“Confirmed Judges, Confirmed Fears” is a blog series documenting the harmful impact of President Trump’s judges on Americans’ rights and liberties. Cases in the series can be found by issue and by judge at this link.
Trump Fifth Circuit judge Don Willett cast the deciding vote to affirm summary judgment and prevent a trial on claims that a corporation had committed fraud and breach of contract in selling rights to lighting technology. The January 2021 decision is Belliveau v Barco Inc.
Richard Belliveau, an inventor in the field of lighting technology, licensed his patents and other intellectual property exclusively to a company he helped found, High End Systems Inc., which was later acquired by Barco, a global technology corporation. Barco decided to sell High End and signed a letter of intent in early 2017 with Electronic Theater Controls Inc. (“ETC”). Before the sale was complete, and without telling Belliveau, Barco and High End reached a sublicense agreement, under which Barco received an exclusive license to all the patents and other intellectual property of High End and Belliveau for a lump sum of $75,000 plus future royalties, and Barco completed the sale to ETC a few days later. Belliveau was entitled to half the proceeds of any such sublicense agreement by prior agreement with High End, but the actual market value of that property was estimated at more than $90 million. Belliveau sued Barco, contending that as sole shareholder of High End, Barco was responsible for fraud against him because of the huge discrepancy between the payment for the sublicense agreement and the market value of the intellectual property. A district court granted summary judgment to Barco, and Belliveau appealed.
In a 2-1 decision in which Trump judge Willett provided the deciding vote, a Fifth Circuit panel affirmed. Under applicable state law, a shareholder like Barco could be legally responsible for the conduct and obligations of a corporation like High End to someone like Belliveau if it can be shown that the shareholder “used” the corporation to “perpetuate an actual fraud” for the benefit of the shareholder. While there was no question that Barco benefited from the sublicense agreement that Beliveau contended was fraudulent, the majority agreed with the lower court that Belliveau “did not provide sufficient evidence” to raise a “material issue of fact” as to whether there was “actual fraud.”
Judge W. Eugene Davis, who was nominated by President Ronald Reagan, firmly dissented. He wrote that Belliveau had clearly presented sufficient evidence to establish a “genuine issue of material fact” that Barco had committed fraud and had “dishonest purpose or deceptive intent.” In addition to evidence that the fair market value of the intellectual property was “drastically more” than what Barco paid -- $93 million to $356 million as opposed to $75,000 – this included a false statement in the sublicense agreement that Barco “already had” a license to use the intellectual property without any royalty payments as well as evidence that the agreement was “concealed” from Belliveau.
Overall, Judge Davis concluded, a jury could “reasonably infer that Barco committed actual fraud” in executing the sublicense agreement, and “Mr. Belliveau deserves to have a jury decide” the issue. As a result of Trump judge Willett’s deciding vote, however, Belliveau will not have that opportunity and other victims of such corporate fraud may find it harder to get a jury trial and obtain relief.