By Cheryl Beise, J.D.
Comity does not preclude All Writs Act injunction to prevent foreign court’s collateral attack on U.S. judgment.
In a long-running contract dispute spanning two continents between software developers SAS Institute, a U.S. company, and U.K.-based World Programming Limited (WPL) over WPL’s alleged unauthorized use of SAS’s computer programming language, the U.S. Court of Appeals in Richmond, Virginia, has affirmed two complementary injunctions issued by a North Carolina federal district court pursuant to the All Writs Act. Although WPL was ordered to pay treble damages of $79 million for breach of contract and unfair trade practices, the U.K. High Court of Justice declined to enforce any portion of the U.S. judgment, and issued a claw-back order entitling WPL to recover two-thirds of the U.S. judgment, the penalty portion. Because a court may rely on the All Writs Act to issue injunctions designed to prevent "collateral attack of its judgments," the district court did not abuse its discretion by issuing an anti-clawback order and enjoining WPL from licensing its software to new U.S. customers until the prior judgment was satisfied (SAS Institute, Inc. v. World Programming Ltd., March 12, 2020, Wilkinson, J.).
SAS and WPL are competitors in the market for statistical analysis software, where users write "SAS programs" in "SAS language" to run on the "SAS system." In 2003, WPL purchased several copies of SAS Learning Edition, which it used to develop World Programming System (WPS), a competitive product that would also run SAS programs. The license terms for SAS Learning Edition included a prohibition on "reverse engineering," as well as a restriction requiring use only for "non-production purposes." SAS filed lawsuits first in the U.K. and then in federal district court in Raleigh, North Carolina, asserting claims for copyright infringement and breach of the Learning Edition license agreement, along with state law claims.
On July 9, 2014, the U.K. judgment became final in favor of WPL on grounds that software copyright did not cover the aspects of the program that were reproduced, and on the breach of license agreement on grounds that parties could not contract around the EU Directive on software copyright. In the U.S., following summary judgment rulings, the case proceeded to trial on SAS’s claims for fraudulent inducement and violations of the North Carolina Unfair or Deceptive Trade Practices Act (UDTPA), as well as calculation of damages for breach of contract, resulting in a $26.4 million compensatory damages award. Following trial, the district court trebled the jury’s damages award, denied SAS’s request for a permanent injunction, and denied WPL’s motion for judgment as a matter of law or a new trial. Both parties appealed, and the Fourth Circuit affirmed in part, reversed in part, and remanded. In 2017, the Fourth Circuit affirmed the breach of contract verdict and $79 million treble damage award, rejected SAS’s claims for injunctive relief, and reversed the copyright infringement judgment as moot since the only relief possible was injunctive.
After the Fourth Circuit’s decision was handed down, SAS sought enforcement of the compensatory portion of the U.S. judgment in the U.K. WPL opposed enforcement and brought counterclaims under the United Kingdom Protection of Trading Interests Act (the "PTIA") to recover any sums SAS collected tied to non-compensatory damages. The U.K. court issued a judgment in favor of WPL and declined to enforce any portion of the U.S. judgment. Further, the U.K. court ordered that WPL could recover two-thirds of any amount it had paid towards the U.S. judgment, corresponding to the non-compensatory portion of damages (the "U.K. clawback order").
In January 2019, soon after the U.K. injunction was issued, SAS filed an emergency motion for injunctive relief in the district court in Raleigh. The district court issued an order "that no sum previously collected or to be collected by [SAS] in the United States is subject to payment to [WPL] on the basis of the [PTIA]," (the "anti-clawback injunction"). Later, the district court issued a permanent injunction prohibiting WPL "from licensing WPS to any new customer for use within the United States," (the "U.S. expansion injunction"). The district court found that WPL’s seeking of the U.K. clawback order was an "affront" to the U.S. judgment, amounting to a collateral attack on the total monetary damage figure when SAS had not received "even a fraction of compensatory damages due." To date, SAS has only collected $6 million of the $79 million WPL owes. WPL appealed the district court’s injunctions.
All Writs Act injunctions. The Fourth Circuit explained that the All Writs Act grants federal courts the authority to "issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law." 28 U.S.C. § 1651(a). Of particular relevance in this case, a court may rely on the AWA to issue injunctions designed to prevent "collateral attack of its judgments."
The Fourth Circuit concluded that the district court did not abuse its discretion by issuing the injunctions—finding that they were necessary to ensure that WPL satisfies the U.S. judgment and U.S. collections remain with SAS. "[T]he district court here needed to ensure that a money judgment reached in an American court under American law—based on damages incurred in America—was not rendered meaningless," the Fourth Circuit said. The district court chose to enforce its judgment "in the most measured terms, concentrating on the litigants’ U.S. conduct and collection efforts."
Comity. WPL argued that the district court’s injunctions were an affront to comity. The appeals court disagreed. North Carolina, and the United States more generally, has a policy of allowing non-compensatory damages. "WPL undermined these policies when it used the English courts to impede U.S. collection efforts and obtain clawbacks of the largely unsatisfied U.S. judgment," the court said. "Comity is not advanced when a foreign country condones an action brought solely to interfere with a final U.S. judgment. Nor is comity advanced when one country enjoins legitimate collection efforts in another country."
Procedural defects. WPL also argued that the anti-clawback injunction suffered procedural defects. The Fourth Circuit again disagreed. District courts have "broad discretion" to manage the timing of injunctive relief, "so long as the opposing party is given a reasonable opportunity, commensurate with the scarcity of time under the circumstances, to prepare a defense and advance reasons why the injunction should not issue," the court noted. In this case, the district court "went out of its way to comply with this requirement." It first issued the anti-clawback injunction sua-sponte at a hearing scheduled to address injunctive relief—after extensive discussion on the U.K. clawback order. It set another hearing for the following month to discuss the anti-clawback injunction with WPL in some detail. "Given WPL’s attempts to frustrate the court’s judgment, it can hardly claim it was without notice that the court would act to protect that judgment," the appeals court said.
Finding that the district court did not abuse its discretion, the Fourth Circuit affirmed both injunctions. For the district court to have done nothing "would invite foreign litigants to undermine the finality of many an American judgment and foreign countries to doubt the very efficacy of American law," the appeals court said.
Attorneys: Raymond Michael Bennett (Womble Bond Dickinson [US ] LLP) for SAS Institute, Inc. James Allen Barta (Molo Lamken LLP) for World Programming Ltd.
Companies: SAS Institute, Inc.; World Programming Ltd.
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