Judgment (attack abroad on a US judgment)
Injunctions
Remedies
All Writs Act
Comity
Equity
Preclusive Effect
License Agreement
Breach (Reverse Engineering)
WPL turned to the English courts and engaged in a two-pronged attack on the U.S. judgment
In this appeal, we affirm the district court’s grant of two complementary injunctions issued pursuant to its All Writs Act authority. While we take the occasion to express our respect for the judicial system and judges of the United Kingdom, the 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 court chose to enforce its judgment in the most measured terms, concentrating on the litigants’ U.S. conduct and collection efforts. Failing to take even these modest steps would have encouraged any foreign company and country to undermine the finality of a U.S. judgment.
World Programming Limited (WPL), a U.K. company, and SAS Institute, a U.S. company, are software developers that compete in the market for statistical analysis software.
When WPL installed the SAS software, it had clicked “Yes” to indicate it would comply with SAS’s license agreement prohibiting “reverse engineering” and allowing only “non-production” use of the software.
(…) Soon after SAS initiated the U.K. enforcement proceedings, it brought additional enforcement proceedings in the Central District of California. The California district court granted an order “providing for direct assignment to SAS of rights to payment from specified WPL customers located anywhere in the world, except in the United Kingdom, until [the U.S.] judgment is satisfied,” (the “assignment order”). SAS Inst., Inc. v. World Programming Ltd., No. 5:10-CV-25-FL, 2019 WL 1447472, at *2 (E.D.N.C. Mar. 18, 2019) [hereinafter SAS-2019]; see also J.A. 3135. WPL appealed the assignment order to the Ninth Circuit.
(…) We agreed that the U.K. litigation did not have a preclusive effect, given the “many legal and factual differences between the U.K. litigation and the present [U.S.] suit.” SAS-2017, 874 F.3d at 378-79.
(…) The U.K. court declined to enforce any portion of the U.S. judgment. Further, the court ordered that WPL could recover two-thirds of any amount it paid towards the U.S. judgment, corresponding to the non-compensatory portion of damages (the “U.K. clawback order”). Clawback could occur even though SAS had “not yet recovered more than the compensatory damages awarded.” J.A. 1030.
The week after the U.K. court issued its judgment, it entered an anti-suit injunction requiring SAS to take certain actions in the United States but forbidding others (the “U.K. injunction”). For instance, the U.K. court ordered SAS to “take all reasonable steps” to prevent entry of the turnover order in California. J.A. 1035. It forbade SAS from seeking— in the United States—an anti-anti-suit injunction or similar relief designed to protect the U.S. judgment and the California collection proceedings. The injunction threatened criminal sanctions if SAS disobeyed.
SAS stayed its motion to the Ninth Circuit to comply with the U.K. injunction.
(…) This court previously declined to issue an injunction impacting WPL’s United States licensing, based on an expectation that WPL would devote some portion of its revenues to satisfaction of the U.S. judgment. SAS-2017, 874 F.3d at 386-88. In a way, we cut WPL a break; the absence of an injunction was intended to help WPL earn additional revenues from U.S. operations that it could use towards the judgment. Things did not go as planned. Since the case was last before this court, WPL has tried to evade, in every way and at every turn, using any revenues for satisfaction of the U.S. judgment. This left the district court with limited options—but options it needed to exercise in order to prevent its judgment from being rendered completely hollow.
Despite a complicated procedural history stemming from years of litigation, the case before us is straightforward. WPL, a foreign company doing business in the United States, has attempted to evade a U.S. judgment. Instead of making a good-faith effort to pay up, WPL has repeatedly engaged in collateral attacks on the district court’s judgment by calling upon the U.K. court system. So far, its tactics have been successful. To date, WPL has only paid a small fraction of the judgment, and it is attempting to undo even that much. The district court could not allow WPL’s evasion to continue. One need look no further than the extensiveness of WPL’s attack on the U.S. judgment to see why the court’s two injunctions were necessary.
