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1N THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re:
) Chapter 11
MALIBU LIGHTING CORPOR,ATIgN,et a1.,1
) Case No. 15-1208p(KG) ) (Jointly Administered)
Debtors.
Hearing Date: December $, 2Q15,at 3:00 p.m. prevailing Eastern time Objection Deadline: December 1, 2915, at 4:OQ p.m. prevailing Eastern time
MOTION OF DEBTOR OUT~QOR DIRECT CORPORATION F/K/A THE BRINKMANN CORPORATION UNDER FED. R.$ANKR.P.9019 FOR AN ORDER APPROVING GENERAL RELEASE AND SETTLEMENT AGREEMENT WITH A&J MANUFACTURING,LLC AND A&J MANUFACTURING,INC. Outdoor Direct Corporation ~/k/a The Brinkmann Corporation("ODC"), one of the above-captioned debtors and debtors in possession (the "Debtors"), hereby moves this Court (the "Motion")for entry of an order approving the compromise and settlement of ODC's dispute with A&J Manufacturing, LLC,and A&J Manufacturing, Inc.(collectively,"A&J")pursuant to Rule 9019 ofthe Federal Rule of Bankruptcy Procedure (the `;$ankruptcv Rules"). A copy of the General Release and Settlement Agreement(the "Settlement") between ODC and A&J is A. In support ofthe Motion, ODC respectfully states as attached to this Motion as Exhibit follows: Jurisdiction 1.
The United States Bankruptcy Court for the District of Delaware (the
"Court") has jurisdiction over. this matter pursuant to 28 U.S.C. §§ 157 and 1334 and the 1 The Debtors, together with the last four digits Qf each Debtor's tax identification number, are: Malibu Lighting Corporation (0556); Outdoor Direct Corporation f/k/a The Brinkmann Corpgration (9246); National Consumer Outdoors Corporation f/k/a Dallas Manufacturing Company, Inc. (1153); Q-Beam Corporation (1560); Smoke `N Pit Corporation (9951); Treasure Sensor Corporation (9938); and Stubbs Collections, Inc. (6615). The location of the Debtors' headquarters and service address is 4215 McEwen Road, Dallas, TX 75244.
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Amended Standing Order ofReference from the United States .District CouNtfor the District of Delaware, dated February 29, 2Q12. This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2), and the Debtors confirm their consent pursuant to Rule 9013-1(~ of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware (the "Local Rules") to the entry of a final order by the Court in connection with this Motion to the extent that it is later determined that the Court, absent consent of the parties, cannot enter final orders or judgments in connection herewith consistent with Article III of the United States Constitution. 2.
Venue is proper pursuant to 28 U.S.C. §§ 14p8 and 1409.
3.
The statutory and rule .predicates for the relief sought in this Motion are
sections 105(a) and 363 of chapter 11 of Title 11, United States Code (the `Bankruptc~Code") and Rule 9019 ofthe Bankruptcy Rules. General Background 4.
On October 8, 2015 (the "Petition Date"), the Debtors each filed with this
Court a voluntary petition for relief under chapter 11 of the Bankruptcy Code commencing the instant Chapter 11 Case (the "Bankruptcy Case"). The Debtors are operating their businesses and managing their properties as debtors and debtors in pgssession pursuant to sections 1107(a) and 11 p8 ofthe Bankruptcy Code. 5.
On Qctober 20, 2015, the Office of the United States Trustee appointed an
Official Committee of Unsecured Creditors (the "Committee"). No request has been made for the appointment of a trustEe or an examiner in the Bankruptcy Case.
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The factual background regarding the Debtors, including their current and
historical business operations and the events precipitating the Bankruptcy Case, is set forth in detail in the Declaration of David M. Bakes in Support of First Day Motions [Docket No. 3], filed on the Petition Date. 7.
On October 16, 2015, QpC filed the Motion ofthe Debtor Outdoor Direct
CorpoNationf/k/a The Brinkmann Corporationfor an Order Pursuant to Sectzon 362 ofthe Bankruptcy Code Determining That Automatic Stay Is Inapplicable to Pending Litigation and Granting ReliefFrom Stay With Respect Thereto (the "Stay Relief Motion")[Docket No. 96] seeking authority to proceed with certain proceedings involving A&J. The United States International Trade Commission (the "ITC")interposed a response to the Stay Relief Motion [Docket No. 180] and A&J filed an objection [Docket No. 181]. Background with Respect to the Dispute 8.
On August 21, 2013, A&J filed a complaint with the ITC against several
respondents, including ODC,alleging a violation of 19 U.S.C. § 1337 for unfair trade practices (the "ITC Complaint"). A&J alleged that the respondents were importing products that infringe A&J's patents directed to dual mode bar{~ecue grills that combine a gas grill and a charcoal grill on a common support structure. A&J asserted infringement of one utility patent, U.S. Patent No. 8,381,712(the "`712 patent"), and two design patents, U.S. Patent Nos. D660,646 and D662,773,(collectively,"Asserted Patents") 9.
On the same day that A&J filed the ITC Complaint, A&J commenced a
lawsuit in the United States District Court for the Southern District of Georgia against ODC(and
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the other respondents, in separate cases)for patent infringement, pending under case number 2:13-cv-00114-LGW-JEG (the "District Court Case"). The District Court Case has been stayed, by motion pursuant to statute, pending the final outcome ofthe ITC Investigation (as defined below), including all appeals. A&J seeks damages based on ODC's sales of allegedly infringing grills from the issue dates ofthe Asserted Patents to the present. The `712 patent was issued on Feb. 26, 2013. The two design patents were issued on May 29, 2012, and July 3, 2012. 10.
The ITC instituted an investigation on September 26, 2013, designated
investigation number 337-TA-895 (the "ITC Investigation") with respect to each of the Asserted Patents. Before the hearing in connection with the ITC Investigation, A&J withdrew its infringement claims on the two design patents only from the ITC Investigation. 11.
