Swyers v. United States Patent & Trademark Office et al, No. 1:2016cv01042 - Document 14 (E.D. Va. 2016)
Court Description: MEMORANDUM OPINION. Signed by District Judge Liam O'Grady on 11/21/2016. (dest )
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Swyers v. United States Patent & Trademark Office et al Doc. 14 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Alexandria Division MATTHEW H. SWYERS, Plaintiff, V. Civil Action No. 1:16-cv-1042 UNITED STATES PATENT AND TRADEMARK OFFICE, et al., Defendants. Memorandum Opinion This Matter comes before the Court on Defendants United States Patent and Trademark Office ("PTO") and defendant-employees Ronald Jaicks, GerardTaylor, Leonardo Villarreal Alejandro, and a Jane Doe (collectively "Defendants") Motion to Dismiss for lackof subject matterjurisdiction. Dkt.No. 7. For the reasons discussed below, the Court GRANTS Defendants' Motion. I. Background Plaintiff, Matthew Swyers, filed a Complaint seeking a declaratoryjudgment that the PTO lacks the authority to promulgate and enforce 37 C.F.R. §11.34(d) which, amongother things, sets the statute of limitations for the PTOto bringa disciplinary actionagainst an applicant; that the regulation is invalid; andthat the PTO should not be permitted to use the regulation to determine the statute of limitations in disciplinary proceedings. The PTO moves to dismissthe complaint on the groundthat this Court's decisionin an earlier case broughtby Dockets.Justia.com Plaintiff collaterally estops thepresent action andthe statutory scheme put in place by Congress precludes judicialreview of Swyers' claims at this stage. The PTO has implemented formal disciplinary proceedings against Plaintiff stemming from the Office of Enrollment andDiscipline's ("OED") investigation mto his patent practice. These proceedings are ongoing before anadministrative law judge. Plaintiff previously challenged the OED investigatory and disciplinary scheme prior to the institution ofthe investigation. The Court granted Defendants' Motion to Dismiss Plaintiffs prior complaint, finding that the Court lacked jurisdiction tohear the claim because Congress intended through 35 U.S.C. § 32to channel allArticle IIIreview of PTO disciplinary proceedings to a single court and only after the conclusion ofadministrative proceedings. Swyers v. United States Patent and Trademark Office etal. No: l:16-cv-00015, Dkt. No. 31 (May 27,2016) (^^Swyers 7"). Plaintiffspresent suitchallenges the statute of limitations forthe OED to charge a violation of the PTO's Code of Professional Responsibility. 35 U.S.C. § 32 confers authority on theDirector of thePTO, upon notice andopportunity for a hearing, to suspend or exclude from further practice before the PTO, any person who engages in incompetent, disreputable, or gross misconduct, or who does not comply with regulations established under § 2(b)(2)(D). The statute of limitations for such action is defined as "one year after the date on which the misconduct forming the basis ofthe proceeding is made known to anofficer or employee ofthe office asprescribed inthe regulations established under section 2(b)(2)(D). Id. (emphasis added). Swyers contends that the regulation promulgated under 2(b)(2)(D) "eviscerates" and "disembowels" the statute of limitationsbecause it provides that the statute of limitations only commences one year after the date on which the OED Director receives a grievance forming the basis ofthe complaint. 37C.F.R. § 11.34(d). Therefore, the PTO can indefinitely suspend the statute of limitations by delaying the submission of a grievance to the OED Director. Plaintiff has a vested interest in this finding because he alleges that it bears on a number of claims brought againsthim in the PTO disciplinary proceeding. Defendants have moved to dismiss Plaintiff's complaint because they contend that § 32 requires Plaintiffto first litigate his claim to completion in the administrative process before challenging the statute of limitations provision in the district court. Defendants argue thatthe same analysis which justified the outcome in / controls this case and the result reached in Swyers I collaterally estops Plaintiff's present challenge. The matter has been fully briefed by the parties. II. Legal Standard Federal