Hess v. Biomet, Inc.
| Decision Date | 30 November 2022 |
| Docket Number | 3:16-CV-208 JD |
| Parties | CHARLES HESS, et al., Plaintiffs, v. BIOMET, INC., et al., Defendants. |
| Court | U.S. District Court — Northern District of Indiana |
The Court now considers whether sanctions shall issue for certain arguments defense counsel have advanced. Given that defense counsel have asserted multiple arguments predicated on unreasonable interpretations of case law, the Court finds that sanctions are warranted. Accordingly, the Court will impose a monetary fine in the amount of $1,000 against Defendants' lead trial counsel, since he was the one who signed the briefs and bears responsibility for the filings.
In its prior order, the Court reviewed the extensive factual and procedural history of this case. (DE 404 at 1-4.) The Court now only reviews the facts pertinent to whether sanctions shall issue.
On August 9, 2021, after a six-day jury trial, a verdict was entered in favor of Plaintiffs Charles Hess, Marty Higgins, Robert “Glen” McCormick, Ronald Papa, Al Tornquist, and Frank Shera (collectively, the “Plaintiffs”). (DE 379.) After the verdict was entered, Defendants Biomet Inc. and Zimmer Biomet Holdings Inc. (collectively, the “Defendants”) renewed their motion for a judgment as a matter of law. (DE 381.) The Court denied this motion and advised Defendants that if they intended “to move on their remaining equitable affirmative defenses, they had 14 days to do so.” (DE 389 at 18.) In line with this order, the Defendants then filed a motion seeking judgment in their favor on the remaining affirmative defenses, which included waiver, estoppel, laches, unjust enrichment, and acquiescence. (DE 391.) Because the sanctions issue primarily concerns defense counsel's arguments regarding waiver, the Court will review the arguments regarding waiver in some depth.
In their opening brief, defense counsel argued that Plaintiffs waived their right to dispute their long-term commissions. In support of their affirmative defense of waiver, defense counsel cited the case Pierce v. Goldsberry (“Pierce II”), 35 Ind. 317, 321 (1871) for the proposition that “waiver may . . . apply where a statement was made in a party's presence which he did not deny, if the circumstances would have, as here, called for a denial.” (DE 392 at 4.) Defense counsel went on to argue that each of the Plaintiffs had “actual and constructive knowledge that Biomet was not paying long term commissions on its subsidiaries' products.” (Id.) Finally, defense counsel argued that because Plaintiffs had “admitted in writing that Biomet had met its obligations” the “Plaintiffs waived the opportunity to claim otherwise” (Id. at 11-13.)
In Plaintiffs' response to defense counsel's opening brief, they pointed to clear, black letter Indiana law holding that “waiver is an affirmative act and mere silence, acquiescence or inactivity does not constitute waiver unless there was a duty to speak or act.” (DE 393 at 2.) Plaintiffs explained that defense counsel, in their opening brief, “did not identify any ‘duty to speak or act' on the part of [the Plaintiff] Distributors ....” (Id. at 3.) Proceeding on the assumption that defense counsel were not arguing there was a duty to speak, Plaintiffs only analyzed whether Plaintiffs (i) “knew Biomet was withholding retirement commissions and (ii) performed affirmative acts that ‘unequivocally and decisively' conveyed Distributors' surrender of those retirement commissions.” (Id. at 4.)
In their reply, defense counsel then, for the first time, argued that Plaintiffs had a duty to speak. Defense counsel explained that Indiana law holds there is a duty to speak where “Plaintiffs had access to all the information” or “even the means of knowledge.” (DE 397 at 2, 4.) Defense counsel further claimed that “silence and inaction [is] the hallmark[] of the defense[] of . . . waiver.” (Id. at 6.) Counsel also go on to draw an analogy between the instant case, where defendants had the means to “ascertain what the[ir] commissions were” and the case Hellyer Communications, Inc. v. WRC Properties, Inc., which defense counsel claims holds that laches applied because “[the tenant] had possession of the space it was leasing at all relevant times and that it was always within [the tenant's] means to measure the space.” (Id. at 7.)
Defense counsel's new argument concerning duty to speak prompted Plaintiffs to file a surresponse. (DE 399) In this surresponse, Plaintiffs argued that defense counsel had waived their argument concerning “duty to speak” by not raising it in their opening brief and by failing to even cite the black-letter law which holds that “waiver is an affirmative act and mere silence, acquiescence or inactivity does not constitute waiver unless there was a duty to speak or act.” (DE 399 at 2.) In this surresponse, Plaintiffs also explained that multiple cases defense counsel cite in their reply were actually inapplicable. (Id. at 8-11.) For example, Plaintiffs explain Hellyer was “factually inapposite” because the court had found there was a duty to speak “under the plain terms of the lease.” (Id.)
