Monsanto Co. v. E.I Du Pont De Nemours & Co.

United States Court of Appeals
for the Federal Circuit
______________________
MONSANTO COMPANY AND
MONSANTO TECHNOLOGY, LLC,
Plaintiffs-Appellees,
v.
E.I. DU PONT DE NEMOURS AND COMPANY AND
PIONEER HI-BRED INTERNATIONAL, INC.,
Defendants-Appellants.
______________________
2013-1349
______________________
Appeal from the United States District Court for the
Eastern District of Missouri in No. 09-CV-0686, Senior
Judge E. Richard Webber.
______________________
Decided: May 9, 2014
______________________
SETH P. WAXMAN, Wilmer Cutler Pickering Hale and
Dorr LLP, of Washington, DC, argued for plaintiffs-
appellees. With him on the brief were PAUL R.Q.
WOLFSON, THOMAS G. SAUNDERS, CAROLYN JACOBS
CHACHKIN, and DANIEL AGUILAR. Of counsel on the brief
were GEORGE C. LOMBARDI, and JAMES MATTHEW
HILMERT, Winston & Strawn LLP, of Chicago, Illinois;
JOHN JUSTIN ROSENTHAL, of Washington, DC; and JOSEPH
P. CONRAN, Husch Blackwell, LLP, of St. Louis, Missouri.
2 MONSANTO COMPANY v. E.I. DU PONT DE NEMOURS
THOMAS G. HUNGAR, Gibson, Dunn & Crutcher LLP,
of Washington, DC, argued for defendants-appellants.
With him on the brief was SCOTT P. MARTIN. Of counsel
on the brief were JAMES P. DENVIR III and AMY J.
MAUSER, Boies, Schiller & Flexner LLP, of Washington,
DC.
______________________
Before LOURIE, REYNA, and WALLACH, Circuit Judges.
LOURIE, Circuit Judge.
E.I. Du Pont de Nemours and Company and its sub-
sidiary Pioneer Hi-Bred International, Inc. (collectively
“DuPont”) appeal from the orders of the United States
District Court for the Eastern District of Missouri impos-
ing sanctions on DuPont by striking DuPont’s contract
reformation defense and counterclaims and awarding
Monsanto Company and Monsanto Technology, LLC
(collectively “Monsanto”) attorney fees. See Monsanto Co.
v. E.I. Du Pont de Nemours & Co., No. 4:09-CV-0686, ECF
No. 974 (E.D. Mo. Dec. 21, 2011) (sealed sanctions order);
ECF No. 1043 (E.D. Mo. Feb. 16, 2012) (order approving
itemized attorney fees); ECF No. 1662 (E.D. Mo. Nov. 16,
2012) (unsealed and redacted version of sanctions order).
Because the district court did not abuse its discretion in
imposing the sanctions, we affirm.
BACKGROUND
Monsanto developed a genetic modification in soybean
seeds, marketed under the Roundup Ready® (“RR”) brand
name and known as the 40-3-2 event (the “RR trait”),
which enables soybean plants to tolerate the application
of glyphosate herbicide that kills weeds. See Monsanto,
ECF No. 124, slip op. at 1 (E.D. Mo. Jan. 15, 2010) (par-
tial judgment on the pleadings). Monsanto owns U.S.
Patent RE 39,247E (the “’247 Patent”), which covers the
RR trait. In 1992, Monsanto granted Pioneer Hi-Bred
International, Inc. (“Pioneer”) a nonexclusive license to
MONSANTO COMPANY v. E.I. DU PONT DE NEMOURS 3
produce and sell soybean seeds containing Monsanto’s
glyphosate-tolerant traits. After Pioneer became a sub-
sidiary of DuPont, Monsanto and Pioneer entered into an
Amended and Restated Roundup Ready® Soybean License
Agreement on April 1, 2002 (the “License”), which super-
seded the 1992 license. J.A. 656. Under the License,
DuPont produced and sold soybean seeds that were
glyphosate-tolerant due to the RR trait. Monsanto, ECF
No. 124, slip op. at 2.
In 2006, DuPont announced that it had developed its
own glyphosate-tolerant trait, Optimum GAT® (“OGAT”),
which was expected to confer tolerance to both glyphosate
and acetolactate synthase inhibitor herbicide. J.A. 33991.
DuPont intended to commercialize the OGAT trait, but
subsequent testing indicated that OGAT alone did not
provide sufficient glyphosate-tolerance for commercial
use. J.A. 34004. DuPont therefore stacked, or combined,
its OGAT trait with Monsanto’s RR trait and discovered
that the OGAT/RR stack provided increased yields in field
trials. Appellant Br. 15; J.A. 14281. DuPont did not sell
any OGAT/RR soybean product, however, and discontin-
ued its development in 2011 or 2012. Reply Br. 29.
