AngioDynamics, Inc. v. Biolitec AG , 780 F.3d 429 ( 2015 )

United States Court of Appeals
For the First Circuit
No. 14-1603
ANGIODYNAMICS, INC.,
Plaintiff, Appellee,
v.
BIOLITEC AG; BIOMED TECHNOLOGY HOLDINGS, LTD.; and
WOLFGANG NEUBERGER,
Defendants, Appellants.
BIOLITEC, INC.,
Defendant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Michael A. Ponsor, U.S. District Judge]
Before
Lynch, Chief Judge,
Stahl and Kayatta, Circuit Judges.
Edward Griffith, with whom Michael K. Callan, Doherty,
Wallace, Pillsbury, and Murphy, P.C., and The Griffith Firm were on
brief, for appellants.
William E. Reynolds, with whom Bond, Schoeneck & King, PLLC
was on brief, for appellee.
March 11, 2015
STAHL, Circuit Judge. This is a companion case to
AngioDynamics v. Biolitec AG, Nos. 13-1626, 13-2179. In this
appeal, Defendants challenge the district court's exercise of
personal jurisdiction over certain defendants, the denial of their
motions to dismiss, and the entry of default judgment and a damages
award against them as a sanction for discovery violations. Finding
all arguments meritless, we affirm.
I. Facts & Background
This court previously set out the basic factual contours
of this case in AngioDynamics, Inc. v. Biolitec AG, 711 F.3d 248
(1st Cir. 2013) (per curiam). Plaintiff AngioDynamics, Inc.
("ADI") obtained a $23 million judgment in New York against
defendant Biolitec, Inc. ("BI"), a New Jersey corporation with its
principal place of business in Massachusetts, based on an
indemnification clause in the supply and distribution agreement
governing BI's sale of medical equipment to ADI. Plaintiff sought
to secure payment on that judgment by bringing suit in the District
of Massachusetts against BI's President and CEO, Wolfgang
Neuberger, and its corporate parents, Biomed Technology Holdings
("Biomed") and Biolitec AG ("BAG") (collectively, "Defendants"),1
1
At the time this action began, Biolitec AG, a German
corporation headquartered in Germany, owned ninety percent of
Biolitec, Inc.'s stock. Neuberger, a citizen of Austria with
residences the world over, served as the President, CEO, and
Chairman of the Board of Directors of both Biolitec, Inc. and
Biolitec AG. He was the sole owner of Biomed Technology Holdings,
a Malaysian corporation that owned approximately seventy-five
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alleging that Defendants had looted BI of over $18 million in
assets in order to render it judgment-proof. Specifically, the
complaint alleged tortious interference with contractual relations,
fraudulent transfers of assets in violation of the Massachusetts
Uniform Fraudulent Transfer Act ("MUFTA"), Mass. Gen. Laws ch.
109A, § 5, and deceptive commercial acts or practices in violation
of Mass. Gen. Laws ch. 93A, § 11 ("chapter 93A"). The complaint
also demanded a declaratory judgment that Neuberger, Biomed, and
BAG were jointly and severally liable for ADI's judgment against BI
in the underlying contract action under the doctrine of piercing
the corporate veil.
We will recount only the portions of the procedural
background of this case pertinent to the issues raised in this
appeal. ADI filed its amended complaint on March 26, 2010. BAG
filed a motion to dismiss, averring that the district court lacked
personal jurisdiction over the German company and that three counts
of ADI's complaint failed to state a claim. The district court
denied the motion in a lengthy memorandum and order.
Angiodynamics, Inc. v. Biolitec AG, No. 09-cv-30181-MAP, 2011 WL
3157312, at *9 (D. Mass. July 25, 2011). Four days later, Biomed
and Neuberger filed their own motion to dismiss, raising
substantially similar arguments as BAG's motion (personal
percent of Biolitec AG's stock. Biolitec, Inc. has filed for
Chapter 11 bankruptcy and is not a party to this appeal.