Rule of Civil Procedure 12(b)(1) permits the defendant to movefor dismissal of a claim when the court lacks subject matterjurisdiction. Fed.R.Civ.P. 12(b)(1). The court must dismissthe action ifit determines at any time that it lacks subjectmatterjurisdiction. Fed. R. Civ. P. 12(h)(3). Plaintiffbears the burden to establish that subject matter jurisdiction exists. See Evans v. B.F. Perkins Co., 166 F.3d 642,647 (4th Cir.1999). A district court should grant a Rule 12(b)(1) motion if the material jurisdictional facts are known and themoving party is entitled to prevail as a matter of law. See Richmond, Fredericksburg &Potomac R.R. Co. v. United States, 945 F.2d 765,768 (4th Cir.1991). in. Analysis Defendants contend that Plaintiffs suit fails to establish subject matter jurisdiction for three reasons. First, Swyers is collaterally estopped from bringing his present suitbythis Court's ruling in Swyers I. Second, even if the claim was notestopped, thereasoning inSwyers I applies with equal force to the present action and necessitates dismissal. Third, even ifSwyers I is inapplicable, a fair reading ofthe case law establishes that Swyer's present claim is of the sort intended to be reviewed first within the statutory framework to the exclusion of collateral District Court review. The Court agrees with Defendants that this case is collaterally estopped by the Court's decision in Swyers I and therefore need not reach the other arguments briefed by the parties. Collateral estoppel requires proof of five elements. The movant must show that (1) the issue is identical to the one decided in the first action; (2) the issue was actually litigated in the first action; (3) resolution of the issue was essential to a final judgment in the first action; (4) that the prior judgment is final and valid; and that (5) plaintiff had a full and fair opportunity to litigate the issue in the first action. Westmoreland Coal Co. v. Sharpe, 692 F.3d 317, 331 (4th Cir. 2012). Defendants contend that all of these conditions are met. First, Defendants describe the issue in the present litigation as "whether, through § 32, Congress created a streamlined system for review of disciplinary charges of misconduct against USPTO practitioners that channeled all Article III judicial review into a single vehicle at the conclusion of administrative proceedings such that a district court lacks jurisdiction over collateral attacks on misconduct charges." Defendants observe that this is precisely the issue litigated in Swyers /. Second, the court fully litigated this question in Swyers /—ultimately disposing of the matter on a motion to dismiss. Third, the jurisdictional finding was essential to the legal conclusion ofthe court because the court dismissed for lack of subject matter jurisdiction. Finally, Plaintiff had an opportunity to fully litigate the jurisdictional question in the prior action. The parties do not dispute the finality ofthe Court's previous order. Plaintiff states that the PTO fails to assert any of the necessary elements of collateral estoppel but Plaintiff only directly challenges the first element. Plaintiffargues thatSwyers I concerned whether the § 32 rules and regulations violated Swyers' Fourthand Fifth Amendment rights butthepresent case seeks, pursuant to the Administrative Procedure Act, thevacatur of a regulation issued pursuant to § 32 butwhich exceeds statutory authority. Therefore, the issues raised in thepresent suitaredistinguishable from the constitutional claims in Swyers I. They were not even ripe for adjudication at the timethatSwyers 1wasfiled on January 6,2016, because the PTO complaint was not filed until March 11,2016. However, Plaintiffs argument mistakes the scope of Defendants' estoppel claim. Defendants do notargue thata challenge to the regulation pursuant to theAPA is estopped by a decision with respect to alleged constitutional violations under the color of PTO regulations. Rather, Defendants contend that a necessary predicate to bothactions—^the right to bring a challenge to the § 32 scheme prior to final adjudication through the administrative process—^was decided inSwyers I and thatfinding collaterally estops Plaintifffrom imploring the court to again review the legitimacy of anaction taken under § 32prior to