In May 2009, Monsanto sued DuPont for breach of the
License and infringement of the ’247 Patent. Monsanto
maintained that the License did not allow DuPont to
stack the RR trait with another glyphosate-tolerant trait,
such as OGAT, or to commercialize the stacked product.
Monsanto, ECF No. 124, slip op. at 2. DuPont answered
and counterclaimed that the License permitted it to stack
OGAT with RR and that if the License were interpreted to
restrict or preclude the OGAT/RR stack, then the License
should be reformed. Id.; Monsanto, ECF No. 21, at 81–82
(E.D. Mo. June 16, 2009) (answer and counterclaims).
DuPont also asserted antitrust counterclaims. Id.
4 MONSANTO COMPANY v. E.I. DU PONT DE NEMOURS
The License provides in section 3.01 that:
(a) Subject to the terms of this Agreement, Mon-
santo hereby grants to Licensee, and Licen-
see, hereby accepts, a non-exclusive license
within the Licensed Field . . . to develop, use,
produce, have produced, offer to sell, sell and
import Licensed Commercial Seed . . . .
(e) The parties agree that except for applicable
patents, Licensee shall be free to introduce
any gene and/or trait into, and commercialize
as set forth in subparagraph 3.01(a), Licensed
Commercial Seed . . . without the prior con-
sent of Monsanto, except as specifically pro-
vided in subparagraph 3.01(g) and 3.01(h). . . .
(g) Licensee shall not be entitled to . . . (iv) use
Biological Materials outside the Licensed
Field. . . .
(i) Licensee agrees not to commercialize a varie-
ty of Licensed Commercial Seed which carries
a gene or genes not supplied by Monsanto and
which results in increased tolerance to a non-
glyphosate herbicide without the prior written
consent of Monsanto which consent shall not
be withheld if Licensee reasonably demon-
strates . . . that the introduction of such non-
glyphosate herbicide tolerance gene(s) does not
increase the injury . . . from glyphosate appli-
cation to the crop . . . .
J.A. 660–61 (emphases added). The term “Licensed Field”
is defined in section 2.09 as: “Licensed Commercial Seed
which exhibit genetically-engineered protection against
Glyphosate herbicide solely due to the presence of the
Glyphosate-Tolerant Soybean Event: 40-3-2.” Id. at 658
(emphasis added).
MONSANTO COMPANY v. E.I. DU PONT DE NEMOURS 5
The district court granted partial judgment on the
pleadings to Monsanto in January 2010, holding that the
License was “unambiguous and [did] not grant [DuPont]
the right to stack non-RR glyphosate-tolerant trait tech-
nologies with the licensed” trait. Monsanto, ECF No. 124,
slip op. at 10, 23. The court reasoned that the primary
license grant provision, section 3.01(a), was limited to a
license “to produce and sell Licensed Commercial Seed
‘within the Licensed Field.’” Id. at 7. In view of the
Licensed Field definition in section 2.09, the court con-
cluded that “Licensed Commercial Seed may only exhibit
glyphosate resistance that is solely due to 40-3-2,” and
thus that the OGAT/RR stack was outside the Licensed
Field because it generated glyphosate resistance that was
not solely due to 40-3-2. Id. at 7–8 (emphasis in original).
The court therefore dismissed DuPont’s contract-based
counterclaim. Id. at 24.
On January 29, 2010, DuPont moved for reconsidera-
tion and sought to restore its counterclaim to reform the
License. Monsanto, ECF No. 150 (E.D. Mo. Jan. 29, 2010)
(motion for reconsideration). DuPont also moved for leave
to file a second amended answer and counterclaims
(“SAAC”) to add three contract reformation counterclaims.
Monsanto, ECF No. 164 (E.D. Mo. Feb. 19, 2010) (motion
for leave to amend). DuPont contended that the amend-
ments were the product of “additional investigations” into
the factual basis for reformation. Id. at 11–12.
The district court declined to reconsider its ruling that
the License did not grant DuPont “a right to create
OGAT/RR stacked seed products.” Monsanto, ECF No.
283, slip op. at 8 (E.D. Mo. July 30, 2010) (order on mo-
tions for reconsideration and for leave to amend). While
noting that “it [would] be difficult for Defendants to prove
their reformation claims, especially given the clear and
convincing evidence standard,” id. at 14, the court none-
theless granted DuPont leave to file the SAAC to assert
reformation counterclaims and defenses, id. at 15.
