AngioDynamics, Inc. v. Biolitec AG et al
Filing
417
Judge Michael A. Ponsor: MEMORANDUM AND ORDER REGARDING DAMAGES entered. As follows: For the reasons stated. the court hereby orders the clerk to enter judgment, jointly and severally, against Defendants BAG (and/or the Austrianentity now bearing tha t name), Biomed, and Wolfgang Neuberger, in the amount of $74,920,422.57, consisting of: Actual damages in the amount of $23,156,287.00, trebled under Mass. Gen. Laws ch. 93A to $69,468,861.00., Pre-judgment interest from the date of t he NY judgment, November 8, 2012, and the February 24, 2014, damages hearing, in the amount of $3,600,961.23., Reasonable attorneys fees and costs in the amount of $1,850,600.34., The clerk will enter judgment for Plaintiff. This case may now be closed. It is So Ordered. See the attached memo and order for complete details. (Lindsay, Maurice)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
ANGIODYNAMICS, INC.,
Plaintiff
v.
BIOLITEC AG,
WOLFGANG NEUBERGER,
BIOLITEC, INC., and
BIOMED TECHNOLOGY HOLDINGS,
LTD.,
Defendants
)
)
)
)
) C.A. NO. 09-cv-30181-MAP
)
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MEMORANDUM AND ORDER
REGARDING DAMAGES
March 18, 2014
PONSOR, U.S.D.J.
I.
INTRODUCTION
On January 14, 2014, this court entered default
judgment against Defendants on the issue of liability.
Angiodynamics, Inc. v. Biolitec AG, –- F. Supp. 2d –-, 2014
WL 129035 (D. Mass. Jan. 14, 2014).
Counsel then appeared
for argument on February 24, 2014, to set forth their
positions on the question of damages.
Because the
allegations in the complaint are accepted as true, Plaintiff
is entitled to recover actual damages, trebled under Mass.
Gen. Laws chapter 93A; pre-judgment interest; and reasonable
attorney’s fees and costs.
The court will therefore enter
judgment for Plaintiff in the amount of $74,920,422.57.
II.
BACKGROUND
The background of this litigation has been exhaustively
detailed on a number of occasions.
See Angiodynamics, Inc.
v. Biolitec AG, 910 F. Supp. 2d 346 (D. Mass. 2012), aff’d,
711 F.3d 248 (1st Cir. 2013); Angiodynamics, Inc. v.
Biolitec, Inc., 2011 WL 3157312 at *1-2 (D. Mass. July 25,
2011).
The facts relevant to the issue of damages are as
follows.
On September 20, 2012, the Northern District of New
York found Defendant Biolitec, Inc. (“BI”) liable to
Plaintiff in the amount of $16,463,846.94, plus pre-judgment
interest, for failing to indemnify Plaintiff as required
under the parties’ Supply and Distribution Agreement
(“SDA”).
Angiodynamics, Inc. v. Biolitec, Inc., No. 1:08-
cv-0004, Mem. & Order (N.D.N.Y. Sept. 27, 2011).
This
damage award was based on amounts Plaintiff had previously
been required to pay to settle litigation brought against it
by two entities -- VNUS and Diomed -- that BI, in violation
-2-
of the SDA, had failed to hold Plaintiff harmless against.
One year later, that court entered partial, final judgment
for Plaintiff in the amount of $23,156,287.00.
Angiodynamics, Inc. v. Biolitec, Inc., No. 1:08-cv-0004,
Partial J. (N.D.N.Y. Nov. 8, 2012).
BI subsequently
appealed the decision to the Second Circuit Court of
Appeals.
In January 2013, with that judgment still outstanding,
BI filed for bankruptcy in the U.S. Bankruptcy Court for the
District of New Jersey.
3.)
(Chp. 11 Pet., Dkt. No. 400, Ex.
On April 3, 2013, the bankruptcy court appointed a
trustee, pursuant to 11 U.S.C. § 1104, and removed control
of the company from Defendant Neuberger.
The trustee, on behalf of BI, entered into a settlement
agreement with Plaintiff on July 16, 2013.
Agreement, Dkt. No. 400, Ex.7.)
(Settlement
As part of that settlement,
Plaintiff agreed to forego efforts to seek monetary damages
against BI in the New York litigation -- BI apparently had
few assets at any rate -- with the understanding that
Plaintiff would instead pursue its remedies against BI and
the other Defendants in this forum.
-3-
In return, BI agreed to
withdraw its appeal before the Second Circuit.
(Id.)
