Contract Materials Processing, Inc. v. Kataleuna GmbH Catalysts

UNPUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 10-1497

CONTRACT MATERIALS PROCESSING, INCORPORATED,

Plaintiff – Appellant,

v.

KATALEUNA GMBH CATALYSTS; TRICAT MANAGEMENT GMBH; SUD CHEMIE
ZEOLITES GMBH, f/k/a Tricat Catalytic Products GmbH,

Defendants – Appellees.

Appeal from the United States District Court for the District of
Maryland, at Baltimore. Andre M. Davis, District Judge. (1:98-
cv-00147-AMD)

Argued: October 26, 2011 Decided: February 1, 2012

Before KING, GREGORY, and WYNN, Circuit Judges.

Affirmed by unpublished per curiam opinion.

ARGUED: Paul Stone Richter, RICHTER, MILLER & FINN, Washington,
D.C., for Appellant. Barbara Susan Wahl, ARENT FOX, LLP,
Washington, D.C., for Appellees. ON BRIEF: Thomas P. Miller,
RICHTER, MILLER & FINN, Washington, D.C., for Appellant.
Randall A. Brater, Karen E. Carr, ARENT FOX, LLP, Washington,
D.C., for Appellees.

Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:

On March 30, 2010, a litigation saga spanning more than

twelve years in the District of Maryland finally came to an end

with the entry of a Final Order and Judgment (the “Judgment”) on

behalf of KataLeuna GmbH Catalysts (“KataLeuna”), Tricat

Management GmbH (“TMG”), and Tricat Catalytic Products GmbH

(“TCP”) (collectively, the “Defendants”). The Judgment awarded

$4,726,518.81 to KataLeuna on its four counterclaims against

Plaintiff Contract Materials Processing, Inc. (“CMP”), net of

two claims on which CMP prevailed. CMP appeals the Judgment and

certain interlocutory rulings incorporated within, including

that CMP pay $202,469.26 in attorney fees and interest to

KataLeuna, along with discovery sanctions of $27,654.30. We

affirm in all respects.

I.

CMP, principally operating out of Baltimore, was

incorporated in 1987 by Dr. Edwin Albers, its president and sole

shareholder, to develop chemical and petrochemical products and

to provide analytical, research, and consulting services. By

1992, CMP had begun to produce and sell Fluid Cracking Catalyst

(“FCC”) additives, which are used in the refining process to

promote the “cracking,” or chemical transformation, of crude oil

into lighter products such as gasoline and diesel fuel. In

2
early 1995, Dr. Albers entered into discussions with Dr. P.

Kenerick Maher of Tricat Industries, Inc. (“TII”), concerning a

trio of additives that CMP was developing and for which it had

submitted patent applications: (1) “SOx A,” designed to reduce

sulfur emissions from the refining process; (2) “Combustion

Promoter B,” a cobalt-based version of Mobil’s platinum-based

progenitor, intended to facilitate the combustion of carbon

monoxide into CO2; and (3) “Octane Enhancer B.”

TII was the American parent and sole shareholder of TMG, a

German holding company managed by Maher. In May 1995, TMG

acquired 74.8% of KataLeuna, with the remaining 25.2% retained

by the Bundesanstalt für vereinigungsbedingte Sonderaufgabe

(“BvS”), a governmental agency overseeing the privatization of

former East German enterprises. Maher’s negotiations with Dr.

Albers resulted in the execution of a Sales Agency Agreement

(“SAA”) and a Research and Development Agreement (“RDA”) between

CMP and KataLeuna, and of a Technology Transfer Agreement

(“TTA”) among the same corporate entities, Dr. Albers, and J.

Gary McDaniel, a key CMP employee familiar with its FCC

operations.

Under the terms of the TTA, effective November 27, 1995,

CMP agreed to transfer to KataLeuna its “entire right, title and

interest” in the additives. In return, KataLeuna agreed to pay

$2.1 million, transfer five thousand shares of non-voting TII

3
stock (having a stipulated value of $75,000), and remit

royalties to CMP amounting to 20% of KataLeuna’s gross margin

realized from the manufacture and sale of the FCC additives, up

to a maximum of $7.6 million. KataLeuna had long been in the

catalyst business, and its acquisition of the FCC additive

technology developed by CMP was part of a plan to expand its

product line, another component being the construction of a new

manufacturing and processing plant in Leuna, Germany. The TTA

included the warranties of CMP and the individual signatories

that KataLeuna could rely on any statements in the patent

applications, that the technology had not been patented and

violated no existing patents, that the reports previously

delivered to KataLeuna “demonstrating the viability and the

reliability of the Combustion Promoter B” technology were “true,

complete and correct,” and that the technology was “new, useful

and unobvious.” J.A. 98-99. 1

The TTA also provided for the transfer of McDaniel’s

employment from CMP to KataLeuna, and it required the delivery

of the fully executed RDA, whereby Dr. Albers would devote

approximately one-third of his time for one year to further test

and develop the FCC additives in order to perfect and expand

1
Citations herein to “J.A. ___” refer to the contents of
the Joint Appendix filed by the parties to this appeal.

4
their uses. In exchange, KataLeuna agreed to pay CMP $400,000

in equal quarterly installments. The SAA, predating both the

RDA and the TTA, appointed CMP as KataLeuna’s exclusive North

American agent for the sale of smaller quantities of zeolites

(absorbent minerals used in the catalytic process). CMP agreed

thereunder to store and sell KataLeuna’s zeolites on consignment

in exchange for a commission on net sales; to defray CMP’s sales

and marketing expenses, KataLeuna covenanted to pay CMP $240,000

annually in equal monthly installments.

In October 1996, notwithstanding the efforts of Dr. Albers

to perfect SOx A, it became obvious to KataLeuna that the

compound was not working as the parties had anticipated. The

hoped-for chemical synergy between the hydrotalcite and zinc

titanate components had not developed, owing to the relative

ineffectiveness of the latter. The outcome was consistent with

tests performed in 1994 on prior versions of the compound by Dr.

Raghubir Gupta of the Research Triangle Institute. Dr. Gupta,

who conducted the testing at the request of Dr. Albers, had been

skeptical of the compound’s efficacy from the outset, given the

chemical reality that particles useful for removing hydrogen

sulfide are generally ineffective to also remove sulfur dioxide.

