Court Opinion

ID: 2785615
Source: CourtListenerOpinion
Date Created: 2015-03-11 22:00:41.541513+00
Date Added: 2024-06-11T11:04:03.333579
License: Public Domain

United States Court of Appeals
                      For the First Circuit

No. 13-1626
No. 13-2179

                       ANGIODYNAMICS, INC.,

                       Plaintiff, Appellee,

                                v.

       BIOLITEC AG; BIOMED TECHNOLOGY HOLDINGS, LTD.; and
                       WOLFGANG NEUBERGER,

                     Defendants, Appellants.

                         BIOLITEC, INC.,

                            Defendant.

          APPEALS FROM THE UNITED STATES DISTRICT COURT
                FOR THE DISTRICT OF MASSACHUSETTS

          [Hon. Michael A. Ponsor, U.S. District Judge]

                              Before

                       Lynch, Chief Judge,
               Stahl and Kayatta, Circuit Judges.

     Edward Griffith, with whom Michael K. Callan,         Doherty,
Wallace, Pillsbury, and Murphy, P.C., and The Griffith Firm were on
brief, for appellants.
     William E. Reynolds, with whom Bond, Schoeneck & King, PLLC
was on brief, for appellee.

                          March 11, 2015
            STAHL, Circuit Judge.           This is a companion case to

AngioDynamics   v. Biolitec AG, No. 14-1603.             In this appeal,

Defendants argue that the district court exceeded the bounds of its

authority when it issued civil contempt sanctions after Defendants

violated the court's preliminary injunction order. Defendants also

aver that the district court should have vacated the underlying

preliminary injunction.        We affirm.

                          I.   Facts & Background

            This court previously set out the basic factual contours

of this case in AngioDynamics, Inc. v. Biolitec AG, 711 F.3d 248

(1st Cir. 2013) (per curiam).              Plaintiff AngioDynamics, Inc.

("ADI") obtained a $23 million judgment in New York against

defendant Biolitec, Inc. ("BI"), a New Jersey corporation with its

principal    place   of   business    in    Massachusetts,     based   on   an

indemnification clause in the supply and distribution agreement

governing BI's sale of medical equipment to ADI.             Plaintiff sought

to secure payment on that judgment by bringing suit in the District

of   Massachusetts    against     BI's     President   and    CEO,   Wolfgang

Neuberger, and its corporate parents, Biomed Technology Holdings

("Biomed") and Biolitec AG ("BAG") (collectively, "Defendants"),1

     1
       At the time this action began, Biolitec AG, a German
corporation headquartered in Germany, owned ninety percent of
Biolitec, Inc.'s stock.   Neuberger, a citizen of Austria with
residences the world over, served as the President, CEO, and
Chairman of the Board of Directors of both Biolitec, Inc. and
Biolitec AG. He was the sole owner of Biomed Technology Holdings,
a Malaysian corporation that owned approximately seventy-five

                                     -2-
alleging that Defendants had looted BI of over $18 million in

assets in order to render it judgment-proof.

          We will recount only the portions of the procedural

background of this case pertinent to the issues raised in this

appeal. In August 2012, ADI learned that BAG planned to merge with

an Austrian subsidiary. Since American judgments are unenforceable

in Austria, the merger would place BAG's assets out of ADI's reach.

The district court issued a temporary restraining order -- later

converted into a preliminary injunction -- barring the merger.

Defendants unsuccessfully filed a motion to vacate the injunction

in the district court, then appealed.   In March 2013, while that

appeal was still pending, Defendants effected the merger anyway,

moving BAG's corporate domicile from Germany to Austria.      This

court affirmed the preliminary injunction on April 1, 2013, the

same day as that panel heard oral argument.     AngioDynamics, 711
F.3d at 252.

          ADI filed an emergency motion for contempt shortly after

learning that BAG had merged with its Austrian affiliate. On April

11, 2013, the district court issued a twenty-page contempt decision

authorizing coercive fines against Defendants and a warrant for

Neuberger's arrest.   AngioDynamics, Inc. v. Biolitec AG, 946 F.

