AngioDynamics, Inc. v. Biolitec AG

991 F. Supp. 2d 283, 87 Fed. R. Serv. 3d 803, 2014 WL 129035, 2014 U.S. Dist. LEXIS 4440
CourtDistrict Court, D. Massachusetts
DecidedJanuary 14, 2014
DocketC.A. No. 09-cv-30181-MAP
StatusPublished
Cited by14 cases

This text of 991 F. Supp. 2d 283 (AngioDynamics, Inc. v. Biolitec AG) is published on Counsel Stack Legal Research, covering District Court, D. Massachusetts primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
AngioDynamics, Inc. v. Biolitec AG, 991 F. Supp. 2d 283, 87 Fed. R. Serv. 3d 803, 2014 WL 129035, 2014 U.S. Dist. LEXIS 4440 (D. Mass. 2014).

Opinion

MEMORANDUM AND ORDER REGARDING PLAINTIFF’S MOTIONS FOR SANCTIONS (Dkts. No. 327, 350 & 359)

PONSOR, District Judge.

I. INTRODUCTION

Plaintiff has filed two motions, each pursuant to Fed.R.Civ.P. 37, seeking sanctions and entry of default judgment based on Defendants’ continuing failure to comply with their discovery obligations. (Dkt. Nos. 327 & 350.) Plaintiff has also filed a motion for default judgment arising from Defendants’ refusal to adhere to this court’s preliminary injunction and order of contempt. (Dkt. No. 359.) Because Defendants’ misconduct during the course of discovery has traveled well beyond the boundary of what is even remotely acceptable in the conduct of litigation, the court will allow the two Rule 37 motions and enter default judgment against Defendants on liability. While the decision on Plaintiffs discovery-related motions obviates the need to rule on its contempt motion, Defendants’ obdurate defiance of this court’s preliminary injunction order bolsters the conclusion that Defendants have conducted themselves in bad faith.1

II. FACTS

A. The Litigation.

The facts underlying this litigation have been fully detailed on previous occasions, and only a summary recitation is necessary here. AngioDynamics, Inc. v. Biolitec AG, 910 F.Supp.2d 346 (D.Mass.2012); AngioDynamics, Inc. v. Biolitec, Inc., 2011 WL 3157312, at *1-2 (D.Mass. July 25, 2011). Plaintiff has brought suit against Defendants Biolitec AG (“BAG”), Wolfgang Neuberger, Biolitec, Inc. (“BI”), and Biomed Technology Holdings, Ltd. Defendant Neuberger is the Chief Executive Officer (“CEO”) of BAG and BI, and the majority shareholder of each company.

The present suit is based on a supply and distribution agreement between Defendant BI, a subsidiary of BAG, and Plaintiff. Defendant BI agreed to defend and indemnify Plaintiff against all third-party patent infringement claims arising out of the marketing and distribution of Defendants’ products. Despite this agreement, after Plaintiff found itself embroiled in patent infringement litigation with a third party, Defendant BI refused to indemnify Plaintiff, and Plaintiff ended up having to pay substantial damages out of its own pocket. Litigation between Plaintiff and BI thereafter ensued, with Plaintiff claiming that BI had reneged on its prior agreement, and a court in the Northern District of New York ultimately found Defendant BI liable to Plaintiff for breach [286]*286of contract in the amount of $16,463,846.94 plus pre-judgment interest.

In the suit before this court, Plaintiff alleges that Defendant BAG deliberately diverted virtually all the assets out of its subsidiary BI to avoid payment of the New York judgment, essentially looting BI to render it judgment-proof. Among other allegations, Plaintiff also accuses Defendant BAG and Neuberger of tortious interference with a contract.

B. The Preliminary Injunction and Defendants’ Contempt.

BAG is currently subject to a preliminary injunction, issued by this court in 2012. The facts underlying the issuance of the injunction and Defendants’ ensuing deliberate defiance of the injunction have been described in detail in previous memoranda. AngioDynamics, Inc. v. Biolitec AG, 946 F.Supp.2d 205 (D.Mass.2013). In summary, Plaintiff learned in the summer of 2012 that Defendant BAG, a German corporation, intended to effectuate a merger with an Austrian subsidiary. This merger, as Plaintiff alleged and the court ultimately found, would render virtually impossible any effort by Plaintiff to enforce any judgment against BAG in this court based upon its systematic looting of its subsidiary BI. The court found, based on the parties’ submissions, that Plaintiff would likely be able to enforce this court’s judgment in Germany, whereas pursuit of BAG in Austria would require the filing of an entirely new lawsuit. In other words, the downstream merger of BAG with its Austrian subsidiary would render the protracted and very expensive litigation before this court meaningless. Everything would have to be repeated in Austria ab initio.2

Convinced by Plaintiff of the bad faith underlying the proposed merger, and finding that Plaintiff had demonstrated both a likelihood of success on the merits and irreparable harm, this court explicitly enjoined Defendants from proceeding with the merger while this litigation was pending. Id.; (Dkt. No. 141). Defendants appealed, and the First Circuit affirmed this court’s decision to issue the injunction. AngioDynamics, Inc. v. Biolitec AG, 711 F.3d 248 (1st Cir.2013).

On March 15, 2013, while the appeal of this court’s preliminary injunction was pending before the First Circuit, Defendants — in direct, admitted defiance of the injunction — went forward with the merger anyway. (Dkt. Nos. 199 & 200.) Plaintiff responded with a Motion for Contempt, and Defendant Neuberger was ordered to appear in person at the hearing on the motion to show cause why he should not be held in contempt. (Dkt. No. 242.) Neuberger failed to attend, and Defendants were held in civil contempt. (Dkt. No. 247.)

Neuberger’s explanation for his decision not to appear was that, if he had come to court, the undersigned might have imposed sanctions on him for his contumacious behavior. According to his lawyer, Neuberger did not want, and should not be required, to risk that. Counsel announced that Neuberger would be willing to appear at the contempt hearing by telephone from Germany, to be sure that if the court ultimately decided against him he would be safe from any consequences. Plaintiffs counsel objected, pointing out (among other things) that this arrangement would interfere with his ability to cross-examine [287]*287Neuberger, and the court declined to afford Neuberger this privilege.

Following the hearing, the court rejected Defendants’ argument that they had somehow complied with the “spirit” of the court’s injunction, while admittedly disregarding its explicit terms. The court also rejected the claim, ambiguously presented, that Plaintiff was somehow no worse off following the merger than before and that, since Plaintiff was not harmed, it would be improper for the court to enforce the preliminary injunction through any contempt sanction. Finally, the court was also not persuaded by Defendants’ contention, later retracted, that once the merger was completed, BAG was legally and logistically unable to revoke it. In the end, Defendants conceded that it would be possible to take action that would effectively place BAG in the position it was before the merger, though the process would be inconvenient and would require some months. This Defendants refused to do. (Dkt. No. 248.)

To coerce compliance with the preliminary injunction, the court ordered Defendants to pay a series of escalating fines until they effectively restored the status quo that existed prior to the merger. An arrest warrant was also issued for Defendant Neuberger based on the finding of civil contempt, and the court indicated that it would be referring the matter to the United States Attorney’s Office for criminal contempt prosecution.

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Bluebook (online)
991 F. Supp. 2d 283, 87 Fed. R. Serv. 3d 803, 2014 WL 129035, 2014 U.S. Dist. LEXIS 4440, Counsel Stack Legal Research, https://law.counselstack.com/opinion/angiodynamics-inc-v-biolitec-ag-mad-2014.