Compaq Computer Corp. v. Ergonome Inc.

United States Court of Appeals
Fifth Circuit

FILED
UNITED STATES COURT OF APPEALS October 5, 2004
FOR THE FIFTH CIRCUIT
_______________________ Charles R. Fulbruge III
Clerk
No. 01-20861
_______________________

COMPAQ COMPUTER CORPORATION,

Plaintiff-Counter-Defendant-Appellee,

versus

ERGONOME INCORPORATED,

Defendant-Counter-Claimant-Appellant,

STEPHANIE L. BROWN; THOMAS W. MOWREY,

Defendants-Appellants.

ERGONOME INCORPORATED; ET AL.,

Plaintiffs,

ERGONOME INCORPORATED,

Plaintiff-Appellant,

versus

COMPAQ COMPUTER CORPORATION,

Defendant-Appellee.

Appeals from the United States District Court
For the Southern District of Texas

Before JONES, DENNIS, and PICKERING, Circuit Judges.

EDITH H. JONES, Circuit Judge:

This case arises from Ergonome’s claim that Compaq’s

Safety and Comfort Guide (“SCG”) unlawfully infringed on a

copyright held by Ergonome in Preventing Computer Injury: The HAND
Book (“THB”), a teaching text describing ergonomically correct hand

positions for computer users and ways to avoid repetitive stress

injuries. On July 11, 2001, after a seven-day trial, the jury

concluded that any copying by Compaq was de minimis and constituted

fair use according to 17 U.S.C. § 107. The district court subse-

quently held that the doctrines of laches and equitable estoppel

also barred Ergonome’s claim. Based on these findings, the

district court awarded Compaq its attorneys’ fees of $2.7 million.

Additionally, the district court deemed defendant Stephanie Brown

to be the alter ego of Ergonome as a sanction for repeated

discovery violations throughout the litigation process.

Ergonome, Brown, and her husband Mowrey appeal on

multiple grounds and argue, inter alia, that (1) the jury’s verdict

should be set aside, (2) the district court erred in finding that

laches and equitable estoppel bar their suit, (3) the district

court erred in shifting attorneys’ fees to Ergonome, and (4) Brown

and Mowrey are not the alter egos of Ergonome and should not be

held jointly and severally liable for the attorneys’ fee award.

To prevail, Ergonome would have to persuade this court

that each of the four independent bases for finding in Compaq’s

favor (de minimis, fair use, laches, and equitable estoppel) is

legally erroneous. Ergonome has not succeeded in this formidable

task, and, focusing exclusively on the jury’s finding of fair use,

we affirm the finding of no infringement. We reach no other

substantive copyright issues raised by the parties. Additionally,

2
we affirm the district court’s decision to shift attorneys’ fees

and its discovery sanction against Brown. However, because no such

sanction was imposed on Mowrey, we reverse this aspect of the

judgment.

I. BACKGROUND

In 1992, Stephanie Brown began writing THB and

subsequently registered the manuscript with the U.S. Copyright

Office. Brown and Mowrey formed Ergonome in 1993 to publish and

market the book. Brown assigned all her rights in THB, including

the copyright, to Ergonome. THB was formally published in 1994.

In 1993, Compaq decided to update a booklet entitled

Creating a Comfortable Work Environment that was packaged with each

Compaq computer. During the revision process, Compaq’s manager of

the Human Factors Group, Cynthia Purvis, referenced THB. The

finished booklet, renamed the Safety and Comfort Guide, contained

four illustrations and seven phrases that were similar to

photographs and phrases in THB.1 Like its predecessor, the SCG was

packaged and included with every Compaq computer.

Meanwhile, Brown and Mowrey had been attempting to market

THB to various computer companies, including Compaq. Mowrey

initially spoke to Purvis on the telephone in March 1994 and

thereafter sent Purvis a letter detailing volume discount prices

1
For example, the SCG contained a hand-drawn illustration of a
computer-user’s hands, angled wrists, and lower arms positioned over a keyboard,
with a caption below reading “Angled-Wrist Position - Incorrect.” THB contained
a similar photograph with a caption reading “Angled-wrist position - No.”

