Ideal Instruments, Inc. v. Rivard Instruments, Inc.Ideal Instruments, Inc. v. Rivard Instruments, Inc.
MEMORANDUM OPINION AND ORDER REGARDING PLAINTIFF’S MOTION FOR SANCTIONS AGAINST DEFENDANTS AND THEIR ATTORNEYS PURSUANT TO
TABLE OF CONTENTS
I. INTRODUCTION..........................................................327
A. Bаckground..........................................................327
1. The parties........................................................327
2. Ideal’s patents and product.........................................328
3. The litigation.....................................................328
4. The motion for preliminarg injunction...............................329
5. Ideal’s “warning shots”............................................329
6. The hearing on the motion for preliminarg injunction.................330
7. Denial of the motion for preliminarg injunction......................330
a. Pertinent factual findings......................................330
b. Pertinent legal conclusions.....................................331
II. LEGAL ANALYSIS........................................................333
A. Which Circuit’s Law Applies?..........................................333
B. Authority And Standards For Sanctions.................................334
C. Sanctions Under
1. Arguments of the parties...........................................335
a. Ideal’s argument..............................................335
b. Rivard’s response..............................................336
2. Prerequisites to
a. The “safe harbor” requirements.................................337
b. Right to be heard..............................................340
c. Parties potentially subject to sanctions..........................340
3. Sanctionable conduct under
a. Lack of evidentiary support.....................................341
i. Applicable standards......................................341
ii. Reasonableness of reliance on Dr. Hoff’s testing.............342
iii. Reasonableness of reliance on metallurgical testing..........343
b. Improper purpose..............................................345
i. Applicable standards......................................345
ii. Inferences of improper purposes............................345
4. The appropriate sanctions..........................................346
a. Applicable standards...........................................346
b. The sanction warranted here ...................................347
D. Other Sanctions.......................................................349
III. CONCLUSION..................... .....................................349
Was the defendants’ motion for preliminary injunction in this case unreasonable and in bad faith, or just wholly unpersuasive? The plaintiff has moved for sanctions against the defendants and their attorneys pursuant to
I. INTRODUCTION
This ruling on the plaintiffs motion for sanctions is, in fact, the fourth substantial ruling in this case. See Ideal Instruments, Inc. v. Rivard Instruments, Inc.,
A. Background
1. The parties
Plaintiff Ideal Instruments, Inc., (Ideal) is a Michigan corporation with its principal
2. Ideal’s patents and product
Two of Ideal’s patents are at issue in this lawsuit. Ideal is the assignee of United States Patent No. 6,488,668 (the '668 patent) for a “detectable heavy duty needle.” The inventor of the '668 patent is identified as Gordon Prindle, and the patent stems from application number 08/714,041, filed November 16, 2000. The '668 patent originally issued on December 3, 2002, and was upheld on ex parte reexamination on December 23, 2004. Ideal is also the assignee of another patent for a “detectable heavy duty needle,” United States Patent No. 6,960,196 (the '196 patent), which also identifies the inventor as Gordon Prindle, and stems from application number 10/215,122, filed on August 8, 2002, as a continuation of the application that ripened into the '668 patent. The '196 patent issued on November 1, 2005.
Ideal manufactures, sells, and distributes a product exploiting the inventions disclosed in the '668 and '196 patents under the commercial name “D3 Detectable Needles.” As the court found in its ruling on Rivard’s motion for preliminary injunction, the packaging for Ideal’s D3 needles clearly identifies the needles as “sterile detectable needles with metal hubs,” as “detectable hypodermic needles,” as “detectable needles,” and as “for veterinary use only.” Ideal has also disseminated marketing literature that describes D3 needles as having “superior detectability,” as having been “found to be 100% detectable” under specified test conditions, and as made from a “detectable alloy” or “patented alloy” that allows them to be “as much as 100% detectable.” Ideal has sold many millions of D3 needles in the last six years without a single reported incident of a D3 needle breaking, passing undetected through a metal detector, and finding its way into a consumer’s food.
