Brilliant Instruments, Inc. v. GuideTech, Inc.

Filing 309

ORDER by Judge Claudia Wilken ON 250 MOTION FOR SANCTIONS AND ADMINISTRATIVE MOTION TO SEAL. (ndr, COURT STAFF) (Filed on 4/9/2014)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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GUIDETECH, INC.,
No. C 09-5517 CW
Plaintiff,

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ORDER ON MOTION
FOR SANCTIONS AND
ADMINISTRATIVE
MOTION TO SEAL

v.

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United States District Court
For the Northern District of California

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BRILLIANT INSTRUMENTS, INC.,

(Re: Docket No.
250)

Defendant.
________________________________/

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Defendant Brilliant Instruments, Inc. moves for sanctions

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against Plaintiff GuideTech, Inc. based on the filing of

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GuideTech’s Motion for Leave to Amend its Answer and

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Counterclaims.

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order Brilliant to pay reasonable expenses and attorneys’ fees

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incurred by GuideTech in filing its opposition.

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the papers, the Court DENIES the motion.

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GuideTech opposes, and in turn asks that the Court

Having considered

BACKGROUND
On November 20, 2009, Brilliant filed suit against GuideTech

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in federal court, seeking declaratory judgment of non-infringement

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of seven of GuideTech’s patents.

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2009, GuideTech answered the complaint and asserted counterclaims

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of patent infringement of three of its patents.

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December 8, 2010, Brilliant amended its complaint to include

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certain state law claims asserted affirmatively against GuideTech.

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Docket No. 35.

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Docket No. 1.

On December 14,

Docket No. 5.

On

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On November 12, 2010, GuideTech filed suit against Brilliant

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in Santa Clara County superior court, asserting (1) intentional

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interference with prospective economic advantage, (2) negligent

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interference with prospective economic advantage, (3) slander, and

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(4) breach of contract.

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court.

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10-CV-5669 CW, Docket No. 1.

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there was no reasonable basis for removal under 28 U.S.C. § 1367

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because the Court did not have original jurisdiction over

Brilliant removed the action to federal

Brilliant Instruments, Inc. v. GuideTech, Inc., Case No.
GuideTech moved to remand, arguing

United States District Court
For the Northern District of California

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GuideTech’s state law claims, and further, GuideTech’s state law

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claims did not arise from the same factual basis as its patent

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infringement claims.

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remanding the case and awarding attorneys’ fees to GuideTech, but

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also noted that it would be more efficient for all of the parties’

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claims against each other to be litigated in the same court.

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10-CV-5669, Docket Nos. 16, 17.

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10-CV-5669, Docket No. 4.

The Court agreed,

Brilliant filed a motion for summary judgment of non-

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infringement of the patents-in-suit.

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considering the motion, on June 29, 2011, the parties filed a

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stipulation agreeing that the state law claims of both parties

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should be consolidated in either the federal court action or the

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state court action, depending on the Court’s ruling on the motion

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for summary judgment.

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against Brilliant, then GuideTech would shift its state law claims

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to federal court; if the Court granted summary judgment in favor

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of Brilliant, then Brilliant would shift its state law claims to

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state court.

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Brilliant’s motion for summary judgment.

While the Court was

Docket No. 133 at 3.

Id. at 4-5.

If the Court ruled

On August 11, 2011, the Court granted

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Docket No. 137.

The

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parties moved jointly to dismiss Brilliant’s state law claims

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without prejudice pursuant to their earlier stipulation, which the

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Court granted.

Docket No. 139.

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GuideTech appealed the Court’s summary judgment order.

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February 20, 2013, the Federal Circuit affirmed in part and

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reversed in part the Court’s order, and remanded for further

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action.

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On

The Court set a case management conference (CMC) on September
25, 2013.

While the parties were preparing the joint CMC

United States District Court
For the Northern District of California

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statement, GuideTech’s counsel, Einav Cohen, indicated to

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Brilliant’s counsel that she intended to withdraw from the case.

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Swope Decl. ¶ 8.

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ninety-day continuance of the trial so that GuideTech could find

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new counsel to represent it in the federal trial, but Brilliant

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declined.

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She asked Brilliant’s counsel to stipulate to a

Id. ¶¶ 9, 10.

At the CMC, the parties appeared to disagree over whether the

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state court action should be recombined with the federal action.

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Docket No. 238 at 2-4 (Brilliant’s counsel stating, “I don’t think

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we made [] the position that it belongs here; GuideTech’s counsel

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stating, “Your Honor, we believe it should be recombined” and

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noting that it could file a notice of removal).

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GuideTech permission to file notice to remove the state court

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claims to federal court within ten days, again stressing that “it

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would be cheaper, more efficient, easier to coordinate” if both

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“fights” were adjudicated in the same place.

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also noted that Brilliant could file a motion to remand, if

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GuideTech’s removal was unwarranted.

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Id.

The Court gave

Id. at 4.

