Demodulation, Inc. v. United States , 2016 U.S. Claims LEXIS 27 ( 2016 )

In the United States Court of Federal Claims
No. 11-236C
(Filed: January 29, 2016)
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DEMODULATION, INC., *
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Plaintiff, * Patent Infringement Case; Rule 54
* Motion for Reconsideration; Failure
v. * to Respond to Discovery Requests;
* Dismissal of Trade Secret Claims as
THE UNITED STATES, * Sanction Under Rule 37.
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Defendant. *
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Keith A. McKenna, The McKenna Law Firm LLC, Montclair, New Jersey, for Plaintiff.
Gary L. Hausken, with whom were Benjamin C. Mizer, Principal Deputy Assistant
Attorney General, John Fargo, Director, and Alice Suh Jou, Of Counsel, Commercial
Litigation Branch, Civil Division, U.S. Department of Justice, Washington, D.C., for
Defendant.
ORDER ON PLAINTIFF’S MOTION FOR RECONSIDERATION
OF THE COURT’S AUGUST 13, 2015 ORDER
WHEELER, Judge.
On December 8, 2015, counsel for Plaintiff Demodulation, Inc. (“Demodulation”)
filed a motion for reconsideration of the Court’s August 13, 2015 Order, Dkt. No. 166,
dismissing all of Plaintiff’s trade secret claims as contained in Counts One, Two, Four, and
Five of Plaintiff’s Third Amended Complaint. Pl.’s Mot. at 1.1 Pursuant to Rule 37, the
Court dismissed Plaintiff’s trade secret claims with prejudice for failure to assert or
describe the claims with any meaningful detail despite being ordered to do so by the Court
no fewer than three times.
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Plaintiff does not seek reconsideration of the monetary sanctions entered against Benjamin D. Light,
Plaintiff’s former counsel of record, and his former law firm, Callagy Law, P.C.
1. Factual and Procedural History
Concerns with Plaintiff’s description of its trade secrets claims arose well over a
year ago. After Demodulation produced just one page of responsive material and failed to
identify its trade secret claims in response to the Government’s discovery requests, the
Government filed a Motion to Compel Answers on October 31, 2014. Dkt. No. 74. When
the deadline passed with no response, the Government filed its Motion to Enter Order
Compelling Discovery and to Show Cause. Dkt. No. 77. The Court granted the
Government’s Motion to Compel and ordered Demodulation to furnish a complete
response to the Government’s First Set of Interrogatories and First Set of Requests for
Production no later than January 5, 2015. Dkt. No. 79. Additionally, the Court ordered
Demodulation to show cause why it should not be sanctioned. Id. On January 5, 2015,
then counsel of record for Demodulation, Mr. Benjamin D. Light, filed a declaration
explaining why neither he nor Demodulation should be sanctioned. Dkt. No. 81. Mr.
Light’s declaration notwithstanding, Demodulation had yet to respond to the Government’s
discovery requests and thus the Court ordered Demodulation to submit supplemental
discovery responses and to furnish all responsive documents by February 11, 2015. Dkt.
No. 83.
Despite multiple orders from this Court to furnish complete discovery responses,
Demodulation’s supplemental responses failed to remedy its incomplete document
production and incomplete answers to the Government’s interrogatories. In response to
these inadequacies, the Government filed its Renewed Motion to Compel Discovery and
for Sanctions. Dkt. No. 91. On August 13, 2015, the Court issued an order dismissing
Plaintiff’s trade secret claims. As the Court explained, “[d]ismissal of all the trade secret
claims is entirely warranted here. . . . Demodulation was given multiple chances to correct
and amend its responses, and its conduct was not merely the product of a misunderstanding
of the Court’s orders.” Dkt. No. 166 at 9.
2. Standard of Review
The decision of whether to grant a motion for reconsideration is squarely within the
discretion of the trial court. Under Rule 54(b), the Court can revise “any order or other
decision, however designated, that adjudicates fewer than all the claims or the rights and
liabilities of fewer than all the parties [that] does not end the action as to any of the claims
or parties” prior to entry of a judgment adjudicating all claims. Reconsideration under Rule
54 is “available ‘as justice requires.’” Martin v. United States, 101 Fed. Cl. 664, 671
(2011). Although the standard for reconsideration is imprecise and affords discretion to
the trial court, “reconsideration is ‘not intended . . . to give an unhappy litigant an additional
chance to sway’ the court.” Id. (quoting Matthews v. United States, 73 Fed. Cl. 524, 525
(2006)). Instead, such a motion should only be granted upon the showing of “exceptional
circumstances justifying relief, based on manifest error of law or mistake in fact. . . .”
Webster v. United States, 93 Fed. Cl. 676, 679 (2010) (citing Henderson Cty. Drainage
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Dist. No. 3 v. United States, 54 Fed. Cl. 334, 337 (2003)). Exceptional circumstances
include: (1) an intervening change in the controlling law; (2) availability of previously
unavailable evidence; or (3) preventing manifest injustice. Shirlington Limousine &
Transp., Inc. v. United States, 78 Fed. Cl. 27, 29 (2007). To prevail, a party seeking
reconsideration based upon “manifest injustice” must demonstrate that the injustice is
“apparent to the point of being almost indisputable.” Webster, 93 Fed. Cl. at 679 (quoting
Pac. Gas & Elec. V. United States, 74 Fed. Cl. 779, 785 (2006)).