3
for THB. In November 1994, Brown and Mowrey attended a meeting

with Compaq personnel in Houston to demonstrate Key Moves, a

software derivative of THB. During this meeting, Purvis gave Brown

a pre-publication copy of the 1994 SCG. According to Brown, while

leafing through the SCG, she became aware of the similarities

between the above-referenced four illustrations and seven phrases

and THB. She said nothing of the alleged infringement, however,

choosing instead to pursue the possibility of a software license

with Compaq. Brown and Mowrey returned to Compaq again in January

1995 for another Key Moves demonstration.

In December 1996, Mowrey notified Purvis of Ergonome’s

infringement claims. In 1997, Compaq filed suit in federal

district court in Houston seeking a declaration that the SCG did

not infringe on THB. Ergonome subsequently filed an infringement

action in federal district court in New York, which was transferred

and consolidated with Compaq’s declaratory judgment action in

Houston. Both parties filed motions for summary judgment, and the

district court concluded as a matter of law that the portions of

THB at issue were copyrightable. However, the district court

ultimately denied the motions because genuine issues of material

fact remained as to Compaq’s affirmative defenses of de minimis and

fair use. See Compaq Computer Corp. v. Ergonome, Inc., 137 F.Supp.

2d 768 (S.D. Tex. 2001). The jury trial and resulting appeal

followed.

4
 II. DISCUSSION

A. Liability

“To establish copyright infringement, a plaintiff must

prove ownership of a valid copyright and copying of constituent

elements of the work that are copyrightable.” Eng’g Dynamics, Inc.

v. Structural Software, Inc., 26 F.3d 1335, 1340 (5th Cir. 1994)

(citing Feist Publications, Inc. v. Rural Tel. Serv. Co., 499 U.S.

340, 361 (1999)). Copyright ownership is shown by (1) proof of

originality and copyrightability and (2) compliance with the

applicable statutory requirements. Id. Compaq does not dispute

that Ergonome possessed a statutorily compliant copyright. In

addition, the district court held as a matter of law that the

portions of THB allegedly copied by Compaq reflected the necessary

originality to qualify as copyrightable.2 Compaq Computer Corp. v.

Ergonome Inc., 137 F. Supp. 2d 768, 777 (S.D. Tex. 2001). The jury

found that Compaq actually copied portions of THB.

Not all copying amounts to copyright infringement,

however. Eng’g Dynamics, 26 F.3d at 1340-41. Specifically,

Congress has excepted from infringement of copyrighted materials

copying that amounts to “fair use” under 17 U.S.C. § 107. When

determining fair use, Congress has provided a non-exclusive list of

factors that must be considered:

2
Ergonome argues that the district court allowed Compaq to relitigate
the question of originality and copyrightability. However, the jury was
instructed that THB was “a copyrighted work subject to the protection of the
Copyright Act.” Ergonome’s argument is wrong.

5
 (1) the purpose and character of the use, including
whether such use is of a commercial nature or is
for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used
in relation to the copyrighted work as a whole; and

(4) the effect of the use on the potential market for
or value of the copyrighted work.

17 U.S.C. § 107 (2000). In the instant case, Compaq pleaded fair

use as an affirmative defense, the jury was instructed on the four

factors enumerated above, and they ultimately concluded that

Compaq’s copying of the four illustrations and seven phrases from

THB amounted to fair use. On appeal, Ergonome does not challenge

the fair use jury instruction. Instead, the company argues that

the district court erroneously excluded evidence relevant to the

fair use defense and erred in refusing to grant Ergonome’s motion

for judgment as a matter of law as to fair use.

1. Exclusion of Evidence

This court reviews a district court’s decision to admit

or exclude evidence for abuse of discretion. Green v. Admin’s of

Tulane Educ. Fund, 284 F.3d 642, 660 (5th Cir. 2002). Even if an

abuse of discretion is found, the harmless error doctrine applies

unless a substantial right of the complaining party was affected.

Id.

Ergonome contends that the district court excluded

evidence relevant to the first statutory fair use factor.

6
Specifically, Ergonome complains about the exclusion of evidence

relating to (1) past lawsuits against Compaq for repetitive stress

injuries (“RSI”), (2) the exact number of the offending copies of

the SCG distributed with Compaq computers, and (3) the proposed

volume discount quoted to Compaq by Mowrey. The district court

apparently premised exclusion on Federal Rule of Evidence 403,

finding that “its probative value is substantially outweighed by

the danger of unfair prejudice.” FED. R. EVID. 403.