The Court

The Court denied

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Cohen’s request for continuance and set trial for March 31, 2014.

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Docket No. 229.

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On October 7, 2013, GuideTech moved for leave to amend its

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complaint and counterclaims to include the state law claims

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pending in Santa Clara superior court.

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contended that it was doing so to save judicial and party economy

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pursuant to the Court’s directive that both disputes should

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proceed together, and as evidenced by the parties’ earlier

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stipulation that if GuideTech’s patent claims survived summary

Docket No. 233.

GuideTech

United States District Court
For the Northern District of California

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judgment, then the patent and state law claims would be combined.

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Id.

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23, 2013, before the Court ruled on the motion, GuideTech withdrew

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the motion, noting that it had retained new counsel and was ready

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to proceed to trial.

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Brilliant opposed the motion.

Docket No. 235.

On December

Docket No. 246.

In the state court action, on September 16, 2013, GuideTech

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filed a case management statement noting that this Court was

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considering whether to combine the patent claims and state law

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claims.

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court granted a stay of proceedings until this Court decided

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whether to combine the claims.

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that GuideTech has “made no effort to date to inform the state

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court that it was no longer seeking to amend its answer in the

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federal case” for purposes of lifting the stay.

Swope Decl. ¶ 11, Ex. F.

Brilliant alleges the state

Id. ¶¶ 15-16.

Brilliant alleges

Id. ¶ 17.1

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Brilliant does not provide the order granting the motion to
stay, and the state court’s docket is unclear as to whether the
motion was granted. See GuideTech, LLC v. Brilliant Instruments,
Inc., et al., Case No. 1-10-CV-187147 (Santa Clara Sup. Ct. Nov.
12, 2010). The case also appears to be open. Id.
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LEGAL STANDARDS
Federal Rule of Civil Procedure 11 provides that by filing a

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pleading, written motion, or other paper, an attorney certifies

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that, after performing a reasonable inquiry, it is not being

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presented for “improper purpose, such as to harass, cause

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unnecessary delay, or needlessly increase the cost of litigation,”

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and that the legal and factual allegations are not frivolous and

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have proper basis.

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attorney or party who violates this rule.

United States District Court
For the Northern District of California

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A court may award sanctions against any
Fed. R. Civ. P. 11(c).

Title 28 U.S.C. § 1927 provides, “Any attorney . . . who so

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multiplies the proceedings in any case unreasonably and

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vexatiously may be required by the court to satisfy personally the

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excess costs, expenses, and attorneys’ fees reasonably incurred

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because of such conduct.”

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be supported by a finding of subjective bad faith,” which is

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present where “an attorney knowingly or recklessly raises a

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frivolous argument, or argues a meritorious claim for the purposes

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of harassing an opponent.”

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78 F.3d 431, 436 (9th Cir. 1996).

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An imposition of § 1927 sanctions “must

In re Keegan Mgmt. Co., Sec. Litig.,

The district court also has “inherent authority to impose

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sanction for bad faith, which includes a broad range of willful

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improper conduct.”

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2001).

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successful party when his opponent has acted in bad faith,

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vexatiously, wantonly, or for oppressive reasons.”

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Co., Inc. v. U.S. for Use of Indus. Lumber Co., Inc., 417 U.S.

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116, 129 (1974).

Fink v. Gomez, 239 F.3d 989, 992 (9th Cir.

The court may award reasonable attorneys’ fees “to a

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F. D. Rich

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DISCUSSION
A.

Motion for Sanctions
Brilliant’s motion charges that GuideTech’s Motion to Amend

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was “frivolous and vexatious.”

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that not only did the motion lack legal basis, but it was filed

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solely to delay adjudication of both the state court action and

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the federal action.

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Motion at 1.

Brilliant argues

GuideTech contends that it is protected by Rule 11’s safe
harbor provision because it withdrew its Motion to Amend long

United States District Court
For the Northern District of California

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before Brilliant served notice of its motion for sanctions.

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Brilliant responds that in order to receive the protection of the

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safe harbor provision, GuideTech had to withdraw its motion

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twenty-one days after service of GuideTech’s own offending motion

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rather than of Brilliant’s motion for sanctions.

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mistaken.

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protects the filer from sanctions so long as it withdraws the

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offending filing within twenty-one days of service of the opposing

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party’s motion for sanctions.

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v. Baldwin, 425 F.3d 671, 678 (9th Cir. 2005).

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safe harbor provision is to ensure “that a party will not be

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subject to sanctions on the basis of another party's motion

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unless, after receiving the motion, it refuses to withdraw that

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position or to acknowledge candidly that it does not currently

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have evidence to support a specified allegation.”

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Because GuideTech withdrew its motion before Brilliant notified

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GuideTech of its intent to file a motion for sanctions in February

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2014, GuideTech receives the protection of the safe harbor

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provision.

Brilliant is

The statute and case law make clear that the provision

Fed. R. Civ. P. 11(c)(2); Holgate

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The purpose of the

Id. at 678.