Supp. 2d 205, 215 (D. Mass. 2013).   The monthly fines escalate in

percent of Biolitec AG's stock.    Biolitec, Inc. has filed for
Chapter 11 bankruptcy and is not a party to this appeal.

                               -3-
amount each month that the merger remains in place.                 Id. at 216.

The district court's contempt order made clear that it would lift

the fines and arrest warrant once Defendants undo the merger and

restore the status quo ante.            Id. at 215.        Four months later,

Defendants filed another round of motions to revoke the contempt

order and vacate the underlying injunction; the district court

denied the motions yet again.          AngioDynamics, Inc. v. Biolitec AG,

974 F. Supp. 2d 1, 5–11 (D. Mass. 2013).              These appeals followed.

                                  II. Analysis

A. Denial of Rule 60(b) Motion to Vacate Preliminary Injunction

             We begin with Defendants' challenge to the district

court's denial of their motion to vacate the preliminary injunction

pursuant     to    Federal     Rules   of   Civil    Procedure    60(b)(4)     and

60(b)(6).2        Defendants    presented     two   sets   of   declarations    in

     2
       ADI urges us to dismiss this appeal based on the fugitive
disentitlement doctrine, which permits an appellate court to
decline to hear appeals from a fugitive from justice. See Degen v.
United States, 517 U.S. 820, 824 (1996); see also Ortega-Rodriguez
v. United States, 507 U.S. 234, 239, 242 (1993) (observing that the
well-settled doctrine "serves an important deterrent function and
advances an interest in efficient, dignified appellate practice").
In the context of civil proceedings, dismissal requires a
determination that, first, the fugitive's status bears some
connection to the civil action, and second, dismissal addresses
concerns underlying the doctrine, including "prejudice to the
opponent, delay, frustration, and unenforceability [of any
potential judgments against the fugitive]." Walsh v. Walsh, 221
F.3d 204, 215 (1st Cir. 2000).
     We decline to exercise our discretion to apply the doctrine to
the two corporate defendants here, given that no criminal sanctions
are pending against them. Cf. United Elec., Radio & Mach. Workers
v. 163 Pleasant St. Corp., 960 F.2d 1080, 1097-98 (1st Cir. 1992)
(rejecting plaintiffs' motion to dismiss corporate defendant's

                                        -4-
support of their motion to refute the district court's finding at

the preliminary injunction stage that relocating BAG to Austria

would make it more difficult or impossible for ADI to enforce its

judgment against the company.

          Rule 60(b)(4) permits a party to move for relief from an

order on grounds that it is void.     We review the denial of a Rule

60(b)(4) motion de novo, as the validity of a judgment is not a

discretionary question.   Fafel v. Dipaola, 399 F.3d 403, 409–10

(1st Cir. 2005).    Rule 60(b)(6), by contrast, is a catch-all

provision warranting excusal from an order or judgment for "any

other reason that justifies relief"; the denial of such a request

appeal based on civil contempt order lodged against the
corporation; "in general, a court should be extremely reluctant to
invoke the equitable doctrine of disentitlement when an appellant
has not committed any criminal act").
     As for Neuberger, the gravity of his conduct and the nexus
between the district court's arrest warrant and ADI's complaint
provides strong support for application of the doctrine as to his
appeal. See Goya Foods, Inc. v. Unanue-Casal, 275 F.3d 124, 129–30
(1st   Cir.   2001)  (dismissing   appeal   under   the   fugitive
disentitlement doctrine where defendants, in an attempt to avoid
satisfying the plaintiff's underlying judgment against them,
violated injunction barring them from transferring certain assets;
defendants' flight from the arrest warrant "grows directly out of
[plaintiff's] effort to enforce its judgment . . . and the appeal
is from actions and orders of the district court designed to
enforce that very judgment").      However, application of this
doctrine is "discretionary rather than automatic and to be applied
with caution." Id. at 129. Given that Neuberger's appeal rests on
identical grounds as his corporate co-defendants, and given the
relative ease with which we can dispose of Defendants' appeal on
the merits, we decline to dismiss Neuberger's appeal on these
grounds.

