A more detailed account of the historical facts of this case is recorded in the many orders of this Court, but in particular in Memorandum and Order dated March 31, 1998 [doc. # 102]; Memorandum and Order dated December 9, 1999 [doc. # 394]; and Memorandum and Opinion dated July 23, 2000 [doc. # 691]. In more concise form, the following recitation is set forth.
Pioneer brought its civil action against Monsanto requesting declaratory judgment relief, injunctive relief, and monetary relief arising from a Development/License Agreement dated July 1, 1993 (Agreement) entered into between the parties to develop a genetically engineered elite seed corn line based on the bacterium Bacillus thuringgienis (Bt). The Bt bacterium expresses an insecticidal protein and incorporation into the corn causes the corn plants to repel damaging insects, including the European Corn Borer (ECB) which annually costs producers many millions of dollars in crop damage. Bt corn has significant commercial value because it eliminates the need to spray insecticides on corn plants for ECB control, which in some years must be repeated several times. It is considered to be environmentally beneficial. Pioneer, an Iowa corporation, is the world's largest producer of commercial seed corn. Monsanto is a Delaware corporation with its principal place of business in St. Louis, Missouri. It is a world leader in plant biotechnology.
The Agreement provided that Monsanto grant to Pioneer a limited license of patent rights relating to Bt genes and provide genes, vectors and Monsanto technology to Pioneer. Monsanto had acquired a license from DeKalb, a major competitor of Pioneer, which allowed Monsanto to achieve the required transformation events (insertion of Bt genes into corn plant cells). Under the Agreement, Pioneer was to breed the transformed plant material into its corn lines and identify successful transformation events that resulted in Bt corn that conferred ECB resistence. The parties, under the Agreement, were to confer and select a corn line which would be advanced by Monsanto to obtain regulatory approval. Pioneer bred the Monsanto supplied material into its corn lines and identified three transformation events it considered to be the best. They were “Ezra,” “Quincy,” and “Absurd.” The parties conferred and selected the Ezra event as the subject for regulatory approval. Monsanto received regulatory approval of its Bt gene known as YieldGard on December 26, 1996. These companies formed an alliance to achieve a limited objective. Before the Agreement was executed, both were engaged with other companies to promote their independent long-range goals which marked them as competitors in the international marketplace.
*2 Pioneer began successfully selling the transgenic corn product and has paid Monsanto $28 million under the Agreement. The final payment due Monsanto from Pioneer was payable under the Agreement upon “the cumulative sale of fifty-thousand (50,000) units of Licensed Corn Seed anywhere in the world....”
On April 26, 1996, over five months after selection of the Ezra event, DeKalb Genetics Corporation (DeKalb) filed two lawsuits against Pioneer and on July 23, 1996, filed two additional suits against Pioneer. A fifth suit against Pioneer was filed on August 27, 1996. All suits allege infringement of DeKalb patents relating to the making and using of transgenic corn plants, seeds, and progeny “through the process of microprojectile bombardment.” The Ezra, Quincy, and Absurd events were created through the process of microprojectile bombardment.
In 1996, Monsanto and DeKalb entered agreements whereby Monsanto acquired a minority equity interest in DeKalb. In an earlier agreement, Monsanto acquired a license for certain DeKalb Bt corn technology including DeKalb's patent protected claims to microprojectile bombardment. By agreement between Monsanto and DeKalb, Monsanto is permitted to sub-license the technology to hybrid seed corn companies smaller than DeKalb. Since Pioneer, the nation's largest seed corn company, is not smaller than DeKalb, Monsanto cannot grant Pioneer a sub-license.
In September, 1995, before the Monsanto-DeKalb equity agreements, Pioneer and Mycogen announced an intention to join in a “major technology and development collaboration ... to develop transgenic crops with built-in insect resistence. Pioneer agreed to provide $51 million to Mycogen, including $21 million for research and development and $30 million to purchase 3 million shares of Mycogen common stock. Pioneer committed to provide extensive research to joint product development including Bt corn. Contemporaneously with this announcement, Mycogen initiated patent litigation against Monsanto.
On the 27th day of March, 1997, Pioneer filed suit in the United States District Court for the Western District of Wisconsin seeking in Count I, “Declaration of Rights”; in Count II, “Specific Performance”; in Count III, “Breach of Contract”; in Count IV, “Breach of Covenant of Good Faith and Fair Dealing”; in Count V, “Breach of Warrant Against Infringement”; and in Count VI, “Breach of Fiduciary Duty”; all related to the Agreement. That case was subsequently transferred to this Court on the August 1, 1997, on Motion to Transfer under 28 U.S.C. § 1404(a) filed by Monsanto. Monsanto thereafter filed three counterclaims against Pioneer on May 15, 1997, in this Court.
In its first counterclaim, Monsanto sought termination of the Agreement based upon the doctrine of anticipatory repudiation. In Count II, Monsanto claims it was entitled to termination of the Agreement based upon material breach of the Agreement by Pioneer when it failed to make a $10 million payment. In Count III, Monsanto again sought to terminate the Agreement based upon a claimed material breach of the Agreement by Pioneer when it made a public statement, violating the Agreement, by appending a copy of the Agreement to its Complaint filed in Wisconsin. On March 31, 1998, in a Memorandum and Order [doc. # 102], this Court entered summary judgment in favor of Monsanto against Pioneer on Pioneer's complaint. At that time, only Monsanto's three counter-claims were before the Court. On October 26, 1999, Monsanto sought leave to file Count IV of its counterclaim alleging illegal stacking of Monsanto's Bt corn technology with herbicide tolerant technology and Count V of its counterclaim which charges revelation of Monsanto's confidential information to a third party (Mycogen) and illegal use of its technology, and under both counts, under the express terms of the contract, Monsanto sought to terminate the Agreement.
*3 Pioneer deposited the sums of $5,000,000.00 and $5,542,793.95 into the Registry of this Court on April 9, 1998, and on April 23, 1998, subsequently deposited the additional sum of $535,836.19 for the difference between what the escrow account earned plus 2% over the prime interest rate as described in the Agreement. These funds remain in an interest-bearing account in this Court's Registry. Section 4.4(e) of the Agreement states that Pioneer shall compensate Monsanto in the form of “A payment of Ten Million Dollars ($10,000.000.00) due and payable upon the cumulative sale of fifty thousand (50,000) Units of Secured Corn Seed anywhere in the world....” There is no dispute that the payment was about to become due when Pioneer filed its complaint in this case. The parties agree the payment became due April 7, 1997.
In response to Monsanto's counterclaims seeking termination of the Agreement, Pioneer maintained that any breach of the parties contract must be a “material breach under Section 241 of the Restatement of Contracts” before the contract could be terminated by the Court. Monsanto vociferously resisted adoption of this asseveration by Pioneer. Pioneer's view was that materiality of any breach is a question of fact for the jury to decide. In a Memorandum and Order dated November 25, 1998 [doc. # 174], the Court adopted Pioneer's arguments concluding that Section 241 of the Restatement of Contracts applied to the facts of this case and that a jury issue existed concerning materiality of alleged breaches of the Agreement by Pioneer.
Pioneer filed Motions for Summary Judgment on Monsanto's first three counterclaims. In a Memorandum and Order dated December 9, 1999 [doc. # 394], this Court granted the motion, in part, dismissing Count one and denying relief on counts two and three.
Late in the litigation, Monsanto sought to recover “royalty” damages to be calculated on sales of licensed corn seed by Pioneer with Monsanto's Bt technology from a time the Court should declare the Agreement with Pioneer terminated. In addition to specifically designated Counts I through V of its counterclaim, Monsanto pleaded “Additional Counterclaims” against Pioneer moving the Court to “award Monsanto damages in an amount to be determined.” Based upon this prayer, Monsanto sought royalty damages.
On November 19, 1999, Pioneer filed a Motion for Sanctions [doc. # 381] under Rule 37(e)(1) to preclude Monsanto from calling additional witnesses to support this claim and presenting any proof on the “monetary damages claim.” That motion was considered by the Court and granted, in part. The Court found that Monsanto should not be precluded from asserting its claim for post-termination damages, concluding for the purpose of ruling on that motion, that Monsanto's conduct did not violate Rule 26 and that a sanction sought by Pioneer would not be appropriate under Rule 37, but that Pioneer should have additional discovery on the motion, that Monsanto's conduct “may have led Pioneer to believe ... that Monsanto no longer wished to claim post-termination damages, ... when Monsanto did list such damages in response to interrogatories 6 and 12 and did not provide evidence in regards to such damages at the 39(b)(6) deposition.” While the Court concluded that Monsanto's conduct did not warrant an order to preclude Monsanto from presenting post-termination damages, a lesser sanction was deemed appropriate and in a separate order acknowledged that Pioneer should receive counsel fees and costs. Those fees and costs will be assessed in this Order.