Ergonome asserts that the evidence concerning past RSI

lawsuits is necessary to prove Compaq’s “commercial motive” for

copying from THB, that is, Compaq’s desire to defray potential RSI

liability. The first statutory fair use factor asks the court or

jury to consider “the purpose or character of the use.” While

Compaq did not produce the SCG for individual sale or profit, the

Supreme Court has noted that “[t]he crux of the profit/nonprofit

distinction is not whether the sole motive of the use is monetary

gain but whether the user stands to profit from exploitation of the

copyrighted material without paying the customary price.” Harper

& Row, Publishers, Inc. v. Nation Enters., 471 U.S. 539, 562, 105

S. Ct. 2218, 85 L. Ed. 2d 588 (1985). Thus, the inclusion of the

SCG with each Compaq computer constitutes a commercial use of the

copied material.

The RSI evidence would be relevant to Ergonome’s “motive”

theory. However, the district court concluded that Ergonome’s true

reason for seeking to introduce the evidence was to paint Compaq as

7
a “bad” company. The court did not abuse its discretion by con-

cluding that any probative value the RSI evidence might hold was

outweighed by its prejudicial and inflammatory nature and by its

tendency to confuse the jury with tangential litigation. In any

event, the exclusion was harmless, because even without the RSI

lawsuit evidence, the jury was presented with ample evidence of

Compaq’s commercial use, or “motive,” relevant to the first

statutory fair use factor.

Ergonome also contests the exclusion of the number of

1994 Compaq guides distributed to customers and evidence concerning

the details of a proposed volume discount price submitted by

Mowrey.3 Such evidence is claimed to be relevant to Compaq’s

commercial use of THB under the first statutory fair use factor.

The district court did not abuse its discretion by excluding this

evidence as cumulative or prejudicial. See FED. R. EVID. 403.

Again, any error that may have occurred was harmless, as Compaq’s

commercial use of THB was evident from the fact that a copy of

Compaq’s SCG was bundled with every Compaq desktop computer sold,

and the jury was aware that Compaq sold millions of computers. The

jury was also apprised of Ergonome’s desire to sell THB to Compaq

and of the sales calls and meetings to that end. Ergonome’s

3
Ergonome asserts that 32,236,510 copies of the SCG were produced.
Additionally, Mowrey suggested a volume discount price of $7.95 per copy for
orders of THB over 100,000.

8
substantial rights were not affected by the exclusion of this

evidence.

2. Judgment as a Matter of Law

We review a district court’s ruling on a motion for

judgment as a matter of law de novo. Ins. Co. of N. Am. v.

Aberdeen Ins. Servs., Inc., 253 F.3d 878, 884 (5th Cir. 2001).

This court views the evidence and inferences drawn therefrom in the

light most favorable to the nonmoving party. Id. Judgment as a

matter of law is appropriate only when the “facts and inferences

point so strongly and overwhelmingly in favor of one party that the

[c]ourt believes that reasonable men could not arrive at a contrary

verdict.” Rubinstein v. Admin’s of the Tulane Educ. Fund, 218 F.3d

392, 401 (5th Cir. 2000); see also FED. R. CIV. P. 50(a).

Ergonome argues sketchily that the evidence as to each of

the four non-exclusive statutory fair use factors points so

overwhelmingly in Ergonome’s favor that the district court erred in

denying its motion for judgment as a matter of law. As discussed

supra, Compaq’s use of THB was commercial in the sense that

Compaq’s SCG was packaged with every desktop computer. While

commerciality generally weighs against finding fair use, it does

not end the inquiry; rather, the fair use determination depends on

the totality of the factors considered. See Campbell v. Acuff-Rose

Music, Inc., 510 U.S. 569, 584, 114 S. Ct. 1164, 1174, 127 L. Ed.

9
2d 500 (1994); Sundeman v. Seajay Soc’y, Inc., 142 F.3d 194, 203

(4th Cir. 1998).

