$10 Million Inherent Power Sanction for Bad Faith Litigation Abuse
The $10 million sanction imposed in DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 2008 U.S. Dist. LEXIS 13759 (D. Mass. Feb. 25, 2008), a patent case, is one of the ten largest reported sanctions awards (at least, it makes the top ten list in Chapter 1 of my book). The District Judge’s summary of the misconduct:
Throughout trial, the defendants demonstrated a failure to accept the claim construction governing this case. In fact, with the exception of their ensnarement argument, their defense to infringement appears to have been wholly based on an attempt to obscure, evade, or minimize the Federal Circuit's construction of the patent-in-suit (the '678 patent). Even as early as the defendants' opening statements, they essentially urged the jury to adopt an interpretation of the patent claims developed by their experts instead of the construction mandated by the Federal Circuit.
The sanctions analysis:
The Court ... has inherent power to sanction parties for litigation misconduct that not only imposes costs upon the other party, but that undermines the sound administration of justice. Chambers v. NASCO, Inc., 501 U.S. 32, 46, 111 S. Ct. 2123, 115 L. Ed. 2d 27 (1991) (remarking that the imposition of sanctions can "transcend a court's equitable power concerning relations between the parties and reach a court's inherent power to police itself'). The defendants prolonged the proceedings unnecessarily (thus unduly imposing upon the jury's time), they sought to mislead both the jury and the Court, and they flouted the governing claim construction as set forth by the Federal Circuit. Under these circumstances, the Court concludes that it is proper to impose a penalty of ten million dollars.
The quantum analysis:
[Footnote 3:] Although this sum is not based directly upon the damages assessed by the jury in this case (about 226 million dollars), it does bear some relation to that amount. The sanction reflects not only to the magnitude of the malfeasance, but also the need to provide a disincentive for such conduct in the future. Where the amount in controversy in a case is large (as was the case here), the prospective penalty for litigation misconduct, if it is to serve the purpose of deterring that conduct, should also be large. Cf. Fed. R. Civ. P. R. 11(c)(2) ("A sanction imposed for violation of this rule shall be limited to what is sufficient to deter repetition of such conduct or comparable conduct by others similarly situated.").
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