*4 Pioneer's Motion for Summary Judgment regarding Monsanto's request for royalty damages was sustained in a Memorandum and Order dated July 28, 2000 [doc. # 691]. In that same order, Pioneer's motion for summary judgment regarding Section 7.1(a) of the Agreement on Monsanto's fifth counterclaim was granted but denied as to Section 7.1(c) of the Agreement. Count V of the counterclaim consists of requests for relief under Section 7.1(a) and Section 7.1(c) of the Agreement. Monsanto alleges that Pioneer revealed its confidential information without its permission, thereby breaching Section 7.1(a) of the Agreement. Monsanto, in the same counterclaim, requested relief under Section 7.1(c) of the Agreement because Pioneer used confidential information of Monsanto for purposes other than performing its responsibilities under the Agreement without Monsanto's written permission. Monsanto continued to receive discovery materials from Pioneer up to and well into the trial. On the 4th day of August, 2000, while the trial was in recess as the Court was still ruling discovery disputes caused by Pioneer's late production, or failure to produce documents, upon motion of Monsanto, the Court reinstated that part of Count V of Monsanto's counterclaim previously dismissed.
Sixty-nine hours and thirty-five minutes of in-court time considering pre-trial motions is recorded by the court clerk. Eight hundred and forty-five entries on 115 pages of docket sheets are reported. After several modifications of Case Management Orders, the case was finally set for trial and the jury was summoned on August 2, 2000, when voir dire was completed. These facts fail to reveal the sordid history of this case. Monsanto methodically sought to obtain pre-trial disclosure of Pioneer records and documents, and Pioneer engaged in, what came to be observed by the Court, a pattern of intentional obstruction of the orderly and lawful disclosure and discovery of its records and documents. Pioneer's conduct caused very substantial delay in the disposition of this case and extreme prejudice to Monsanto. Hereafter, the Court will supply details of Pioneer's abusive behavior which resulted in imposed sanctions.
Because the Court was still hearing arguments on discovery, the jury was instructed to return on August 4, 2000, at 9:00 a.m. Among other motions, on August 4, 2000, the Court heard Monsanto's motion for default judgment and sanctions. The motion was denied. The jury was again contacted and instructed to return on August 7, 2000, when the oath was administered and the jury was told to return on August 9. In the meantime, the Court continued to hear arguments on pre-trial matters and rule disputed discovery issues. On August 9, 2000, opening statements were made and the evidentiary phase of the trial finally proceeded, after a one-week delay. The evidence was closed on August 22, 2000. The case was argued and submitted on August 23, 2000.
The jury returned verdicts finding Pioneer's failure to pay $10 million when due to Monsanto to be a material breach of the contract (Monsanto's counterclaim Count II); that Pioneer's attachment of the Agreement to its original Complaint was a material breach of the Agreement (Monsanto's counterclaim Count III); that Pioneer's stacking of Monsanto's Bt corn technology with technology that confers herbicide tolerance was a material breach of the Agreement (Monsanto's counterclaim Count IV); that Pioneer's use of Monsanto's Confidential Information for purposes other than performing its responsibilities under the Agreement was a material breach of the Agreement; that Pioneer breached the Agreement by disclosing Monsanto's Confidential Information to Dow Agro Sciences, formerly Mycogen, and that Pioneer's breach of the Agreement by disclosing Confidential Information to Dow Agro Services or Mycogen was a material breach of the Agreement (Monsanto's counterclaim Count V).
*5 The Court will now make rulings on pending motions. It is the Court's intention to rule all remaining outstanding motions so that the judgment herein is in all respects final for purposes of appeal.
1. “Monsanto's Motion to Stay the Entry of Final Judgment and Memorandum in Support” [doc. # 747] is DENIED; and
2. “Monsanto's Motion for Entry of Judgment Granting Relief Based on Jury's Verdict” [doc. # 750] is, in part, SUSTAINED as follows:
(a) That the July 1, 1993 Development/License Agreement between Pioneer is terminated effective on June 12, 1998, sixty days after Monsanto's notice of termination;
(b) Monsanto is awarded $10 million under the Agreement, which sum is held in the Court's Registry. The Clerk of the Court is ordered to pay Monsanto the $10 million sum so deposited together with accumulated interest. The Clerk of the Court is ordered to pay Monsanto the $10 million sum, plus the additional $1,078,630.14, so deposited by Pioneer, together with accumulated interest, less administrative fees;
(c) Pioneer shall destroy biological material discovered through the use of Monsanto's Bt technology, including the following:
(1) all so-called 149B1 events and all germplasm, seeds, and plants derived from any 149B1 event;
(2) all so-called Cry2A events, and all germplasm, seeds, and plants derived from any Cry2A event;
(3) all plant material derived from streptavidin events TC11001, TC11003, TC11008, TC11127, and TC11128;
(4) all plant material derived from TSS events TC676, TC677, TC678, TC680, and TC1922;
(5) all so-called GA21 events and all germplasm, seeds, and plants derived from any GA21 event;
(6) all so-called MON832 events and all germplasm, seeds, and plants derived from any MON832 event;
(7) all plant material derived from Pentin-1 constructs P11184, P11335, and P11443;
(8) all plant material derived from 80JJ1 constructs P11005 and P11007;
(9) all plant material derived from Pentin-1 constructs P11184, P11335, P11443 and 80JJ1 constructs P11005 and P11007.
The Court believes that the destruction of Cry1F events and all germplasm, seeds, and plants derived from Monsanto technology is not justified from the record in this case. The Court concludes that in comparison to the relatively minor use of Monsanto technology in the development of Cry1F and the catastrophic consequences to Pioneer in granting such an order, such an award would be so destructive to Pioneer as to be inconceivable under all of the evidence presented in this case.
All materials ordered destroyed shall be destroyed within ninety (90) days of this Order.
3. “Monsanto's Motion to Bifurcate Trial on Damages” [doc. # 751] is DENIED;
4. “Pioneer's Motion for Judgment as a Matter of Law or, in the Alternative, For a New Trial” [doc. # 754] is DENIED;
5. “Pioneer's Motion to Stay Proceedings and Compel Arbitration” [doc. # 763] is DENIED;
6. “Third-Party Aventis Cropscience, N.V.'s (“Aventis”) Motion to Intervene for Limited Purpose of Obtaining Access to Certain Judicial Record” [doc. # 784] will now be addressed.
*6 Aventis has requested this Court to unseal certain judicial records and trial exhibits currently sealed under a protective order entered in this case. Aventis argues that it is both in the public interest, and in the interest of Aventis (who is currently involved in litigation against Pioneer), for this Court to unseal the judicial records and trial exhibits in this case, as well as opening any further proceedings in the case. Both Pioneer and Monsanto object to this motion by Aventis.
“While recognizing a common law right of access to court records, the Eighth Circuit has expressly declined to adopt a ‘strong presumption’ of common law access.” Jochims v. Isuzu Motors, Ltd., 151 F.R.D. 338, 342 (S.D.Iowa 1993) (citing United States v. Webbe, 791 F.2d 103, 106 (8th Cir.1986)). Whether court records should be sealed is a decision left to the sound discretion of the trial court. Jochims, 151 F.R.D. at 340 (citing Webster Groves Sch. Dist. v. Pulitzer Publishing Co., 898 F.2d 1371, 1374 (8th Cir.1990)).
Moreover, the Supreme Court has recognized that “[e]very court has supervisory power over its own records and files,” and the right of inspection may be overridden where the records are sources of confidential business information, the disclosure of which could harm a litigant's competitive standing.
Jochims, 151 F.R.D. at 340-41 (quoting Nixon v. Warner Communications, Inc., 435 U.S. 589, 599, 601 (1978)). “Neither the Supreme Court nor the Eight Circuit has recognized a constitutional right of access in a civil case.” Jochims, 151 F .R.D. at 342 n. 8 (citing Webster Groves, 898 F.2d at 1377)). The mere fact that the public has an interest in viewing court records does not negate a party's “interest in maintaining the confidentiality of those proprietary confidential documents.” Jochims, 151 F.R.D. at 341-42.
