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Sigma-Tau Industrie Framaceutiche Riunite

June 7, 2000

SIGMA-TAU INDUSTRIE FRAMACEUTICHE RIUNITE, S.P.A., ET AL., PLAINTIFFS,
v.
LONZA, LTD., DEFENDANT.



MEMORANDUM ORDER

This is a declaratory judgment action in which plaintiffs seek a determination that U.S. Patent No. 5,073,376 ("the '376 patent") is invalid and not infringed. During the course of discovery, plaintiffs took the deposition of Stephen Blum, then an employee of defendant and a co-inventor of the patent which plaintiffs have alleged is prior art to the '376 patent.

After the close of discovery, plaintiffs sought leave to reopen discovery, and to redepose Mr. Blum and conduct follow-up discovery with respect to Blum's corrections of his deposition testimony. See Plaintiffs' Motion for Leave to Reopen Discovery to Redepose Stephen Blum and Conduct Discovery of Matters Raised Therein. By an Order entered on July 27, 1998, the trial court granted the motion. The trial court found that "[m]any of the proposed revisions reveal that Mr. Blum did not respond accurately and completely to the questions posed at his deposition[,]" and that "the significantly different answers now proposed by Mr. Blum ... [are] ample justification for plaintiffs' request to re-depose Mr. Blum." July 27, 1998 Order at 2. By the same Order, the trial court referred to the undersigned any disputes between the parties regarding the reasonableness of the follow-up discovery. July 27, 1998 Order at 3. In a subsequent Order, the trial court referred to the undersigned for resolution the plaintiffs' allegations that counsel for defendant caused the re-deposition by instructing Mr. Blum to lie, to withhold information and not to correct his original deposition testimony. September 16, 1998 Order at 2; see Plaintiffs' Supplemental Opposition to Defendant's Motion for Partial Reconsideration of the Order Granting Leave to Reopen Discovery to Re-Depose Stephen Blum and Conduct Discovery of Matters Raised Therein at 2-3. These and other allegations of misconduct by both defendant and its counsel were the subject of Plaintiffs' Motion to Compel Production of Withheld Documents and Testimony Under the Crime-Fraud Exception to the Attorney-Client Privilege and Work Product Immunity Doctrine (Docket No. 117).

During the course of five days in December, 1998, the undersigned heard testimony from six witnesses - - including Mr. Blum and Bert Lewen, one of defendant's counsel - - and reviewed 84 exhibits, 58 of which were received into evidence. At the conclusion of the hearing, counsel for the parties met and conferred in accordance with the undersigned's order. In the written report of their conference, plaintiffs identified seven acts which they alleged were relevant to their allegations of fraud, all involving conduct by Mr. Lewen with respect to Mr. Blum. See Stipulations of the Parties Regarding Issues Before the Court as a Result of the Hearing Pertaining to [Plaintiffs'] Motion to Compel Production of Documents (Docket No. 138) ("Stipulations") at 3-4. Plaintiffs withdrew their allegations of fraud against lawyers David Francescani and Maryann Hayes, as well as the various officers and employees of Lonza, Inc. and Lonza AG against whom such allegations were initially made. *fn1 Stipulations at 4. Plaintiffs also withdrew their allegation that Mr. Lewen committed an act of fraud by taking a position he knew to be incorrect. *fn2 Stipulations at 5.

Upon consideration of the evidence offered at the hearing, the oral arguments of counsel, the parties' written submissions and the entire record herein, the undersigned found that no credible evidence was offered in support of plaintiffs' allegations that Mr. Lewen, through his participation in either the document review at Mr. Blum's home or the preparation of Mr. Blum for the December, 1997 deposition, committed any fraud on the Court. The undersigned further found that plaintiffs failed to demonstrate that Mr. Blum offered any testimony at his December, 1997 deposition which was false. Finally, the undersigned found that even assuming, arguendo, that Mr. Blum willfully offered false testimony during his December, 1997 deposition, plaintiffs did not show that Mr. Lewen knew that Mr. Blum's testimony was false. More specifically, the undersigned found that Mr. Lewen never directed Mr. Blum to testify falsely; had no knowledge that any testimony offered by Mr. Blum was false; and had no reason to believe that Mr. Blum would testify falsely. On the basis of those findings, the undersigned denied Plaintiffs' Motion to Compel Production of Withheld Documents and Testimony Under the Crime Fraud Exception to the Attorney-Client Privilege and Work Product Immunity Doctrine. Sigma-Tau Industrie Farmaceutiche Riunite, S.p.A., et al. v. Lonza, Ltd., 48 F. Supp.2d 16 (D.D.C. 1999).