On
August 9, 2012, the Bankruptcy Court approved the
settlement. (Bankr. Ct. Approval, Dkt. No. 400, Ex. 8.)
Two
weeks later the Second Circuit dismissed BI’s appeal. (Ct.
App. Mandate, Dkt. No. 400, Ex. 2.)
At that point, the New
York judgment became final.
In the litigation before this court, Plaintiff has
attempted to recover the New York judgment from Defendants.
Plaintiff accused Defendants Biolitec AG (“BAG”), Biomed
Technology Holdings, Ltd. (“Biomed”), and Wolfgang Neuberger
-- all entities closely associated with BI -- of (among
other things) wrongfully diverting assets from BI in an
effort to render BI judgment-proof and escape paying the New
York judgment.
The specific claims asserted by Plaintiff in
this case include tortious interference with a contract,
fraudulent transfer, and violation of Mass. Gen. Laws
chapter 93A.
Plaintiff contends that the close relationship
among the parties and their course of conduct permits it to
reach through the corporate structure and, as the phrase
goes, “pierce the corporate veil.”
After nearly five years of litigation characterized by
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increasingly recalcitrant behavior on Defendants’ part, the
court allowed two of Plaintiff’s Motions for Default
Judgment stemming from Defendants’ bad-faith behavior during
pre-trial discovery.
Angiodynamics, Inc. v. Biolitec AG, –-
F. Supp. 2d –-, 2014 WL 129035 (D. Mass. Jan. 14, 2014).
After entering judgment on the issue of liability for
Plaintiff, the court heard argument on damages on February
24, 2014.
Following this, the court provided additional
time for Defendants to file a sur-reply, (Dkt. No. 416), and
took the matter under advisement.
III.
DISCUSSION
Since the court entered default judgment against
Defendants on the issue of liability, it is obliged to
accept the allegations in the complaint as true.
McKinnon
v. Kwong Wah Rest., 83 F.3d 498, 506 n.5 (1st Cir. 1996);
see also Oritz-Gonazalez v. Fonovisa, 277 F.3d 59, 62-63
(1st Cir. 2002).
Plaintiff contends that, given this, the
damage calculation in the case is straightforward:
Defendants owe the $23 million in damages awarded in the
Northern District of New York, trebled under chapter 93A,
along with pre-judgment interest, attorney’s fees, and
-5-
costs.
Defendants, citing principles of res judicata, argue
that they cannot be “bound” by the New York judgment.1
In
addition, they reprise several arguments the court has
already rejected, attempting to demonstrate substantively
that Plaintiff has failed to assert any valid cause of
action.
The facial substantive deficiencies in the
complaint, Defendants say, make it improper to award
Plaintiff any remedy, even though the court has defaulted
them due to their pretrial misconduct.
Analysis of
Defendants’ arguments quickly reveals their flaws.
A.
“Res Judicata” Defense
Defendants broadly assert that the New York judgment
cannot provide the basis for an award of damages because
they did not have a full and fair opportunity to litigate
that case through appeal.
Implicitly tied up in this
argument is the assumption that Plaintiff seeks through this
1
Defendants misapply the term “res judicata.” In fact,
they are essentially arguing that the New York judgment
cannot form the basis of any damage award against them,
because they were personally unable to appeal it. The court
will consider the substance of Defendants’ argument despite
its dubious label.
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litigation to enforce the New York judgment; Plaintiff, they
say, is essentially invoking the doctrine of res judicata to
preclude them from defending themselves.
In their view, the
parties must now re-litigate the issue of whether the Supply
and Distribution Agreement obligated BI to defend and
indemnify Plaintiff and whether BI breached that contract.
Defendants concede that these issues were the subject of the
extensive litigation in the Northern District of New York,
but they take the position that, because BI’s trustee in
bankruptcy settled the appeal of the New York judgment to
the Second Circuit over their protest, this court is now
barred from using the judgment in calculating damages.
This argument has no merit.
First, and most
importantly, Plaintiff is not seeking to enforce the New
York judgment by applying the doctrine of res judicata, or
so called “claim preclusion.”
Instead, now that the court
accepts as true Plaintiff’s allegations that Defendants
deliberately and intentionally looted BI to ensure that it
would have no funds to pay any judgment emerging from the
New York litigation, Plaintiff points to the damage award in
the New York case as the starting point for the calculation
-7-
of the damage award here.
By identifying the New York
judgment in this way, Plaintiff has not, in any sense,
invoked the doctrine of res judicata: it has used the New
York judgment as the basis for establishing the value of the
SDA -- the contract that is the subject of Plaintiff’s
tortious interference claim.