completion of the administrative process. If,as Defendants' argue, a challenge to the statute of Imutations for bringing a disciplinary action is ofthetype Congress intended to bereviewed within the statutory framework, then a litigant must comply with § 32 by exhausting the administrative process before resorting to suit inthe district court. See Thunder Basin Coal Co. v. Reich, 510 U.S. 200,207 (1994). PlamtifFs regulatory challenge is ofthetype Congress intended to bereviewed with this statutory scheme unless "a finding ofpreclusion could foreclose all meaningful judicial review", 'the suit is wholly collateral to a statute's review provisions", or'the claims are outside ofthe agency's expertise." Swyers /, slip op. at 18 (quoting Free Enter. Fundv. Pub. Co. Accounting Oversight Bd., 561 U.S. 477 (2010)). The parties do not dispute that the first and third factors do notsupport a collateral action. A findmg that the matter must befully adjudicated inthe administrative proceedings does not foreclose meaningful judicial review because § 32 expressly provides for review by theCourt upon the conclusion ofthe administrative proceeding. See 35 U.S.C. § 32. Furthermore, the procedural rules governing PTO disciplinary action are within the agency's expertise. As evidence, the statute expressly delegates that the agency shall issue regulations identifiying which officer must be notified inorder to start the clock on the statute of limitations. Id. ("one year after the date onwhich themisconduct forming the basis of the proceeding is made known to an officer oremployee ofthe office asprescribed inthe regulations established under section 2(b)(2)(D)."). Plaintiff relies only onthe second factor, arguing that his challenge is notsubject to the statutory scheme because it is wholly collateral tothe statute's review provisions. Specifically, Plaintiff argues that § 32only permits review ofthe suspension orexclusion of a practitioner thus Congress did not intend that a challenge tothe validity ofthe regulation would be fiinneled through the same review process. This argument fails in three respects. First, § 32's reqiurement thata practitioner suffer suspension or expulsion before obtaming review from the Court isa test for determining whether the practitioner has standing to further litigate his claim; it is not a limitation onthe scope ofthe appeal. The counterfactual proves this purpose. IfPlaintiffwas not refused recognition, suspended, or excluded atthe end ofthe PTO adjudication then hewould not have suffered aninjury for which this Court could provide redress. This result would hold true whether ornot Plaintiffwas successfiil in challengmg the statute oflimitations before the PTO. Without injury, any subsequent opinion rendered by the Court would be an improper advisory opinion. See UnitedStates v. McClure, 241 F. App'x 105,108 (4th Cir. 2007) C*the Supreme Court linked satisfaction ofthe redressability prong to the assurance that the case 'does not entailthe issuance of an advisory opinion... andthat the exercise of a court's remedial powers willactually redress the alleged injury.'") (quoting CityofLosAngeles v. Lyons, 461 U.S. 95,129 (1983)). Second, Swyers' reading of § 32 strains grammatical convention. When courts interpret statutes that include a limiting clause or phrase, they customarily adhere to the "rule of last antecedent" which "provides thata limiting clause orphrase... should ordinarily be read as modifying only thenoim orphrase that it immediately follows." Lockhart v. United States, 136 S. Ct. 958,962 (2016) (quotations omitted); see also 2A N. Singer, Sutherland on Statutory Construction § 47.33, p. 494(7threv. ed. 2008) ("Referential andqualifying words andphrases, where no contrary intention appears, refer solely to thelastantecedent."). Section 32describes the Court's jurisdiction thusly: "The United States District Coxirt fortheEastern District of Virginia.. .may review the action of the Director upon the petition of the person so refused recognition, suspended, or excluded^ Id. (emphasis added). The clause beginning with "so refused" is preceded bythe"person" who brings thepetition. Thus "person" is thelast antecedent of the limiting clause. "[S]o refused" does not, as Swyers argument would require, limit