According to Dr. Gupta, it was “very, very well-known that zinc

oxide is an excellent H2S removal. So from common sense normally

it will not work for SO2 removal.” J.A. 1806.

5
 CMP had also conducted preliminary testing on Combustion

Promoter B, with inconclusive results. Another test was run in

late 1996 after KataLeuna had taken ownership, but, absent full

saturation of the cobalt-based compound in the FCC unit, i.e.,

complete displacement of the platinum-based promoter, it could

not be conclusively determined whether CMP’s invention was

effective. McDaniel was optimistic, in that the processing

temperature had remained fairly steady throughout, but the

owners of the unit were so unimpressed that they purchased no

more of the compound. Then, at a full-saturation test in August

1997, after Mobil’s promoter had to be reintroduced to the unit

to control rapidly rising temperatures, it became apparent that

Combustion Promoter B was generally ineffective. Scientific

testing by a Dutch catalyst manufacturer in August 1999

confirmed that conclusion.

Octane Enhancer B was similarly a bust. KataLeuna

prosecuted the patent application that had been transferred to

it pursuant to the TTA, but the United States Patent and

Trademark Office rejected it on the ground that the additive was

virtually identical to a pre-existing South African patent.

Both compounds were based upon a blend of synthetic zeolites

with natural clinoptilolite, and each was designated for use in

a hydrocarbon cracking process.

6
 The parties’ business association thus turned out to be

short-lived. KataLeuna opted to not renew the RDA, withholding

the final quarterly installment of $100,000. KataLeuna also

notified CMP that the SAA would be terminated at the end of

November 1996. The zeolites remained with CMP until late August

2005, when KataLeuna removed some and abandoned the rest. CMP,

whose lease on the storage area was expiring, disposed of the

remaining materials. No royalty payments, contemplated by the

TTA to begin on February 1, 1998, were ever made.

On January 15, 1998, prior to the date of performance with

respect to the royalty payments, CMP filed suit in the District

of Maryland against KataLeuna and TMG. The Complaint alleged

breaches of payments due under the RDA and SAA, and it

anticipatorily sought a declaratory judgment as to the parties’

rights and responsibilities under the TTA. Issues regarding

proper service resulted in the filing of the operative Amended

Complaint on December 9, 1998, which retained the RDA and SAA

breach claims (Counts I and II); substituted a claim (Count IV)

under the TTA for the former declaratory judgment count; amended

a separate SAA claim (Count III) to assert entitlement to

compensation for bailment of the stored zeolites; and added

claims (Counts V and VI) for misappropriation and conversion,

respectively, of trade secrets relating to CMP’s FCC additives

technology. The Amended Complaint named a third Defendant, TCP,

7
which had been created in 1997 to establish KataLeuna’s former

research division, Triadd, as a formal business entity. Counts

VII through X alleged that TMG was responsible for the acts of

KataLeuna outlined in Counts I-III, and independently liable for

conversion, misappropriation, and breach of the TTA. The latter

three allegations were essentially repeated against TCP in

Counts XI through XIII. CMP demanded a jury trial on all

claims.

The Defendants answered and counterclaimed on April 16,

1999. By its operative Second Amended Counterclaim, KataLeuna

asserted breaches of the three agreements (Counts I-III) and

alleged in the alternative (Counts IV-VI) that CMP was unjustly

enriched. According to KataLeuna, CMP did not live up to its

warranties in the TTA and ignored its obligations under the RDA

and SAA. KataLeuna also maintained that CMP had converted the

consigned zeolites (Count VII), negligently exposed them to the

elements (Count VIII), and failed to remit sales proceeds as

agreed in the SAA (Count IX). Finally, KataLeuna requested an

accounting as to chemicals it transferred to CMP, and as to FCC

additives that CMP sold to third parties (Count X).

The district court dismissed CMP’s conversion claims as to

the additives technology (Counts VI, IX, and XIII) on August 11,

1999. Thereafter, on September 18, 2001, the court granted

summary judgment to TMG and TCP as to the remaining claims

8
against them (Counts VII, VIII, X, XI, and XII), and to

KataLeuna on the claims for breach of the TTA (Count IV) and for

misappropriation (Count V), leaving only CMP’s claims for breach

of the RDA and SAA (Counts I and II) and for bailment (Count

III). On the counterclaim side of the ledger, the district

court awarded summary judgment to KataLeuna for $18,507.40, the

undisputed amount owed by CMP for the sale of zeolites (Count

IX). In a proposed joint pretrial order submitted to the court

on August 28, 2002, KataLeuna abandoned its claims for unjust

enrichment (Counts IV-VI).

With most of CMP’s case being dismissed or summarily

adjudicated against it, the district court was of the opinion

that the portion of the counterclaim relating to the TTA (Count

I) dominated the remaining issues. The court thus decided to

bifurcate that count for a bench trial on KataLeuna’s assertion

that it was entitled to equitable rescission, putting aside for

the time-being the parties’ competing legal claims under the RDA

and SAA (CMP’s Counts I-II, and KataLeuna’s Counts II-III),

along with those arising from the storage and safekeeping of the

consigned zeolites (CMP’s Count III and KataLeuna’s Counts VII-

VIII). As the result of that twelve-day bench trial, the

evidentiary portion of which was conducted over scattered dates

in the winter and spring of 2003, the district court, on

September 28, 2003, entered a Rule 54(b) judgment rescinding the

9
TTA, awarding restitution of $2,793,449.13 to KataLeuna for

“equitable damages . . . intertwined with its remedy of

rescission,” J.A. 2712, and ordering CMP and KataLeuna to

return, respectively, the TII stock and the technology

properties. 2 The judgment awarded an additional $134,945 to

KataLeuna for attorney fees incurred in defending the

misappropriation claims. CMP proceeded to file an interlocutory

appeal, which we declined to certify and therefore dismissed.

See Order, Contract Materials Processing, Inc. v. Tricat Mgmt.

GmbH, No. 03-2253 (4th Cir. Mar. 10, 2005) (unpublished).