It is perfectly obvious, in
fact, that the New York litigation, which was pursued on
theories entirely separate from the causes of action in this
court, lacked the overlapping features that would qualify it
even for consideration of any traditionally recognized
preclusive effect.
By setting up the irrelevant issue of
res judicata, and then pointing out that its elements have
not been satisfied, Defendants have constructed the classic
straw man.
Defendants’ argument that they were denied a full and
fair opportunity to litigate the New York case through
appeal is also without support.
It must be noted that
Wolfgang Neuberger, a co-Defendant in this case, was aware
of and, through his position with BI, participated in the
New York litigation at every stage.
Neuberger cannot
dispute that he worked actively with BI’s counsel throughout
-8-
the NY action up to and including the entry of judgment
against BI.
(Dkt. No. 345, Ex. 7.)
He also was involved in
BI’s bankruptcy proceedings until the Bankruptcy Judge found
it necessary to supplant him and appoint a trustee to
protect BI’s interests.
Once that occurred, the trustee
stepped into the shoes of BI and represented BI.
11 U.S.C.
§ 1106; see also In re Lowry Graphics, Inc., 86 B.R. 74, 76
(S.D.Tex. 1988).
The trustee’s decision to settle that case
and dismiss the appeal thereafter constituted a valid and
legally binding decision of the corporation itself.
The New
York judgment, entered and affirmed by all courts properly
exercising their jurisdiction, now represents the
unsatisfied value of the damage suffered by Plaintiff as a
result of BI’s failure to fulfill its obligations under the
SDA and its breach of contract.
In addition to its broad, off-base attack on the
supposedly improper “res judicata” application of the New
York judgment, Defendants make a number of arguments
specific to individual counts in the complaint here.
None
of these arguments has any merit, and most if not all of
them have previously been rejected by this court, often more
-9-
than once.
B.
Count One: Tortious Interference
In its amended complaint, Plaintiff alleged that
Defendants allowed BI to enter into the SDA and then
siphoned revenues from BI to prevent it from complying with
the terms of the agreement.
Dkt. No. 7.)
(Am. Compl. ¶¶ 60, 62 & 134,
In the face of these allegations, and now
confronting the judgment against them on liability,
Defendants persist in contending that the complaint failed
to allege any improper means on Defendants’ part that would
constitute tortious interference.
In addressing this argument, the court will assume that
it is proper for Defendants, having been defaulted for their
misconduct during the pretrial phase of this case, to carry
on with their attack on the substance of the complaint -- a
proposition that, given the court’s prior rulings, is not at
all self evident.
See Remexcel Managerial Consultants v.
Arlequin, 583 F.3d 45, 53 (1st Cir. 2009)(noting that while
an entry of default does not preclude a defendant from
attacking the sufficiency of the complaint to support a
claim, that calculus shifts where the law of the case
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already establishes well-pled allegations.)
Even making
room for this argument, however, it must be noted that over
two years ago, on July 25, 2011, this court found that the
allegations contained in the complaint were amply sufficient
to support a claim for tortious interference and to require
the court to deny Defendants’ motion under Fed. R. Civ. P.
12(b)(6).
Angiodynamics, 2011 WL 3157312 at *7-8.
To reach that conclusion, the court looked at the
allegations respecting Defendants’ actions towards its
subsidiary -- particularly the claim that they set BI up to
violate the SDA and wrongfully diverted assets from BI when
it suffered an adverse judgment -- and concluded that these
allegations satisfied each element of the cause of action.
Id.
The court reaffirmed that decision on November 22,
2011. (ECF Ord. Nov. 22, 2011.)
As it has before, now for
the third time, this court finds that the complaint contains
specific allegations sufficient to support a valid claim for
tortious interference.
The default on liability now obliges
the court to accept these allegations as true.
Given this, Plaintiff is entitled to “the loss of
advantages . . . which, but for such interference, the
-11-
plaintiff would have been able to attain or enjoy.”
Nat’l
Merchan. Corp. v. Leyden, 370 Mass. 425, 430
(1976)(citations omitted).2
Here, the New York court
determined that the contract, with pre-judgment interest,
was valued at $23,156,287.00.
But for Defendants’
interference, Plaintiff would have recovered this amount.
This sum, therefore, represents the monetary award Plaintiff
is entitled to on its claim for tortious interference.
C.
