Brilliant Instruments, Inc. v. GuideTech, Inc.

Filing 309


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1 2 IN THE UNITED STATES DISTRICT COURT 3 FOR THE NORTHERN DISTRICT OF CALIFORNIA 4 5 GUIDETECH, INC., No. C 09-5517 CW Plaintiff, 6 7 ORDER ON MOTION FOR SANCTIONS AND ADMINISTRATIVE MOTION TO SEAL v. 8 9 United States District Court For the Northern District of California 10 BRILLIANT INSTRUMENTS, INC., (Re: Docket No. 250) Defendant. ________________________________/ 11 12 Defendant Brilliant Instruments, Inc. moves for sanctions 13 against Plaintiff GuideTech, Inc. based on the filing of 14 GuideTech’s Motion for Leave to Amend its Answer and 15 Counterclaims. 16 order Brilliant to pay reasonable expenses and attorneys’ fees 17 incurred by GuideTech in filing its opposition. 18 the papers, the Court DENIES the motion. 19 20 GuideTech opposes, and in turn asks that the Court Having considered BACKGROUND On November 20, 2009, Brilliant filed suit against GuideTech 21 in federal court, seeking declaratory judgment of non-infringement 22 of seven of GuideTech’s patents. 23 2009, GuideTech answered the complaint and asserted counterclaims 24 of patent infringement of three of its patents. 25 December 8, 2010, Brilliant amended its complaint to include 26 certain state law claims asserted affirmatively against GuideTech. 27 Docket No. 35. 28 Docket No. 1. On December 14, Docket No. 5. On 1 On November 12, 2010, GuideTech filed suit against Brilliant 2 in Santa Clara County superior court, asserting (1) intentional 3 interference with prospective economic advantage, (2) negligent 4 interference with prospective economic advantage, (3) slander, and 5 (4) breach of contract. 6 court. 7 10-CV-5669 CW, Docket No. 1. 8 there was no reasonable basis for removal under 28 U.S.C. § 1367 9 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 10 GuideTech’s state law claims, and further, GuideTech’s state law 11 claims did not arise from the same factual basis as its patent 12 infringement claims. 13 remanding the case and awarding attorneys’ fees to GuideTech, but 14 also noted that it would be more efficient for all of the parties’ 15 claims against each other to be litigated in the same court. 16 10-CV-5669, Docket Nos. 16, 17. 17 10-CV-5669, Docket No. 4. The Court agreed, Brilliant filed a motion for summary judgment of non- 18 infringement of the patents-in-suit. 19 considering the motion, on June 29, 2011, the parties filed a 20 stipulation agreeing that the state law claims of both parties 21 should be consolidated in either the federal court action or the 22 state court action, depending on the Court’s ruling on the motion 23 for summary judgment. 24 against Brilliant, then GuideTech would shift its state law claims 25 to federal court; if the Court granted summary judgment in favor 26 of Brilliant, then Brilliant would shift its state law claims to 27 state court. 28 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 2 Docket No. 137. The 1 parties moved jointly to dismiss Brilliant’s state law claims 2 without prejudice pursuant to their earlier stipulation, which the 3 Court granted. Docket No. 139. 4 GuideTech appealed the Court’s summary judgment order. 5 February 20, 2013, the Federal Circuit affirmed in part and 6 reversed in part the Court’s order, and remanded for further 7 action. 8 9 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 10 statement, GuideTech’s counsel, Einav Cohen, indicated to 11 Brilliant’s counsel that she intended to withdraw from the case. 12 Swope Decl. ¶ 8. 13 ninety-day continuance of the trial so that GuideTech could find 14 new counsel to represent it in the federal trial, but Brilliant 15 declined. 16 She asked Brilliant’s counsel to stipulate to a Id. ¶¶ 9, 10. At the CMC, the parties appeared to disagree over whether the 17 state court action should be recombined with the federal action. 18 Docket No. 238 at 2-4 (Brilliant’s counsel stating, “I don’t think 19 we made [] the position that it belongs here; GuideTech’s counsel 20 stating, “Your Honor, we believe it should be recombined” and 21 noting that it could file a notice of removal). 22 GuideTech permission to file notice to remove the state court 23 claims to federal court within ten days, again stressing that “it 24 would be cheaper, more efficient, easier to coordinate” if both 25 “fights” were adjudicated in the same place. 26 also noted that Brilliant could file a motion to remand, if 27 GuideTech’s removal was unwarranted. 28 3 Id. The Court gave Id. at 4. The Court The Court denied 1 Cohen’s request for continuance and set trial for March 31, 2014. 