The UNITED STATES (Louis Marx & Co., Inc., Party-in-Interest), Appellee.
Eugene L. Stewart, Washington, D. C., attorney of record, for appellant.
William D. Ruckelshaus, Asst. Atty. Gen., Andrew P. Vance, Chief, Customs Section, Herbert T. Posner, U. S. Dept. of Justice, Civil Division, Customs Section, for the United States.
Barnes, Richardson & Colburn, New York City, for party in interest. Hadley S. King, New York City, Earl R. Lidstrom, Chicago, Ill., of counsel.
Before RICH, Acting Chief Judge, JONES, Judge, sitting by designation, and ALMOND, BALDWIN and LANE, Judges.
This is an appeal from the judgment and decision of the Customs Court, 61 Cust.Ct. 152, C.D. 3554 (1968), overruling appellant's protest against the classification of merchandise imported by the appellee party-in-interest. The appellant is a competing American manufacturer who instituted the protest under 19 U.S.C. § 1516(b).
The United States and the importer are in agreement that the items should be classified as typewriters under TSUS Item 676.05,1 duty free. Appellant contends the classification should have been toys under TSUS Item 737.90,2 35% ad val.
The machines are described in the record as being able to write 84 characters, upper and lower case, and having three rows of keys with the letters arranged relative to each other as on a standard typewriter. One witness, an expert typist, said he was able to type 52 words on the machine in one minute. There is evidence that similar items were designed by appellant to sell for under twenty dollars.
The Customs Court overruled the protest on the grounds that the protester had not carried either of the two burdens of proof imposed upon him: to show by a preponderance of the evidence (1) that the items are not classifiable as typewriters; and (2) that the items were properly classifiable as toys. We find no reason to reverse the Customs Court.
It is well known in customs jurisprudence that the two burdens mentioned above are placed upon a protester because of the presumption of correctness which attaches to the collector's classification. See Seagram & Sons v. United States, 30 CCPA 150, 157, C.A.D. 227 (1943); United States v. Gardel Industries, 33 CCPA 118, 121, C.A.D. 325 (1946); Bob Stone Cordage Co. v. United States, 51 CCPA 60, 65, C.A.D. 838 (1964).
To carry the second burden mentioned above the protester was obliged to show that the items in question were toys within the meaning of the Tariff Schedules. In Schedule 7, Part 5, Subpart E, headnote 2, we find the following definition: "For purposes of the tariff schedule, a `toy' is any article chiefly used for amusement of children or adults." (Emphasis in original.) The protester's burden, therefore, was to show that the chief use of the items in question was amusement. This he attempted to do by introducing evidence that the items were unsuitable for office use, that they were unsuitable for formal instruction in typewriting, that the principal owners of similar items of the appellant were children, and that the only wholesale purchasers of these similar items were toy buyers. The appellee in interest introduced in evidence a "Petite Typewriter" with carrying case and instructions, sold by the appellant. The defense also introduced the instructions accompanying one of the imported typewriters which had been introduced in evidence by appellant.
In weighing the evidence the Customs Court noted that "plaintiff's own brochure * * * states: `youngsters can do homework, learn spelling, improve letter writing and neatness,' none of which is deemed by the court as constituting amusement." The court pointed out that while the evidence may have shown the chief users to be children, it did not show the chief use to be amusement, as required by the schedule.
Chief use is a question of fact. L. Tobert Co., Inc. v. United States, 41 CCPA 161, 164, C.A.D. 544 (1953). This court will not reverse the lower court on a question of fact except where the findings are without evidence to support them, or are clearly contrary to the weight of the evidence. United States v. F. W. Myers & Co., 45 CCPA 48, 52, C.A.D. 671 (1958); United States v. Charles Garcia & Co., 48 CCPA 140, 143, C.A.D. 780 (1961). In this case both a presumption and evidence operate to support the decision of the Customs Court, and we cannot say that the decision below was clearly contrary to the weight of the evidence. There was no evidence directly showing that the chief use of the imported merchandise, or of similar items, was amusement. The noncommercial uses by children could well be educational, even though the items are sold by toy dealers or in toy departments. We therefore must affirm the Customs Court's holding that a chief use of amusement was not shown.
Since the appellant's case failed on the second burden, we need not consider the issue of whether the items in question were typewriters.
"Typewriters not incorporating a calculating mechanism: Non-automatic with hand-operated keyboard."
"Toys, and parts of toys, not specifically provided for: * * * Other."
MARVIN JONES, Senior Judge (dissenting).
I believe that the appellant successfully carried the two burdens of proof customs jurisprudence imposes on protesters.
Initially, the appellant proved by a preponderance of the evidence that the items in question are not classifiable as typewriters. The commercial meaning, not the common dictionary definition, of the word "typewriter" controls in this case. It is a fundamental principle of customs law that commercial meaning will be followed if it differs from the common definition and if its use is well established in the trade. Cadwalader v. Zeh, 151 U.S. 171, 176, 14 S.Ct. 288, 38 L.Ed. 115 (1894). It must be shown that the commercial meaning is definite, uniform, and general. Maddock v. Magone, 152 U.S. 368, 371, 14 S.Ct. 588, 38 L.Ed. 482 (1894). The party relying on the commercial meaning is obligated to offer evidence in order to meet these requirements. United States v. Simon Saw & Steel Co., 51 CCPA 33, 38, C.A.D. 834 (1964).
The appellant met the obligation. Two of his witnesses testified as to the commercial meaning of the word "typewriter." Raymond Haney, Vice President for Product Planning of the Smith-Corona Marchant Division of the SCM Corporation and Chairman of the American Standards Association Sub-Committee on Typewriters, testified that he had assisted in the drafting of standards for typewriter keyboards. These standards call for 42 keys situated on four rows with two shift levels, i. e., an upper and lower case. While the standards are not compulsory, all typewriters have come to comply with them.
Gale Mead, who was involved in the wholesale and retail distribution of office machinery as President of Mead-Columbia, Inc. and Gale Mead Wholesale, Inc. and who has formerly held several offices, including president, of the National Office Machine Dealers Association, testified that a commercial typewriter can take a block of ten pieces of typing paper.
These witnesses and others stated that the imported article, designated by the Louis Marx & Co. as "Marxwriter 200" did not come within the commercial meaning of the word typewriter. Witness Haney testified that it did not meet the keyboard standards as it had only 30 keys on three rows with three shift levels. Witness Mead concluded that it could not be "* * * commercially used as a typewriter, in the general concept of a typewriter. It doesn't have the necessary equipment; it won't handle the abundance of different type paper that a typewriter is supposed to in normal use. The keyboard is not standard all the way through; and basically, lack of equipment."
When asked what the imported article was in his opinion, Morris C. Fuller, Jr., Vice President for sales of SCM Corporation, answered, "I would say it is a toy or replica of a typewriter. To nearly approach an office keyboard, it doesn't approach it at all." He further answered that it did not correspond to his understanding of the meaning of the word "typewriter" as that word is used in the trade and commerce of the United States.
Dr. Alan C. Lloyd was the Editor-in-Chief of all McGraw Hill Book Co. publications on typewriting. He was also a former typewriting teacher and editor of shorthand and typewriting magazines. He had published 52 text books and articles on typewriting. Over 50 percent of the people being taught typewriting at the time of trial were using his works. This expert testified that the imported item was unacceptable as a typewriter. He stated that he could not give instructions on it, since it had no standard keyboard, no margin sets, no margin release, no device for properly and efficiently straightening the paper and because the spacing is irregular. Ordinarily on a regular commercial typewriter Dr. Lloyd could type 85-90 words a minute. On the item in question he could at best achieve slightly more than one-half his normal speed.
The imported article probably comes within the broad, all-inclusive dictionary definition of the word "typewriter," e. g., Webster's Third New International Dictionary, 2476 (1968). However, it is plain from the testimony that the word "typewriter" has another more specific commercial meaning. This commercial meaning is well established, definite, uniform, and general through the typewriter trade. The commercial meaning incorporates certain standards which the imported article fails to satisfy. Because it fails, it is not classifiable as a "typewriter" according to the controlling commercial meaning of the word. Appellant thus overcame the presumption of correctness that had attached to the collector's classification.
It is interesting to note that the importation would not come within the scope of the legal definition of "typewriter," i. e., "* * * an instrument operated by hand, and used largely in business requiring much correspondence with others, or in commercial transactions." Black's Law Dictionary, 1689 (4th ed. 1951); see Hooper v. Kennedy, 100 Vt. 314, 137 A. 194, 196 (1927). "A typewriter is a machine intended for use as a substitute for handwriting in a commercial sense, * * *." In re Tidball, 40 F.2d 560, 561 (D.Wyo.1930). The item in question lacks the features necessary to be useful in commerce or for correspondence.
It is doubtful that the item in question would be considered a "typewriter" in any popular sense. It simply does not measure up to what the public expects of a typewriter.
Having proved that the collector's classification was wrong, the appellant must, in addition, prove by a preponderance of the evidence that what he claims to be the proper classification is right. The appellant carried the burden and proved the imported article to be a toy. Henry Katz, who ran his own company selling and distributing toys for 50 years, testified that the Marx import was a toy. Katz was responsible for distribution of appellant's toy typewriter. He stated that in carrying out this responsibility he had encountered direct competition from the item in question in the toy market of the United States. He added that the Marx Co. had displayed its product at the annual "Toy Fair" held in New York City. To his knowledge it was sold only through toy sales channels. Lewis N. Masters, the Vice President of appellant Western Stamping Corporation testified that he dealt directly with the toy buyers of large national mail order houses and that in attempting to secure orders for his toy typewriter he had experienced competition from the imported item.
Appellant corporation's president James E. Thomson confirmed this testimony. He testified that the article had been competing with his product in the toy market of the United States since 1962. He knew that it cost $16.00 at retail toy outlets.
Despite the fact that the importation is sold only in toy sales channels and through toy outlets, Congress has established a "chief use" test for toys, i. e., "For purposes of the tariff schedules, a `toy' is any article chiefly used for the amusement of children or adults." Headnote 2, subpart E, part 5, schedule 7, TSUS. "* * * [C]hief use is a question of actual fact which, * * * should be established on the basis of positive testimony representative of an adequate geographical cross section of the nation." L. Tobert Co., Inc. et al. v. United States, 41 CCPA 161, 164, C.A.D. 544 (1953). The appellant therefore must offer such positive testimony that the item in question is chiefly used for the amusement of children or adults. United States v. Bruce Duncan Co., Inc., 50 CCPA 43, 46, C.A.D. 817 (1963).