The second statutory factor asks the factfinder to

determine “the nature of the copyrighted work.” The Supreme Court

has noted that “fair use is more likely to be found in factual

works than in fictional works.” Stewart v. Abend, 495 U.S. 207,

237, 110 S. Ct. 1750, 1769, 109 L. Ed. 2d 184 (1990). Ergonome

argues that because the district judge found at summary judgment

that portions of THB were sufficiently original to warrant a

copyrightability finding, the second factor must favor Ergonome.

In order to be copyrightable, a work must contain a certain modicum

of originality. Originality’s relatively low hurdle may be cleared

when the “selection and arrangement” of sometimes uncopyrightable

facts evinces a “minimal degree of creativity.” Feist

Publications, Inc. v. Rural Tel. Serv. Co., Inc., 499 U.S. 340,

345, 111 S. Ct. 1282, 1287, 113 L. Ed. 2d 358 (1991). At summary

judgment, the district court concluded that THB possessed the

requisite amount of originality.

Ergonome’s argument proves too little, however, because

fair use excuses otherwise actionable infringement. Thus, a work

will always be found “original” for copyrightability purposes

before the fair use analysis is applied. The second statutory fair

use factor, then, refers to the “nature” of the work beyond this

initial inquiry. At trial, Brown herself stated that THB was a

factual teaching text. Based on the evidence submitted at trial,

10
the jury could have easily concluded that THB was a factual work,

as opposed to a highly creative fictional work, and that the second

fair use factor favored Compaq.

The third statutory factor considers “the amount and

substantiality of the portion used in relation to the copyrighted

work as a whole.” The copied portions of THB at issue in this case

amount to four illustrations and seven phrases. The evidence at

trial revealed that THB is approximately 100 pages long and

contains over 88 photographs. Based on the evidence adduced at

trial, the jury could have reasonably concluded that the minimal

portions of THB used in Compaq’s SCG were insubstantial in relation

to THB as a whole.

Finally, the Copyright Act focuses on “the effect of the

use on the potential market for or value of the copyrighted work.”

The Supreme Court states that this factor represents the most

important aspect of fair use. Harper & Row, 471 U.S. at 566, 105

S. Ct. at 2233. This factor requires courts to consider not only

actual harm to the market for the original, but also whether

widespread use of the work, like the sort complained of by the

copyright-holder, would impair the potential market for the

original work and any derivative works. Campbell, 510 U.S. at 590,

114 S. Ct. at 1177.

In this case, Ergonome could not show that the

distribution of Compaq’s SCG deprived Ergonome of any sales. In

fact, Brown and Mowrey conceded that in June 1994, six months

11
before Compaq began distributing its SCG, they decided to cease

actively marketing THB. Mowrey testified that because of the

increased demand for computer software, he and Brown decided to

focus on marketing Key Moves as opposed to THB. In addition, he

stated that it was simply too easy for company managers to read THB

and instruct employees on its techniques rather than buy numerous

copies of the book. Based on this evidence, the jury could have

reasonably concluded that the distribution of Compaq’s SCG had

little or no impact on the market for THB. Moreover, Mowrey stated

that the potential market for THB was essentially thwarted by an

uncontrollable market phenomenon, namely, managerial consumption

and dissemination of THB techniques. The jury could also have

reasonably concluded that Compaq’s use of portions of THB had

little or no impact on the potential market. The evidence

presented at trial and the reasonable inferences therefrom, when

viewed through the lens of the statutory fair use factors, support

the jury’s fair use finding.4

B. Attorneys’ Fees

The Copyright Act provides that

[i]n any civil action under this title, the court in its
discretion may allow the recovery of full costs by or
against any party other than the United States or an
officer thereof. Except as otherwise provided by this
title, the court may also award a reasonable attorney’s
fee to the prevailing party as part of the costs.

4
Because we uphold the jury’s fair use finding, which in turn results
in a finding of no infringement, we have no occasion to address Ergonome’s other
claims on appeal relating to liability and damages.

