Angiodynamics, Inc. v. Biolitec Ag

• Decision Date: 01 April 2013
• Docket Number: No. 12–2044.,12–2044.
• Citation: 711 F.3d 248
• Parties: ANGIODYNAMICS, INC., Plaintiff, Appellee, v. BIOLITEC AG; Wolfgang Neuberger; Biolitec, Inc.; Biomed Technology Holdings, Ltd., Defendants, Appellants.
• Court: U.S. Court of Appeals — First Circuit

711 F.3d 248

ANGIODYNAMICS, INC., Plaintiff, Appellee,

v.BIOLITEC AG; Wolfgang Neuberger; Biolitec, Inc.; Biomed Technology Holdings, Ltd., Defendants, Appellants.

No. 12–2044.

United States Court of Appeals,First Circuit.

April 1, 2013.

Edward Griffith, with whom Michael K. Callan and Doherty, Wallace, Pillsbury and Murphy, P.C. were on brief, for appellants.

William E. Reynolds, with whom Bond, Schoeneck, & King, PLLC was on brief, for appellee.

Before LYNCH, Chief Judge, LIPEZ and THOMPSON, Circuit Judges.

PER CURIAM.

This is an expedited appeal from the grant of a preliminary injunction barring defendants Biolitec AG (“BAG”), Biolitec, Inc. (“BI”), Biomed Technology Holdings, Ltd., and Wolfgang Neuberger from completing a merger between the German-based BAG and its Austrian subsidiary, and from the denial of defendants' motion for reconsideration. BI, which is a U.S.-based BAG subsidiary, sold medical equipment to plaintiff AngioDynamics, Inc. (“ADI”), and agreed to indemnify ADI for any patent infringement claims. Such claims were brought against ADI by the patent-holders and ADI settled the claims. In a separate lawsuit in New York, ADI obtained a $23 million judgment (including interest) against BI under the indemnification clause. Attempting to secure payment on that judgment, ADI sued defendants in this case in Massachusetts on claims including corporate veil-piercing and violation of the Massachusetts Uniform Fraudulent Transfers Act (“MUFTA”), Mass. Gen. Laws ch. 109A, § 5. ADI alleged that BAG looted BI of more than $18 million to render BI judgment-proof and to move BI's assets beyond reach.

On August 29, 2012, the district court granted ADI a temporary restraining order which, among other things, barred defendants from “carry[ing] out the proposed ‘downstream merger’ of Biolitec AG with its Austrian subsidiary” and from “transfer[ring] any ownership interest [they] hold[ ] in any other defendant.” ADI alleged that the merger would place the company's assets out of its reach, as American judgments are unenforceable in Austria. Following the merger, the Austrian company would hold all assets and liabilities previously held by BAG. On September 13, 2012, the court issued a preliminary injunction with the same terms as the temporary restraining order. The court denied defendants' motion for reconsideration on December 14, 2012,¹see AngioDynamics, Inc. v. Biolitec AG, No. 09–cv–30181–MAP, 2012 WL 6569272 (D.Mass. Dec. 14, 2012), and defendants ² have appealed.

Our review of the grant of injunctive relief is for abuse of discretion, and we review legal questions de novo. See KG Urban Enters., LLC v. Patrick, 693 F.3d 1, 14 (1st Cir.2012).

I.

Defendants argue that (1) as a matter of law, preliminary injunctive relief is barred, and (2) the court erred in finding that ADI had demonstrated likelihood of success on the merits and irreparable harm. Defendants argue that, in the absence of an underlying court judgment, a preliminary injunction may not freeze assets as to which a plaintiff does not have a lien or equitable interest, invoking Grupo Mexicano de Desarrollo, S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308, 119 S.Ct. 1961, 144 L.Ed.2d 319 (1999). Here there is an underlying judgment against BI, if not BAG. Moreover, the Court expressly noted that state statutes “conferring on a nonjudgment creditor the right to bring a fraudulent conveyance claim .... may have altered the common-law rule that a general contract creditor has no interest in his debtor's property.” Id. at 324 n. 7, 119 S.Ct. 1961. In Iantosca v. Step Plan Services, Inc., 604 F.3d 24, 33 (1st Cir.2010), we held that where a creditor has a judgment against a debtor and can make a colorable claim that the debtor's funds have been fraudulently conveyed to other entities, “the creditors do have a claimed lien interest to support [a] preliminary injunction” freezing assets transferred to the other entities. Massachusetts law creates an action for fraudulent conveyance, Mass. Gen. Laws ch. 109A, § 5, and ADI has asserted a claim under this statute. ADI has a final judgment against BI and presented substantial evidence that under Massachusetts law, BI fraudulently conveyed $18 million of its assets to BAG, an amount less than ADI's judgment against BI. ADI also presented evidence that BAG had intermingled these transferred assets with its other funds, and that in the absence of injunctive relief there was a strong likelihood ADI would not be able to collect on its judgment. The court's injunction was narrowly tailored to protect ADI's interest in BI's transferred assets and explicitly allowed defendants to “tak[e] such actions as are reasonable and necessary to the ongoing and continued operation of the[ir] business.” Under these circumstances, Grupo Mexicano did not bar preliminary injunctive relief.

As for the court's findings regarding the four preliminary injunction factors, there was no abuse of discretion. See Swarovski AG v. Building No. 19, Inc., 704 F.3d 44, 48 (1st Cir.2013) (per curiam). The court supportably found that ADI had demonstrated a likelihood of success on its veil-piercing claim. See AngioDynamics, 2012 WL 6569272, at *9–10.

The court also supportably found that ADI had shown likelihood of success on its MUFTA claim. Defendants argue that the district court erred in failing to explicitly address six of the eleven factors enumerated in Mass. Gen. Laws ch. 109A, § 5, that are relevant for determining whether a debtor acted with “actual intent” to defraud a creditor. However, MUFTA never states that a court must explicitly consider each of the eleven factors or that a court can only set aside a transfer as fraudulent if a majority of the eleven factors are present. See id. § 5(b) (“consideration may be given” to eleven factors “ among other[s] ” (emphasis added)); Soza v. Hill, 542 F.3d 1060, 1067 (5th Cir.2008) (“[n]ot all, or even a majority, of the [eleven factors] must exist to find actual fraud” under Uniform Fraudulent Transfer Act).

ADI presented sufficient evidence to warrant a finding that five of these factors demonstrated a fraudulent transfer had taken place, and the district court did not err in concluding that based on the totality of the evidence, ADI had demonstrated a likelihood of succeeding on its MUFTA claims. Cf. Brandon v. Anesthesia & Pain Mgmt. Assocs., 419 F.3d 594, 599–600 (7th Cir.2005) (Posner, J.) (eleven factors are “not additive,” and defendant may be held liable under the Uniform Fraudulent Transfer Act if five of the eleven are present); McBirney v. Paine Furniture Co., No. 960031, 2003 WL 21094555, at *13 (Mass.Super.Ct. Mar. 31, 2003) (finding “actual intent” to defraud where five of eleven factors are present). ADI also presented direct evidence as to this claim, in the form of a declaration from a former BAG board member stating that Neuberger, BAG's majority shareholder and CEO, diverted assets from BI to BAG to frustrate collection of ADI's judgment against BI.³AngioDynamics, 2012 WL 6569272, at *5. Though defendants argue that some of this evidence could have been interpreted differently, the district court's view of the evidence was permissible and it did not clearly err.

Nor did the court err in finding that ADI had demonstrated irreparable harm. Id. at *10. Due to defendants' actions, ADI has been put through hoops and may not be able to collect on its...