Federal Circuit Trims Sanction Award In Prison-Friendly Flexible Toothbrush Suit

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By Tamlin Bason

Nov. 13 — The Federal Circuit Nov. 13 affirmed-in-part, vacated-in-part and remanded a district court's sanction award against defendants and their counsel in a dispute that began as a patent infringement action over flexible toothbrushes. 

The district court cited four grounds for exercising its discretion under Federal Rule of Civil Procedure 37 to strike the defendant's pleadings—including its answer and affirmative defenses—and enter judgment in favor of the plaintiff, Loops LLC. Loops was awarded $54,718.85 in patent infringement damages for Phoenix Trading Inc.'s infringement of its patent related to a flexible-handles toothbrush designed for safe use in prison. That award, however, was not on appeal.

Instead, the Federal Circuit's review was on whether the district court abused its discretion by striking the pleadings and ordering Phoenix, its president, Wendy Hemming, and their attorney, Rick Klingbeil, to pay $200,926 in attorneys' fees and costs.

Four Grounds Reduced to Two

Some of the cited grounds for sanctions, including Hemming's false deposition testimony and violations of a discovery order, were proper, the appeals court said. However, the district court also justified the sanctions on the grounds that “Defendants may have submitted numerous false declarations in this lawsuit.”

“But a party cannot be sanctioned on the basis of mere speculation,” the Federal Circuit said. Reliance on the third ground was thus an abuse of discretion, it held.

The fourth ground for the sanction was that Klingbeil erroneously told the court that a witness, who worked for a codefendant and lived in China, did not have a visa and so had to be deposed by videoconference. The witness in fact had a visa, and so the district court included this ground as justification for its sanction.

The Federal Circuit noted that Klingbeil was actually just representing the facts as he understood them since the witness in question had lied about not having a visa. Thus, it was improper to sanction Phoenix, Hemming and Klingbeil for the misconduct of a codefendant, the court said.

It remanded and instructed the district court to determine an appropriate sanction for the two grounds left intact: the false deposition testimony and the discovery order violations.

The Federal Circuit stressed that default judgment sanctions under Rule 37 should be issued only when there are not less drastic sanctions available.

Remand for Consideration of Less Drastic Sanctions

On remand, the district court will also have to determine what role, if any, Klingbeil played in the discovery violations, since that was the only ground for which he could potentially bear personal responsibility after the third and fourth grounds were rejected.

“If Klingbeil is sanctioned for the discovery order, then the district court should determine what portion of the $200,926.00 in attorney's fees and costs were ‘caused by the failure' to comply with the discovery order,” Judge Timothy B. Dyk said.

Judges Richard G. Taranto and Raymond T. Chen joined the opinion.

Loops was represented by Stephen Michael Hogan, San Diego. Phoenix and Hemming were represented by Brooks F. Cooper, Portland, Ore. Klingbeil represented himself.

To contact the reporter on this story: Tamlin Bason in Washington at tbason@bna.com

To contact the editor responsible for this story: Tom P. Taylor at ttaylor@bna.com