6 MONSANTO COMPANY v. E.I. DU PONT DE NEMOURS
In the SAAC, DuPont acknowledged that it intended
to commercialize the OGAT/RR stack and asserted that
the License should be reformed to reflect the parties’
understanding that it would not restrict DuPont from
developing the OGAT/RR stack. Monsanto, ECF No. 316,
at 30–31, 108, 110–11 (E.D. Mo. Aug. 19, 2010). DuPont
based the amended reformation counterclaims on three
alternative grounds: (1) mutual mistake, (2) DuPont’s
unilateral mistake and Monsanto’s knowing silence, and
(3) Monsanto’s fraud. Id. at 167–72.
To support those counterclaims, DuPont asserted that
“[a]t all times during the drafting and execution of the
[License], Pioneer and DuPont thought that [the License]
did not prohibit Pioneer from stacking other traits or
genes, including traits or genes for glyphosate tolerance . .
. .” Id. at 167–69. DuPont also asserted that “Pioneer
and DuPont and Monsanto’s agents all understood that
the Licensed Field term, including the language ‘solely
due to the presence of’ . . . has nothing to do with stacking
restrictions,” and that “Pioneer and DuPont did not at any
time understand the Licensed Field term to restrict
Pioneer from stacking traits or genes that provide similar
protection as the licensed trait.” Id. at 121.
During discovery, both parties filed motions that re-
quired the district court’s frequent intervention. Concern-
ing DuPont’s reformation counterclaims, Monsanto moved
to compel production of documents relating to DuPont’s
understanding of stacking restrictions under the License.
Monsanto, ECF No. 639 (E.D. Mo. Mar. 4, 2011). The
district court ruled that, by asserting reformation claims
based on mutual mistake and unilateral mistake, DuPont
had placed its subjective belief concerning its stacking
rights at issue, “the truthful resolution of which re-
quire[ed] an examination of attorney-client communica-
tions.” Monsanto, ECF No. 756, slip op. at 3 (E.D. Mo.
May 17, 2011). The court consequently gave DuPont the
option to “either voluntarily dismiss these reformation
MONSANTO COMPANY v. E.I. DU PONT DE NEMOURS 7
claims or produce to Monsanto all documents bearing on
these issues that it previously withheld.” Id. at 4.
DuPont chose to continue litigating its reformation
counterclaims and produced previously withheld internal
e-mails of its in-house attorneys and high-level executives
who were directly involved in negotiating the License.
Those e-mails showed, for example, that DuPont’s negoti-
ators were aware in March 2002 that the “solely” lan-
guage in section 2.09 could be a stacking restriction. See,
e.g., J.A. 14797 (“[S]ection 2.09 may be a problem . . . if we
use a Glyphosate resistance gene (i.e. GAT) as a se-
lectable marker in soybean transformation.”). Moreover,
when DuPont developed the OGAT/RR stack in 2007 and
early 2008, those in-house attorneys advised that DuPont
did not have the right to commercialize the OGAT/RR
stack “[b]ecause of the field of use limitation in section
3.01(a).” See, e.g., J.A. 14291, 14799.
Monsanto then moved for sanctions, seeking to invoke
the district court’s inherent powers and asserting that
DuPont had misrepresented its subjective belief concern-
ing stacking rights and had perpetrated a fraud on the
court. Monsanto, ECF No. 864 (E.D. Mo. Sept. 6, 2011).
DuPont maintained in opposition that it had always
understood that the License authorized it to make and
sell the OGAT/RR stack. Monsanto, ECF No. 893, at 9–
10, 13, 21 (E.D. Mo. Sept. 21, 2011) (DuPont’s opposition
brief); Monsanto, ECF No. 961, at 43:3–5 (E.D. Mo. Nov.
30, 2011) (motion hearing transcript).
After a hearing, the district court granted the motion
and imposed sanctions pursuant to its inherent powers on
December 21, 2011. Monsanto, ECF No. 974 (sealed
sanctions order); ECF No. 1662 (unsealed and redacted
version). The court noted that, since the beginning of the
litigation, DuPont had taken the position that “they
contracted for, and have always believed that the [Li-
cense] provided them with, the right to stack and com-
8 MONSANTO COMPANY v. E.I. DU PONT DE NEMOURS
mercialize” the RR trait with the OGAT trait in soybeans,
which provided the basis for DuPont’s reformation claims.
Monsanto, ECF No. 1662, slip op. at 2. The court found,
however, that DuPont’s position was not “rooted in fact”
and that DuPont had made misrepresentations, which
called into question its candor to the court. Id.
