Hamm v. Mercedes-Benz USA, LLC

Filing 127

Order Denying 112 Defendant's Motion for Sanctions; Denying Plaintiff's Request for Sanctions. Signed by Judge Edward J. Davila on 4/8/2021. (ejdlc3S, COURT STAFF) (Filed on 4/8/2021)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

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TERRY HAMM, et al.,

Case No. 5:16-cv-03370-EJD

Plaintiffs,
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v.

United States District Court
Northern District of California

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MERCEDES-BENZ USA, LLC,
Defendant.

ORDER DENYING DEFENDANT’S
MOTION FOR SANCTIONS;
DENYING PLAINTIFF’S REQUEST
FOR SANCTIONS
Re: Dkt. No. 112

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Pending before the Court is Defendant Mercedes-Benz USA, LLC’s (“MBUSA”) motion

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for sanctions under Fed. R. Civ. P. 11(b) and Civil Local Rule 7-8. MBUSA contends that

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Plaintiff’s counsel misleadingly characterized an e-mail attachment prepared by an unrelated third-

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party as a MBUSA “internal document” that purportedly showed that the existence of the alleged

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defective car transmission is “not in dispute.” MBUSA’s Mot. for Sanctions at 6, Dkt. No. 112. As

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a sanction, MBUSA seeks an award of reasonable attorney’s fees and costs incurred as a result of

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Plaintiff’s counsel’s conduct. Id. Plaintiff filed an opposition, which includes a request for

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sanctions against MBUSA (Dkt. No. 116), and MBUSA filed a reply (Dkt. No. 119). The Court

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finds it appropriate to take the motion under submission for decision pursuant to Civil Local Rule

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7-1(b). For the reasons stated below, MBUSA’s motion is DENIED and Plaintiff’s request for

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sanctions is DENIED.

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I.

BACKGROUND
Plaintiff’s counsel submitted a document referred to by MBUSA as the “Beckmann

Case No.: 5:16-cv-03370-EJD
ORDER DENYING DEFENDANT’S MOTION FOR SANCTIONS; DENYING PLAINTIFF’S
REQUEST FOR SANCTIONS
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Document” in opposition to MBUSA’s motion to strike Plaintiff’s experts D.C. Sharp and Murat

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Okcuoglu. See Ex. 1 to Decl. of Pl.’s Counsel re Okcuoglu, Dkt. No. 106-2; Ex. 3 to Decl. of Pl.’s

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Counsel re Sharp, Dkt. No. 105-5. The portion of the Beckmann Document that Plaintiff relied

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upon is attached to a June 7, 2011 cover email from Robert Beckmann (“Beckmann”) of

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Beckmann Technologies, a third-party independent servicer, to [e-mail]. Dkt.

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No. 106-2 at 2. At the time, Paul Nitsche (“Nitsche”) was MBUSA’s Department Manager. Opp’n

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at 3. Beckmann states in the body of the cover email that the attachment outlines “the issues

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regarding the 722.9 electronics assembly as I see them,” and expresses his opinion that this

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component “is a big problem” for his customers. Dkt. No. 106-2 at 2.
MBUSA contends that Plaintiff’s counsel misleadingly characterized and quoted from a

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United States District Court
Northern District of California

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page of Beckmann Document that is Bates-stamped HAMM_MBUSA_02331. That page of the

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Beckmann Document states:

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Mercedes 722.9XX Transmissions

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Starting around 2002 Mercedes has integrated the transmission
control electronics into the valve body assembly inside the
transmission. . . . .

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Fast forward to 2010. Due to a metallurgy issue inside the
transmissions all the electronic assemblies have started to fail. I
mean ALL of them. Many still under warranty. Not good for the
manufacturer. In order to save costs MB has reevaluated the repair
process last year and began to sell just the electronics assembly
alone at a fire sale price. It gets better! The software to properly
program the electronics was not working correctly and the cars didn’t
get fixed. Dealers started throwing the electronics in the trash and
ordering the complete valve bodies again which were preprogrammed and worked fine. MB didn’t like this since new valve
body =$1200, electronics = $150 WARRANTY.
Dkt. No. 106-2, at Bates-stamp HAMM_MBUSA_002331 (emphasis added).

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MBUSA contends that Plaintiff’s counsel falsely claimed that the Beckmann Document is

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MBUSA “acknowledg[ing] that all 722.9 transmissions are defective” and that “[t]he existence of

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a defect is not in dispute.” MBUSA’s Mot. for Sanctions at 2 (quoting Pl. Opp. to Mot. to Strike

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Okcuoglu at 7:1-5, Dkt. 106). MBUSA also faults Plaintiff’s counsel for making the following

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Case No.: 5:16-cv-03370-EJD
ORDER DENYING DEFENDANT’S MOTION FOR SANCTIONS; DENYING PLAINTIFF’S
REQUEST FOR SANCTIONS
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allegedly misleading statements:
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“MBUSA, however, overlooks Hamm’s actual claim that all
722.9 transmissions . . . were defective. And, Hamm’s claim
is borne out by MBUSA’s own documents produced in this
litigation. [citing and quoting the Beckmann Document].
While MBUSA may now attempt to argue against its own
internal documents . . . .” Dkt. 105 (Plaintiff’s Opposition
to MBUSA’s Motion to Strike the Report of D.C. Sharp) at 18
(emphasis added);

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“Indeed, that such a defect exists across the 722.9
transmission equipping the Class Vehicles is not even subject
to reasonable dispute. MBUSA’s own internal documents
produced in this litigation confirm as much.” Dkt. 106
(Plaintiff’s Opposition to MBUSA’s Motion to Strike the
Expert Report of Murat Okcuoglu) at 1 (citing and quoting the
Beckmann Document, as opposed to anything written by
MBUSA);

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“Here, Hamm has pled and MBUSA’s documents
acknowledge that all 722.9 transmissions are defective [citing
and quoting the Beckmann Document, as opposed to anything
written by MBUSA]. The existence of a defect is not in
dispute.” Id. at 7 (emphasis added).

