AngioDynamics, Inc. v. Biolitec AG et al
Filing
656
Judge Michael A. Ponsor: MEMORANDUM AND ORDER Regarding Plaintiff's 522 Motion for Sanctions, 622 Motion for Attorney Fees and 639 Motion for Sanctions ENTERED. "...In summary, the court rules as follows. Plaintiff's Motion for Sanctions Under Rule 37 (Dkt. No. 522) is hereby ALLOWED, in part. Defendants have until April 15, 2018, to serve full and complete answers to Plaintiff's interrogatories and requests for production. Absent compliance, the court orders t hat Defendants pay $25,000 to the Clerk of Court of the United States District Court for the District of Massachusetts on or before April 15, 2018, and on the 15th of every month thereafter, up to a maximum of $1,000,000, until Defendants have complied with the court's order.Plaintiff's Motion for Expenses (Dkt. No. 622) is hereby ALLOWED in the amount of $48,930. Both Defendants and their primary counsel, The Griffin Firm, are jointly and severally liable for this am ount, which must be paid to Plaintiff's counsel on or before May 1, 2018. In the event of an appeal, the funds will be paid to the Clerk.Plaintiff's Motion for Rule 37 Sanctions (Dkt. No. 639) ishereby DENIED." See Order for details. (Healy, Bethaney)
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.
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) C.A. NO. 09-cv-30181-MAP
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MEMORANDUM AND ORDER
REGARDING PLAINTIFF’S MOTION FOR SANCTIONS UNDER RULE 37;
PLAINTIFF’S MOTION FOR EXPENSES; AND PLAINTIFF’S FURTHER MOTION
FOR RULE 37 SANCTIONS
(Dkt. Nos. 522, 622, and 639)
March 29, 2018
PONSOR, U.S.D.J.
I. INTRODUCTION
Plaintiff has filed three motions seeking various
sanctions for Defendants’ deliberate refusal to comply with
this court’s post-judgment discovery orders.
Defendants’
counsel does not deny that his clients have knowingly and
intentionally flouted these orders.
Indeed, this most recent
conduct of Defendant Wolfgang Neuberger is perfectly consistent
with Neuberger’s pattern of unscrupulous and dishonorable
conduct both as a litigant and a businessman, over many years.1
After a summary of the pertinent procedural background, the
court’s rulings on the motions are set forth below.
As will
be seen, the court will allow Plaintiff’s first motion, in part,
declining to enter judgment as requested but imposing a monetary
contempt sanction as an alternative.
It will allow the second
motion for attorney’s fees, imposing this sanction on both
Defendants and their counsel.
It will deny the third motion.
II. PROCEDURAL BACKGROUND
The numerous decisions already issued by this court and by
the First Circuit make it unnecessary to recite a fine grained
history of the background of this case.
See generally
AngioDynamics, Inc. v. Biolitec AG, 880 F.3d 600 (1st Cir. 2018)
(declining, “reluctantly,” to impose sanctions on defense
counsel); AngioDynamics, Inc. v. Biolitec AG, 880 F.3d 596 (1st
Cir. 2018) (affirming district court’s denial of Defendants’
motion for relief under Rule 60(a) and 60(b)(5));
1
His attorney’s behavior has also been of concern. In his
latest foray before the Court of Appeals, Neuberger’s counsel
barely escaped a rare imposition of sanctions upon him
personally. AngioDynamics, Inc. v. Biolitec AG, 880 F.3d 600,
601 (1st Cir. 2018).
2
AngioDynamics, Inc. v. Biolitec AG, 991 F. Supp. 2d 283 (D. Mass.
2014) (entering default judgment against Defendants on the
issue of liability as a sanction for misconduct during the
course of discovery), and AngioDynamics, Inc. v. Biolitec AG,
991 F. Supp. 2d 299 (D. Mass. 2014) (entering judgment for
Plaintiff in the amount of $74,920,422.57), both aff’d, 780 F.3d
429 (1st Cir. 2015); AngioDynamics, Inc. v. Biolitec AG, 946
F. Supp. 2d 205 (D. Mass. 2013) (allowing Plaintiff’s emergency
motion for sanctions, issuing an arrest warrant for Defendant
Neuberger for civil contempt, and levying coercive fines),
aff’d and remanded in part, 780 F.3d 420 (1st Cir. 2015);
AngioDynamics, Inc. v. Biolitec AG, 910 F. Supp. 2d 346 (D. Mass.
