New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.

Commercial Litigation and Arbitration

New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
Commercial Litigation and Arbitration
« Back to Complex Lit Blog

Procedural Due Process Requires Notice of Grounds For, And Potential Types Of, Sanctions — Abuse of Discretion to Impose Inherent Power Sanction Requiring Warning Paragraph On First Page Of Complaint Without Notice

Download PDF

Malem Med., Ltd. v. Theos Med. Sys., Inc., 2020 WL 1028062 (9th Cir. Mar. 3, 2020) (unpublished):

MEMORANDUM**

*1 Appellants Theos Medical Systems, Inc. and Saket Bhatia (collectively “Theos”) appeal the district court’s order requiring Theos to include a warning paragraph in the complaint it plans to file with the Food and Drug Administration (“FDA”) against Appellees Malem Medical, Ltd. and Enuresis Associates, LLC (collectively “Malem”). Theos argues this warning paragraph constitutes a sanction of which Theos did not have notice.

We review a district court’s imposition of sanctions for abuse of discretion. Weissman v. Quail Lodge, Inc., 179 F.3d 1194, 1197 (9th Cir. 1999). “[W]e review de novo issues of law, including whether the district court provided adequate process before imposing sanctions.” Lasar v. Ford Motor Co., 399 F.3d 1101, 1109 (9th Cir. 2005).

Earlier in the case, the district court found Theos had violated the non-disparagement clause of a consent decree between it and Malem by falsely reporting to various government agencies that Malem’s products were hazardous. Malem had requested only attorneys’ fees and costs in its motion for order to show cause and at the contempt hearing. After the contempt finding, the district court ordered Theos to pay Malem attorneys’ fees and costs and we affirmed. Malem Med., Ltd. v. Theos Med. Sys., Inc., 761 F. App’x 762, 765 (9th Cir. 2019).

Theos later moved the district court for leave to file an FDA complaint against Malem on a new issue. The parties briefed the issue, and the district court decided it could not conclude that Theos’s proposed FDA complaint was “not intended to raise legitimate business concerns,” so the district court granted Theos leave to file the FDA complaint. However, the district court added that it could not ignore Theos’s prior fraudulent actions and required Theos to include a warning paragraph on the first page of the FDA complaint in 12-point font, which reads:

The District Court for the Northern District of California has required the undersigned (Theos Medical Systems and Saket Bhatia) to include this text. In August 2017, following a two-day trial, the Court found the undersigned in contempt for filing false and misleading FDA complaints about Malem Medical and Enuresis Associates’ products. The case is Malem Medical, LTD. v. Theos Medical Systems, Inc., No. 13-cv-5236-EMC (N.D. Cal.).

This required paragraph is a sanction. Haeger v. Goodyear Tire & Rubber Co., 813 F.3d 1233, 1252–54 (9th Cir. 2016), rev’d on other grounds by 137 S. Ct. 1178 (2017). Theos argues that the warning paragraph will discredit Theos’s complaint before the FDA and that Theos did not have notice of or the opportunity to be heard on this specific sanction. Theos argues that if it had notice or a chance to reply, then it could have bolstered the declaration it submitted with its briefing regarding Theos’s motive for its request or asked for an evidentiary hearing.

 “[I]t is axiomatic that procedural due process requires notice of the grounds for, and possible types of, sanctions.” Lasar, 399 F.3d at 1110 (reversing a district court’s lifetime ban on an attorney appearing pro hac vice in its division, because the district court failed to notify the parties that it was considering such a sanction) (internal quotation marks and citation omitted). Neither the briefing or hearing in the earlier contempt proceeding, nor the briefing related to Theos’s motion for leave to file the FDA complaint, warned that Theos might be required to include a warning paragraph in its proposed FDA complaint. The district court abused its discretion by invoking its inherent authority to sanction Theos without giving notice of the type of sanction that might be imposed—the warning paragraph in Theos’s FDA complaint against Malem—and the opportunity to respond. Id. at 1113–14.

*2 REVERSED AND REMANDED.

 

All Citations

--- Fed.Appx. ----, 2020 WL 1028062 (Mem)

Footnotes

 

*

 

The Honorable Janis Graham Jack, United States District Judge for the Southern District of Texas, sitting by designation.

 

**

 

This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3.