3. The litigation
Ideal filed the present lawsuit on December 30, 2005. In its original Complaint, Ideal asserted claims of infringement by Rivard Instruments and Meril Rivard of Ideal’s '196 patent for “detectable” hypodermic needles for livestock, non-infringement by Ideal of the defendants’ Canadian patent for a similar device, and various commercial torts. By order dated May 8, 2006, the court dismissed Ideal’s claim of non-infringement of Rivard’s Canadian patent for lack of subject matter jurisdiction, but otherwise denied Rivard’s motion to dismiss. See Ideal Instruments, Inc. v. Rivard Instruments, Inc.,
Ideal filed further amended complaints, so that the operative document is now Ideal’s Third Amended Complaint filed December 29, 2006 (docket no. 122). The claims in Ideal’s Third Amended Complaint, at least those that are before the court and not stayed, are the following: infringement by Rivard Instruments of Ideal’s '668 patent in
Rivard filed its Answer (docket no. 129) to Ideal’s Third Amended Complaint on January 16, 2007, denying Ideal’s claims and asserting numerous affirmative defenses and counterclaims. Of interest here is Rivard’s Eighth Counterclaim, which asserts a “false descriptions” form of “false advertising” in violation of § 43 of the Lanham Act,
4. The motion for preliminary injunction
Rivard filed the original version of its Motion For Preliminary Injunction on October 30, 2006 (docket no. 85), seeking to enjoin Ideal from violating the false advertising provisions of § 43 of the Lanham Act, codified at
Rivard filed various supplements to its motion on November 28, 2006 (docket no. 105), December 12, 2006 (docket no. 115), and February 2, 2007 (docket no. 140). More specifically, the November 28, 2006, supplement incorporated results of further testing by Dr. Hoff, undertaken on his own initiative in November 2006; the December 12, 2006, supplement asserted new arguments about Ideal’s failure to use metal detectors to verify detectability of its products and purported problems with Ideal’s products; and the February 2, 2007, supplement asserted that new metallurgical testing of Ideal’s needles by the defendants’ metallurgy expert revealed that Ideal’s needles were sometimes made with a type of stainless steel that Ideal had considered unsuitable for “detectable” needles.
Ideal filed a comprehensive Opposition (docket no. 153) to Rivard’s motion for preliminary injunction, as repeatedly supplemented, on March 7, 2007. Rivard filed a Reply (docket no. 154) on March 9, 2007. On March 10, 2007, Ideal filed two further declarations (docket no. 155) in response to what Ideal contended were “new” arguments in Rivard’s Reply.
5. Ideal’s “warning shots”
Not only did Ideal strenuously resist Ri-vard’s various attempts to supplement its Motion For Preliminary Injunction and the motion itself, as ultimately framed, Ideal also fired various “warning shots” at Rivard urging Rivard to withdraw its Motion For Preliminary Injunction or face a motion for sanctions. First, in a letter dated October 30, 2006, in response to a request from Rivard that Ideal simply stipulate to a preliminary injunction, Ideal’s counsel informed counsel for Rivard in pertinent part, “from what we know and from what have [sic] already filed with the court, such a motion for a preliminary injunction would appear to raise the
6. The hearing on the motion for preliminary injunction
After various delays caused by Rivard’s supplementation of its Motion For Preliminary Injunction and discovery and other disputes related to that motion, Rivard’s Motion For Preliminary Injunction eventually came on for hearing on March 13, 2007. Although the parties had submitted copious exhibits in support of and resistance to Rivard’s Motion For Preliminary Injunction and its various supplements, neither party appeared with witnesses to establish the necessary foundation for those exhibits at the March 13, 2007, hearing on the Motion For Preliminary Injunction. Thus, much of the time set aside for the hearing was actually occupied with the parties’ attempts to reach various stipulations on the admissibility of certain exhibits. Once such stipulations were reached, the parties agreed to submit to the court a unified set of exhibits within the next two business days. The court then heard arguments from both sides. The parties agreed that no further briefing would be required, once the court received the unified set of exhibits.
The logistical problems involved in assembling a unified set of exhibits exceeded the parties’ expectations. Therefore, the court received the parties’ Stipulated Exhibits Regarding Rivard’s Motion For Preliminary Injunction And Ideal’s Brief In Opposition To Same (Stipulated Exhibits) on March 19, 2007. With the receipt of the Stipulated Exhibits, Rivard’s Motion For Preliminary Injunction was, at long last, fully submitted.
7. Denial of the motion for preliminary injunction
a. Pertinent factual findings
On March 28, 2007, the court filed a ruling denying Rivard’s Motion For Preliminary Injunction as repeatedly supplemented. See Ideal Instruments, Inc. v. Rivard Instruments, Inc.,
In contrast, the court made these findings about other testing of Ideal’s D3 needles in December 2006 and the court’s ultimate finding on the “detectability” of those needles:
Unlike the “detectability” tests by Dr. Hoff in October and November 2006, the*331 court finds that Ideal’s December 2006 tests are probative of whether or not Ideal’s D3 neеdles are “detectable” within the meaning of the livestock and meat processing industries and that such tests demonstrate that the needles are, in fact, “detectable” within the meaning of those industries. Ideal’s December 2006 tests, like Dr. Hoffs independent tests for the NPB in 2000-2001 and Dr. Hoffs tests commissioned by Ideal in 2002 and 2006, used valid samples and procedures to determine “detectability” of needles in conditions realistically approximating conditions in meat processing plants. Moreover, in light of the lack of probative value of Dr. Hoffs October 2006 tests and the probative value of the “detectability” tests commissioned by Ideal, the court finds that Ideal’s D3 needles are “detectable” within the meaning of the livestock and meat processing industries.