As a result ofthe ITC Investigation, the ITC found a violation with respect
to ODC's importation of its accused dual mode grills Models 3800, 3802, and 3821, but not accused Mode13820, which the ITC found ODC had ceased importing before any ofthe Asserted Patents issued. The ITC also found that the claims ofthe `712 patent had not been proven invalid by clear and convincing evidence. The ITC subsequently issued a limited exclusion order("LEO") preventing OIaC from importing Models 3$00, 3802, and 3821 grills into the United States: ODC represents that, at the time ofthe issuance ofthe LEO;it had _ceased selling the accused products and had begun selling a redesigned product(Mode16340)that, based on QDC's interpretatipn ofthe ITC's claim construction rulings, QDC does not believe infringes the `712 patent. At all relevant times, QDC asserts that it only sold dual mode grills either directly to consumers or through an exclusive customer relationship with The Home
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Depot. On July 1, 2015, U.S. Customs ruled'that ODC is not restricted from importing the Mode16340 because it does not infringe the `712 patent. Neither party has sought or received a determination by the ITC whether Mode16340 infringes the `712 patent. 12.
A&J appealed the ITC's findings adverse to it to the U.S. Court of
Appeals for the Federal Circuit(the "Federal Circuit") with respect to the determination that one ofthe respondents do not infringe the `712 patent, as well other issues of claim construction. A&J's appeal is case number 2015-1494. ODC is an intervenor in A&J's ITC appeal number 2015-1494. ODC appealed the ITC's determination that the claims ofthe `712 patent were not proven invalid. ODC's appeal is case number 2015-1751. A&J is an intervenor in ODC's ITC appeal number 2015-1751. Collectively, these are referred to herein as the "ITC Appeals." 13.
The opening briefs in the ITC Appeals were to be due on October 19,
2015. However, on October 16, 2015,the Federal Circuit issued orders staying the ITC Appeals based on the pendency of the Bankruptcy Case and directing ODC to notify the court in the event that the bankruptcy stay is lifted. 14.
In addition, on October 13, 2014, ODC filed a petition for inter pates
review (the "IPR Proceeding") ofthe `712 patent before the United States Patent and Trademark Office (the "USPTO"),on the ground that the claims ofthe `712 patent are not patentable over the prior art. In March 2015, the USPTO granted ODC's petition, finding that ODC had shown a reasonable likelihood of success. A&J filed its response to the petition in July 2015, and ODC filed its reply on October 6, 2015. The proceeding is IPR2015-00056.
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Following the Petition Date, ODC filed the Stay Relief Motion seeking to
proceed with the ITC Appeals and the IPR Proceeding. The Stay Relief Motion was initially set for hearing before this Court on November 4, 2015. Prier to the hearing, A&J and ODC entered into good-faith, arms' length negotiations that resolved their pending disputes, as reflected in the Settlement. By agreement of ODC and A&J,the hearing scheduled for November 4, 2015, with respect to the Stay Relief Motion was adjourned pending documentation of the Settlement and the filing ofthis Motion. Settlement Details ODC and A&J entered into the Settlement described below, subject to
16.
Court approval.2 The Settlement essentially provides fora "walk-away" deal between ODC and A&J. The key terms ofthe Settlement are as follows: a. The effectiveness ofthe Settlement is contingent upon the Court entering an order approving the Settlement and such order becoming final and nonappealable (the "Effective Date"); b. Upon the Effective Date, A&J shall take all steps reasonably necessary to (i) dismiss the District Cpurt Case against ODC with prejudice, and (ii) terminate the IPR Proceeding, including preparing and filing a motion to jointly request termination ofthe IPR Proceeding. ODC will join A&J,as reasonably necessary, in seeking these results. After the filing of a joint
Z The terms ofthe Settlement summarized in this Motion in no way alter, change, or amend the actual terms set forth in the Settlement with A&J. In the event that there are any inconsistencies between this summary and the actual terms ofthe Settlement, the language set forth in the Settlement shall control.
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request to terminate the IPR Proceeding, to the extent necessary if the USPTO does not terminate the proceeding, ODC will ale a written notice withdrawing its participation as petitioner in the IPR Proceeding, withdraw the appearance of counsel in the IPR Proceeding, and not otherwise participate in the IPR Proceeding should it continue. Further, upon the Effective Date, ODC shall take all steps reasonably necessary to dismiss its ITC appeal number 201 S1751 and to withdraw as an intervenor in A&J's ITC appeal number 20151494; c. The hearing on the Stay Relief Motion shall be continued and, upon the Effective Date,the Stay Relief Motion shall be deemed withdrawn; d. A&J and ODC,upon the Effective Date, shall mutually release each other and their respective affiliates and representatives as to any claims or causes of action alleged in, arising from,related to or connected with the ITC Complaint,the Asserted Patents, the ITC Investigation, the District Court Case,the ITC Appeals,the IPR Proceeding, the Bankruptcy Case, and the Stay Relief Motion; e. A&J shall agree not to file or assert a claim against ODC in this bankruptcy case and that ODC may sell any remaining grills in its custody, possession or control, including dual mode grills designated Models 3800, 3802, 3820, 3821, and 6340(of which there should be no more than three copies remaining); and
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f. A&J shall release, subject to an express exclusion ofnon-affiliated parties to ODC,ODC's vendors, suppliers, distributors, resellers, and customers arising out of or related to any and all dual mode grills designated Models 3800, 3802, 3820, 3821, and 634p, including accessories and parts therefor, made or sold by or for ODC before the Effective Date. $asis for Relief 17.
By this Motion, ODC seeks approval ofthe Settlement with A&J as set
forth in Exhibit A to this Motion. 18.
Bankruptcy Rule 9019 provides that "[o]n motion by the trustee and after
notice and a hearing, the court may approve a compromise or settlement." See In re Martin, 91 F.3d 389, 393(3d Cir. 1996). In deciding whether to approve a settlement pursuant to Bankruptcy Rule 9019,the court shquld determine whether "the compromise is fair, reasonable, and in the interests ofthe estate." In re Marvel Entertainment Group, Inc., 222 B.R. 243, 249 (D. Del. 1998). The court must "assess and balance the value ofthe claim that is being compromised against the value to the estate ofthe acceptance ofthe compromise proposal." In re Martin, 91 F.3d at 393. 19.
