Opinion ID: 3066527
Heading Depth: 3
Heading Rank: 2

Heading: Joinder of Giulio Catallo

Text: Defendants appeal the joinder of Giulio Catallo as a defendant in his individual capacity. According to defendants, the addition of Catallo as a party to this suit violated due process and was contrary to the Supreme Court’s decision in Nelson v. Adams U.S.A., Inc., 529 U.S. 460 (2000). For their part, plaintiffs distinguish Nelson and rely on our decision in Fromson v. Citiplate, Inc., 886 F.2d 1300 (Fed. Cir. 1989). Plaintiffs assert that Catallo is the main executive officer of both CAT and Firstliner and (1) had controlling authority of their day-to-day operations, (2) was directly and actively involved in all aspects of the litigation, and (3) was individually responsible for all of the conduct that led the district court to increase damages and award attorney’s fees. As explained below, the district court’s ruling on this point is supported by our decision in Fromson, and we see no clear error in the court’s interpretation of the facts. We accordingly affirm the court’s decision on this point. Giulio Catallo is the sole owner of defendants CAT and Firstliner. He also is president of both corporations. Plaintiffs first attempted to join Catallo in his individual capacity in January of 1991, before the first infringement trial in the case. That motion was denied without prejudice and without opinion. Plaintiffs renewed their motion after the infringement trial (the trial for damages was bifurcated) in July 1991. This motion also was denied without prejudice and without opinion. In each case, the reason asserted for the joinder of Catallo was that he was “directly responsible for all of the activities of CAT and INLINER [and] was clearly the moving force behind infringement [and] personally financially benefited from the payments made [under one of the contracts found to be infringing.]” Additionally, plaintiffs asserted that Catallo was personally a licensee of the accused process because he signed a license agreement twice, on behalf of himself and as President of Firstliner. The damages portion of the case was tried in September 1997. After trial, the court found that defendants’ infringement had been willful. In July 1999, plaintiffs moved again to add Giulio Catallo as a defendant. In so doing, they argued that Catallo’s corporations were a “real credit risk.” They also argued that Catallo was a personal tortfeasor. Finally, they urged that in the intervening years (1991-1999) many facts had come to light that weighed in favor of making Catallo personally liable as an individual party. Defendants acknowledge that a corporate entity may be disregarded if doing so will prevent fraud, illegality, injustice, a contravention of public policy, or prevent the corporation from shielding someone from criminal liability. See Manville Sales Corp. v. Paramount Sys., Inc., 917 F.2d 544, 552 (Fed. Cir. 1990). They argue, however, that none of these reasons were present in this case. They state that Catallo “was merely acting in accordance [with] the duties and scope of his position” and that he “had a good faith belief and basis that the Firstliner process did not infringe any Insituform patents when the contracts were performed.” In short, defendants contend that there was no reason to pierce the corporate veil in this case. In an August 30, 1999 order, the district court granted plaintiffs’ motion to join Giulio Catallo. Joinder Order, slip op. at 9. In granting this third request to add Catallo as a defendant, the district court recognized that it was faced “with the uncommon situation where an individual is sought to be added as a party after the conclusion of trial.” Id. at 5. With respect to the propriety of adding Catallo as a defendant, the district court relied on our decision in Ohio Cellular Products Corp. v. Adams, U.S.A., Inc., 175 F.3d 1343 (Fed. Cir. 1999), rev’d sub nom. Nelson v. Adams, U.S.A., Inc., 529 U.S. 460 (2000), which was, at that time, pending before the Supreme Court. The court also pointed to our decision in Fromson. With respect to the personal liability of Catallo, the court relied on Walker v. Federal Deposit Insurance Corp., 970 F.2d 114, 122 (5th Cir. 1992), where the Fifth Circuit stated that “[a]n officer is individually liable for any tortious conduct that he committed in connection with his corporate duties . . . . If a corporate officer knowingly participates in a tortious act, there is no need to pierce the corporate veil in order to impose liability.” In light of the facts that led to a finding of willful infringement, and because the court believed that Catallo “was personally responsible for many, if not all, of the aggravating facts which led this court to award attorney’s fees and enhanced damages,” Joinder Order, slip op. at 7, it granted the motion to add Catallo as a defendant in his individual capacity, id. at 9. As noted above, because the amendment of a pleading to add a party is not unique to patent law, we apply the law of the regional circuit. McGinley, 262 F.3d at 1357. We thus review a district court’s decision to add a party pursuant to Rules 15 and 21 of the Federal Rules of Civil Procedure for an abuse of discretion. Jacobsen, 133 F.3d at 318. Our decision in Ohio Cellular, upon which the district court relied, was subsequently overturned by the Supreme Court. Nelson, 529 U.S. at 472. Resolution of this issue thus turns on whether the facts of this case fall more closely under the Supreme Court’s decision in Nelson, or our decision