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Lincoln Diagnostics, Inc. v. Panatrex

February 18, 2009

LINCOLN DIAGNOSTICS, INC., AN ILLINOIS CORPORATION, PLAINTIFF,
v.
PANATREX, INC., A CALIFORNIA CORPORATION, DEFENDANT.



OPINION

This case is before the court for ruling on various pending motions. This court has carefully considered the arguments of the parties and the documents filed by the parties. Following this court's careful and thorough consideration, this court rules as follows: (1) Plaintiff's Motions for Sanctions (#68, #73) are GRANTED; and (2) Plaintiff's Motion for Order to Bar Contradictions to Deposition (#104) is GRANTED. Plaintiff's Motion for Attorney Fees (#114) and Motion in Limine (#115) remain pending. This case remains scheduled for a bench trial on damages scheduled to commence on March 23, 2009, at 9:30 a.m.

FACTS

This case has had a lengthy and tortured history in this court. The record shows that Defendant, through its president, Dr. Ray L. Hsiao, has made every effort to avoid providing information to Plaintiff. This was apparent throughout the deposition of Dr. Hsiao taken on August 25, 2008. At one point, Dr. Hsiao specifically stated that he had information which had been requested by Plaintiff but was not going to provide it to Plaintiff. It is also clear from reading the deposition that little or no effort was made by Defendant to find some of the documents responsive to Plaintiff's Requests for Production of Documents.

The basis for Plaintiff's requests for sanctions and for attorney fees is the Opinion (#52) entered by this court on May 29, 2008. In the Opinion, this court thoroughly detailed Defendant's failure to provide any documents in response to Plaintiff's Requests for Production, which were served on Defendant on November 5, 2007. This court also recounted the fact that Defendant's purported Response to Interrogatories, filed almost two months late, was deficient in numerous respects. This court further recounted that Defendant refused to make any of the corporate representatives Plaintiff sought to depose available for depositions. In addition, this court concluded that Defendant's failure to respond in a timely manner to Plaintiff's Request for Admission of Facts resulted in the admission of all the facts included in the Request. This court also noted that Defendant, in its two-page Response to Plaintiff's Motion for Partial Summary Judgment, did not specifically respond to any of the Undisputed Material Facts listed by Plaintiff in its Motion, so that Defendant conceded Plaintiff's version of the facts. Based upon Defendant's admissions, this court granted Plaintiff's Motion for Partial Summary Judgment. This court found that Plaintiff was entitled to summary judgment on the issue of liability. This court stated that a bench trial would be held in this case solely on the issue of the proper and appropriate remedy to be awarded to Plaintiff.

In its Opinion, this court also granted Plaintiff's Motion to Compel and Request for Sanctions (#39) based upon the finding that Plaintiff had shown that Defendant had failed to comply with discovery requests so that sanctions were warranted under Rule 37 of the Federal Rules of Civil Procedure. This court ordered, in clear and simple language: (1) that Defendant was to respond fully and completely to the Interrogatories and Requests for Production served on it, in compliance with the Federal Rules of Civil Procedure, within 30 days of the date of this court's Opinion; and (2) that Defendant was to produce for deposition corporate representatives who could provide information regarding Defendant's sales and other matters related to recovery and damages within 30 days of the date of this court's Opinion. This court allowed Plaintiff 30 days to submit an affidavit documenting the attorney fees and costs it incurred as a result of Defendant's failure to respond to written discovery in a proper and timely manner. This court also granted Defendant's counsel's Motion to Withdraw as Counsel because both Defendant's attorney and Defendant agreed that there were irreconcilable differences between counsel and Defendant.

On June 9, 2008, in compliance with this court's Opinion, Plaintiff filed an affidavit stating that it had incurred $2,242.67 in attorney fees and costs on June 9, 2008.*fn1 On June 23, 2008, Attorney Paul Adami filed an entry of appearance (#55) on behalf of Defendant. Defendant, through Attorney Adami, also filed a Motion to Reconsider the Opinion granting partial summary judgment (#57). Defendant argued that its failure to timely respond to written discovery and Plaintiff's Request for Admission of Facts was attributable to Defendant's former attorney. On July 21, 2008, this court entered an Opinion (#66) and denied the Motion to Reconsider. This court pointed out that the applicable case law provided that "attorney inattentiveness is not excusable, no matter what the resulting consequences the attorney's somnolent behavior may have on a litigant." This court further noted that Defendant is a "business firm, not a hapless individual, and it has to take responsibility for the actions of its agents, including the lawyers whom it hires."

