Case 1:18-cv-00966-CFC-CJB Document 996 Filed 12/09/22 Page 1 of 42 PageID #: 38420
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`REDACTED - PUBLIC VERSION
`Original Filing Date: December 2, 2022
`Redacted Filing Date: December 9, 2022
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`

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`Case 1:18-cv-00966-CFC-CJB Document 996 Filed 12/09/22 Page 2 of 42 PageID #: 38421
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`
`Gregory H. Lantier
`Amanda L. Major
`Thomas G. Saunders
`Joshua L. Stern
`R. Gregory Israelsen
`WILMER CUTLER PICKERING
` HALE AND DORR LLP
`1875 Pennsylvania Avenue NW
`Washington, DC 20006
`(202) 663-6000
`
`S. Calvin Walden
`Jeffrey A. Dennhardt
`WILMER CUTLER PICKERING
` HALE AND DORR LLP
`7 World Trade Center
`250 Greenwich Street
`New York, NY 10007
`(212) 295-6359
`
`Arthur W. Coviello
`WILMER CUTLER PICKERING
` HALE AND DORR LLP
`2600 El Camino Real
`Suite 400
`(650) 858-6069
`
`December 2, 2022
`
`
`
`

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`
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`TABLE OF CONTENTS
`
`Page
`
`B.
`
`II.
`
`INTRODUCTION ..................................................................................................... 1
`BACKGROUND ....................................................................................................... 3
`ARGUMENT ............................................................................................................. 7
`I.
`The Court Has Authority To Issue And Enforce Its Standing Order .............. 7
`A.
`Rule 83(b) Expressly Grants District Courts The Authority To
`Enact Standing Orders Such As The Court’s Disclosure Order ........... 7
`The Court Also Has Inherent Authority To Issue And Enforce
`The Order ............................................................................................11
`The Order Is Necessary To Prevent Conflicts Of Interest And The
`Appearance Of Impropriety ...........................................................................11
`A. Disclosure Could Reveal A Conflict Under Section 455(b) ...............12
`B.
`Financial Or Personal Connections Could Create An Appearance
`of Impropriety Under Section 455(a) ..................................................14
`Presiding With A Conflict, Even Unknowingly, Risks Vacatur .........16
`C.
`III. The Order Promotes Transparency ................................................................19
`IV. VLSI’s Suit Should Be Dismissed With Prejudice With A Declaration
`That The Patents-In-Suit Are Unenforceable Against Intel And An
`Adverse Inference Against VLSI On Intel’s License Defense .....................21
`A.
`The Court Has The Power To Dismiss This Case With Prejudice
`And Declare The Patents-In-Suit Unenforceable Due To VLSI’s
`Failure To Comply With Its Order ......................................................21
`VLSI Has Made It Impossible For The Court To Proceed .................22
`The Poulis Factors Favor Dismissal Of VLSI’s Suit With
`Prejudice ..............................................................................................23
`
`B.
`C.
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`i
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`D. VLSI’s Failure To Comply With The Court’s Order Should
`Trigger An Adverse Inference On Intel’s License Defense ................28
`CONCLUSION ........................................................................................................29
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`
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`ii
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`
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`TABLE OF AUTHORITIES
`
`CASES
`
`Page(s)
`
`Briscoe v. Klaus,
`538 F.3d 252 (3d Cir. 2008) ......................................................................... 21, 26
`Catherines v. Copytele, Inc.,
`608 F. Supp. 1031 (E.D.N.Y. 1985) ................................................................... 13
`Centripetal Networks, Inc. v. Cisco Systems, Inc.,
`38 F.4th 1025 (Fed. Cir. 2022) ........................................................................... 16
`Chambers v. NASCO, Inc.,
`501 U.S. 32 (1991) .............................................................................................. 11
`Chase Manhattan Bank v. Affiliated FM Insurance Co.,
`343 F.3d 120 (2d Cir. 2003) ................................................................... 14, 16, 17
`Dietz v. Bouldin,
`579 U.S. 40 (2016) .............................................................................................. 11
`Dillon v. Select Portfolio Servicing,
`2008 WL 3925080 (D.N.H. Aug. 15, 2008) ....................................................... 13
`Doe v. Megless,
`654 F.3d 404 (3d Cir. 2011) ......................................................................... 19, 23
`Eash v. Riggins Trucking Inc.,
`757 F.2d 557 (3d Cir. 1985) ............................................................................... 11
`Feezor v. Big 5 Corp.,
`2010 WL 308751 (E.D. Cal. Jan. 15, 2010) ................................................. 12, 13