Specifically, Monsanto argued that DuPont had made
five types of misrepresentations in its pleadings and
motions: (1) that it “always had the right to commercial-
ize (or sell) RR/OGAT stacked seeds;” (2) that it “always
had the right to stack RR and OGAT traits;” (3) that it
“believe[d] that Section 2.09 of the license agreements,
the ‘Licensed Field’ definition, ha[d] no relation to stack-
ing;” (4) that it “did not discover the meaning of the
‘Licensed Field’ definition and its limitation on stacking
until 2008;” and (5) that it “believe[d] that Section 3.01(a)
[did] not contain any type of field of use limitation.” Id. at
4. After reviewing the record and considering arguments
from both parties, the court found that DuPont had made
factual misrepresentations concerning its subjective belief
under each of the five categories as shown by its internal
documents in order to support its reformation claims. Id.
at 8, 15, 18–20. The court thus held that DuPont had
perpetrated a fraud on the court and abused the judicial
process, which warranted sanctions. Id.
As sanctions, the district court struck DuPont’s
reformation defense and counterclaims. Id. at 32. More-
over, after finding that DuPont had acted in bad faith, the
court awarded attorney fees to Monsanto, but limited the
award to fees incurred in defending against DuPont’s
reformation counterclaims beginning on January 29,
2010, the date on which DuPont moved to restore those
claims, as well as fees incurred for the sanctions motions.
Id. at 34; Monsanto, ECF No. 1043.
The parties then litigated the remaining claims. In
June 2012, the district court granted summary judgment
MONSANTO COMPANY v. E.I. DU PONT DE NEMOURS 9
in Monsanto’s favor on its breach of contract claims and
rejected DuPont’s license defense, but held that the only
contractual damages available to Monsanto were nominal
damages. Monsanto, ECF Nos. 1308, 1309, 1310 (E.D.
Mo. June 6, 2012). The patent infringement claims
proceeded to trial and the jury returned a verdict for
Monsanto, awarding a royalty as damages for the patent
infringement. Monsanto, ECF No. 1563 (E.D. Mo. Aug. 1,
2012). A separate trial on DuPont’s antitrust counter-
claims was scheduled for October 2013. Monsanto, ECF
No. 1618 (E.D. Mo. Oct. 2, 2012). In March 2013, Mon-
santo and DuPont stipulated to dismiss all claims and
counterclaims with prejudice and jointly moved for final
judgment. Monsanto, ECF No. 1687 (E.D. Mo. Mar. 26,
2013). DuPont reserved its right to appeal from the
sanctions orders and rulings embodied therein, but not
from other orders or rulings of the court. Monsanto, ECF
No. 1688 (E.D. Mo. Mar. 26, 2013). The district court
entered final judgment accordingly. Monsanto, ECF No.
1691 (E.D. Mo. Mar. 26, 2013).
DuPont timely appealed and we have jurisdiction pur-
suant to 28 U.S.C. § 1295(a)(1). Zenith Elecs. Corp. v.
Exzec, Inc., 182 F.3d 1340, 1346 (Fed. Cir. 1999) (holding
that dismissal of patent claims with prejudice did not
divest our jurisdiction to review a district court’s decision
regarding nonpatent claims).
DISCUSSION
I.
In appeals in patent cases, we apply the law of the re-
gional circuit “to which district court appeals normally lie,
unless the issue pertains to or is unique to patent law.”
Molins PLC v. Quigg, 837 F.2d 1064, 1066 (Fed. Cir.
1988). When reviewing the imposition of sanctions under
a district court’s inherent powers, we apply the law of the
regional circuit in which the district court sits, here the
10 MONSANTO COMPANY v. E.I. DU PONT DE NEMOURS
Eighth Circuit. Baldwin Hardware Corp. v. FrankSu
Enter. Corp., 78 F.3d 550, 560–562 (Fed. Cir. 1996).
The Eighth Circuit reviews a district court’s imposi-
tion of sanctions under its inherent powers for an abuse of
discretion. Stevenson v. Union Pac. R.R. Co., 354 F.3d
739, 745 (8th Cir. 2004) (citing Chambers v. NASCO, Inc.,
501 U.S. 32, 55 (1991)); Dillon v. Nissan Motor Co., 986
F.2d 263, 267 (8th Cir. 1993). Applying Eighth Circuit
law, we give “substantial deference to the district court’s
determination as to whether sanctions are warranted
because of its familiarity with the case and counsel in-
volved.” Willhite v. Collins, 459 F.3d 866, 869 (8th Cir.
2006). Moreover, “whether the extent of a sanction is
appropriate is a question peculiarly committed to the
district court.” Dillon, 986 F.2d at 268. “[T]he issue is not
what we might have done if the situation had been pre-
sented to us originally, but rather, whether the district
court abused its discretion in imposing the sanction.” Id.
at 267. “‘A district court would necessarily abuse its
discretion if it based its ruling on an erroneous view of the
law or on a clearly erroneous assessment of the evidence.’”