Id. at 979-80.
As to the “wrong steel” dispute raised as Rivard’s last ground for preliminary injunc-tive relief, the court found as follows:
At the hearing, Rivard attempted to correlate metallurgical tests with Dr. Hoffs tests in October and November 2006 to demonstrate that D3 needles that produced poor signals in metal detector tests were made from type 304 stainless steel. Even if there is such a correlation, however, for the reasons stated above, Dr. Hoffs October 2006 tests have no probative value on “detectability,” so a significant point of reference is lacking. Moreover, as Ideal points out, Dr. Hoff has admitted that needles made from type 304 stainless steel are detectable, and metallurgy tests reveal that Rivard also makes or made some of its “detectable” needles from type 304 stainless steel. Ideal has also submitted the affidavit of Terri Morrical, a Vice President of Ideal’s parent company, Neogen, averring that, when Ideal learned from Rivard’s tests that some of Ideal’s D3 needles are made from type 304 stainless steel, not a duplex steel as required by the specifications to Ideal’s manufacturer, out of an abundance of caution, she quarantined all remaining D3 needles from affected lots, and none of those quarantined needles have ever been sold or distributed. Plaintiffs Exhibit 34. Thus, there is no convincing evidence that the use of the “wrong” stainless steel alloy in some of Ideal’s D3 needles resulted in needles that were not “detectable” or that were a danger to the public.
Id. at 981.
b. Pertinent legal conclusions
In its legal analysis, the court noted that, in this Circuit, preliminary injunctions and temporary restraining orders are generally measured against the following “Dataphase factors”: (1) the movant’s probability of success on the merits, (2) the threat of irreparable harm to the movant absent the injunction, (3) the balance between the harm and the injury that the injunction’s issuance would inflict on other interested parties, and (4) the public interest. Id. at 983 (citing Dataphase Systems, Inc. v. C L Systems, Inc.,
As to “likelihood of success on the merits,” the first Dataphase factor, the court concluded that “Rivard has little or no chance of proving the ‘literal falsity’ element of its ‘false advertising’ claim under § 43(a) of the Lanham Act,” that “the lack of any convincing evidence on three of the five elements of Rivard’s ‘false advertising’ claim— false representation, deception, and injury to claimant — means that Rivard has little or no likelihood of success on such a claim under governing law, and such limited likelihood of success clearly does not support the sweeping preliminary injunctive relief Rivard seeks.” Id. at 989-90. This conclusion was based on the court’s findings (1) that the word “detectablе” on Ideal’s packaging meant that the needles so labeled will be detected in animal carcasses by metal detectors routinely used in the meat processing industry, and that Ideal’s testing, and even the deposition testimony of Rivard’s expert, Dr. Hoff, supported the conclusion that Ideal’s D3 needles are, indeed, “detectable”; (2) that Dr. Hoffs testing for Rivard in October
Furthermore, the court found that “even though Rivard has also failed to prove likelihood of success on the merits, denial of in-junctive relief would be justified solely by Rivard’s failure to demonstrate irreparable harm,” the second Dataphase factor. Id. at 992. This court concluded that, “where there has been no convincing proof of false advertising, there is no likelihood of harm, let alone irreparable harm, to a competitor from that alleged false advertising that would justify a preliminary injunction on the sale of the products in question or a preliminary injunction requiring the recall of such products.” Id.
The court also found that the “balance of harms” Dataphase fаctor “weighs decidedly against granting Rivard the relief that it seeks,” for the following reasons:
Here, as explained above, Rivard’s harm is so unlikely as to be illusory, so that it has little or no weight in the calculus. On the other hand, the potential economic harm to Ideal of a prehminary injunction of the breadth that Rivard seeks would be substantial, if not huge, because of its deleterious effect not only on Ideal’s immediate business, but because of the lasting harm to its reputation with no offsetting justified economic benefit to Rivard, only an unjustified windfall. Moreover, as the court has repeatedly pointed out, whatever potential for harm might have existed has been substantially reduced by Ideal’s recent remedial actions to ensure that ah of its “detectable” needles are tested for “detectability” using an industry standard metal detector and regular metallurgical testing to ensure that the specified alloys of steel are used in the actual manufacturing of the D3 needles. Even imagining, contrary to all of the evidence showing that no D3 needles have ever passed through the meat processing system to arrive on the plate of a consumer, that there was some past misconduct — in the form of lax production standards that allowed needles of questionable “detectability” or made of the “wrong” alloy to reach the market — there is no showing of a present harm from such past misconduct requiring some additional corrective action, because such relief goes beyond the purpose of a preliminary injunction. Indeed, the lack of any evidence that isolated reports of problems in the field resulted in any harm to the public, the livestock industry, or the meat processing industry, and the lack of any evidence that actions by Ideal did not prevent any such harm, demonstrates that there is presently no public health risk requiring a recall of any of Ideal’s D3 needles or a prohibition on any sales of such needles. Ultimately, this is another Lanham Act case in which the movant has failed to demonstrate a probability of ultimate success, so that the possibility that it will suffer any harm from the continuing use by the non-movant of its challenged advertising is highly speculative and therefore does not serve to tip the balance of equities in [Rivard’s] favor.