2012) (denying Defendants’ emergency motion for
reconsideration of the preliminary injunction order).
Even with this overview, the narrative summary needed to
put the court’s current rulings in context is unfortunately
somewhat lengthy.
The story begins with a supply and distribution agreement
Defendant Biolitec, Inc., entered into with Plaintiff, which
included a provision requiring Biolitec to hold Plaintiff
harmless from any damages resulting from patent infringement
3
litigation arising from the sale by Plaintiff of Biolitec’s
products.
When Plaintiff found itself the target of precisely
the patent litigation contemplated, Biolitec reneged on its
agreement.
Plaintiff sued to enforce the agreement in the
Northern District of New York, and in 2012 it obtained a judgment
against Biolitec in the amount of $23,156,287.00.
(Dkt. No.
205, Attach. 1 at 7.)
To avoid paying this judgment, two related Biolitec
entities, Biomed Technology Holdings, Ltd., and Biolitec AG,
looted Biolitec, removing all its assets so that it would
essentially be judgment-proof.
The upshot was this lawsuit,
filed in October 2009 against three corporations and one
individual: Biolitec, Inc. (a Massachusetts corporation);
Biolitec AG (a German corporation); Biomed Technology Holdings,
Ltd. (a Malaysian corporation); and Dr. Wolfgang Neuberger,
president, CEO, Chairman, and dominant shareholder of Biolitec
AG as well as numerous affiliated entities.
During the
preliminary stage of the litigation, Neuberger dodged service
of process energetically, greatly delaying the litigation.
(May 17, 2011, Mem. & Order at 3 (remarking on Defendant
Neuberger’s “evasive conduct” and his counsel’s “possibly
4
inadvertent but nevertheless misleading statements”), Dkt. No.
47.)
A critical moment in the lawsuit occurred in August 2012,
when Plaintiff learned of the plans of Biolitec AG to merge with
its Austrian subsidiary.
Persuaded that this move was intended
to make any judgment obtained against Biolitec AG in this court
unenforceable, the court granted a preliminary injunction
prohibiting the merger.
126.)
(Order dated Aug. 29, 2012, Dkt. No.
Subsequent motions to reconsider and to vacate in
December 2012 and February 2013 were denied, and Defendants
appealed to the First Circuit.
All during this time,
Defendants’ counsel repeatedly assured this court that his
clients, though disagreeing, would respect the injunction and
not proceed with the merger.
In the teeth of these assurances,
and while Defendants’ appeal was pending, Neuberger
intentionally violated the preliminary injunction by
organizing and consummating the Biolitec AG downstream merger
into Austria.
As a result, on March 22, 2013, Plaintiff filed
its first Motion for Contempt.
(Dkt. No. 205.)
On April 1, 2013, the First Circuit affirmed the issuance
of the preliminary injunction, noting that the “troubling
5
questions about Defendants’ good faith” raised before the
district court were even “more disquieting in light of
defendants’ decision to complete [the] merger . . .
notwithstanding the court’s preliminary injunction.”
AngioDynamics, Inc., 711 F.3d 248, 250 n.1.
In connection with Plaintiff’s motion for contempt, the
court ordered Defendant Neuberger to appear in person to show
cause why he should not be sanctioned.
After Defendants’
counsel informed the court that Neuberger refused to appear,
the court issued a warrant for his arrest.
still outstanding.
This warrant is
Someday, perhaps, it may result in his
well-deserved apprehension.
In addition to the warrant for arrest, the court, on April
11, 2013, allowed Plaintiff’s motion for contempt.
This ruling
provoked motions by Defendants for reconsideration and for
recusal.
The court denied both motions; a petition for
mandamus seeking an order requiring recusal was rejected by the
First Circuit as “entirely without merit.”