Aventis bears the burden of proof in attempting to show that the protective order in this case should be modified or amended to allow disclosure of the named court records in Aventis Supplement to Motion of Third Party Aventis Cropscience, N.V. to Intervene [document # 789]. “[W]hen an attempt is made to amend or lift [a protective order], there must be a showing that intervening circumstances have obviated or eliminated any potential prejudice to the protected party.” Id. at 342.
Even if Aventis had managed to produce evidence of intervening circumstances sufficient to obviate or eliminate potential prejudice to Monsanto and Pioneer, the scope of the requested production is so broad as to leave this Court with no alterative but to conclude that Aventis is unable to point to any specific exhibits or documents to which it believes it is entitled. During the in-court hearing on this Motion, Aventis stated to the Court that it would provide the Court with a list of the relevant trial exhibits and court records which it believed was necessary to be produced. This list includes some 170 court records, and makes no mention of the intervening circumstances which would justify the post-trial modification and amendment of the protective order entered in this case. Although there may be ongoing litigation between Aventis and Pioneer, and that production of all of these court records may serve the end of judicial economy, the Court is not convinced that the prejudice to Pioneer and Monsanto has been obviated or eliminated by intervening circumstances. Third Party Aventis Cropscience, N.V.'s (“Aventis”) Motion to Intervene for Limited Purpose of Obtaining Access to Certain Judicial Records [document 784] is DENIED.
*7 Finally, the Court will consider and rule outstanding oral and written motions for attorneys fees, costs and appropriate remedies for sanctionable conduct. This case features two large international companies that compete in a world marketplace where each possesses highly sensitive and secret information, protected by patents and supplemented by licensing agreements with other companies which are sometimes in a competitive position. In an age of worldwide mergers and acquisitions, protection of competitive advantages can become a sophisticated management nightmare. The quest for dominance and prevalence at any cost by corporate officers and managers can pose a significant threat to the orderly functioning of the courts that are called upon to resolve disputes in this hostile environment. Without a reasonable expectation that parties, without regard to their financial or social standing, will comply with the rules of law that govern an orderly society, the most powerful are given an advantage to prevail over the lesser advantaged or unsuspecting adversary that abides by rules which are put in place to give all equal opportunity under the law. No party is entitled to special dispensation in order to protect a competitive advantage, to gain relief from the necessity of strict compliance with the Rules of Civil Procedure or to claim that competition in the market place justifies deceptive practices and the withholding of information to defeat a competitor's claim. The Court is convinced in this case, that Pioneer wilfully engaged in deceptive practices designed to prevent Monsanto from learning of information that was damaging to Pioneer. Pioneer did this notwithstanding orders by the Court, pursuant to rulings on motions to compel, requiring the disclosure of information to Monsanto. The profession has concluded, over centuries, that pre-trial development of the facts is preferred to trial by ambush, because it promotes alternative means of disposition of litigation, and methodical preparation and eventual trial, when indicated. Some accommodation must be made when material that is discoverable is not surrendered because of inadvertence. The law recognizes that when a party is dilatory about surrendering material, a motion to compel, timely ruled, will usually serve to secure information a party needs to prepare adequately for trial. The law also provides a remedy, under the unusual circumstances, when a party wilfully impedes the orderly disposition of a case to the prejudice of an opponent. Regrettably, it is this kind of action by Pioneer which repeatedly caused delay in disposition of this case and extreme prejudice to Monsanto which requires this Court to impose sanctions under Fed.R.Civ.P. 37.
At an early stage in the litigation, when Monsanto sought dismissal of Pioneer's pleadings pursuant to Rule 37, the Court stated a preference to allow both parties the opportunity to have the case concluded on the merits, as opposed to termination of the case by a Court ruling granting a sanctions motion. The Court was not unaware of the large volume of documents that Pioneer was required to review. Thousands of documents were disclosed. However, from the beginning, Pioneer demonstrated that when it was ordered to disclose documents, a systematic pattern developed whereby it would alter documents or carefully redact documents to delete damaging information. Repeatedly, the Court declined to strike Pioneer's pleadings, believing that it would eventually comply with the Court's orders to permit Monsanto to fairly prepare for trial. That trust was misplaced, as the Court learned, well into the trial, of Pioneer's willful non-compliance with the Court's orders and its efforts to conceal discoverable information from Monsanto.
*8 In a March 4, 1999 order on Monsanto's Motion to Compel, the Court concluded that Monsanto's requests for production should be narrowed to avoid unduly burdensome and oppressive requirements from Pioneer. The Court had earlier issued a show cause order to Monsanto to narrow its requests. The Court, in part, ordered Pioneer to produce all accounting records for all sales and price premiums in a one-month period, to be selected by Monsanto for the purpose of spot checking Pioneer's summarization of financial data.
On April 22, 1999, the court conducted a hearing on Monsanto's Motions for Sanctions wherein it sought to persuade the Court to strike Pioneer's pleadings under Fed.R.Civ.P. 37. Monsanto had designated January, 1999, as the month for Pioneer to produce all accounting records, above referenced. In an affidavit, corporate counsel for Pioneer stated that it had produced true, accurate and complete statement of all invoiced activity for January, 1999. (Tr. 4-22-99 pp. 10-11).
This information was relevant and significant for Monsanto's defense of Pioneer's forfeiture claim under Section 241 of the Restatement, pertaining to Monsanto's counterclaims. Pioneer sought to show in discovery that if the Agreement should be terminated, Pioneer would lose $300 million. One of Monsanto's purposes in spot-checking invoices was to determine if there were discounts offered to Pioneer's customers that would reduce Pioneer's forfeiture claim. Corporate counsel represented to the Court that nothing else existed in actual invoices. After Pioneer had formulated its claim of a $300 million loss ranging from $40 to $33 per unit of Bt corn sold, Monsanto was able to secure an original invoice Pioneer had sent to Jacobs Brother's Farm, one of its customers. The invoice produced in discovery by Pioneer to Monsanto did not reveal customer documents. The actual invoice, secured by Monsanto from a third party, reveals an “EPS” discount, “release credit” and other discounts. These discounts were not included on a summary report which Pioneer represented constituted everything that existed, and that Pioneer had fully complied with the Court's order in producing all account records. Pioneer's expert testified that the premiums upon which he based his forfeiture projection were $31.50 per unit. However, the Jacob's Brothers Farm invoice showed a premium, not of $30 to $33 per unit, but, with all discounts taken, a difference of $13.53 to $15.09 per unit for the sale of Bt corn seed over regular corn seed. (Tr. 4-22-99 p. 17). This was not disclosed. Monsanto filed its motion and eight days later, Pioneer's CFO reduced Pioneer's forfeiture claim by $60 million. It is apparent that Monsanto's independent search of another source exposed Pioneer's misrepresentation that the exhibits produced represented all account records that existed on the subject.
Pioneer's arguments in response, that the information would have been of no help to Monsanto, are not persuasive. Counsel for Monsanto observes, “They say this information wouldn't have helped us. Well, we got the invoice and their claim has dropped by $60 million by their own concessions. I'd say that might be considered somewhat relevant to the case.” (Tr. 4-22-99 p. 92). It is not for Pioneer to decide what might or might not be helpful. It appears to the Court that Pioneer failed to supply ordered discovery and supplied information that would reasonably mislead Monsanto in its determination of whether to request further information and in defending the forfeiture defense to its counterclaims. Pioneer's counsel suggested that if an error was made, that the Court would tell Pioneer what to produce. At that time, however, discovery had ended on April 1. Summary judgment motions were on file. The trial date was scheduled for July 12, 1999.
*9 In a separate argument for sanctions heard on April 22, 1999, Monsanto argued that Pioneer had not supplied all requested information concerning Pioneer's development of alternatives to YieldGard. In its March 24, 1999 order, the Court ordered Pioneer to produce all plans, compilations, proposals, and summaries, not just relating to current Bt projects, but to any developments or licensing or introduction to the market of such alternatives.