On June 30, 2008, Defendant filed a Motion for Protective Order (#59) and a Memorandum in Support (#60). Defendant sought an order allowing Dr. Hsiao to appear by telephone for his deposition as corporate representative of Defendant. Plaintiff opposed the Motion for Protective Order (#65). On July 21, 2008, Plaintiff filed a Motion for Sanctions (#68) and Memorandum in Support (#69). Plaintiff stated that, after this court's Opinion ordered Defendant to fully respond to Plaintiff's written discovery requests within 30 days, Defendant had not complied. Plaintiff noted that Defendant's change in legal counsel had done little to rectify the improper discovery efforts by Defendant "to avoid producing any relevant information or documents whatsoever." Plaintiff set out in detail the shortcomings of Defendant's most recent purported responses to Plaintiff's Interrogatories and Requests for Production. For example, Plaintiff pointed out that, in Interrogatory 17, Plaintiff asked Defendant to set forth all facts in support of the claim that the "Quick-Test[(r)] applicator[,] equipped with central stopper[,] can limit the puncture depth within 0.3-0.4 mm" (which claim was presented on the web-site). In its response to the Interrogatory, Defendant denied that it made such a claim. Plaintiff attached a copy of the package insert for Defendant's products which included the following statement:

we have designed a new test device with a stopper according to the needs of allergists. The depth of which it penetrates the skin properly is limited to 0.3 mm, increasing the reproducible accuracy.

Plaintiff argued that "it is inappropriate for Panatrex to deny ever having made such a claim when said claim exists in the package insert supplied by Panatrex with the Panatrex Products." Plaintiff also stated that, in response to Plaintiff's Requests for Production, Defendant still had failed to produce any documents or materials other than the first page of Defendant's purported federal income tax returns for specified years, some self-created tabular information and copies of limited studies. Plaintiff stated that Defendant still had not provided the information Plaintiff had requested regarding Defendant's revenues, gross margins and profits associated with Defendant's sales of the Panatrex Products for calendar years 2001 through 2007.

On July 29, 2008, Defendant filed a Second Motion for Protective Order (#71) and Memorandum in Support (#72). Defendant stated that Plaintiff's request for sale documents was a request for Defendant's customer list, which is a trade secret. On July 30, 2008, Defendant filed Dr. Hsiao's affidavit (#74) in support of the Motion.

Also on July 30, 2008, Plaintiff filed its Second Motion for Sanctions (#73). Plaintiff complained about Defendant's most recent behavior, including the fact that Defendant had not paid Plaintiff the attorney fees and costs ordered by this court. On July 30, 2008, Defendant filed its Response to Plaintiff's First Motion for Sanctions (#75). Defendant noted that Defendant had recently obtained new counsel and argued that sanctions were not warranted. On July 31, 2008, Plaintiff filed a Memorandum in Opposition (#76) to Defendant's Second Motion for Protective Order.

On July 31, 2008, a hearing regarding Defendant's Motion for Protective Order (#59) was held before Magistrate Judge David G. Bernthal. After hearing argument, Judge Bernthal denied Defendant's Motion for Protective Order (#59). On August 4, 2008, Defendant filed its Response to Plaintiff's Second Motion for Sanctions (#79). Defendant stated that it mailed a check to Plaintiff's counsel for $2,242.67 on July 29, 2008. Defendant again argued that sanctions were not warranted.

On August 5, 2008, a hearing was held before this court. This court denied Defendant's Second Motion for Protective Order (#71). This court concluded that, by failing to respond to written discovery within the original time allowed, Defendant waived any objections to Plaintiff's requests. This court therefore directed Defendant to produce documents in response to Plaintiff's Requests for Production #26 pertaining to sales of Defendant's products. This court then scheduled the deposition of Dr. Hsiao, as corporate representative of Defendant, for August 25, 2008, at 10:00 a.m. at the U.S. Courthouse.