in Fromson, which the Supreme Court distinguished in Nelson. If the facts are closer to Nelson, then the district court decision is incorrect as a matter of law, and Catallo was improperly joined. If the facts are closer to Fromson, then the district court decision should be affirmed. In Nelson, Ohio Cellular Products Corp. (“OCP”) sued Adams, U.S.A., Inc. (“Adams”) for patent infringement. Eventually, the action was dismissed and Adams was awarded costs and attorney fees. Nelson, 529 U.S. at 462. Adams, fearful that OCP would be unable to pay, moved to amend its pleadings pursuant to Fed. R. Civ. P. 15 to include Nelson, the sole shareholder of OCP, as a party. Id. The district court granted the motion and simultaneously subjected Nelson to the judgment, a decision we subsequently affirmed in Ohio Cellular. The Supreme Court reversed our decision in Ohio Cellular on due process grounds. The Court determined that Nelson was never afforded a proper opportunity to respond to the claim against him. Id. at 467. He was never served with an amended pleading, nor was any such pleading actually composed and filed in the court. Id. at 466. Nor, after the amendment naming him as a party, was Nelson accorded ten days to state his defenses against personal liability for costs and fees. Id. Instead, judgment was entered against him the moment permission to amend the pleading was granted. Id. The Court stated that “appeal after judgment, in the circumstances this case presents, did not provide an adequate opportunity to defend against the imposition of liability.” Id. Finally, the Court noted that Adams never once sought to sue Nelson individually until after judgment was entered against Ohio Cellular. Id. at 467. In Fromson, Citiplate, Inc. (“Citiplate”) was sued by Howard A. Fromson (“Fromson”) for patent infringement. Fromson moved before trial to add the individual owners of Citiplate as parties, because he suspected that the defendant corporation might not be able to pay a judgment against it. Fromson, 886 F.2d at 1301. The district court initially denied the motion because of defendant Citiplate’s assurances that its financial condition was sound. Id. These assurances turned out to be false. After judgment had been entered, the court allowed Fromson to amend its original complaint to add the individual owners of Citiplate as parties pursuant to Fed. R. Civ. P. 15(c). Id. at 1302. We affirmed the district court’s decision. In so doing, we relied upon the test articulated by the Supreme Court in Schiavone v. Fortune, Inc., 477 U.S. 21 (1986), to determine whether the requirements of Rule 15(c) had been met. In Schiavone, the Court articulated a four-part test: Relation back is dependent upon four factors, all of which must be satisfied: (1) the basic claim must have arisen out of the conduct set forth in the original pleading; (2) the party to be brought in must have received such notice that it will not be prejudiced in maintaining its defense; (3) that party must or should have known that, but for a mistake concerning identity, the action would have been brought against it; and (4) the second and third requirements must have been fulfilled within the prescribed limitations period. Schiavone, 477 U.S. at 29. Based on this test, we determined that the “identity of interests between Citiplate and [its individual owners] is virtually complete and that [the individual owners] should have known all along that joinder was a possibility.” Fromson, 886 F.2d at 1304. We concluded that the owners of Citiplate “themselves created the ‘mistake’ respecting the identity of the proper party rightfully to be sued and capable of responding to damages.” Id. The original 1991 motions to add Giulio Catallo presumably were denied because the district court believed defendants’ assertions that Catallo “was merely acting in accordance [with] the duties and scope of his position” and that he “had a good faith belief and basis that the Inliner process did not infringe any Insituform patents when the contracts were performed.” When all the facts were determined following the 1997 damages trial, the court concluded that these assertions were not true, finding that Catallo “was personally responsible for many, if not all, of the aggravating facts which led this court to award attorney’s fees and enhanced damages.” Joinder Order, slip op. at 7. Furthermore, the court found that “Catallo diligently acted to protect his interests at every stage of the proceedings.” Id. The court subsequently exercised its discretion and granted the motion requesting that Catallo be added as a defendant. Applying the Fifth Circuit’s abuse of discretion standard, we cannot say that the district court abused its discretion in adding Catallo as a defendant in his individual capacity. In our view, the controlling case is Fromson, which the Supreme Court distinguished in Nelson. As in Fromson, plaintiffs in this case sought from the very beginning to add Catallo as a defendant in his individual capacity on the theory that he was liable as an individual tortfeasor. We have stated that “it is well settled that corporate officers who actively aid and abet their corporation’s infringement may be personally liable for inducing infringement under § 271(b) regardless of whether the corporation is the alter ego of the corporate officer.” Orthokinetics, Inc. v. Safety Travel Chairs, Inc., 806 F.2d 1565, 1579 (Fed. Cir. 1986). The facts of this case are closer to Fromson than to Nelson. Accordingly, we affirm the decision of the district court.