`Gumbs v. International Harvester, Inc.,
`718 F.2d 88 (3d Cir. 1983) ................................................................................. 29
`Guy v. City of Wilmington,
`169 F.R.D. 593 (D. Del. 1996) ........................................................................... 28
`Hall v. Holman,
`2007 WL 2049776 (D. Del. July 12, 2007) ........................................................ 28
`
`iii
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`Indemnity Insurance Co. of North America v. Electrolux Home Products, Inc.,
`520 F. App’x 107 (3d Cir. 2013) ........................................................................ 29
`Leininger v. Twoton, Inc.,
`2009 WL 1363386 (M.D. Pa. May 14, 2009) ..................................................... 23
`Liljeberg v. Health Services Acquisition Corp.,
`486 U.S. 847 (1988) ................................................................................ 15, 16, 17
`Link v. Wabash R.R. Co.,
`370 U.S. 626 (1962) ...................................................................................... 21, 22
`McLaren v. New Jersey Department of Education,
`462 F. App’x 148 (3d Cir. 2012) .................................................................. 22, 23
`O.E. Wheel Distributors, LLC v. Mobile Hi-Tech Wheels, LLC,
`2022 WL 484967 (M.D. Fla. Feb. 16, 2022) ...................................................... 19
`Poulis v. State Farm Fire & Casualty Co.,
`747 F.2d 863 (3d Cir. 1984) ......................................................................... 22, 24
`Qualcomm Inc. v. Broadcom Corp.,
`548 F.3d 1004 (Fed. Cir. 2008) .......................................................................... 22
`Santos v. Countrywide Home Loans,
`2009 WL 5206682 (E.D. Cal. Dec. 22, 2009) .................................................... 13
`SCA Services, Inc. v. Morgan,
`557 F.2d 110 (7th Cir. 1977) .............................................................................. 13
`Shell Oil Co. v. United States,
`672 F.3d 1283 (Fed. Cir. 2012) .......................................................................... 12
`Toro v. N.J. State Courts Judge,
`2022 WL 2187855 (3d Cir. June 17, 2022) ........................................................ 22
`United States v. Hudson & Goodwin,
`11 U.S. (7 Cranch) 32 (1812) ............................................................................. 11
`United States v. Martin,
`746 F.2d 964 (3d Cir. 1984) ............................................................................... 19
`
`iv
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`Wilson v. Iron Tiger Logistics, Inc.,
`628 F. App’x 832 (3d Cir. 2015) .......................................................................... 8
`Zambelli Fireworks Manufacturing Co. v. Wood,
`592 F.3d 412 (3d Cir. 2010) ............................................................................... 10
`DOCKETED CASES
`Uniloc 2017 LLC v. Netflix, Inc.,
`No. 8:18-cv-02055-GW-DFM (C.D. Cal.) ........................................................... 5
`VLSI Tech. LLC v. Intel Corp.,
`No. 22-1906 (Fed. Cir.) ...................................................................................... 28
`VLSI Tech. LLC v. Intel Corp.,
`No. 1:19-cv-977-ADA (W.D. Tex.) ............................................................... 4, 25
`STATUTES, RULES, AND REGULATIONS
`26 U.S.C. § 701 .......................................................................................................... 5
`28 U.S.C.
`
`§ 455 .................................................................................................... 2, 11, 14, 16
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`§ 455(a) ............................................................................................. 14, 15, 16, 17
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`§ 455(b)(4) .................................................................................................... 12, 13
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`§ 455(b)(5) .......................................................................................................... 12
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`§ 455(d)(4) .......................................................................................................... 13
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`§ 455(f) ................................................................................................................ 17
`
`§ 2072 .................................................................................................................... 7
`
`§ 2075 .................................................................................................................... 7
`Del Code. Ann. Tit. 6
`
`§ 18-101 ................................................................................................................ 5
`
`§ 18-1107 .............................................................................................................. 5
`RULES
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`Fed. R. Civ. P.
