AngioDynamics, Inc. v. Biolitec AG

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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