(Dkt. No. 380.)
Defendants’ continuing contempt eventually led to entry
of a default judgment against them on March 18, 2014, for
$74,920,422.57.
This judgment was affirmed by the First
6
Circuit on March 11, 2015, which stated: “Facing repeated
recalcitrance almost five years after [Plaintiff] filed the
instant action, the district court acted well within its
discretion when it concluded that no lesser sanction could
address the twin goals of penalty and deterrence.”
AngioDynamics, Inc., 780 F.3d at 436.2
Predictably, Defendants have ignored the outstanding
judgment.
Plaintiff in response has worked steadily, through
what would in an ordinary case be routine post-judgment
discovery, to locate assets from which to satisfy the judgment,
at least in part.
For example, Plaintiff served a document
request seeking information on United States agents for
Biolitec entities engaged in the manufacture or processing of
products imported into this country.
An interrogatory asked
Defendants to “[l]ist all accounts receivable held by any
Biolitec entity in which the amount is owed by any United
2
In its decision the First Circuit remanded the case, in part,
instructing this court to put a cap on the escalating civil
sanction intended to coerce Neuberger into reversing the
forbidden merger. This court modified its sanction order
accordingly, and the First Circuit affirmed this action on May
6, 2016. AngioDynamics, Inc. v. Biolitec AG, 823 F.3d 1, 10
(1st Cir. 2016).
7
States-based entity or person.”
(Reynolds Aff., Dkt. No. 498,
Attach. 2 at 5-6.)
These discovery initiatives made sense.
Good cause exists
to conclude that Defendants, and particularly Neuberger,
continue to enjoy substantial income from business transactions
conducted in the United States through foreign corporations
controlled by him.
Neuberger is the moving force behind an
array of affiliated corporations established from Malaysia, to
Dubai, to Latvia.
Evidence suggests some of them may do
business in this country.3
In response to these discovery initiatives, Defendants
filed partial, superficial responses, but substantively
stonewalled.
As a result, on December 2, 2015, Plaintiff filed
a motion to compel, which was allowed by the court on February
18, 2016, with an order that Defendants serve full and complete
responses by March 21, 2016.
Defendants failed to comply and
filed an interlocutory appeal of the court’s ruling with the
3
Trustee process against Neuberger-affiliated American
entities resulted in the prompt transfer of their United States
assets to foreign companies controlled by Neuberger, followed,
the next day, by their filing of bankruptcy. Litigation in the
bankruptcy court arising from this conduct has recently been
settled. (See Notice of Settlement Agreement, Dkt. No. 650.)
8
First Circuit.
On June 27, 2016, Plaintiff filed a motion for
sanctions (Dkt. No. 522), which will be addressed below.
On August 31, 2016, the First Circuit dismissed Defendants’
appeal, observing that the district court’s discovery ruling
did not constitute a final appealable order.
Among other
reasons for the dismissal, the Court of Appeals stated that to
challenge the order Defendants “may refuse to comply with it
and the district court may then hold them in contempt, thereby
opening a potential path for review.”
(United States Court of
Appeals Judgment of Aug. 31, 2016, at 1, Dkt. No. 540.)
Plaintiff, meanwhile, continued its attempts to unearth
assets in the United States from which it might satisfy the
outstanding judgment, this time serving discovery seeking
information relating to the identification of U.S. patents,
copyrights, or trademarks in which Biolitec entities possessed
an interest.
responses.
Defendants again failed to provide substantive
Again, Plaintiff filed a motion to compel (Dkt. No.
551), again the court allowed the motion (Dkt. No. 575), and
again Defendants refused to comply.
On April 12, 2017,
Plaintiff filed a motion for attorney’s fees pursuant to Rule
37(a)(5)(A) (Dkt. No. 622), which is addressed below.
9
On July 27, 2017, Plaintiff filed a motion for sanctions
based on Defendants’ failure to comply with the court’s order
allowing Plaintiff’s second motion to compel.
(Dkt. No. 639.)