`
`7.1 ............................................................................................................ 1, 8, 9, 10
`
`41(b) .............................................................................................................. 21, 22
`
`83(b) ........................................................................................................ 1, 7, 8, 11
`3d Cir. R. 26.1.1(b) .................................................................................................... 9
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`4th Cir. R. 26.1(a)(2) .................................................................................................. 9
`5th Cir. R. 28.2.1 ........................................................................................................ 9
`6th Cir. R. 26.1(b) ...................................................................................................... 9
`10th Cir. R. 46.1(D) ................................................................................................... 9
`11th Cir. R. 26.1-1(a)(1) ............................................................................................ 9
`C.D. Cal. L.R. 7.1-1 ................................................................................................... 9
`D. Md. L.R. 103.3(b) ................................................................................................. 9
`E.D. Va. L.R. 7.1(A)(1)(b) ......................................................................................... 8
`N.D. Cal. L.R. 3-15 .................................................................................................... 9
`N.D. Ga. L.R. 3.3 ....................................................................................................... 9
`N.D. Tex. L.R. 3.1(c), 3.2 (e) ..................................................................................... 9
`S.D. Ga. L.R. 7.1 ........................................................................................................ 9
`OTHER AUTHORITIES
`2021 Year-End Report on the Federal Judiciary ..................................................... 14
`Fortress Overview, https://www.fortress.com/about ................................................. 3
`Grimaldi, James V. et al., 131 Federal Judges Broke the Law by
` Hearing Cases Where They Had a Financial Interest, Wall St. J.
`(Sept. 28, 2021), https://www.wsj.com/articles/131-federal-judges-
`
`
`broke-the-law-by-hearing-cases-where-they-had-a-financial-interest-
`11632834421....................................................................................................... 16
`Intel, 2021 10-K, https://tinyurl.com/2v3w9v8w ...................................................... 4
`Kalajdzic, Jasminka et al., Justice for Profit: A Comparative Analysis
`of Australian, Canadian and U.S. Third Party Litigation Funding,
`
`61 Am. J. Comp. L. 93 (2013) ............................................................................ 18
`
`Kass, Dani, Mapping Out VLSI-Intel’s Sprawling Patent War,
` Law360 (Nov. 23, 2022), https://tinyurl.com/3vmtdr2n ...................................... 4
`
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`Langford, Carol, Betting on the Client: Alternative Litigation Funding
`Is an Ethically Risky Proposition for Attorneys and Clients, 49
`
` U.S.F. L. Rev. 237 (2015)................................................................................... 18
`SoftBank Nears US$2b Sale of Fortress to Mubadala, Business Times
`(Sept. 7, 2022) https://tinyurl.com/2ypfysmy. ...................................................... 3
`
`Standing Order for All Judges of the N.D. Cal. (Oct. 20, 2022) ............................... 9
`U.S. Chamber of Commerce Institute for Legal Reform, A New
` Threat: The National Security Risk of Third Party Litigation
` Funding (Nov. 2022) .......................................................................................... 20
`Zur, Eran, Why Investment-Friendly Patents Spell Trouble for Trolls
`
`(Sept. 24, 2015), https://tinyurl.com/243xmd37................................................... 4
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`INTRODUCTION
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`VLSI Technology LLC (“VLSI”) and the entity that controls it, Fortress
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`Investment Group LLC (“Fortress”), chose to file suit seeking over $4 billion in
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`damages for the benefit of their investors. Nonetheless, VLSI has repeatedly failed
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`to disclose its full ownership as required by the April 18, 2022 Standing Order
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`Regarding Disclosure Statements Required by Federal Rule of Civil Procedure 7.1
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`(the “Order”). The concealment of those who stand to benefit from the suit is no
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`accident. VLSI’s opaque ownership structure is an entrenched feature of hedge-
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`fund-driven patent litigation, in which lightly capitalized nonpracticing entities
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`(NPEs) acting on behalf of highly sophisticated investors use the judicial system for
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`financial gain while obscuring the interests behind the litigation. This lack of
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`transparency places the Court in an untenable position with respect to its ethical
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`obligations and risks undermining public confidence in the courts. The Court has
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`ample authority to insist on knowing who is really behind this litigation, and it should
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`not proceed without that information.
