Commercial Litigation and Arbitration

Sanctions — Lead Counsel Responsible for Discovery Failures, Cannot Shift Blame — Rule 37 Motion Puts Counsel on Notice of Personal Risk — No Defense That He Didn’t Instruct Client Not to Comply — No Right to Oral Argument in Second Circuit

Rates Technology, Inc. v. Mediatrix Telecom, Inc., 2012 U.S. App. LEXIS 15489 (Fed. Cir. July 26, 2012):

This appeal arises from the imposition of discovery sanctions against James B. Hicks. Mr. Hicks was the lead attorney for Rates Technology, Inc. ("RTI"), the plaintiff in a patent infringement action. The two patents in suit relate to systems for minimizing the cost of placing long-distance telephone calls. The defendants, Mediatrix Telecom, Inc., and Media5 Corporation (collectively, "Mediatrix"), manufacture and sell equipment that modifies existing telephone systems to convert them to voiceover-Internet-protocol ("VoIP") systems. Over the course of the litigation, RTI was ordered on four separate occasions to respond to a specific contention interrogatory propounded by Mediatrix. A magistrate judge determined that RTI never adequately responded to the interrogatory, despite the court's repeated orders to do so, and that the failure to comply with the court's orders was willful. Accordingly, the magistrate judge recommended dismissing the case and imposing monetary sanctions against Mr. Hicks and RTI in the amount of $86,965.81, to be split evenly between them. The district court adopted the recommendation. Mr. Hicks now appeals the monetary sanctions imposed against him. RTI did not appeal the order dismissing the action or the award of monetary sanctions against it. We affirm. ***


*** Mr. Hicks cites various authorities for the legal proposition that he cannot be sanctioned for failing to produce information not within his possession and that to do so would violate his due process rights. See, e.g., Cornell Research Found., Inc. v. Hewlett-Packard Co., No. 5:01-cv-1974, 2006 WL 5097357, at *23 (N.D.N.Y. Nov. 13, 2006); see also Satcorp Int'l Grp. v. China Nat'l Silk Imp. & Exp. Corp., 101 F.3d 3, 6 (2d Cir. 1996). As an initial matter, all of the cases cited by Mr. Hicks involved fact interrogatories, whereas the interrogatories at issue in this case were contention interrogatories that simply asked Mr. Hicks for RTI's theory of infringement. But even accepting Mr. Hicks's assertion that the category of "information not within his possession" can reasonably be said to include responses to contention interrogatories, Mr. Hicks has failed to show any error in the court's sanctions order, because the magistrate judge found that RTI and Mr. Hicks did have the information necessary to respond to Mediatrix's interrogatories yet repeatedly and willfully failed to provide adequate responses. As noted above, on April 17, 2006, Mediatrix produced thousands of pages of technical drawings and other documents to RTI. RTI did not file any objections to that production during the 10 days the court allowed for it to do so. By the time RTI did complain about Mediatrix's production, nearly five months later, the time to object had long since passed. In any event, the magistrate judge found that the discovery produced by Mediatrix was "substantial" and that it enabled RTI "to make an element-by-element claim construction analysis" with respect to interrogatory no. 3. Mr. Hicks has not even attempted to show that the magistrate judge's finding on that point was erroneous.***

We likewise reject Mr. Hicks's argument that he was denied adequate notice of the possibility that sanctions would be imposed. The record shows that Mr. Hicks was put on clear notice of the possibility that the court would impose sanctions if he did not comply with the court's directives. On July 24, 2006, the magistrate judge stated, "It should be noted that this is Plaintiff's final opportunity to comply with this Court's orders and the rules of discovery. Should Plaintiff fail to do so, the Court will fashion an appropriate remedy" (emphasis in original). And on September 5, 2007, after ordering Mr. Hicks for a fourth time to provide an adequate response to Mediatrix's contention interrogatory, the magistrate judge warned Mr. Hicks "that this is indeed the last opportunity to comply with the directives of this Court and Plaintiff proceeds at its own peril. If a full and complete response is not provided to [Mediatrix] with respect to Interrogatory No. 3, I shall recommend . . . that this matter be dismissed . . . ."

The magistrate judge noted that the motion for sanctions under Rule 37(b) necessarily placed Mr. Hicks on notice of the possibility that, as counsel for the sanctioned party, he would be subject to a personal monetary sanction. We agree. Because Rule 37(b)(2)(C) provides that absent a valid excuse a monetary sanction will be imposed for discovery violations on "the disobedient party, the attorney advising the party, or both," Mr. Hicks had clear notice that any monetary sanction issued by the court could extend to him.***

Mr. Hicks also argues that he cannot be sanctioned because he did not personally violate a discovery order or advise his client to do so. His position on this point seems to have two elements. First, he argues that he could not personally be responsible for any discovery violation because he could not produce information that he did not have. We have already considered and rejected that argument. Second, Mr. Hicks tries to shift the blame for the production failures to Robert Epstein, whom Mr. Hicks describes as "RTI's patent counsel." Mr. Hicks argues that, "[a]s a business litigator, Hicks was entitled to rely on the plaintiff's patent counsel's analysis." It is unclear exactly what role Mr. Epstein played in this case, but he is not listed as counsel for RTI on the district court's docket sheet. Rather, Mr. Hicks is listed as "lead attorney." As lead counsel for RTI, Mr. Hicks had a duty to comply with the district court's orders, which he failed to do — a failure that the magistrate judge characterized as willful. Therefore, we reject Mr. Hicks's attempt to shift the blame for the discovery abuses to Mr. Epstein. As for his claimed lack of culpability, the district court flatly rejected that argument, ruling that his conduct as counsel for RTI in the discovery process was "egregious," and that RTI and Mr. Hicks "were both responsible for the sanctionable conduct."

Finally, Mr. Hicks argues that the magistrate judge and the district court abused their discretion in failing to grant him the opportunity for oral argument on the motion for sanctions. We disagree. Aside from his opportunity to address the sanctions issue in written submissions, Mr. Hicks had an opportunity to discuss the sanctions motion at a hearing on October 24, 2007. Although the hearing dealt with several matters, both parties were able to, and did, address the sanctions motion at that time. Under Second Circuit law, which applies to this non-patent issue arising from a district court in that circuit, there is no general right to make an oral presentation in civil matters, even on dispositive motions. See Dotson v. Griesa, 398 F.3d 156, 159 (2d Cir. 2005); AD/SAT v. Associated Press, 181 F.3d 216, 226 (2d Cir. 1999); Greene v. WCI Holdings Corp., 136 F.3d 313, 315 (2d Cir. 1998) (citing numerous cases). With respect to sanctions, "due process requires that courts provide notice and opportunity to be heard." In re 60 East 80th Street Equities, Inc., 218 F.3d 109, 117 (2d Cir. 2000). However, "a full evidentiary hearing is not required; the opportunity to respond by brief or oral argument may suffice." Id.; see also Schlaifer Nance & Co. v. Estate of Warhol, 194 F.3d 323, 335 (2d Cir. 1999) ("We have acknowledged that the opportunity to submit written briefs may be sufficient to provide an opportunity to be heard."). In this case, Mr. Hicks had the opportunity to respond both orally and with written briefs.

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