These direct quotations from the record lead to the inescapable conclusion that the imported item provides amusement. Katz had sold toys throughout the toy market of the nation for 50 years. His testimony represents an adequate geographical cross section of the nation. It must be remembered that the appellees offered no contrary testimony.
In addition to this testimony, "* * * it is proper to consider * * *, the characteristics of the merchandise itself." United States v. Colibri Lighters, 47 CCPA 106, 109, C.A.D. 739 (1960). "A sample of merchandise in issue, * * * is a very potent witness." United States v. Halle Bros. Co., 20 CCPA 219, 221, T.D. 45995 (1932). An inspection of the imported item itself drives one to the conclusion that it is a toy.
The Customs Court in its opinion wrote that the importation, like the appellant's competing "Tom Thumb" toy typewriter, could be used to, "* * * `do homework, learn spelling, improve letter writing and neatness,' [The Henry Katz Organization 1967 Catalogue] none of which [was] deemed by the court as constituting amusement." Western Stamping Corp. v. United States (Louis Marx & Co., Inc., Party in Interest), Cust.Ct., 289 F.Supp. 1016 (1968). In other words, the chief use could be educational. However, Thomson the appellant corporation's president who developed the "Tom Thumb" refuted this reasoning when he testified that it was not designed as an educational tool. Henry Katz testified that he had attempted to sell a toy typewriter to toy houses specializing in educational toys, but that, "They have been unwilling to buy it." Dr. Lloyd, the typewriting education expert, did not consider the imported article a learning instrument. "To take a child who is eager to learn something and put him on a machine that at first frustrates him and prevents his ever becoming an expert would be educational treachery." He felt that any training on the Marx machine would be a handicap.
It is manifest from the evidence as a whole that the purpose of labelling the imported article as a typewriter is to avoid payment of duties on toys with which it competes in the market, and to enter duty free along with regular typewriters with which it does not compete.
Regardless of one's views on the merits of the tariff system, all must agree that whatever tariff duties are levied should be applied fairly and without discrimination. This is the declared purpose of Congress, yet the net effect of affirmance would be to permit discrimination.
For a court to permit an importer who knows that an item will be distributed exclusively through toy marketing channels and never sold through typewriter marketing agencies, to bring in the article duty-free, merely through the guise of labelling, would in effect strike down the intent of Congress in enacting the applicable tariff provision. Rank discrimination would be the inevitable effect of such an interpretation.
All this evidence viewed as a whole supports appellant's claim that the merchandise in question is a toy and that its chief use is for amusement. Thus because the appellant carried the two burdens required of him, I am persuaded the case should be reversed.


LEROI BURTON, Respondent, v. DOUGLAS COUNTY, Defendant.
 Covenants - Restrictive Covenants - Construction. Restrictive covenants, being in derogation of the common law right to use land for all lawful purposes, will not be extended by implication to include any use not clearly expressed, and doubts will be resolved in favor of the free use of the land; therefore, in construing an instrument. the primary objective is to determine the intent of the parties considering the instrument in its entirety, together with surrounding circumstances when the meaning is doubtful, but clear and unambiguous language will be given its manifest meaning.
 Same - Restrictive Covenants - Restricting Business Activities. While the word "business" in a restrictive covenant is one of ambiguous and uncertain meaning, the commonly accepted meanings of the word do not include social organizations, since business is ordinarily employed to designate human efforts, which have for their end, living or reward; and the fact that a social organization charges its members and guests for services and makes a profit on some of its activities would not change its essential character as a social organization.
 Same - Restrictive Covenants - Businesses - Social Club Parking. A restrictive covenant prohibiting the use of land for business trade purposes would not restrict the land's use as a parking lot for the social members of a golf and country club, since the parking lot is an adjunct to a social club and not a business trade.
HUNTER, J., ROSELLINI, C. J., HILL and HALE, JJ., dissent.
Appeal from a judgment of the Superior Court for Douglas County No. 8635, Felix Rea, J., entered October 10, 1962. Reversed.
Action for injunctive relief. Defendant appeals from a judgment in favor of the plaintiff.
Hughes & Jeffers and Engst & Phelps, for appellant.
Sperline & Kuntz, for respondent.
«*» Reported in 399 P. (2d) 68.
 See Ann. 132 A.L.R. 288, 80 A.L.R. (2d) 1260; Am. Jur., Covenants, Conditions and Restrictions (1st ed. § 250).
house, and a blacktopped parking lot with a capacity for 100 automobiles. In 1930, certain real property in the immediate vicinity of the clubhouse and along a winding road designated as Country Club Drive was platted into blocks and lots, as indicated by the partial plat below.
"(2) No building shall be erected on any building plot except one detached single-family dwelling. . .
"(3) No noxious or offensive or business trade shall be carried on upon said premises or permitted thereon; nor shall anything be done thereon which may be or become an annoyance or nuisance to the neighborhood."
The deeds to all of the platted area contained the restrictive covenants.
Within the past 5 years, the country club added a second nine holes to the golf course on its unplatted area lying east of Country Club Drive and adjacent to the platted area.
In 1955 LeRoi Burton purchased lots l and 2 in block 2 adjacent to the clubhouse and the blacktopped parking facilities, and constructed a residence thereon. In 1957, the country club purchased lots 1 and 2 of block 3, and, in 1959, purchased lots 3, 4, and 5 of block 3, which are located adjacent to Country Club Drive and across the drive from the clubhouse. A part of lots 1 and 2 of block 3 was planted to grass and used as tees for the adjacent fairways. Lots 3, 4, and 5, although unimproved, had been used by the club members for parking purposes for a period in excess of 10 years. None of the property owners objected to these uses of the lots as being violative of the restrictive covenants, although the lots in block 1 are substantially developed and those in block 2 are fully developed with beautiful suburban homes.
The Wenatchee Golf and Country Club sought to level and blacktop lots 3, 4, and 5 of block 3 to improve the established use of the premises for parking approximately 35 automobiles. LeRoi Burton instituted this action to enjoin the improvement, contending that the proposed plan was violative of restrictive covenant No. 3.
The trial court, sitting without a jury, found that, although the proposed improvement of the parking lot was neither noxious nor offensive, nor an annoyance or nuisance to the neighborhood, nevertheless the golf club operation was a business, and the maintenance of the proposed parking lot, being an integral part of such business operation, was therefore a "business trade," in violation of restrictive covenant No. 3.
From the judgment enjoining the proposed improvement, the Wenatchee Golf and Country Club has appealed.
The appeal presents a single issue: Was the restriction upon carrying on a "noxious or offensive or business trade", intended to proscribe the maintenance of a parking lot in conjunction with the operation of the golf club?
the parties to the agreement, and, in determining intent, clear and unambiguous language will be given its manifest meaning. Gwinn v. Cleaver, 56 Wn. (2d) 612, 354 P. (2d) 913 (1960); Katsoff v. Lucertini, 141 Conn. 74, 103 A. (2d) 812 (1954). (2) Restrictions, being in derogation of the common-law right to use land for all lawful purposes, will not be extended by implication to include any use not clearly expressed. Doubts must be resolved in favor of the free use of land. Granger v. Boulls, 21 Wn. (2d) 597, 152 P. (2d) 325 (1944); 155 A. L. R. 523; 14 Am. Jur. § 211, p. 620. (3) The instrument must be considered in its entirety, and surrounding circumstances are to be taken into consideration when the meaning is doubtful. Gwin v. Cleaver, supra; B. T. Harris Corp. v. Bulova, 135 Conn. 356, 64 A. (2d) 542 (1949); Parrish v. Newbury, 279 S. W. (2d) 229 (Ky. 1955).
Applying these rules to the restrictive covenants in question, the intent of the contracting parties becomes apparent. Although no structure other than a detached singlefamily dwelling was permitted, it was not intended that the land should be used for residential purposes only. Land may be used without a structure thereon, and here there is no express covenant prohibiting such use. Granger v. Boulls, supra. Had the intent been to restrict to residential use only, the parties could have so provided. Weber v. Graner, 137 Cal. App. (2d) 771, 291 P. (2d) 173 (1955). The fact that the parties designated "noxious or offensive or business trade" as the only prohibited nonresidential use is clear evidence of their intention that other nonresidential uses were permissible.
". . . The word `business' in its ordinary and common use among men, is employed to designate human efforts which have for their end living or reward. It is not commonly used as descriptive of charitable, religious, educational, or social agencies. Can it be imagined readily that any one of these parties would have referred to a charitable institution, or a church building or adjunct, or a free school, or a social club, as a business? We imagine not, and it is no less improbable that they employed that term in the instrument in question in the permissible broad sense of it which would include such activities."
 Respondent relies upon Bennett v. Consolidated Realty Co., 226 Ky. 747, 11 S. W. (2d) 910 (1928). In the cited case, the court held that a parking lot, operated in conjunction with a roadhouse open to the public, was a business use and violative of a covenant which provided: "`No trade or business whatever shall be permitted or maintained on this property. . . .'" The platted area was not dependent upon the roadhouse as its promotional adjunct, and it was not the intention of the platters, in platting the addition, to further the successful operation of the roadhouse. In the instant case, the residential development was dependent upon the successful operation of the country club, and the restrictive covenants were not intended to deter the needed parking facility as an adjunct of the country club.
Clearly, a roadhouse is a business facility within the meaning of a restrictive covenant prohibiting all business activity. A country club, on the other hand, is essentially a social organization. The Bennett case is not apposite here.
automobile parking is essential to the development of any facility where substantial numbers of people gather. The trial court found that the Wenatchee Golf and Country Club Addition was "one of the finest residential areas in Eastern Washington." Its character as such is certainly due to the fact that it lies between the two nines of the golf course. The very name of the plat, "Country Club Addition," suggests its dependence upon the continued successful operation of the golf club.
The conduct of the parties to the agreement, and all of the surrounding circumstances, establish that the intent of the parties was that the covenants would not restrict such an improvement. B. T. Harris Corp. v. Bulova, supra.