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`The Court clearly has authority to issue and enforce the Order. Federal Rule
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`of Civil Procedure 83(b) empowers courts to issue standing orders regarding practice
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`and procedures where, as here, no contrary statute or rule dictates otherwise. The
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`Court also has inherent authority to require the disclosures.
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`1
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`The straightforward disclosures required by the Court will help ensure that it
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`does not have a conflict requiring recusal. See 28 U.S.C. § 455. Indeed, complete
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`disclosure is particularly important in this case where every 1% share of the $4
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`billion award that VLSI sought would amount to $40 million. Failure to insist on a
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`full assessment of potential conflicts now runs the risk that later revelations would
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`upend the litigation and create an appearance of impropriety. The Court cannot be
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`expected to move forward without the information it needs to ensure compliance
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`with the letter and the spirit of the law. The Order also promotes transparency and
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`the public interest in monitoring judicial proceedings.
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`VLSI has been given multiple chances to comply with the Order but has failed
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`to provide the mandated information. VLSI originally took the position that the
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`Order did not apply to it, while falsely claiming that all the information required by
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`the Order was already before the Court. Ex. 1. After the Court ordered the parties
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`to certify compliance, VLSI’s first submission was, in the Court’s words, “clearly
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`inadequate.” D.I. 975 at 2. Despite being given another chance, VLSI again failed
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`to comply, claiming for the first time that Fortress and the undisclosed owners that
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`seek to benefit from this litigation would not provide the information the Court
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`needs. VLSI made no effort to demonstrate that there were any legally binding
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`confidentiality restrictions in place, let alone restrictions that prevent this
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`information from being shared pursuant to a court order. D.I. 983 at 4-5. Regardless,
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`2
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`VLSI’s owners had a choice: If they wanted to use this case to pursue financial gain,
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`they needed to be transparent with the Court about who stands to benefit.
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`Because VLSI has not complied with the Order, this case should be dismissed
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`with prejudice—with a declaration that the patents-in-suit are unenforceable against
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`Intel and an adverse inference against VLSI on Intel’s license defense. A lesser
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`remedy would reward VLSI’s disregard for a valid court order and leave the Court
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`without the information it needs. Moreover, a lesser remedy might allow VLSI to
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`refile and put another judge in the same dilemma, while sowing public distrust in the
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`courts by creating the appearance that parties can judge-shop on issues regarding
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`ethics and public disclosure. The Court should not allow the suit to proceed in any
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`forum without VLSI’s full compliance with the Order.
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`BACKGROUND
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`Fortress, which is owned by Softbank Group Corp., manages approximately
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`$50 billion in assets, primarily held in private equity and hedge funds. Fortress
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`Overview, https://www.fortress.com/about.1 Among its other activities, Fortress’s
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`patent monetization business creates or acquires NPEs to assert or license patents.
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`D.I. 732 ¶ 159. Eran Zur, who manages the IP Finance Group at Fortress and serves
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`1 Fortress’s current owner, Softbank Group, is reportedly in talks to sell Fortress
`to Mubadala Investment Co., a sovereign wealth fund of Abu Dhabi. See SoftBank
`Nears US$2b Sale of Fortress to Mubadala, Business Times (Sept. 7, 2022),
`https://tinyurl.com/2ypfysmy.
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`3
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`on VLSI’s board, has explained that patent litigation can lead to “oversized awards”
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`due to the “sheer complexity” of devices and damages being awarded “on the price
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`of the entire end product” instead of based on the “specific patent claim.”2
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`VLSI is an NPE created by Fortress-managed funds in 2016 as part of what
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`Fortress called a “privateering option” to monetize patents acquired from NXP USA
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`Inc. (“NXP”). D.I. 801 ¶ 4; Ex. 2, FORTRESS00001621. VLSI acquired over 170
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`patents from NXP for $35 million and, to date, VLSI’s only activity has been to
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`assert 23 different patents against Intel across seven different suits. VLSI Tech. LLC
`
`v. Intel Corp., No. 1:19-cv-977-ADA (W.D. Tex. Nov. 14, 2022), D.I. 676 at 1.