In striking this balance, the court should consider the following factors:
"(1)the probability of success in litigation;(2)the likely difficulties in collection;(3)the complexity ofthe litigation involved, and the expense,inconvenience and delay necessarily attending it; and (4)the paramount interest ofthe creditors." Id. Courts generally defer to a trustee's business judgment when there is a legitimate business justification for the trustee's
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decision. Id. at 395. Bankruptcy Rule 9019(a) commits the approval or rejection of a settlement to the sound discretion of the bankruptcy court. In re Michael, 183 B.R. 230,232(Bankr. D. Mont. 1995). 20.
Moreover, settlements should be approved if they fall above the lowest
point on the continuum ofreasonableness. "[The] responsibility ofthe bankruptcy judge ... is not to decide the numerous questions oflaw and fact raised by the appellants but rather to canvass the issues and see whether the settlement falls] below the lowest point in the range of reasonableness." In re W.T. GNant Co.,699 F.2d 599,608(2d Cir. 1983);In re Planned Protective Servs., Inc., 130 B.R. 94,99 n.7(Bankr. C.D. Cal. 1991); see generally In re Blair, 538 F.2d 849, 851 (9th Cir. 1976)(court should not conduct a "mini-trial" on the merits of a proposed settlement). Thus,the question is not whether a better settlement might have been achieved or a better result reached if litigation pursued. Instead, the court should approve settlements that meet a minimal threshold ofreasonableness. Nellis v. Shugrue, 165 B.R. 115, 123 (S.D.N.Y. 1994); In re Tech.for Energy Corp., 56 B.R. 307, 311-312(Bankr. E.D. Tenn. 1985); In re Mobile AzN Drilling Co., Inc., 53 B.R. GOS,608(Bankr. N.D. Ohio 1985). 21.
The Settlement with A&J is in the best interests of ODC and its estate,
constitutes a reasonable resolution of disputes with A&J,and is clearly within the Debtors' sound business judgment. Most importantly, the Settlement provides this estate with the best outcome that ODC could hope to achieve if all of the pending proceedings involving A&J were to proceed—specifically, that A&J will have no claim against QDC. This result is achieved immediately under the Settlement, without the costs, risks, and delays associated with litigation.
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Probability of Success in Litigation 22.
Although ODC is confident that it will ultimately prevail in litigation with
A&J,there are always risks associated with patent infringement disputes, especially given that such litigation is pending in various tribunals. A&J has asserted claims in the millions of dollars against ODC for patent infringement and associated damages. Those claims are pending in the District Court Case and are related to the ITC Appeals and the IPR Proceeding. There is no certainty as to the outcome of any ofthese proceedings. Yet, under the Settlement, all such matters are resolved and A&J will walk away from its claims against A&J. B.
Likely Difficulties in Collection 23.
ODC does not have any affirmative claims against A&J that would need to
be collected, but A&J has asserted millions of dollars of claims against this estate that, if allowed, would significantly dilute the unsecured claims pool and reduce recoveries to the holders of allowed general unsecured claims. Under the Settlement, this risk is immediately eliminated and there will be no need to reserve for the possible allowance of A&J's claims against ODC,or to have such claims estimated by this Court. C.
Camnlexity of the Litigation Involved, and Expense,Inconvenience and Delay 24.
A&J's claims against ODC are complex patent infringement matters. It is
for this reason that ODC filed the Stay Relief Motion in the first place. The parties' disputes are technical in nature and, hence, best addressed by the Federal Circuit and the USPTO, where the matters were pending as ofthe Effective Date. Although a significant portion ofthe briefing in these proceedings has been completed, additional briefing and argument will be required, and
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subsequent appeals could take significant time to resolve. The underlying District Court Case also remains pending and the outcome of A&J's patent infringement claims ultimately might need to be litigated, depending on the outcome of the ITC Appeals and-the IPR Proceeding. Taken together, significant time and expense remains to be dedicated to the disputes between ODC and A&J,absent the Settlement. D.
The Paramount Interests of Creditors 25.
The Settlement furthers the paramount interests of creditors in this case by
resolving a complex patent infringement dispute with A&J through a "walk away" deal. A potential multi-million dollar claim against ODC is resolved through a global mutual release. 26.
For all the reasons set forth above,the Settlement is fair, reasonable, and
in the best interest of ODC's estate and is well supported by ODC's business judgment. ODC submits that this Court should approve the Settlement. No Prior Repuest 27.
No prior motion for the relief requested herein has been made to this or
any other Court. Notice 28.
Notice ofthis Motion has been given to:(a)the Office ofthe United States
Trustee;(b)counsel for the Committee;(c) counsel for the Debtors' prepetition and postpetition lenders;(d)counsel for A&J;(e) counsel for the ITC; and(~ any party that has requested notice pursuant to Bankruptcy Rule 2002. ODC submits that, in light ofthe nature ofthe relief requested, no gther or further notice need be given.
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Conclusion WHEREFORE,ODC respectfully requests that this Court enter the attached order granting the Motion approving the Settlement attached as Exhibit A to the Motion, and grant such other and further relief as the Court deems just and equitable.
Dated: November 17, 2015
PACHULSKI STAND ZIEHL &JONES LLP
Jeffrey N. Pomerantz(CA Bar No.143717) Maxim $. Litvak(CA Bar No. 215852) Michael R. Seidl(DE Bar No. 3889) 919 North Market Street, 17th Floor P.O. Box $705 Wilmington, DE 19899-8705 Telephone: 302/652-4100 Facsimile: 302/652-4400
[email protected] E-mail:
[email protected] mseidl~pszjlaw.com Counsel for the Debtors and Debtors in Possession
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IN THE UNITED STATES BANKRUPTCY COURT FQR THE DISTRICT OF DEI,.A~VARE
) Chapter l l
In re:
MALIBU LIGHTING CpRPORATION,et al.,l) Case No. 15-1208Q(KG) Debtors.
