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AngioDynamics, Inc. v. Biolitec AG

United States District Court, D. Massachusetts

March 29, 2018





         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.


         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)); 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 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 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. (Order dated Aug. 29, 2012, Dkt. No. 126.) 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 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. This warrant is still outstanding. 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 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 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 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. Defendants again failed to provide substantive responses. 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.

         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 ...

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