12
17 U.S.C. § 505 (2000). As the prevailing party, Compaq requested

an award of attorneys’ fees. In granting Compaq’s request for

attorneys’ fees of $2,765,026.90, the district court relied upon

several factors, inter alia: (1) Ergonome continuously failed to

comply with discovery orders, which resulted in monetary sanctions

and holdings of contempt; (2) Ergonome filed a multitude of “non-

meritorious motions;” and (3) had Ergonome prevailed on its $800

million claim for damages, its attorneys would have received a

forty percent contingent fee, which represents an award 120 times

greater than the amount requested by Compaq. Appellants argue that

the district court’s decision to award attorneys’ fees to Compaq

violates Supreme Court precedent and also represents an abuse of

discretion. They do not, however, contest the quantum of the fee

award.

Whether the district court applied an incorrect legal

standard in awarding attorneys’ fees is a question of law reviewed

de novo. Hogan Sys., Inc. v. Cybresource Int’l, Inc., 158 F.3d

319, 325 (5th Cir. 1998). We review a district court’s decision to

award attorneys’ fees, however, for abuse of discretion. Id.

In deciding to award attorneys’ fees, the district court

noted that “[t]he Fifth Circuit has acknowledged that an award of

attorneys’ fees in copyright cases is within the discretion of the

trial court, but has held that the award of attorneys’ fees in

copyright cases is the rule rather than the exception, and should

be awarded routinely.” See Hogan, 158 F.3d at 325; McGaughey v.

13
Twentieth Century Fox Film Corp., 12 F.3d 62, 65 (5th Cir. 1994).

Appellants argue that the Supreme Court’s decision in Fogerty v.

Fantasy, Inc., 510 U.S. 517, 114 S. Ct. 1023, 127 L. Ed. 2d 455

(1994), displaced this court’s “discretionary but routinely

awarded” standard.5 This argument is without merit. In Hogan,

this court considered and rejected the identical argument advanced

by Appellants here. 158 F.3d at 325. Specifically, this court

held that both this circuit’s rule and the Fogerty rule allow for

district court discretion in the decision to award attorneys’ fees.

Id. The district court did not apply the incorrect legal standard.

Appellants also argue that the district court failed to

apply the correct factors, as announced in Fogerty, when making its

decision. However, the Supreme Court in Fogerty stated that

“[t]here is no precise rule or formula for making [a fee award

determination] . . . .” 510 U.S. at 534, 114 S. Ct. at 1033. The

factors that Appellants point to as being determinative

(frivolousness, motivation, objective unreasonableness, and the

need to advance considerations of compensation and deterrence) were

indeed referenced by the Court, but only as factors that “may be

used to guide courts’ discretion.” Id. at 535 n.19, 114 S. Ct. at

1033 n. 19. This court has already considered and rejected the

idea that district courts are bound to apply verbatim the factors

5
In Fogerty, the Supreme Court rejected the argument that Section 505
adopted the British Rule of awarding costs to the prevailing party as a matter
of course and instead adopted an “evenhanded” approach that relied on the
district court’s discretion. 510 U.S. at 533-34, 114 S. Ct. at 1033.

14
listed above. Hogan, 158 F.3d at 325-26. Additionally, the

factors relied upon by the district court overlap with several of

the factors advanced by Appellants, namely, motivation, objective

unreasonableness, and compensation. The district court did not

apply the incorrect legal standard.

Finally, we cannot say that the district court abused its

discretion in awarding Compaq its attorneys’ fees. The court

examined both procedural and substantive aspects of the litigation

in making its decision. The attorneys’ fee award is affirmed.

C. Discovery Sanction

In its order amending the final judgment, the district

court, as discussed supra, ordered “Ergonome” to pay Compaq’s

attorneys’ fees. The court further defined “Ergonome” as

“Ergonome, Inc., Stephanie L. Brown and Thomas Mowrey,” thus

holding Brown and Mowrey liable for the fee award. Brown and

Mowrey were included in the collective definition of “Ergonome”

following the district court’s finding of alter ego as a discovery

sanction.6 The sanction was made pursuant to Federal Rule of Civil

Procedure 37(b), which provides that when a party fails to comply

with a discovery order, the court may “order that the matters

regarding which the order was made or any other designated facts

shall be taken to be established for the purposes of the action in

accordance with the claim of the party obtaining the order.” FED.

6
A finding that Brown and Mowrey are the alter egos of Ergonome
results in their personal liability for the award of attorneys’ fees.