Counts Two and Three: Veil Piercing
Defendants insist that the allegations of the complaint
2
Defendants also argue that Plaintiff’s damages for
tortious interference, and the fraudulent transfer claims
below, should be reduced by the supposed “fact” that BI
lacked the ability to pay Plaintiff’s settlement with Diomed
and VNUS in April and June 2008. Defendants rely on a
declaration by Art Henneberger, a managing agent Defendants
refused to produce for a deposition, as support for their
contention. First, it would be manifestly unjust to
consider Henneberger’s declaration now. Angiodynamics, 2014
WL 129035 at *11-14. However, even if the court were
willing to consider the submission of a witness who has
dodged his deposition, it is evident that BI likely would
have been capable of paying the amounts owed in these
settlements if Defendants had not wrongfully diverted funds
out of BI beforehand. Moreover, the supposed debts BI
carried that made the company unable to pay the VNUS and
Diomed settlements were owed predominantly to other entities
in the Biolitec Group, all of which were controlled by the
individual Defendant Neuberger. The legitimacy of these
supposed debts is therefore highly doubtful. (Dkt. No.
404.)
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are insufficient to justify piercing the corporate veil
under Massachusetts law.3
In July 2011, the court found
precisely the opposite, stating that the amended complaint
offered evidence sufficient to satisfy virtually all the
discretionary factors identified by Massachusetts courts
that support piercing a corporate veil.
WL 3157312 at *6.
Angiodynamics, 2011
Nearly a year later, the court found a
probability of success on that claim, AngioDynamics, 910 F.
Supp. 2d at 357; this finding was subsequently affirmed by
the First Circuit.
AngioDynamics, Inc. v. Biolitec AG, 711
F.3d 248, 251 (1st Cir. 2013).
In sum, the complaint
clearly offers a more than adequate legal and factual basis
for piercing the corporate veil.
As a result, Defendants
essentially stand in the shoes of BI and are accountable for
the judgment against it.
Since Plaintiff holds the
unsatisfied NY judgment for $23,156,287.00 against BI,
3
Defendants now also appear to contend that foreign
law may govern the claims for corporate veil piercing. This
court, and the First Circuit, have already utilized
Massachusetts law when evaluating these claims. See, e.g.,
Angiodynamics, 910 F. Supp. 2d at 356-57. Not only has
Defendants’ position on this issue shifted, but they do not
provide any United States authority applying non-U.S. law on
a veil piercing claim that would justify the application of
foreign law to this case.
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Defendants are now liable on counts two and three for that
amount.
D.
Count Four: Fraudulent Transfer
Defendants contend, as they have before, that Plaintiff
may only recover for fraudulent transfers specifically made
to BAG.
On May 15, 2013, this court denied Defendants’
Motion for Judgment on the Pleadings anchored largely on
that argument.
(Endorsed Order, Dkt. No. 275.)
That
motion, and the court’s later denial of Defendants’ Motion
for Reconsideration, (Dkt. No. 339), adopted Plaintiff’s
opposition memoranda. (Pl’s Mems. in Opp’n, Dkt. Nos. 258 &
311.)
In its memoranda, Plaintiff emphasized the plain
language of the relevant statute, which provides that
judgment may be entered against: “the first transferee of
the asset or the person for whose benefit the transfer was
made.”
Mass. Gen. Laws ch. 109A, § 9 (emphasis added).
As
the statute makes evident, Plaintiff properly chose to
target Defendants, the parties at the top of the Biolitec
group, who instigated, controlled, and benefitted from the
fraudulent scheme.
This is sufficient to support the cause
-14-
of action.
In terms of recovery, a “creditor may recover judgment
for the value of the asset transferred, as adjusted under
subsection (c), or the amount necessary to satisfy the
creditor’s claim, whichever is less.”
Id.
In its
complaint, Plaintiff alleges that the value of the
fraudulent transfers is, even limiting the value of the
transferred patents to $1 million, $18,444,137.50.
Though
the amount is engulfed in the $23,156,287.00 owed by
Defendants on other counts, Plaintiff would still be
entitled to the $18,444,137.50 in damages, at a minimum, for
this count.
E.
Count Five: Mass. Gen. Laws ch. 93A
Defendants rehash two arguments in response to
Plaintiff’s chapter 93A claim.
First, they contend that the
allegations of the complaint show a mere breach of contract
and do not include facts demonstrating “unfair or deceptive
acts or practices.”
Second, they say that Plaintiff has
failed to establish Massachusetts as the “center of gravity”
where the events underlying the claim occurred, as required
under the statute.
(Defs’ Mem. 35-36, Dkt. No. 405.)