Ideal Instruments III,
Because none of the Dataphase factors weighed in favor of granting the preliminary injunctive relief that Rivard sought, the court denied Rivard’s Motion For Prehminary Injunction. Id.
On April 20, 2007, Ideal filed its Combined Motion And Brief In Support Of Motion For Sanctions Against Defendants And Their Attorneys Pursuant To F.R. Civ. P. 11,
On May 8, 2007, Rivard filed its Memorandum In Opposition To Ideal’s Motion For Sanctions (Rivard’s Opposition) (docket no. 178). Based on a sweeping review of evidence, including opinions of two experts, Dr. Hoff and a metallurgist, Rivard contends that it and its counsel reasonably believed that the validity of Ideal’s patents was seriously undermined and that some portion of Ideal’s D3 needles were not “detectable” within the meaning of the meat processing and detectable needle industries. Rivard also contends that, based on its Motion For Preliminary Injunction, Ideal implemented numerous corrective actions, which the court then found undermined the need for preliminary injunctive relief. Thus, Rivard contends that Ideal’s Motion For Sanctions is based on the erroneous notion that there was no evidence to support Rivard’s Motion For Preliminary Injunction and on significant erroneous characterizations of Rivard’s motion, Rivard, and Rivard’s counsel.
On May 8, 2007, the same day that Rivard filed is Opposition, Ideal filed a Reply (docket no. 179), characterizing Rivard’s Opposition as laden with half-truths, out-of-context and misleading statements, misrepresentations, and ad hominem arguments directed at Ideal, its parent company, and past and present attorneys with the firm now representing Ideal. In essence, however, Ideal’s Rеply was that “[t]he lady doth protest too much, me thinks.” Ideal’s Reply (docket no. 179) at 3 (quoting William Shakespeare, Hamlet (III, n, 239)).
The court held oral arguments on Ideal’s Motion For Sanctions on June 28, 2007. At that oral arguments, plaintiff Ideal was represented by Mark R. Fox of Fraser, Trebil-cock, Davis & Dunlap, P.C., in Lansing, Michigan. Defendants Rivard Instruments and Meril Rivard were represented by Terence J. Linn and Karl T. Ondersma of Van Dyke, Gardner, Linn & Burkhart, L.L.P., in Grand Rapids, Michigan, both of whom offered arguments on behalf of the defendants and their counsel, and local counsel Angela E. Dralle of Dorsey & Whitney, L.L.P., in Des Moines, Iowa.
Ideal’s Motion For Sanctions is now fully submitted.
II. LEGAL ANALYSIS
A. Which Circuit’s Law Applies?
Even in litigation, such as patent litigation, that falls within the exclusive appellate jurisdiction of the Federal Circuit Court of Appeals, questions of whether or not to impose sanctions pursuant to
B. Authority And Standards For Sanctions
Ideal seeks sanctions pursuant to
A violation of
Federal courts also have the inherent power to assess attorney fees against a party or attorney “ ‘as a sanction for bad faith conduct.’” Gas Aggregation Servs.,
Because of the potency of inherent powers, “[a] court must exercise its inherent powers with restraint and discretion, and a primary aspect of that discretion is the ability to fashion an appropriate sanction.” Harlan v. Lewis,982 F.2d 1255 , 1262 (8th Cir.1993) (citing Chambers,501 U.S. at 44-45 ,111 S.Ct. 2123 ,115 L.Ed.2d 27 ). Furthermore, in invoking its inherent power, a court “must comply with the mandates of due process.” Chambers,501 U.S. at 50 ,111 S.Ct. 2123 ,115 L.Ed.2d 27 . Thus, before a district court may impose sаnctions, the individual must receive notice that sanctions against her are being considered and an opportunity to be heard. In re Clark,223 F.3d 859 , 864 (8th Cir. 2000) (citing Chambers,501 U.S. at 56-57 ,111 S.Ct. 2123 ,115 L.Ed.2d 27 ; Jensen v. Fed. Land Bank of Omaha,882 F.2d 340 , 341 (8th Cir.1989)).