Restrictive covenants will not be extended by implication to include matters not clearly expressed in the agreement. Applying the rules heretofore stated to the facts in the instant case, we conclude that the improvement of the parking lot does not constitute a "business trade," within the restrictive covenant.
The judgment is reversed, and the cause remanded with instructions to dissolve the permanent injunction.
DONWORTH, FINLEY, WEAVER, and HAMILTON, JJ., concur.
HUNTER, J. (dissenting) - The restrictive covenant with which we are concerned in this case applies to all the lots contained in the Country Club Addition. This area is situated east of East Wenatchee and overlooks the Columbia River to the west.
It is clear to me, as it was to the trial court, that the restrictive covenants in the notice and agreement are to protect the area for residential purposes. The restrictive covenant in question, in simple language, prohibits the use of any of these residential lots from being used to carry on a "business trade."
activities include business operations of a nonprofit social club, and that the proposed operation of the parking facilities would be directly related to the accomplishment of this business activity.
The trial judge quotes the following from the case of Bennett v. Consolidated Realty Co., 226 Ky. 747, 11 S. W. (2d) 910. I disagree with the majority opinion that the case is not apposite. It speaks for itself.
" 'The use of the lots by Bennett's patrons was plainly a use for business purposes. It was necessary to have a parking place for these automobiles. The parking place was an incident to the roadhouse, without which the roadhouse could not have been successfully operated under the circumstances. Bennett was carrying on the business of operating the roadhouse; and, in providing parking places for his patrons he was simply performing an incident of that business. While such provisions in deeds are not construed to create restrictions beyond the fair and natural meaning of the words used, read in the light of the circumstances under which they were used, they will be enforced according to their fair and natural meaning, in the absence of fraud or mutual mistake. To hold that no trade or business was permitted on these lots would be to refuse to enforce the provision according to the plain meaning of the common words of everyday speech in which it is expressed; for such a use as Bennett was making of the property would be especially objectionable in a residential section, and the restriction was inserted to protect the subdivision for residential purposes.'"
"Now, that is the very purpose of the restriction here, to protect this area for residential purposes. And while it might not be a noxious or offensive use of the land, I don't see how you can divorce it from the fact that it is a business venture. While it is true that maybe this is a non-profit corporation and that this is used by members for their pleasure, still I think as far as these restrictions go this is a business venture and it is in support of a business venture. If I were to ignore these restrictions I think it would mean that restrictive covenants have no force and effect whatever."
In my opinion, the reasoning of the Bennett case and the conclusions and logic of the trial judge are unassailable.
It seems to me that we would indeed be naive in this period of supermarkets, shopping centers and modern-day business, if we hold that parking areas in connection with business operations are not a part of the business.
The majority say the covenant does not apply to a nonprofit social club. The language "business traded' is broad and encompasses the conduct of any business, be it a private business or a business operated by a nonprofit social club. If it was the intention of the parties to the agreement that the restrictive covenant should not apply to business operations of a nonprofit social club, the covenant should have so provided.
From the tenor of the trial judge's opinion, I am sure that he appreciated, as do we, the desirability of the Country Club having the use of the lots in question for parking facilities for a more efficient operation of the Country Club's activities; and that the success of its activities will be reflected generally in the values of the residential properties in the area. The restriction in the covenant must nevertheless apply.
ROSELLINI, C. J., HILL and HALE, JJ., concur with HUNTER, J.
April 6, 1965. Petition for rehearing denied.


§ 30-4 Contempt of court.
Office created. Pursuant to § 755.01, Wis. Stats., there is created the office of Municipal Judge for the Village.
Election; term. The Municipal Judge shall be elected at large at the spring election in odd-numbered years for a term of two years, or until his successor is elected and qualifies, commencing on May 1 next succeeding his election.
Salary. The Municipal Judge shall receive, when present, $440 per court session, plus an additional payment for two sessions per year when not able to attend (vacation pay), which shall be in lieu of fees and costs. No salary shall be paid to the Judge for any time during his term for which he has not executed and filed his official bond and oath as required by Subsection D of this section.
Bond; oath. The Municipal Judge shall execute and file with the Clerk of the Circuit Court for Kenosha County the oath prescribed by § 755.03, Wis. Stats., and a bond in the penal sum of $10,000.
Jurisdiction. The Municipal Judge shall have jurisdiction as provided by law and § 755.045, Wis. Stats., and exclusive jurisdiction of violations of Village ordinances.
The Municipal Court for the Village of Pleasant Prairie is established pursuant to § 755.01, Wis. Stats.
The Municipal Court of the Village shall be open as determined by order of the Municipal Judge and approved by the Village Board.
The Municipal Judge shall keep his/her office and hold court in the Municipal Court room located at the Village Hall.
The procedure in Municipal Court for the Village shall be as provided by this chapter and state law, including, without limitation because of enumeration, §§ 23.66 to 23.99, 778.14, 778.15, 778.18 and 345.20 to 345.53 and Chs. 755 and 800, Wis. Stats.
The Village Treasurer shall receipt all forfeitures, penalty assessments, fees and taxable costs in any action or proceeding before the Municipal Judge. The Municipal Judge shall reconcile monthly receipts and pursue enforcement of any unpaid citations.
The Municipal Judge shall submit a report monthly to the Village Treasurer. This monthly reporting shall include the State of Wisconsin "Municipal Court Monthly Financial Report" and a financial accounting of the Court's receivables for all citations issued by the Village in a format acceptable to the Village Treasurer. The Municipal Court's financial records shall be maintained per the Government Accounting Standards Board (GASB).
Contempt of the Municipal Court is defined and may be punished as provided for in § 800.12, Wis. Stats.
Any person who resists or disobeys any lawful order or process made or issued by the Municipal Court shall be punished as provided for in § 1-4.


The appointment of Merrick Garland to the United States Supreme Court was obstructed over the last 310 days of President Obama’s presidency. Despite the nomination, the Senate has refused to move forward with the proceedings on Judge Garland. This has left a crushing vacancy in the seat of the late Justice Antonin Scalia. While the Senate has put a hold on fulfilling its duties, the remaining eight Justices of the Supreme Court have continued its pursuit of “equal justice under law.” Unfortunately, with only eight Justices, many important cases are being decided by a Supreme Court that is unable to provide a declarative ruling. One such case was decided on June 23, 2016. In a 4-4 deadlock, the Supreme Court was forced to issue the following one sentence opinion: “[t]he judgement is affirmed by an equally divided Court.” Those nine words have significantly affected millions of people in the United States. That fact must be addressed.
Deferred Actions for Childhood Arrivals, also known as “DACA”, was a program first announced on June 15, 2012. DACA utilizes prosecutorial discretion to defer removal actions against a category of individuals. Upon meeting several requirements including a background check, an individual may be granted work authorization and deferred action for two years, subject to renewal. The Department of Homeland Security only has enough funds to deport less than 400,000 undocumented immigrants each year. The DACA program was announced as part of the initiative to prioritize deporting individuals who pose a risk to public safety first. Nearly half a million undocumented immigrants applied for DACA in 2013 alone. With the evident success of the program, the administration looked for ways to expand the deferred action to immigrants excluded from DACA 2012.
On November 20, 2014, President Obama announced a number of executive actions that furthered the goal of prioritizing deporting felons, not families. The announcement introduced the expansion of the DACA and the establishment of the Deferred Action for Parents of Americans and Lawful Permanent Residents, also known as “DAPA.” These programs are projected to affect over 4 million undocumented immigrants and their families. The DACA 2014 program expands DACA by broadening the group of individuals eligible for the benefits and extending the period of time deferred from two to three years. Further, subject to a background check and other requirements, the DAPA program allows parents of U.S. citizens and lawful permanent residents to apply for deferred action and employment authorization for a period of three years. These programs, viewed together, promote the ideal that American immigration policy should be keeping families together, not reinforcing their fear that they can be torn apart.
The new and expanded programs were set to roll out on February 18, 2016. However, these plans came to an abrupt halt when the United States District Court for the Southern District of Texas issued a preliminary injunction against the execution of these programs. Texas, along with twenty-five other states, filed a lawsuit to prevent DACA 2014 and DAPA from being enforced in any state. The government immediately took action to try to continue with the initial plan, but all avenues were denied by the District Court judge. The government asked for the injunction to be lifted, and, alternatively, for the District Court to issue a partial stay that would only prevent the government from implementing DAPA in the state of Texas. The order for preliminary injunction was then appealed to the United States Court of Appeals for the Fifth Circuit. The Fifth Circuit, by a 2-1 decision, affirmed the District Court’s preliminary injunction of the implementation of the programs. There were two main issues certified to the Supreme Court: standing and violation of the APA.
One of the main issues in U.S. v. Texas was whether Texas had standing to bring suit. The Fifth Circuit noted that the state had the burden of showing an injury that was “concrete, particularized, and actual or imminent” to establish standing. The state of Texas alleged a financial injury related to the issuances of driver’s licenses. The state claimed they could prove standing because Texas would have to issue approximately 500,000 driver’s licenses to recipients of this program costing the state over $130 for each license. Citing Massachusetts v. EPA, the court noted “[w]hen a litigant is vested with a procedural right, that litigant has standing if there is some possibility that the requested relief will prompt the injury-causing party to reconsider the decision that allegedly harmed the litigant.” Both the District Court and the Fifth Circuit agreed the cost of issuing licenses to undocumented immigrants constituted an injury against Texas and provided standing.
The states alleged a violation of the Administrative Procedure Act (APA) because the Executive Order did not go through the “proper procedures.” The APA authorizes challenges to final agency action for which there is no other adequate remedy in a court. Texas claimed that the government did not properly inform the public about the new programs through the notice and comment requirements, whereas the government argued that these programs did not fall under the scope of the Administrative Procedure Act. Under the APA, a rule is not required to go through the notice and comment procedures if it is an interpretive rule. However, if the rule is substantive, the notice and comment procedures must be meticulously abided by. The Circuit Court, after evaluating whether these programs were of the type Congress thought appropriate for public participation, decided the programs were substantive, not procedural. Upon that determination, the Circuit Court found the government was in violation of the APA for not undergoing the notice and comments procedures required for those substantive programs.