or qualify the"action" subject to review, which is partof a different clause altogether. While the rule of last antecedent can be overcome where context or considerations compel a different approach, there are no "special reasons [] for so construmg the clause in question" to overcome the last antecedent construction in this case. Porto Rico Railway, Light & Power Co. V. Mor, 253 U.S. 345,348 (1920). Third, the Court's analysis in Swyers /, and the cases it cites, illustrate that challenges to the administrative process are not wholly collateral where they bear on the challenging party's administrative proceeding. See Elgin v. Dep't ofTreasury, 132 S. Ct. 2126,2139 (2012) (finding that a claim was not wholly collateral because "petitioners' constitutional claims are the vehicle by whichthey seekto reversethe removal decisions"); Tilton v. SEC, 824 F.3d 276,287 (2d Cir. 2016) ("a claim is not wholly collateral if it has been raised in response to, and so is procedurally intertwinedwith, an administrative proceeding—^regardless of the claim's substantiveconnection to the initial merits dispute in the proceeding."); Jarkesy v. SEC, 803 F.3d 9,23 (D.C. Cir. 2015) ("Jarkesy's constitutional and APA claims do not arise 'outside' the SEC administrative enforcement scheme—^they arise from actions the Commission took in the course of that scheme. And they are the 'Vehicle by which" Jarkesy seeks to prevail in his administrative proceeding."); cf Free Enter. Fund v. Pub. Co. AccountingOversightBd., 561 U.S. at 487 (noting that suit was broughtby the Free Enterprise Fund whichwas not itself subjectto the administrative procedure). Jarkesy is especially instructive becausethat court observed that "Jarkesy pressedthe same claims as affirmative defenses before the ALJ, and pressed them again to the Commission on review of the ALJ's initial decision." Id. Therefore it was difficult for the court "to see how [the claims] can still be consideredcollateralto any Commissionorders or rules from which review might be sought, since the ALJ and the Commissionwill, one way or another, rule on those claims and it will be the Commission's order that [Jarkesy] will appeal." Id\ see also Bebo V. SEC, No. 15-C-3,2015 WL 905349, at *4 (E.D. Wis. Mar. 3,2015) ("Bebo complains that she is limited to raising her constitutional arguments as 'affirmative defenses' before the SEC ALJ. Even so...[a]ppellatereviewin the court of appeals is sufficient."), affd, 799 F.3d 765 (7th Cir. 8 2015), cert, denied, 136 S. Ct. 1500,194 L. Ed. 2d 588 (2016). "[T]he statute of limitations is an affirmative defense." Eriline Co. S.A. v. Johnson, 440 F.3d 648,653 (4th Cir. 2006). Accordingly, it can be reviewed by the district court after being raised in the administrative proceeding. Plaintiff's facial challenge to the statute of limitations regulation is only a precedent to, and entwined with, his affirmative defense that the statute of limitations has run. Furthermore, the PTO has provided arguments to the presiding ALJ in opposition to the merits of Plaintiffs position on § 11.34(d) ensuring that the issue will be fully litigated through the administrative process. As discussed above, the logic and language of § 32 sets forth a standing requirement for appeal to the district court but does not limit the issues which the court can consider on appeal. Furthermore a defense based on the statute of limitations, even if it includes a challenge to the calculation ofthe operative period, is within the purview ofthe administrative agency. Accordingly, Plaintiffs challenge is not "wholly collateral" to the administrative proceeding. Because the challenge is not wholly collateral. Congress intended that it be reviewed within the § 32 scheme. Thus the nature of Plaintiffs claim today is no different from the one the Court ruled on in Swyers I and Plaintiff is collaterallyestopped from bringingthis challenge until after the completion of the administrative process. rV. Conclusion For the reasons discussed above, and for good cause shown, the Court ORDERS that Defendants' Motion to Dismiss for lack of subject matter jurisdiction is GRANTED. Novembeio^, 2016 Alexandria, VA LiamO'Grady /s/ x United States District Judge
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