The case languished on remand until CMP moved for the

district court’s recusal on September 28, 2006, citing in part

the litigation delay and other grounds, but based primarily on

the court’s service in 2003-05 as a member of the Board of

Directors of the Foundation for Research on Economics and the

Environment (“FREE”). FREE’s activities as a nonprofit entity

are substantially underwritten by corporate subsidies, including

donations from Shell Oil Co., which, since 1998, has been an

indirect corporate parent of KataLeuna. Following a hearing on

June 14, 2007, the court declined to recuse itself. In the

2
Rule 54 permits a district court to “direct entry of a
final judgment as to one or more, but fewer than all, claims or
parties,” on condition that “the court expressly determines that
there is no just reason for delay.” Fed. R. Civ. P. 54(b).

10
interim, on January 24, 2007, CMP petitioned for mandamus relief

to compel recusal, which we summarily denied. See Order, In re:

Contract Materials Processing, Inc., No. 07-1059 (4th Cir. Feb.

16, 2007) (unpublished).

At the June 14 hearing, the district judge revealed that he

had resigned from the Board of FREE following his receipt of an

undisclosed letter opinion on the matter from the Committee on

Codes of Conduct, an authorized body of the Judicial Conference

of the United States. CMP again sought the court’s recusal

through a second petition for a writ of mandamus filed on July

13, 2007, requesting disclosure of the letter. We again denied

relief via a short-form order. See Order, In re: Contract

Materials Processing, Inc., No. 07-1657 (4th Cir. Oct. 2, 2007)

(unpublished).

On April 28, 2008, KataLeuna tendered a Rule 68 offer of

judgment to CMP on the latter’s claims for breach of the RDA and

of the SAA (Counts I and II), agreeing to pay the damages

demanded in the pleadings, plus interest and costs, to be offset

against any judgment in its favor on the counterclaim, Counts II

and III of which (pertaining to KataLeuna’s claims against CMP

under the RDA and SAA) would be dismissed with prejudice. CMP

refused the offer, but, on October 30, 2008, the district court

nonetheless granted KataLeuna’s motion to dismiss Counts I and

II of the Amended Complaint for mootness. The dismissal order

11
also encompassed Counts II and III of the Second Amended

Counterclaim. CMP sought immediate review of the district

court’s order through a third mandamus petition and a separate

notice of appeal, neither of which were successful. See Order,

In re: Contract Materials Processing, Inc., No. 08-2246 (4th

Cir. Dec. 16, 2008) (unpublished) (denying petition for writ);

Order, Contract Materials Processing, Inc. v. KataLeuna GmbH

Catalysts, No. 08-2311 (4th Cir. Feb. 9, 2009) (unpublished)

(dismissing appeal as interlocutory).

The parties submitted an amended proposed pretrial order on

November 19, 2009, in which KataLeuna abandoned its claim for an

accounting of proceeds from the sale by CMP of certain chemicals

and additives (Count X). That paved the way, after almost

twelve years of litigation, for a jury trial solely on the

claims emanating from the consigned zeolites, relating to Count

III of the Amended Complaint and Counts VII and VIII of the

Second Amended Counterclaim. The trial commenced on December 7,

2009, with the court granting judgment as a matter of law to

KataLeuna on CMP’s claim for bailment at the close of the

latter’s case-in-chief. At the conclusion of trial, the jury

returned a verdict for KataLeuna on its claims for conversion

and negligence in the amount of $571,389.25, plus prejudgment

interest. The district court entered its final judgment against

CMP on March 30, 2010, as follows:

12
 2,793,449.13 (TTA equitable damages)
+ 1,732,091.53 (interest from 10/5/99)
4,525,540.66
571,389.25 (zeolites conversion/negligence)
+ 8,452.51 (interest from 11/14/05)
5,105,382.42
+ 18,507.40 (zeolites consignment sales)
5,123,889.82
(181,021.37) (KataLeuna breach of RDA, plus interest)
+ (216,349.64) (KataLeuna breach of SAA, plus interest)
$ 4,726,518.81

The district court entered a final net judgment in

KataLeuna’s favor of $4,726,518.81, supplementing interlocutory

awards to KataLeuna of $202,469.26 in attorney fees and

interest, together with discovery sanctions of $27,654.30. On

appeal, CMP asserts that the proceedings below were infected

throughout with error. For clarity’s sake, we address in

chronological order the specific instances giving rise to these

assertions.

II.

A.

Shortly after the filing of the Amended Complaint, the

Defendants sought to dismiss CMP’s claims for misappropriation

and conversion. The district court granted dismissal of the

conversion claims, concluding that CMP’s assignment through the

TTA of the entirety of its interest in the FCC additives

deprived it of any entitlement to possess them, an essential

element of the tort. The court, however, “[i]n light of the

13
liberal spirit pervading the pleading requirements,” declined to

dismiss the misappropriation claims. J.A. 158. In so ruling,

the court recognized that CMP had not alleged “that Kataleuna

initially obtained the technology improperly,” but had instead

maintained that, through subsequent transfers, one or more of

the other Defendants had “improperly procured [its] use . . . in

order to circumvent Kataleuna’s responsibility to pay CMP

royalty payments.” Id. at 159.

The misappropriation claims were thus among those permitted

to proceed to discovery. In developing the discovery plan,

counsel for CMP became informed that TII had hired John McCauley

in April 1996 to coordinate with McDaniel in specifying and

controlling the research that CMP and Dr. Albers were to conduct

under the RDA. McCauley’s assigned station was a lab in a

trailer at CMP, where he worked through October 1996. CMP

speculated that McCauley was a potential conduit for the flow of

proprietary information that enabled KataLeuna to further its

fledgling FCC additives business by developing patentable

advances from the TTA technology and, perhaps, other CMP

discoveries. Proceeding on that theory, CMP requested at the

outset of the litigation “documents concerning . . . any FCC

additive,” J.A. 199, and “patent prosecution files . . . for all

patent applications related to [the TTA patents] or any related

non-U.S. patent applications.” Id. at 201. The defendants

14
objected on trade secret and other grounds, in particular that

“documents concerning technology other than the [TTA technology]

are irrelevant.” Id. at 213.