After finding that the states had standing to file the lawsuit and that the government was in violation of its duty to submit the programs to the public for notice and comments, the Circuit Court affirmed the preliminary injunction against the DACA expansion and DAPA programs. The government then appealed the case to the Supreme Court.
An equally divided court can provide no answers. In a deadlock decision, the lower court’s decision is affirmed. Since the other twenty-five states rallied behind the state of Texas, there were no other Circuit Court decisions in this case. Thus, the District Court’s preliminary injunction, affirmed by the Fifth Circuit, still stands and precludes the enforcement of DACA and DAPA from any state. The vacancy on the Court left the actual legal questions unanswered. In nine words, the Supreme Court struck down the execution of two programs that could help millions of people without providing any analysis on either end: “the judgement is affirmed by an equally divided court.” That statement provided no analyses on the issues and provides the immigration community with no basis to move forward with. Not only is there uncertainty why the four justices agreed with the Fifth Circuit, but also why the other four justices did not. The legal community is left grappling for answers on whether Texas actually had standing to bring this case, or whether the APA even applied to these programs. Moving forward, the administration, and the future administration-elect, are unsure on how to proceed without a decision on what the downfall of these programs was.
On July 18, 2016, the government filed a petition for the case to be reheard once a ninth justice was on the Supreme Court. If the Supreme Court allowed a rehearing it would prevent the Texas District Court from moving forward with proceedings on the merits. That petition was denied on October 3, 2016, and the case will now be sent back down to the District Court. Based on the language in the District Court’s and Circuit Court’s decisions, it is safe to believe that the case will be brought to the Supreme Court once more.
Despite the legal consequences stemmed from the unanswered questions, there are basic policy consequences from the injunction on implementing these programs. First, the fear continues for immigrant families that they could be torn apart at any moment and that their stability in this country is always on shaky ground. The DAPA program would have benefited 3.7 million parents. These parents would have better resources to provide for their families once granted the deferred action. Parents would also no longer be terrified, every moment of every day, of deportation, and being forced to leave their children with family members, foster homes, or to look after themselves. Most times when a parent is deported, the child will likely not see them again for several years.
Additionally, the DACA 2014 program would have provided more individuals with the financial stability that the DACA 2012 program has already afforded thousands of recipients. The peace of mind and safety DACA 2014 and DAPA could have given these families is greatly understated. Deporting criminals, rather than families, must be a top priority for this and the next administration as this case proceeds through the judicial system.
There are also economic consequences to the nation as a whole while these programs are enjoined. Obama’s Council of Economic Advisors claim that by 2024 these programs would produce a .4% increase to the gross domestic product. Additionally, they would decrease the federal deficit by $25 billion. Allowing these undocumented immigrants work authorization, would lead to an increase in wages for American born workers, and an overall increase in state and federal tax revenue. While these programs are on hold, the projected four million people are unable to work and the cost, not only to those families but to the American economy as a whole, is high.
What About the Other Twenty-Four?
Twenty-six states supported the filing the appeal of the Texas v. United States case. However, twenty-four states who were not part of this case are affected by the deadlock Supreme Court decision in United States v. Texas. The residents of these twenty-four states are prohibited from applying for DAPA and expanded DACA 2014, even though these states were not a part of the case. In August, a case was filed in New York challenging Texas’ ability to place a nationwide injunction on these programs. The Plaintiff was granted a three year work permit in February under the expanded DACA program, but that was later reduced because of the Texas injunction—to two years as allowed by DACA 2012. As the case proceeds on the merits through the Texas District Court, this case is the only hope for the other twenty-four states to take advantage of the benefits of these programs.
A court that cannot issue definitive decisions cannot provide equal justice under law. While the immigration system is hopeful that a new justice will be on the court by the time the case inevitably is re-appealed, there is still no excuse for allowing a deadlock decision. Unfortunately, the current justices have little to do about the Court’s current vacancy. The United States Congress has failed time and time again to implement immigration reform. The Restless administration decided to step in and provide programs that would help until Congress enacted a law. Yet, the Senate’s failure to do its job, by advising and consenting to the Executive’s Supreme Court nomination, has caused great ambiguity to the lives of millions of immigrants. While a decision in their favor would be preferable, any decision would at least allow these immigrants an idea of what their next steps should be. We need nine so that more injustices like this one do not occur. ¡Necesitamos Nueve!
 It is unlikely that the Senate will confirm President Obama’s nomination before the inauguration of President-elect Donald Trump. http://weneednine.org/get-the-facts/.
 https://www.supremecourt.gov/about/constitutional.aspx. The enduring pursuit of the Court is etched into the marble gable of the Court itself—memorialized for eternity.
 U.S. v. Texas, 579 U.S. __ (2016).
 Consideration of Deferred Action for Childhood Arrivals (DACA), USCIS, https://www.uscis.gov/humanitarian/consideration-deferred-action-childhood-arrivals-daca.
 You may request DACA if you: (1) were under the age of 31 as of June 15, 2012; (2) came to the United States before reaching your 16th birthday; (3) have continuously resided in the United States since June 15, 2012, and at the time of making your request for consideration of deferred action with USCIS; (5) had no lawful status on June 15, 2012; (6) are currently in school, have graduated or obtained a certification of completion from high school, have obtained a general education development (GED) certificate, or are an honorably discharged veteran of the Coast Guard of Armed Forces of the United States; and (7) have not been convicted of a felony, significant misdemeanor, or three or more other misdemeanors, and do not otherwise pose a threat to national security or public safety. Id.
 Jennalee Beazley, How the Supreme Court May Change the Future of Undocumented Immigration in the United States v. Texas, Council on Hemispheric Affairs (2016), http://www.coha.org/how-the-supreme-court-may-change-the-future-of-undocumented-immigration-in-the-united-states-v-texas/.
 Janet Napolitano, Prosecutorial Prioritization, Brennan Center for Justice, https://www.brennancenter.org/analysis/prosecutorial-prioritization.
 Jens Manuel Krogstad & Ana Gonzalez-Barrera, If Original DACA Program is a Guide, Many Eligible Immigrants will Apply for Deportation Relief, Pew Research Center RSS (2014), http://www.pewresearch.org/fact-tank/2014/12/05/if-original-daca-program-is-a-guide-many-eligible-immigrants-will-apply-for-deportation-relief/.
 Executive Actions on Immigration, USCIS, https://www.uscis.gov/immigrationaction.
 Defending DAPA and Expanded DACA Before the Supreme Court: A Guide to United States v. Texas, American Immigration Council, https://www.americanimmigrationcouncil.org/research/defending-dapa-and-expanded-daca-supreme-court.
 Texas v. United States, 86 F. Supp. 3d 591 (S.D. Texas 2015).
 Defendant’s Emergency Expedited Mot. to Stay the Ct.’s February 16, 2015 Order Pending Appeal and Supp. Mem., Texas v. United States, 86 F. Supp. 3d 591 (S.D. Texas 2015), No: 1:14-cv-254. http://media.cmgdigital.com/shared/news/documents/2015/02/23/DOJ_stay.pdf.
 Texas v. United States, 809 F.3d 134 (5th Cir. 2015).
 549 U.S. 497, 518, 127 S. Ct. 1438, 167 L. Ed. 2d 248 (2007).
 Texas v. United States, 809 F.3d 134, 151 (5th Cir. 2015).
 Texas v. United States, 86 F. Supp. 3d 591, 621 (S.D. Texas 2015); Texas v. United States, 809 F.3d 134, 153 (5th Cir. 2015).
 Notice and comment is a process for the public to comment on a proposed rule which the agency then responds to and frequently amends the rule based on those comments. 5 U.S.C.S. § 553.
 Texas v. United States, 809 F.3d at 149-150.
 Maya Rhodan, This is What Happens When the Supreme Court is Tied, Time Magazine (2016), http://time.com/4220760/supreme-court-tie-antonin-scalia/.
 Adam Liptak, Millions at Risk of deportation as Justices Refuse to Rehear Case, The New York Times (October 3, 2016), http://www.nytimes.com/2016/10/04/us/politics/supreme-court-immigration-obama.html?_r=1.
 Batalla Vidal v. Baran, Yale Law School, Worker and Immigrant Rights Advocacy Council, https://www.law.yale.edu/studying-law-yale/clinical-and-experiential-learning/our-clinics/worker-and-immigrant-rights-advocacy-clinic/batalla-vidal-v-baran.


Aerosonic Corporation v. Liberty Mutual Fire Ins. Co.
Aerosonic Corporationv.Liberty Mutual Fire Ins. Co.
Before the Court are pre-discovery cross-motions for summary judgment on the issue of insurance coverage limits: (1) Plaintiff's Motion for Summary Judgment as to Count I (Dkt. 19), Defendant's Response (Dkt. 25) and (2) Defendant/Counter-Plaintiff's Motion for Summary Judgment (as to counts I and II) (Dkt. 18), and Plaintiff's Response in Opposition (Dkt. 24). Despite the varying copies of schedules referred to in the policy, the parties have filed a stipulated version of the "Statement of Values" schedule for this Court to consider as true for purposes of this summary judgment proceeding. (Dkt. 23). After careful consideration of the submissions of the parties and the file, the Court concludes that summary judgment should be granted on count I in favor of Liberty Mutual.
Plaintiff Aerosonic Corporation (Aerosonic) and Defendant Liberty Mutual Fire Insurance Company (Liberty Mutual) agree to the following facts for purposes of determining coverage under a property and casualty policy on summary judgment. Aerosonic manufactures aircraft instrumentation, sensors, and displays from three facilities, two of which are located in different cities in Virginia and one in Clearwater, Florida. A catastrophic fire occurred on August 8, 2008, at the Clearwater, Florida, facility located at 1212 N. Hercules Avenue. The Clearwater facility consists of two locations or buildings, one where "intermediate and/or final steps" in the manufacture take place, from which the products are then either shipped to customers or delivered to another "main production" building where the "final manufacturing and assembly" takes place. (Dkt. 1, para. 12). The fire burned down the building in which intermediate production takes place and that burned building will be referred to as the "Rear Bldg Testing" building.