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jurisdiction as to Biomed, and failure to state a claim on three
counts as to both Biomed and Neuberger). The district court denied
this second motion on the same grounds as the first.
As the parties began discovery, Defendants resisted ADI's
efforts to depose Neuberger and other key witnesses. ADI served
Neuberger with a notice of deposition in July 2012, but he
indicated he would not attend. After ADI filed a motion to compel
his attendance at the deposition, Neuberger agreed to come and ADI
withdrew its motion. Neuberger attended the first day of the
deposition in Springfield, Massachusetts, in January 2013, but the
parties were forced to postpone the remainder of the deposition
until Defendants produced various court-ordered documents for ADI's
review. In July 2013, Defendants filed a motion for a protective
order to stay Neuberger's deposition. The magistrate judge
assigned to this case denied the motion as, inter alia, untimely
and unfairly prejudicial to ADI. Defendants refused to produce
Neuberger, and filed a second motion for a protective order seeking
to continue the deposition by videolink; the magistrate judge
denied this motion as well. Similar issues arose in relation to
the depositions of three key BI corporate officers: the parties
agreed to suspend their depositions until Defendants produced
various court-ordered documents. Subsequently, Defendants refused
to produce any of the documents or the three witnesses. ADI filed
two motions for sanctions based on the Defendants' failure to turn
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over the key documents and refusal to produce either Neuberger or
the three managing agents.
During the discovery period, ADI learned that Defendants
planned to merge BAG with its Austrian subsidiary. ADI moved for
a temporary restraining order and then for a preliminary injunction
to prevent the merger, arguing that ADI would be unable to enforce
any judgment against BAG in the Austrian courts. The district
court enjoined the merger and this court affirmed the issuance of
the preliminary injunction. AngioDynamics, 711 F.3d at 252. While
that appeal was pending, Defendants effected the merger anyway.
ADI moved for contempt proceedings, and the district court ordered
Neuberger to appear in person to show cause why he should not be
held in contempt. Neuberger did not appear. On April 11, 2013,
the district court held Defendants in contempt for violating the
preliminary injunction and ordered coercive penalties against
Defendants until they undid the merger. AngioDynamics, Inc. v.
Biolitec AG, 946 F. Supp. 2d 205, 215–16 (D. Mass. 2013). This
contempt order is the subject of the companion case to this
opinion, AngioDynamics v. Biolitec AG, Nos. 13-1626, 13-2179.
Approximately a month later, on May 24, 2013, ADI moved
for default judgment based on Defendants' failure to comply with
the contempt order. The district court denied the motion on August
30, 2013, but ordered Defendants to file a status report detailing
their plan for complying with the contempt decision and for
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producing Neuberger to the district court to "testify as to his
actions in response to the injunction." AngioDynamics, Inc. v.
Biolitec AG, 966 F. Supp. 2d 71, 74 (D. Mass. 2013). Defendants'
status report, dated October 1, 2013, stated definitively that they
had no intention of complying with the contempt order. See
AngioDynamics, Inc. v. Biolitec AG, 991 F. Supp. 2d 283, 298 (D.
Mass. 2014). On October 11, 2013, ADI filed a renewed motion for
default judgment based on Defendants' status report, which the
district court heard along with ADI's two motions for sanctions for
violations of various discovery orders. On January 14, 2014, the
district court allowed the motions for sanctions and entered
default judgment for ADI.2 Id. at 299. On March 18, 2014, the
court awarded approximately $75 million to ADI, which included
chapter 93A damages. AngioDynamics, Inc. v. Biolitec AG, 991 F.
Supp. 2d 299, 307 (D. Mass. 2014). This appeal followed.
II. Analysis
A. Personal Jurisdiction
Defendants begin by positing that the default judgment is
void as to BAG, BI's parent corporation, and Biomed, BAG's primary
2
The district court entered default judgment in relation to
the motions for sanctions for discovery order violations; it denied
ADI's separate motion for default judgment as moot in light of the
fact that it had entered default judgment against Defendants as the
penalty for discovery order violations. AngioDynamics, Inc. v.