                                -5-
is reviewed for abuse of discretion. Ungar v. Palestine Liberation

Org., 599 F.3d 79, 83 (1st Cir. 2010).

             Under either standard, Defendants cannot use their Rule

60(b) motion to collaterally attack the preliminary injunction,

which   this     court     already     has   considered       and     affirmed.

AngioDynamics, 711 F.3d at 252.         A Rule 60(b) motion "must satisfy

a special set of criteria; it is not enough merely to cast doubt on

the soundness of the underlying judgment."           Nansamba v. N. Shore

Med. Ctr., 727 F.3d 33, 37 (1st Cir. 2013).          The moving party must

demonstrate in a timely motion that "'exceptional circumstances

exist, favoring extraordinary relief; that if the judgment is set

aside, he has the right stuff to mount a potentially meritorious

claim or defense; and that no unfair prejudice will accrue to the

opposing parties should the motion be granted.'"                Id. (quoting

Fisher v. Kadant, Inc., 589 F.3d 505, 512 (1st Cir. 2009)).

             Defendants' motion does little to even cast doubt on the

underlying injunction. First, they offer two declarations from one

of their experts on German law -- an expert who previously offered

multiple declarations in opposition to ADI's original preliminary

injunction motion -- to refute the district court's finding that

ADI cannot enforce its judgment in Austria, but might be able to

enforce it in Germany.          Essentially, Defendants assert that the

downstream     merger    with   the   Austrian   subsidiary    will    have   no

practical impact on ADI's ability to collect, and thus ADI will

                                       -6-
suffer    no    harm    from    Defendants'      violation      of     the    court's

preliminary injunction.         The expert opined that ADI would face the

same burden enforcing its judgment in Germany as in Austria,

virtually the same opinion Defendants' experts had offered and the

district court and this court have already rejected.

             Second, Defendants offer Neuberger's own declaration in

support of their assertion that a German court will not recognize

the district court's jurisdiction over BAG -- and thus will not

enforce   ADI's      judgment   --    because    ADI    is    unable    to   present

affirmative evidence that BAG's stock certificates were located in

the United States at the time ADI commenced this action.                          In

affirming      the   preliminary      injunction,      this   court     noted   that

Defendants had failed to offer information concerning the location

of BAG's stock certificates, despite their "assertion that ADI's

ability to enforce the judgment in Germany would turn on whether

[the] stock certificates were located in the United States."

AngioDynamics, 711 F.3d at 252.          Defendants attempt to remedy this

deficiency      with    Neuberger's      statement      that     he     "personally

recall[s]" seeing BAG's stock certificates in Germany both in 2000

and on some indeterminate date after, although he "do[es] not

recall the precise year or the circumstances."                 While Neuberger's

declaration provides some new evidence that the stock certificates

were located outside the United States when ADI filed suit, which

could    preclude      ADI   from    enforcing   its    judgment       in    Germany,

                                        -7-
Neuberger's vague memories hardly provide conclusive proof that the

stock certificates were not in this country when this suit began.

Further, Neuberger's statement is undermined by evidence in the

record that BI's counsel kept the stock certificates showing BAG's

ownership of BI in the company's East Longmeadow, Massachusetts,

office from before 2009 and at least until the date of his

deposition in 2012.

          For      all   their    repeated   assertions,     Defendants'

submissions   in   support   of   their   Rule   60(b)   motion   fail   to

demonstrate that the preliminary injunction, already affirmed by

this court, warrants extraordinary relief under Rule 60(b)(6) or is

void under Rule 60(b)(4).