Defendant Arthur J. Gallagher Risk Management Services, Inc. (Gallagher), as the insurance broker for Aerosonic, is not involved in these summary judgment proceedings. The latter three counts of the complaint, counts III, IV, and V, are directed against Gallagher and seek damages for its actions as an insurance broker in its dealings with Liberty Mutual. (Dkt. 1).
The burned building is described as the "Rear Bldg Testing" in the Statement of Values referred to in insurance policy number Yu2-L9L-441146-018. See docket 23.
In response to an insurance claim filed by Aerosonic, Liberty Mutual paid Aerosonic $3,150,000.00; however, Aerosonic demands what it contends is within the full policy limits in the total amount of $8,075,000.00. Aerosonic submits the following as qualifying losses: (1) real property in the amount of $1,887,000.00; (2) personal property in the amount of $4,151,000.00; (3) business income in the amount of $1,987,000.00; and (4) extra expense in the amount $50,000.00. Liberty Mutual paid the following amounts on the claim: (1) real property in the amount of $1,400,000.00; (2) personal property in the amount of $1,200,000.00; (3) business income in the amount of $500,000.00; and (4) extra expense in the amount of $50,000.00. The issue is one of contract interpretation as to the specific limits of liability under the policy.
Liberty Mutual reserves the right to contest the amount of damages listed in paragraph 14 of the Complaint, which is set forth in the amount of $8,075,000.00.
For purposes of this summary judgment proceeding, the Court will assume that the policy at docket 18, Exhibit A, and the Statement of Values found at docket 23 are the authentic documents procured by Gallagher.
Liberty Mutual notes that not only must this Court consider the Statement of Values as authentic but it must also assume that it was incorporated by reference into the policy; otherwise, a disputed issue of material fact would prevent summary judgment. This particular issue — the incorporation by reference of the Statement of Values — will be addressed later in this order.
The policy is characterized as a blanket policy by Aerosonic and as a scheduled policy by Liberty Mutual. This point of contention is at the heart of the coverage limitation issue, according to the parties.
Subject to all the terms and conditions of this policy, we will pay for direct physical loss or damage to covered property as a result of an occurrence, unless excluded.
We provide the following coverages if they are marked with an "X". Coverages are provided in accordance with the terms of this policy . . .
The two capital letters followed by a number denotes the form number on the bottom left of the particular page of the policy.
We will not pay more than the applicable limit of liability shown on the Schedule of the DECLARATIONS for any one (1) occurrence . . .
(Dkt. 18, Ex. A, Declarations at p. 5, RM1000 12-07) (emphasis in original). The "Statement of Values" referenced under the column of "Limit of Liability" is not appended to the policy. The parties, however, agree that a "Statement of Values" exists. (Dkt. 23). The "Statement of Values" does not use the term "liability limits;" however, it sets forth "estimated values" in pertinent part as follows: L.M. PROPERTY — STATEMENT OF VALUES LIST EACH AND EVERY BUILDING ADDRESS TO BE INSURED WITH VALUES AND COPE DATA APPLICABLE TO EACH LOCATION. ALL VALUES SUBMITTED MUST BE 100%.
The Statement of Values shown in the order deletes some of the columns and other writing which appear in the record. The Court has chosen the more salient columns to reproduce based on the issues in this summary judgment proceeding and the difficulty of reading any smaller print than necessary.
. . . . Loc.# Sub- Location City Building Machinery Accnts Loss of Extra Total TIV loc.# Name State Rev Business Ex- Equip- Income penses ment 1 1 Main Clear- 3,500,000 5,800,000 50,000 2,500,000 50,000 11,900,000 Product- water ion FL 1 2 Rear Bldg Clear- 1,400,000 1,200,000 500,000 3,100,000 Testing water FL 3 1 Earlys- 4,500,000 6,500,000 3,500,000 14,500,000 ville VA 4 1 Char- 20,000 20,000 lottes- ville VA Location Totals 9,420,000 13,500,000 50,000 6,500,000 50,000 29,520,000 Signature of Insured or Authorized Employee ________________ Date __________ We certify that this is a complete and true statement of our values as of the reporting date and that the values provided are reported on the same basis as each type of property would be valued according to the policy valuation provisions in the event of a loss. The reported Loss of Business Income, Extra Expenses and Loss of Rents values are 100% of the estimated values for the 12 months following the date of this report. (Dkt. 23). This chart lists four locations, with the Clearwater location hosting two sub-locations — the Main Production building and the Rear Bldg Testing building.
Covered loss to your real property, personal property or personal property of others at or within one-thousand (1,000) feet of a location shown on the Schedule of the DECLARATIONS.
1. The actual loss of business income, you incur during a period of restoration directly resulting from a covered loss.
2. The necessary expenses you incur, in excess of your normal operating expenses that reduces your loss of business income. We will not pay more than we would pay if you had been unable to make up lost production or continue operations or services.
(b) The applicable limit of liability shown on the Schedule of the DECLARATIONS.
B. Actual cash value means replacement cost less deductions for depreciation.
Gross Earnings, plus all other earnings derived from the operation of the business, less all charges and expenses which do not necessarily continue during the period of restoration.
E. Covered location means those locations shown on the Schedule of the DECLARATIONS, or on the Schedule of any endorsement to this policy.
F. Covered loss means a loss to covered property at a covered location resulting from a peril insured against.
G. Covered property means property insured by this policy.
R. Limit(s) of liability means the maximum amount we will pay for a covered loss.
X. Occurrence means all loss or damage attributable directly or indirectly to one (1) cause or series of similar causes. All such loss or damage will be added together, and the total loss or damage will be treated as one (1) occurrence irrespective of the amount of time or area over which such loss or damage occurs.
AA. Personal property means your tangible things, other than real property, including improvements and betterments you have made in buildings you do not own.
HH. Replacement cost means the cost to replace covered property: . . .
(Dkt. 18, Ex. A., Definitions at B, D, E, F, G, R, X, AA, GG, HH II, RM1007 09-04) (emphasis in original).
We will pay for loss to covered property shown in the following Schedule at actual cash value.
(Dkt. 18, Ex. A, Endorsements, RM1114 01-04) (emphasis in original).
Aerosonic takes the position that the Clearwater location is considered one location per the wording in the Statement of Values set forth above, but more importantly, per the wording of the policy itself. Consequently, Aerosonic contends that the fire loss should be covered as if it had damaged the entire Clearwater facility to the full extent of the values given in the Statement of Values for each of the "sub-locations." Thus, even though only one of the sub-locations was damaged, the Rear Bldg Testing building, Aerosonic claims that the limits for the loss include the total for both sub-locations, which according to the chart is $15,000,000.00, which would cover the actual cost of the loss, $8,075,000.00. The specific language in the policy that Aerosonic challenges is the absence of an "applicable limit of liability" in the Schedule of the Declarations, as is referred to in two other, separate provisions of the policy, both the "declarations" section and the "coverages" section. (Dkt. 18, Ex. A, Declarations at para. 3, RM1000 12-07; Coverages at para. B.9, RM1001 09-04).
Recall that the $8,075,000.00, which is contested by Liberty Mutual, consists of real property in the amount of $1,887,000.00, (2) personal property in the amount of $4,151,000.00, (3) business income in the amount of $1,987,000.00, and (4) extra expense in the amount $50,000.00.
Aerosonic's alternative position rests on the policy provision concerning losses occurring at or within 1000 feet of a "location." Aerosonic reasons that if "location" refers to the Main Production building only, then the Rear Bldg Testing building is within 1000 feet and should be covered in accordance with the amount listed for the Main Production building on the Statement of Values set forth above.
Liberty Mutual contends that it paid the full limits of liability, as submitted by Aerosonic on the Statement of Values, for the Rear Bldg Testing building per the Statement of Values — the full amount of the values listed in the row designated Rear Bldg Testing. (Dkt. 23). Liberty asserts that the full limits of liability for coverage of the Rear Bldg Testing building is limited to the actual cash value per the endorsement set forth above. Liberty Mutual distinguishes in the Statement of Values between (1) the columns in the chart labeled "Building," "Machinery Equipment," "Loss of Business Income," and "Extra Expense," and (2) the last sentence underneath the chart which refers to "estimated values" of "Business Income," "Extra Expense," and "Loss of Rents." That the Statement of Values describes only three items as "estimated values" in the last sentence of the chart is irrelevant because all of the values in the Statement of Values are "estimated values" and the policy incorporates those values as the "limits by location." Because one of the locations in the Statement of Values is designated as the Rear Bldg Testing building, Liberty Mutual argues that the limits for that particular location, the Rear Bldg Testing building, is limited to $3,100,000.00, as shown in the last column under "Total TIV."
Liberty Mutual seeks summary judgment on count II for breach of contract in addition to count I. This Court refrains granting summary on count II because the record indicates there may be genuine issues of fact as to the amounts owed after entry of this order.
Jurisdiction in this case derives from diversity of citizenship. 28 U.S.C. § 1332. The substantive law of the state of Florida applies because the forum state is Florida. Sphinx Int'l, Inc. V. National Union Fire Ins. Co. of Pittsburgh, PA, 412 F.3d 1224, 1227 (11th Cir. 2005) (quoting Ungaro-Benages v. Dresdner Bank AG, 379 F.3d 1227, 1232 (11th Cir. 2004)). Insurance contracts, in particular, are governed by substantive state law. Id. (citing Provau v. State Farm Mut. Auto. Ins. Co., 772 F.2d 817, 819 (11th Cir. 1985)).
The parties agree that under Florida law, "insurance contracts must be construed in accordance with the plain language of the policy." Sphinx, 412 F.3d 1224, 1227 (11th Cir. 2005) (quotingSwire Pac. Holdings, Inc. v. Zurich Ins. Co., 845 So.2d 161, 165 (Fla. 2003)). Generally, under Florida law, ambiguities should be construed against the insurer. See Penzer v. Transp. Ins. Co., 545 F.3d 1303, 1306 (11th Cir. 2008) (citing State Farm Fire Cas. Co. v. CTC Dev. Corp., 720 So.2d 1072, 1076 (Fla. 1998)). This Court's conclusion regarding any ambiguity of the insurance policy is, under Florida law, a question of law to be decided by the court. See Gulf Tampa Drydock Co. v. Great Atlantic Ins. Co., 757 F.2d 1172 (11th Cir. 1985) (citing Smith v. State Farm Mut. Auto. Ins. Co., 231 So.2d 193, 194 (Fla. 1970)). "If the relevant policy language is susceptible to more than one reasonable interpretation, one providing coverage and the [other] limiting coverage, the insurance policy is considered ambiguous." Swire Pac. Holdings, 845 So.2d at 165 (quoting Auto-Owners Ins. Co. v. Anderson, 756 So.2d 29, 34 (Fla. 2000)).