Plaintiffs’ Baycol Steering Committee v. Bayer Corp.,
Owing to these differing standards and the differing parties and conduct sanctionable, depending upon the source of the court’s authority to impose sanctions, the Eighth Circuit Court of Appeals encourages district courts to state the authority for each sanction imposed. Willhite,
C. Sanctions Under
Ideal, first, seeks sanctions pursuant to
1. Arguments of the parties
a. Ideal’s argument
In support of its argument for
More specifically, Ideal argues that Rivard lacked any objectively reasonable basis for its Motion For Preliminary Injunction and that Rivard would have realized the eviden-tiary insufficiency of its motion if it had conducted a reasonable investigation. Ideal argues that the court’s determination that none of the Dataphase factors weighed in favor of a preliminary injunction demonstrates that Rivard made no reasonable inquiry before filing its motion, then maintained the motion despite the lack of any credible evidence to support it, even after the insufficiency of its evidence became clear. Ideal contends that all of the evidence known to Rivard, in fact, undermined Rivard’s allegations, where Rivard had copies of Dr. Hoffs earlier, independent testing of Ideal’s D3 needles and his prior findings that those needles were “clearly 100% detectable”; Ri-vard knew that Dr. Hoffs October 2006 tests were performed using entirely different test procedures and protocols and that those tests did not replicate field conditions, let alone meet the standards for peer review or statistical significance; and Rivard knew that there were no known incidents of a broken and undetected D3 needle reaching a consumer. Ideal also points out that Rivard was aware that Dr. Hoff had to be deposed three times after the filing of his report on the October 2006 tests and that Rivard fought each and every redeposition, which unnecessarily increased the cost of the litigation, even though Rivard knew that the depositions revealed that Dr. Hoffs October and November 2006 reports were wholly unreliable. Ideal asserts that, viewed objectively, it is apparent that Rivard’s intent was to force Ideal either to yield its position or be crushed under the weight of misstated facts аnd drowned in bombast. Such conduct, Ideal argues, warrants imposition of sanctions pursuant to
b. Rivard’s response
Contrary to Ideal’s contentions, Rivard asserts that its decisions to file its Motion For Preliminary Injunction and its various supplements to that motion were objectively reasonable and based upon reasonable inquiry, even if the court ultimately rejected the motion, as supplemented. Rivard argues that it reasonably relied on several items of favorable evidence, including the opinions of two experts and what it understood to be the basis for Ideal’s patents in light of the inventor’s representations about what types of steel were or were not “detectable.”
Somewhat more specifically, Rivard contends that it was objectively reasonable for it to rely on the following: (1) testing by the expert in the field, Dr. Hoff, showing that certain lots of Ideal’s D3 needles were insufficiently detectable, on a par only with conventional Monoject brand needles made from type 304 stainless steel and not marketed as “detectable”; (2) proof that those lots of needles with poor detectability were made from prior art conventional type 304 stainless steel, which is not the stainless steel specified by Ideal for its D3 needles; and (3) recognition in the industry, as reflected in representations in Ideal’s own patents, that conventional needles are not sufficiently detectable. Rivard also argues that Dr. Hoff established the protocols and procedures for his tests, and it was objectively reasonable for Rivard to rely on his testing, where he was the acknowledged expert in the field of detectability testing. Rivard also highlights two parts of its argument as demonstrating the reasonableness of its preliminary injunction motion, its contention that Dr. Hoff distinguished between “detection” and “rejection” of needles and its contention that the metallurgical evidence supported and explained Dr. Hoffs evidence, not that it provided a different ground for injunctive relief. Rivard also contends that it was not arguing that all D3 needles are insufficiently detectable, only that certain lots of D3 needles were undetectable, and that even one undetectable needle, advertised as detectable but capable of
As to the manner in which the Motion For Preliminary Injunction was litigated, Rivard contends that the motion was ultimately decided on evidence made of record. In addition, Rivard argues that Ideal obstructed the course of the litigation of the motion by withholding documents and opposing supplementation of Rivard’s motion, thereby multiplying the proceedings and increasing the costs of litigating the motion. Rivard also argues that documents that it is accused of improperly withholding were not actually in its possession, but were, instead, in the possession of Dr. Hoff.
Rivard contends that a relevant consideration for
As further grounds for denying Ideal’s motion for
2. Prerequisites to
The court provided, above, a sketch of the provisions of
a. The “safe harbor” requirements
A motion for sanctions under this rule shall be made separately from other motions or requests and shall describe the specific conduct alleged to violate subdivision (b). It shall be served as provided in Rule 5, but shall not be filed with or presented to the court unless, within 21 days after service of the motion (or such other period as the court may prescribe), the challenged paper, claim, defense, contention, allegation, or denial is not withdrawn or appropriately corrected. If warranted, the court may award to the party prevailing on the motion the reasonable expenses and attorney’s fees incurred in presenting or opposing the motion. Absent exceptional circumstances, a law firm shall be held jointly responsible for violations committed by its partners, associates, and employees.