Biolitec AG, 991 F. Supp. 2d 283, 299 (D. Mass. 2014).
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shareholder, for lack of personal jurisdiction.3 Defendants aver
that even if the court could impute BI's contacts with the forum to
BAG and Biomed for personal jurisdiction purposes, the district
court was required to conduct an independent analysis of each of
the Defendants' contacts with Massachusetts. Defendants' argument
relies on two recent Supreme Court cases, Goodyear Dunlop Tires
Operations, S.A. v. Brown, 131 S. Ct. 2846 (2011), and Daimler AG
v. Bauman, 134 S. Ct. 746 (2014). We need not reach this
particular argument because jurisdiction is so clearly established
in this case.
It is undisputed that the District of Massachusetts could
properly exercise personal jurisdiction over BI, a corporation with
its principal place of business in Massachusetts, making BI "at
home" in this forum. See Daimler, 134 S. Ct. at 760. ADI must
make a prima facie showing of jurisdiction sufficient to overcome
Defendants' Rule 12(b)(2) motion to dismiss. See Phillips v.
Prairie Eye Ctr., 530 F.3d 22, 26 (1st Cir. 2008) (where the
district court does not hold an evidentiary hearing on a
jurisdictional question, this court reviews the proffered evidence
to determine whether the plaintiff has established a prima facie
showing of jurisdiction by a preponderance of the evidence). ADI's
3
Neuberger, BI's CEO, President, and Chairman of the Board,
waived any challenge to the district court's personal jurisdiction
over him by failing to raise the issue in his answer or move for
dismissal under Rule 12(b)(2).
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complaint alleged that Defendants looted BI by fraudulently
transferring its assets out of Massachusetts, and thereby rendering
BI unable either to perform its contractual duties owed to ADI or
to satisfy the judgment due to ADI. This conduct gives rise to
each of the counts in the complaint and was materially connected to
the forum state because it occurred here. E.g., Harlow v.
Children's Hosp., 432 F.3d 50, 61 (1st Cir. 2005) (citing United
Elec., Radio & Mach. Workers v. 163 Pleasant St. Corp., 960 F.2d
1080, 1088–89 (1st Cir. 1992)). Thus, as the district court
discussed at length in its memorandum and order, ADI's allegations
suffice to establish jurisdiction over BAG and Biomed, and the
cases cited by Defendants do not require a different result.
AngioDynamics, 2011 WL 3157312, at *3–7 & *7 n.8.
B. Motion to Dismiss for Failure to State a Claim
Defendants argue that the default judgment is void as to
all Defendants because ADI's complaint fails to state valid causes
of action for tortious interference with contractual relations,
veil piercing, and MUFTA violations.4 The district court rejected
Defendants' arguments when it denied their Rule 12(b)(6) motion to
dismiss, AngioDynamics, 2011 WL 3157312, at *7–9, denied their
motion for partial judgment on the pleadings as to the MUFTA
4
Defendants' briefing on appeal does not dispute that ADI
stated a valid claim for chapter 93A relief, although they
contested this cause of action below.
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claims, and again when it awarded damages to ADI after entry of
default judgment, AngioDynamics, 991 F. Supp. 2d at 304–06.
This court previously found that ADI demonstrated a
likelihood of success on its veil piercing and MUFTA claims.
AngioDynamics, 711 F.3d at 251. It follows that ADI's complaint,
which alleged that Defendants' exercised pervasive control over BI
by fraudulently transferring assets, thus looting the company and
rendering it judgment-proof, was sufficient to overcome Defendants'
Rule 12(b)(6) and 12(c) motions. We will not revisit legal rulings
"explicitly or implicitly decided by an earlier appellate decision
in the same case." Remexcel Managerial Consultants, Inc. v.
