” for a RICO claim. 18 U.S.C. § 1961(1).
Nor do the rest of the pleadings sufficiently support any of
the other alleged predicate acts for a RICO claim. The
First Amended Complaint fails to identify any goods that
bear “counterfeit marks,” as Dr. Arunachalam alleges.
We are aware of no authority treating products that
infringe a patent as “stolen property” for purposes of a
criminal predicate act under RICO. Compare Dowagiac
Mfg. Co. v. Minnesota Moline Plow Co., 235 U.S. 641, 648
(1915) (describing patent infringement as “a tortious
taking” of a part of property), with 18 U.S.C. § 1961(1)
(referring to criminal “sections 2314 and 2315 (relating to
interstate transportation of stolen property)” as predicate
“racketeering activity” under RICO). The First Amended
Complaint does reference federal witnesses, but there are
no factual allegations of tampering. And while Dr. Aru-
nachalam states she “was deprived of specific relief from
the federal district courts in Wilmington, Delaware,”
SAppx15, unfavorable judicial rulings are insufficient to
form the predicate activity for a RICO claim. On appeal,
Dr. Arunachalam fails to address these deficiencies in her
pleadings. For at least these reasons, we find that the
2 “SAppx” refers to the “Supplemental Appendix for
Defendant-Appellee International Business Machines
Corporation.”
8 ARUNACHALAM v. IBM
district court correctly dismissed the RICO claims for
failure to state a claim.
2. Proposed Second Amended Complaint
We review a district court’s “denial of a motion to
amend a complaint . . . by the regional circuit’s standard.”
Ferguson Beauregard/Logic Controls, Div. of Dover Res.,
Inc. v. Mega Systems, LLC, 350 F.3d 1327, 1342 (Fed. Cir.
2003). In the Third Circuit, a denial of a motion to amend
beyond the single amendment of right is reviewed for
“abuse of discretion.” Lake v. Arnold, 232 F.3d 360, 373
(3d Cir. 2000). Though “the pleading philosophy” of Rule
15(a)(2) “counsels in favor of liberally permitting amend-
ments to a complaint,” CMR D.N. Corp. v. City of Phila.,
703 F.3d 612, 629 (3d Cir. 2013), the court may deny leave
if there is a showing of “undue delay, bad faith or dilatory
motive on the part of the movant, repeated failure to cure
deficiencies by amendments previously allowed,
. . . futility of amendment, etc.” Foman v. Davis, 371 U.S.
178, 182 (1962). Amendment is futile when the amended
complaint does not state a claim upon which relief can be
granted. See In re Burlington Coat Factory Sec. Litig.,
114 F.3d 1410, 1434 (3d Cir. 1997).
In granting Dr. Arunachalam a second opportunity to
amend the complaint, the district court issued two explicit
instructions: the amendment must: 1) be filed “in compli-
ance with D.Del. LR 15.1,” and 2) “address not only the
deficiencies identified” by the court in the First Amended
Complaint (e.g., absence of any factual allegations of “any
racketeering activity”) “but also those raised in the vari-
ous Defendants’ briefs.” Appx25–26. Dr. Arunachalam
did not fulfill either condition. According to the district
court, Dr. Arunachalam’s “failure to comply with the
Local Rule” was “willful and in bad faith,” and the pro-
posed second amended complaint did not cure the plead-
ing defects identified in the First Amended Complaint.”
Appx29. Based on these alternative reasons, the district
ARUNACHALAM v. IBM 9
court denied leave to amend the pleadings for a second
time.
On appeal, Dr. Arunachalam disputes that her Second
Amended Complaint failed to contain allegations of a
cognizable RICO claim. But she merely asserts that the
proposed Second Amended Complaint contained “solid
evidence of racketeering activity” without identifying
what that “evidence” is. Appellant’s Reply Br. 19 (empha-
sis in original). She further argues that Judge Andrews
was “compromised” because his denial of leave for further
amendment was based on “false and lame procedural
grounds.” Id. at 29 (emphasis in original). Dr. Arunacha-
lam’s arguments are unpersuasive.
The proposed Second Amended Complaint adds fur-
ther detail about various defendants’ involvement in the
IBM Eclipse Foundation but still lacks factual allegations
to support a cognizable predicate act for RICO. Though
Dr. Arunachalam adds verbiage about the alleged use of
“source code and inventions belonging to Plaintiff and
others without a copyright license,” SAppx107 (em-
phasis in original), she alleges no facts to support that she
owns a copyright in that source code. Accordingly, we find
that the district court did not abuse its discretion in
denying Dr. Arunachalam’s motion for leave to amend the
complaint for a second time.