*338 The motion for sanctions is not, however, to be filed until at least 21 days (or such other period as the court may set) after being served. If, during this period, the alleged violation is corrected, as by withdrawing (whether formally or informally) some allegation or contention, the motion should not be filed with the court. These provisions are intended to provide a type of “safe harbor” against motions underRule 11 in that a party will not be subject to sanctions on the basis of another party’s motion unless, after receiving the motion, it refuses to withdraw that position or to acknowledge candidly that it does not currently have evidence to support a specified allegation. Under the former rule, parties were sometimes reluctant to abandon a questionable contention lest that be viewed as evidence of a violation ofRule 11 ; under the revision, the timely withdrawal of a contention will protect a party against a motion for sanctions.
To stress the seriousness of a motion for sanctions and to define precisely the conduct claimed to violate the rule, the revision provides that the “safe harbor” period begins to run only upon service of the motion. In most cases, however, counsel should be expected to give informal notice to the other party, whether in person or by a telephone call or letter, of a potential violation before proceeding to prepare and serve aRule 11 motion.
Not long ago, in Gordon v. Unifund CCR Partners,
Unlike the situation in Gordon, Ideal did serve a draft
First, the grounds for sanctions asserted in the draft
While it is certainly true that the Motion For Sanctions is in a different format than the November 14, 2006, draft motion, in that it is a “combined” motion and brief,
Finally, the relief pursuant to
Thus, unlike the situation in Gordon, the court finds that Rivаrd was “afforded the benefit of the twenty-one day ‘safe harbor’ provision allowing [it] the opportunity to withdraw [its] allegedly frivolous pleading,” id. at 1030, even if the
b. Right to be heard
Although
c. Parties potentially subject to sanctions
The allegedly unreasonable Motion For Preliminary Injunction on which Ideal’s Motion For Sanctions is based was filed only by Rivard Instruments; Meril Rivard was not, identified as a movant. See Rivard’s Motion For Preliminary Injunctiоn on October 30, 2006 (docket no. 85). The court notes that Ideal’s November 14, 2006, draft motion for sanctions indicated an intention to seek sanctions against Meril Rivard, as well as Rivard Instruments and the defendants’ attorneys. See Plaintiffs Sanctions Exhibit 3. Ideal’s Motion For Sanctions, as ultimately filed, is also captioned as a motion for sanctions “against defendants and their attorneys,” but actually seeks sanctions only against “Defendant Rivard Instruments, Inc. (‘Rivard’) and its attorneys.” See Motion For Sanctions (docket no. 165), 1.
3. Sanetionable conduct under
Preliminary matters aside, the court turns to the question of whether any conduct sanetionable under
(b) Representations to Court. By presenting to the cоurt (whether by signing, filing, submitting, or later advocating) a pleading, written motion, or other paper, an attorney or unrepresented party is certifying that to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances,' — •
(1) it is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation;
(2) the claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law;
(3) the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and
(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief,
(c) Sanctions. If, after notice and a reasonable opportunity to respond, the court determines that subdivision (b) has been violated, the court may, subject to the conditions stated below, impose an appropriate sanction upon the attorneys, law firms, or parties that have violated subdivision (b) or are responsible for the violation.
Fed.R.Civ.P. ll(b)-(e). In this case, Ideal expressly asserts that Rivard’s Motion For Preliminary Injunction violated subsections (b)(1) and (b)(3). The court will consider these alleged violations, below. However, the court will consider whether these provisions have been violated in reverse order, for example, because inferences of improper purpose and an attorney’s state of mind, within the meaning of subsection (b)(1), “must necessarily be based on circumstantial evidence and inferences drawn therefrom.” Clark,
a. Lack of evidentiary support
i. Applicable standards. A violation of
Similarly, “
The duty of a party to assess the viability of a claim is not measured solely at the time that the claim was filed, but is a continuing one. Therefore, a party may be sanctioned for persisting with a claim or motion once it becomes apparent that it lacks evidentiary support. See
Ultimately, the court must determine “ ‘whether a reasonable and competent attorney would believe in the merit of an argument.’ ” Coonts,
ii. Reasonableness of reliance on Dr. Hoff’s testing. In this case, it is just barely possible that Rivard and its attorneys could have believed that their original Motion For Preliminary Injunction had merit, on the basis that their expert had found from certain testing that 55% of Ideal’s D3 needles had failed a “detectability” test. Indeed, this court observed in its ruling on Rivard’s Motion For Preliminary Injunction that a 55% failure rate for what are supposed to be “detectable” needles, as found in Dr. Hoffs October 2006 tests, would be “frightening.” Ideal Instruments III,