This third motion, as will be seen below, seeks an order from
this court first finding (as a sanction for Defendants’
discovery intransigence) that Defendants own certain patents
held in the name of four third-party entities, and second
ordering Defendants to transfer these patents to Plaintiff.
While Plaintiff was vainly trying to get responses to its
discovery, or compliance with court orders compelling it,
Defendants continued to dun the Court of Appeals with attempts
to obtain reversal of this court’s rulings.
On Defendants’
fifth unsuccessful try, the First Circuit’s patience appeared
to be wearing thin: “This case is at an end, and we will not
be as charitable, and will not expect the district court to be
charitable, to any additional attempts at prolonging it.”
AngioDynamics, Inc., 880 F.3d at 601.
At the same time, the
Court of Appeals issued a ruling “reluctantly” declining to
impose sanctions on Defendants’ counsel.
III.
A.
Id. at 600.
DISCUSSION
Motion for Sanctions Under Rule 37 (Dkt. No. 522)
10
As noted above, in December 2015, Plaintiff moved to compel
Defendants to provide information with regard to assets held
by third parties that might be available to satisfy the $74.9
million judgment Plaintiff has obtained against them.
No. 497.)
(Dkt.
On February 18, 2016, the court allowed the motion,
requiring Defendants to serve full and complete responses to
the document requests and interrogatories no later than March
21, 2016.
It is undisputed that Defendants have defied the
court’s order.
Indeed, their attorney has declined to confirm
whether his clients will comply with the court’s ruling, even
if they are held in contempt, and the contempt order is affirmed
on appeal.4
Defendants have on multiple occasions appealed
rulings by this court and then continued to ignore them when
they are affirmed.
(See Dkt. No. 649, at 10-11, listing twelve
instances in this litigation where Defendants defied a court
order, filed a motion to vacate it or took an appeal, and then
continued to defy the order once it was upheld.)
4
Counsel has only gone so far as to suggest, in a footnote to
a recent memorandum, that his clients are “likely to comply”
with this court’s ruling in the event the First Circuit affirms
it, but possibly only to the extent of disclosing “publicly
available” information. (Defs.’ Mem. in Opp’n at 14 n.3, Dkt.
No. 647.)
11
As a sanction pursuant to Fed. R. Civ. P. 37(b)(2)(A),
Plaintiff’s motion requests that the court enter a default
judgment establishing that “all U.S. revenues of any Biolitec
group entities belong to [D]efendants and thus are subject to
execution to satisfy AngioDynamics’s judgment.”
at 2.)
(Dkt. No. 522
The motion includes as an exhibit a proposed “Judgment
in a Civil Case.”
This judgment, if issued by the court, would
find that “[a]ny sum or liability owed to any entity owned
directly or indirectly by [Biolitec AG, Biomed Technology
Holdings, and Wolfgang Neuberger] belongs to those [D]efendants
and is subject to execution or other applicable procedure to
satisfy the March 18, 2014 judgment of this Court against the
[D]efendants.”
(Id. at Ex. 1.)
The proposed judgment
specifically excludes certain named entities that, at the time
Plaintiff’s motion was filed, were subject to formal Chapter
7 bankruptcy proceedings.
The problem with this motion, at least as originally filed,
is that it has not identified who the “Biolitec group entities”
referred to are (assuming they exist), or precisely what the
relationship of these unspecified entities to Defendants
(whether “direct” or “indirect”) may be.
12
The phrase “Biolitec
group entities” seems to be merely a shorthand used by Plaintiff
to refer to any unnamed entities owned “directly or indirectly”
by Defendants.5
This lack of specificity means that the court, if it entered
the requested judgment, would be, in essence, flailing around
in the dark hoping to hit something that deserved a blow.
While
the authorities cited by Plaintiff confirm the power of courts
to use the contempt sanction generally in connection with
misconduct during discovery, none of them support the specific
sort of judgment Plaintiff is requesting.
There is a maddening irony here, which Defendants and their
counsel are surely aware of.
The reason for Plaintiff’s and
the court’s blindness is Defendants’ shameless stonewalling.