) (Jointly Administered)
Hearing Date: December 8, 2015, at 3:OQ p.m. prevailing Eastern time Objection Deadline: December 1, 2015, at 4:00 p.m. prevailing Eastern time
NgTICE OF MOTION OF DEBTQR OUTDQOR DIRECT CORPQRATION F/K/A THE BRINKMANN CQRPORATIQN UNDER Fula. R. BANKR.P.9019 FOR AN ORDER APPROVING GENERAL RTL~ASE AND SETTLEMENT AGREEMENT WITH A&J MANUFACTURING,LLC AND A&J MANUFACTURING,INC. TO:
(a)the Office ofthe United States Trustee;(b)counsel for the Committee;(c) counsel for the Debtors' prepetition and postpetition lenders;(d)counsel for A&J;(e)counsel for the ITC; and(~ any party that has requested notice pursuant to Bankruptcy Rule 2002. PLEASE TAKE NOTICE that on November 17, 2015, the above-captioned
debtors and debtors in possession (the "Debtors") filed.the Motion ofDebtor Outdoor Direct Corporationf/k/a The Brinkmann Corporation Under'Fed. R. Bankr. P. 9019for an Oder Approving General Release and SettlementAg~eement with A&J Manufacturing, LLC and A&1 Manufacturing, Inc. (the "Motion") with the United States Bankruptcy Court for the District of Delaware, 824 North Market Street, Wilmington, Delaware 19801 (the `Bankruptcy Court"). A copy ofthe Motion is attached hereto. PLEASE TAKE FURTHER NOTICE that any response or objection to the entry of an order with respect to the relief sought in the Motion must be filed with the Bankruptcy Court on or before December 1,2015, at 4:40 p.m. prevailing Eastern time. ' The Debtors, together with the last four digits of each Debtor's tax identification number, are: Malibu Lighting Corporation (0556); Outdoor Direct Corporation f/k/a The Brinkmann Corporation (9246); National.Consumer Outdoors Corporation f/k/a Dallas Manufacturing Company, Inc. (1153); Q-Beam Corporation (1560); Smoke `N Pit Corporation (9951); Treasure Sensor Corporation (9938); and Stubbs Collections, Inc. (6615). The location of the Debtors' headquarters anti service address is 4215 McEwen Road, Dallas, TX 75244.
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PLEASE TAKE FURTHER NOTICE that at the same time, you must also serve a copy ofthe response or objection upon:(i) counsel to the Debtors: (a)Pachulski Stang Ziehl &Jones LLP,919 North Market Street, 17th Floor, Wilmington, DE 19801, Attn: Michael R. Seidl, ~sq.,
[email protected], and(b)Pachulski Stang Ziehl &Jones L,LP, 10100 Santa Monica Blvd., 13th Floor, Los Angeles, California 90067, Attn: Jeffrey N. Pomerantz,
[email protected];(ii) counsel for dank of America, N.A. as Agent, Issuer, and Guaranty Agent,(a)Buchanan Ingersoll &Rooney,FC,919 North Market Street, Suite 1500, Wilmington, DE 19801, Attn: Kathleen A. Murphy, Esq., kathleen.murphy@bipacom and (b) Bryan Cave LLP,Two North Central Avenue, Suite 220Q,Phoenix, AZ, Attn: Robert J. Miller, Esq.,
[email protected] and Brian C. Walsh, Esq.,
[email protected];(iii) Office ofthe U.S. Trustee, 844 King Street, Suite 2207, Lockbox 35, Wilmington, DE 19801, Attn: Linda Casey,
[email protected]; and (iv) counsel for CQmerica Bank:(a) Jackson Waller L.L.P., 1401 McKinney Street, Suite 1900, Houston, TX 77Q10, Attn: Bruce J. Ruzinsky, Esq.,
[email protected], and (b)Buchanan Ingersoll &Rooney PC,919 North Market Street, Suite 1500, Wilmington, DE 19801-3046, Attn: Peter J. Duhig, Esq., peter.duhig@bipacom. PLEASE TAKE FiJRTH~R NOTICE THAT IF YOU FAIL TO RESPOND IN ACCORDANCE WITH THIS NOTICE,THE COURT MAY GRANT THE RELIEF REQUESTED 1N THE MOTION WITHOUT FURTHER NOTICE OR HEARING. PLEASE TAKE FURTHER NOTICE THAT A HEARING TO CONSIDER THE RELIEF SOUGHT IN TI-3E MOTION WILL BE HELD ON DECEMBER 8,2015, AT 3:00 P.M.PREVAILING EASTERN TIME BEFpRE THE HONORABLE KEVIN GROSS, UNIT~~ STATES BANKRUPTCY JUDGE,AT THE UNITED STATES BANKRUPTCY
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COURT FOR THE DISTRICT OF DELAWARE,824 NORTH MARKET STREET,SIXTH FLOOR,COURTROOM 3, WILMINGTON,DELAWARE 19801.
Dated: November~~2015
PACHULSKI STANG ZIEHL &JONES LLP
Jeffrey N.Pomerantz(CA Bar No.143717) Maxim B. Litvak(CA Bar No. 215852) Michael R. Seidl (ICE Bar No. 3889) 919 North Market Street, 17th Floor P.O. Box 8705 Wilmington, DE 19899-8705 Telephone:302/652-4100 Facsimile: 302/652-440Q
[email protected] E-mail:
[email protected] [email protected] Counsel to the Debtors and Debtors in Possession
Kj
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EXHIBIT A
(Settlement Agreement)
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GENERAL RELEASE AND SETTLEMENT AGREEMENT This GENERAL RELEASE ANA SETTLEMENT AGREEMENT (this "Agreement") is entered into as ofthis 17th day of November, 2Q15, by and between (i) Outdoor Direct Corporation f/k/a The Brinlcmann Corporation("qDC" or the "Debtor"), as debtor and debtor in possession in the chapter 11 case described in the recitals below, and (ii) A&J Manufacturing, LLC and A&J Manufacturing, Inc.(together,"A&J"). The Debtor and A&J are referred to herein collectively as the "Parties" and each individually as a "Party". RECITALS WHEREAS,on August 21,2Q13, A&J filed a complaint with the United States International Trade Commission (the "ITC")against several respondents, including ODC, alleging a violation of 19 U.S.C. § 1337 fpr unfair trade practices (the "ITC Complaint"). A&J alleged that the respondents were importing products that infringe A&J's patents directed to dual mode barbecue grills that combine a gas grill and a charcoal grill qn a common support structure. A&J asserted one utility patent, U.S. Patent No. 8,381,712(the "`712 patent"), and two design patents, U.S. Patent Nos. D660,646 and p662,773,(collectively,"Asserted Patents"); WHEREAS,on the same day that A&J filed the ITC Complaint, A&J commenced a lawsuit in the United States District Court for the Southern District of Georgia against ODC(and the other respondents, in separate cases) fqr patent infringement, pending under case number 2:13-cv-00114-LGW-JEG (the "District Gourt Case"). The District Court Case has been stayed, by motion pursuant to statute, pending the final outcome ofthe ITC Investigation(as defined Uelow), including all appeals. A&J seeks damages based on ODC's sales ofthe grills from the issue dates ofthe Asserted Patents to the present. The `712 patent was issued on Feb. 26, 2013. The two design patents were issued