February 16, 2005
Ninth Circuit En Banc ruling in Gator.com v. LL Bean
Gator.com v. LL Bean, 2005 WL 351228 (9th Cir. Feb. 15, 2005). In 2001, LL Bean sent a C&D to Gator (now Claria). Gator responded by suing for a declaratory judgment. The district court dismissed Gator’s lawsuit for lack of personal jurisdiction over LL Bean. The Ninth Circuit reversed, and then granted an en banc rehearing.
So far, so good. Now things get weird. The parties brief the jurisdiction issue and make oral arguments. Then they reach a “confidential” settlement that “does not provide for the dismissal” of the Ninth Circuit appeal. The Ninth Circuit asks for a copy of the settlement agreement. The parties submit the agreement “under seal.” However, the Ninth Circuit learns that no court has ever agreed that the settlement was confidential. Therefore, the Ninth Circuit says “it is appropriate for us to disclose the settlement agreement's content because the outcome of our mootness inquiry hinges upon those specifics.”
Out goes the confidentiality seal. The Ninth Circuit proceeds to dish on the settlement terms:
Gator got a 3 month “wind-down” period where it could display up to 25 pop-ups per month over the LL Bean site. After that, the LL Bean site is off-limits to Gator. Gator also paid money (unfortunately not revealed) to LL Bean, and LL Bean waived all claims relating to the pop-ups.
Finally, the parties make a “side bet” on the 9th Circuit’s ruling. If LL Bean wins the ruling, it gets an extra $10k; otherwise no money is exchanged. Although the court’s discussion seems to suggest that other litigants have used side bets in the past as a way to preserve a lawsuit post-settlement, I find the approach uncomfortable. Gambling on the lawsuit’s outcome is illegal; why isn’t this?
The en banc majority concludes that LL Bean’s release of liability moots the appeal and dismisses the lawsuit. A minority would have let the lawsuit continue because the side wager was enough to provide an actual case or controversy. From my perspective, the majority got it right.
Of course, this leaves the adverse Ninth Circuit jurisdictional ruling against LL Bean as precedent.