Some of the contested documents were accidentally produced,

relating to six patent applications that KataLeuna was then

pursuing, including one for SOx B, a magnesium oxide variation of

the zinc oxide-based SOx A technology. CMP argued for the

production of additional materials based on its assertion that

the inadvertently disclosed documents revealed that some of the

new applications were “continuation” applications, that some

were attributable to McCauley’s efforts, and that some

incorporated work product, such as testing results, produced by

CMP pursuant to the RDA. Indeed, it seems that some of these

applications contained graphs with plot points derived from a

proprietary CMP procedure, which the company evidently perfected

while developing the additives that were the subject of the TTA.

Although the threshold for relevance is not a high one,

i.e., “information . . . reasonably calculated to lead to the

discovery of admissible evidence,” Fed. R. Civ. P. 26(b)(1), the

district court, at the December 16, 1999 hearing on CMP’s motion

to compel, called the company’s attempts at discovery

“promiscuous,” J.A. 351, making it plain that the court was not

going to convert its “extraordinarily generous” denial of

KataLeuna’s threshold motion to dismiss the misappropriation

15
claims “into some dragon of a discovery machine and thereby open

up all kinds of lines of inquiry that simply are not likely to

lead anywhere fertile.” Id. at 380. After hearing from both

sides, the court declared that it was “not persuaded” by CMP’s

arguments that the requested materials were germane. Id. at

401.

A district court’s discovery rulings are reviewed for abuse

of discretion. See Carefirst of Md., Inc. v. Carefirst

Pregnancy Centers, Inc., 334 F.3d 390, 396 (4th Cir. 2003). In

denying CMP’s motion to compel, some of the court’s remarks may

have rankled (“This is exactly the kind of thing, with all

respect, sir, that people point to when they talk about

discovery abuse.”), J.A. 352, but the undercurrent motivating

them is readily understood: the relatively discrete claims that

survived dismissal had, with discovery scarcely begun, been

transformed into something much broader.

Worse, the transformation had no legal basis. A claim

under Maryland law for the misappropriation of business

information is governed by the state’s adoption of the Uniform

Trade Secrets Act (“UTSA”), which requires, among other things,

that the information be “acquired by improper means.” Md. Code.

Ann. Com. Law § 11-1201(c)(1). To the extent that KataLeuna may

have used the CMP technology to facilitate its fledgling

catalyst business, it was not barred from doing so by the TTA,

16
which merely required KataLeuna to pay royalties to CMP on sales

of the specific additives that were the subject of that

agreement; consistently therewith, the RDA imposed an obligation

of confidentiality solely on CMP, with no similar restriction on

KataLeuna. Consequently, the information that CMP sought was

not reasonably calculated to lead to the discovery of admissible

evidence, and the district court did not abuse its discretion by

declining to compel the Defendants to produce it.

Hewing more closely to the misappropriation claims as

conceived in its pleadings, CMP pursued information concerning

the April 1997 decision to transfer TMG’s majority interest in

KataLeuna to BvS, the minority owner. The arrangement as

proposed would have assigned KataLeuna’s rights to the FCC

additives to TCP, contrary to an alleged oral understanding

between Maher and Dr. Albers. That deal never materialized,

however. Instead, by virtue of a series of agreements executed

in the summer of 1998 among multiple parties, TMG indeed

divested its interest in KataLeuna, but the latter retained the

rights and obligations set forth in the TTA.

CMP sought to discover these “Summer 1998 Agreements,” but

not all of them were provided, and some that were provided were

heavily redacted. With the assistance of the court, KataLeuna

agreed to produce less-redacted versions. The matter appeared

to have been resolved, except for some complaints from CMP at a

17
hearing to dismiss KataLeuna’s counterclaims, see J.A. 562-63,

and a couple of objections at the subsequent bench trial on

rescission, see id. at 1796-97, 1912-14, that the documentation

evidencing the transfer was unclear or incomplete. Absent more

proactive efforts from CMP to bring their complaints to the

attention of the court prior to the hearing or trial, however,

we are unable to ascertain any abuse of discretion.

B.

The misappropriation claims ultimately failed at the

summary judgment stage, as CMP could show no impropriety or

misuse in that KataLeuna legitimately acquired all rights to the

FCC additives, and there was no evidence adduced of a subsequent

transfer in violation of the supposed oral agreement. In

addition, the district court noted a dearth of evidence

supporting the proposition that the technology had actually been

maintained with sufficient secrecy to qualify as a “trade

secret” under the UTSA. See Md. Code. Ann. Com. Law § 11-

1201(e)(2) (defining term in part as information that “[i]s the

subject of efforts that are reasonable under the circumstances

to maintain its secrecy”). The court thereafter granted a

petition for attorney fees of $134,945 incurred in defending the

claims, finding that KataLeuna, TMG, and TCP had “carried the

burden imposed upon them by Maryland law, frankly by a very

large margin, to show clearly and convincingly that CMP

18
initiated and maintained its trade secrets claims in bad faith.”

J.A. 1459.

A court may award attorney fees under the UTSA if a party

initiates or pursues in bad faith a claim for misappropriation

of trade secrets. See Md. Code. Ann. Com. Law § 11-1204(1);

Optic Graphics, Inc. v. Agee, 591 A.2d 578, 588 (Md. Ct. Spec.

App. 1991). Generally, an award of fees lies within the trial

court’s discretion. See Deadwyler v. Volkswagen of Am., Inc.,

884 F.2d 779, 784 (4th Cir. 1989).

The district court here concluded that the misappropriation

claims were “alleged and maintained in objective speciousness,”

J.A. 1478 (footnote omitted), and it further referred to CMP’s

approach to discovery (multiple unsuccessful motions to compel,

coupled with deposition notices and a non-party subpoena being

quashed for “reckless extravagance”) as evidence of its

subjective ill will. Insofar as the court’s ruling is

plausible in view of the facts and the law, it was not an abuse

of discretion. CMP complains that the court awarded fees

without convening an evidentiary hearing, but our precedent

counsels that due process is satisfied so long as the court has

familiarized itself with the relevant facts by becoming immersed

in the underlying proceedings. See In re Kunstler, 914 F.2d

505, 521 (4th Cir. 1990). Such was undoubtedly the case here.