Moreover, Rivard and its counsel shirked their responsibility to conduct a continuing inquiry into the viability of their grounds for a preliminary injunction based on Dr. Hoffs testing, even and especially after Dr. Hoff conducted further testing in November 2006 and was subjected to various depositions demonstrating the faultiness of his October 2006 test results. See
Thus, the court concludes that Rivard’s attorneys’ reliance on Dr. Hoffs testing as the basis for the sweeping preliminary in-junctive relief they sought simply was not “objectively reasonable,” see Norsyn, Inc.,
iii. Reasonableness of reliance on metallurgical testing. Rivard nevertheless argues that it reasonably relied on its metallurgical expert’s testing results, showing that some of Ideal’s D3 “detectable” needles were made of the same type 304 stainless steel that Ideal had asserted was not sufficiently detectable. Rivard asserts that the metallurgical evidence was intended to support and explain Dr. Hoffs results, but was not intended to be an independent ground for preliminary injunctive relief. The court is considerably more sympathetic to Rivard’s contentions that the metallurgical evidence could reasonably have been believed to support a claim that Ideal’s D3 needles were not “detectable,” because some or all of such needles were made from the “wrong steel.” Unlike the copious evidence undermining Dr. Hoffs late 2006 tests and conclusions from those tests, the preliminary injunction record dоes not contain any evidence suggesting that the metallurgical tests were so faulty that no party or attorney could reasonably have relied upon them or that further inquiry could or should have demonstrated that the metallurgical evidence was so suspect that it could not be relied upon. This is true, even in light of Ideal’s evidence that Dr. Hoff admitted in one of his depositions that needles made from type 304 stainless steel are detectable, and metallurgy tests that revealed that Rivard also makes or made some of its “detectable” needles from type 304 stainless steel. See Ideal Instruments III,
Ideal has also submitted the affidavit of Terri Morrical, a Vice President of Ideal’s parent company, Neogen, averring that, when Ideal learned from Rivard’s tests that some of Ideal’s D3 needles are made from type 304 stainless steel, not a duplex steel as required by the specifications to Ideal’s manufacturer, out of an abundance of caution, she quarantined all remaining D3 needles from affected lots, and none of those quarantined needles have ever been sold or distributed. Plaintiffs Exhibit 34. Thus, there is no convincing evidence that the use of the “wrong” stainless steel alloy in some of Ideal’s D3 needles resulted in needles that were not “detectable” or that were a danger to the public.
Ideal Instruments III,
The court finds that, even if Ideal has, in the past, relied substantially or entirely on the metallurgy of its needles to ensure the detectability of its needles, the evidence shows that Ideal does not now do so. Rather, as mentioned above, the court finds that Toku-E, Ideal’s Chinese manufacturer, tests every lot of needles using a flatbed metal detector to ensure detectability before shipping the needles to Ideal, and every test has confirmed the detectability of the needles. Plaintiffs Exhibit 26, Pan Declaration 116. Moreover, as also mentioned above, the court finds that Ideal has now purchased a Safeline Powerphase Plus metal detector for its Lansing, Michigan, facility, which it uses to test every lot of D3 needles that it receives from Toku-E. Plaintiffs Exhibit 14, Herbert Declaration, 1120. In addition, Ideal now regularly sends out D3 needles from Toku-E to Chicago Spectro for metallurgy testing to ensure that its D3 needles are made from duplex stainless steel. Id. Also, as mentioned above, despite the lack of routine metallurgical testing until recently, there is no convincing evidence that D3 needles have been “undetectable,” not least because there have been no widespread or repeated complaints of “undetectability” in the field and no evidence of a single instance in which a D3 needle passed entirely through the livestock production and meat processing system to a consumer. Under the circumstances, the court finds that, at least now, Ideal conducts adequate testing to ensure that its D3 needles are, indeed, “detectable,” without relying exclusively on the metallurgy of its needles, which could be subject to variation owing to manufacturing processes or substitution of the “wrong” alloys, and there is no convincing evidence that its prior failure to conduct such testing resulted in a danger to the public from “undetectable” needles entering the stream of commerce.
Ideal Instruments III,
In its preliminary injunction ruling, however, the court did reject Rivard’s argument that the metallurgical evidence explained Dr. Hoffs test results:
At the hearing, Rivard attempted to correlate metallurgical tests with Dr. Hoffs tests in October and November 2006 to demonstrate that D3 needles that produced poor signals in metal detector tests were made from type 304 stainless steel. Even if there is such a correlation, however, for the reasons stated above, Dr. Hoffs October 2006 tests have no probative value on “detectability,” so a significant point of reference is lacking.