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`VLSI’s strategy is to assert its patents in waves of litigation with outsized damages
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`requests, such that even a single successful suit would produce a windfall for its
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`investors and Fortress. For example, VLSI initially sought $4.13 billion in damages
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`in this Court and has sought as much as $7.1 billion in the Northern District of
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`California. Intel, 2021 10-K at 108, https://tinyurl.com/2v3w9v8w. In the Western
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`District of Texas, VLSI lost one suit against Intel, but won a $2.175 billion verdict
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`that is currently on appeal and a $948 million verdict that was recently issued. Dani
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`Kass, Mapping Out VLSI-Intel’s Sprawling Patent War, Law360 (Nov. 23, 2022),
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`https://tinyurl.com/3vmtdr2n.
`
`
`2 Eran Zur, Why Investment-Friendly Patents Spell Trouble for Trolls (Sept. 24,
`2015), https://tinyurl.com/243xmd37.
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`4
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`Another hallmark of Fortress’s NPE strategy has been the use of complicated
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`ownership structures that hide the involvement of Fortress and its investors behind
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`layers of limited liability companies and partnerships. See Uniloc 2017 LLC v.
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`Netflix, Inc., No. 8:18-cv-02055-GW-DFM (C.D. Cal. Dec. 14, 2020), D.I. 188 at 9
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`(Netflix discussing how Uniloc, another Fortress NPE, sought to conceal the nature
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`of its relationship with Fortress).
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`Here, VLSI has steadfastly refused to provide complete information regarding
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`its ownership. VLSI is a limited liability company (LLC) that has
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`
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` Ex. 3, VLSI-18-966DE00050417.3
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`VLSI’s sole member (i.e., owner) is CF VLSI Holdings LLC (“VLSI Holdings”),
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`which is also an LLC. D.I. 972 ¶ 3. VLSI has stated that VLSI Holdings is “owned”
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`by ten entities: seven LLCs and three limited partnerships with generic names. D.I.
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`972 ¶ 4. VLSI has also stated that the “majority owner” of VLSI Holdings is an LLC
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`owned by an unnamed investment fund comprising six further unnamed Fortress-
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`managed investment funds, the “ultimate owners” of which are unnamed “pension
`
`and retirement funds, sovereign wealth funds, foundations, high net worth
`
`
`3 Under Delaware law, an LLC is different from an ordinary corporation. LLCs
`have members rather than shareholders. Del Code. Ann. Tit. 6, § 18-101. LLCs are
`also eligible to be treated as partnerships for tax purposes, id. § 18-1107, meaning
`they can function as pass-through entities in which income is attributed to their mem-
`bers, 26 U.S.C. § 701.
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`5
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`
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`individuals, endowments and other institutional investors.” D.I. 972 ¶ 5. But VLSI
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`has not disclosed the members and partners of the ten members of VLSI Holdings.
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`
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`This Court called VLSI’s response “clearly inadequate” and reminded VLSI
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`that the Order requires an LLC to disclose “‘the name of every owner, member, and
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`partner of the party, proceeding up the chain of ownership until the name of every
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`individual and corporation with a direct or indirect interest in the party has been
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`identified.’” D.I. 975 at 1-2. In its second response, VLSI did not question the
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`Court’s authority to issue the Order, but claimed for the first time that an unnamed
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`contact at Fortress would not provide the information the Court needs due to
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`unspecified “confidentiality obligations.” D.I. 976 ¶¶ 2, 4. VLSI made no effort to
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`demonstrate that these obligations were legally binding or would prevent
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`information from being shared pursuant to a court order.