By a motion filed on December 6, 1999- - nearly ten months after the entry of the Order denying plaintiffs' motion to compel - - defendant moves, pursuant to Rule 37(a)(4)(B) of the Federal Rules of Civil Procedure, for entry of an order awarding reasonable fees and expenses incurred in defending plaintiffs' motion to compel. See Defendant/Counter-Plaintiff's Motion for Fees and Expenses Pursuant to Rule 37(a)(4)(B), FED. R. Civ. P (Docket No. 162). In the memorandum in support of its motion, defendant maintains that [r]epeatedly, Plaintiffs represented to the Court that the entire process of new depositions, additional documentary production and a five-day hearing was necessary in order to obtain critical evidence relating to the patent-in-suit which was kept from them during the initial deposition of Mr. Stephen Blum, Defendant's former employee. In doing so, Plaintiffs presented a tale of Machiavellian-intrigue, complete with allegations of coercion, conspiracy to commit perjury and double-crossing. Instead, the uncontroverted evidence showed that Mr. Blum's accusations were nothing more than the ramblings of a deeply troubled individual seeking the proverbial "pound of flesh" from an employer who he felt had betrayed him.

Defendant/Counter-Plaintiff's Memorandum of Law in Support of its Motion for Fees and Expenses Pursuant to Rule 37(a)(4)(A), FED. R. Civ. P. ("Defendant's Memorandum") at 2.

Defendant further maintains that

[s]o incredible and nonsensical was Mr. Blum's testimony that it cannot, in good faith, be argued that Plaintiff's motion contained the requisite "substantial justification" for a bona fide motion to compel under Rule 37, FED. R. Civ. P. As such, Plaintiffs should be made to bear the expenses, including attorneys fees, incurred by Defendant in opposing this baseless motion.

Defendant's Memorandum at 3. Defendant submits that "all of the evidence presented by the parties at the hearing was already known to plaintiffs," and that there was "absolutely no justification to proceed with the hearing after discovery on the matter was taken and there are no circumstances which make an award of expenses unjust." Id.

Plaintiffs, in their opposition, argue that defendant's motion "is predicated upon what is at best described as a disingenuous reconstruction of the record." Plaintiffs' Opposition to Defendant's Motion for Fees and Costs Associated With Sigma Tau's Motion to Compel Production ("Plaintiffs' Opposition") at 2. Plaintiffs further maintain that defendants bear the "singular responsibility for the court's decision to receive oral evidence" by reason of their assertion of an "' absolute right to present both testimony and argument' on the crime-fraud issue." Id. Plaintiffs state that they "never independently sought a hearing at all." Id.

Plaintiffs submit that defendant's decision to put on five witnesses at the hearing "belies its contention that Mr. Blum's incredibility was so patently obvious that plaintiffs should have withdrawn their motion prior to the hearing." Plaintiffs' Opposition at 4. Plaintiffs maintain that they have met their burden of "substantial justification," and that defendant's motion for an award of costs and fees must therefore be denied. Id. at 4-5.

Defendant, in its reply, asserts that plaintiffs have made no attempt to justify their actions in proceeding with the hearing after discovery on the crime-fraud issue was completed, or in proceeding with the hearing on the sole basis of the "incredible testimony of Stephen Blum[.]" Defendant/Counter-Plaintiff's Reply Memorandum of Law in Support of its Motion for Fees and Expenses Pursuant to Rule 37(a)(4)(B), FED. R. CIV. P. ("Defendant's Reply") at 2. Defendant also asserts that "Plaintiffs neglect to address the fact that at the completion of the hearing, they dropped all charges against two of Defendant's three attorneys and all of [the] Lonza employees whom they initially charged with witness subornation." Id. Defendant submits that

Plaintiffs' voluntary dismissals of all of their fraud allegations against Lonza and its attorneys (with the exception of attorney Lewen) at the end of the hearing and the Court's total rejection of Plaintiffs' fraud allegations against Mr. Lewen provide ample evidence of the lack of substantial justification for Plaintiffs' proceeding with the motion to compel hearing.

Defendant's Reply at 6. Defendant also argues that "Plaintiffs have utterly failed to address the merits of Defendant's motion and for that reason alone, Defendant's ...


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