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In July 2011, the court explicitly rejected both of
those arguments, noting that “this case centers on the
allegation that Defendants fraudulently transferred funds
out of a Massachusetts-based entity . . . .
This allegation
is sufficient to overcome the motion to dismiss.”
Angiodynamics, 2011 WL 3157312 at *8-9 (emphasis added).
Moreover, the suggestion that the claims set forth in the
complaint support no more than a cause of action for breach
of contract borders on the absurd.
Defendants are charged,
in essence, with having inveigled Plaintiff into signing the
SDA and, then, ensuring that BI would not be able to comply
with it by siphoning assets out of BI that could have been
used to hold Plaintiff harmless from later claims.
much more than a simple breach of contract.
This is
Defendants’
unfair and deceptive conduct was prohibited under chapter
93A, and the statute has been properly invoked.
Actual damages resulting from Defendants’ actions are
easily calculated as the value of the contract, plus prejudgment interest, adjudicated in New York at
$23,156,287.00.
The only arguable question is whether the court should
-16-
multiply those damages.
Section 11 of chapter 93A permits a
court to double or treble damages if the court finds “the
act or practice was a willful or knowing violation” of
chapter 93A.
This remains true where a party succeeds
through default judgment.
See KPS & Assoc. v. Designs by
FMC, Inc., 318 F.3d 1, 25 (1st Cir. 2003)(affirming doubling
of compensatory damages).
Taking the complaint as true, Defendants willfully
allowed BI to enter into the SDA without any intention of
complying with its indemnification obligations.
Defendants
then intentionally interfered with the contract, inducing BI
to break the agreement.
Finally, Defendants transferred at
least $18 million of BI’s assets once its liability became
apparent.
Their goal, quite clearly, was to prevent
Plaintiff from being indemnified and, subsequently, from
recovering the resulting New York judgment.
Given these facts, Defendants’ actions were calculated,
deceitful, and egregious.
Defendants conducted themselves
in an effort to escape their obligations and, equally
troubling, to prevent the enforcement of a judicial mandate.
As a result, the court, as is contemplated by the statute,
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will treble the damages to $69,468,861.00.4
F.
Pre-Judgment Interest, Attorney’s Fees, and Costs
In addition to damages, Plaintiff argues that it is
entitled to pre-judgment interest at 12%, from the date of
the New York judgment, November 8, 2012, to the February 24,
2014, hearing date.
Mass. Gen. Laws ch. 231, § 6B.
This
amount totals $3,600,961.23.
Moreover, Plaintiff believes it is also owed attorney’s
fees and costs under Mass. Gen. Laws ch. 93A.
In support of
that claim, Plaintiff presents records detailing that amount
at $1,850,600.34.
See (Dkt. No. 400.)
Defendants fail to oppose either contention.
The
court, noting the lack of objection, and making an
independent evaluation of the merits of these arguments,
agrees that Defendants must pay both amounts.
4
Plaintiff correctly points out that, though the New
York judgment includes pre-judgment interest, the full
amount of the judgment may be trebled. See R.W. Granger &
Sons v. J & S Insulation, Inc., 435 Mass. 66, 84 (2001)(“As
to [the litigant’s] contention that the interest and
attorney’s fees components of the judgment on the underlying
bond claim should not have been included in the amount of
damages subject to multiplication, the judge was correct to
include both components.”)
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IV.
CONCLUSION
Throughout the course of this litigation, nearly half a
decade in length, Defendants have tried to circumvent the
judicial process and evade accountability.
When their
conduct evolved from evasive, to delinquent, to grossly
contumacious, Defendants left the court no choice but to
enter default judgment in Plaintiff’s favor.
Accepting Plaintiff’s allegations as true, the court
hereby orders the clerk to enter judgment, jointly and
severally, against Defendants BAG (and/or the Austrian
entity now bearing that name), Biomed, and Wolfgang
Neuberger, in the amount of $74,920,422.57, consisting of:
•
Actual damages in the amount of
$23,156,287.00, trebled under Mass. Gen. Laws
ch. 93A to $69,468,861.00.
•
Pre-judgment interest from the date of the NY
judgment, November 8, 2012, and the February
24, 2014, damages hearing, in the amount of
$3,600,961.23.
•
Reasonable attorney’s fees and costs in the
amount of $1,850,600.34.
The clerk will enter judgment for Plaintiff.
may now be closed.
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This case
It is So Ordered.
/s/ Michael A. Ponsor
MICHAEL A. PONSOR
U. S. District Judge
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