on May 29 and July 3, 2012; WHEREAS,the ITC instituted the investigation on September 26, 2013, designated investigation number 337-TA-895 (the "ITC Investi~ion"), with respect to each ofthe Asserted Patents. Before the hearing in connection with the ITC Investigation, A&J withdrew its infringement claims on the two design patents only from the ITC Investigation; WHEREAS,as a result ofthe ITS Investigation, the ITC found a violation with respect to ODC's importation of its accused dual mode grills Models 3800, 3802, and X821, but not accused Mode13$20, which the ITC found ODC had ceased importing before any ofthe Asserted Patents issued. The ITC also found that the claims ofthe `712 patent had not been proven invalid by cleax and convincing evidence. The ITC subsequently issued a limited exclusion order("LEO")preventing ODC from importing Models 3800, 3802, and 3$21 grills into the United States. ODC represent$ that, at the time ofthe issuance ofthe LEO,it had ceased selling the accused products and had begun selling a redesigned product(Mode1634Q)that, based on ODC's interpretation ofthe ITC's claim construction rulings, ODC does not believe infringes the `712 patent. At all relevant times, ODC asserts that it only sold dual mode grills either directly to consumers or through an exclusive customer relationship with The Home Depot. On July 1, 2015, U.S. Customs ruled that ODC is not restricted from importing the Mode16~40 because it does not infringe the `712 patent. Neither Party has sought or received a determination by the ITC whether Mode16340 infringes the `712 patent; DOCS SF:89121.3 10821-002
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WHEREAS,A&J appealed the ITC's findings adverse to it to the U.S. Court of Appeals for the Federal Circuit(the "Federal Circuit") with respect to the determination that one ofthe respondents do not infringe the `712 patent, as well other issues of claim construction. A&J's appeal is case number 2015-1494. ODC is an intervenor in A&J's ITC appeal number 20151494. ODC appealed the ITC's determination that the claims ofthe `712 patent were not proven invalid. ODC's appeal is case number 2015-1751. A&J is an intervenor in ODC's ITC appeal number 2015-1751. Collectively, these are referred to herein as the "ITC Appeals"; W~IEREAS,the opening briefs in the ITC Appeals were to be due on October 19, 2015. However, on October 16, 2015, the Federal Circuit issued orders staying the ITC Appeals based on the pendency of the Debtor's bankruptcy case and directing the Debtor to notify the court in the event that the bankruptcy stay is lifted; WHEREAS,on October 13, 2014, ODG filed a petition for inter partes review (the "IPR Proceeding")ofthe `712 patent before the United States Patent and Trademark Office (the "USPTO"),on the ground that the claims ofthe `712 patent are not patentable over the prior art. The proceeding is IPR2015-00056; WHEREAS,on October 8, 2015,the Debtor, and its jointly administered affiliates, each filed a voluntary petition for relief under chapter 11 of title 11 ofthe United States Code (the "Bankruptcy Code")in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"), pending under jointly administered case number 15-12080(the "Bankruptcy"). The Debtor is operating its business and managing its properties as debtor and debtor in possession pursuant to sections 1107(a) and 1108 ofthe Bankruptcy Code; WHEREAS,on October 16, 2Q15, the Debtor filed its Motionfor An Order Pursuant to Section 362 ofthe Bankruptcy Code Determining that Automatic Stay is Inapplicable to Pending Litigation and Granting Relieffrom Stay With Respect Thereto [Docket No. 96](the"Stay Motion"), seeking authority of the bankruptcy Court to proceed with the ITC Appeals and the IPR Proceeding, to which A&J objected [T?ocket No. 181] and the ITC filed ~ response [Docket No. 180]; WHEREAS,ODC desires to resolve the outstanding disputes with A&J as part of its liquidating chapter 11 case; and WHEREAS,after good-faith, arms' length negotiations, the Parties have resolved their disputes regarding the ITC Complaint,the Asserted Patents, the ITC Investigation, the District Court Case, ODC's ITC appeal number 2015-1751,the IPR Proceeding, the Bankruptcy Case, and the Stay Motion. NOW,THEREFORE,based on the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:
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AGREEMENT Incorporation of Recitals. Each Party acknowledges that the foregoing recitals 1. are true and correct to the best of the Parties' knowledge, are hereby adopted, incorporated herein by reference, and are made a part ofthis Agreement. Dismissal or Termination of Pending Proceedings. Upon the Effective Date, 2. A&J shall take all steps reasonably necessary to (a) dismiss the District Court Case against ODC with prejudice, and (b)terminate the IPR Proceeding, including preparing and filing a motion seeking to jointly request termination ofthe I~'R Proceeding. ODC will join A&J,as reasonably necessary, in seeking these results. Further, upon the Effective Date, ODC shall take all steps reasonably necessary to dismiss its ITC appeal number 2015-1751, and to withdraw as an intervenor in A&J's ITC appeal number 2015-1494. After the filing of a joint request to terminate the IPR Proceeding, to the extent necessary if the USPTQ does not terminate the proceeding, ODC will file a written notice withdrawing its participation as petitioner in the IPR Proceeding, withdraw the appearance of counsel in the IPR Proceeding, and not otherwise participate in the IPR Proceeding should it continue. The Parties agree that the hearing on the Stay Motion shall be continued pending the occurrence ofthe Effective Date and, upon the occurrence ofthe Effective Date, shall be deemed withdrawn. The Parties covenant and agree to cooperate with each other following the Effective Date in obtaining the dismissal or termination of all pending proceedings referenced herein. Effective Date. The Parties' rights and obligatigns under this Agreement shall be 3. contingent and specifically conditioned upon entry by the Bankruptcy Court of an order approving this Agreement becoming final and non-appealable (the "Effective Date"). 4.
Representations, Warranties, and Covenants.