3. Analysis
Claim dismissal by a trial court pursuant to Rule 37 generally requires advance
warning from the court and a showing of more than mere negligence on the part of the
sanctioned party. See Ingalls Shipbuilding, Inc. v. United States, 857 F.2d 1448, 1451
(Fed. Cir. 1988) (“A party’s simple ignorance, grounded in confusion or sincere
misunderstanding of the Court’s orders, does not warrant dismissal.”) (internal citations
omitted). Dismissal is appropriate when the court expressly highlights the inadequacy of
discovery responses and warns the responding party that it may be subject to sanctions.
R.W. Int’l Corp. v. Welch Foods, Inc., 937 F.2d 11, 15 (1st Cir. 1991); see Wexell v. Komar
Indus., 18 F.3d 916, 920 (Fed. Cir. 1994) (finding that dismissal was an appropriate
sanction where the plaintiff willfully disobeyed the court’s order to provide responses to
initial discovery requests, was warned of the consequences of failing to respond, and
caused prejudice to the defendant); see also Refac Int’l v. Hitachi, Ltd., 921 F.2d 1247,
1255-56 (Fed. Cir. 1990) (affirming trial court’s dismissal of plaintiff’s suit and sanctions
for failure to provide adequate supplemental responses to initial inadequate discovery
responses despite the court’s order).
In seeking reconsideration of the Court’s August 13, 2015 Order, Demodulation
claims that it “took all steps it could have taken at that time [when the claims were
dismissed] to comply” with the trade secrets discovery requests and orders. Pl.’s Mot. 4.
Additionally, Demodulation claims that it “was not aware that the Court also believed the
supplemental answers to be inadequate” and that it “was not on notice of the possibility of
the imposition of any sanctions. . . .” Id. at 7. Finally, Demodulation highlights the
monetary sanctions the Court imposed on its prior counsel to argue that “the additional
sanction of dismissal with prejudice of the Trade Secret Claims was in error given the
availability of the lesser sanctions and the manifest injustice that resulted.” Id. at 4.
Plaintiff’s arguments misconstrue the procedural history of this litigation and contain
factual assertions that are patently false.
As this Court already has explained, the steps Plaintiff had taken to comply with the
discovery requests when the claims were dismissed were so grossly inadequate that the
Court determined Plaintiff had no trade secrets to protect and “that it would be unfair to
the Government to allow such claims to go forward.” Dkt. No. 166 at 9. Although
Demodulation now seeks to shift responsibility for its failure to articulate its claims to its
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prior counsel, Demodulation is the party asserting the trade secret claims in this matter and
it should have been able to come forward with a comprehensible description of those claims
in a timely fashion. It failed to do so. After first offering evasive boilerplate responses to
the Government’s interrogatories, Demodulation then submitted a response indicating the
Government could find its trade secrets somewhere among 2,360 pages of partly illegible
documents it had produced. Id. at 9. The “Claim Chart” included as an appendix to
Plaintiff’s Reply to Opposition to Motion for Reconsideration, filed on January 7, 2016, is
too little, too late. Reply, App’x 1. “At the very least, a defendant is entitled to know the
bases for plaintiff’s charges against it. The burden is upon the plaintiff to specify those
charges, not upon the defendant to guess what they are.” Xerox Corp. v. Int’l Bus.
Machines Corp., 64 F.R.D. 367, 371 (S.D.N.Y. 1974). Plaintiff’s ongoing refusal to
specify its trade secret appropriation charges has caused prejudice to the Government.
Without knowledge of Demodulation’s trade secrets, the Government has been unable to
determine whether any of those secrets were misappropriated, and thus has not been able
to develop its defense.
The record does not support Plaintiff’s claims of being unaware that the Court
considered its discovery responses inadequate or that dismissal of its trade secrets claims
was a possibility. After multiple Government motions and Court orders requesting
identification of Plaintiff’s trade secret claims failed to elicit an adequate response from
Plaintiff, the Court held a status conference on April 2, 2015. During this conference, the
Court repeatedly asked Plaintiff’s counsel to describe the claims, to no avail. Dkt. No. 110.
At that time, there was already a motion pending from the Government seeking partial
dismissal of Plaintiff’s claims as a sanction. On the record, the Court expressly stated that
the Government’s motion for sanctions was fully briefed and the Court would be ruling on
it in short order. Id. Thus, Plaintiff’s claims that it was unaware that the Court considered
its discovery responses inadequate and that it had no warning regarding the possibility of
sanctions are simply untenable, if not disingenuous.
4. Conclusion
Demodulation had notice that the Court considered its responses to the
Government’s discovery requests regarding its trade secret claims inadequate. Further,
Demodulation was given multiple opportunities to address this inadequacy. It failed to do
so, even when facing a clear possibility of sanctions by this Court. Demodulation’s refusal
to cooperate has frustrated the Government’s ability to litigate this matter. As
Demodulation was given fair warning of sanctions and multiple opportunities to respond
to the Government in a satisfactory manner, it was well within the discretion of this Court
to dismiss Demodulation’s trade secret claims. Any “injustice” Demodulation now
perceives is of its own making. Accordingly, Plaintiff’s motion for reconsideration of the
portion of this Court’s August 13, 2015 Order dismissing Plaintiff’s trade secret claims is
DENIED.
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IT IS SO ORDERED.
s/Thomas C. Wheeler
THOMAS C. WHEELER
Judge
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