2 Docket No. 229. 3 On October 7, 2013, GuideTech moved for leave to amend its 4 complaint and counterclaims to include the state law claims 5 pending in Santa Clara superior court. 6 contended that it was doing so to save judicial and party economy 7 pursuant to the Court’s directive that both disputes should 8 proceed together, and as evidenced by the parties’ earlier 9 stipulation that if GuideTech’s patent claims survived summary Docket No. 233. GuideTech United States District Court For the Northern District of California 10 judgment, then the patent and state law claims would be combined. 11 Id. 12 23, 2013, before the Court ruled on the motion, GuideTech withdrew 13 the motion, noting that it had retained new counsel and was ready 14 to proceed to trial. 15 Brilliant opposed the motion. Docket No. 235. On December Docket No. 246. In the state court action, on September 16, 2013, GuideTech 16 filed a case management statement noting that this Court was 17 considering whether to combine the patent claims and state law 18 claims. 19 court granted a stay of proceedings until this Court decided 20 whether to combine the claims. 21 that GuideTech has “made no effort to date to inform the state 22 court that it was no longer seeking to amend its answer in the 23 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 24 25 26 27 28 1 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. 4 1 2 LEGAL STANDARDS Federal Rule of Civil Procedure 11 provides that by filing a 3 pleading, written motion, or other paper, an attorney certifies 4 that, after performing a reasonable inquiry, it is not being 5 presented for “improper purpose, such as to harass, cause 6 unnecessary delay, or needlessly increase the cost of litigation,” 7 and that the legal and factual allegations are not frivolous and 8 have proper basis. 9 attorney or party who violates this rule. United States District Court For the Northern District of California 10 A court may award sanctions against any Fed. R. Civ. P. 11(c). Title 28 U.S.C. § 1927 provides, “Any attorney . . . who so 11 multiplies the proceedings in any case unreasonably and 12 vexatiously may be required by the court to satisfy personally the 13 excess costs, expenses, and attorneys’ fees reasonably incurred 14 because of such conduct.” 15 be supported by a finding of subjective bad faith,” which is 16 present where “an attorney knowingly or recklessly raises a 17 frivolous argument, or argues a meritorious claim for the purposes 18 of harassing an opponent.” 19 78 F.3d 431, 436 (9th Cir. 1996). 20 An imposition of § 1927 sanctions “must In re Keegan Mgmt. Co., Sec. Litig., The district court also has “inherent authority to impose 21 sanction for bad faith, which includes a broad range of willful 22 improper conduct.” 23 2001). 24 successful party when his opponent has acted in bad faith, 25 vexatiously, wantonly, or for oppressive reasons.” 26 Co., Inc. v. U.S. for Use of Indus. Lumber Co., Inc., 417 U.S. 27 116, 129 (1974). Fink v. Gomez, 239 F.3d 989, 992 (9th Cir. The court may award reasonable attorneys’ fees “to a 28 5 F. D. Rich 1 2 3 DISCUSSION A. Motion for Sanctions Brilliant’s motion charges that GuideTech’s Motion to Amend 4 was “frivolous and vexatious.” 5 that not only did the motion lack legal basis, but it was filed 6 solely to delay adjudication of both the state court action and 7 the federal action. 8 9 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 10 before Brilliant served notice of its motion for sanctions. 11 Brilliant responds that in order to receive the protection of the 12 safe harbor provision, GuideTech had to withdraw its motion 13 twenty-one days after service of GuideTech’s own offending motion 14 rather than of Brilliant’s motion for sanctions. 15 mistaken. 16 protects the filer from sanctions so long as it withdraws the 17 offending filing within twenty-one days of service of the opposing 18 party’s motion for sanctions. 19 v. Baldwin, 425 F.3d 671, 678 (9th Cir. 2005). 20 safe harbor provision is to ensure “that a party will not be 21 subject to sanctions on the basis of another party's motion 22 unless, after receiving the motion, it refuses to withdraw that 23 position or to acknowledge candidly that it does not currently 24 have evidence to support a specified allegation.” 25 Because GuideTech withdrew its motion before Brilliant notified 26 GuideTech of its intent to file a motion for sanctions in February 27 2014, GuideTech receives the protection of the safe harbor 28 provision. Brilliant is The statute and case law make clear that the provision Fed. R. Civ. P. 11(c)(2); Holgate 6 The purpose of the Id. at 678. 