Ideal Instruments III,
6. Improper purpose
i. Applicable standards. Ideal also seeks sanctions for a violation of
In Clark v. United Parcel Serv., Inc.,
ii. Inferences of improper purposes. The court observed, above, that the record here demonstrates an unwarranted eagerness by Rivard and its attorneys to seize upon flimsy evidence, Dr. Hoffs obviously invalid and unreliable test results, as the basis for a demand for sweeping injunctive relief that would have devastated Ideal’s detectable needle business, and that Rivard and its attorneys persisted in relying on Dr. Hoffs tests after any reasonable inquiry, and depositions of Dr. Hoff, would have revealed
While Rivard’s and its attorneys’ conduct could, perhaps, be characterized as an attempt to place their motion for a preliminary injunction on valid grounds, it was plain that the original motion lacked such valid grounds. Thus, the reasonable and appropriate course would have been to withdraw that motion until valid support for the preliminary injunctive relief that Rivard was seeking could be assembled. Indeed, had Rivard’s Motion For Preliminary Injunction been presented in its final, complete form, instead of eрisodically, the court would be unlikely to impose any sanctions at all, notwithstanding the court’s conclusion that substantial portions of the evidence supporting the motion were of little or no probative value. Episodic amendment of the motion simply delayed the proceedings and unnecessarily increased the costs to the parties of litigating the motion. Inevitably, litigation of the preliminary injunction motion on such an initially untenable basis and in such an episodic manner delayed proceedings and distracted the parties and the court from the orderly disposition of this case. Rivard’s and its attorneys’ conduct was not simply a matter of “zealous[ ] representation],” but an example of “litigation tactics that are unjustifiable within the broad bounds of our adversarial system,” and which “our system does not tolerate.” MHC Inv. Co.,
Thus, the court concludes that Rivard’s and its attorneys’ conduct is sanctionable pursuant to
4. The appropriate sanctions
a. Applicable standards
“The court has broad discretion in the choice of sanctions” pursuant to
Subject to the limitations in subparagraphs (A) and (B), the sanction may consist of, or include, directives of a nonmonetary nature, an order to pay a penalty into court, or, if imposed on motion and warranted for effective deterrence, an order directing payment to the movant of some or all of the reasonable attorneys’ fees and other expenses incurred as a direct result of the violation.
Whatever sanctions are imposed,
b. The sanction warranted here
Under the circumstances presented here, in determining what sanction is sufficient, but properly limited, “to deter repetition of such conduct or comparable conduct by others similarly situated,”
Finally, the court deems it appropriate to impose this sanction jointly upon both Rivard and its attorneys. See Tenkku,
Therefore, that part of Ideal’s April 20, 2007, Motion For Sanctions seeking sanctions pursuant to
D. Other Sanctions
In addition to sanctions pursuant to
III. CONCLUSION
The court cannot adequately express its disappointment that it has been necessary to impose sanctions upon any party or attorney appearing before it. Nevertheless, with due sensitivity to two areas of concern under
THEREFORE,
1. Ideal’s April 20, 2007, Combined Motion And Brief In Support Of Motion For Sanctions Against Defendants And Their Attorneys Pursuant To F.R. Civ. P. 11,
a. The motion is granted to the extent that the court imposes sanctions pursuant toRule 11 consisting of an award of all of Ideal’s reasonable attorneys fees and expenses incurred in litigating Rivard’s Motion For Preliminary Injunction, including challenges to Rivard’s motions to supplement its Motion For Preliminary Injunction and underlying discovery disputes, until February 2, 2007, and half of Ideal’s reasonable attorneys fees and expenses incurred thereafter in litigating Rivard’s Motion For Preliminary Injunction. Such award is against Rivard Instruments, Inc., and its attorneys, including local counsel, jointly.
b. The motion is otherwise denied.
2. Not later than August 10, 2007, Ideal shall submit a claim for fees and expenses, in compliance with N.D. Ia. L.R. 54.2, for all fees and expenses incurred in litigating Ri-vard’s Motion For Preliminary Injunction. The court will make the adjustments to the award of fees and expenses described above, in addition to the court’s evaluation of the reasonableness of the claim. Rivard and its attorneys shall have to and including August 24, 2007, to file any response to Ideal’s claim for fees and expenses challenging the reasonableness of the fees and expenses claimed or their relationship to litigation of Rivard’s Motion For Preliminary Injunction.
IT IS SO ORDERED.
Notes
. For present purposes, the court will not distinguish between Ideal and its parent company, Neogen Corporation.
. This counterclaim includes allegations of other false statements in Ideal’s advertising of its D3 needles, but those allegations were not material to the defendants’ motion for preliminary injunction.
. Individual defendant Meril Rivard was not identified as a movant on the motion for preliminary injunction.
. A combined motion and brief is not the preferred format for motions in this court. Rather, N.D. Ia. L.R. 7.1(d) contemplates, if it does not expressly require, the filing of a separate brief in support of a motion.
. The Eighth Circuit Court of Appeals has held that "[i]t is not permissible to award attorneys’ fees under
. Owing to electronic filing, no attorney physically signed any of the pertinent pleadings, and each of the pertinent pleadings in support of Rivard's motion for preliminary injunction indicates only an outside attorney's name as the filing attorney. Nevertheless, each such filing bears the names of all of the outside and local attorneys who have appeared for Rivard. Thus, to conclude that local counsel has no responsibility, because local counsel did not physically sign any of the pertinent pleadings would be a hyper-technical and nonsensical reading of