They refuse to reveal whether any Biolitec group entities, which
Defendants prefer to call “non-party affiliates,” even exist.
5
In a more recent filing, Plaintiff has identified four
corporations that it says are Biolitec group entities: Biolitec
Unternehmensbeteiligungs II AG (BUIIAG) of Austria; Biolitec
Pharma Marketing, Ltd. (BPML) of Malaysia; Biolitec Pharma IP
and Investment Ltd. (BPI) also of Malaysia; and Biolitec SIA
(BSIA) of Latvia. (Pl.’s Mem. in Support at 1 n.5, Dkt. No.
640.) In a subsequent memorandum, Plaintiff makes clear that
this listing only captures entities using as part of their name
the term “Biolitec” in some form. Other corporations with
different names may still be “Biolitec group entities.” (Pl.’s
Reply at 8 n.9, Dkt. No. 649.)
13
Hints and inferences suggest that indeed these “entities” or
“affiliates” are alive and well, that they do business in the
United States, and that Wolfgang Neuberger is very possibly
garnering significant income through them –- funds that should
be available to satisfy Plaintiff’s judgment.
But Defendants
refuse to respond to routine post-judgment discovery and
provide information that they possess regarding these entities.
This information would allow Plaintiff to take Step One, to
confirm that these entities exist.
Step Two might follow,
allowing Plaintiff to discover whether the entities possess
funds owed to Defendants that may legitimately be garnished to
satisfy the judgment.
None of this can happen because of
Defendants’ defiance of court orders.
As frustrating and as ethically dubious as Defendants’
tactic may be, the solution is not for the court to issue a
broad-ranging judgment whose targets and impact cannot be
gauged.
For this reason, and for this reason alone,
Plaintiff’s motion must be denied.6
6
At times, Plaintiff appears to argue that it is uncontested,
or conceded, that Defendants are in privity with, own, or
control the “Biolitec group entities.” The court has been
unable to locate any such formal or binding concession. The
tenor of Defendants’ opposition is quite the opposite: they
14
Having made this adverse ruling, the court must underline
that it is not adopting any of the often repeated, and frequently
nonsensical, arguments offered by Defendants in opposition.
Defendants continue to contend that the underlying default
judgment, though affirmed by the First Circuit more than once
now, is invalid, because the record contains “uncontested
expert declarations that a judgment would be equally
unenforceable in both Austria and Germany.”
Opp’n at 3, Dkt. No. 533.)
(Defs.’ Mem. in
The court has time and again rejected
this hired-gun opinion, which it has no obligation to adopt,
finding the contrary evidence (including the deposition
testimony of a Biolitec insider) more persuasive.
Another of Defendants’ arguments is especially
distasteful: the accusation that Plaintiff is “arrogantly”
requesting relief against the Biolitec group entities “without
even attempting to identify the entities.”
(Id. at 3.)
Defendants make this argument without stooping to acknowledge
contend that the entities or affiliates (if they exist) are
independent corporations under the law; judgment cannot be
obtained against them, and their assets cannot be seized,
without formal notice and the other protections of due process.
Of course, this contention is irrelevant to the question whether
Defendants are obliged to provide discovery about these
entities.
15
that the reason Plaintiff, and the court, are unable to identify
the entities, or even learn whether they exist, is because
Defendants have taken such pains to conceal them, in bald-faced
violation of court orders.
Finally, the argument that the court lacks jurisdiction
over the entities and would be operating beyond its authority
by issuing a default judgment against these so called “non-party
affiliates” falls flat because the court is not in a position
of knowing whether it has jurisdiction over the parties, due
to Defendants’ own misconduct in throwing a blanket over them.
It is unfortunate, but true, that the basis of the court’s
ruling is simple and unrelated to Defendants’ specious
opposition.
The fact is the court is essentially blind both
as to the targets of Plaintiff’s proposed judgment and as to
the nature of the judgment’s impact.
Even in circumstances
crying out for justice, the court would risk compounding
inequity by entering the requested judgment in this situation.
Other sanctions are, however, appropriate.
Defendants
themselves recognize this, indicating that they wish to take
yet another appeal and that an order of contempt would entitle
them to do so.