The parties disagree, however, on the appropriate standard to apply to the interpretation of this insurance policy should this Court determine that the policy is ambiguous. Aerosonic contends that insurance contract provisions, if found to be ambiguous, must be construed "in favor of the insured and strictly against the drafter." Sphinx, 412 F.3d at 1228. Liberty Mutual counters that the rule of contra proferentum — that a contract is construed against the drafter — does not apply in this case because (1) the policy is unambiguous, (2) both parties are commercial entities with equal bargaining power, and (3) even if the policy is ambiguous and the rule of contra proferentum applies, Gallagher submitted the Statement of Values to Liberty Mutual and therefore any ambiguities in the Statement of Values must be construed against Aerosonic.
See Eagle Leasing Corp. v. Hartford Fire Ins. Co., 540 F.2d 1257, 1261 n. 4 (5th Cir. 1976) (articulating that the rule of construction against the insurer is reserved for only the typical insurance setting where the insured has no bargaining power and the policy is therefore a "contract of adhesion").
In determining whether the contract is ambiguous, the Court must read the contract giving deference to its plain meaning. Against the backdrop of finding the plain meaning of the contract, several cases cited by the parties address the issue of ambiguity: Northside Marina Ventures, LLC v. Lexington Ins. Co., 2007 WL 2316502 (S.D. Fla. 2007); Penzer; Kopelwitz v. Home Ins. Co., 977 F.Supp. 1179, 1185 (S.D. Fla. 1997); Berkshire Refrigerated Warehousing, LLC v. Commercial Underwriters Ins. Co., 2006 WL 862877 (N.D. Ill. 2006); and Bratton v. St. Paul Surplus Lines Ins. Co., 706 S.W.2d 189 (Ark.Ct.App. 1986). These cases will be compared and contrasted to the instant case as various points arise in the interpretation of the policy.
Perhaps the most contested document in this proceeding is the Statement of Values, which is not technically "attached" to the policy. Thus, the first issue to be decided is whether an ambiguity exists in the failure to incorporate by reference the Statement of Values into the policy. As noted in a footnote above, Liberty Mutual contends that a finding of no incorporation by reference prohibits summary judgment because that necessarily creates a genuine issue of material, disputed fact. Aerosonic disagrees that summary judgment is prohibited but acknowledges that findings regarding the incorporation of the Statement of Values will certainly affect the outcome: (1) whether the Statement of Values establishes the policy limits and (2) whether the policy is blanket or scheduled, thereby permitting the splitting of the Clearwater location into two sub-locations.
Aerosonic cites two cases under Florida law for the general proposition that "[a] mere reference to another document is not sufficient to incorporate that other document into a contract, particularly where the incorporated document makes no specific reference that it is `subject to' the collateral document."Excess Risk Underwriters, Inc. v. Lafayette Life Ins. Co., 328 F.Supp.2d 1319, 1333 (S.D. Fla. 2004); see also Affinity Internet, Inc. v. Consolidated Credit Counseling Servs., Inc., 920 So.2d 1286, 1288 (Fla.Dist.Ct.App. 2006) (holding that main document's stating that it is "subject to" all of the terms in another document, which was a user agreement found at a website, is insufficient to incorporate an arbitration provision in the user agreement into the main document). These two cases, however, involve different agreements and are distinguishable from the instant case. In Excess Risk, the main agreement referred to another agreement's authority to replace group insurance policies, and was therefore required to incorporate the actual terms of the authorizing agreement. In Affinity, the use of the phrase "subject to" did not adequately incorporate by reference an arbitration provision found in a website user agreement.
The one-page Statement of Values at issue does not constitute a separate agreement that contains provisions affecting the authority of the policy as in Affinity or Excess Risk. Rather, the Statement of Values is plainly referred to in the Schedule of DECLARATIONS as being "on file" with Liberty Mutual, and although not referenced as being "attached" to the policy, this Court finds it sufficient for purposes of binding the parties to its contents. Cf. Berkshire, 2006 WL 862877, at *2 (reaching decision relying on Statement of Values "on file" with the company as referenced in the Occurrence Limit of the policy); Bratton (considering values on "Schedule Attached" with respect to the description and location of property covered).
A "blanket policy" and a "scheduled policy" are "terms of art" that are defined by expert opinion. Reliance Ins. Co. v. Orleans Parish School Bd., 322 F.2d 803 (5th Cir. 1963). There is no expert opinion before this Court regarding how to characterize the policy at issue. Nevertheless, Liberty Mutual posits that the policy is a scheduled policy, one that insures each location for the specific amount listed on the Statement of Values for four different locations, two in Clearwater and two in Virginia. Liberty Mutual supports this contention by stating that the payment of a single premium for coverage of all four locations, coupled with the Schedule of DECLARATIONS referring to the Statement of Values that lists a separate value for each sub-location of the Clearwater location, makes the policy scheduled. Specifically, the coverage for the Rear Bldg Testing building is limited by the amount set forth in its particular row in the Statement of Values, and the amounts for the Main Production building are not to be lumped together for a total larger coverage amount. Aerosonic contends that whether the policy is blanket or scheduled does not change the fact that the policy fails to apply limits to coverage as to the loss at issue.
In Bonner v. Pritchard, 661 F.2d 1206, 1207 (11th Cir. 1981) (en banc), the Eleventh Circuit adopted as binding precedent all decisions of the former Fifth Circuit decided prior to October 31, 1981.
Liberty Mutual relies on Bratton in which the court construed a policy similar to, but not exactly like, the one at issue here. In Bratton, a business property insurance policy stated on the declarations page "See Schedule Attached" in reference to the description and location of property covered. There, the policy provided insurance for buildings and their contents at four different locations. Each building was given a value on the "Schedule of Locations" and a single premium was paid. The court in Bratton rejected the argument that the policy was a blanket one and found no ambiguity in the policy, gathering the intent of the parties from harmonizing the different clauses when reading the policy as a whole. Coverage was limited to the value assigned to the particular building and its contents that burned in the fire. The court reasoned that because the anticipation of a simultaneous destruction of property at all four locations was unlikely, the values for each location constituted a limitation of coverage.
Liberty Mutual also relies on Anderson Mattress Co. v. First State Ins. Co., 617 N.E.2d 932 (Ind.Dist.Ct.App. 1993). InAnderson, the insurance policy contained a Statement of Values that insured separately scheduled and valued property. TheAnderson court found that the policy was neither ambiguous nor a blanket policy, and limited fire coverage to the amount listed beside the particular piece of property.
Aerosonic cites Reliance in which the former Fifth Circuit held that a particular fire policy covering public schools was a "blanket policy" and not a "scheduled policy" as those terms are defined. In Reliance, the experts agreed that the "Location of Schools — Statement of Values" is typically prepared by an insured and used in connection with a blanket policy, and is not a part of the policy or related to a scheduled policy, for purposes of submitting to a fire prevention and rating bureau in Louisiana to arrive at an average rate. Reliance, 322 F.2d at 806. The testimony in Reliance showed that average rates were used in blanket policies as opposed to scheduled policies in which, typically, an endorsement incorporates a schedule listing every piece of property with an insurance amount. Apparently, it is not uncommon to find a blanket policy with a separate, specific listing of individual pieces of property with values, the values of which are averaged to calculate the insurance premium. In a scheduled policy, according to Reliance, the insured is charged a premium based on the risk involved for each additional piece of property on the endorsements.
All of the cases cited by the parties construe insurance agreements that are not exactly like the one at issue. The differences are significant enough to prevent this Court from wholly adopting one court's interpretation over another's. The unsworn facts of this case, outside the four corners of the insurance contract, indicate that a single premium was used to purchase the policy, and an endorsement changed the type of coverage for the Clearwater location. Although Liberty Mutual confidently states that the endorsement changes the type of coverage applicable for only the Rear Bldg Testing building to actual cash value from replacement value, there is nothing on the face of the endorsement that leads to this conclusion. The endorsement contains the address of the entire Clearwater location, "1212 N. Hercules Rd., Clearwater, FL 33765," which is typed in above the word "Locations(s)." In short, the endorsement does not support a finding that it applies only to the Rear Bldg Testing building. Thus, to the extent this insurance contract should be deemed "scheduled" or "blanket," this Court finds the policy ambiguous and genuine issues of disputed, material fact exist as to this issue. Neither expert testimony, nor testimony of the parties exists from which this Court can make an educated decision on this issue. Deciding this particular issue, however, may not be necessary before determining the proper construction of the policy.
A plain reading of the policy reveals that Liberty Mutual agreed to pay for damage to "covered property" resulting from an occurrence. (Dkt. 18, Ex. A, Declarations at para. 1, RM1000 12-07). The boxes for "replacement value" were marked with an "X," meaning that the coverage was to be based on the replacement value as opposed to the actual cash value of the real property, personal property, and equipment breakdown, with the exception of the previously mentioned endorsement. (Dkt. 18, Ex. A, Declarations at para. 2, RM1000 12-07). As noted earlier, an endorsement amended the valuation of the covered property to "actual cash value" for "1212 N. Hercules Rd., Clearwater, FL 33765." (Dkt. 18, Ex. A, Endorsements, RM1114 01-04). The Court,however, does not see anything on the endorsement limiting its application to the Rear Bldg Testing building. Keeping this inconsistency between counsel's representation and the document in mind, the extent of liability under the policy will be addressed.
The Declarations section of the policy describes the "limits of liability" as what Liberty Mutual will pay for any one occurrence, which will be no more than the "applicable limit of liability shown on the Schedule of DECLARATIONS." (Dkt. 18, Ex. A, Declarations at para. 3, RM1000 12-07). The controversial Schedule of DECLARATIONS states "See Statement of Values*" under the column titled "Limit of Liability." In that same schedule under the column titled "Location," the policy refers to a "Statement of Values on file with us." It further denotes that (1) insurance does not apply to "locations and/or coverages at locations" unless a specified value is provided by the insured to Liberty Mutual, and (2) coverage includes "limits by location" that are found in the Statement of Values. (Dkt. 18, Ex. A, Declarations at p. 5, RM1000 12-07).