15
R. CIV. P. 37(b)(2)(A). Brown and Mowrey challenge the court’s

alter ego discovery sanction, which we review for abuse of

discretion. Tollett v. City of Kemah, 285 F.3d 357, 363 (5th Cir.

2002).

The district court’s discovery sanction finds its roots

in Brown’s repeated refusal to respond adequately to interroga-

tories aimed at proving alter ego. The dispute began in 1998, when

the district court ruled that Compaq would be given an opportunity

to pierce the corporate veil to provide a jurisdictional basis for

joining Brown as a party to Compaq’s declaratory judgment action.7

For over two years, Brown creatively refused to provide the

discovery sought by Compaq.8 Brown filed three unsuccessful

petitions for writ of mandamus to this court, one motion requesting

that the district judge recuse herself, one motion requesting that

the district court refer the case to the U.S. Attorney for

prosecution under the Hobbs Act, and finally, a bankruptcy case in

New York, which the bankruptcy judge ultimately found was filed “to

7
Personal jurisdiction may be established over a corporate officer by
establishing that the individual is an alter ego of a corporation over which the
district court has established personal jurisdiction. See, e.g., Patin v.
Thoroughbred Power Boats Inc., 294 F.3d 640, 653 (5th Cir. 2002). Because the
corporation and its individual alter ego “are the same entity, the jurisdictional
contacts of one are the jurisdictional contacts of the other for the purposes of
the International Shoe due process analysis.” Id. (emphasis in original). In
this case, the district court found that it had personal jurisdiction over
Ergonome, Inc., and no party disputes that finding on appeal.
8
Compaq admits that a portion of the requested discovery was received
in 1999, however, the remainder of the discovery requests went unanswered and was
the subject of additional discovery orders by the district court.

16
prevent potential liability of Ms. Brown in the event Compaq

prevailed in the Houston litigation.”

On March 26, 2001, the district court held Ergonome,

Inc., Brown, and Mowrey in contempt of court for failing to respond

adequately to Compaq’s discovery requests. While the court

declined at that time to find that Brown was the alter ego of

Ergonome as a matter of law, the court cautioned that if the

discovery was not provided within thirty days, it would be

“prepared to do so in light of Defendants’ long history of

filibuster and delay on the matter.” In that same order, the court

denied Brown’s and Mowrey’s motion for judgment on the pleadings,

in which they argued the merits of the alter ego issue. The court

noted that Brown and Mowrey were “ironically invoking the very

doctrine on which they have been recalcitrant with regard to

Compaq’s discovery requests.”

On July 16, 2001, five days after the trial, the district

court entered a final judgment, declaring that Compaq’s Safety and

Comfort Guide did not infringe Ergonome’s The HAND Book and

ordering that Compaq recover its costs from Ergonome. In that

order, the district court referred to Ergonome, Inc., Stephanie L.

Brown, and Thomas Mowrey collectively as “Ergonome.” Brown and

Mowrey moved to alter or amend the final judgment, asserting that

they should be removed from the judgment because Ergonome’s

corporate veil was never pierced. The district court noted that

the argument was simply a “re-urging of the same points in their

17
Motion for Judgment on the Pleadings, which was denied March 26,

2001.” The court further stated that, after the March 2001 order,

Brown and Mowrey were given an opportunity to respond fully to the

discovery requests. Additionally, the court reminded Brown of the

March 2001 order warning her that any future failure to provide the

requested discovery would result in a finding that she was the

alter ego of Ergonome. Ultimately, the court granted Compaq’s

request and, as a sanction, held Brown to be the alter ego of

Ergonome, Inc.

The Supreme Court has noted that rule 37(b)(2) “contains

two standards — one general and one specific — that limit a

district court’s discretion.” Ins. Corp. of Ireland, Ltd. v.

Compagnie des Bauxites de Guinee, 456 U.S. 694, 707, 102 S. Ct.

2099, 2107, 72 L. Ed. 2d 492 (1982). “First, any sanction must be

‘just’; second, the sanction must be specifically related to the

particular ‘claim’ which was at issue in the order to provide

discovery.” Id. Based on the facts and circumstances surrounding

the district court’s decision, we conclude that the sanction was

“just.” Compaq struggled for well over two years to obtain

sufficient alter ego discovery from Brown and Ergonome.9 Brown and

Ergonome engaged in abusive practices for the sole purpose of

9
Brown argues that her responses to Compaq’s interrogatories were
sufficient. However, although the supplemental answers filed on April 30, 2001,
contain certain additional information not present in the earlier versions, those
portions dealing with the relationship among Brown, Mowrey and Ergonome consist
largely of rhetoric aimed at inflaming the opposing party. The district court
did not abuse its discretion in concluding that the responses did not satisfy the
March 2001 order.