Mutual Representations and Warranties. Each Party makes the following a. representations and warranties, solely with respect to itself, to each ofthe other Parties: Enforceability. This Agreement is a legal, valid and binding i. obligation of each Party, enforceable against it upon the Effective Date in accordance with its terms. No Consent or Approval. With the exception of approval by ii. Bankruptcy Court in the Bankruptcy Case, no consent or approval is required by any other entity for it to carry out the provisions ofthis Agreement. Power and Authority. The Party has all requisite power and iii. and to carry out the transactions contemplated by, and Agreement enter into this authority to perform its respective obligations under, this Agreement. Authorization. Upon the Effective Date, the execution and iv. delivery ofthis Agreement- and the performance of its obligations hereunder have been duly authorized by all necessary action on its part. 3 DOCS SF:89121.3 10821-002
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No Conflicts. The execution, delivery and performance ofthis v. shall not: (a) violate any provision of law, rule or regulations applicable not and Agreement does to it or any of its subsidiaries; or(b) violate its certificate Qfincorporation, bylaws or other organizational documents or those of any of its subsidiaries. vi. No Material Misrepresentations. Each Party represents that it has not materially misrepresented any fact set fgrth qr referred to herein on which another Party could reasonably rely in entering into this Agreement, including without limitation, the specific representations by ODC that The Home Depot and OpC have been the only sellers and distributors ofthe grills, the number of grills remaining in ODC's inventory, and that ODC is not importing any additional grills. The specific representations concerning The Home Depot,the number of grills remaining in ODC's inventory, and that ODC is not importing any additional grills, are material representations in this Agreement. Non-Reliance on Representations Outside Agreement. Each Party b. acknowledges that it is not relying on any representations, warranties, covenants, restrictions, promises or undertakings in entering into this Agreement, other than those expressly set forth or referred to herein. Approval ofthis Agreement. The Debtor shall, as soon as reasonably c. practicable, file a motion with the Bankruptcy Court to obtain approval ofthis Agreement pursuant to Bankruptcy Rule 9019, and shall take any other reasonable steps to obtain such approval, which motion shall be supported by A&J. 5.
Releases.
A&J Releases in Favor of OIaC. Except for claims and obligations a. expressly preserved under this Agreement, upon the occurrence ofthe Effective Date, A&J on its own behalf and on behalf of any and all of its Affiliates, estates, agents, attorneys, representatives, employees, officers, directors, successors and assigns, shall be deemed to withdraw, release, remise, forgive, acquit; settle, compromise and forever discharge ODC,and each of its respective current and former Affiliates, estates, agents, attorneys, advisors, representatives, employees, officers, directors, predecessors, successors and assigns (collectively, the "ODC Released Parties"),from any and all claims, demands, debts, liabilities, contracts, obligations, accounts, torts, causes of action, or claims for relief of whatever kind or nature, whether known or unknown or suspected or unsuspected by the releasing party, which such same releasing party may have, claim to have, or have at any time heretofore had or claimed to have had, or that may hereafter accrue against any ofthe ODC Released Parties arising out of or relating to any transaction, occurrence, act, or omission involving or connected with the ITC Complaint, asserted infringement ofthe `712 Patent, the ITC Investigation, the District Court Case,the ITC Appeals, the IPR Proceeding, the Bankruptcy Case, and the Stay Motion, including without limitation the manufacture, importation, marketing, advertising, distribution, offer for sale, sale, or use of any ofthe ODC grills Models 3800, 3802, 3820, 3821, and 6340 (the"ODC Released Grills") and any claims or causes of action for infringement of any of the Asserted Patents as asserted in the ITC Complaint,the.ITC Investigation, and the District Court 4 DOCS_SF:89121.3 10821-002
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Case, by whomever asserted, whether at this time known or suspected, unknown or unsuspected, anticipated or unanticipated, direct or indirect, fixed or contingent, that may presently exist or become known in the future, in law or in equity, arising prior to the Effective Date (collectively, the "ODC Released Claims"). A&J agrees that this release of the ODC Released Claims shall operate as a complete bar to any such ODC Released Claims against the ODC Released Parties. A&J further agrees(a) not to file or assert any QDC Released Claims against ODC or its Affiliates in the Bankruptcy Case, and (b)that QDC may sell or cause to be sold any remaining Models 3800, 3802, 3820, 3821, and 634p grills, of which ODC represents it only has possession or control of one Model 3802 grill and one Mode13821 grill. The ODC Released Parties do not include(a) mere contractual privies of ODC and other non-Affiliates of ODC;(b)any ofthe other respondents in the ITC Investigation and/or district court actions, and their agents, subsidiaries, privies, vendors, suppliers, distributors, resellers, and customers to the extent, and only to the extent, that they are alleged to be infringing, or have been held to infringe any ofthe Asserted Patents by reason of manufacturing, importing, offering to sell, selling, or using grills other than the ODC Released Grills, or inducing others to do so; and (c) any other person or entity that made,imported, offered to sell, sold, or used a competing grill to the grill ofthe `712 patent and/or the ODC Released Grills. A&J Limited Releases in Favor of Grill-Related Parties. Except for b. claims and obligations expressly preserved under this Agreement, upon the occurrence ofthe Effective Date and subject to the truth and accuracy ofthe material representations of ODC in this Agreement, A&J on its own behalf and on behalf of any and all of its Affiliates, estates, agents, attorneys, representatives, employees, officers, directors, successors and assigns, shall be deemed to withdraw, release, remise, forgive, acquit, settle, compromise and forever discharge each of ODC's vendors, suppliers, distributors, resellers, and customers, and each oftheir respective current and former Affiliates, estates, agents, attorneys, advisors, representatives, employees, officers, directors, predecessors, successors