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One court watcher calls it “every lawyer’s worst nightmare.” On Jan. 17, the U.S. Court of Appeals for the Federal Circuit reinstated $20 million in punitive damages against Biomet Inc., a Warsaw, Ind.-based company that makes orthopedic products. Biomet’s undoing: The company had waived its right to challenge the punitive damages because it failed to attack them in an earlier phase of the case, according to a unanimous three-judge panel. The company’s outside lawyer was Donald Dunner, one of the country’s leading patent lawyers and a name partner at Washington, D.C.’s Finnegan, Henderson, Farabow, Garrett & Dunner. Dunner declined to discuss the case, saying he didn’t want to interfere with his client’s pending petitions. But his client, Daniel Hann, Biomet’s senior vice president and general counsel, says Biomet did indeed appeal the punitive damages, pointing to two footnotes from an earlier brief in the case. Dunner made the same point during oral arguments in July before the panel. “With all due respect to the Federal Circuit, we disagree,” Hann says. “We firmly believe they made a mistake.” Hann says he’s not giving up. According to Hann, Dunner will lead the company’s efforts to urge the panel — Senior Judge Glenn Archer Jr. and Judges Pauline Newman and Alan Lourie — or the full Federal Circuit to rehear the case. If that fails, it’s on to the Supreme Court. Hann has tapped Carter Phillips of the Washington, D.C. office of Sidley & Austin to assist in further appeals and to handle a challenge at the Supreme Court, should Dunner’s continuing efforts before the Federal Circuit fail. Like Dunner at the Federal Circuit, Phillips is a veteran at the high court, a former assistant to the solicitor general. He’s argued 23 cases in his 17 years at Sidley, winning all three cases that he handled before the justices last year. Considering the history of this case, Biomet will need all the help it can get. Raymond G. Tronzo v. Biomet Inc. dates to the 1980s, when Florida orthopedist Dr. Raymond Tronzo designed a new component for a hip replacement. Tronzo, who had an informal consulting relationship with Biomet, claims the company promised to pay him if he was able to patent the invention. Hann says the company merely promised to discuss the matter further. Tronzo did get a patent, but Biomet marketed its own hip replacement device. Tronzo claimed the company stole his idea and made $88 million doing so. He sued in federal court in 1991. When the case went to trial in 1996, a West Palm Beach, Fla., jury concluded that Biomet infringed Tronzo’s patent, committed fraud, and breached a confidential relationship. The jury awarded Tronzo nearly $40 million, which U.S. District Judge Daniel Hurley reduced to $7 million in compensatory damages and $20 million in punitive damages. Then in 1998 the Federal Circuit reversed the finding of infringement. But while ruling parts of Tronzo’s patent invalid, the Federal Circuit nonetheless upheld the other two parts of the verdict — that the company had committed fraud and breached a confidential relationship with Tronzo. It ordered District Judge Hurley to recalculate the damages after subtracting the profits that Tronzo said he had lost on the now-invalid patent. So Judge Hurley concluded that Tronzo was entitled to only $520 in compensatory damages — what it cost him to pursue the patent. Biomet then argued to Hurley that, given such tiny compensatory damages, the $20 million in punitives were so disproportionate to the compensatory award as to be unconstitutional under the Supreme Court’s 1996 ruling BMW v. Gore. Hurley agreed. Citing case law calling a 100 to 1 ratio between punitive and compensatory damages as the outer limit, he reset punitive damages at $52,000. Now Tronzo appealed, arguing that the judge should not have reduced the punitive damages because Biomet had not addressed the issue in its first appeal. “All they did was challenge liability,” says Tronzo lawyer James Davis, a partner at Howrey Simon Arnold & White. Not so, says Biomet’s Hann. He points to two footnotes in Biomet’s original brief that cite case law holding that if the court affirms the fraud and breach claims, but Tronzo cannot prove damages — as happened in this case — “he can recover neither the compensatory damages award nor the punitive damages award.” That wasn’t enough for the Federal Circuit. “Biomet waived this issue and was barred from raising it on remand,” Archer wrote for the three-judge panel. “It is uncontroverted that Biomet never appealed, nor questioned in any way, the amount of the punitive damages on appeal to this court.” Biomet’s Hann argues that the company did not originally appeal the ratio of punitive to compensatory damages because the ratio after trial was only $20 million to $7 million, or 2.8 to 1. Only after the judge reduced the compensatory damages to $520 did the specter of a 38,000 to 1 ratio come up. “You shouldn’t have to deal with every possible contingent ‘what if,’” adds Hann. Stephen Gillers, who teaches legal ethics at New York University School of Law, calls the Federal Circuit decision “every lawyer’s