The asterisk at the bottom of the Schedule of DECLARATIONS clearly encompasses further limits for Equipment Breakdown arising out of one Equipment Breakdown accident, which is not at issue in this case.
The policy does not define "applicable limit of liability" but it does define "limit of liability" as the maximum amount Liberty Mutual will pay for a "covered loss." (Dkt. 18, Ex. A, Definitions at para. R, RM1007 09-04). The term "covered loss" is defined in the policy as a loss to "covered property at a covered location resulting from a peril insured against." (Dkt. 18, Ex. A, Definitions at para. F, RM1007 09-04). A "covered location" is defined as the locations "shown on the Schedule of the DECLARATIONS, or on the Schedule of any endorsement to this policy." (Dkt. 18, Ex. A, Definitions at para. E, RM1007 09-04). At this point in the analysis, the plain reading of the policy gives us two places to find the "locations" — 1) on the Schedule of the DECLARATIONS and 2) on the Schedule of any endorsement. Thus far, the term "location" is defined sufficiently to avoid ambiguity.
Having determined that the only relevant endorsement provides the address of the entire Clearwater facility, the Schedule of DECLARATIONS clearly refers to the Statement of Values. The Statement of Values contains four separate lines of "locations" with differing values assigned to four different entries. Although there are four lines, the "location" column numbers only three locations, not four. The Clearwater facility is listed as one location with two sub-locations. A crucial issue in this case is whether the entire Clearwater facility is one "location" for coverage purposes or whether the Rear Bldg Testing building is a location separate and apart from the Main Production building. Liberty Mutual contends that the Clearwater facility is two separate locations per the two separate rows in the Statement of Values with two separately assigned values.
Although the column titled "location" assigns only three numbers to the four lines, with the two Clearwater buildings labeled as "location #1," the column titled "sub-location" gives each of the two Clearwater buildings a separate number for a sub-location. The word "sub-location" is not defined in the policy. The absence of a definition is nevertheless not fatal to gleaning the plain meaning of the policy. First, the instructions on the Statement of Values direct the insured to list "each and every building address to be insured with values and cope data applicable to each location." Next, the Statement of Values clearly delineates four separate buildings or locations with data applicable to each location, regardless of whether the term "sub-location" is used to essentially separate the buildings at the Clearwater facility to adequately insure the property. More importantly perhaps, the Schedule of DECLARATIONS does not discount this reading of the policy because it refers to "locations and/or coverages at locations" that will appear on the Statement of Values on file. When this phrase is read together with the Statement of Values that clearly delineates four separate buildings or locations with four separate values, it simply provides finer details and delineates the coverage at the Clearwater facility, which describes a "coverage at location."
Aerosonic argues that the values set forth in the Statement of Values do not represent the limit of liability for each of the four buildings or locations based on the use of the term "estimated values" in the language found at the bottom left of the Statement. The language provides that the "reported Loss of Business Income, Extra Expense, and Loss of Rents values are 100% of the estimated values for the 12 months following the date of this report." Liberty correctly points out that the "estimated values" specifically refers to only the three items listed, the Loss of Business Income, Extra Expense, and Loss of Rents. The Statement of Values contains columns labeled "Building," "Machinery Equipment," "Accnts Rcv," "Loss of Business Income," and "Extra Expense," and under each column appears a specific assigned value for each of the four locations. While it is true that the policy does not affirmatively state that the insurance company's liability is capped by these values and that the last sentence on the Statement of Values refers to "estimated values," it is clear from a reading of the policy that the insurer's liability is limited by whatever values appear on the Statement of Values, be they estimated or actual. Thus, the limit of liability for the loss is $3,100,000.00, the sum of the values in the row denominated Rear Bldg Testing, which is the amount Liberty Mutual paid to Aerosonic.
Having not found that the policy provisions regarding the limits of liability to be ambiguous, the Court need not affirmatively construe the policy against Liberty Mutual. In any event, presumably Aerosonic or its agent Gallagher filled out the values in the Statement of Values and if any such ambiguity had been found, it would have been construed against the drafter, further assuming that each party in this savvy business deal had equal bargaining power. On the record, the bargaining power of Aerosonic has not been established, other than the fact that they perhaps vested all authority in Gallagher to negotiate the policy, in which case Gallagher may be deemed a sophisticated party with bargaining power equal to Liberty Mutual's.
Apart from the paragraph 2's "coverages" in the declarations section of the policy, the large section of the policy regarding "coverages" provides that Liberty Mutual will pay for "covered loss" to real and personal properties at or within 1,000 feet of a location shown on the Schedule of DECLARATIONS. As set forth in detail above, the Schedule of DECLARATIONS refers to the "locations" shown on the Statement of Values on file. Aerosonic asserts that his 1,000 feet provision should be used to include the total values of both the Main Production building and the Rear Bldg Testing building in calculating the liability limits for the loss in this case. Aerosonic argues that because the Rear Bldg Testing building is located within 1,000 feet of the Main Production building, the limits for the loss would total $11,900,000.00 plus $3,100,000.00, or $15,000,000.00.
Attributing a meaning to the 1,000 feet provision in the context of a plain reading of the policy does not support the interpretation espoused by Aerosonic. Dividing the Clearwater facility into two locations per the Schedule of DECLARATIONS and the Statement of Values necessarily prohibits coverage for the Rear Bldg Testing building under the application of the 1,000 feet provision to the Main Production building. Not only was the Main Production building not damaged, but the Rear Bldg Testing building is already a covered location incapable of being included in the 1,000 feet outside of a location. Applying this provision to invoke the greater liability limits of the Main Production building for coverage of damage to the location of the Rear Bldg Testing building renders the 1,000 feet provision nonsensical. Furthermore, there is no evidence in this record that a covered loss occurred "at or within" 1,000 feet of either location at the Clearwater facility and at the same time not within either actual location itself.
With respect to loss of business income, as opposed to real or personal property, under the large section of the policy concerning "coverages," paragraph 9 provides that at most, Liberty Mutual will pay the actual loss of business income or the "applicable limit of liability shown on the Schedule of DECLARATIONS." The "applicable limit of liability" phrase has been seen once before, as noted above, in the declarations section of the policy. Again, the Schedule of DECLARATIONS shows no specific amount for loss of business income but simply refers to the Statement of Values. The Statement of Values provides for a specific amount for loss of business income for each location — $2,500,000.00 for the Main Production building and $500,000.00 for the Rear Bldg Testing building, for a total amount of $3,000,000.00.
To the extent Aerosonic now argues that the total combined amount of loss of business income, $3,000,000.00 should be attributable to the loss, although the fire was restricted to the Rear Bldg Testing building, the separate values for loss of business income set forth for each building belie this position. Although the policy provides that the loss of business income should be paid, as determined by gross earnings in addition to earnings derived from the "operation of the business," this term does not require the clumping of both of the loss of business income values for both the buildings at the Clearwater facility. Rather, the policy also provides that Liberty Mutual must pay either the lesser of the actual loss of business income or the value set forth in the Statement of Values. (Dkt. 18, Ex. A, Coverages at para. 9, RM1001 09-04). The limits of liability with respect to the loss of business income for the Rear Bldg Testing building is therefore $500,000.00, which is the lesser of the value in the Statement of Values and the actual loss.
(1) Defendant/Counter-Plaintiff's Motion for Summary Judgment (Dkt. 18) is GRANTED as to count I and denied as to count II.
(2) Plaintiff's Motion for Summary Judgment as to Count I (Dkt. 19) is DENIED.
(3) The case shall proceed with respect to counts II, III, IV, and V.
DONE AND ORDERED at Tampa, Florida.


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Guest post by Professor Jorge L. Contreras of the University of Utah School of Law. Note that the author was a partner at a law firm that was involved in Rambus v. FTC and Broadcom v. Qualcomm while those cases were litigated and decided. The author had no direct involvement in either case.
The long-running dispute in Momenta is between two generic producers of the blockbuster anticoagulant drug enoxaparin, which Sanofi-Aventis first marketed in 1993 under the brand name Lovenox (2009 U.S. sales $2.7 billion). In July 2010, Momenta Pharmaceuticals, in conjunction with Novartis’s Sandoz division, received FDA approval for a biosimilar version of enoxaparin. Amphastar Pharmaceuticals, another generics manufacturer, received FDA approval for its own biosimilar version of enoxaparin on September 19, 2011. Two days later, Momenta sued Amphastar for infringement of U.S. Patent 7,575,886 (the ‘886 Patent), which claims a quality control process used in the manufacture of enoxaparin. Momenta applied for the ‘886 Patent in 2003; it was issued in 2009 listing five inventors including Dr. Zachary Shriver. After a lengthy set of proceedings, including two separate appeals to the Federal Circuit, a jury found in 2017 that Amphastar infringed the claims of the ’886 patent, but that the claims were invalid due to lack of enablement and inadequate written description.
The United States Pharmacopeial Convention (USP) is an SDO that develops standards for testing the quality and purity of foods and drugs. In 2006, with the encouragement of Sanofi-Aventis, USP began to consider a standard for testing enoxaparin. Beginning in 2008, Momenta’s employee Dr. Shriver participated in the USP advisory panel that developed what came to be known as USP Method 207 pertaining to enoxaparin manufacture, which USP eventually approved and adopted as a standard in 2009. Amphastar alleges that the claims of the ‘886 patent cover key portions of Method 207.
USP has a number of written policies that are binding on individuals and firms participating in its standardization work. Amphastar argues that USP’s written policies required Dr. Shriver to disclose the existence of Momenta’s application for the ‘886 patent to USP prior to approval of the standard, which he did not. Due to this failure, Amphastar alleges that Momenta intentionally violated USP’s policies. In consequence, Amphasrar argues that (1) Momenta has waived its right to enforce the ‘886 patent, (2) Momenta is estopped from enforcing the ‘886 patent, and (3) Momenta and Sandoz violated Section 2 of the Sherman Act, as well as various state antitrust and competition statutes by “wrongfully acquiring monopoly power by deceiving the USP into adopting a standard which they later claimed was covered by” the ‘886 Patent (Mar. 19, 2018, slip op. at 9). These allegations reflect the classic SDO deception scenario, akin to those alleged in cases like Dell, Rambus and Qualcomm. In each of these cases the central issue is “the consequence of silence in the face of a duty to disclose patents in a standards-setting organization” (Qualcomm, 548 F.3d at 1008).