 

 

Share this article:

Facebook
Twitter
LinkedIn
Email

Recent Posts

(1) FRAP 38 Sanctions Inapt for Appeal That Is Weak — “Borderline Frivolous” — Test Is Whether Appellant Should Have Known the Appeal Had Absolutely No Chance of Success — (2) Lay Opinion Testimony under Rule 701: Nub of Helpfulness Requirement Is to Exclude Testimony When the Witness Is No Better Suited Than the Jury to Assess the Issue; (3) Appeals: No Appeal from Denial of Motion for Judgment As a Matter of Law Unless Appellant Made That Motion Before Case Was Submitted to Jury

(1) § 1927 and Inherent Power Sanctions — Extrajudicial Misconduct After Obtaining Verdict: Filing Lis Pendens Based on False Statements and in Violation of Governing Law, Filing Fraudulent Abstracts of Judgment That Represented They Had Been Court-Issued; (2) Rule 37 Sanctions for Baseless Motion to Compel Required Unless Target Shows That the Motion Was Substantially Justified Or Other Circumstances Make An Award Of Expenses Unjust

Rule 37 Dismissal Factors (10th Circuit) — Rule 37(d) Sanctions Apply Without Regard to Whether the Court Has Ordered the Delinquent Party to Appear for His, Her or Their Deposition

Rule 37 Dismissal Factors (Sixth Circuit) — Refusal to Answer Deposition Questions on Relevancy Grounds Is Not Valid Rule 30(c)(2) — Pro Se Deponent’s Attendance At Zoom Deposition While Driving A Semi, Refusing to Answer Questions, Inter Alia, Held Contumacious

Rule 26(a)(1) Disclosures and Rule 37 Preclusion: Rule 26 Does Not Require Disclosure of Legal Theories Underlying Damages Computations Provided Pursuant to 26(a)(1)(A)(i)

Rule 37 Sanctions: (1) Forfeiture of Objections to Produce Specific Categories of Documents (Including Tax Returns, Social Media Passwords) as Sanction for Violation of Discovery Order — (2) Default Judgment for Multiple Violations of Discovery Orders — (3) Ninth Circuit’s 5-Factor Test for Dismissal or Default Sanction — (4) Three Additional Factors Considered by Court of Appeals in Assessing Whether Lesser Sanctions Were Adequately Considered — (5) District Court Need Not Recite Each Factor: It Suffices If Record Permits Appellate Court to Apply Them — (6) Public Policy Favoring Disposition of Cases on the Merits Is Not Dispositive Where At Least 4 Factors “Support,” Or 3 Factors “Strongly Support,” Dismissal/Default — (7) And Lends Little Support to A Party Whose Conduct Impedes Adjudication on the Merits — (7) Order to Show Cause Why FRAP 38, § 1927 and Inherent Power Sanctions Should Not Issue for Multiple Misstatements Of Counsel At Oral Argument

Electronic Spoliation Sanctions: “Intent to Deprive” in Rule 37(e)(2) Means Willful Destruction of Evidence to Avoid Its Discovery by an Adverse Party — Relevant Circumstantial Evidence in Determining “Intent to Deprive” — Rule 37(e)(2)(C)’s Standards Trump Circuit’s Multi-Factor Test for Determining Whether Dismissal Is Appropriate — No Prejudice Required for 37(e)(2) Sanctions Because Intent to Deprive Creates Inference the Loss of Information Favored the Spoliator

Sanctions and Appealability — Fifth Circuit’s 2023 Survey of Circuit Cases Concerning Whether Judgment of Dismissal As a Sanction Bars Review of Earlier Sanctions Orders Due to Lack of Jurisdiction or Whether The Decision to Review Pre-Dismissal Sanctions Orders Is Prudential

Sanctions and Appealability — Prior Sanctions Orders Do Not Merge into Judgment of Dismissal Imposed As Sanction under Rules 16(f), 37(b) and 41(b) and Are Unappealable — Courts of Appeal Differ As to Whether This Lack of Reviewability Is Jurisdictional or Discretionary (Jurisdictional in Second Circuit)

Sanctions Enforcement and Appealability: Failure to Pay Rule 37 Sanctions and Otherwise Comply with Discovery Orders Leads to Dismissal under Rule 41(b) — Second Circuit Factors for Dismissal for Failure to Prosecute or Comply with Court Orders — Belated, Partial Compliance with Orders Does Not Deprive District Court of Discretion to Dismiss Based on Continuing Non-Compliance with Other Aspects of Orders — “Hopelessly Belated Compliance” with Court Orders Not Accorded Great Weight — Prior Sanctions Orders Do Not Merge into Judgment of Dismissal under Rule 41(b) And Are Unreviewable

Archives
New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.

New York Office

© 2024 Joseph Hage Aaronson LLC  
Disclaimer | Attorney Advertising Notice | Legal Notice