Nelson v. Adams USA, Inc., 529 U.S. 460 (2000)

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certiorari to the united states court of appeals for the federal circuit

No. 99-502. Argued March 27, 2000—Decided April 25, 2000

Ohio Cellular Products Corporation (OCP) sued respondent Adams USA,

Inc. (Adams), for patent infringement. The District Court dismissed OCP's claim and ordered OCP to pay Adams' costs and attorney fees. In awarding costs and fees, the court determined that petitioner Nelson, president and sole shareholder of OCP, had deceitfully withheld from the United States Patent and Trademark Office prior art that rendered OCP's patents invalid, and that this behavior constituted inequitable conduct chargeable to OCP. Fearing that OCP might be unable to pay the fee, Adams moved under Rule 15 of the Federal Rules of Civil Procedure to amend its pleading to add Nelson, personally, as a party from whom fees could be collected. Adams also asked the court, under Rule 59(e), to amend the judgment to make Nelson immediately liable for the fee award. The District Court granted Adams' motion in full. In affirming the judgment entered against Nelson, the Federal Circuit acknowledged that it was "uncommon" to add a party after the entry of judgment. Nevertheless, Nelson had not demonstrated prejudice, the Court of Appeals concluded, because he made no showing that anything different or additional would have been done to stave off the judgment had he been a party, in his individual capacity, from the outset. That court, over a vigorous dissent, was apparently satisfied that the District Court's simultaneous allowance of the pleading amendment and entry of judgment satisfied due process.

Held: The District Court erred in amending the judgment immediately upon permitting amendment of the pleading. Due process, as reflected in Rule 15 as well as Rule 12, required that Nelson be given an opportunity to respond and contest his personal liability for the fee award after he was made a party and before the entry of judgment against him. Pp. 465-472.

(a) Nelson was never afforded a proper opportunity to respond to the claim against him, but was adjudged liable the very first moment his personal liability was legally at issue. The Federal Circuit observed that as long as no undue prejudice is shown, due process is met if Rule 15's requirements for amended pleadings are met. But the requirements of Rule 15 were not met here, and due process does not countenance such swift passage from pleading to judgment in the

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