Justices Urged To Not Review Biolitec $70M Contempt Ruling By Kevin Penton
Law360, New York (October 24, 2015, 12:04 AM ET) -- The U.S. Supreme Court should pass on reviewing a $70 million contempt penalty for Biolitec AG and an arrest warrant for its CEO after it disregarded an order in a patent infringement case that barred a merger, because the First Circuit followed decades of legal precedent when it backed the penalty, AngioDynamics Inc. has argued.
AngioDynamics' Oct. 16 brief countered Biolitec’s argument that the First Circuit had virtually eliminated the distinction between punitive criminal sanctions and coercive civil sanctions when it affirmed a lower court's decision to hit the company with a civil contempt penalty purely to punish it.
AngioDynamics told the justices that the appellate court correctly followed the high court’s previous determinations that contempt sanctions are civil if they are conditional and if they are imposed to induce compliance with a previous order. In this case, it said, the purpose of the contempt sanctions was to get Biolitec to undo the merger.
A Massachusetts federal court had imposed the sanctions against the German laser company and its CEO Wolfgang Neuberger in April 2013, after the company proceeded with a merger that was forbidden by a preliminary injunction in an underlying patent indemnification suit brought by AngioDynamics.
AngioDynamics argues that as Biolitec can cause the sanctions to be lifted should it undo the merger, the lower court gave the company “the keys to their own prison."
“Even as petitioners ask this court to issue the writ of certiorari, they have entirely disregarded the sanctions they challenge,” the brief reads. “Neuberger has remained an overseas fugitive for two and a half years, petitioners have not paid any of the coercive fines, and they have done nothing to purge their contempt. Petitioners’ utter refusal to comply with the contempt order is another strong ground for denying the petition.”
AngioDynamics argues that Biolitec disregarded the lower court’s finding that the merger posed a “likelihood of harm” before it occurred and its determination that AngioDynamics was “seriously harmed” after the deal’s completion, as it complicated the company’s efforts to enforce judgments.
In its July 1 petition to the high court, Biolitec questioned the method by which the contempt penalty was calculated, arguing that coercive sanctions need to derive from the actual harm suffered in the violation of an injunction and the threat of continued noncompliance. Otherwise, it said, there is no guiding rule for the court to determine what the appropriate sanctions will be.
It argued the First Circuit’s March 11 ruling clashed with previous decisions in the high court, as well as various circuit courts. Biolitec also claimed that its conduct did not harm AngioDynamics.
“By untethering the district court’s coercive sanctions from actual harm and holding that coercive sanctions may serve a punitive purpose, the court of appeals’ decision essentially eliminates the distinction between coercive civil sanctions and punitive criminal sanctions, at least where the order at issue is an injunction,” it wrote.
The petition is the latest chapter in a case that dates to 2009, when AngioDynamics first sued Biolitec for allegedly failing to indemnify it in two patent infringement suits over a laser treatment for varicose veins that Biolitec licensed to the company.
Afraid it wouldn’t be able to enforce a potential judgment if Biolitec completed a planned merger with a subsidiary and moved from Germany to Austria, AngioDynamics filed for a preliminary injunction, which the court granted.
Despite a pending appeal of the injunction, Biolitec completed the merger, prompting the Massachusetts court to authorize the fines against Biolitec and the arrest warrant for Neuberger. The escalating fines ballooned at one point to $160 million, but were later capped at $70 million. In a separate decision, the First Circuit upheld the lower court's ruling that Biolitec pay AngioDynamics a $75 million judgment in the underlying case.
Edward Griffith, an attorney representing Biolitec, told Law360 on Monday that AngioDynamics’ brief ignores the petition’s constitutional question of under what circumstances may a court impose serious contempt sanctions in a summary civil proceeding without allowing the defendant the procedural protections of criminal law.
“This case presents an attractive vehicle for the court to make the ‘adjustments’ necessary to the civil/criminal contempt distinction in order to protect the constitutional rights of parties facing serious contempt sanctions,” Griffith said.
Counsel for AngioDynamics could not be reached on Friday for comment.
Biolitec is represented by Michael K. Callan of Doherty Wallace Pillsbury & Murphy PC and Edward Griffith of the Griffith Firm.
AngioDynamics is represented by William E. Reynolds of Bond Schoeneck & King PLLC.
The case is Biolitec AG, et al. v. AngioDynamics, Inc., case number 15-69, in the Supreme Court of the United States.
--Additional reporting by Matthew Bultman, Vin Gurrieri and Kat Greene. Editing by Kat Laskowski.
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