18
frustrating Compaq’s ability to extract the discovery. The

district court was not alone in its assessment of the delaying

tactics. In denying Ergonome’s third petition for writ of mandamus,

this court warned that “[t]he mandamus petition is arguably

frivolous and would entitle the opposing party to attorneys’ fees.”

Additionally, the bankruptcy court found that Ergonome’s suggestion

of bankruptcy was filed solely to avoid potential liability in the

Compaq litigation. The entire egregious course of overlitigation

and discovery abuse is among the worst we have seen.10

Second, the court’s decision to deem Brown the alter ego

of Ergonome was “specifically related to the particular ‘claim’

which was at issue in the order to provide discovery.” Id. at 707,

102 S. Ct. at 2107. The purpose of the discovery, from its very

inception, was to discover facts that would support a finding of

alter ego. This finding, in turn, would result in piercing

Ergonome’s corporate veil. The district court’s sanction of

deeming Brown to be the alter ego of Ergonome corresponded to the

“claim” at issue in Compaq’s repeated discovery requests.11 The

10
It need hardly be added that the court warned Brown that failure to
comply with the discovery order would result in a sanction of the type ultimately
imposed. See id. at 707-08, 102 S. Ct. at 2106-07 (relying on similar factors
to conclude that the sanction was “just”).
11
Brown argues that the district court failed to recognize the
difference between alter ego for jurisdictional purposes and alter ego for
liability purposes; she argues that because the discovery sought related only to
personal jurisdiction, the district court’s sanction affecting her personal
liability amounted to an abuse of discretion.
Although it is true that Compaq originally sought the alter ego
discovery to establish personal jurisdiction over Brown, the record supports the
conclusion that by January of 2000, at the very latest, Ergonome was aware of
Compaq’s desire to prove alter ego for the purpose of collecting attorneys’ fees

19
result of this sanction — personal liability for attorneys’ fees —

flows directly from the finding of alter ego. See id. at 709, 102

S. Ct. at 2108 (“That a particular legal consequence . . . follows

from [the discovery sanction], does not in any way affect the

appropriateness of the sanction.”). As a result, we cannot say

that the district court abused its discretion in deeming Brown to

be the alter ego of Ergonome and that portion of the order is

affirmed.

The district court’s order, however, plainly fails to

levy the same sanction against Mowrey. The order states: “As a

sanction the Court will declare Brown to be the alter ego of

Ergonome, Inc., and will deny the motion to alter or amend the

final judgment.” Thus, there is no legal basis for holding Mowrey

to be the alter ego of Ergonome, Inc., and no corresponding basis

for holding him personally liable for the attorneys’ fees in

question. Accordingly, we reverse that portion of the district

court’s order holding Mowrey personally liable for the attorneys’

fee award.

III. CONCLUSION

For the reasons discussed above, the judgment in favor of

Compaq is AFFIRMED, except insofar as the judgment holds Thomas

from Brown and Mowrey individually. Additionally, Compaq moved to amend its
complaint on June 1, 2000, and specifically added an alter ego liability claim.
This motion was unopposed. Finally, the district court warned Brown in March of
2001 that failing to comply with the discovery order would result in a finding
of alter ego. Brown’s protestations are unconvincing.

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Mowrey personally liable for the attorneys’ fee award. The

judgment against Mowrey is REVERSED.

AFFIRMED IN PART; REVERSED IN PART.

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PICKERING, SR., CHARLES W., Circuit Judge, specially concurring.

I concur in the result but write separately because the

attorney’s fee sanction against defendant Brown has given me

considerable pause and concern. The district court’s finding alter

ego as a sanction had the effect of imposing a $2.8 million

attorney’s fee on the individual defendant Brown. Our case law is

very clear that we should not dismiss a cause of action as a

sanction unless all other lesser sanctions have been considered and

found ineffective. Long v. Simmons, 77 F.3d 878, 880 (5th Cir.