Plaintiffs’ Baycol Steering Comm. v. Bayer Corp., 419 F.3d
794, 802 (8th Cir. 2005) (quoting Cooter & Gell v. Hart-
marx Corp., 496 U.S. 384, 405 (1990)). Factual findings
are not clearly erroneous unless “the reviewing court on
the entire evidence is left with the definite and firm
conviction that a mistake has been committed.” Anderson
v. City of Bessemer, 470 U.S. 564, 573 (1985).
II.
DuPont contends that interpreting the objective
meaning of the License was a question of law and that the
district court improperly sanctioned DuPont for making
reasonable legal arguments that section 3.01 of the Li-
cense permitted stacking and commercialization of
glyphosate-tolerant traits. DuPont also contends that the
district court erred in improperly relying on selected
MONSANTO COMPANY v. E.I. DU PONT DE NEMOURS 11
documents to find that DuPont misrepresented its subjec-
tive belief concerning stacking restrictions, whereas the
full record reflected a contested factual issue. Moreover,
DuPont contends that the views of its individual employ-
ees should not be attributed to the company. DuPont also
contends that the statements made by its employees in
2007 and 2008 were irrelevant to the reformation of the
2002 agreement and that those statements were merely
conservative legal advice of in-house counsel. DuPont
asserts that the sanctions were improper because the
court’s ability to function impartially was not adversely
affected and that the sanctions would hinder zealous
advocacy. DuPont also asserts that its conduct did not
meet the high standard for a finding of fraud on the court.
Monsanto responds that the district court did not
sanction DuPont for making legal arguments concerning
the objective meaning of the License, but, rather, the
court imposed narrowly-tailored sanctions on DuPont for
factual misrepresentations of its subjective belief concern-
ing stacking rights supporting its reformation claims.
Monsanto contends that those representations were
directly contradicted by DuPont’s later-produced internal
documents and that the court properly relied on docu-
ments that were authored by DuPont’s in-house attorneys
and top executives who negotiated the License. Moreover,
Monsanto argues that the court properly considered
documents from 2007 and 2008, because they shed addi-
tional light on DuPont’s prior understanding of the 2002
agreement and whether DuPont continued to maintain
that understanding. Monsanto also responds that
DuPont’s repeated misrepresentations and their effect on
the litigation supported the court’s finding that DuPont
acted in bad faith, which warranted the attorney fees
sanction.
We agree with Monsanto that the district court did
not abuse its discretion in imposing narrowly-tailored
sanctions on DuPont for making factual misrepresenta-
12 MONSANTO COMPANY v. E.I. DU PONT DE NEMOURS
tions concerning its subjective understanding of the
License in order to advance its reformation counterclaims.
“[A] district court possesses inherent powers ‘to manage
[its] affairs so as to achieve the orderly and expeditious
disposition of cases.’” Wescott Agri-Prods., Inc. v. Sterling
State Bank, Inc., 682 F.3d 1091, 1095 (8th Cir. 2012)
(quoting Chambers, 501 U.S. at 43). “A court must exer-
cise its inherent powers with restraint and discretion, and
a primary aspect of that discretion is the ability to fashion
an appropriate sanction.” Harlan v. Lewis, 982 F.2d
1255, 1262 (8th Cir. 1993).
The record is clear that the district court did not sanc-
tion DuPont for making legal arguments concerning the
objective meanings of the License. Almost two years
before imposing the sanctions, the court interpreted the
License as a matter of law in the partial judgment on the
pleadings, in which it concluded that the License did not
grant DuPont the right to stack OGAT with the RR trait.
Monsanto, ECF No. 124. DuPont then moved for recon-
sideration of that interpretation and, alternatively,
sought to reform the License so that it could avoid in-
fringement liability for developing the OGAT/RR stack.
Monsanto, ECF Nos. 150, 316. The district court declined
to reconsider its interpretation of the License, but granted
DuPont leave to file the SAAC to pursue its reformation
counterclaims. Monsanto, ECF No. 283. Thus, the objec-
tive meaning of the License had been decided at an early
stage of the litigation and DuPont’s allegations were
made in an attempt to obtain reformation of the License
in view of the district court’s interpretation. *
* Because DuPont had stipulated to only appeal
from the sanctions orders, and not from other rulings of
the district court including the partial judgment on the
pleadings, we need not consider whether the district court
correctly interpreted the License as a matter of law.
MONSANTO COMPANY v. E.I. DU PONT DE NEMOURS 13
In the sanctions order, the district court made clear
that DuPont was sanctioned for knowingly making factu-
al misrepresentations concerning its subjective belief in
order to maintain its reformation claims. Monsanto, ECF
No. 1662, slip op. at 2, 4, 8, 15, 18–20. The court reviewed
DuPont’s statements in the SAAC and subsequent mo-
tions concerning reformation and found that DuPont had
misrepresented its subjective belief, an element of refor-
mation that was to be decided as a matter of fact. Id. at
8–9, 15–16, 18–19. As sanctions, the court specifically
and exclusively targeted the reformation claims, which
depended on DuPont’s factual misrepresentations, by
striking those claims and awarding related attorney fees.
