Insituform Techs., Inc. v. Amerik Supplies, Inc., Civil Action No. 1:08–cv–333–TCB.

• Decision Date: 29 March 2012
• Docket Number: Civil Action No. 1:08–cv–333–TCB.
• Parties: INSITUFORM TECHNOLOGIES, INC., et al., Plaintiffs, v. AMERIK SUPPLIES, INC., et al., Defendants, v. Cosmic–Sondermaschinenbau GmbH, Third–Party Defendant.
• Court: U.S. District Court — Northern District of Georgia

850 F.Supp.2d 1336

INSITUFORM TECHNOLOGIES, INC., et al., Plaintiffs,
v.
AMERIK SUPPLIES, INC., et al., Defendants,
v.
Cosmic–Sondermaschinenbau GmbH, Third–Party Defendant.

Civil Action No. 1:08–cv–333–TCB.

United States District Court,
N.D. Georgia,
Atlanta Division.

March 29, 2012.

[850 F.Supp.2d 1342]

Benjamin R. Askew, Dean L. Franklin, Matthew Arthur Braunel, Michael L. Nepple, Thompson Coburn, LLP, St. Louis, MO, Jeffrey C. Morgan, Puja Patel, Troutman Sanders, LLP, Atlanta, GA, for Plaintiffs.

Daniel Arthur Kent, Kent Law, P.C., Alpharetta, GA, Geoffrey Kirkland Gavin, Matthew Mahoney Lubozynski, Steven D. Moore, William Henry Boice, Kilpatrick

[850 F.Supp.2d 1343]

Townsend & Stockton, LLP, Atlanta, GA, for Defendants and Third–Party Defendants.

ORDER
TIMOTHY C. BATTEN, SR., District Judge.

This case comes before the Court on the unresolved portions of AMerik Supplies, Inc. and Erik Nielson's renewed motion for entry of final judgment [709]; AMerik Supplies, Inc. and Eric Nielson's motion for partial reconsideration or clarification of the Court's June 8, 2011 order [805]; and Cosmic–Sondermaschinenbau, GmbH's motion for reconsideration of the Court's June 8, 2011 order [808].

I. BackgroundA. Overview of the Case

This is a patent-infringement suit that began in the U.S. District Court for the Eastern District of Virginia in November 2007. The original Plaintiffs were Insituform Technologies, Inc. and Insituform (Netherlands), B.V., Inc. (collectively, “Insituform”).¹ The original Defendants were AMerik Supplies, Inc. and its CEO, CFO and secretary, Erik Nielson (collectively, “AMerik”).²

Insituform holds several patents relating to a process it developed to repair sewage pipelines without incurring the expenses normally associated with such repair. In particular, Insituform's process allows pipelines to be repaired without the expense or inconvenience of digging into the ground. This is accomplished by installing a “cured-in-place pipeline” or “CIPP.” A CIPP is a flexible liner that is soaked in resin and inserted into an existing pipeline. When the resin cures, the CIPP hardens to form a “pipe within a pipe,” thus restoring the structural integrity of the pipeline.

AMerik was formerly one of several U.S. companies that sold a competing CIPP product manufactured by an Austrian company called Cosmic–Sondermaschinenbau, GmbH (“Cosmic”). Insituform claims that Cosmic's CIPP product, known as the Cosmic “Top Hat,” infringes its valid and enforceable U.S. patents.

B. AMerik's Indemnity Claims and Cosmic's Defaults

On December 10, 2007, while the case was still proceeding in the Eastern District of Virginia, AMerik filed a third-party complaint against Cosmic, seeking indemnity for any liability it might have to Insituform for patent infringement. The third-party complaint asserts the following claims against Cosmic: (1) breach of contract; (2) breach of the implied warranty against infringement, O.C.G.A. § 11–2–312; and (3) equitable indemnification. It also includes a general prayer for attorneys' fees.

On January 29, 2008, AMerik filed a separate action in this Court, seeking a declaratory judgment that Insituform's patents were invalid, unenforceable or not infringed, and asserting four claims against Cosmic. That complaint will hereinafter be referred to as the “declaratory-judgment complaint.” The four claims against Cosmic in the declaratory-judgment complaint consist of the same three indemnity claims asserted in AMerik's

[850 F.Supp.2d 1344]

third-party complaint, plus an additional claim under Georgia's vouchment statute, O.C.G.A. § 9–10–13.³ The declaratory-judgment complaint also includes a general prayer for attorneys' fees.

On January 30, 2008, 2008 WL 276404, Insituform's patent-infringement action (along with AMerik's third-party claims) was transferred from the Eastern District of Virginia to this Court. The case was later consolidated with AMerik's declaratory-judgment action.

On March 3, 2008, the Clerk entered default against Cosmic on AMerik's third-party complaint because Cosmic failed to plead or otherwise defend. Three days later, the Clerk entered default against Cosmic on AMerik's declaratory-judgment complaint for the same reason.