19
 The district court also granted summary judgment to

KataLeuna on CMP’s claim for breach of the TTA. CMP insists the

court’s ruling was in error, pointing to a single page from a

July 15, 1997 report by KataLeuna’s auditor, translated from the

German, stating that the TTA “was rescinded effective January 1,

1997.” J.A. 1119. The court excluded the report excerpt as

hearsay, but CMP contends that the statement is a party

admission, see Fed. R. Evid. 801(d)(2), in that the auditor may

properly be considered an agent of KataLeuna.

Assuming, for the sake of argument, that the auditor was

KataLeuna’s agent and that the excerpt accurately reflected his

understanding with respect to the TTA, its potential

admissibility under a hearsay exception is beside the point in

that the statement utterly lacks probative value. To suggest

that KataLeuna attempted a unilateral rescission of the TTA is

contrary to any reasonable view of the case and its surrounding

context. Following the initial exchange of rights for money,

KataLeuna’s only substantive obligation under the TTA was to pay

CMP if and when it sold the FCC additives. Having not sold any

additives, KataLeuna paid no royalties to CMP; it did not have

to “rescind” anything. KataLeuna did seek rescission as a

remedy once it had been sued, but that particular action in no

way meets the legal definition of “breach.”

20
 Wrapped up in this issue, as with the misappropriation

claims, is CMP’s assertion that, prior to the execution of the

TTA, Maher and Dr. Albers reached an oral agreement that

KataLeuna would not further transfer the FCC additive rights

until the royalty payments topped out at $7.6 million. Maryland

law governs the contract, with the result that “[t]he parol[]

evidence rule only applies where the parties to a written

contract agree or intend that the writing shall be their whole

agreement.” State Dep’t of Gen. Servs. v. Cherry Hill Sand &

Gravel Co., 443 A.2d 628, 631 (Md. Ct. Spec. App. 1982)

(citations omitted). Inasmuch as there is no merger or

integration clause in the TTA, it is at least arguable that

Maher’s alleged assurances to Dr. Albers could be part of the

parties’ agreement, at least to the extent that non-

transferability is not flatly inconsistent with CMP’s written

assignment of its “entire right, title and interest.” Again,

however, there is no evidence that KataLeuna actually

transferred the rights to the additives. The district court

therefore appropriately awarded summary judgment to KataLeuna on

CMP’s claim for breach.

21
 III.

A.

KataLeuna countered CMP’s claims of breach with similar

allegations of its own, asserting entitlement to alternative

remedies. In late 2002 or early 2003, as the parties were

preparing for trial, KataLeuna elected to pursue rescission,

forgoing its pursuit of legal damages and abandoning its claims

for unjust enrichment. Rescission is an equitable proceeding,

see Griggs v. E.I. duPont de Nemours & Co., 385 F.3d 440, 447 &

n.4 (4th Cir. 2004), among those that fall outside the

constitutional right to trial by jury of “suits at common law.”

U.S. Const. amend. VII; see Tull v. United States, 481 U.S. 412,

417 (1987) (citations omitted).

Nonetheless, the right to a jury trial for claims at law is

“preserved to the parties inviolate,” Fed. R. Civ. P. 38(a), and

“only in the most imperative circumstances . . . can the right

to a jury trial of legal issues be lost through prior

determination of equitable claims.” Dairy Queen, Inc. v. Wood,

369 U.S. 469, 472-73 & n.7 (1962) (quoting Beacon Theatres, Inc.

v. Westover, 359 U.S. 500, 510-11 (1959)). Thus, “where legal

and equitable claims are contained in the same set of facts, the

right to a jury trial, which the legal claims permit, should

predominate.” Ritter v. Mount St. Mary’s College, 814 F.2d 986,

22
990 (4th Cir. 1987); accord, Terry v. Chauffers, Teamsters and

Helpers Local 391, 863 F.2d 334, 336 (4th Cir. 1988).

Ritter, however, proved an exception to the rule. In that

case, the district court erroneously dismissed the plaintiff’s

legal claims and conducted a bench trial on an equitable claim;

after the legal claims were reinstated on appeal, the question

arose as to whether the bench trial findings were precluded from

relitigation before the jury. The district court ruled in the

affirmative, and we agreed, relying on the Supreme Court’s

decision in Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 322

(1979), arising on similar facts, for the proposition that “the

harm complained of is insufficient to override the judicial

interest in the speedy resolution of disputes.” Ritter, 814

F.2d at 991.

Plainly, “mixed” cases in which rescission is invoked as a

potential remedy pose a problem for the district courts in case

administration. One approach to the problem is to employ a

method whereby “the jury first decides the questions of fact and

then the judge decides whether rescission is an appropriate

remedy.” Falco v. Alpha Affiliates, Inc., No. 97-494, 2000 WL

727116 (D. Del. Feb. 9, 2000) (unpublished) (citing precedent

that substantial non-performance justifying rescission is a

question for the trier of fact, and noting that “many, but not

all, of the alleged facts underlying the equitable counterclaim

23
are the same as that underlying the counterclaims triable to the

jury”); cf. Terry, 863 F.2d at 339 (“Resolution of the

declaratory relief demand, however, raises legal issues that may

well require both a determination by the court of the meaning of

the collective bargaining agreement and a resolution by the jury

of disputed facts concerning whether that agreement was

breached.”).

It is arguably a different situation where the legal and

equitable claims arise on separate facts, such as in Dollar

Sys., Inc. v. Avcar Leasing Sys., Inc., 890 F.2d 165 (9th Cir.

1989), in which the court of appeals upheld the district court’s

decision to conduct a bench trial on the defendants’

counterclaim for rescission, prior to impaneling a jury to

decide the remaining legal claims. The Ninth Circuit

acknowledged the rule of Dairy Queen, but observed that “[t]he

legal and equitable claims asserted in this action . . . do not

involve any common questions of law or fact.” Id. at 170. In

such a situation, “the order of trial is immaterial, and may be

left in the discretion of the court.” Id. at 171 (quoting 9 C.