1996) (“A dismissal without prejudice is appropriate only if the

failure to comply with the court order was the result of purposeful

delay or contumaciousness and the record reflects that the district

court employed lesser sanctions before dismissing the action.”).

That same rationale should be applicable in this case. Dismissing

a complaint puts a plaintiff out of court without trial, and

finding alter ego as a sanction, in this case imposed liability on

a defendant without trial. One is the death sentence to a

plaintiff. The other is the death sentence to a defendant.

The Ergonome defendants strenuously argue that plaintiffs were

seeking alter ego discovery only for the purpose of jurisdiction

and not for the purpose of liability. However, the record clearly

reflects that at least eighteen months before the sanction was

imposed, Compaq made it clear to the Ergonome defendants that it
was seeking alter ego liability as to Brown for attorney’s fees.

Despite their argument to the contrary, the Ergonome defendants

were on notice well before the sanction was imposed that Compaq was

trying to obtain an award of attorney’s fees against the individual

defendant Brown on the basis of alter ego.

A sanction of this magnitude is a serious consequence and

should not be imposed lightly. See Roadway Express, Inc. v. Piper,

447 U.S. 752, 767 (1980) (“sanctions . . . should not be assessed

lightly or without a fair notice and an opportunity for a hearing

on the record.”). I write separately to emphasize the

egregiousness of the litigation strategy of the Ergonome

defendants, absent which I would not concur in this sanction.

The Ergonome defendants’ litigation strategy can only be

described as fitting the prototype of a trial strategy of extortion

by unreasonably aggressive and obstructive litigation practices.

In other words, they attempted to make the litigation so unpleasant

and so costly that the defendants would be forced to settle.

On at least seven different occasions the trial court ordered

Ergonome and Brown to comply with alter ego discovery.

Additionally, the court ordered the Ergonome defendants to comply

with these discovery requests within thirty days or face a $1,000

per day fine. Ergonome responded by filing a frivolous bankruptcy

petition which was dismissed by the bankruptcy court on the ground

that Brown was seeking to avoid the consequences of having

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attorney’s fees assessed against her in this action. The trial

court then levied a $34,000 sanction against Brown and her

attorneys for failing to comply with discovery orders. Eventually

the court advised Ergonome and Brown that if they did not comply

with the alter ego discovery requests within thirty days, alter ego

would be admitted as a discovery sanction. Yet in face of all of

this, Ergonome and Brown only provided cursory answers. As a last

resort, the trial court imposed the sanction of taking alter ego as

having been established, the issue as to which Ergonome had

stonewalled Compaq by failing to provide adequate discovery.

Additionally, Ergonome and Brown filed three meritless

petitions for writs of mandamus to the Fifth Circuit in this

litigation. A writ of mandamus is an extraordinary remedy that is

rarely granted. See In re Avantel, S.A., 343 F.3d 311, 317 (5th

Cir. 2003). After the third writ of mandamus, the Fifth Circuit

warned Ergonome and Brown that the petition was arguably frivolous

and could entitle Compaq to attorney’s fees. Besides filing for

three writs of mandamus, Ergonome employed another unusual tactic

by filing a motion for interlocutory appeal to the Fifth Circuit

which was denied.

But that is not all. Ergonome filed a 60-page memorandum

asking the trial judge to recuse herself on a relatively

straightforward and tenuous basis. When the trial court refused to

recuse herself, Ergonome followed up with a frivolous 39-page

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motion to reconsider the denial of the motion to recuse. Ergonome

also filed a 63-page request, based on a farfetched theory, that

plaintiffs be referred for prosecution. The trial court refused to

do so. Ergonome made a demand for $800 million in their complaint.

Based on the record in this case, such a demand was preposterous.

The trial strategy of the Ergonome defendants was clearly vexatious

and oppressive.

The trial court found that there was “an incredible amount of

gamesmanship” by Ergonome and Brown and that they had “not acted in

good faith.” Since lesser sanctions did not get the defendants’

attention and did not result in an appropriate response to

discovery, and in view of the oppressive and obstructive litigation

strategy of the defendants, the sanction imposed by the trial court

was appropriate.

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