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Brilliant contends that its motion for sanctions is based on

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more than just the filing of the Motion to Amend, and under

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authority in addition to Rule 11.

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“vexatious litigation conduct for the bad faith purpose of

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delaying trial and multiplying the proceedings,” starting from the

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parties’ preparation of the joint CMC statement in September 2013,

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is sanctionable under both § 1927 and the Court’s inherent power.

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Brilliant argues GuideTech’s

As mentioned previously, § 1927 requires a showing that an
attorney recklessly argued a frivolous position, or alternatively,

United States District Court
For the Northern District of California

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argued a meritorious position but for the improper purpose of

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harassment of an opponent.

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78 F.3d at 436.

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had any legal basis, the Court turns to Federal Rule of Civil

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Procedure 15, which provides that the court shall grant leave to

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amend freely “when justice so requires.”

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applied with “extreme liberality” unless there is evidence of

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undue delay, bad faith or dilatory motive, repeated failure to

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cure deficiencies pointed out by the court, undue prejudice to the

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opposing party, or futility of amendment.

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v. Aspeon, Inc., 316 F.3d 1048, 1051-52 (9th Cir. 2003).

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Brilliant argues that GuideTech was dilatory in seeking leave to

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amend after first filing its federal patent counterclaims and

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state law claims separately, then attempting to combine the two

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several years later.

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this tactic originally to increase the costs of litigation, but

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later sought to bring its state law claims to federal court to

In re Keegan Mgmt. Co., Sec. Litig.,

To determine whether GuideTech’s Motion to Amend

This policy should be

Eminence Capital, LLC

According to Brilliant, GuideTech adopted

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avoid facing sanctions in state court.2

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contends amendment would be futile because the patent claims and

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the state law claims do not arise from the same core of operative

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facts, which was GuideTech’s previous position.

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Further, Brilliant

GuideTech’s Motion to Amend was not frivolous because both

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the Court and the parties contemplated on multiple occasions the

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possibility of bringing the state court claims to federal court.

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The Court observed on multiple occasions that there might be

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pendent although not original jurisdiction, and to litigate both

United States District Court
For the Northern District of California

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sets of claims in the same forum might serve judicial economy.

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See 10-CV-5669, Docket Nos. 16, 17.

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recognized the benefits of litigating both sets of claims

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together.

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discussed the possibility of combining both sets of claims with

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the Court, albeit through a notice to remove.

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that removal would not be successful because the Court would not

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have original jurisdiction over the state law claims and

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accordingly filed the proper motion for the circumstances, the

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Motion to Amend.

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motion was dilatory or would be futile.

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not legally baseless, nor was it for improper purpose.

The parties’ stipulation

As recently as the September 25, 2013 CMC, the parties

GuideTech realized

The Court is therefore hard-pressed to find that
The Motion to Amend was

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Brilliant lists numerous complaints about GuideTech’s
actions in the state court proceedings. See Motion at 11-12. The
Court only considers GuideTech’s conduct in the state court action
for purposes of determining whether GuideTech acted improperly in
the present action. The Court does not consider the question of
whether GuideTech improperly failed to seek to dissolve the stay
in the state court action, which is an inquiry that should be
explored by the state court because of its superior knowledge of
that litigation.
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Brilliant also has not proven that GuideTech’s withdrawal of

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the Motion to Amend was conducted in bad faith.

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explains that its change in litigation tactics was due to the

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change in counsel as well as circumstances.

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hired new counsel in late 2013.

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GuideTech to decide, upon advice of new counsel, not to add new

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claims to the federal court action in order to streamline the

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issues for the impending trial.

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GuideTech

Indeed, GuideTech

It is not unreasonable for

Because Brilliant has not demonstrated GuideTech acted in bad

United States District Court
For the Northern District of California

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faith, either in filing its Motion to Amend or otherwise, the

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Court declines to impose sanctions under either § 1927 or its

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inherent power.

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Brilliant’s motion for sanctions is DENIED.

In its opposition, GuideTech seeks attorneys’ fees for

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responding to the motion for sanctions.

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not filed as a separate motion, it is DENIED.

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F.3d at 677.

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B.

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Because this request was
See Holgate, 425

Administrative Motion to Seal
Brilliant filed an administrative motion to seal portions of

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its motion for sanctions.

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to information that GuideTech designated as “Highly Confidential -

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Attorneys’ Eyes Only” pursuant to the protective order in this

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case.

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file a declaration establishing that the designated material is

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sealable.

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administrative motion to seal is therefore DENIED.

The portions sought to be sealed refer

As the Designating Party, GuideTech must within four days

Civ. L.R. 79-5(e)(1).

GuideTech did not do so.

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The

Brilliant

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shall file an unredacted version of document on the public docket

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in accordance with Civil Local Rule 79-5(e)(2).

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IT IS SO ORDERED.

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Dated:

4/9/2014

CLAUDIA WILKEN
United States District Judge

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United States District Court
For the Northern District of California

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