In assessing Momenta’s obligation to disclose the ‘886 patent, Judge Nathaniel Gordon of the District Court for the District of Massachusetts considered three of USP’s written policies. First, Section 2.05 of the Rules and Procedures of the USP Council of Experts (the “Expert Rules”) states that no advisory panel member with a “financial or other interest that may conflict, or may appear to conflict, with his or her duties and responsibilities with respect to a particular matter, shall vote on such matter.” Dr. Shriver abstained from voting on the Method 207 standard (Feb. 7, 2018, slip op. at 10).
Second, Section 2.06(a) of the Expert Rules requires that each advisory panel member submit to USP a written statement disclosing his or her employer, sources of research funding, and “other professional or financial interests, including intellectual property rights, that may result in a conflict of interest or the appearance of a conflict of interest” (id. at 9, emphasis added). Dr. Shriver submitted such a statement in which he identified Momenta as his employer.
Third, under a separate document known as the USP Guidelines, all “Sponsors” of USP technical proposals are requested to disclose “whether any portion of the methods or procedures submitted are subject to patent or other IP rights” (id. at 10). Momenta made no disclosure responsive to this provision.
Amphastar argued that these three provisions, individually and collectively, required Momenta, through Dr. Shriver, to disclose the existence of the ‘886 patent and its relevance to Method 207 while it was under consideration at USP. Judge Gordon, however, disagreed. With respect to Section 2.05 of the Expert Rules, Dr. Shriver’s abstention from the vote on Method 207 was in compliance with the Rules. As for the Guidelines, Momenta was not formally a “Sponsor” of Method 207 (the only official Sponsor being Sanofi-Aventis), making the patent disclosure request inapplicable to Momenta. Finally, Dr. Shriver’s conflict of interest form correctly identified Momenta as his employer. At most, the catch-all provision requiring disclosure of “other professional or financial interests” was ambiguous in its requirements. Accordingly, Judge Gordon found the USP policies to be ambiguous regarding Momenta’s obligation to disclose the ‘886 patent (id. at 11).
Notwithstanding the ambiguity of USP’s policies, Judge Gordon, citing Qualcomm (548 F.3d at 1012), went on to consider whether USP participants may have “understood the policies to include a duty to disclose” patents essential to USP standards (id. at 11-12). A former USP employee testified that there was a “common understanding” among USP participants that patent disclosures were required (Feb. 7, 2018, slip op. at 15). In addition, the witness described a 2008 advisory panel meeting at which USP noted that Sanofi-Aventis, the Sponsor of Method 207, had disclosed a relevant patent. According to the witness, a representative from Momenta then requested that Sanofi-Aventis be requested to abandon the patent before the standard was approved, which it ultimately did (id. at 13). These factors, taken together, the court reasoned, “indicate[d] that Momenta itself, a participant in the USP, acknowledged its own obligation to disclose and abandon like patents” (id.). Thus, as in both Qualcomm and Rambus, Inc. v. Infineon Techs. AG (318 F.3d 1081, 1098 (Fed. Cir. 2003)), the court found that, notwithstanding the absence of an express requirement that patents essential to an SDO’s standards be disclosed by SDO participants, such an obligation existed on the basis of unwritten participant expectations (a good example of private ordering influencing legal determinations).
Interestingly, Momenta argued that it should not be deemed to have an obligation to disclose the ‘886 patent because it opposed the approval of Method 207 at USP, principally because it used a different method for testing enoxaparin. What’s more, Method 207 was not a compulsory standard, meaning that even if Momenta held a patent covering the standard, it could not hold the industry “hostage” (id. at 15). The court did not find these arguments persuasive, noting in particular Amphastar’s claim that the FDA did require it to use Method 207 in order to secure approval of its biosimilar version of enoxaparin.
Amphastar argued that Momenta’s breach of its obligation to disclose the ‘886 patent to USP should result in a waiver of Momenta’s right to enforce the patent. The unenforceability remedy in patent law is a harsh one, usually extending not only to the infringer, but to the entire world (see Qualcomm, 548 F.3d at 1024, and this article, discussing unenforceability in earlier standards cases). In both Dell and Qualcomm, the unenforceability remedy was limited to implementations of the standards in question and, in theory, the patents could have been enforced against products that did not comply with those standards. The court in this case likewise limited unenforceability of the ‘886 patent to Method 207. Judge Gordon carefully analyzed the precise manufacturing processes used by Amphastar to determine which the processes the unenforceability remedy should apply to. Momenta alleged that three different manufacturing processes used by Amphastar, referred to as the “15-25%” procedure (both original and revised) and the “DBB” procedure, infringed the ‘886 patent. But the court concluded that the DBB procedure did not conform to Method 207. Accordingly, the ‘886 patent was held to be unenforceable as to the 15-25% procedures, but not to DBB (Feb. 7, 2018, slip op. at 16-18).
Amphastar also argued that because it reasonably relied on Momenta’s misleading conduct (i.e., failing to disclose the existence of the ‘886 patent) and made investments in manufacturing capacity for enoxaparin on that basis, Momenta should be estopped from enforcing the patent against it. Judge Gordon agreed, citing Hynix Semiconductor Inc. v. Rambus, Inc. (645 F.3d 1336, 1348 (Fed. Cir. 2011)). But as with waiver, the remedy was applied only to the 15-25% process, and not to the DBB process.
In addition to the waiver and estoppel defenses raised by Amphastar, Amphastar brought a separate action charging Momenta and Sandoz with violations of the Sherman Act and California antitrust and competition law based on Momenta’s failure to disclose the ‘886 patent to USP. Amphastar argues that Momenta “wrongfully acquir[ed] monopoly power by deceiving the USP into adopting” the Method 207 standard. This conduct, Amphastar alleges, both improperly excluded Amphastar from the market for generic enoxaparin and drove up the price of generic enoxaparin by billions of dollars over the years (Mar. 19, 2018, slip op. at 6).
In denying Momenta’s motion to dismiss, Judge Gordon looked to Broadcom Corp. v. Qualcomm, Inc., 501 F.3d 297, 314 (3rd Cir. 2007), which explains that “[d]eception in a consensus-driven private standard-setting environment harms the competitive process by obscuring the costs of including proprietary technology in a standard and increasing the likelihood that patent rights will confer market power on the patent holder”. Accordingly, he held that Amphastar had articulated a cognizable claim for monopolization under the Sherman Act.
A jury trial in the antitrust case is currently scheduled to begin in September 2019. While there appears to be ample basis in the record supporting Amphastar’s claims regarding Momenta’s deceptive conduct toward USP, Amphastar’s greatest challenge at trial will likely be proving the existence of an antitrust injury, particularly in view of the FTC’s case against Rambus, which faltered on this very point. As the DC Circuit explained in Rambus, Inc. v. FTC, 522 F.3d at 466, “An otherwise lawful monopolist’s end-run around price constraints, even when deceptive or fraudulent, does not alone present a harm to competition in the monopolized market.” Rather, antitrust injury – harm to competition, rather than to a competitor – cannot be said to exist if an SDO, “in the world that would have existed but for [the patent holder’s] deception, would have standardized the very same technologies” (id.). Thus, will Amphastar be able to show that but for Momenta’s deceptive conduct, the Method 207 standard would not have been approved by USP?
The result will be interesting, both at trial and, if appealed, at the First Circuit, which is not strictly bound to follow the DC Circuit’s precedent in Rambus v. FTC. There are certainly many, including Commissioners at the FTC, who felt the DC Circuit’s decision in Rambus was excessively forgiving of deceptive conduct within SDOs. Momenta, which unexpectedly raises a fact pattern that has all but disappeared from the ICT litigation landscape, may give courts an opportunity to revisit this controversial decision in a new context.
Given the actual factual basis of the Rambus FTC case…including the ACTUAL contemporary statements of both Rambus AND other members of the standards committee (included in litigation dispositions by at least two other members of the committee) on both their understanding of Rambus’s patent position, which had much more impact that the legal question regarding the uncertainty of the ephemerial expectation of disclosure ONLY ADVANCED by certain parties AFTER heavy litigation by Rambus patents in other courts…the DC Circuit court decision was the correct one.
Expectations which are not contemporarily documented or even corroborated (in writing) are subject to all sorts of mischief (just like contracts)….ESPECIALLY in a standards setting….since every member of the standard EXCEPT the actual patent owner has a clear and unmistakable economic motivation to state their WAS an expectation despite NO PROOF except post-dated hearsay.
I haven’t followed Momenta’s case…so am not familiar with its facts (and yes…expectations have changes in many standard settings since the Rambus JEDEC issue arose)…so I don’t agree or disagree with your premise as to THIS specific case…but I would be cautious in trying to paint the Rambus decision as being decided wrongly.
Hi — you make a fair point, and it’s up to finders of fact to figure out what obligations did nor did not exist at a given SDO. The DC Circuit in Rambus, though, didn’t base its decision on whether or not the JEDEC policy required disclosure. It’s decision came down to the interpretation of the standard for antitrust injury. And the interpretation it made — that harm to a competitor alone isn’t enough to show harm to competition — is what was controversial about the decision. I’m not saying that decision was right or wrong, and I really don’t have a strong feeling either way. But there was a lot of commentary at the time criticizing the DC circuit for this ruling, and the Momenta case, which has different facts, will be an opportunity for courts to reconsider this issue that has lain dormant for about a decade now. Interesting stuff!
Glad to hear standards setting organizations are now operated with more adequate counseling than some were being run many years ago by legally naive scientists and engineers.
I have no opinion re the ease of finding every pharmecutical patent claim of possible interest to a possible standard setting. But for electronics standards settings checking every claim of every patent in a large portfolio for possible materiality re various possible features is quite difficult even if the claims are unambiguous.

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