In a 13 page decision released September 3, 2015, Judge Gross of the Delaware Bankruptcy Court examined the results of Yellow Pages Photos, Inc. (“YPPI”) failing to disclose agreements that directly affected its claim against the Debtors.  Judge Gross’ opinion is available here (the “Opinion”).

The Court had entered an order which held that the Debtor, SuperMedia LLC, was liable for infringement because SuperMedia had violated its license from YPPI and transferred YPPI’s images to, among others, bieMedia and ASEC.  Opinion at *1.  The damages trial is scheduled for the last week of September.

The Debtor moved to vacate the Opinion and Order when if found out that bieMedia and ASEC had entered license agreements with YPPI for the same material that it had transferred.

Judge Gross’ Opinion

Because the Debtors had asked for the production of documents related to the license agreement, ” YPPI had a duty to produce the ASEC settlement/license agreement and the bieMedia license. Instead, YPPI hid the documents.”  Opinion at *4.  This was further compounded when “Trent Moore, YPPI’s principal, forcefully testified falsely under oath…” Opinion at *4.

The Court did hold, however, that “The transfers to bieMedia and ASEC, licensed parties, were violative of the license YPPI gave to SuperMedia. However, the damages flowing from the transfers would likely be affected.”  Opinion at *8.  Despite YPPI’s bad acts at trial, “The Court is unable to conclude that its decision would have been different had it known of the bieMedia and ASEC licenses.”  Opinion at *12.

Yet despite finding that its prior ruling would stand because the disclosures to bieMedia and ASEC were a violation of its license agreement, “YPPI made misrepresentations and non-disclosures which require some relief…” Opinion at *12.  The Court determined that under Rule 60(b)(6), the relief for YPPI’s misrepresentation would be that “Court will not consider the transfers to or from bieMedia and ASEC in the damages trial.”  Opinion at *12.  The Court also indicated that it would charge YPPI with the cost of prosecuting the Rule 60(b) motion.

My $.02

At the end of the day, the failure to disclose will not cost the Debtor anything.  However, YPPI will pay the fees and expenses of the 60(b) motion, for both parties.  YPPI will also lose the portion of damages that it could have obtained due to these two disclosures made by the Debtors.  At the end of the day, getting caught hiding the ball will result in more pain than being forthcoming with the court.