(Dkt. No. 540.)
16
Not surprisingly, Defendants
suggest that any sanction for their contempt be “modest.”
(Defs.’ Mem. in Opp’n at 16 n.3, Dkt. No. 634.)
While naturally
disagreeing that the sanction should be merely a slap on the
wrist, Plaintiff agrees that at this point, and having exhausted
other options, a contempt sanction is proper at a minimum.
Based on the foregoing, as an alternative to the judgment
sought by Plaintiff, the court hereby finds that Defendants are
in contempt of its discovery order dated February 18, 2016 (Dkt.
No. 511), and orders Defendants, one last time, to serve full
and complete answers to Plaintiff’s interrogatories and
requests for production, on or before April 15, 2018.
Failure
to do this, will result in the imposition of a contempt sanction
in the amount of $25,000, and a further sanction of $25,000
accumulating on the fifteenth of the month for each succeeding
month, until Defendants have complied, up to a maximum of
$1,000,000.
To this extent, Plaintiff’s Motion for Sanctions (Dkt. No.
522) is hereby ALLOWED, in part.
Absent compliance, the court
orders that the $25,000 contempt sanction be paid to the Clerk
of Court of the United States District Court for the District
of Massachusetts on or before April 15, 2018.
17
In the event of
an appeal, the court orders that the sanction nevertheless
continue to be paid monthly and held by the Clerk in an
interest-bearing account pending the outcome of the appeal.
This sanction is for civil contempt; it has been crafted to
enforce compliance by Defendants with the court’s discovery
order and may be reconsidered when and if Defendants do comply
with that order.
B.
Motion for Expenses (Dkt. No. 622)
This motion is straightforward and should obviously be
allowed.
Rule 37 states that when the court grants a motion
to compel it “must, after giving an opportunity to be heard,
require the party . . . whose conduct necessitated the motion,
the . . . attorney advising that conduct, or both to pay the
movant’s reasonable expenses incurred in making the motion,
including attorney’s fees.”
Fed. R. Civ. P. 37(a)(5)(A)
(emphasis added).
Escape hatches to avoid an award of fees and expenses in
these circumstances are closed to Defendants here.
Plaintiff
consulted with Defendants twice before filing the motion,
Defendants’ opposition was not substantially justified, and the
award is more than just.
18
In fact, even without the mandatory language of Rule
37(a)(5)(A), it would be clear that the egregious circumstances
of this case demand the award requested as a matter of the
court’s discretion.
The motion to compel at issue here,
Plaintiff’s second, was filed on December 26, 2016.
551.)
(Dkt. No.
It was allowed by the court on February 17, 2017.
motion for costs and fees followed on April 12, 2017.
The
No
substantive response has ever been filed to these discovery
requests; Defendants’ failure to do this lacks any plausible
justification.
Defendants’ argument that the December 2016 motion was
unnecessary and that an alternative strategy by Plaintiff -a motion for a contempt sanction to punish Defendants’ earlier
failure to respond to discovery -- would have saved time and
money is without merit, for at least two reasons.
First, nothing in the law, and certainly nothing in Rule
37, requires a court to wait to impose sanctions for a discovery
violation until the violator has been held in contempt and
unsuccessfully sought review in the Court of Appeals.
On the
contrary, the rule says that when a motion to compel is allowed,
the court “must” require the party whose conduct necessitated
19
the filing of the motion to pay costs and attorney’s fees, absent
some overriding consideration.
The monetary penalty here is
a straightforward application of that mandate.
Second, filing a new motion to compel was a perfectly
legitimate strategy by Plaintiff to try to pry new discovery
out of Defendants.
The second round of interrogatories and
requests for production were aimed at an entirely different area
of discovery.
A party wrongfully resisting discovery cannot
avoid sanctions by offering stage directions as to how the
moving party might, in its view, have more economically
proceeded.
Plaintiff’s counsel had a right, and an obligation
to his client, to proceed with tools of his own choice, the ones
he felt offered the greatest likelihood of success.