At the April 22, 1999 hearing on Monsanto's Motion for Sanctions under Rule 37, Monsanto argued to the Court that Pioneer had not produced all relevant requested documents pertaining to its development of Bt alternatives to YieldGard. Pioneer stated that if the Court terminated the Agreement, it would suffer multi-million dollar losses because it had no Bt alternative product; it was developing three alternative products which were not currently marketable; and that it had given Monsanto all requested relevant documents pertaining to its Bt development of alternatives to YieldGard. After hearing arguments, the Court asked Pioneers counsel, “So you're saying there are no plans, proposals, summaries, or any other word you want to use that would describe these related B, C, and D. There are none; is that correct?” Pioneer's counsel responded, “Well, what I'm saying is that there's nothing other, no other projects other than B, C and D.” The Court stated, “That's right.” Pioneer's counsel then stated that the only thing Pioneer could provide “was the fully detailed time lines on each of those projects, Cry1F, 2001; Cry1F, 2002; and 31G1A. Those are the three projects which Pioneer has with Mycogen. And we had attached as Exhibits B, C, and D the summary time lines, which consisted of approximately, I'm not exactly certain of the numbers, but we'll say 30 to 35 tasks.” (Tr. 4-22-199 pp. 59-60). The Court again inquired, more specifically, “I want to make it real clear before we leave this subject. There are no plans, proposals, summaries, or any other procedures related to B, C, and D that have not been produced other than what you've just described rolled up as 147 tasks, I think you mentioned; is that correct?” Plaintiff's counsel responded, “That is correct, your Honor. And just for the record, I think those are documents 2730, 2731, 2732 and in addition, we subsequently produced document 2733, which is a revised time line on the 31G1A project,....” (Tr. 4-22-1999 pp. 61, 62). Pioneer's counsel then was even more specific. “Our position, and I think my letter is clear and I think our papers are clear, [was] not that we don't have any other projects other than these three, and the documents we have are responsive for these three, i.e., all other plans, compilations, summaries, et cetera, are enclosed herewith, and those are the more expanded and detailed time lines. So that is our position. We're not saying we're somehow excused from anything. Mr. Long scoured the company and this is what he came up with. That's all there is. That's what his affidavit says.” (Tr. 4-22-1999 pp. 63, 64).
*10 In the arguments heard on September 30, Monsanto's counsel, in seeking Rule 37 sanctions for false statements made by Pioneer in documents relating to the April 22, 1999 sanctions hearing, stated, “Your honor, there weren't just three responsive documents, as Pioneer repeatedly told this Court, there weren't just 30 tucked away in a file that someone overlooked, there weren't just 300 in the files of someone who didn't get the message, there weren't just 3000. So far, and we're still not finished with our review, we've counted 18,547 pages of documents that relate to Bt alternatives and that are titled or characterized by Pioneer's own employees as plans, compilations, proposals or summaries. We've provided the Court with a log. It's Exhibit 2 to our brief. The log alone is 89 pages long. And the documents, the 18,000 we've found just so far, are in these boxes in the back of the courtroom. And, we're not finished counting.” (Tr. 9-30-99 p. 4).
In the deposition of Steven Ritchie, taken a few days before the September 30 hearing, Mr. Ritchie, who is in charge of reviewing, developing and testing Bt alternatives, testified that, “I was never asked to do any searching or anything,” when asked if anyone at Pioneer asked him to search his records for “plans, compilations, proposals, summaries relating to Pioneer's development, licensing or introduction to the market of Bt corn other than Monsanto YieldGard.” Mr. Ritchie had many documents on his computer which he was never asked to search.
At the September 30 hearing, Monsanto first brought to the Court's attention the sophistication of Pioneer officials in understanding the discovery process and efforts it took to attempt to evade its responsibilities to the Court and Monsanto. In a memo from John Duesing involved in research technology at Pioneer to “Barbara,” suggesting revisions to her memo, Mr. Duesing stated, in part,
“In the first paragraph, you should have said that ‘The attachment of our Monsanto ECB Agreement does not include the following among the list of licensed or sublicensed patents:’ rather than “Monsanto has not provided PHI with a sublicense. It is Pioneer's position that Monsanto is under a positive obligation to grant us a license or a sublicense. Never use any statements regarding claims blocking our product. Statements like that place the Pioneer organization in too much potential jeopardy (from future discovery) and could result in severe restrictions on the ability of RTS to continue the kind of activities that we are currently allowed to do.”
He directs her to revise her memo and resend it, asking recipients to delete the earlier version and to shred paper copies. (Tr. 9-30-1999 pp. 21, 22). In a January, 1999 e-mail from Dr. McConnell to Tony Cavalieri, he stated, “another issue with disclosure of corn rootworm leads, either Bt or pentin is the transformation method used. We don't want to make it easy for DK to request discovery on our pipeline that uses biolistics. We have been resisting their attempts to do this in the Rockford case for over a year now. I don't want to expose ourselves and make it easy for them to ask the right questions.” (Tr. 8-21-2000 pp. 9, 10).
*11 Pioneer's counsel acknowledged that Pioneer's earlier representation of the non-existence of documents was not accurate and apologized to the Court and Monsanto's counsel. (Tr. 9-30-1999 pp. 40, 41). Pioneer moved the Court for “measured and gradual” sanctions, insisting that extreme sanctions should only be imposed when less severe sanctions fail.
Pioneer recognized, in court, the rule for imposition of sanctions. “The case law, your Honor, makes clear that a showing of intentional and willful conduct [is] usually a requirement of a repeated or multiple set of violations is required of the court's discovery orders and after there are, in the cases, repeated warnings, ... but these cases, when the Court reviews them, you will see are very different than this case where there has been one sanctions order and there has been full compliance and, in the course of that, it has remedied the discovery concern that was the original source of the issue that prompted the Court to issue the sanctions order.” (Tr. 9-30-1999 p. 51).
In its argument, Monsanto's counsel notes that the case of Chrysler Corp. v. Casey, 186 F.3d 1016 (8th Cir.1999), concluded that when statements are made under oath that are false, “they are a direct affront to the Court.” He observed that Pioneer told the Court under oath and through its officers that Pioneer had no summaries, that the company had been “scoured;” employees had been pumped for information; a thorough and exhausted search had been made; and additional documents did not exist. Monsanto learned through Court ordered discovery that from June, 1994 through May, 1999, Pioneer issued monthly summaries of crop projection efforts including Bt corn, other than YieldGard, which went out to more than 50 people, going to at least six of the employees “who told Pioneer's corporate counsel, Mr. Long, according to his sworn affidavit, that there was no such thing.” (Tr. 9-30-2000 p 5, 6). The representations in the Court's transcripts, and Mr. Long's affidavit, are representative of Pioneer personnel's contempt and lack of respect for the judicial process. Monsanto's counsel made reference to the long affidavit:
After receipt of the Court's March 24, 1999 Order, I again talked with ... Ritchie. I believe that I spoke with ... Ritchie on March 29, 1999. Based on my communications with ... Ritchie, I obtained from Mr. Ritchie on the morning of April 1, 1999 ... for production to Monsanto [the timelines] ... which I understood at the time and I believe ... Ritchie understood, to be a full and complete production of documents responsive to the Court's March 24, 1990 Order. (Affidavit of Scott Long, 5(b)).
Based upon my discussion with numerous individuals at Pioneer regarding this matter (including those identified in paragraphs ... 5(b)), as well as my independent investigation regarding this matter, other than [the timelines] referenced above, which have already been produced to Monsanto, it is my belief and understanding that there are no other “plans, compilations, proposals or summaries relating to Pioneer's development, licensing and/or introduction to the market of Bt corn other than the Monsanto YieldGard product, including all projections of sales relating to any such products. (Affidavit of Scott Long, 5(d)).
*12 Monsanto then refers to a Ritchie deposition:
Q. Looking to the second page of this exhibit [the Court's March 24 order], did anyone ever have you search your e-mail and your files for all plans, compilations, proposals and summaries related to Pioneer's development licensing and/or introduction to the market of Bt corn other than Monsanto YieldGard product, information relating to those things?
Did anybody ever tell you that that was what the Court had ordered to produce and to search your e-mails and your files in your desk and produce all those documents?
A. I was never asked to do any searching or anything.
Q. All right. So you were never contacted?
A. Not to actually do it, no. They mentioned I might get e-mails from some people, but I assumed it was somebody else.
Q. All right. Did anybody ever sit down with you and explain to you that you had to search your files and your computer and produce the documents?