Wright & A. Miller, Federal Practice and Procedure § 2305, at 35

(1971)); accord, Arber v. Essex Wire Corp., 490 F.2d 414, 421-24

(6th Cir. 1974) (finding no violation of Seventh Amendment where

federal claim potentially implicating right to jury trial was

24
dismissed and rescission subsequently elected as to remaining

state law claim).

The parties dispute whether KataLeuna’s equitable

counterclaim seeking rescission of the TTA is truly independent

of CMP’s indisputably legal claims for damages under the RDA and

SAA. It is certainly the case that the RDA is one of several

documents referred to in the TTA whose execution and delivery

was a condition of closing. It is also true that one purpose of

the RDA was “to further develop [the TTA] technology,” J.A. 106,

together with new additives technologies. That the FCC

additives were apparently subject to additional testing and

refinement, however, has scant bearing on whether CMP lived up

to its representations in the TTA that the technology was

useful, reliable, and patentable, and very little to do with

CMP’s specific claim of non-payment under the RDA. Thus, the

facts underlying this appeal are analogous to those described by

the Ninth Circuit in Avcar, and a similar result should arguably

obtain. More to the point, however, any error occasioned by the

bifurcation in this matter was harmless, inasmuch as CMP

recovered fully on its claims under the RDA and SAA.

B.

KataLeuna’s claim under the TTA thus proceeded to trial

before the district court, sitting without a jury. Among the

witnesses were Christopher Rosenthal and Arthur Steiner.

25
Rosenthal was KataLeuna’s damages expert. Following Rosenthal’s

brief testimony, CMP declined the court’s invitation to cross-

examine, explaining that “[w]e’re going to call him during our

defense case.” J.A. 1756. KataLeuna objected, and the court

reserved ruling, although it opined “That’s not the way it’s

done.” Id. at 1759. CMP employed the same tactic with Steiner,

who had testified on behalf of KataLeuna as an expert on

patents, and also as a fact witness on KataLeuna’s attempt to

obtain certain patents. KataLeuna again objected, and the court

again deferred its ruling: “You know my feelings about the

whole question of CMP’s recalling certain witnesses . . . .

[Counsel] will have to make a very detailed proffer . . . before

I permit him to recall any witness.” Id. at 1811-12.

When the time came for the proffer, counsel explained that

CMP wanted to question Rosenthal on his damages calculation

being premised on a legal breach theory, rather than an

equitable rescission theory, to inquire as to some late

revisions to his report, and “to ask him about some defects that

are in his methodology and in his analyses.” J.A. 1817. With

respect to Steiner, CMP proposed to examine him regarding patent

applications for SOx B and combustion promoters submitted by

KataLeuna that, according to CMP, had been based upon the FCC

additives technology. The district court denied recall of both

witnesses, ruling that the proffer as to Rosenthal would have

26
been the proper subject of cross-examination, and the proffer as

to Steiner was foreclosed in reaffirmation of the court’s prior

rulings on the misappropriation claims. Proffered testimony

from Dr. Albers as to the patent sources was also excluded.

We review evidentiary rulings to ensure that the district

court did not abuse its discretion. See United States v. Blake,

571 F.3d 331, 350 (4th Cir. 2009) (citation omitted). The trial

court is afforded wide latitude in the conduct of proceedings

and presentation of evidence, and, in this instance, it gave

counsel ample and timely warning that CMP might be precluded

from eliciting evidence from hostile witnesses in the manner it

apparently preferred. Under the circumstances, the court

appears to have acted well within its sound discretion in

conforming its rulings to its warnings.

Apart from the foregoing procedural dispute, CMP maintains

that the district court substantively erred in adjudging

KataLeuna entitled to rescission. CMP contends that the court’s

conclusion flouts a number of legal prerequisites to equitable

relief, specifically that: (1) the parties could not be

restored to their respective positions prior to the TTA, because

KataLeuna sold the additives technology to TCP; (2) KataLeuna

failed to tender all the benefits it received under the TTA; (3)

KataLeuna had an adequate remedy at law for damages; (4) the

27
election of remedy came too late and was thus barred by laches;

and (5) CMP’s breach of the TTA, if any, was not material.

These contentions merit little discussion. The record is

clear that although KataLeuna contemplated a transfer of the

additives technology, it actually retained those rights

throughout. Moreover, the supposed benefits KataLeuna failed to

tender (the profits purportedly realized from the transfer that

did not happen, together with allegedly derivative SOx B and

copper palladium combustion promoter patents) likewise find no

record support for their existence. Indeed, McCauley

testified at deposition, without contradiction, “that he

learned nothing from CMP.” J.A. 392.

Although a minority of jurisdictions adhere to the

traditional rule that rescission is contingent upon damages at

law proving inadequate, Maryland affords the innocent party the

right to rescission whenever “there has been a material breach

of a contract.” Washington Homes, Inc. v. Interstate Land Dev.

Co., 382 A.2d 555, 563 (Md. 1978). The right to elect

rescission can be waived if not elected within a reasonable time

following discovery of the breach and the breaching party

suffers prejudice from the delay, see Benjamin v. Erk, 771 A.2d

1106, 1120 (Md. Ct. Spec. App. 2001), but the district court

specifically found that KataLeuna did not reasonably discover

that all the TTA technologies were without value until well

28
after litigation had commenced. See J.A. 2704. And,

notwithstanding CMP’s insistence that the TTA cannot be properly

understood independently of the RDA’s contemplation that the

additive technologies were subject to further development, it

seems plain that the essence of CMP’s obligations under the TTA

was that something worth developing was being transferred. The

district court’s judgment of rescission, being supported by the

facts and governing law, was therefore proper.

IV.

As previously noted, we dismissed as premature CMP’s appeal

of the Rule 54(b) order entering judgment for KataLeuna on its

counterclaim for rescission. About eighteen months afterward,

Dr. Albers filed a sworn declaration pursuant to 28 U.S.C.

§ 144, seeking the district court’s recusal. 3 The declaration

accused the court of intentionally delaying the proceedings on

remand, and it set forth Dr. Albers’s belief that the court had

“not been impartial in this case as a result of [its]

association with FREE or [its] identification with the

3
The statute provides, in pertinent part, that if a party
to any proceeding before the district court devises and submits
“a timely and sufficient affidavit that the judge before whom
the matter is pending has a personal bias or prejudice either
against him or in favor of any adverse party, such judge shall
proceed no further therein, but another judge shall be assigned
to hear such proceedings.” 28 U.S.C. § 144.