Although founded in the U.K., WPL is a company “doing business in America” subject to “American law in American courts.” Laker Airways Ltd. v. Sabena, Belgian World Airlines, 731 F.2d 909, 940 (D.C. Cir. 1984). WPL violated North Carolina law by using SAS software to create a competing product in breach of a license agreement. A jury in North Carolina set compensatory damages at $26.4 million, based solely on harm SAS incurred from lost U.S. customers and revenues. Under North Carolina law, these compensatory damages were trebled to total damages of $79.1 million.
After obtaining the U.S. judgment, SAS set about to collect on it—as it had every right to do. SAS commenced an enforcement action in the Central District of California and received the assignment order assigning to SAS “WPL’s right to payments from” specified non-U.K. customers “until such a time as the North Carolina judgment in the amount of $79,129,905.00 is fully satisfied.” J.A. 3135; see also SAS-2019, 2019 WL 1447472, at *2.
Unhappy with the pace of collections and possessing evidence to suggest that WPL instructed customers to disregard the assignment order, SAS moved for entry of the turnover order obligating WPL to deliver to SAS “all income received from customers located worldwide, except in the United Kingdom.” SAS-2019, 2019 WL 1447472, at *3. Rather than challenge SAS’s efforts in the Ninth Circuit, WPL turned to the English courts and engaged in a two-pronged attack on the U.S. judgment.
First, WPL attacked the U.S. judgment by requesting to claw back two-thirds of SAS’s collections—corresponding to the non-compensatory portion of damages. A U.K. court granted this relief under the PTIA, even though WPL had “not yet paid sums exceeding the value of the compensatory part of the [U.S.] judgment.” J.A. 1026-30; see also SAS-2019, 2019 WL 1447472, at *4. By seeking and receiving the U.K. clawback order, WPL fundamentally altered the U.S. judgment. Practically speaking, WPL relitigated the U.S. damage amount, lowering it by two-thirds.
Second, WPL sought relief designed to interfere with the California collection proceedings. Its efforts were successful. A U.K. court granted an injunction preventing SAS from pursuing normal collection efforts “in this country, the country of origin of the judgment at issue.” SAS-2019, 2019 WL 1447472, at *11. The U.K. injunction forbade SAS from pursuing entry of the turnover order. It explicitly directed SAS not to file a brief with the Ninth Circuit due that very day. It limited SAS’s ability to enforce aspects of the assignment order that WPL did not challenge. It broadly prohibited SAS from seeking an anti-anti-suit injunction or similar relief related to either the California or North Carolina proceedings. Finally, the U.K. injunction warned of criminal sanctions if SAS did not comply, a serious threat since SAS has around 637 employees in the U.K., J.A. 2715, and “none of those employees wants to go to jail,” J.A. 1257.
(…) The combined impact of WPL’s actions was particularly destructive. The U.K. injunction undermined SAS’s ability to enforce the U.S. judgment, while the U.K. clawback order attempted to undo SAS’s limited collection success.
(…) An immediate response was required, so the district court turned to the anti-clawback injunction and the U.S. expansion injunction.
The anti-clawback injunction provides 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].” J.A. 1185.
(…) There is an irony here. Rather than the district court’s anti-clawback injunction being an affront to comity, actions by WPL have shown a lack of respect for American courts and American law. “The conflict . . . we confront today has been precipitated by the attempts of another country to insulate its own business entities from the necessity of complying with legislation of our country designed to protect this country’s domestic policies.” Laker Airways, 731 F.2d at 955. Comity is not advanced when a foreign country condones an action brought solely to interfere with a final U.S. judgment.
In contrast, the district court showed great respect for comity, limiting the impact of its anti-clawback injunction to sums collected in the U.S.—“monies without any nexus to any enforcement proceeding in the United Kingdom.” SAS-2019, 2019 WL 1447472, at *9. Comity does not advise against such measured relief.
(…) “The essence of equity jurisdiction has been the power of the Chancellor . . . to mould each decree to the necessities of the particular case.” Hecht Co. v. Bowles, 321 U.S. 321, 329 (1944).
(U.S. Court of Appeals for the Fourth Circuit, March 12, 2020, SAS Institute, Inc. v. World Programming Ltd., Docket No. 19-1290, Published)
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