Defendants
could have avoided the risk of an award of costs and fees simply
by responding to Plaintiff’s discovery.
The amount of the costs and fees award requested here,
$48,930, would be somewhat on the high side if this were a normal
case, but this case is anything but normal.
Plaintiff’s
counsel understandably briefed his motion to compel with
particular thoroughness and diligence, given Defendants’
history of endlessly inventive opposition.
20
The choice of
motion and hours spent on that motion were well justified in
light of Defendants’ history of dilatory tactics.
The court
finds the hours expended litigating the discovery motion by
Plaintiff’s counsel entirely reasonable in this context.
Defendants offer no opposition to the hourly rates, which the
court also finds reasonable.
The award of sanctions will be against Defendants and
against Defendants’ primary counsel, The Griffith Firm, which
has been calling the shots throughout this litigation.
It is
quite clear that local counsel is acting essentially as a host
attorney under the local rules.
Local counsel’s entirely
formal position was evidenced at the January 25, 2017, hearing,
when counsel for The Griffin Firm was unexpectedly absent due
to a family emergency, and local counsel merely requested a
continuance.
(Dkt. No. 567.)
Evidence of complicity by The Griffin Firm in Defendants’
contumacy has been manifested by the continuous stream of
baseless arguments offered in support of its clients’ conduct.
A good example is the specious argument, offered at the outset
of this case and trotted out repeatedly since then, that
Neuberger was justified in defying the court’s preliminary
21
injunction and moving ahead with the downstream merger of his
German company with his Austrian one, because this merger did
not substantively prejudice Plaintiff.7
First of all,
Neuberger had an obligation to comply with the court’s order,
period.
He was not entitled to make his own assessment as to
its necessity.
Second, as noted above, his suggestion that
Plaintiff was not prejudiced by the merger is contrary to the
strong weight of the evidence.
In the same vein, counsel’s argument in opposition to the
motion to compel now at issue is so glaringly baseless that it
reflects a lack of good faith and a failure to satisfy the
obligation incumbent upon an officer of the court.
Counsel
grossly mischaracterizes the issue in question as “whether
disclosure of assets of a judgment debtor’s affiliate exceeds
the scope of permissible post-judgment discovery where the
judgment creditor fails to articulate a valid legal theory under
which it may execute its judgment against such assets.”
(Defs.’ Mem. in Opp’n at 16 n.3, Dkt. No. 634.)
As noted above,
Defendants will not identify their affiliates, will not even
7
It is noteworthy that this argument was offered after primary
counsel had represented in open court that his client would
comply with the injunction.
22
confirm whether they exist, so Plaintiff is entirely unable to
litigate the issue Defendants cynically identify as central.
This amounts to tying Plaintiff’s hands and then condemning him
for not throwing a proper punch -- transparent game-playing.
Equally importantly, Plaintiff’s motion seeks discovery
only, and, more importantly, discovery of information that is
entirely within the control of the named Defendants.
Provision
of this information, which Defendants do not deny possessing,
would merely give Plaintiff an opportunity to offer further
argument for execution of its judgment in the daylight of full
and fair disclosure.
Plaintiff might win or lose, but seeking
access to information Defendants themselves possess about
“affiliates” or “entities” possibly holding funds or other
valuable property belonging to Defendants is perfectly
appropriate, routine post-judgment discovery.
No proper
rationale justifies withholding this information.
Counsel’s
defense of his clients’ refusal to produce this discovery falls
far outside the boundary of zealous advocacy.
For the foregoing reasons, Plaintiff’s Motion for Expenses
(Dkt. No. 622) is hereby ALLOWED in the amount of $48,930.
Both
Defendants and their primary counsel, The Griffin Firm, are
23
jointly and severally liable for this amount, which the court
orders to be paid to Plaintiff’s counsel on or before May 1,
2018.
In the event that Defendants appeal this ruling prior
to that date, the court orders that this payment be made to the
Clerk of Court for the United States District Court for the
District of Massachusetts and held in an interest-bearing
account pending the outcome of the appeal.
C.
