Patentee Seeks Cert Due to Mediator’s Failure to Disclose Conflicts that CAFC Held Breached Mediator’s Duties and Undermined Trust in Mediation

Petitioner CEATS, Inc. (“Petitioner” or “CEATS”) engaged in court-ordered mediation with a mediator who had an undisclosed close, enduring, and personal relationship with a partner for the law firm that was lead defense counsel in the underlying CEATS patent infringement litigation. The undisclosed relationship involved continuous emails, phone calls, visits, gifts, and lavish dinners. The Federal Circuit found that: (i) the mediator breached his duty of disclosure by failing to inform Petitioner of the relationship; and (ii) the breach was likely to undermine the public’s confidence and trust in mediation.

Notwithstanding those express findings and express recognition of the potential adverse impact the decision would have on the public’s view of the federal mediation process generally, the Federal Circuit declined to grant Petitioner any form of relief under Fed. R. Civ. P. 60(b). To reach its conclusion, the Federal Circuit utilized the special harmless error standard for judges set forth in the United States Supreme Court case Liljeberg v. Health Services Acquisition Corp., 486 U.S. 847 (1988).

The issue presented is whether in the face of a specific finding that the court-appointed mediator breached his duty to disclose the conflict, did the Federal Circuit err in utilizing the special harmless error standard from Liljeberg for a mediator in declining to grant Petitioner any relief for the undisclosed conflict of interest.

Stated another way, the question for Supreme Court review is whether the failure of a court-appointed mediator to disclose a long standing conflict of interest with one of the parties to the mediation can ever be “harmless.” The answer to that question strikes at the very foundation of the integrity of the Federal judicial process as well as the public’s perception of the fundamental fairness of those proceedings.