Boynton v. Headwaters, Inc. involved a tortured procedural history spanning thirteen years of litigation, arising out of a scheme to defraud corporate investors with implications concerning patents and patent licenses. As an interesting footnote, the appeal in the case was lodged initially with the Federal Circuit, but the Federal Circuit transferred it to the Sixth Circuit after determining that it no longer had jurisdiction over the matter. While there are myriad issues raised in this appeal, we will focus on a couple.
First, the Court made short work of the arguments seeking reversal of the $16 million judgment before turning to consider the arguments by plaintiffs seeking to increase their $16 million judgment. However, the Court emphasized the difficulty in that task, given the deference with which the jury’s damage award is afforded. Plaintiffs sought $43 million in damages, but the Sixth Circuit found nothing in the record to compel the conclusion that “a reasonable juror” could not arrived at the $16 million figure. Relatedly, the plaintiffs had challenged the district court’s implementation of a constructive trust, but again, this fell victim to a deferential standard of review. The Sixth Circuit reviews equitable remedies, including constructive trusts, for an abuse of discretion. Under Tennessee law, moreover, a court of equity imposing a constructive trust is bound by “no unyielding formula.”
Judge McKeague dissented, concluding that the plaintiffs lacked standing. He premised his dissent on the applicable corporate survival statute and argued that because the plaintiffs filed their suit after the requisite survival period expired, their claims were extinguished unless they fell within limited exceptions. Judge McKeauge would have held that the plaintiffs were harmed only indirectly and therefore their claim should be described as derivative in nature. As a result, under the applicable statute, the claims should be barred.
Notwithstanding the complexity of this case, and the amount of money at issue, the Court’s opinion was unpublished. That likely stems from the relative straightforward nature of the actual issues that the Court was deciding, but obviously it did prompt a dissent. The case is noteworthy in light of the amount of damages awarded, and helps illustrate some of the challenges in convincing the Court to disturb an amount awarded by the jury.