Two inventors who were entitled to royalties on the sales of products sued the purchaser of their former company over their royalty rights. The litigation and arbitration took years, and after the third round of arbitration, the arbitrator determined that the inventors were not entitled to compensation from the company they sued. Despite this finding, the two continued to engage in litigation against the firm. After their final suit was dismissed in the district court, the company sought sanctions for bringing a groundless lawsuit. The district court granted the motion, finding that the suit had been barred by the doctrine of res judicata and the plain language of the governing agreements. The appellate panel agreed, determining that the results of the third and fourth rounds of arbitration made the suit frivolous and it affirmed the imposition of sanctions.
In 1997, Tai Matlin and James Waring co-founded Gray Matter Holdings, LLC. In 1999, they entered into a Withdrawal Agreement with Gray Matter. The agreement entitled Matlin and Waring to royalties on the sales of certain key products. In 2003, Gray Matter sold some of its assets to Swimways Corp.
Since that sale, Matlin and Waring have been engaged with Gray Matter in protracted litigation and arbitration over their royalty rights. During the third arbitration, the arbitrator determined that Gray Matter had not transferred its royalty obligations to Swimways in 2003, and therefore remained solely responsible for any royalty compensation owed to Matlin and Waring under the Withdrawal Agreement. Continue reading ›