29
substantial contributors to that private foundation.” J.A.

4083. According to Dr. Albers, partiality was manifest in the

court’s rulings against CMP and in its statement on remand that

it would not reconsider any matter previously decided.

A district court has the discretion to entertain the

possibility of recusal, and its exercise of discretion in favor

of remaining on the matter is reviewed for abuse. See Newport

News Holdings Corp. v. Virtual City Vision, Inc., 650 F.3d 423,

432 (4th Cir. 2011). At the outset, we may decline KataLeuna’s

invitation to invoke res judicata on its assertion that our

denial of mandamus relief decided the issue. Mandamus is, of

course, an extraordinary remedy to which the petitioner need

show a clear entitlement. See In re Beard, 811 F.2d 818, 826

(4th Cir. 1987) (noting that “mandamus will not issue when all

that is shown is that the district court abused its discretion

in making the challenged ruling”). Our review would therefore

have been more deferential than it is now, on appeal of the

final order.

Under any standard, however, it was hardly incumbent upon

the district court to disqualify itself. To begin with, “the

bias or prejudice which can be urged against a judge must be

based upon something other than rulings in the case.” Berger v.

United States, 255 U.S. 22, 31 (1921). A properly sworn § 144

affidavit accompanied by the certificate of counsel that it is

30
being filed in good faith, upon being acknowledged by the court

as legally sufficient, is enough to require recusal of the

presiding judge. The affidavit, however, must “show the

objectionable inclination or disposition of the judge, which we

have said is an essential condition.” Id. at 35. Mere

intimations of prejudice or bias founded on the court’s

association with a nonprofit entity receiving indeterminate

funding by a remote parent of a corporate litigant fall short of

the required showing.

In Berger, the affidavit was filed on information and

belief by defendants in a 1918 espionage prosecution, three of

whom were of German or Austrian descent. The defendants’

averments related certain remarks attributed to the trial judge,

Kenesaw Mountain Landis, in a different proceeding. According

to the defendants, Judge Landis premised his remarks by

boasting, “If anybody has said anything worse about the Germans

than I have I would like to know it so I can us[e] it.” 255

U.S. at 28. Judge Landis went on to opine that “[o]ne must have

a very judicial mind, indeed, not to be prejudiced against

German-Americans in this country.” Id. He continued:

Their hearts are reeking with disloyalty . . . . This
same kind of excuse of the defendant offering to
protect the German people is the same kind of excuse
offered by the pacifists in this country, who are
against the United States and have the interests of
the enemy at heart by defending that thing they call
the Kaiser and his darling people . . . . I know a

31
 safe-blower . . . who is making a good soldier in
France. He was a bank robber for nine years, that was
his business in peace time, and now he is a good
soldier, and as between him and this defendant, I
prefer the safeblower.

Id. at 28-29. Needless to say, Judge Landis’s purported

statements were far more illuminative of his state of mind in

that case than the circumstances alleged here to reveal the

district court’s supposed bias in favor of KataLeuna. Cf. Davis

v. Bd. of Sch. Comm’rs of Mobile Cnty., 517 F.2d 1044, 1050 (5th

Cir. 1975) (concluding that trial judge did not abuse his

discretion by refusing to disqualify himself in response to

“peremptory challenge type approach [that] would bid fair to

decimate the bench. Lawyers, once in controversy with a judge,

would have a license under which the judge would serve at their

will.”).

Though we by no means insinuate that a section 144 affiant

need produce evidence of a trial judge’s bias or prejudice to

the degree attributed to Judge Landis in Berger, Dr. Albers’s

declarations in this matter fall far short of the evidentiary

critical mass necessary to compel the conclusion that the

district court should have recused itself. That being the

situation, we can discern no abuse of discretion in the court’s

decision to remain on the case.

32
 V.

A.

The matter of the court’s recusal having been resolved for

the time-being by our denial of extraordinary relief, the

parties moved inexorably toward their final trial. The issues

to be tried narrowed considerably upon the district court’s

approval of KataLeuna’s offer of judgment to CMP for the

former’s breach of the RDA and SAA. Federal Rule of Civil

Procedure 68 provides that “a party defending against a claim

may serve on an opposing party an offer to allow judgment on

specified terms, with the costs then accrued.” Fed. R. Civ. P.

68(a). If the offer is accepted, then the clerk must enter

judgment consistent with the agreed terms, but “[a]n unaccepted

offer is considered withdrawn,” and the defendant’s subsequent

costs are subject to being paid by the plaintiff in the event

that the eventual judgment obtained is less favorable than the

defendant’s offer. Fed. R. Civ. P. 68(b), (d).

The rule undoubtedly contemplates an offer in the nature of

a compromise, but in this case KataLeuna tendered full judgment

in offset, including prejudgment interest and costs, as to

Counts I and II of CMP’s Amended Complaint. Despite CMP’s

purported rejection of the offer, the district court essentially

forced its acceptance by ruling that it no longer had subject

33
matter jurisdiction over the claims because their satisfaction

had mooted the underlying case or controversy.

Our precedent supports the court’s ruling. In Zimmerman v.

Bell, 800 F.2d 386, 390 (4th Cir. 1986), a putative class

action, we affirmed the district court’s dismissal of the

plaintiff’s individual claims following the defendants’ offer of

judgment in full. We observed that in light of the offer,

“there was no longer any case or controversy. . . . [The

plaintiff’s] personal stake in the outcome had disappeared, and

federal courts do not sit simply to bestow vindication in a

vacuum.” Id.

CMP counters, citing Bevier v. Blue Cross & Blue Shield of

S.C., 337 Fed. App’x 357 (4th Cir. 2009) (per curiam)

(unpublished), in which we rejected the plaintiff’s contention

on appeal that his acceptance of the defendant’s Rule 68 offer

of a money judgment failed to extinguish his right to pursue

permanent injunctive relief on the same claim. According to

CMP, the circumscribed context evident in Bevier permits

consideration of a broader proposition that a court may not

invoke an offer of judgment to dismiss particular claims in a

multiple-claim proceeding.