B. Civil Contempt Sanctions

          Next, we turn to the district court's imposition of civil

contempt sanctions and its denial of Defendants' Rule 60(b) motion

for relief from the same.

          A district court may issue a civil contempt order if the

moving party establishes by clear and convincing evidence that the

alleged contemnor violated the order despite clear and umambiguous

notice of the order and the ability to comply with it.        Hawkins v.

Dep't of Health & Human Servs. for N.H., Comm'r, 665 F.3d 25, 31

(1st Cir. 2012).     Defendants do not dispute the district court's

contempt finding, but argue that the scope and gravity of the

penalties rise to the level of a criminal sanction, thus exceeding

                                   -8-
the bounds of the district court's authority.              Mindful that the

district court enjoys wide latitude in its choice of sanctions, our

review is limited to abuse of discretion.           Goya Foods, Inc. v.

Wallack Mgmt. Co., 290 F.3d 63, 77–78 (1st Cir. 2002).           Under that

deferential standard, we conclude that no abuse of discretion

occurred here.

           A district court's authority to issue a contempt order

derives from its inherent power to "sanction . . . litigation

abuses which threaten to impugn the district court's integrity or

disrupt its efficient management of [case] proceedings."             United

States v. Kouri-Perez, 187 F.3d 1, 7 (1st Cir. 1999).             Since the

civil contemnor may absolve herself of the sanction by complying

with the contempt order, civil contempt sanctions may be imposed

with merely notice and an opportunity to be heard.            United States

v. Winter, 70 F.3d 655, 661 (1st Cir. 1995).        Conversely, criminal

contempt is a "crime in the ordinary sense," requiring full

procedural protections before imposition. Int'l Union, United Mine

Workers of Am. (UMWA) v. Bagwell, 512 U.S. 821, 826–27 (1994)

(internal quotation marks omitted).

           "Civil contempt is a forward-looking penalty meant to

coerce   compliance   rather   than   to   punish   past    noncompliance."

Hawkins, 665 F.3d at 32.       There is no dichotomous split between

coercion and punishment, however, and a civil contempt sanction may

evidence a punitive flavor. After all, "[m]ost contempt sanctions,

                                  -9-
like most criminal punishments, to some extent punish a prior

offense as well as coerce an offender's future obedience."     Int'l

Union, UMWA, 512 U.S. at 828.      In addition to nudging a party to

comply with a past court order, a district court may also utilize

sanctions to compensate the complainant for harms suffered as a

result of the contempt and to reinforce the court's own authority.

See Goya Foods, 290 F.3d at 78.    This court examines the character

and purpose of the district court's sanctions to determine whether

they are civil or criminal in nature.    Int'l Union, UMWA, 512 U.S.

at 827–28.

             Defendants' argument that the sanctions are so punitive

as to rise to the level of a criminal contempt order rests on

territory familiar to this litigation: first, ADI suffered no harm

from the prohibited merger; second, the district court should have

allowed Defendants' expert to testify that the underlying judgment

would be as difficult to enforce in Germany as in Austria; and

third, it is impossible for Defendants to undo the merger and

restore the status quo ante.3    This court has already rejected the

argument that no harm will come to ADI as a result of the merger,

     3
       Defendants raised these arguments in support of their motion
for relief from the contempt order pursuant to Federal Rules of
Civil Procedure 60(b)(4) and 60(b)(6), and in support of their Rule
59(e) motion, which the district separately rejected as untimely.
See AngioDynamics, Inc. v. Biolitec AG, 974 F. Supp. 2d 1, 5–11 (D.
Mass. 2013).    We reject Defendants' challenge to the district
court's denial of their Rule 60(b) motions for substantially the
same reasons that their challenge to the underlying contempt order
fails.