Id. at 32–34.
Even though the court also cited statements from
DuPont’s motion opposing the partial judgment on the
pleadings regarding the objective meaning of the License,
the court referred to those statements only to infer
DuPont’s litigation position on its subjective belief con-
cerning the License. Id. at 5–6, 8, 20 (finding that
DuPont maintained in the litigation that “they believed
they had the right to sell RR/OGAT stacked seeds”). By
asserting the reformation counterclaims after the partial
judgment on the pleadings, DuPont maintained its prior
position that the 2002 agreement allowed it to stack and
commercialize an OGAT/RR product, although at that
later stage it based its claims on its purported subjective
belief in that position. Even assuming that DuPont’s
arguments concerning the objective meaning of the Li-
cense were not sanctionable when first made, its subse-
quent insistence in attempting to reform the License to
reflect its interpretation of the agreement rendered those
earlier statements relevant to factual issues underlying
the reformation claims.
Under Delaware law, which governs the License, a
contract may be reformed in rare instances to express the
“real agreement” of the parties. Cerberus Int’l, Ltd. v.
14 MONSANTO COMPANY v. E.I. DU PONT DE NEMOURS
Apollo Mgmt. L.P., 794 A.2d 1141, 1151 (Del. 2002).
Delaware law recognizes three grounds for reformation:
(1) mutual mistake, (2) unilateral mistake coupled with
knowing silence of the other party, and (3) fraud by the
other party. See id. (mutual mistake and unilateral
mistake); Emmert v. Prade, 711 A.2d 1217, 1219 (Del. Ch.
1997) (fraud). Because a duly executed formal instrument
may not be lightly set aside, a party seeking to reform a
contract must prove by clear and convincing evidence
that, before executing the written instrument, the parties
came to a specific prior understanding that differed
materially from the written agreement, and that it mis-
takenly believed that the final, executed contract accu-
rately expressed that prior understanding. Cerberus, 794
A.2d at 1150–52, 1155; Hob Tea Room, Inc. v. Miller, 89
A.2d 851, 856–57 (Del. 1952). Thus, by asserting refor-
mation counterclaims based on all three possible grounds,
DuPont’s subjective belief concerning the License became
a material factual issue.
Here, the district court did not clearly err in finding
that DuPont had made material factual misrepresenta-
tions of its subjective belief. DuPont’s later-produced
internal documents contradict its litigation statements
concerning its subjective belief. For example, DuPont
maintained in the SAAC that it “did not at any time
understand the Licensed Field term [in section 2.09] to
restrict” stacking of glyphosate-tolerant traits. Monsanto,
ECF No. 316, at 121. However, in a March 26, 2002 e-
mail, a DuPont negotiator noted that “section 2.09 may be
a problem . . . if we use a Glyphosate resistance gene (i.e.
GAT) as a selectable marker in soybean transformation.”
J.A. 14797. The district court thus found that DuPont
was aware of possible stacking restrictions in section 2.09,
but it did not change the language of that section or
suggest any language on the topic of stacking glyphosate-
tolerant traits prior to executing the License. Monsanto,
ECF No. 1662, slip op. at 10–11, 18. Thus, we discern no
MONSANTO COMPANY v. E.I. DU PONT DE NEMOURS 15
clear error in the district court’s findings that DuPont had
made factual misrepresentations of its subjective under-
standing.
We also find no error in the district court’s reliance on
the statements of DuPont’s individual employees to infer
DuPont’s subjective belief concerning the License. Those
employees were high-level executives and in-house attor-
neys, who directly participated in the negotiation with
Monsanto as DuPont’s corporate representatives. In
addition, because DuPont had waived its attorney-client
privilege to pursue the reformation counterclaims, the
court properly considered the statements of DuPont’s in-
house attorneys who were part of the negotiation team.
In addition, we find no error in the district court’s dis-
cretionary consideration of subsequent statements made
by those negotiators in the 2007 and 2008 documents,
which are relevant at least as circumstantial evidence of
DuPont’s prior understanding of the 2002 agreement and
whether DuPont “always” had that understanding as it
had pled. DuPont’s negotiators stated in 2007 that
DuPont did not have the right to commercialize the
OGAT/RR stack because of the field of use limitation in
section 3.01(a). J.A. 14799. The district court observed
that those negotiators expressed “no surprise at an ex-
pected claim by Monsanto that the [License contained]
stacking restrictions.” Monsanto, ECF No. 1662, slip op.
at 28. Moreover, DuPont asserted to the district court
that it had always believed that the License granted it
certain rights, and thus the 2007 and 2008 documents
were relevant to the basis of that assertion. Monsanto,
ECF No. 893, at 1, 9–10, 21; ECF No. 961, at 43:3–5. As
such, the court did not err in considering the 2007 and
2008 documents.