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United States District Court
Northern District of California

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MBUSA’s Mot. for Sanctions at 5-6. MBUSA contends the allegedly misleading characterizations

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of the Beckmann Document are egregious not only because Plaintiff’s counsel knew that the

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Beckmann Document was an external document emailed to MBUSA by Beckmann and that

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Beckmann did not speak on behalf of MBUSA, but because Plaintiff’s counsel knew that MBUSA

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disputed the assertions made by Beckmann.

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II.

STANDARDS

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Federal Rule of Civil Procedure 11 provides in pertinent part that “[b]y presenting to the

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court a pleading, written motion, or other paper. . . an attorney. . . certifies that to the best of the

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person’s knowledge, information, and belief, formed after an inquiry reasonable under the

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circumstances . . . the factual contentions have evidentiary support.” Fed. R. Civ. P. 11(b)(3). Rule

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11 authorizes a court to sanction a party and the party’s counsel for filing a pleading, written

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motion, or other paper lacking evidentiary support. Fed. R. Civ. P. 11(c). The sanction may take

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many forms, including reasonable attorney’s fees and expenses, but must “must be limited to what

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Case No.: 5:16-cv-03370-EJD
ORDER DENYING DEFENDANT’S MOTION FOR SANCTIONS; DENYING PLAINTIFF’S
REQUEST FOR SANCTIONS
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suffices to deter repetition of the conduct or comparable conduct by others similarly situated.”

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Fed. R. Civ. P. 11(c)(4).

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III.

DISCUSSION

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A. MBUSA’s Motion

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MBUSA contends that Plaintiff and his counsel violated Rule 11 by falsely representing to

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the Court that (1) the document prepared by third-party Beckmann of Beckmann Technologies is a

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MBUSA “internal document,” and (2) the document shows that the existence of the alleged defect

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“is not in dispute.” Mot. at 6. Plaintiff’s counsel denies engaging in any sanctionable conduct, and

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moreover, accuses MBUSA of filing a “scurrilous motion” that warrants sanctions against

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United States District Court
Northern District of California

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MBUSA. Opp’n at 1.
The Court finds that Plaintiff’s repeated characterization of the Beckmann Document as a

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MBUSA “internal document” is misleading because it suggests that the Beckmann Document was

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prepared or authorized by MBUSA and/or reflects MBUSA’s opinions, when it does not.

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Plaintiff’s explanation—that the Beckmann Document is properly characterized as an MBUSA

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“internal document” because it was produced by MBUSA from its own files during discovery—is

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also misleading and dubious. Just because a third-party document was received by an MBUSA

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employee, kept in MBUSA’s files, and subsequently produced by MBUSA does not make it a

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MBUSA “internal document,” which suggest it was prepared by the company itself.

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Nevertheless, the Court finds that Plaintiff’s mischaracterization of the Beckmann

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Document does not rise to the level of a Rule 11 violation because Plaintiff submitted Beckmann’s

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cover email with the Beckmann Document as one exhibit, and the cover email makes clear that the

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Beckmann Document originated with Beckmann, not MBUSA. Moreover, Plaintiff accurately

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described the Beckmann Document in his reply brief in support of the class certification motion.

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Plaintiff makes clear in his reply brief that the Beckmann Document was sent via email to

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MBUSA from one of MBUSA’s “independent servicer[s]” and that MBUSA produced the

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Beckmann Document to Plaintiff during this case. See Pl.’s Reply In Support of His Mot. for Class

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Case No.: 5:16-cv-03370-EJD
ORDER DENYING DEFENDANT’S MOTION FOR SANCTIONS; DENYING PLAINTIFF’S
REQUEST FOR SANCTIONS
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Certification at 1:1-19, Dkt. No. 110. Were it not for Plaintiff’s submission of Beckmann’s cover

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email and the accurate description of the Beckmann Document in Plaintiff’s reply brief, however,

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the Court would be inclined to impose sanctions.
The second allegedly misleading statement—that the Beckmann Document shows the

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alleged defect “is not in dispute”—is not misleading. In the context of the lawsuit, the Court

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understood Plaintiff’s “is not in dispute” comment as nothing more than aggressive advocacy: that

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Plaintiff believed the Beckmann Document was indisputable evidence that the 722.9 transmission

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is defective. Although MBUSA may dispute the meaning or import of the Beckmann Document,

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the Document supports Plaintiff’s theory of the case.

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B. Plaintiff’s Request for Sanctions

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United States District Court
Northern District of California

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Plaintiff seeks sanctions against MBUSA given “the utter baselessness of MBUSA’s

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sanctions filing and the indefensible reputational attacks it levies against Hamm’s counsel.” Opp’n

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at 9. The Court does not share Plaintiff’s view of the motion for reasons stated above. The

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personal invectives against Plaintiff’s counsel, however, were inappropriate. Nevertheless, the

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Court declines to impose sanctions for the personal invectives with the expectation that MBUSA

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will refrain from such conduct in the future.

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IV.

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CONCLUSION
MBUSA’s motion for sanctions is DENIED. Plaintiff’s request for sanctions is also

DENIED.

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IT IS SO ORDERED.
Dated: April 8, 2021
______________________________________
EDWARD J. DAVILA
United States District Judge

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Case No.: 5:16-cv-03370-EJD
ORDER DENYING DEFENDANT’S MOTION FOR SANCTIONS; DENYING PLAINTIFF’S
REQUEST FOR SANCTIONS
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