                                  -10-
AngioDynamics, 711 F.3d at 251–52, and Defendants have presented

this argument to the district court multiple times.            The district

court   was    well   within   its   discretion   in    declining    to   hear

additional testimony on German law from another of Defendants'

experts.      We easily reject Defendants' third argument as well: as

Defendants     conceded   to   the   district   court   and   here   at   oral

argument, it is not "impossible" for Defendants to undo the merger,

but merely costly and inconvenient.         Thus, Defendants fail to meet

their burden to show that they are unable to comply with the terms

of the district court's order.        See United States v. Puerto Rico,

642 F.3d 103, 108 n.8 (1st Cir. 2011) (stating that an alleged

contemnor cannot meet his burden to prove impossibility if he

"offers no evidence as to his inability to comply" or offers only

"his own denials which the court finds incredible in context"

(quoting Maggio v. Zeitz, 333 U.S. 56, 75–76 (1983))).

              Defendants also assemble a cherry-picked set of the

district court's expressions of frustration in an attempt to

demonstrate that the court had the primarily punitive purpose of

vindicating its authority.           A careful review of the contempt

hearing transcripts and the sanctions order, however, reveals that

the district court consistently justified the fines and civil

arrest warrant as tools to coerce Defendants' compliance with the

preliminary injunction. Int'l Union, UMWA, 512 U.S. at 827–28. As

the district court stressed, "[t]he goal of this court is not to

                                     -11-
punish Defendants gratuitously; the goal is to obtain compliance

with the court's order."     AngioDynamics, 974 F. Supp. 2d at 9.

          That leaves us to consider whether the district court

abused its discretion in delineating the fines set out in the

contempt order,4 totaling over $160 million as of oral argument --

an amount far greater than the $23 million judgment that spurred

this action in the first place. Defendants' characterize the fines

as "draconian," "wildly disproportionate," and certain to lead to

"financial ruin."     For the most part, we disagree.          The fine

accumulates   over   time,   incentivizing   Defendants   to   cure   the

contempt promptly.   While the monthly dollar amounts are high, the

district court determined in its discretion that it needed to set

a large enough fine to prod Defendants, heretofore recalcitrant and

even obstinate in the face of court orders, to take action to undo

the merger.   The district court's order states that the court will

"lift[]" the fines as soon as Defendants come into compliance with

the preliminary injunction.     AngioDynamics, 946 F. Supp. 2d at 215

("Defendants have the keys to their prison in their own pockets.

The coercive fines and arrest warrant . . . will be lifted as soon

as the court is satisfied that the status quo ante has been

     4
       The fine schedule gave Defendants thirty days from the date
of the order to begin undoing the downstream merger. The contempt
order delineates that at the thirty day mark, on May 10, 2013, the
court would assess a $1 million fine, then $2 million on June 1, $4
million on July 1, $8 million on August 1, and thereafter $8
million on the first of each month.        AngioDynamics, Inc. v.
Biolitec AG, 946 F. Supp. 2d 205, 215 (D. Mass. 2013).

                                 -12-
restored.") (internal quotation marks and citations omitted).

Defendants thus retain the power to end the accruing of the fines

and avoid the potential fiscal catastrophe invoked in their brief.

Cf. In re Grand Jury Proceedings, 744 F.3d 211, 214 (1st Cir. 2014)

("In keeping with [the] coercive function [of civil contempt

orders], courts have long recognized that civil contempt sanctions

are necessarily limited to the period in which the contemnor can

unlock   the    figurative    prison     door   by   purging     himself   of

contempt.").    The district court acted well within its discretion

in   setting   out   a   "prospective,    conditional    fine"   to   achieve

compliance.    United States v. Prof'l Air Traffic Controllers Org.

(PATCO), Patco Local 202, 678 F.2d 2, 4 (1st Cir. 1982).

           That said, at this point, the amount of the cumulative

fine far exceeds the amount of the original judgment ADI is

attempting to collect.        This is in large part Defendants' own

doing, since they have failed to take steps to undo the merger, and

the fines continue to accumulate each month.             We remand only to

direct the district court to amend the sanction order so that the

fines cease to accrue at some total amount.             If Defendants purge

their contempt by restoring the status quo ante, we expect that the

district court will make good on its promise to reassess the fine

amount if Defendants come into compliance with the preliminary

injunction.    AngioDynamics, 974 F. Supp. 2d at 8.