B. Patent Infringement Claim
Both asserted claims of the ’506 Patent were cancelled
in the Board’s Final Written Decision in a parallel CBM
proceeding during the pendency of the case below. On
appeal, Dr. Arunachalam appears to argue that this
decision is void because the Board lacks authority to
invalidate her patent. Among other theories, she argues
that the Contracts Clause under Fletcher v. Peck, 10 U.S.
87 (1810) and “prosecution history estoppel” under Aqua
Products, Inc. v. Matal, 872 F.3d 1290 (Fed. Cir. 2017) bar
10 ARUNACHALAM v. IBM
the Board from invalidating her patent. Appellant’s
Opening Br. 10–11.
The Supreme Court in Oil States Energy Services,
LLC v. Greene’s Energy Group, LLC, 138 S. Ct. 1365, 1375
& n.2, 1377–78 (2018) rejected several similar constitu-
tional challenges to the inter partes review process. In
any event, the proper recourse for raising such arguments
was to have appealed the Board’s decision to this Court.
See 35 U.S.C. §§ 319, 329, 141(c). Given that Dr. Aru-
nachalam did not do so, the Board’s decision invalidating
both claims is final and may not be collaterally attacked
through a separate litigation. Since the two asserted
claims have been cancelled, Dr. Arunachalam’s allegation
of patent infringement based on these claims is moot.
C. Motions for Recusal
We review a district court’s denial of recusal according
to the law of the regional circuit. Baldwin Hardware
Corp. v. FrankSu Ent’t Corp., 78 F.3d 550, 556 (Fed Cir.
1996). The Third Circuit reviews a district court’s “denial
of a motion for recusal for abuse of discretion.” Gen.
Motors Corp. v. New A.C. Chevrolet, Inc., 263 F.3d 296,
336 n. 25 (3d Cir. 2001).
1. Judge Andrews
During the course of the district court litigation, Dr.
Arunachalam filed repeated motions to recuse Judge
Andrews on various grounds. Judge Andrews denied
these motions as having no merit.
On appeal, Dr. Arunachalam argues that the district
court ignored important allegations made in the First
Amended Complaint that required recusal, namely Judge
Andrews’s alleged investment in “mutual funds hold[ing]
JPMorgan stock” and purchase of “direct JPMorgan stock
during pendency” of an earlier case litigated against
JPMorgan—Pi-Net Int’l Inc. v. JPMorgan Chase & Co.,
No. 1:12-CV-282-RGA (D. Del. 2012). SAppx39. JPMor-
ARUNACHALAM v. IBM 11
gan argues that there was no conflict requiring recusal.
When Judge Andrews discovered that he was “likely to
acquire involuntarily at some undetermined point in the
future J.P. Morgan stock,” he reassigned that case to
another judge, promptly sold the stock once he received it,
and was then reassigned the case once again. Pi-Net Int’l
Inc. v. JPMorgan Chase & Co., No. 12-282-RGA, 2016 WL
697618, at *1 (D. Del. Feb. 19, 2016). Since Dr. Aru-
nachalam does not contest these facts on appeal, we find
that the district court did not abuse its discretion in
denying recusal of Judge Andrews.
2. Chief Judge Stark
Dr. Arunachalam filed a motion to recuse Chief Judge
Stark, alleging various acts that purportedly warranted
recusal. These included Chief Judge Stark’s: 1) previous
mediation involving Dr. Arunachalam; 2) prior work at
one of the law firms representing one of the defendants;
and 3) alleged financial holdings in one or more of the
Defendants and members of The IBM Eclipse Foundation.
Chief Judge Stark denied recusal, noting there was no
obligation for a judge to recuse himself from a case which
he previously mediated. And Dr. Arunachalam failed to
cite any authority requiring a judge to recuse himself
from a case in which his previous law firm appears.
Regarding the alleged “financial holdings,” Chief Judge
Stark also explained that he “own[ed] no shares of stock”
and “only own[ed] shares of widely-held mutual funds”
and “ordinary bank accounts,” which were not “disqualify-
ing financial interests” as a matter of law. Appx12 (citing
28 U.S.C. § 455(d)(4)(i)).
Dr. Arunachalam fails to address any of the district
court’s rationale on appeal. Since Dr. Arunachalam does
not contest the factual basis of the district court’s denial,
and fails to offer any legal authority requiring Chief
Judge Stark’s recusal, we find that the district court did
12 ARUNACHALAM v. IBM
not abuse its discretion in denying the motion to recuse
Chief Judge Stark.
CONCLUSION
We have considered the rest of Dr. Arunachalam’s ar-
guments and find them unpersuasive. Accordingly, we
affirm the district court’s dismissal of the patent in-
fringement claim against IBM, dismissal of all RICO
claims against all defendants, denial of the motion for
leave to file a second amended complaint, denials of
motions to recuse, and all other district court rulings
challenged by Dr. Arunachalam in this appeal.
AFFIRMED