DuPont argues, however, that the record as a whole
showed a disputed factual issue concerning its subjective
belief and thus did not warrant sanctions for misrepre-
16 MONSANTO COMPANY v. E.I. DU PONT DE NEMOURS
sentation. DuPont specifically referred to internal e-mails
between its negotiators in March 2002. J.A. 14440,
14969–70, 14301–02. However, we find that those e-mails
do not support DuPont’s broad assertion to the district
court that it had negotiated for and obtained the right to
make and sell an OGAT/RR product.
In a March 27, 2002 e-mail, a DuPont negotiator in-
formed his colleague that the parties were “[s]till having
major problems with the RR/[ ] stack on beans as a com-
mercial product,” but Monsanto had “OK’ed a gene that
confers [glyphosate] resistance as a marke[r] (i.e. GAT).”
J.A. 14440 (emphasis added). That negotiator, however,
cautioned his colleague that “[b]efore you get too excited
about GAT . . . [t]hey do not know about it specifically,
and they will obviously have other issues (i.e. patents)
regarding [its] use . . . [but] at least the agreement does
not prohibit use of a non-Mon[santo] gene which supplies
gly[phosate]-tolerance.” J.A. 14440. In a March 28
e-mail, the negotiator explained to his colleague that by
introducing section 3.01(i), which addressed the stacking
and commercialization of non-glyphosate-tolerant gene(s)
with the RR trait, DuPont “would not be blocked against
using another glyphosate resistance gene as a selectable
marker, . . . but . . . it does not necessarily mean we have
an FTO on another Gly[phosate]-tolerant gene,” where
FTO referred to freedom-to-operate. J.A. 14969 (empha-
sis added).
Upon review of the entire record, we find no clear er-
ror in the district court’s finding of misrepresentation.
The March 27 and 28 e-mails are consistent with the
court’s finding that DuPont was aware that Monsanto
sought to impose stacking restrictions during the license
negotiation, but that DuPont did not propose contract
language to specifically address its right to stack and
commercialize an OGAT/RR product. At best, those e-
mails showed that DuPont anticipated using OGAT as a
selectable marker, a research tool or marker for detecting
MONSANTO COMPANY v. E.I. DU PONT DE NEMOURS 17
the successful transformation of another gene into the RR
soybeans. Those e-mails, however, contained no discus-
sion concerning whether DuPont negotiated for the right
to make and sell an OGAT/RR commercial product.
Notably, DuPont made no argument at the district court
that the License should be reformed based on DuPont’s
purported belief that it was not prohibited from using
OGAT as a selectable marker. Instead, DuPont sought in
the district court to reform the License in order to obtain
the express right to make and sell an OGAT/RR product,
when its internal documents directly contradicted its
broad assertion of that right. See, e.g., J.A. 14799
(“[DuPont] can stack but no commercial rights.”); J.A.
14318 (“A conservative reading says we can stack but may
not be able to commercialize, a potentially useless right.”).
We therefore conclude that the district court did not
clearly err in finding that DuPont had misrepresented its
subjective belief concerning the License in order to main-
tain its reformation claims. We further conclude that the
district court did not abuse its discretion in imposing its
narrowly-tailored sanctions.
A district court has the discretion “‘to fashion an ap-
propriate sanction for conduct which abuses the judicial
process,’ including assessing attorney fees or dismissing
the case.” Wescott, 682 F.3d at 1095 (quoting Chambers,
501 U.S. at 44–45). “When a litigant’s conduct abuses the
judicial process, dismissal of a lawsuit is a remedy within
the inherent power of the court.” Martin v. Daim-
lerChrysler Corp., 251 F.3d 691, 694 (8th Cir. 2001) (citing
Pope v. Fed. Express Corp., 974 F.2d 982, 984 (8th Cir.
1992)). Under Eighth Circuit law, “a finding of bad faith
is not always necessary to the court’s exercise of its inher-
ent power to impose sanctions.” Stevenson, 354 F.3d at
745; Harlan, 982 F.2d at 1260 (noting that the bad faith
requirement does not extend “to every possible discipli-
nary exercise of the court’s inherent power”). However,
“[a] bad faith finding is specifically required in order to
18 MONSANTO COMPANY v. E.I. DU PONT DE NEMOURS
assess attorneys’ fees.” Stevenson, 354 F.3d at 751 (citing
Chambers, 501 U.S. at 45–46). Thus, “if a court finds that
fraud has been practiced upon it, or that the very temple
of justice has been defiled, it may assess attorney’s fees
against the responsible party, as it may when a party
shows bad faith by delaying or disrupting the litigation or
by hampering enforcement of a court order.” Chambers,
501 U.S. at 46 (internal citation and quotation marks
omitted).