                                   -13-
C. Alternative Method of Service on Biomed and Neuberger

          As alternate grounds for reversal, Defendants Biomed and

Neuberger argue that the preliminary injunction and contempt order

are void as to them because they were not served in accordance with

international law and the Federal Rules of Civil Procedure.      We

review the district court's decisions regarding service of process

for abuse of discretion.      Crispin-Taveras v. Municipality of

Carolina, 647 F.3d 1, 6 (1st Cir. 2011).

          Federal Rule of Civil Procedure 4(f) provides that an

individual or corporation5 may be served in a foreign country by

(1) "any internationally agreed means of service that is reasonably

calculated to give notice"; (2) a method prescribed by the foreign

country's laws or directives, or, if permitted by that country, by

personal delivery or certified mail; or (3) "by other means not

prohibited by international agreement, as the court orders."    The

advisory committee note to this subdivision states that, in the

interest of "reasonable notice," "an earnest effort should be made

to devise a method of communication that is consistent with due

process and minimizes offense to foreign law."      Fed. R. Civ. P.

4(f) advisory committee's note (1993 Amendments).

     5
       Rule 4(f) applies to corporations through Rule 4(h)(2),
which states that a domestic or foreign corporation may be served
outside a United States judicial district "in any manner prescribed
by Rule 4(f) for serving an individual, except personal delivery."

                               -14-
            The record demonstrates that ADI endeavored to serve both

Biomed and Neuberger in multiple countries on multiple occasions

and by various methods. Despite ADI's repeated requests, Neuberger

would not authorize his counsel to accept service on his behalf,

despite his admitted awareness of the suit.               ADI tried to serve

Biomed and Neuberger four times in Germany in accordance with the

Hague Convention, including an attempt at a BAG shareholder meeting

which Neuberger unexpectedly failed to attend.              After Defendants

argued that Neuberger and Biomed should have been served by

registered mail in Dubai and Malaysia, Plaintiff delivered service

documents by registered mail, with return receipt requested, to

Neuberger's address in Dubai and Biomed's headquarters in Malaysia.

Nevertheless, Neuberger and Biomed refused to concede at the

alternative service motion hearing that these mailings effectuated

service of process on them.       In the face of these difficulties and

the "possibly inadvertent but nevertheless misleading statements

made   by   [defense]    counsel,"      the    district    court    authorized

alternative service on Biomed, a Malaysian corporation located in

Malaysia, and Neuberger, a citizen of Austria with residences on

four continents, pursuant to Rule 4(f)(3).          AngioDynamics, Inc. v.

Biolitec AG, No. 09-cv-30181-MAP, 2011 WL 1878145, at *1 (D. Mass.

May 17, 2011).

            By   its   plain   terms,   Rule    4(f)(3)    does    not   require

exhaustion of all possible methods of service before a court may

                                     -15-
authorize service by "other means," such as service through counsel

and by email. Given that the district court was presented with "an

elusive international defendant, striving to evade service of

process," the court acted within its discretion when it authorized

alternative service under Rule 4(f)(3).           Rio Props., Inc. v. Rio

Int'l Interlink, 284 F.3d 1007, 1016 (9th Cir. 2002) (affirming

court-ordered alternative service methods on a foreign business,

including service via email).        Thus, the judgment is not rendered

void for failure to serve Biomed and Neuberger.

                           III.      Conclusion

             For the foregoing reasons, we affirm both the district

court's denial of Defendants' motion to vacate the preliminary

injunction and the district court's civil contempt finding.              We

remand for the sole purpose of directing the district court to take

action   with   respect   to   the   total   accruing   fine   amount,   in

accordance with this opinion.         We award costs of this appeal to

Plaintiff.

                                     -16-