Arlequin, 583 F.3d 45, 53 (1st Cir. 2009) (internal quotation marks
omitted) (holding that where earlier appellate panel held that
complaint adequately stated a cause of action, law of the case
doctrine precludes challenge to sufficiency of the pleadings after
entry of default judgment). As for the tortious interference cause
of action, the complaint alleges that Defendants wrongfully induced
BI to violate its supply and distribution contract with ADI, and
then rapaciously drained BI of its assets in order to avoid
satisfying the judgment due to ADI, causing ADI significant
financial loss. As the district court repeatedly found, these
allegations sufficiently plead tortious interference with
contractual relations under Massachusetts law. E.g.,
AngioDynamics, 2011 WL 3157312, at *7–8; see also Weiler v.
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PortfolioScope, Inc., 469 Mass. 75, 84 (2014) (setting out elements
of cause of action).
C. Entry of Default Judgment
After Defendants repeatedly refused to produce various
individuals for depositions, including Neuberger, ADI moved for
sanctions pursuant to Federal Rule of Civil Procedure 37. The
district court granted the motions and entered default judgment
against all Defendants. AngioDynamics, 991 F. Supp. 2d at 297.
Under Rule 37, the district court maintains a variety of
tools at its disposal to sanction a party who violates discovery
orders, from staying the proceedings to entering default judgment
against the disobedient party. Fed. R. Civ. P. 37(b)(2)(A).
District courts may impose such sanctions with an eye both to
penalize the particular noncompliance and to deter others from
engaging in the same tactics. Companion Health Servs., Inc. v.
Kurtz, 675 F.3d 75, 84 (1st Cir. 2012) (quoting Nat'l Hockey League
v. Metro. Hockey Club, Inc., 427 U.S. 639, 643 (1976) (per
curiam)). The choice of sanction lies in the purview of the
district court, and we review for abuse of discretion. As we have
observed in the past, "this standard of review is not appellant-
friendly -- and a disgruntled litigant bears a heavy burden in
attempting to show that an abuse occurred." Tower Ventures, Inc.
v. City of Westfield, 296 F.3d 43, 46 (1st Cir. 2002).
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We have set out a non-exhaustive list of factors for
consideration when reviewing a Rule 37 motion for sanctions, some
substantive and others procedural. Vallejo v. Santini-Padilla, 607
F.3d 1, 8 (1st Cir. 2010). Specifically, we have called on
district courts to weigh the severity of the discovery violations,
legitimacy of the party's excuse for failing to comply, repetition
of violations, deliberateness of the misconduct, mitigating
excuses, prejudice to the other party and to the operations of the
court, and adequacy of lesser sanctions. Id. On the procedural
side, we consider whether the district court gave the offending
party notice of the possibility of sanctions and the opportunity to
explain its misconduct and argue against the imposition of such a
penalty. Id.
The district court dutifully reviewed and discussed each
of these factors in a detailed forty-five page memorandum and
order. AngioDynamics, 991 F. Supp. 2d at 290–97. As the district
court ably and convincingly described, Defendants' conduct here was
severe, repeated, and deliberate, with no legitimate or mitigating
explanation for noncompliance. Id. at 291–93, 296–97. Their
discovery violations frustrated ADI's ability to prosecute this
lawsuit and the district court's ability to manage its docket. Id.
at 293–95, 297. Defendants do not contend that they were
subjected to any procedural inadequacies in the imposition of
default judgment. Indeed, the district court afforded Defendants
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numerous opportunities to explain themselves, both on paper and in
person, and had warned them that default judgment was a possibility
if they continued to flout discovery orders. See id. at 290–91;
AngioDynamics, Inc. v. Biolitec AG, 966 F. Supp. 2d 71, 74 (D.
Mass. 2013) (denying ADI's first motion for default judgment, but
stating, "Defendants should be aware, however, that their continued
defiance of court orders will have increasingly severe
consequences," including "reconsideration of entry of default
judgment"). Despite the admonitions, Defendants continued to
engage in a "deliberate pattern of stonewalling with the aim of
frustrating effective discovery and the progress of the case."