and assigns,(collectively, the "GrillRelated Released Parties")from any and all claims, demands, debts, liabilities, contracts, obligations, accounts, torts, causes of action, or claims for relief of whatever kind or nature, whether known or unknown or suspected or unsuspected by the releasing party, which such same releasing party may have, claim to have, or have at any time heretofore had or claimed to have had, or that may hereafter accrue against any ofthe Grill-Related Released Parties arising out of or related to any transaction, occurrence, act, or omission involving or connected with-the manufacture, importation, marketing, advertising, distribution, offer for sale, sale, or use of any of the ODC Released Grills, including accessories and parts therefor, that were made or sold by or for ODC before the Effective Date (the"Pre-Settlement Accused Grills, Accessories, and Parts"), including without limitation any claims or causes of action for infringement of any ofthe Asserted Patents arising therefrom, by whomever asserted, whether at this time known or suspected, unknown or unsuspected; anticipated or unanticipated, direct or indirect, fixed or contingent, that may presently exist or arise in the future, in law qr in equity, with respect to the Pre-Settlement Accused Grills, Accessories, and Parts (collectively, the "Grill-Related Released Claims"). A&J agrees that this release ofthe Grill-Related Released Claims shall operate as a complete bar to any such Grill-Related Released Claims against the Grill-Related Released Parties. For the avoidance of doubt, such release shall extend to the Grill-Related Released
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Parties' distribution, offer for sale, sale, use, and repair after the Effective Date ofPre-Settlement Accused Grills, Accessories and Parts, and to the manufacture, importation, distribution, offer for sale, sale, and use after the Effective Date of repair parts for repair ofPre-Settlement Accused Grills, Accessories and Parts. A&J gives this limited release expressly based upon the representation of ODC that the only entities selling the OIaC Released Grills have been ODC itself and The Home Depot. The Grill-Related Released Parties do not include (a) any ofthe other respondents in the ITC Investigation and/or district court actions, and their agents, subsidiaries, privies, vendors, suppliers, distributors, resellers, and customers to the extent, and only to the extent, that they are alleged to be infringing, or have been held to infringe A&J's patents by manufacturing, importing, offering to sell, selling, or-using grills other than the ODC Released Grills, or by inducing others to do so;(b)any other person or entity that has made,imported, sold, offered to sell or used a competing grill to the grill ofthe `712 patent and/or the ODC Released Grills; or (c)any person or entity that engages in reconstruction of any ODC Released Grills after the Effective Date. ODC Releases in Favor of A&J. Except for claims and obligations c. expressly preserved under this Agreement, upon the occurrence ofthe Effective Date, ODC on its own behalf and on behalf of any and all of its Affiliates, estates, agents, attorneys, representatives, employees, officers, directors, successors and assigns, shall be deemed to withdraw, release, remise, forgive, acquit, settle, compromise and forever discharge A&J,and each of its respective current and former Affiliates, estates, agents, attorneys, advisors, representatives, employees, officers, directors, predecessors, successors and assigns (collectively, the "A&J Released Parties"), from any and all claims, demands, debts, liabilities, contracts, obligations, accounts, torts, causes of action, or claims for relief of whatever kind or nature, whether known or unknown or suspected or unsuspected by the releasing party, which such same releasing party may have, claim to have, Qr have at any time heretofore had or claimed to have had, or that may hereafter accrue against any ofthe A&J Released Parties by reason of any transaction, occurrence, act, or omission related to any claims or causes of action alleged in, arising from,.related to or connected with the ITC Complaint, asserted infringement of the `712 Patent, the ITC Investigation, the District Court Case,the ITC Appeals,the IPR Proceeding, the Bankruptcy Case, and the Stay Motion, by whomever asserted, whether at this time known or suspected, unknown or unsuspected, anticipated or unanticipated, direct or indirect, fixed or contingent, that may presently exist or arise in the future, in law or in equity (collectively, the "A&J Released Claims"). ODC agrees that this release of the A&J Released Claims shall operate as a complete bar to any such A&J Released Claims. ODC further agrees not to file, participate in, cooperate with, or assist any other individual or entity in connection with any proceedings seeking any adverse ruling,judgment, or similar outcome or result concerning the Asserted Patents. QDC also further covenants to not bring suit, attempt to enjoin, or otherwise interfere with A&J's manufacture, sale, use, and offers to sell grills and/or other business-related endeavors of A&J while this Agreement remains in force. Waiver of Cal. Civ. Code § 1542. Solely to the extent ofthe releases d. each ofthe Parties hereby waives all rights conferred by the Agreement, provided in this
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provisions of California Civil Code § 1542 and/or any similar state or federal law. California Civil Code § 1542 provides as follows: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DpES NOT KNOW OR SUSPECT TO EXIST 1N HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNQWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED.HIS pR HER SETTLEMENT WITH THE DEBTOR. The Parties understand and acknowledge the significance and consequence oftheir waiver of § 1542 ofthe California Civil Code, as well as any other federal or state statute or common law principle of similax effect, and acknowledge that this waiver is a material inducement to and consideration for each Party's execution ofthis Agreement. Notwithstanding the foregoing waiver, it is explicitly agreed and understood that the Parties are not releasing, acquitting, discharging or waiving any oftheir rights specifically provided for in this Agreement. Covenant Not to Assert. The Parties agree and covenant not to assert, or to 6. threaten to assert, in any court, administrative agency, or otherwise, any claim or demand against any party on the basis of any claims released under Sections S(a)-(c) above. 7.
Miscellaneous Terms. a.
Defined Terms.
