How Not to Follow an Order Granting a Motion in Limine - Counsel Gets 48 Hour Jail Sentence

This Eastern District case illustrates something I tell people all the time, which is that the judges really do expect the parties to play by the rules, and attorneys or litigants who engage in the practice - common in some courts - of violating the court's orders expecting only a slap on the wrist, or some other sanction insufficient to deter the violation, often get a nasty surprise.  None nastier than in this case - but any regular Eastern District practitioner east of Dallas would have seen this coming.
The case is O2 Micro Int’l Ltd. v. Beyond Innovation Tech. Co..  If that name sounds familiar, it should because following a jury trial May 8-15, 2006 in which the jury returned a verdict, finding inducement and contributory infringement and further finding such conduct was willful, the defendants appealed a number of issues, including the court’s claim construction ruling. The Federal Circuit held that the district court erred by not construing the “only if” limitation in the claims, vacated the jury verdict, the final judgment of infringement, and the permanent injunction, and remanded the case to the district court. See O2 Micro Int’l Ltd. v. Beyond Innovation Tech. Co., 521 F.3d 1351 (Fed. Cir. 2008).
The retrial of the case is set for this month, and at the pretrial conference, Judge Everingham granted in part a motion in limine regarding the plaintiff's incorporation in the Cayman Islands and its motivation for doing so.  The Court held that with respect to the motion "[p]reclud[ing] evidence relating to O2’s selection of Cayman Islands for its headquarters: Granted in part and denied in part. Defendants may refer to the fact that O2 is a Cayman Islands corporation. The motion is granted to the extent defendants seek to offer evidence relating to taxation."  (Emphasis added).
Same ruling Judge Ward had made for the first trial.  But at jury selection last week, counsel
for one of the defendants BiTEK, John David van Loben Sels, after noting that the plaintiff was a Cayman corporation - which was permitted - asked the following question of the jury panel, “now, are there any of you who have a problem with a company that puts its headquarters offshore on a Caribbean island in order to avoid paying U.S. taxes?”
Judge Everingham instructed the jury to disregard the question, and after jury selection, this court gave Mr. van Loben Sels an opportunity to provide an explanation as to why he violated the motion in limine. Mr. van Loben Sels told the Court that he did not intend to violate the order on the motion in limine and that he believed, by asking the question in a hypothetical manner, without mentioning O2 Micro, he would avoid violating the order. The Court rejected Mr. van Loben Sels’ argument and found that he intentionally violated the pretrial order in limine.  Judge Everingham further held Mr. van Loben Sels in contempt of court and
sentenced him to 48 hours in jail. The sentence was suspended, pending completion of the trial, with the Court indicating that if Mr. van Loben Sels did not violate any further orders of the court, then his sentence would be considered discharged.  Judge Everingham declined to assess case-dispositive sanctions against BiTEK as a result of its counsel's conduct, but considered other sanctions and in an order on Friday informed the parties what those sanctions were.
"BiTEK, through its counsel, has undermined the parties’ expectations to a trial by a jury selected from the panel summoned according to the regular process of the court," Judge Everingham wrote. "In light of the court’s ruling on the motion in limine, it is no answer that the question was phrased in the hypothetical. By design, the question was intended to prejudice the jury against the plaintiff, which had been introduced as having its headquarters in the Cayman Islands. Moreover, the question directly related to tax motives, clearly within the scope of subject matter the court had excluded by the order in limine."
Although the conduct was "flagrant and intentional," he continued, "the Federal Circuit has
made clear that “death penalty” sanctions, such as those requested by O2 Micro, may be imposed in only the most limited circumstances." See ClearValue v. Pearl River Polymers, Inc., 242 F.R.D. 362 (E.D. Tex. 2007), rev’d in part, 560 F.3d 1291 (Fed. Cir. 2009) (addressing sanctions for discovery violations). Interestingly, as regular blog readers know, in ClearValue Judge Davis in Tyler entered death penalty sanctions against the plaintiff during trial for failure to disclose test results, but was reversed by the Federal Circuit, thus indicating that courts should perhaps tack in the direction of lesser sanctions wherever possible - as Judge Everingham did here. 
But Judge Everingham noted that the court’s task here was complicated by the fact that there are multiple defendants in this case and only BiTEK was culpable. A sanction in the form of curative and/or punitive jury instructions against BiTEK runs the risk that the adverse effects will “spill over” onto the other defendants.  "In any event, such instructions would only highlight the overly prejudicial question to the panel. In the current posture of the case, a sanction in the form of the preclusion of BiTEK’s evidence runs the risk of being ineffectual as to BiTEK. The only issues in the case are infringement and willfulness, and the other defendants would be able to introduce non-infringement evidence favorable to BiTEK because they purchase the accused products from BiTEK. Furthermore, the court finds that monetary sanctions are inappropriate in this case. An order simply requiring BiTEK to pay all costs associated with the jury selection would be insufficient in this case. To hold otherwise would effectively allow a litigant to buy a new jury panel by intentionally violating the court’s orders in limine. Even if the court were to impose a substantial fine, in cases of this magnitude, parties might well have the incentive and the financial resources to engage in this type of conduct."
So what to do? 
"Accordingly, this court finds the following sanctions to be warranted: At the plaintiff’s
election, the court will grant O2 Micro’s motion for a mistrial. Furthermore, the court will sever the case against BiTEK from the case against the remaining defendants. The court will summon a new jury panel for July 27, 2009, and will proceed to trial in the case involving BiTEK." And a lot of Eastern District lawyers could have written much of the next paragraph - it's the Anderson v. Ford formula for sanctions, first developed a number of years back by Judge Ward in a products case where he found that Ford had not produced documents in compliance with the Court's order. "The court will limit BiTEK’s voir dire time to 15 minutes; O2 Micro will receive 30 minutes. The court will also limit BiTEK to two peremptory challenges. O2 Micro will receive four peremptory challenges. The court will instruct the jury panel that BiTEK has received less time in voir dire because its counsel intentionally violated a court order in the first jury selection, and the violation required the court to dismiss the jury that was originally selected and summon the new jury panel. In addition, BiTEK will not be entitled to call an expert witness on the issue of infringement. See, e.g., Livingston v. Isuzu Motors, Ltd., 910 F. Supp. 1473 (D. Mont. 1995) (precluding, in a product liability case, the defendant from offering additional evidence after the defendant violated a pretrial ruling prohibiting introduction of evidence that the plaintiff was not wearing a seat belt). Finally, BiTEK will pay all of the parties’ costs and attorneys’ fees involved in the first jury selection and will pay the plaintiff’s costs and attorneys’ fees in having to try the severed case against the remaining defendants. Any judgment rendered in the case against BiTEK shall not have preclusive effect against the remaining defendants. The court shall try the case pending between O2 Micro and Lien Chang and FSP in a separate action after the BiTEK trial has been completed. . . The court has considered lesser sanctions and finds that they are insufficient under the circumstances of this case."
As I said at the top, there are some courts that don't enforce their rulings, and parties know that there is a tactical benefit to violating an order because the penalty for getting caught will be outweighed - often substantially so - by the advantages the violation confers.  Not here.  If there's a benefit to be obtained, local practitioners know that the Court's penalty will be crafted to ensure that that benefit is wholly, completely, and irretrievably lost, and that the penalty coming back at the violator will be painful (the Harrison County Jail is not a real fun place to spend a couple of days, but I'd take it any day over explaining to my client that we don't get to call a noninfringement expert and the jury's going to be told we're a cheater, both because of something I did.)
I guess the silver lining is that the defendant did finally figure out how to get a separate trial!