A. No. I haven't-I've never been asked to do that.
(Deposition of Steven Ritchie, pp. 275, 276).
Pioneer recognized that one sanctions order was issued, and at another sanctions motion hearing was forced to admit “that its earlier representations regarding the non-existence of documents was not accurate.” (Tr. 9-30-1999 p. 41). Pioneer recognized the proper standard for imposition of sanctions, and the Court, in rejecting Monsanto's motion for the most severe sanctions, adopted Pioneer's argument and imposed “measured and gradual” sanctions once again. The Court agreed with Pioneer that strong judicial policy favors resolution of cases on the merits, and declined to strike Pioneer's pleadings and enter default judgment for Monsanto. Notwithstanding this conduct by Pioneer, the Court in the order of April 26, 1999, concluded that, “while sanctions are appropriate, the relief sought by Monsanto will not, in all respects, be granted, at this time.” The Court found that Monsanto was entitled to its attorneys' fees and costs in bringing its motions to compel and that those fees and costs would be taken with the case and determined at a later time. The Court concluded that a new Case Management Order was required and announced one would be forthcoming.
On October 7, 1999, the Court concluded in an order that further sanctions against Pioneer were indicated, after hearing arguments the preceding September 30th. The Court found that Pioneer's actions “might justify the harsh sanctions requested by Monsanto” but that “the Court is mindful of the fact that there is a strong public policy in favor of cases tried on their merits,” citing Fox v. Studebaker-Worthington, Inc., 516 F.2d 989, 996 (8th Cir.1975). The Court balanced the preference for trying cases on their merits against the “Court's desire to deter future discovery abuses,” and concluded that alternative sanctions should be pursued, citing Malantia v. Suzuki Motor Co., 987 F.2d 1536, 1542 (11th Cir.1993) (severe sanction of dismissal or default judgment is appropriate only as a last resort, when less drastic sanctions would not ensure compliance with the court's orders). The Court announced its intention to impose “substantial monetary sanctions on Pioneer for its conduct in this matter.”
*13 At the September 30, 1999 sanctions hearing, Pioneer's counsel stated, “Well, I'd like to-- I think it's important I respond to that, your Honor, which I had prepared to do, and simply by saying first and foremost that the Court's sanctions order has in large part eliminated the possibility of any further discrepancies about what is or isn't the case with Pioneer's research and development work. That does not explain or justify what transpired.” (Tr. 9-30-1999 p. 59). At that time, the Court believed both the representation of counsel and that finally Pioneer understood its obligations under the Federal Rules of Civil Procedure. However, Pioneer proved the Court's faith in Pioneer was misplaced.
At this hearing, the issue of Pioneer's stacking of Monsanto's MON810 began to emerge, along with Pioneer's attempt to hide its stacking activities of Monsanto's Bt gene. Monsanto's counsel observed, “And yet as we read the documents, they indicate, and there's been nothing to suggest it isn't correct, they indicate stacking of MON810 with the Starlink event, which is a dual gene parent event, and it may well be that even if there had not been a claim based on what Pioneer said it was doing, that the fact that we now are learning that Pioneer is also doing what it didn't say it was doing would lead to a potential claim. But see, we didn't get the chance to evaluate that in a way that would have allowed us to introduce it in a timely fashion that wouldn't cause even more delay, and what the case law says is that that's prejudice.” (Tr. 9-30-1999 p. 86). Monsanto's counsel was accurate in stating Monsanto's claim of prejudice. The prejudice to Monsanto lasted well into the trial. As documents were gradually released, well into the trial, it became apparent to all counsel and the Court that Pioneer continued, after the September 30th hearing, to conceal relevant information, very prejudicial to Monsanto, especially in the area of its unauthorized stacking of Monsanto's MON810 with not only corn, but rice as well. Pioneer's conduct caused well over a year of delay in this case and extreme prejudice to Monsanto's ability to present its case in a timely and orderly fashion. Pioneer managed to delay disclosure of information which was lawfully discoverable well beyond the time discovery had been closed.
Monsanto again sought default judgment relief against Pioneer in its Motion for Sanctions (doc. # 644] under Rule 37. A hearing was conducted in a fragmented manner on July 26 and July 27, 2000, a few days before the jury trial was to begin. In its order of July 27, 2000, the Court concluded under Chrysler Corp. v. Casey, 186 F.3d 1016 (8th Cir.1999) and National Hockey League v. Metropolitan Hockey Club, 427 U.S. 639 (1976), that Pioneer's
“further actions in this case in failing to provide discovery [were] a direct result of willful behavior on the part of Pioneer personnel, and Monsanto has been severely prejudiced by the conduct of Pioneer personnel as to justify and compel sanctions. In this case, there has been a systematic pattern of abuse and disregard of the Court's orders and the Rules of Discovery. Monsanto is being required to go to trial without important evidence otherwise available, because of the deceitful behavior of Pioneer personnel. The Court does not ascribe such behavior to Pioneer's counsel.”
*14 (Memorandum and Opinion dated 7-27-2000 pp. 1, 2). The Court again recognized the strong public policy favoring trial of cases on the merits, and for the third time, set forth a measured response, short of striking Pioneer's pleadings. The Court announced it would limit evidence and testimony of Pioneer at trial to the extent it would be linked to failure to provide discovery, reserved the right to order further depositions of Pioneer witnesses and announced its intention to impose monetary sanctions in addition to attorney fees. (Memorandum and Opinion dated 7-27-2000 p 2, 3).
Some of the facts supporting this July 27, 2000 order were developed in hearings on July 26 and 27, 2000, on Monsanto's Motion for Default Judgment under Rule 37. Mr. Hal Thorne was a Pioneer executive who was one of two key people who negotiated the Agreement on behalf of Pioneer. On July 28, 1998, Pioneer identified Mr. Thorne as a possible witness in the case. On July 28, 1999, in supplemental disclosures, Pioneer supplied Thorne's e-mails and attachments. On November 9, 1999, Pioneer opposed Monsanto's counterclaim for unauthorized stacking of the MON810 gene, taking a position contrary to what was in the Thorne documents, which, at that time, had not been produced. On January 10, 2000, Pioneer identifed Thorne as a witness with knowledge of stacking, but did not produce these Thorne documents. Two requests for production sought specific information from Pioneer. Monsanto followed with a motion to compel. On March 24, 2000, Pioneer responded saying it had produced all documents. Thorne's deposition was noticed. Just before he was deposed, on July 10, 2000, the Thorne documents were produced in readable form. On July 10, approximately two weeks before the case was finally tried to the jury, Monsanto's counsel received “a large stack of documents that were identified as the-- as having come from Mr. Thorne.” (Tr. 7-27-2000 pp. 3, 4). Mr. Thorne's deposition was scheduled for July 11, 2000. He said he had given the documents to counsel for Pioneer more than two years ago. The documents had been delivered to another law firm that represented Pioneer in separate litigation, and still represents Pioneer. Mr. McConnell, who was one of the key witnesses at trial for Pioneer, had been earlier deposed by Monsanto's counsel without the benefit of these documents which contradict the testimony of Mr. McConnell, other Pioneer representatives, as well as an antagonistic former Monsanto employee. The documents were not available for use in deposing another Pioneer employee who was no longer subject to being subpoenaed for trial. There were other people mentioned in the documents who were associated with the case. Mr. Thorne was key negotiator for Pioneer when the Agreement was being prepared. Several months earlier, Pioneer represented that it had produced all Thorne documents. In his deposition, Thorne said he did a search for documents a couple of years ago and sent them to counsel.
*15 Pioneer, from the time Monsanto filed its counterclaims to seek to terminate the Agreement, maintained that Monsanto had to prove a material breach of the Agreement, under the contract's terms, before such relief would be available. In the Materiality Analysis under Section241 of the Restatement of Contracts, one of the factors for the Court's consideration in determining materiality is the extent to which Pioneer would suffer forfeiture if the contract should be terminated. Soon after Monsanto's counterclaims were filed, Pioneer claimed its forfeiture to be $300 million or more. After the earlier mentioned altered invoice was discovered which is mentioned above, the claim was reduced to $60 million. In the documents delivered to Pioneer just hours before the Thorne deposition, Monsanto's counsel learned that there was evidence suggesting the Pioneer forfeiture claim was regarded by Pioneer, earlier, as substantially diminished from the $300 million claim asserted. “And at the bottom you come to the conclusion you thought there was a $50 million total potential for ECB resistance and based upon over market share this translates to about $25 million opportunity for Pioneer, is that right?” “That is correct.”
