A federal appeals court yesterday upheld a pair of legal wins for AngioDynamics (NSDQ:ANGO) in its long-running dispute with former partner Biolitec (ETR:BIB), but remanded the case to a lower court to adjust contempt-of-court fines for Biolitec that have topped the $160 million mark.
A Massachusetts judge last year trebled a $23 million jury award to AngioDynamics in a harshly-worded decision finding that Biolitec deliberately effected a so-called "downstream merger" to move its incorporation to Austria to escape jurisdiction in U.S. courts.
In addition to the $75 million judgment against the German medical laser maker, Ponsor also issued an arrest warrant for ex-Biolitec CEO Wolfgang Neuberger and imposed an injunction on sales of some of Biolitec’s vascular offerings. Ponsor also levied a hefty fine schedule against Biolitec to compel it to undo the merger.
Biolitec appealed the decisions to the U.S. Court of Appeals for the 1st Circuit, which yesterday affirmed both rulings, scorching Biolitec and Neuberger for their conduct.
“As the district court ably and convincingly described, defendants’ conduct here was severe, repeated, and deliberate, with no legitimate or mitigating explanation for noncompliance," the 1st Circuit ruled. "Facing repeated recalcitrance almost 5 years after [AngioDynamics filed the instant action, the district court acted well within its discretion when it concluded that no lesser sanction could address the twin goals of penalty and deterrence."
The appeals court also upheld the injunction, which is slated to expire Jan. 22, 2017.
"Defendants’ motion does little to even cast doubt on the underlying injunction," the appeals court ruled, deciding that Biolitec "fail[ed] to demonstrate that the preliminary injunction, already affirmed by this court, warrants extraordinary relief."
The contempt of court fines began at $1 million a month May 10, 2013, escalated to $2 million the next month, $4 million July 1, 2013, $8 million August 1 and $8 million a month thereafter. The appeals court ruled that, although Ponsor was justified in imposing the fines, the cumulative amount dwarfs the original judgment amount.
"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 appeals court found. "That said, at this point, the amount of the cumulative fine far exceeds the amount of the original judgment [AngioDynamics] 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."
The court also awarded the costs of both appeals to AngioDynamics.
"We are pleased with the court’s decision," AngioDynamics president & CEO Joseph DeVivo told MassDevice.com via email. "The judgment has once again illustrated the merit of our case, and we will continue to vigorously pursue this litigation until we recover our damages."