1 Brilliant contends that its motion for sanctions is based on 2 more than just the filing of the Motion to Amend, and under 3 authority in addition to Rule 11. 4 “vexatious litigation conduct for the bad faith purpose of 5 delaying trial and multiplying the proceedings,” starting from the 6 parties’ preparation of the joint CMC statement in September 2013, 7 is sanctionable under both § 1927 and the Court’s inherent power. 8 9 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 10 argued a meritorious position but for the improper purpose of 11 harassment of an opponent. 12 78 F.3d at 436. 13 had any legal basis, the Court turns to Federal Rule of Civil 14 Procedure 15, which provides that the court shall grant leave to 15 amend freely “when justice so requires.” 16 applied with “extreme liberality” unless there is evidence of 17 undue delay, bad faith or dilatory motive, repeated failure to 18 cure deficiencies pointed out by the court, undue prejudice to the 19 opposing party, or futility of amendment. 20 v. Aspeon, Inc., 316 F.3d 1048, 1051-52 (9th Cir. 2003). 21 Brilliant argues that GuideTech was dilatory in seeking leave to 22 amend after first filing its federal patent counterclaims and 23 state law claims separately, then attempting to combine the two 24 several years later. 25 this tactic originally to increase the costs of litigation, but 26 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 27 28 7 1 avoid facing sanctions in state court.2 2 contends amendment would be futile because the patent claims and 3 the state law claims do not arise from the same core of operative 4 facts, which was GuideTech’s previous position. 5 Further, Brilliant GuideTech’s Motion to Amend was not frivolous because both 6 the Court and the parties contemplated on multiple occasions the 7 possibility of bringing the state court claims to federal court. 8 The Court observed on multiple occasions that there might be 9 pendent although not original jurisdiction, and to litigate both United States District Court For the Northern District of California 10 sets of claims in the same forum might serve judicial economy. 11 See 10-CV-5669, Docket Nos. 16, 17. 12 recognized the benefits of litigating both sets of claims 13 together. 14 discussed the possibility of combining both sets of claims with 15 the Court, albeit through a notice to remove. 16 that removal would not be successful because the Court would not 17 have original jurisdiction over the state law claims and 18 accordingly filed the proper motion for the circumstances, the 19 Motion to Amend. 20 motion was dilatory or would be futile. 21 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 22 23 24 25 26 27 28 2 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. 8 1 Brilliant also has not proven that GuideTech’s withdrawal of 2 the Motion to Amend was conducted in bad faith. 3 explains that its change in litigation tactics was due to the 4 change in counsel as well as circumstances. 5 hired new counsel in late 2013. 6 GuideTech to decide, upon advice of new counsel, not to add new 7 claims to the federal court action in order to streamline the 8 issues for the impending trial. 9 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 10 faith, either in filing its Motion to Amend or otherwise, the 11 Court declines to impose sanctions under either § 1927 or its 12 inherent power. 13 Brilliant’s motion for sanctions is DENIED. In its opposition, GuideTech seeks attorneys’ fees for 14 responding to the motion for sanctions. 15 not filed as a separate motion, it is DENIED. 16 F.3d at 677. 17 B. 18 Because this request was See Holgate, 425 Administrative Motion to Seal Brilliant filed an administrative motion to seal portions of 19 its motion for sanctions. 20 to information that GuideTech designated as “Highly Confidential - 21 Attorneys’ Eyes Only” pursuant to the protective order in this 22 case. 23 file a declaration establishing that the designated material is 24 sealable. 25 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. 26 27 28 9 The Brilliant 1 shall file an unredacted version of document on the public docket 2 in accordance with Civil Local Rule 79-5(e)(2). 3 IT IS SO ORDERED. 4 5 6 Dated: 4/9/2014 CLAUDIA WILKEN United States District Judge 7 8 9 United States District Court For the Northern District of California 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10

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