Another of the Thorne documents which confirmed Monsanto's view of the case was a handwritten note which said, “Agree-no herbicide that conveys tolerance as a marker.” Counsel for Monsanto highlighted the obvious, “That is 180 degrees the opposite of the position that Pioneer and their witnesses have taken in this case.” (Tr. 7-26-2000 p. 9). Monsanto's counsel persuasively argued to the Court that these documents were never supplied until after the discovery cut-off, until after the time for filing dispositive motions and after pre-trial briefs were filed on the “stacking” counterclaim. Pioneer's response is that there was no intent to conceal, but that the documents were out of Thorne's possession and had been overlooked. It may be that there was no intent to conceal these documents, but there was an obligation to search for discoverable materials. Failure to produce these documents caused prejudice to Monsanto. They did not have the opportunity to use them in deposing key witnesses in the case. Pioneer's pattern of intentional concealment of documents and recklessness in producing documents throughout the course of this litigation caused delays which required the trial be repeatedly rescheduled and placed Monsanto's counsel at a substantial disadvantage. Many of the video depositions were prepared for use at trial without the use of the unavailable documents. Monsanto did not have documents it was entitled to receive and should have had, except for Pioneer's manipulation of the discovery materials. One of the main issues in this case was whether Pioneer had stacked the Monsanto MON810 gene with Pioneer events, and if so, whether that was a material breach of the Agreement. The Thorne documents reveal Monsanto technology “can only be used for EBC resistant genes that Monsanto gives us; no other genes can be included unless Monsanto gives approval.” (Tr. 7-26-2000 pp. 10, 11). The documents also suggest bad faith in Pioneer in its filing of its suit in Wisconsin which was later transferred here.
*16 Next, the Court will address yet another serious abuse by Pioneer in failing its responsibility to comply with the Federal Rules of Civil Procedure. Pioneer provided inadequate and misleading documents related to its unauthorized stacking of the Monsanto MON810 gene. This behavior threatened the final trial setting and resulted in embarrassing delays in conducting the trial in an orderly fashion. Monsanto's counsel was forced to work literally around the clock at a time after the jury had been selected, but before evidence could be presented, while the Court ruled ongoing discovery issues and pre-trial matters with the jury being placed on “hold” status for one week. The following is an example of Pioneer's deceitful behavior.
Pioneer supplied to Monsanto a “sample copy” of a field research notebook. The one supplied to Monsanto by Pioneer did not contain “summaries, reports or compilations.” Pioneer had earlier moved the Court to refrain from filing severe sanctions against it because it had made full compliance regarding compilations and summaries. On April 26, 2000, this Court had ordered Pioneer to produce all “confidential” documents under the parties' contract definition of “ ‘confidential’ that relate to all
stacking, not only single gene, of MON810, between Pioneer and Mycogen,....” In an April 20, 2000 deposition, Monsanto became aware that some summaries existed in the notebooks. No summaries were included in the sample copy supplied to Monsanto by Pioneer. Monsanto filed a motion to compel and on June 21, 2000, the Court ordered “that Pioneer shall make the notebooks available at Pioneer's offices for inspection by Monsanto's counsel. Counsel for Monsanto may inspect such documents and identify the specific ones needed. Pioneer shall make copies of the required pages, in redacted form if necessary, at Monsanto's expense....” Monsanto's expert began to examine the notebooks early in July, but the key notebook for Cry1F, Pioneer's lead Bt alternative event being developed to compete with MON810, was missing. In fact, this missing notebook was not supplied by Pioneer until July 26, 2000. (Tr. 7-26-2000 p. 80). Monsanto's expert, nevertheless, gradually discovered, as more material was supplied, that, in fact, Pioneer had been stacking the MON810 gene with other events which were previously unknown to Monsanto. Monsanto's expert also learned, contrary to earlier representations by Pioneer, that Pioneer's Cry9C event had continued to be developed as a competitive product to Monsanto's YieldGard. All of this was discovered less than one month before trial and after discovery was closed.
Monsanto did not learn until July 2000, that Pioneer had stacked MON810 with Pioneer's TSS (Tissue Specific Sterility) event contrary to its strongly stated position that it had not used co-transformation with MON810. Mr. Compomohr for Monsanto wrote to Pioneer personnel on July 10, asking if Pioneer had stacked MON810 with a TSS event. There was no response until Pioneer's argument on July 26, 2000 when it was admitted that there was such a stack. The trial was rapidly approaching. Pioneer allowed this time to pass without responding to Mr. Compomohr. When it was disclosed, Pioneer's counsel represented, “Now, there really is one event that we failed to disclose in these meetings, something that took place back in 1996, the TSS event.” Later, it became apparent that there were many more such events.
*17 With the jury trial scheduled to begin on August 2, 2000, Monsanto filed a motion for default judgment pursuant to Fed.R.Civ.P. 37 [doc. # 644] which was considered at a hearing on July 26 and 27, 2000. The Court concluded in an order of July 27, 2000 [doc. # 689] that sanctions against Pioneer were justified, that
“Pioneer's further actions ... in failing to provide discovery [were] a direct result of wilful behavior on the part of Pioneer personnel, and Monsanto has been severely prejudiced by the conduct of Pioneer personnel as to justify and compel sanctions. In this case, there has been a systematic pattern of abuse and disregard of the Court's orders and the Rules of Discovery. Monsanto is being required to go to trial without important evidence otherwise available, because of the deceitful behavior of Pioneer personnel. The Court does not ascribe such behavior to Pioneer's counsel.”
The Court again recognized the strong public policy favoring trial of cases on their merits, and denied Monsanto's motion for default judgment. The Court noted that it would limit Pioneer's evidence to the extent it was linked to failure to provide discovery, reserved the right to order further depositions at Pioneer's cost, and announced it would likely impose monetary sanctions against Pioneer at the close of the case.
Monsanto first saw the research notebooks, except for the misleading notebook sample supplied by Pioneer without summaries, on July 6 or July 8, 2000. (Tr. 7-26-2000 pp 22,23). Pioneer had been ordered to disclose compilations and summaries relating to Bt alternatives. On August 1, 2000, one day before the jury was summoned to appear, a hearing was conducted pursuant to Monsanto's motions related to Pioneer's failure to produce documents. Pioneer had produced redacted copies of the research notebooks.
The Court had earlier dismissed part of Count V of Monsanto's counterclaim related to Monsanto's claim that Pioneer had shared Monsanto's confidential information with Mycogen. On the day before trial, Monsanto produced information just received from Pioneer, that in a Pioneer-Mycogen collaboration, Monsanto's MON810 was used as a benchmark by which the collaborated events were measured.
The Court inquired about Pioneer's heavy redaction of documents supplied to Monsanto. Pioneer's counsel had earlier represented that, “I can tell you that what we have redacted, again, relates completely to issues other than those that are before the Court.” (Tr. 8-1-2000 p. 27). “In addition, we have given them all the information in the documents they requested relating to the stacking of Monsanto's technology so we have not redacted any of the information relevant to the issues in this case.” (Tr. 8-1-2000 p. 28).
Counsel for Pioneer represented that on the morning of this August 1, 2000 hearing, he had delivered to Monsanto the remainder of the missing notebooks including the TSS/MON810 stack to the office of Monsanto's counsel. Before the arguments of Pioneer's counsel at the hearing, Monsanto's counsel was not aware that the notebooks were being produced. A recess was declared at noon. Monsanto's counsel returned to the courtroom after the recess which was called so Monsanto's counsel could review the documents claimed by Pioneer's counsel to have been delivered. In fact, they had not been delivered. Counsel represented that he was unaware of any confidential Monsanto information disclosed to Mycogen or any company by Pioneer.
*18 At the hearing, Pioneer's counsel represented that the documents produced contained redactions of corn rootworm activity. Monsanto had earlier information from Mr. Steven Ritchie's sworn testimony that he performed stacks of corn rootworm.
