Angio Dynamics, Inc. v. Biolitec, Inc.

Summarized by Joel Levitin , Cahill Gordon & Reindel LLP
11 years 1 month ago

Citation:

Docket No. 12-4364-cv (2nd Cir. January 9, 2015)

Tag(s):

Ruling:

Non-party parent of debtor in appellate litigation was not permitted to be substituted for its subsidiary that settled underlying litigation (through its bankruptcy trustee) and dismissed appeal, since Federal Rule of Appellate Procedure 43(b) applies only when a party is "unable to continue to litigate", as opposed to when the "original party has voluntarily chosen to stop litigating", quoting from and adopting the reasoning of a case from the DC Circuit. The fact that the parent purportedly received an assigment of the claims was not sufficient either, given that the assignment was expunged in bankruptcy proceedings pending in a different jurisdiction.

Procedural context:

Motion for substitution was filed in Second Circuit while underlying litigation matters were being settled in New Jersey Bankruptcy Court, further described in Facts section, below.

Facts:

AngioDynamics brought a claim in the the US District Court for the Northern District of New York for defense and indemnity against Biolitec under a product distribution agreement. Biolitec asserted counterclaims for certain litigation expenses not covered by the distribution agreement. The district court granted partial summary judgment in favor of AngioDynamics and certified that judgment for immediate appeal to the US Court of Appeals for the Second Circuit. While the appeal was pending, Biolitec filed a Chapter 11 petition in New Jersey. Biolitec's schedules listed the claim against AngioDynamics as an asset. The bankruptcy court modified the automatic stay to permit the appeal to proceed. The parties (including the bankruptcy trustee for Biolitec) agreed to settle the matter and to withdraw the appeal, subject to the bankruptcy court's approval of the settlement. Biolitec's corporate parent moved in the Circuit Court to be substituted for or joined with Biolitec as a party to the appeal pursuant to Federal Rule of Appellate Procedure 43(b) because, it claimed, it had received an assignment of a 75% interest in certain of the counterclaims in exchange for providing $200,000 to cover Biolitec's legal fees for the bankruptcy. Biolitec and ANgioDynamics opposed the motion. After the substitution motion was fully briefed, the bankruptcy court approved the settlement of all claims in the underlying litigation and the purchase of most of Biolitec's assets by AngioDynamics. In connection therewith, the bankruptcy court expunged the parent's proof of claim based on the counterclaim assignment, concluding that it was "void and without force and effect".

Judge(s):

Cabranes, Hall, Chin, Circuit Judges

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