The term "Affiliate" means, as to any Person, any other Person i. (other than an individual) directly or indirectly Controlling, Controlled by, or under direct or indirect common Control with such Person. The term "Cpntrol" of a Person means the possession, directly or ii. indirectly, ofthe power to direct or cause the direction ofthe management and policies of such Person, whether through the ability to exercise voting power, by contract, or otherwise, and the terms "Controlling" and "Controlled" shall have correlative meanings. The term "Person" means any individual, corporation, limited iii. liability company, partnership,joint venture, association,joint stock company, trust, unincorporated organization, government or any agent or political subdivision thereof, or any other form of entity. Binding Obli ag tion. This Agreement is a legally valid and binding b. obligation ofthe Parties, enforceable in accordance with its terms, and shall inure to the benefit ofthe Parties and their representatives. Unless expressly set forth herein, nothing in this Agreement, express or implied, shall give to any entity, other than the Parties and their respective members, officers, directors, agents, financial advisors, attorneys, employees, partners, Affiliates, successors, assigns, heirs, executors, administrators and representatives, any benefit or any legal or equitable right, remedy or claim under this AgreemeMt. 7 DOCS SF:89121.3 1g821-002
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Further Assurances. The Parties agree to execute and deliver such other c. instruments and perform such acts, in addition to the matters herein specified, as may be reasonably appropriate or necessary, from time to time, to effectuate the agreements and understandings of the Parties, whether the same occurs before or after the date ofthis Agreement, and they shall similarly refrain from executing any instruments or taking any actions that would interfere with the effectuation ofthe agreements and understandings ofthe Parties. Headings. The headings of all sections ofthis Agreement are inserted d. solely for the convenience ofreference and are not a part of and are not intended to govern, limit or aid in the construction or interpretation of any term or provision hereof. Governin~Law. THIS AGREEMENT IS TO BE GOVERNED BY AND e. ACCORDANCE WITH THE LAWS QF THE STATE OF DELAWARE CONSTRUED IN APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN SUCH STATE, WITHOUT GIVING EFFECT TO THE CHOICE OF LAWS PRINCIPLES THEREOF. f. Bankruptcy Court Jurisdiction. By its execution and delivery ofthis Agreement, each Party hereby irrevocably and unconditionally agrees for itself that any legal action, suit or proceeding against it with respect to any matter under or arising out of or in connection with this Agreement or the breach, termination, enforcement, interpretation or validity thereof, may and shall be brought solely and exclusively before the Bankruptcy Court, or before such successor court as may gain jurisdiction over the Bankruptcy Case, and each ofthe Parties hereby consents to the entry of a final order or judgment by the $ankruptcy Court or any successor court that gains jurisdiction over the Bankruptcy Case. g. Specific Performance. The Parties hereby acknowledge that the rights of the Parties under this Agreement are unique and that remedies at law for breach or threatened breach of any provision of this Agreement would be inadequate and, in recognition ofthis fact, agree that, in the event of a breach or threatened breach ofthe provisions ofthis Agreement, in addition to any remedies at law,the Parties shall, without posting any bond, be entitled to seek to obtain equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available and the Parties hereby waive any objection to the impositign of such relief. Complete Agreement. This Agreement constitutes-the complete h. agreement between the Parties with respect to the subject matter hereof and supersedes all prior agreements, oral or written, between qr among the Parties with respect thereto. Modification ofthis A r~eement. - This Agreement may only be modified, i. or ptherwise deviated from by waiver, consent or otherwise, supplemented, altered, amended or by an agreement in writing signed by each Party to which such modification, alteration, amendment or supplerrient materially affects such Party's rights under this Agreement. Execution ofthis A rg Bement. This Agreement may be executed and j. delivered(by facsimile, email, or otherwise)in any number of counterparts, each of which, when executed and delivered, shall be deemed an original, and all of which together shall constitute the 8 DOCS SF:89121.3 10821-002
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same agreement. Each individual executing this Agreement on behalf of a Party has been duly authorized and empowered to execute and deliver this Agreement on behalf of said Party. Interpretation. Whenever the context so requires in this Agreement, all k. words used in the singular shall be construed to have been used in the plural(and vice versa), and each gender shall be construed to include any other genders. Construction. Each Fatty to this Agreement and such Party's legal 1. counsel have reviewed and revised this Agreement. The rule of construction that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation ofthis Agreement or any addenda, amendments pr exhibits to this Agreement. m. No Admission of Liability. Nothing herein shall be construed as an admission of liability by any ofthe Parties hereto as to any ofthe allegations raised in litigation between the Parties. Costs and Expenses. Each Party will be solely responsible for any costs n. and/or fees due its respective attorney(s), accountants, experts, and vendors relating to any and all matters leading up to this Agreement, and no Party has the right to reimbursement from any other Party of any fees and/or costs previously paid. [Remainder of page intentionally left blank]
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IN 4~I`l"KI SS x'4'1-IE IZ1(~7~•', the I'a~~t.ies l~~ti°e ca~.ised this ~.~~~ee~~ient tc> be duly ~;aecuted 4~i~d ti~liver~d 6y tl~~:.ir ~~~spective cal-dicers t}~ez~uunt~ ett~ly ~~i~tlzcjrizc:cl sis ~~f tl~e elate first ~~rittetY `t~ lI{~ ~~~.'i.
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1N THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re:
) Chapter 11
MALIBU LIGHTING CORPORATION,et al., l
) Case No. 15-12080(KG)
Iaebtors.
) (Jointly Administered) Re: Docket No.
ORDER AS TO DEBTOR OUTDOOR DIRECT CORPORATION F/K/A THE BRINKMANN CORPORATION UNDER FED. R. BANKR.P.9019 APPROVING GENERAL RELEASE AND SETTLEMENT AGREEMENT WITH A&J MANUFACTURING LLC AND A&J MANUFACTURING INC. Upon consideration ofthe Motion ofDebtor Outdoor DiNect Corporationf/k/a The Brinkmann Corporation Under Fed. R. Bankr. P. 9019for an Order Approving General Release and Settlement Agreement with A&J Manufacturing LLC and A&J Manufacturing Inc. (the "Motion");2 and the notice ofthe Motion having been adequate; and sufficient legal and factual bases existing for the relief requested, and the Court having jurisdiction to consider the Motion pursuant to 28 U.S.C. §§ 1334 and 157(b)(2); and the Court finding that the Settlement was negotiated at arm's length and entered into in good faith by the parties and the Settlement is fair and reasonable, it is hereby ORDERED that the Motion is GRANTED and the settlement agreement attached hereto as Exhibit A is hereby approved pursuant to Bankruptcy Rule 9019.
1 The Debtors, together with the last four digits of each Debtor's tax identification number, are: Malibu Lighting Corporation (0556); Qutdoor Direct Corporation f/k/a The Brinkmann Corporation (9246); National Consumer Outdoors Corporation f/k/a Dallas Manufacturing Company, Inc. (1153); Q-Beam Corporation (1560); Smoke `N Pit Corporation (9951); Treasure Sensor Corporation (9938); and Stubbs Collections, Inc. (6615). The location of the Debtors' headquarters and service address is 4215 McEwen Road, Dallas, TX 75244. Z Capitalized terms not otherwise defined herein shall have the same meanings ascribed to them in the Motion.
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ORDERED that this Order is effective immediately. ORDERED that the Court reserves jurisdiction over any matters or disputes arising under the Settlement or implementation thereof.
Dated:
,2015 The Honorable Kevin Gross United States Bankruptcy Judge
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