On August 1, 2000, among other issues before the Court, the Court first considered Monsanto's motion to continue the trial; Monsanto's motion to compel production of additional unredacted documents; and motions in limine. On August 2, 2000, the date when the jury was to appear for the beginning of the trial, Monsanto moved the Court to consider Monsanto's arguments that newly produced discovery had disclosed that Pioneer had delivered Monsanto's confidential information to Mycogen. Monsanto produced convincing evidence that Pioneer supplied to Mycoggen pedigree information of MON810, one of the most carefully guarded secrets of Monsanto. Pioneer resisted any continuance of the case. The jury was called and voir dire was completed. The jury was selected but was not sworn. After the jury was excused, the Court considered arguments on additional motions in limine. After the jury was selected, Monsanto still did not have the research notebooks, irrespective of Pioneer's earlier representations that they had already been delivered.
On August 3, 2000, after the research notebooks and unredacted documents had been delivered to Monsanto's counsel in mid-afternoon on August 2nd, Monsanto learned that Pioneer had, in fact, stacked Pentin-1, the corn rootworm construct, with Monsanto's Cry1A(b) gene and the PAT gene that confers herbicide tolerance or a triple stack. It is very clear that Pioneer had wilfully and carefully redacted documents to conceal the Pentin-1 stack, even to the point of redacting handwritten notes that would lead to the evidence of the unauthorized stack. This was not discovered by Monsanto until after midnight preceding the hearing on August 3rd. Not only were stacks made, but co-transformation events were completed and plants were produced. There can be no questions that Monsanto had timely requested in its interrogatory, information about Pioneer material that had been combined with anything that exhibits any degree of herbicide tolerance. Pioneer always denied any co-transformation stacks (except one which Monsanto does not contest). Pioneer had earlier argued extensively that any stacking activity at Pioneer occurred from natural breeding of plants. Shortly before trial, Monsanto learned Pioneer had stacked a Monsanto gene with a TSS gene by co-transformation. After all discovery was completed, and after the jury was selected, Monsanto learned that Pioneer had not only engaged in co-transformation stacking, but had done so in a triple stack and had tried to conceal the stack by redacting documents. No conclusion is plausible except Pioneer wilfully attempted to conceal its stacking activity of Monsanto's Cry1A(b) gene, which it had denied. Pioneer had argued against allowing a counter-claim for stacking because it had claimed that it had not engaged in that activity. This was a clear misrepresentation. Officials at the highest level of Pioneer attested that stacking by co-transformation was not allowed in the Agreement.
*19 Rita Mumm, a Ph.D. in plant breeding and genetics, began testifying, out of the hearing of the jury, in support of Monsanto's renewed motion for default judgment, on August 3, 2000. She had been reviewing documents well into late hours as they were produced by Pioneer. She continued her testimony on August 4, 2000, from 9:30 a.m. until about 2:30 p.m.
After hearing arguments in support of and in opposition to Monsanto's motion for default judgment, the motion was denied. The Court announced it would, at appropriate times and in appropriate ways, inform the jury of the manner in which Monsanto was placed at a disadvantage because of Pioneer's behavior. The Court concluded, based on the evidence addressed, that it should, and it did, reconsider the granting of the motion for summary judgment in favor of Pioneer on Monsanto's Fifth Counterclaim and reinstated that part of the Counterclaim that had earlier been dismissed.
Through the trial, Monsanto discovered additional undisclosed stacks of Monsanto's genes by co-transformation. In a hearing on August 7, 2000, the Court was apprized of two additional previously undisclosed stacks of Monsanto's gene with corn rootworm, one with 80JJ1 (a corn rootworm gene), one with 149B1, and one with rice. The jury was present on this date, and was sent home after being sworn and instructed so the Court could again consider Monsanto's sanctions' motion after giving Pioneer an opportunity to respond. On August 9, 2000, the Court heard further arguments on Monsanto's renewed motion for default judgment. Pioneer delivered laboratory notebooks the night before this hearing. Counsel for Pioneer argued that these stacks were not herbicide tolerant and so, were not proscribed by the Agreement. As to the Pentin-1 stack with Monsanto material, Pioneer's counsel confessed “there was a herbicide-tolerant stack with Monsanto material ... We should have caught it and we didn't....” He concluded it was insignificant. Regarding the TSS stack, it is not disputed that it was proscribed by the Agreement, but “it was an insignificant experiment and the researcher didn't find it, he had forgotten about it when they did the document search....” The Court concludes that it was not inadvertence or oversight on the part of Pioneer personnel or just a “failure to catch it.” The evidence is clear beyond any doubt that Pioneer intentionally redacted the references to the Pentin-1 stack, and the Court concludes it was a wilful act to prevent Monsanto and the Court from learning of Pioneer's unauthorized stacking activities of Monsanto's Cry1A(b) gene which is clearly proscribed by the Agreement.
The Court once again refused to grant the requested default judgment, concluding that Pioneer's behavior justified the ultimate sanction, but instead, stated,
“I have no confidence that Pioneer has been nor will be honest in its responsibilities to comply with the Court's orders and the local rules and the rules of the Court. Their behavior has demonstrated to me that they have no intention of doing that. Having said those things, I am going to proceed with this case, with the jury deciding the ultimate issue of whether or not the multiple breaches of Pioneer are material.”
*20 (Tr. 8-9-2000 p. 749). Finally, many of the documents finally produced to Pioneer after the voir dire was completed in this case were redacted so that the most damaging information was concealed. The Court was required to inspect many documents and make rulings during the week-long hiatus while the jury waited for the trial to begin. After this hearing, the jury was seated and opening statements were given.
The facts of this case require that sanctions be imposed against Pioneer in addition to required payment of counsel fees concerning activity embracing sanctions motions. This Court has considered the full record in fashioning a sanctions order. National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. 639, 642-643 (1976). This Court reaffirms that Pioneer caused the discovery process to be protracted and acrimonious. Pioneer represented to the Court that documents did not exist and that all documents had been produced, when such representations were false. Pioneer proffered an altered document, representing that it reflected accurate discount information when it did not, intending to mislead the Court and Monsanto. The litigation has received active professional attention for more than three years. Orders compelling discovery had been issued by this Court and Pioneer has wilfully violated those orders, Pioneer engaged in a systematic pattern of abuse and blatant disregard of the Court's orders and the Federal Rules of Civil Procedure. In the face of repeated abuses of the Federal Rules of Civil Procedure and the Court orders by Pioneer, the Court continued to deny Monsanto's repeated requests for default judgment against Pioneer which the Court found would have been appropriate, and insisted that the case proceed on its merits so factual disputes could be and were decided by a jury. The Court was repeatedly presented with false affidavits and testimony by Pioneer officials. The Court lost faith in Pioneer's ability to follow discovery rules, and concludes, that its officials intentionally acted to prevent Monsanto from receiving lawfully discoverable materials. Monsanto was forced to go to trial lacking evidence it would have had except for the deceitful behavior of Pioneer officials. Their behavior on numerous occasions seriously threatened the integrity of the judicial process. See
Chrysler Corp. v. Casey, 186 F.3d 1016, 1019-21 (8th Cir.1999).
The Court does not now believe, nor has it ever believed, that the blame for Pioneer's willful disobedience of the Court's orders, supplying false information, intentionally hiding information by unreasonable redaction and recklessness in searching for information ordered produced, lies with its court counsel. To the contrary, the Court believes that all representations of counsel have been truthful and honest. The Court is absolutely convinced, beyond any doubt, that Pioneer's officials have intentionally obstructed the discovery process in this case and carefully sought to impede the Court's orderly disposition of the case by intentionally misleading the Court, filing knowingly false information, and engaging in reckless practices in failing to make adequate searches for information when so ordered.
*21 The Court has inherent power to impose sanctions for bad-faith conduct. See
Chambers v. Nasco, Inc., 501 U.S. 32, 45-46 (1991). “A primary aspect of that discretion is the ability to fashion an appropriate sanction for conduct which abuses the judicial process.” Id.
Within this inherent power to impose sanctions for bad-faith conduct is the ability to assess attorney's fees against the party which has engaged in bad-faith. Id.
at 45 (“the ‘less severe sanction’ of an assessment of attorney's fees is undoubtedly within a court's inherent power ....”) (quoting Roadway Express, Inc. v. Piper, 447 U.S. 752, 765 (1980). Among the “ample grounds” available for recognizing the inherent power of the Court to impose sanctions are the “willful disobedience of a court order” and when a party has “acted in bad faith, vexatiously, wantonly, or for oppressive reasons.” Id.