worst nightmare, to have a court say you’ve lost the right to appeal.” Lawyers who negligently waive rights can find themselves defendants in a malpractice action, Gillers says, speaking in general terms but not specifically about this case. He adds, “There’s a certain plausibility to [Biomet's] argument. It’s a very harsh decision.” ENEMY FIRE Don’t mess with the Federal Circuit. On Jan. 26, a three-judge panel slapped a financial sanction on an experienced appellate practitioner it believes made a “frivolous” argument. The panel’s target was Kenneth Carpenter, a lawyer from Topeka, Kan., who represented veterans Herbert Abbs and Peter Wisner before the U.S. Court of Appeals for Veterans Claims. The two men had filed for government benefits for what they say are service-related mental illnesses. The government rebuffed their request. The Board of Veterans’ Appeals refused to reopen their cases, a decision affirmed by the U.S. Court of Appeals for Veterans Claims. But the Federal Circuit reversed. That prompted Carpenter to demand that the government, which had opposed the benefits request, pay his clients’ legal fees under the 1980 Equal Access to Justice Act. The Equal Access to Justice Act (EAJA) allows litigants who prevail over the United States in civil actions to petition for recovery of their fees by proving the government’s position in the suit was not “substantially justified.” In Herbert J. Abbs and Peter J. Wisner v. Anthony J. Principi, Carpenter argued that the Court of Appeals for Veterans Claims is a federal “agency” — indistinguishable from the Department of Veterans Affairs — and therefore subject to the act. The Federal Circuit didn’t buy it — punctuating its disagreement by essentially fining Carpenter. Judge Paul Michel, joined by Judges Randall Rader and Richard Linn, deemed Carpenter’s argument “flatly false” and “frivolous as filed and as argued.” If Carpenter’s argument were true, Michel added, the EAJA would require attorney fees whenever an appeals court overturned the result of a district court or a specialized trial court. “Such a reading of the statute would be utterly nonsensical,” Michel wrote. The panel ordered Carpenter, who has a practice representing veterans and has argued before the Federal Circuit in at least 37 published cases, to pay the government for its costs in defending the case. The sanctions compel Carpenter to pay his opponent’s printing, copying, and related costs, but not attorney fees. Carpenter declined to discuss the case. WAS NAVY OFFICER OFF BASE? In what Judge Timothy Dyk characterizes as a “most unusual case,” the Federal Circuit has ordered a U.S. Navy contracting officer to explain why he awarded a contract to an Italian company suspected of being controlled by the Mafia. The dispute got its start on the Navy’s Sigonella Air Base in Sicily. In 1997, Italian authorities broke up a ring of Mafia-controlled companies that conspired to win construction contracts on the base. Among those indicted was Carmelo La Mastra, whom Italian prosecutors have accused of using intimidation and murder to further the interests of organized crime. Two years later, the base awarded a janitorial contract to a company owned by La Mastra. At the time, the company, Joint Venture Conserv., was in receivership. The contractor who lost out, Dominico Garufi, appealed the Navy’s decision. He claimed that Joint Venture was controlled by La Mastra and thus ineligible for a U.S. government contract. The U.S. Court of Federal Claims didn’t see it that way and rejected Garufi’s suit. But now Garufi has gotten a second chance from Federal Circuit Judges Pauline Newman, Richard Linn, and Timothy Dyk. In a Jan. 3 opinion written by Dyk, the panel in Impresa Construzioni Geom. Dominico Garufi v. United States ordered a limited deposition of the contracting officer. The deposition’s goal: To learn how Joint Venture was able to satisfy requirements that contractors be responsible and comport to business ethics standards. Dyk cautioned that new discovery “should not be ordered unless record evidence raises serious questions as to the rationality of the contracting officer’s responsibility determination.” ROOM WITH A VIEW With his chambers overlooking the White House and Pennsylvania Avenue, Federal Circuit Chief Judge Robert Mayer has one of the best views of Washington’s seat of power. It’s not surprising, then, that Mayer opened his doors to all court personnel who wanted to watch President George W. Bush’s inaugural parade on Jan. 20. Daunted by the heavy crowds and tight security surrounding the area, Mayer himself stayed away. But about 30 to 40 visitors filled his office, he says. It wasn’t a partisan gathering, he says. “It’s a just a good place to watch the parade,” Mayer adds. It’s also a great place to watch fireworks at the nearby National Mall. Since becoming chief judge in late 1997, Mayer has hosted Fourth of July parties and a notable New Year’s Eve soiree on Dec. 31, 1999 — when, at the stroke of midnight, newly confirmed Judge Richard Linn took the oath as the capital’s millennium fireworks danced in the window behind him.

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