On August 25, 2008, Dr. Hsaio appeared for his deposition and the deposition was completed on that date. This court then held a hearing and various matters and problems, including Dr. Hsiao's attempts to file material with the court and send correspondence directly to the court, were discussed. This court reminded Dr. Hsaio that it was inappropriate for someone represented by counsel to contact the court and also reminded him that it was the corporation which is a party to this case, not Dr. Hsiao, the individual. This court also stated:

Well, I'll make it clear. Please don't send any documents to the Court, to the Clerk of the Court, or to Mr. Peckert [Plaintiff's attorney]; and I'm sure you've been given that advice. But I'm telling Dr. Hsiao that on the record.

On September 10, 2008, this court entered an Opinion (#91) in this case. This court stated that, despite this court's very clear and direct admonition to Dr. Hsiao, he faxed four documents to the clerk's office in Urbana on September 9, 2008. This court further stated that corporations must be represented by counsel, so Dr. Hsiao could not represent Defendant and file documents on its behalf. This court then ordered that documents #87, #88, #89, and #90 were stricken. On September 16, 2008, this court entered another Opinion (#93). This court granted Plaintiff's Motion for Reimbursement of Reasonable Expenses, Including Attorney's Fees (#80). This court concluded that Plaintiff was entitled to recover the expenses it incurred in responding to Defendant's Motions for Protective Order. This court concluded that the motions were not "substantially justified" so that sanctions were warranted under Rule 37(a)(5)(B) of the Federal Rules of Civil Procedure. In doing so, this court specifically found that Defendant had exhibited a pervasive course of conduct that could only be described as calculated to frustrate legitimate discovery which was continued when Defendant filed Motions for Protective Order instead of complying with this court's clear order of May 29, 2008. This court also concluded that materials sent by Dr. Hsiao directly to Attorney Peckert did not need to be returned or safeguarded. This court rejected Defendant's argument that the documents were privileged and were sent "inadvertently." This court concluded that "Dr. Hsiao's complete unwillingness to comply with simple instructions and intentional defiance of those instructions must have some consequences." After Plaintiff filed an affidavit (#94) regarding the attorney fees it incurred in responding to Defendant's two motions for protective order, this court entered an Order (#97) and ordered Defendant to pay Plaintiff $2,456.25 to reimburse Plaintiff for the attorney fees it incurred in responding to Defendant's two motions for protective order.

On October 30, 2008, Plaintiff filed a Motion to Bar Contradictions to Deposition and for Sanctions (#104) and a Memorandum of Law in Support (#105). Plaintiff stated that, pursuant to this court's order, Defendant presented Dr. Hsiao as the principal corporate representative to testify in response to Plaintiff's deposition notice, with Kevin Kuo present to assist and answer questions as might be necessary. It was agreed that sworn statements by either would be deemed the testimony of Defendant. The court reporter at the August 25, 2008, deposition certified the resulting transcript on September 11, 2008. Plaintiff stated that, on October 23, 2008, Plaintiff received from Defendant an executed errata sheet, dated October 7, 2008. Plaintiff stated that, by means of the errata sheet, Defendant attempted to contradict the oral testimony provided by Dr. Hsiao on August 25, 2008. Plaintiff stated that, in a transcript consisting of 101 pages, Defendant sought to alter 35 statements made at the deposition. These attempted alterations included changing answers of "yes" to "no" and "no" to "yes" and changing names which were provided, and carefully spelled, at the deposition. Plaintiff argued that:

By means of the Errata sheet, the Panatrex representative, Dr. Hsiao, presently advances an assertion which, to [Plaintiff], appears fanciful at best. Dr. Hsiao contends that this deposition testimony was false (as herein described), because (after reflection and likely participation by Panatrex's legal counsel) he seeks to contradict his oral testimony. Panatrex's contention is advanced at a time when Panatrex no longer is required to explain to [Plaintiff] the reasons Panatrex believes it can truthfully respond affirmatively and negatively to the same question.

Plaintiff asked this court to enter an order barring Defendant from altering the deposition testimony of its representative, ...


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