Antitrust Law Daily Wrap Up, ANTITRUST—7th Cir.: Appellate defense attacking one’s own complaint was frivolous; sanctions warranted, (Oct 8, 2014)

By Jody Coultas, J.D.

The U.S. Court of Appeals in Chicago denied a petition for rehearing of its dismissal of Outland Renewable Energy’s antitrust counterclaims against Gamesa Technology Corporation, Inc. and Iberdrola Renewables, Inc. The court also granted Gamesa and Iberdrola’s motion for sanctions (McCoy v. Iberdrola Renewables, Inc., October 7, 2014, Hamilton, D.).

An employee of Outland, a provider of operation and maintenance services for Gamesa’s wind turbines, filed a personal injury lawsuit against Gamesa and Iberdrola. When Outland was brought into the action, it filed federal and state antitrust counterclaims against Gamesa.

A district court dismissed Outland's third-party counterclaims. The appellate court rejected Outland’s “effort to salvage part of its case” by arguing that its dismissed federal antitrust counterclaims were too “feeble” to support federal question jurisdiction and alternatively that its state law counter claims fell outside the scope of supplemental jurisdiction. Outland filed a petition for rehearing, while Gamesa filed a motion for sanctions.

Petition for rehearing. The court affirmed the lower court’s decisions and denied Outland’s motion for rehearing. Outland argued that the court misinterpreted Illinois law in affirming the district court’s rejection of Outland’s proposed counterclaim for tortious interference with prospective economic advantage. Outland also alleged that the court failed to address its attempt to revive an indemnification claim against Gamesa for the fines that Outland paid to the federal Occupational Safety and Health Administration (OSHA) based on the injuries to its employee. However, the court correctly held that the actions had to be directed to the relevant third party. The district court was also correct in holding that the proposed claim for indemnification did not fall within the category of “commercial counterclaims” that the parties agreed to exclude from their settlement regarding the employee’s accident.

Sanctions. Federal Rule of Appellate Procedure 38 authorizes a United States Court of Appeals to award damages and single or double costs to an appellee where an appeal is frivolous.

Rule 38 sanctions were appropriate to compensate Gamesa for having to oppose the appeal and to deter similar appeals in the future, according to the court. Outland based its appeal on the theory that it had improperly invoked federal subject matter jurisdiction over its third-party counterclaims and violated Federal Rule of Civil Procedure 11 by asserting and pursuing its federal antitrust counterclaims and choosing to combine its state law counterclaims with the federal antitrust counterclaims. The appeal was frivolous because of the contradictions between Outland’s own actions and its jurisdictional arguments. Because the principal arguments were frivolous jurisdictional ones aimed at Outland’s own claims and actions, sanctions were appropriate. Even if Outland’s attempts to support its appellate objections to the jurisdiction that it had invoked had merit, those objections would merely show that Outland had been wasting the time of Gamesa and the district court. However, Outland’s arguments concerning its state law claims were not frivolous, and rejected on the merits of the claims.

The court awarded Gamesa $50,000 based on the frivolousness of Outland’s appeal.

The case is No. 13-3350.

Attorneys: Dominic R. Fichera (Fichera & Miller PC) for Aaron McCoy. Julie Negovan (Kutak Rock LLP) for Gamesa Technology Corporation, Inc., and Gamesa Wind U.S., LLC. Kurt E. Olsen (Law Offices of Kurt E. Olsen) for Streator-Cayuga Ridge Wind Power, LLC. Thomas Melone (Allco Renewable Energy Ltd.), and Jack Everett Pierce (Benick Lifson, PA) for Outland Renewable Energy, LLC, and Outland Energy Services, LLC. Howard J. Roin (Mayer Brown LLP) for Iberdrola Renewables, Inc.

Companies: Gamesa Technology Corporation, Inc.; Gamesa Wind U.S., LLC; Streator-Cayuga Ridge Wind Power, LLC; Outland Renewable Energy, LLC; Outland Energy Services, LLC; Iberdrola Renewables, Inc.

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