Motion for Rule 37 Sanctions (Dkt. No. 639)
This most recent motion, which seeks an order that certain
third parties must convey a large number of patents to Plaintiff
(or, failing that, that the court make the conveyances itself)
must be denied for largely the same reasons that the earlier
motion for sanctions (Dkt. No. 522) has been denied.
This
motion offers somewhat more detail, naming four foreign
corporations that Plaintiff contends fall under the “Biolitec
group” umbrella.
Moreover, an attached declaration offers an
extensive catalogue of patents allegedly owned by these
entities.
Two problems make allowance of this motion inadvisable.
First, the four identified foreign corporations may, or may not,
include all the targeted Biolitec group entities.
24
Other
corporations may also be subject to the requested order.
Pl.’s Reply at 8 n.9, Dkt. No. 649.)
(See
The court is still in the
dark about the exact parties that might be subject to its order
beyond the four named.
Second, even to as the entities named, it is unclear where
they stand in relation to the named Defendants.
Plaintiff
asserts that Defendants “have conceded that all Biolitec
entities are in privity with them.”
(Pl.’s Mem. in Support at
13 n.13 (citing an earlier memorandum filed by Plaintiff), Dkt.
No. 640.)
But the record does not appear, at least at this
point, to contain any such binding concession.
Certainly,
under Plaintiff’s definition of the term “Biolitec group
entities” -- entities owned directly or indirectly by the named
Defendants -– some connection must exist.
The connection,
however, is not sufficiently clear to leave the court
comfortable ordering assignment to Plaintiff of dozens of
patents, as well as other intellectual property, owned, at least
on their face, by third-parties.
This is not a classic situation where a judgment creditor,
for example, is seeking access to funds held by a bank in an
account under the name of the debtor, or held by an employer
25
and subject to garnishment as funds owed to an employee/debtor.
At this stage, and without further information, the court has
no sufficient basis to conclude that patents or other
intellectual property held in the name of “Biolitec Pharma” or
one of the other four named entities are necessarily equitably
owned by Neuberger and subject to forfeiture.
It bears repeating, once again, that the source of this
obscurity is Defendants’ contumacy -- the wrongful withholding
of relevant evidence and the repeated violation of court orders.
The provision of routine post-judgment discovery by Defendants
would allow Plaintiff to litigate, and this court to adjudicate,
the question of Plaintiff’s entitlement to the patents and to
funds and other property possibly being held by third parties
but equitably owned by Defendants.
This discovery should have
been provided long ago.
A paragraph of Plaintiff’s memorandum argues that, as an
alternative remedy, the court can order joinder of the four
Biolitec group entities now identified by Plaintiff as “reach
and apply defendants.”
own initiative.
The court declines to do this on its
Plaintiff of course is free to file a motion
seeking this joinder.
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For the foregoing reasons, Plaintiff’s Motion for Rule 37
Sanctions (Dkt. No. 639) is hereby DENIED.
IV. CONCLUSION
In summary, the court rules as follows.
Plaintiff’s
Motion for Sanctions Under Rule 37 (Dkt. No. 522) is hereby
ALLOWED, in part.
Defendants have until April 15, 2018, to
serve full and complete answers to Plaintiff’s interrogatories
and requests for production.
Absent compliance, the court
orders that Defendants pay $25,000 to the Clerk of Court of the
United States District Court for the District of Massachusetts
on or before April 15, 2018, and on the 15th of every month
thereafter, up to a maximum of $1,000,000, until Defendants have
complied with the court’s order.
Plaintiff’s Motion for Expenses (Dkt. No. 622) is hereby
ALLOWED in the amount of $48,930.
Both Defendants and their
primary counsel, The Griffin Firm, are jointly and severally
liable for this amount, which must be paid to Plaintiff’s
counsel on or before May 1, 2018.
In the event of an appeal,
the funds will be paid to the Clerk.
Plaintiff’s Motion for Rule 37 Sanctions (Dkt. No. 639) is
hereby DENIED.
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It is so ordered.
/s/ Michael A. Ponsor
MICHAEL A. PONSOR
U.S. DISTRICT JUDGE
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