On April 18, 2008, Cosmic made its first appearance in the litigation by moving to set aside the defaults, arguing that it had not been served. However, the evidence showed that Cosmic's president and CEO, Johann Kübel, was served with copies of AMerik's complaints on January 29, 2008 and that he was otherwise aware of the litigation. The Court found that Cosmic had demonstrated an intentional or reckless disregard for the judicial proceedings and that it had otherwise failed to show good cause for setting aside the defaults. Thus, the motion was denied.

C. Insituform's Claims Against Cosmic, Cosmic's Participation in the Lawsuit, and the Court's Sanction of Default

On April 15, 2008, Insituform filed an amended complaint, adding patent-infringement claims directly against Cosmic. Cosmic timely filed an answer that included counterclaims against Insituform for declaratory relief, seeking to establish that Insituform's patents were invalid, unenforceable or not infringed.

After filing its answer, Cosmic actively defended against Insituform's claims by, inter alia, participating in discovery, responding to Insituform's motion for a more definite statement on Cosmic's counterclaims, filing an amended answer after the Court granted Insituform's motion for a more definite statement, and responding to Insituform's infringement contentions pursuant to Patent L.R. 4.2.

On January 21, 2009, after obtaining leave of Court, Insituform filed a second amended complaint, adding several new Defendants but bringing the same patent-infringement claims against Cosmic. After receiving an extension, Cosmic timely filed an answer to the second amended complaint, again asserting counterclaims for declaratory relief to establish that Insituform's patents were invalid, unenforceable or not infringed.

After filing its answer to Insituform's second amended complaint, Cosmic continued to actively defend against Insituform's claims by, inter alia, participating in additional discovery, serving a disclosure of invalidity contentions pursuant to Patent L.R. 4.3, filing a claim-construction brief, responding to Insituform's claim-construction brief, participating in a claim-construction hearing, and filing a post-hearing brief.

On August 26, 2009, Insituform moved for entry of default judgment against Cosmic as a sanction for discovery misconduct. The motion argued that an entry of default was appropriate because, inter alia, Cosmic had not permitted Insituform to fully inspect its Austrian facilities despite being ordered to do so, and Cosmic had withheld

[850 F.Supp.2d 1345]

information in response to an interrogatory that the Court had ordered it to answer.

On February 19, 2010, after extensive briefing, the Court denied Insituform's motion for entry of default. The Court found that Cosmic was guilty of bad-faith discovery misconduct but concluded that lesser sanctions would suffice. Specifically, the Court ordered Cosmic to pay the attorneys' fees Insituform incurred as a result of Cosmic's discovery misconduct. After Insituform submitted a statement of those fees and Cosmic had an opportunity to respond, the Court ordered Cosmic to pay Insituform $441,148.97 by May 3, 2010.

On May 28, 2010, Insituform moved for reconsideration of the Court's February 19, 2010 order based on Cosmic's failure to pay any of its attorneys' fees. On November 22, 2010, the Court granted Insituform's motion for reconsideration. The Court found that although Cosmic had ample opportunity, it failed to make any payment toward Insituform's attorneys' fees or to demonstrate an inability to pay. As a result, the Court found it necessary to impose a more severe sanction and entered default against Cosmic on Insituform's second amended complaint.

D. Insituform's Claims Against Southwest Pipeline and Southwest Pipeline's Indemnity Action Against AMerik

As previously mentioned, Insituform's second amended complaint added claims against several new Defendants. One of those Defendants is Southwest Pipeline and Trenchless Corporation. Insituform alleges that Southwest purchased Cosmic Top Hats from Cosmic and/or AMerik and resold or installed them in the United States, thus infringing Insituform's patents.

On August 30, 2010, Southwest filed a separate action against AMerik in this Court,⁴ seeking indemnity for any liability it may have to Insituform based on the Top Hats it purchased from AMerik. On February 4, 2011, the Court entered a consent judgment pursuant to a settlement agreement between Southwest and AMerik.

E. AMerik's Settlement with Insituform and Cosmic's Motion to Set Aside the Consent Judgment

On September 23, 2009, the Court entered a consent judgment pursuant to a settlement agreement between Insituform and AMerik.⁵ In the consent judgment, AMerik stipulates that it sold 15,399 Cosmic Top Hats and that those Top Hats infringed Insituform's patents. The consent judgment also provides that AMerik is obligated to pay Insituform a royalty of $200 per Top Hat sold, or $3,079,800, plus $1,782,241.24 in attorneys' fees, for a total of $4,862,041.24.

Under the Insituform/AMerik settlement agreement, Insituform has agreed to forbear from collecting on the consent judgment, so long as AMerik (1) diligently pursues a final judgment on its indemnity claims against Cosmic, and (2) if such a judgment is obtained, promptly assigns its rights under the judgment to Insituform.

On October 7, 2009, Cosmic moved to set aside the consent judgment. Among other things, Cosmic argued that its due process rights would be violated if the consent judgment were later used to determine the amount of AMerik's indemnity damages.⁶

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Cosmic further argued that the Court lacked subject-matter jurisdiction over...