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`
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`VLSI’s effort to distance itself from its own investors and from Fortress is
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`emblematic of the deliberate strategy “to provide some distance to Fortress and its
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`funds in case of litigation.” Ex. 4, FORTRESS00050754. But despite their complex
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`organizational structure, the entities remain closely intertwined. The same Fortress
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`employee signed VLSI’s original LLC agreement on behalf of each of its original
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`ten members, who are now the members of VLSI Holdings. Ex. 5, VLSI-19-
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`966DE00050646. That Fortress employee also signed SEC filings on behalf of three
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`of those members. Ex. 6 at 3; Ex. 7 at 3; Ex. 8 at 3; Ex. 9 at 72. Fortress selects
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`6
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`VLSI’s board, and Fortress employees have always constituted a majority of VLSI’s
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`board. D.I. 983 at 3-4. Fortress employees have access to VLSI’s bank account,
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`maintain only limited operational funds in those accounts, and approve VLSI’s
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`requests for additional funds. D.I. 801 ¶¶ 8-9. Fortress and VLSI are represented
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`by the same outside counsel. VLSI has claimed privilege over hundreds of
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`communications with Fortress employees, as well as communications and
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`documents prepared by Fortress in-house legal counsel. Id. A Fortress employee—
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`paid by Fortress rather than VLSI—provides VLSI “general advice and legal advice”
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`regarding VLSI’s lawsuits, and VLSI’s CEO doesn’t “know exactly who assigned
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`her” other than that it was “someone at Fortress.” D.I. 979-01, Ex. D (31:4-19,
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`35:13-36:20).
`
`
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`In short, VLSI’s complicated structure is having its intended effect—allowing
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`Fortress and VLSI’s investors to control VLSI and reap any benefits from this suit,
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`while concealing their identities from the Court and the public.
`
`I.
`
`ARGUMENT
`The Court Has Authority To Issue And Enforce Its Standing Order
`A. Rule 83(b) Expressly Grants District Courts The Authority To
`Enact Standing Orders Such As The Court’s Disclosure Order
`Federal Rule of Civil Procedure 83(b) expressly grants courts the authority to
`
`issue standing orders, stating that “[a] judge may regulate practice in any manner
`
`consistent with federal law, rules adopted under 28 U.S.C. §§ 2072 and 2075, and
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`7
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`
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`the district’s local rules.” The Advisory Committee Notes explain that “[t]his rule
`
`provides flexibility to the court in regulating practice when there is no controlling
`
`law” since “courts rely on multiple directives to control practice” including
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`“standing orders.” Fed. R. Civ. P. 83(b) advisory committee’s notes to 1995
`
`amendments; see also Wilson v. Iron Tiger Logistics, Inc., 628 F. App’x 832, 834
`
`n.2 (3d Cir. 2015) (“Rule 83(b) allows courts discretion to manage cases when the
`
`rules are silent on an issue in any manner not inconsistent with the Federal Rules of
`
`Civil Procedure or statute.”).
`
`The Order does not conflict with any statute or rule. Federal Rule of Civil
`
`Procedure 7.1 sets a floor, not a ceiling, when it requires corporate parties to disclose
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`any parent corporation and publicly held corporation owning 10% or more of its
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`stock. The Advisory Committee Notes state that Rule 7.1 “does not cover all of the
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`circumstances that may call for disqualification” and “does not prohibit local rules
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`that require disclosures in addition to those required.” Fed. R. Civ. P. 7.1 advisory
`
`committee’s notes to 2002 rules.
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`It is thus commonplace for courts to require disclosure of additional
`
`information beyond the bare minimum required by Rule 7.1. For example, the
`
`Eastern District of Virginia requires that litigants “identif[y] all parties in the
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`partnerships, general or limited, or owners or members of non-publicly traded
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`entities such as LLCs or other closely held entities.” E.D. Va. L.R. 7.1(A)(1)(b).
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`8
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`Many other courts require broad disclosure of individuals or corporations with a
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`financial interest in litigation. The Third Circuit requires parties to “identify …
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`every publicly owned corporation not a party to the appeal, if any, that has a financial
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`interest in the outcome of the litigation and the nature of that interest.” 3d Cir. R.
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`26.1.1(b).4 Similarly, the Northern District of Texas requires “a complete list of all
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`persons, associations of persons, firms, partnerships, corporations, guarantors,
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`insurers, affiliates, parent or subsidiary corporations, or other legal entities that are
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`financially interested in the outcome of the case.” N.D. Tex. L.R. 3.1(c), 3.2(e).5
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`Requiring LLCs and partnerships to identify members and partners is critical
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`to ensuring compliance with ethical requirements and maintaining public confidence
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`in the judiciary. See infra Part II. Indeed, this case aptly illustrates the wisdom of
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`supplementing Rule 7.1’s disclosures. Disclosing only entities that own 10% or
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`more of a company makes little sense in a case originally seeking over $4 billion in
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`damages—where, for example, an undisclosed 7% stake would be worth more than
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`$280 million and a 3% stake would be worth more than $120 million. Nor is it
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`sufficient to stop before reaching the corporations or individuals with an interest in
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`4 See also 4th Cir. R. 26.1(a)(2)(B)-(C); 5th Cir. R. 28.2.1; 6th Cir. R. 26.1(b)(1)-
`(2); 10th Cir. R. 46.1(D)(1)-(2); 11th Cir. R. 26.1-1(a)(1).