In so arguing, CMP conflates the dismissal of individual

“claims” in a lawsuit (which is clearly permitted by the text of

the rule), with the dismissal of the gamut of potential

34
“remedies” associated with a claim (which is all that Bevier had

occasion to address). CMP insists that the RDA and SAA issues

overlap the rest of the case, and it was therefore error to

remove the consideration of those claims from the jury, but for

the reasons previously discussed with respect to the bifurcation

of KataLeuna’s claim for rescission of the TTA, the court did

not abuse its discretion in the conduct of the proceedings.

B.

In preparing for the jury trial on the claims involving the

consigned zeolites, KataLeuna noticed depositions of Dr. Albers

and his son-in-law, Kurt Kroger, the latter being a lawyer who

had assumed responsibility for winding up CMP’s business

affairs. Although CMP had, throughout the litigation, accepted

and produced witnesses pursuant to the identical notice

templates, counsel in these instances (in conjunction with local

counsel for Dr. Albers in Florida, and with counsel for Kroger

in California) advised their clients not to attend the scheduled

depositions because, in counsel’s estimation, the notices were

technically defective for not including the witnesses’ local

addresses. Thereafter, CMP’s counsel refused all proffered

dates to reschedule the deposition of Kroger (whom his firm did

not represent), and did not relent until KataLeuna filed a

motion to compel. After the depositions were conducted, the

district court denied KataLeuna’s motion as moot.

35
 In addition to the deposition shenanigans, CMP failed to

produce a videotape that KataLeuna specifically requested, one

in which Kroger detailed KataLeuna’s cleanup and removal of the

zeolites. At first, CMP disavowed the video’s existence and

denied that such a thing had ever been commissioned; six months

later, CMP acknowledged possession of the tape but produced only

a redacted copy, asserting the attorney-client and work-product

privileges in its formation.

Upon finding all the foregoing, the district court awarded

KataLeuna $27,654.30 in attorney fees. Where a party “fails to

obey an order to provide or permit discovery,” sanctions may

include paying “the reasonable expenses, including attorney’s

fees” attributable to the failure. Fed. R. Civ. P. 37(b)(2)(A),

-(C). CMP points out that it disobeyed no specific order

pursuant to a motion to compel, but that position misapprehends

the proper meaning of the word “order” in the rule. CMP’s

actions contravened the general order of the district court

authorizing discovery, see J.A. 3211, and it was therefore

within the court’s discretion to award sanctions. See Deadwyler

v. Volkswagen of Am., Inc., 884 F.2d 779, 784 (4th Cir. 1989)

(reciting abuse-of-discretion standard).

C.

A jury was impaneled to decide whether KataLeuna was liable

in bailment to reimburse CMP for the cost of keeping the

36
consigned zeolites on the latter’s property for nearly ten years

prior to their removal, and whether CMP was liable in conversion

or negligence for permitting the exposed materials to degrade by

moving them outside its warehouse. Under the SAA, CMP was

entitled to a percentage of net sales of the zeolites, plus

$20,000 per month “[i]n support of [its] sales and Marketing

expenses.” J.A. 89.

CMP took the position that $6,000 of the monthly charge for

expenses was allocated for storage, based on an alleged

conversation among McDaniel (on behalf of KataLeuna) and Dr.

Albers and his son (on behalf of CMP), following termination of

the SAA, during which CMP offered to continue to house the

zeolites for that price. Prior to trial, the district court

excluded evidence of that particular conversation and, more

generally (based on the parol evidence rule and the SAA

integration clause), evidence of any negotiations concerning the

execution of the SAA or attempted oral modification afterward.

The court explained that, in light of CMP’s failure to

respond to specific discovery inquiries regarding damages

(including the non-disclosure prior to the hearing of any

conversation involving McDaniel and the Alberses), it was stuck

with Dr. Albers’s 1999 deposition testimony that the standard

annual storage fee in the area was “probably around $6 a square

37
foot.” J.A. 3639-40, 3810. 4 The court rejected CMP’s arguments

that KataLeuna should have phrased its discovery requests

differently or moved to compel more specific answers. See id.

at 3866.

During the trial, the district court sustained objections

to questions concerning the substance of post-termination

conversations between Dr. Albers and McDaniel, to questions

regarding similar conversations between Dr. Albers’s son and

other KataLeuna representatives, and to CMP reading into the

record a letter whereby KataLeuna’s counsel referred to the

zeolites as “consigned.” See J.A. 3871-74, 3901-06, 4010. All

that was presented to the jury with respect to CMP’s claim for

bailment was KataLeuna’s recitation, for impeachment purposes,

of Dr. Albers’s conclusory testimony at deposition that CMP was

seeking $6,000 per month as storage compensation. There was no

evidence of any written agreement between the parties

establishing a bailment at a particular rate, nor of any written

demand or invoice supporting an inference that KataLeuna had

acquiesced to CMP’s terms. Dr. Albers was not even asked to

4
Based on the uncontested representations of KataLeuna’s
counsel that the zeolites had been stored in approximately 1,600
square feet of space, CMP’s claim would have been for only about
$800 per month.

38
repeat his deposition testimony that the fair market value for

storage was $6 per square foot.

At the end of CMP’s case-in-chief, the district court

granted KataLeuna’s judgment as a matter of law on CMP’s

bailment claim, ruling that no reasonable jury could conclude

that KataLeuna was legally obligated to CMP. Moreover, the lack

of evidence on damages, according to the court, would have

required the jury to engage in impermissible speculation as to

their proper measure. See J.A. 3937-39.

The rules plainly specify that “[i]f a party fails to

provide information or identify a witness . . . , the party is

not allowed to use that information or witness to supply

evidence . . . at a trial, unless the failure was substantially

justified or is harmless.” Fed. R. Civ. P. 37(c)(1). It is

therefore difficult to see how the district court abused its

discretion in excluding CMP’s late proffer. The court was also

correct, in light of the resultant lack of proof, to enter

judgment as a matter of law for KataLeuna on CMP’s bailment

claim.

VI.

Pursuant to the foregoing, the judgment of the district

court is affirmed.

AFFIRMED

39