Defense counsel then filed a surreply. In this surreply, defense counsel disagreed that they were raising a new argument in their reply. Rather, they asserted that they had always claimed that “where a plaintiff has actual knowledge or even the means of knowledge, he has a duty to speak up.” (DE 401 ¶ 3.) Afterwards, they cited to six bullets of their initial brief that were ostensibly “replete with this theme.” (Id. ¶ 4.) One of these bullets was to a quotation citing Pierce v. Goldsberry, five were to bullets which concerned the law of laches, and the final bullet point was to the conclusory statement that “Plaintiffs' willful ignorance and silence until 2016 was an inexcusable failure to speak up.” (DE 401 ¶ 4.) Defendants finally explained that they have “provided an example of Hellyer . . . to illustrate that [there is an obligation to speak] where a plaintiff is charged with knowledge and stays silent.” (Id. ¶ 5.)
The Court issued an order which held, among other things, that defense counsel had waived their arguments concerning duty to speak up by not raising it in their opening brief. (DE 404 at 19.) In a separate section, the Court also explained that in making these arguments concerning waiver, defense counsel had advanced multiple “legally unreasonable” arguments which indicated “a failure to do even basic legal research before filing papers with this Court.” (Id. at 40.) The Court explained that it believed that “[d]efense counsel's failure to argue that there was a duty to speak in their opening brief waived that issue and undermined multiple of their affirmative defenses from the outset.” (Id.) The Court further explained that the cases defense counsel had cited in support of its “duty to speak” argument (i.e., Pierce and Hellyer) were being used to demonstrate propositions they did not support. (Id.) The Court then ordered counsel to show cause as to why they should not be sanctioned under Rule 11 for making out arguments which “wast[ed] the time of the Court, burden[ed] the opposing party, and “divert[ed] resources from more pressing matters.” (Id. at 43.)
Defense counsel have now filed their response to the show cause order, making this issue ripe for review.
Federal Rule of Civil Procedure 11 serves an important role for civil cases in the federal court's jurisdiction, ensuring that the “powers and machinery [of the federal courts] are engaged only to address claims and defenses that have a reasonable basis in fact and law and that are asserted only for a proper purpose.” N. Illinois Telecom, Inc. v. PNC Bank, N.A., 850 F.3d 880, 884 (7th Cir. 2017). When an attorney presents any “pleading, written motion, or other paper” to the court, Rule 11 holds them to have “certifie[d] that to the best of the persons knowledge, information, and belief . . . the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law; [and] the factual contentions have evidentiary support.” Fed.R.Civ.P. 11(b)(2)-(3).
A court may impose sanctions under Rule 11 “if a lawsuit is ‘not well grounded in fact and is not warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law.'” Cuna Mut. Ins. Soc y v. Office & Prof'l Emps. Int'l Union, Local 39, 443 F.3d 556, 560 (7th Cir. 2006) (quoting Nat'l Wrecking Co. v. Int'l Bhd. of Teamsters, Local 731, 990 F.2d 957, 963 (7th Cir. 1993). When an attorney fails to make an “objectively reasonable investigation of the facts underlying a claim or the applicable law,” Rule 11 sanctions are justified. Gottlieb v. Westin Hotel Co., 990 F.2d 323, 327 (7th Cir. 1993). In other words, “Rule 11 requires counsel to study the law before representing its contents to a federal court.” Thornton v. Wahl, 787 F.2d 1151, 1154 (7th Cir. 1986). “An empty head but a pure heart is no defense.” Id. Therefore, when determining if Rule 11 sanctions should issue, the Court must “undertake an objective inquiry into whether the party or his counsel should have known that his position is groundless.” Cuna Mut. Ins. Soc y v. Office & Prof'l Emps. Int'l Union, 443 F.3d 556, 560 (7th Cir. 2006).
If an attorney's inquiry is “objectively reasonable under the circumstances of the case,” then Rule 11 sanctions are not warranted. Gottlieb, 990 F.2d at 327.
If the court determines that Rule 11(b) has been violated, then “the court may impose an appropriate sanction on any attorney, law firm, or party that...
To continue reading
Request your trial