Here, the district court found that DuPont had abused
the judicial process and acted in bad faith. The court
found that DuPont repeatedly misrepresented its subjec-
tive belief in order to support its reformation counter-
claims, which prolonged the “already-protracted
proceedings and caused unnecessary expense to Monsanto
and needless effort by the [c]ourt.” Monsanto, ECF No.
1662, slip op. at 8, 15, 19, 20. The court found that
DuPont delayed the litigation “by their insistence that
they believed they had the right to stack and commercial-
ize RR and OGAT.” Id. at 33. The court reasoned that
striking portions of the SAAC was “the only means” to
deter DuPont’s misconduct and to preclude DuPont from
continuing its behavior, which the district court found to
be “an abuse of judicial process.” Id. at 32. The court also
found that the repeated misrepresentations had “com-
promised the integrity of the case,” that DuPont’s refusal
“to abandon these false statements . . . amount[ed] to
vexatious conduct,” and that DuPont had “acted in bad
faith.” Id. at 34.
We consider those findings of the district court not to
be clearly erroneous, as the court had first-hand
knowledge of how DuPont’s conduct affected the progress
of the litigation. For almost two years from January 2010
to December 2011, DuPont restored, amended, and liti-
gated its reformation counterclaims. When seeking leave
to file the SAAC, DuPont represented to the district court
that the amended counterclaims were the product of its
MONSANTO COMPANY v. E.I. DU PONT DE NEMOURS 19
“additional investigation” of the factual basis for refor-
mation. Monsanto, ECF No. 164, at 11–12. DuPont’s
internal documents, however, contradicted its litigation
statements concerning reformation. Those internal
documents were initially withheld by DuPont under a
claim of privilege and produced only after the court’s
ruling on Monsanto’s motion to compel, in which the court
gave DuPont the option of either dismissing the refor-
mation claims or producing those internal documents.
DuPont chose to continue litigating the reformation
claims and seeking to invoke the court’s equitable power
to reform the License in order to obtain the right to make
and sell an OGAT/RR product, despite contradictory
evidence showing that DuPont’s own negotiators ques-
tioned whether DuPont had obtained that right. We
therefore conclude that the district court did not err in
holding that DuPont had abused the judicial process and
acted in bad faith.
Moreover, the district court properly exercised its dis-
cretion in imposing targeted sanctions by carefully fitting
its sanctions to the conduct that it found to be improper.
The court allowed DuPont to continue litigating other
contract, patent infringement, and antitrust counter-
claims and defenses. The court limited the attorney fees
award to fees directly incurred on the reformation claims
after January 29, 2010, the date on which DuPont moved
to restore those claims. We therefore conclude that the
court acted within its discretion.
Although, as indicated, we agree with the district
court that DuPont’s overly zealous advocacy to advance
its reformation claims constituted bad faith and vexatious
conduct, we do find that DuPont’s conduct did not satisfy
the high standard for “fraud on the court” as described in
Nichols v. Klein Tools, Inc., 949 F.2d 1047, 1048 (8th Cir.
1991) and Pfizer Inc. v. International Rectifier Corp., 538
F.2d 180, 195 (8th Cir. 1976). In those cases, fraud on the
court was narrowly defined as “the most egregious mis-
20 MONSANTO COMPANY v. E.I. DU PONT DE NEMOURS
conduct directed to the court itself, such as bribery of a
judge or jury or fabrication of evidence by counsel.” Id.
Such conduct did not occur here.
However, other Eighth Circuit cases appear to apply a
lower standard for sanctions under the court’s inherent
powers and do not require a finding of “fraud on the
court.” See, e.g., Gas Aggregation Servs., Inc. v. Howard
Avista Energy, LLC, 458 F.3d 733, 739 (8th Cir. 2006)
(sanctions after a finding of bad faith); Stevenson, 354
F.3d at 751 (sanctions of attorney fees and adverse infer-
ence jury instruction for “bad faith conduct”); see also
Chambers, 501 U.S. at 46 (sanctions of attorney fees when
a party “shows bad faith by delaying or disrupting the
litigation”). Under the latter test, DuPont exceeded the
bounds of appropriate conduct and stretched its advocacy
beyond what was reasonably justified. Because the
district court correctly found that DuPont had abused the
judicial process and acted in bad faith by making affirma-
tive factual misrepresentations and because the court
imposed narrowly-tailored sanctions, we affirm.
CONCLUSION
Because we conclude that the district court did not
abuse its discretion in imposing the sanctions on DuPont,
we affirm.
AFFIRMED