Integrated Systems and Wind River Systems
Bionic Buffalo licensed some software to Integrated Systems Inc. (ISI), which was to act as a distributor. Bionic Buffalo was to be paid whenever Integrated Systems billed their own customers for a sub-license. ISI billed its customer KETI, but did not pay. In fact, they lied about the existence of the invoice, even after KETI had paid it. After six months or so, Bionic Buffalo cancelled the contract, which terminated the distribution agreement, but the money still owing. ISI filed several arbitration claims, but cancelled each of them before they came to a hearing. Eventually, ISI paid, but refused to recognize the contract cancellation. Finally, Bionic Buffalo filed suit against ISI.
Nevada First Judicial District Court, Dept. 2, No. 98-00268A.
In accordance with the terms of the contract, the Court orders arbitration.
At the time of the Complaint, ISI was still using Bionic Buffalo code. After they were sued, ISI realized their free ride was ending, and they decided to develop replacement software. About a month after they had been served, they hired a contractor to look into creating new code.
American Arbitration Association, No. 79 117 00112 99
The arbitrators (Leland Eugene Backus, Lee Hollaar, and M. Scott Donahey) supposedly had backgrounds in intellectual property and computer software. Maybe, but they were either clueless about the law, or refused to deal with it. Furthermore, they ignored the evidence. Corrupt? or just stupid? Read the record, and decide for yourself.
(Arbitration as practiced has a serious problem: greed. The arbitrators are always looking for more business. The best way to get more business is to establish yourself as biased towards the party who, directly or through its law firm or by referral, will give you the most business. The arbitrators are paid by the hour, so rainmaking is everything to them. So they will usually lean toward the larger or best connected party, depending on who will give them more business. Since most arbitrations are confidential, the little guy has almost no chance of seeing their records. With real judges you have a chance to read their opinions, usually made public. Furthermore, courts rarely overturn arbitration awards, no matter how bad. All of these things breed corruption. A lesson I learned too late: avoid arbitration clauses whenever possible.)
In their decision, the arbitrators granted one prayer for relief: they ordered ISI not to use the Bionic Buffalo code. However, by that time, ISI had developed replacement code, so it was not difficult for ISI to comply with the order. All of the previous misappropriation and breaches were ignored.
Finally, although the only relief was granted to Bionic Buffalo, they declared ISI the prevailing party. The definition of a prevailing party has been addressed all the way up to the U.S. Supreme Court, and the arbitrators got it wrong. A prevailing party is the party obtaining relief, and ISI obtained no relief. But the arbitrators didn't bother to trouble themselves with the law, they made that up as they went along.
The reason the prevailing party question is significant is that the prevailing party (according to the contract) collects reasonable attorney fees. Effectively, the arbitrators had ordered the winner to pay the losers.
(At some point I'll post the arbitrator's award and some of the exhibits. It's an amazing example of trying to justify a decision by ignoring the evidence, instead of using the evidence to decide the question.)
(after arbitration, back to) Nevada District Court
The foregoing was brought to the attention of the district court judge William A. Maddox. Maddox, however, was about to retire, and apparently didn't give a damn about the cases remaining on his desk. Shortly before he left, he signed an order prepared in advance by one of ISI's attorneys. No explanation, no findings. Nevada expects district court judges to render findings of fact and law, and the Nevada Supreme Court has declared that such prepared orders, submitted prior to decisions by the Court, are a violation of due process. If you're a short timer, as was Judge Maddox, you don't care much about due process anymore, or about the rules.
So Bionic Buffalo appealed to the Nevada Supreme Court. (There is no appellate court in Nevada, the Supreme Court takes all of the appeals from district courts.)
(appeal to) Nevada Supreme Court
Shortly after the appeal was docketed, Bionic Buffalo lost its attorney. It was unable to find a new attorney, they all wanted lots of money, some wanted to be paid before even agreeing to take the case, so I decided to try and represent Bionic Buffalo myself.
It's common for courts to require attorneys to represent artificial entities such as corporations. In other state and Federal jurisdictions, the courts often waive the rule when there is a hardship, especially with small, closely held companies such as Bionic Buffalo. In Nevada, however, the lawyer's union (the Nevada State Bar) has a fairly tight lock on things, and hates competition. The Nevada Supreme Court (all lawyers, of course) backs them up. They say the rule is to protect “the public”, presumably from unqualified or unethical attorneys, but there is no “public” in this case: the officers, stockholders, employees, and directors are the same two people.
Eventually, the Nevada Supreme Court dismisses the appeal, apparently feeling that the interests of the union take precedence over the requirements of due process.
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