`5 See also, e.g., D. Md. L.R. 103.3(b) (similar); S.D. Ga. L.R. 7.1 (similar); N.D. Ga.
`L.R. 3.3 (similar); C.D. Cal. L.R. 7.1-1 (similar); N.D. Cal. L.R. 3-15 (similar);
`Standing Order for All Judges of the N.D. Cal. ¶ 18 (Oct. 20, 2022) (similar).
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`9
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`Case 1:18-cv-00966-CFC-CJB Document 996 Filed 12/09/22 Page 19 of 42 PageID #: 38438
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`
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`LLCs and partnerships, given that LLCs, partnerships, and LPs can all function as
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`pass-through entities. See supra n.3.
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`Ownership information is routinely disclosed in diversity suits where
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`“citizenship of an LLC is determined by the citizenship of its members” and “where
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`an LLC has, as one of its members, another LLC, the citizenship of unincorporated
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`associations must be traced through however many layers of partners or members
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`there may be.” Zambelli Fireworks Mfg. Co. v. Wood, 592 F.3d 412, 420 (3d Cir.
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`2010) (internal quotation marks omitted); see also Fed. R. Civ. P. 7.1(a)(2) (revised
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`effective Dec. 1, 2022).
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`If anything, the Order and the companion Standing Order Regarding Third-
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`Party Litigation Funding Arrangements are underinclusive with respect to screening
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`for potential conflicts. For example, VLSI has exploited the wording of the two
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`standing orders to omit from its response that NXP is entitled to receive a percentage
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`of any judgment in this case.6 VLSI’s response also did not mention that Fortress
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`stands to receive
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` in the form of
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`. Ex. 10 (122:9-
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`123:21). Nor did it mention that Fortress is providing free in-house legal counsel to
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`VLSI. See D.I. 979-1, Ex. D (31:4-19, 35:13-36:20).
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`6 VLSI elsewhere pointed out that NXP has a financial interest in the litigation. D.I.
`834 at 14. But VLSI made this disclosure only because it perceived an advantage in
`doing so, whereas VLSI evidently decided that the standing orders did not require it
`to disclose NXP’s interest in any proceeds from the litigation.
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`10
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`Case 1:18-cv-00966-CFC-CJB Document 996 Filed 12/09/22 Page 20 of 42 PageID #: 38439
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`Because there is no conflict between the Order and any rule or statute, the
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`Court has the authority to issue and enforce it under Rule 83(b).
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`B.
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`The Court Also Has Inherent Authority To Issue And Enforce The
`Order
`The Court also has inherent authority to craft procedures governing litigation
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`
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`before it. See Eash v. Riggins Trucking Inc., 757 F.2d 557, 563 (3d Cir. 1985). A
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`court’s power to regulate practice before it has been recognized since the early days
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`of the Constitution. E.g., United States v. Hudson & Goodwin, 11 U.S. (7 Cranch)
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`32, 34 (1812); Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991) (collecting cases).
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`“The Federal Rules of Civil Procedure set out many of the specific powers of a
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`federal district court,” but “they are not all encompassing.” Dietz v. Bouldin, 579
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`U.S. 40, 45 (2016). The Supreme Court has thus “long recognized that a district
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`court possesses inherent powers that are ‘governed not by rule or statute but by the
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`control necessarily vested in courts to manage their own affairs so as to achieve the
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`orderly and expeditious disposition of cases.’” Id. (citation omitted).
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`II. The Order Is Necessary To Prevent Conflicts Of Interest And The
`Appearance Of Impropriety
`VLSI’s compliance with the Order is necessary to ensure that the Court does
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`not violate 28 U.S.C. § 455. Without knowing which companies and individuals
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`have an interest in the outcome of this case, the Court cannot be certain that it does
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`not have a disqualifying financial or personal conflict.