Companion Health Servs., 675 F.3d at 85. Facing repeated
recalcitrance almost five years after ADI 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.
Although entry of default judgment is a "drastic
sanction," it nonetheless "provides a useful remedy" where, as
here, "a litigant is confronted by an obstructionist adversary."
Crispin-Taveras v. Municipality of Carolina, 647 F.3d 1, 7 (1st
Cir. 2011) (internal quotation marks omitted). Given the severity
of Defendants' discovery violations, the district court acted well
within its discretion in entering default judgment, a sanction that
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can play a "constructive role in maintaining the orderly and
efficient administration of justice." Id.
D. Award of Damages Without an Evidentiary Hearing
After entry of default judgment, the district court heard
argument from the parties regarding the issue of damages and
permitted the parties to submit both pre- and post-argument briefs.
On March 18, 2014, the court awarded approximately $75 million in
damages to ADI. AngioDynamics, 991 F. Supp. 2d at 307. Defendants
aver that the award of damages without an evidentiary hearing
amounts to an abuse of the district court's discretion. We
disagree. See HMG Prop. Investors, Inc. v. Parque Indus. Rio
Canas, Inc., 847 F.2d 908, 919 (1st Cir. 1988) ("We review a
determination that a hearing was not compulsory under Rule 55(b)
only for abuse of discretion.").
Federal Rule of Civil Procedure 55, which governs the
entry of default judgment against a party, states explicitly that
the district court "may conduct hearings . . . when, to enter or
effectuate the judgment, it needs to: . . . determine the amount of
damages." Fed. R. Civ. P. 55(b)(2)(B) (emphasis added). The
rule's language makes an evidentiary hearing an available tool, not
a prerequisite, to the determination of a damage award. We have
observed in the past that "no evidentiary inquiry is necessary if
the claim is for a 'sum certain,'" that is, where "there is no
doubt as to the amount to which a plaintiff is entitled as a result
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of the defendant's default." KPS & Assocs., Inc. v. Designs by
FMC, Inc., 318 F.3d 1, 19 (1st Cir. 2003). While a stated dollar
amount alleged in a complaint does not, by itself, present a sum
certain, see id. at 20 n.9, here, ADI rooted its claim for damages
in past adjudication: $23,156,287, the amount entered in its favor
in the New York action. The district court took the New York
judgment amount, trebled it pursuant to Mass. Gen. Laws ch. 93A,
§ 11, and calculated statutory prejudgment interest pursuant to
Mass. Gen. Laws ch. 231, § 6B. AngioDynamics, 991 F. Supp. 2d at
306–07. The court did not need an evidentiary hearing to input
these calculations, especially given its familiarity with the case.
Cf. HMG Prop. Investors, 847 F.2d at 919 ("It is settled that, if
arriving at the judgment amount involves nothing more than
arithmetic -- the making of computations which may be figured from
the record -- a default judgment can be entered without a hearing
of any kind."). The district court could, in its discretion, award
treble damages under chapter 93A where Defendants' liability was
established by default and the district court was well-acquainted
with the egregiousness of Defendants' conduct. Cf. KPS & Assocs.,
318 F.3d at 21–25 (affirming doubling of compensatory damages under
chapter 93A and taking factual allegations of the complaint as true
by virtue of default judgment). The only conceivable sum uncertain
in the damage award was the amount of attorneys' fees and costs
owed ADI under chapter 93A, but Defendants failed to contest ADI's
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presented calculation either to the district court or here on
appeal. The district court committed no abuse of discretion and
complied with Rule 55's elective language when it entered a damage
award based on preexisting figures without an evidentiary hearing.
III. Conclusion
For the foregoing reasons, we affirm the entry of default
judgment against Defendants and the district court's award of
damages. We award costs of this appeal to Plaintiff.
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