(quoting Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 257-59 (1975)). “[I]f a court finds ‘that fraud has been practiced upon it, or that the very temple of justice has been defiled,’ it may assess attorney's fees against the responsible party,” Id.
at 46 (quoting Universal Oil Products Co. v. Root Refining Co., 328 U.S. 575, 580 (1946)) “as it may when a party ‘shows bad faith by delaying or disrupting the litigation or by hampering enforcement of a court order.” ’ Id.
(quoting Hutto v. Finney, 437 U.S. 678, 689, n. 14 (1978)).
The imposition of sanctions in this instance transcends a court's equitable power concerning relations between the parties and reaches a court's inherent power to police itself, thus serving the dual purpose of “vindicat[ing] judical authority without resort to the more drastic sanctions available for contempt of court and mak[ing] the prevailing party whole for expenses caused by his opponent's obstinancy.
at 46. Furthermore, the Supreme Court has held that nothing in the other sanctioning mechanisms available to the court, or the cases which have interpreted them, suggests “that a federal court may not, as a matter of law, resort to its inherent power to impose attorney's fees as a sanction for bad-faith conduct.” Id.
at 50. It does not matter whether the sanctionable conduct could be sanctioned under one of the available sanctioning mechanisms or not. Id.
The Eighth Circuit has acknowledged the holding in Chambers
in Lamb Engineering & Construction Co. v. Nebraska Public Power District, 103 F.3d 1422, 1434-35 (8th Cir.1997) (“Federal courts have inherent power to assess attorney fees in narrowly defined circumstances, despite the so-called “American rule,” which prohibits fee shifting in most instances.”).
An example of the limited circumstances where a court may impose such sanctions is “when a losing party has acted in bad faith....” Lamb Engineering, 103 F.3d at 1435 (quoting Chambers, 501 U.S. at 45).
*22 The Court concludes that this lawsuit was brought in bad faith by Pioneer when it failed the action in the Northern Division of Wisconsin. John Duesing, Pioneer's Director of Research Technology Services, testified that in July, 1996, Monsanto confirmed it would not grant any license or sub-license beyond those stated in the Agreement without further representation. (Tr. 8-14-2000 pp 8, 9). Mr. Duesing prepared a statement for Pioneer's Board of Directors for a September 6, 1996 meeting noting that Monsanto's licenses and sub-licenses did not include DeKalb Technology. (Tr. 8-14-2000 pp 12-14). Carol Bolen, Pioneer's Vice-President and legal counsel, testified that Pioneer would be required to pay a license fee for DeKalb transformation rights (Tr. 8-14-2000 pp 47-63) and that by filing suit, Pioneer hoped to induce Monsanto to put pressure on DeKalb. Brian Hart, Pioneer's Chief Financial Officer, testified that before Pioneer filed its suit and withheld payment of $10 million, high level executive decisions were made within Pioneer about leveraging the payment to resolve Monsanto's obligations. (Tr. 8-15-2000 pp 76-79). Dr. Rick McConnell testified that on October 16, 1996, that he wrote David Jensen, Pioneer employee, about leveraging Pioneer's payment obligations to resolve Monsanto's Freedom to Operate Obligation. (8-16-2000 pp 45-47). Pioneer officials at the highest level knew it had no freedom to operate under the Agreement, and proceeded to file suit against Monsanto to leverage that company into compliance with its demands. Once suit was filed, Pioneer engaged in a systematic pattern of deceitful behavior to prevent Monsanto from discovering facts known by Pioneer to exist, to prevent Monsanto from prevailing in its defense of the suit and its counterclaims. This behavior was not isolated, but pervaded the litigation well into the trial.
Pursuant to Fed.R.Civ.P. 37, the Court awards Monsanto the sum of $1,090,868.90 for Pioneer's discovery misconduct. Fees allowed to Covington and Burling are reduced 25% in consideration of customary allowable fees in the St. Louis area for similarly experienced counsel.
The Court has carefully considered all sanctions appropriately imposed, and concludes that Pioneer, in addition, must pay Monsanto's total counsel fees, litigation expenses, and costs that it has incurred in this litigation which will be ordered under the Court's inherent authority. Monsanto's total fees and expenses incurred in this litigation are $8,211,287.50. The Court has already allowed $1,090,868.90 to Monsanto for Pioneer's discovery misconduct. The Court orders Pioneer to pay Monsanto additional attorney fees, litigation expenses, and costs of $7,120,418.60.
As noted in its previous order, the Court determined that Monsanto engaged in sanctionable conduct under Fed.R.Civ.P. 37. (Order of 2-10-2000 pp 7-8). The Court was careful to differentiate between the conduct of Pioneer and Monsanto in the discovery disputes that existed in this case. Pioneer shall recover against Monsanto the sum of $94,283.52, according to its submission, for Monsanto's sanctionable conduct.
IT IS HEREBY ORDERED that Monsanto's Motion to Stay the Entry of Final Judgment and Memorandum in Support” [doc. # 747] is DENIED.
IT IS FURTHER ORDERED that Monsanto's Motion for Entry of Judgment Granting Relief Based on Jury's Verdict [doc. # 750] is, SUSTAINED in part, as follows:
(1) That the July 1, 1993 Development/License Agreement between Pioneer is terminated effective on June 12, 1998, sixty days after Monsanto's notice of termination;
(2) Monsanto is awarded $10 million under the Agreement, which sum is held in the Court's Registry. The Clerk of the Court is ordered to pay Monsanto the $10 million sum, plus the additional $1,078,630.14, so deposited by Pioneer together with accumulated interest, less administrative fees, upon submission by Monsanto Company of appropriate Tax ID# s;
(3) Pioneer shall destroy biological material discovered through the use of Monsanto's Bt technology, including the following:
(a) all so-called 149B1 events and all germplasm, seeds, and plants derived from any 149B1 event;
(b) all so-called Cry2A events, and all germplasm, seeds, and plants derived from any Cry2A event;
(c) all plant material derived from streptavidin events TC11001, TC11003, TC11008, TC11127, and TC11128;
(d) all plant material derived from TSS events TC676, TC677, TC678, TC680, and TC1922;
(e) all so-called GA21 events and all germplasm, seeds, and plants derived from any GA21 event;
(f) all so-called MON832 events and all germplasm, seeds, and plants derived from any MON832 event;
(g) all plant material derived from Pentin-1 constructs P11184, P11335, and P11443;
(h) all plant material derived from 80JJ1 constructs P11005 and P11007;
(i) all plant material derived from Pentin-1 constructs P11184, P11335, P11443 and 80JJ1 constructs P11005 and P11007.
The Motion is DENIED in part, as follows: The Court believes that the destruction of Cry1F events and all germplasm, seeds, and plants derived from Monsanto technology is not justified from the record in this case. The Court concludes that in comparison to the use of Monsanto technology in the development of Cry1F and the catastrophic consequences to Pioneer in granting such an order, such an award would be so destructive to Pioneer as to be unconscionable under all of the evidence presented in this case.
All materials ordered destroyed shall be destroyed within ninety (90) days of this Order.
IT IS FURTHER ORDERED that Monsanto's Motion to Bifurcate Trial on Damages [doc. # 751] is DENIED.
IT IS FURTHER ORDERED that Pioneer's Motion for Judgment as a Matter of Law or, in the Alternative, For a New Trial [doc. # 754] is DENIED.
IT IS FURTHER ORDERED that Pioneer's Motion to Stay Proceedings and Compel Arbitration” [doc. # 763] is DENIED.
IT IS FURTHER ORDERED that Third-Party Aventis Cropscience, N.V.'s Motion to Intervene for Limited Purpose of Obtaining Access to Certain Judicial Record [doc. # 784] is DENIED.
*24 IT IS FURTHER ORDERED that Monsanto is awarded, pursuant to Fed.R . Civ.P. 37, the sum of $1,090,868.90 for Pioneer's discovery misconduct.
IT IS FURTHER ORDERED that Monsanto is awarded additional attorney's fees, litigation expenses, and costs in the amount of $7,120,418.60.
IT IS FURTHER ORDERED that Pioneer's is awarded the sum of $94,283.52, according to its submission, for Monsanto's sanctionable conduct pursuant to Pioneer's Motion for Sanctions [doc. # 381].